Supreme Court of the ACT|2015-08-14|Before: Refshauge J

VTS IT Pty Limited v Russell [2015] ACTSC 230 (14 August 2015)

SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Andrew Eyre Russell pay the costs of VTS IT Pty Ltd of the proceedings.

CIVIL - Jurisdiction, practice and procedure - Application for costs - Interim orders made ex parte - Injunction - Consent orders - Costs follow the event - Undertaking as to damages

Amaca Pty Ltd (formerly known as James Hardie & Co Pty Ltd) v Hannell [2007] WASCA 158(s)

Australian Securities Commission v Aust-Home Investments Ltd [1993] FCA 585; (1993) 44 FCR 194

Barnett v Crozier [1987] 1 WLR 272

Bateman and Idameneo (No 123) Pty Limited v Fairfax Media Publications Pty Limited and Ors [2013] ACTSC 72

Bowen v Alsanto Nominees (Pty Ltd) [2011] WASCA 39 (S)

Colburt v Beard [1992] 2 Qd R 67

Commissioner of Australian Federal Police v Razzi (No 2) [1991] FCA 267; (1991) 30 FCR 64

Cretazzo v Lombardi (1975) 13 SASR 4

Financial Integrity Group Pty Ltd v Farmer (No 2) [2013] ACTSC 166

Foster v Farquhar [1893] 1 QB 564

Howell v Dering [1915] 1 KB 54

Joint Committee of River Ribble v Croston Urban District Council [1897] 1 QB 251

Loutchansky v Times Newspapers Ltd (No 2 - 5) [2001] EWCA Civ 1805; [2002] QB 783

O & D Pty Ltd v Pangalos [2015] ACTCA 4

Oshlack v Richmond River Council [1993] HCA 11; (1998) 193 CLR 72

R v Judges of District Court; Ex parte Kruger Enterprises (1982) 41 ALR 531

Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Zuin [1997] HCA 6; (1997) 186 CLR 622

Russell v Adwan Pty Ltd (2000) 144 ACTR 1

Thomas A Edison Ltd v Bullock [1912] HCA 72; (1912) 15 CLR 679

Xenou v Katsanas [2002] VSC 515; (2002) 7 VR 335

ICF Spry, Equitable Remedies (Thomson Reuters, Lawbook Co: Sydney, 2014) 9th ed

Peter Young, Clyde Croft and Megan Smith, On Equity (Thompson Reuters Lawbook Co: Sydney, 2009)

1. The defendant, Andrew Eyre Russell, became an employee of the plaintiff, VTS IT Pty Ltd (VTS), when VTS acquired the assets of the company Data Flex Pty Ltd (Data Flex).

2. Data Flex provided information technology services to its clients. These appear to have included services such as management of systems, hardware and software, as well as providing security for these systems, data backups and help desk support.

3. In February 2014, Data Flex was placed into administration and, in early March 2014, VTS approached the administrator and negotiated the purchase of the assets which, at that time, consisted chiefly of the goodwill of the Data Flex business.

4. Mr Russell had been employed by Data Flex since 16 April 2012. When VTS acquired the assets of Data Flex, it then offered Mr Russell employment as a Level 3 Technical Engineer and he entered into an employment contract with VTS on 30 May 2014. As an employee he had access to confidential information of VTS and worked regularly for its clients, gaining an understanding of their information technology needs.

5. Mr Russell left the employ of VTS on 13 June 2014 when his employment was terminated. He later became employed by MIT Services Group Pty Ltd (MIT Services), a business which provided information technology systems integration products and services to its clients, mainly businesses, as well as industry maintenance of software and hardware and help desk support.

6. As a result of information provided to VTS that a number of its clients, who had terminated their contracts with it, had retained MIT Services instead, VTS commenced these proceedings seeking to restrain Mr Russell from disclosing any of the confidential information he had gained as an employee of VTS to anyone else, to restrain him from certain contacts or activities with VTS clients and for other orders.

7. Interim orders were made ex parte restraining Mr Russell from engaging in certain activities. After several further mentions of the matter, the proceedings were resolved on 15 September 2014 with the injunction continuing, but being limited to apply until 3 November 2014. This was the period of six months, being one of the relevant periods in the "cascading restraint of trade clause" (see O & D Pty Ltd v Pangalos [2015] ACTCA 4 at [15]) in the employment contract between Mr Russell and CTS. The only outstanding matter was costs. It is to this issue that I now turn.

8. As noted above (at [7]), interim orders were made ex parte on 4 August 2014 which restrained Mr Russell from:

• canvassing, soliciting or enticing away any clients of VTS as listed in the evidence;

• from inducing or encouraging any such clients to terminate their contracts or other their business relationship with VTS;

• or from accessing any information technology systems of such clients;

• or altering, adding to or configuring any such system.

9. As is required for the grant of such an injunction, VTS, through its counsel, gave an undertaking as to damages: see Financial Integrity Group Pty Ltd v Farmer (No 2) [2013] ACTSC 166 at [18]- [23].

10. Service of the Originating Application, the supporting affidavit and a sealed copy of the Interim Order was required to be effected on Mr Russell and the matter adjourned for a short period, as would be the ordinary procedure following the making of an ex parte injunction (or other order). Mr Russell appeared, by counsel, on the adjourned date and, as might be expected, some variations were made to the orders which, however, were continued broadly as made.

11. There were, as also noted above (at [7]), a number of further adjournments until, on 15 September 2014, I was informed that the proceedings had been settled save as to costs and damages. The orders were varied again but then the varied orders were, by consent, continued to expire on 3 November 2014.

12. I later gave directions as to the filing of evidence in connection with the argument about damages and costs and then heard that matter on 11 December 2014 when I reserved my decision.

13. The general background of the proceedings is set out above (at [1]-[7]). I do not need to repeat these facts.

14. The parties filed affidavits in connection with the argument as to costs and damages. Neither party sought to cross-examine any of the deponents. I can make the following findings of fact from these affidavits.

15. Mr Russell had been employed by Data Flex from 16 April 2012 until 15 May 2014 as a Systems Engineer. Although he was an employee, he was permitted by his employer to provide on his own account a Domain Name Service, under the business name Digital Internet Wizard. This business was not owned by or otherwise connected with the business of Data Flex.

16. Following the sale of the assets of Data Flex to VTS, Mr Russell was employed by VTS, first on a casual basis from 16 May 2014 and then as a full-time employee from 30 May 2014. He signed a contract of employment which contained a clause requiring him to respect the confidentiality of certain information and which imposed certain post-employment obligations in the cascading restraint of trade clause to which I have referred above (at [7]).

17. Mr Russell did inform senior managers of VTS that he had the Domain Name Services business and would continue to conduct that business separately. He showed them a list of his clients.

18. His employment, however, was only for about fourteen days, as his contract was terminated on 13 June 2014.

19. Mr Russell then commenced employment with MIT Services on 18 June 2014. On 30 September 2014, his employment with that company was terminated because of the restraints imposed on him by the injunction.

20. VTS consulted its lawyers in mid July 2014 about the claimed breaches by Mr Russell of the terms of his contract with, and his duty of confidentiality to, VTS. Its lawyers then sent, by email, a letter dated 21 July 2014 to Mr Russell identifying the claimed breaches and seeking an undertaking from him in the terms of a draft contained in a document enclosed with the letter. The draft undertaking was in wide terms, somewhat wider than that later sought in the Originating Application which commenced these proceedings. A letter was also sent that day to MIT Services with a copy of the letter and enclosure sent to Mr Russell. No reply was received to either letter.

21. On 24 July 2014, VTS advised its lawyers that they considered that, despite the letters, Mr Russell was still breaching his obligations to them and a further letter was sent to Mr Russell and to MIT Services about the alleged breaches and further requesting that the undertaking be given.

22. As a result, Mr K Pattenden, solicitor of Pattenden Law, contacted VTS's solicitor, Mr A Bland, solicitor of Blands Law, on 25 July 2014. He requested copies of all correspondence between the parties and with MIT Services to date and these were sent to him by email later that day. Mr Bland reiterated that VTS still required that Mr Russell give the undertaking that had been earlier requested of him.

23. Correspondence between the solicitors was then exchanged involving the extension of the time within which the undertaking was to be given, its terms and details of the allegations made by VTS against Mr Russell. Mr Pattenden also criticised the terms of the proposed undertaking as 'vague and expansive' but did not offer that Mr Russell would give an amended or any undertaking.

24. Further correspondence was exchanged between the solicitors about an issue involving another client of VTS.

25. When, by 4 August 2014, the requested undertaking had not been given by Mr Russell, Mr Bland arranged for the application for injunctive relief to be made to me.

26. Copies of the relevant correspondence, much of it contained in emails, was provided to me. I do not need to address the terms between the solicitors or contents of any of it in detail.

27. The initial letter from Mr Bland to Mr Russell, which might be described as a letter of demand, referred to allegations that Mr Russell had been making "disparaging" comments to current employees of VTS about the business and the Chief Executive Officer of VTS, which, it was alleged, were damaging to the business and its reputation. It was suggested that, in addition, Mr Russell had changed, deleted or withheld critical passwords to infrastructure of VTS's clients, an attempt to "sabotage" the business of VTS. It finally alleged that Mr Russell had approached and solicited clients of VTS, with whom he had had dealings when employed by VTS, in breach of his employment contract. Two particular clients were mentioned.

28. In an earlier letter from Mr Pattenden, the allegation of deleting or failing to return property of VTS was denied, while he sought further details.

29. Later, Mr Bland provided further details, including some specific material said to show improper attempts by Mr Russell to access the server of a customer of VTS.

30. The correspondence also dealt with access to the Domain Name Service server of a client, which VTS required, but which Mr Russell refused to provide unless the client authorised such access. The client wrote advising that it would not authorise such access as it had a separate arrangement with Mr Russell in respect of that matter. Another client also wrote in similar terms.

31. A communication from the former Chief Executive Officer of Data Flex to Mr Pattenden, forwarded to Mr Bland, was also in evidence and in which he confirmed that he was aware of Mr Russell's business of providing a separate Domain Name Service and that he considered that there was no conflict of interest in him operating it when an employee of Data Flex.

32. In an affidavit filed by him, Mr Russell expressly denied making any disparaging comments about the business or Chief Executive Officer of VTS nor of changing, deleting or withholding critical passwords to the infrastructure of VTS.

33. He also denied approaching the client referred to in the correspondence which had transferred its business from Data Flex and VTS to MIT Services. The National Information Technology Projects Manager of that client also made an affidavit in which he deposed that he and his Chief Executive Officer had been dissatisfied for some time with the service provided from Data Flex. He deposed that he perceived incompetence in the delivery of services by both Data Flex and VTS. It was this which led to its decision to transfer its business to MIT Services.

34. When the decision was notified to VTS, an officer of VTS suggested to the client's manager that the client was terminating the arrangement because of the termination of the contract of "an ex employee", clearly referring to Mr Russell. That was expressly denied by the client's manger in that conversation. He later confirmed to another senior officer of VTS that Mr Russell had not contacted the client, had not tried to solicit its business and that it had transferred its business to MIT Services because of a relationship with another senior manager of that company.

35. Mr Russell also denied contacting the other client whose name was also mentioned in the correspondence. He also denied disclosing or communicating any confidential information of VTS to any other person.

36. Mr Russell further denied the allegation in the correspondence that he had accessed the information technology environment of another client of VTS and created an account that would give him unfettered access to that client's system, in breach of his employment contract obligations.

37. In respect of a particular former client of VTS, he deposed that all his dealings and information technology access had been in accordance with his separate arrangements with that client, entered into prior to the acquisition by VTS of the assets of Data Flex.

38. Mr Russell also denied a number of allegations that had been made in the original affidavit relied on by VTS to obtain the original injunction. I do not need to address them serially.

40. Mr J Moffett, counsel for VTS, submitted that, in the light of the earlier correspondence, and communications to which I have referred above (at [22]-[23]), where express notice was given to Mr Russell of the intention to commence proceedings, with an opportunity to give an undertaking so as to avoid the need for such proceedings, and the failure of Mr Russell to give the requested undertaking meant that I should conclude that VTS acted reasonably in commencing the proceedings. It is to be noted that VTS gave a number of extensions of time in which the undertaking was to be given, so its demand could not be considered to be peremptory or demanded in an unreasonable manner, especially as to time.

41. The undertaking was in terms significantly wider than the terms of the injunction actually sought by VTS and then granted by me. That, however, is not particularly relevant. A compromise of proceedings, being essentially a contractual matter between the parties, is not limited to terms that are ones that a court could make. A classic example is an apology by a defendant when a plaintiff claims to have been defamed by the defendant; an apology is often included in a settlement or compromise of such proceedings, including, for example, the reading of a statement of retraction or correction in open court (Barnett v Crozier [1987] 1 WLR 272 at 276), but, except in such a case or by statutory provision, a court determining the case has no power to order a defendant to give an apology (Loutchansky v Times Newspapers Ltd (No 2 - 5) [2001] EWCA Civ 1805; [2002] QB 783 at 824; [99]).

42. The Originating Application filed by VTS sought various orders in the nature of injunctions and an order for delivery up of any documents in the possession of Mr Russell containing any confidential information of VTS. The injunctions sought were not expressed to be limited as to time for the period of the restraints they imposed.

43. The orders ultimately made were not precisely in the terms sought and were more limited in their provisions, especially in that they were limited as to time, namely for a maximum of a short period of about six months, as noted above (at [7]). No order was ultimately made for the delivery up of any documents.

44. The orders were made by consent and, apart from costs and damages, constituted the completion of the proceedings. Neither party sought to proceed with the matter.

45. The consent orders made no provision for costs or damages. VTS sought its costs of the proceeding. Mr Russell sought damages consequent upon the undertaking as to damages, opposed the order for costs sought by VTS and sought his own costs.

46. The general rule is that costs follow the event. See, for example, Russell v Adwan Pty Ltd (2000) 144 ACTR 1 at 14; [63]; Oshlack v Richmond River Council [1993] HCA 11; (1998) 193 CLR 72 at 96-7; [66]- [69]; 120-2; [134]. Indeed, as Miles CJ stated in Mann v Carnell [2001] ACTSC 18; (2001) 159 FLR 466 at 467; [7]- [8]:

Costs are in the discretion of the Court: Supreme Court Act 1933, s 23. However, there is a well entrenched judge-made rule of practice that, in the absence of circumstances justifying an order to the contrary, costs 'follows the event', that is to say, the 'loser' pays the costs of the 'winner'. It seems that unless the legislature specifies some other outcome, such as parties paying their own costs, for example, Family Law Act 1975 (Cth), s 117, the winner-take-all rule confines the width of the discretion conferred by the statute.
The practice is so entrenched that it is often approached as if it were part of the common law. It was not part of the common law of England. That appears to be the reason why it does not apply in the United States, unless authorised by statute. Whether it is part of the common law of Australia does not need to be decided. A judge who proceeded as if there were an open discretion on costs unhindered by the practice would almost certainly be regarded as erring in law.

47. The question, then, is what is the event? In Howell v Dering [1915] 1 KB 54 at 63, Buckley LJ said:

An 'event'...is an outcome in the presentation to the tribunal of some claim made by the plaintiff against the defendant which results in a finding that the plaintiff is or is not entitled to relief against the defendant.

48. In my view, VTS obtained relief, indeed substantially that which it sought, and, ordinarily should have its costs of so doing as the event was the outcome it sought and which it subsequently achieved.

49. The evidence adduced by Mr Russell on the costs hearing did raise issues about whether the factual basis for the claim of VTS could be maintained. However, in the circumstances, that was irrelevant since the issue had been decided against it by the making of the orders, even though by consent.

50. It would be contrary to principle for a court to go behind the order of the court when considering the issue of costs and to make any costs orders on a basis that was inconsistent with the basis on which its final orders had been made.

51. What Mr Russell was attempting to do, it seemed to me, was to treat the orders of the Court as if they were a private settlement with the proceedings in effect being discontinued. He then sought to agitate whether the proceedings had been brought in accordance with the law and the facts. That, however, became irrelevant when the orders were made which continued the injunction.

52. As McHugh J pointed out in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Zuin [1997] HCA 6; (1997) 186 CLR 622 at 624, there are good policy reasons for not permitting that to be done, saying:

The court cannot try a hypothetical action between the parties [Australian Securities Commission v Aust-Home Investments Ltd [1993] FCA 585; (1993) 44 FCR 194 at 201]. To do so would burden the parties with costs of a litigated settlement or extra-curial they had avoided.

53. In the circumstances of a discontinuance or a settlement without substantive orders, the court may make an order for costs where a party was unreasonable in commencing or continuing the action, as his Honour went on to suggest.

54. That, however, does not apply here. For the reasons set out above (at [40]), the failure of Mr Russell to give a pre-action undertaking meant that it was not unreasonable for VTS to have commenced the proceedings. More significant than that, however, is that the consent order involved an inevitable acceptance that VTS was entitled to the relief given and, indeed, substantially the relief that it sought.

55. Mr Pattenden pointed out that the undertaking sought before proceedings were initiated was, he suggested, vague and became more "expressive" over time. VTS was not successful in obtaining an undertaking in these precise terms from the Court. He further submitted that it was relevant that, after the initial ex parte orders were made, the terms of the injunction had to be, and were, varied.

56. That may all be accepted but it does not alter the position that VTS sought orders restraining Mr Russell from breaching the contractual and fiduciary obligations he owed to VTS and it was successful in obtaining orders that did just that, even though in different terms from those it sought pre-trial and then in its Originating Application.

57. I will not undermine the courts orders by a finding that, in effect, Mr Pattenden asked me to make, that were there to have been a full hearing of the case, I would not have made those orders.

58. The question of unreasonable behaviour in commencing proceedings will not normally require the court to consider the strength or weakness of a plaintiff's case. See Australian Securities Commission v Aust-Home Investments Ltd [1993] FCA 585; (1993) 44 FCR 194 at 200. That issue, may, in an appropriate case, be relevant, but it cannot be relevant when the plaintiff has obtained the relief it seeks. Inevitably, that must mean that it had a good case.

59. Mr Pattenden also submitted that the conduct of VTS was such that it was not entitled to costs. He submitted that it had made allegations that it knew to be false. This referred to allegations such as that Mr Russell had solicited a client when an officer of that client had told VTS that this was not so.

60. Again, that is a matter which clearly would have been an issue in the proceedings, but which has not been resolved by any of the procedure adopted to date. For the reasons explained by McHugh J above (at [53]), it would have been inappropriate to have held a hearing to determine such issues, especially after the orders made had been made.

61. VTS would, in any event, be entitled to challenge the evidence set out in that client's affidavit as, for example, to the actual contents of the relevant conversations there stated and, indeed, their truth. That facts have been asserted in the affidavits and not the subject of cross-examination (not usually permitted in the interlocutory applications, such as was this application for costs: see Bateman and Idameneo (No 123) Pty Limited v Fairfax Media Publications Pty Limited and Ors [2013] ACTSC 72 at [17]- [18]) does not mean, in the circumstances, that the assertions in the affidavits must be accepted.

62. Strictly speaking, it may be that the affidavits should not have been admitted because, in the light of the orders made by me, the facts in them were irrelevant to any issue in the proceedings and were contrary to the findings of the Court. See Joint Committee of River Ribble v Croston Urban District Council [1897] 1 QB 251. That is to say, the question of whether VTS had a right to relief was no longer an issue and Mr Russell was estopped by the res judicata of the consent order from raising the matter.

63. It was submitted that Mr Russell had made a decision to limit the costs of the proceedings by not challenging the original grant of the injunction, contenting himself with some variations and amendments. He did not submit, for example, that it should be set aside for any non-disclosure by VTS. Non-disclosure of relevant material in an ex parte application justifies the order gained being set aside: Thomas A Edison Ltd v Bullock [1912] HCA 72; (1912) 15 CLR 679 at 681-2.

64. The fact is, however, that Mr Russell did not make that application and, indeed, consented to the final continuation of the orders, albeit for a limited period. It is now too late to say that he had a basis for having the order set aside. He has made his forensic choice and is bound by it.

65. There were other matters raised by Mr Pattenden which, he submitted, undermined the claimed reasonableness of the commencement and conduct of the proceedings by VTS. For example, he submitted that a reading of the transcript showed some difficulties that VTS faced in obtaining the injunction in the first place and that amendments were necessary, especially when Mr Russell became represented in the proceedings.

66. Mr Pattenden also submitted that VTS made false claims and claims that it knew to be false. He submitted that, as it sought an equitable remedy (an injunction), it was required to come to the court with 'clean hands'. The maxim that 'they who come to equity must come with clean hands' is helpfully discussed in Peter Young, Clyde Croft and Megan Smith, On Equity (Thompson Reuters Lawbook Co: Sydney, 2009) at 180-4; [3.320]-[3.370].

67. It is, however, a matter of defence which requires, in this case, the Court to consider whether the right sought by VTS is one which, if protected, would allow VTS to take advantage of its own wrong (Xenou v Katsanas [2002] VSC 515; (2002) 7 VR 335 at 348). Thus, it did not address the so-called false claims but pre-action conduct which was relied on for the claim. None was, in fact, specified. Again, the fact of that consent order meant that this was an irrelevant claim.

68. This must be seen in the context that the general principle that costs follow the event may be modified so that a successful party may be deprived of costs or, indeed, required to pay costs for a discrete part of the proceedings. This is usually referred to as the "costs of issues".

69. In this context, the term "issue" is not used in the somewhat technical sense of a question that the court is required to decide on the pleadings. As McPherson J explained in R v Judges of District Court; Ex parte Kruger Enterprises (1982) 41 ALR 531 at 535:

The word "issue" is not defined by the Act, but it is, of course, a term well known in the context of legal proceedings. In a court of pleading having a procedural system modelled on that introduced by the Judicature Act it has been said that every fact in issue in the proceedings is not necessarily itself an "issue", but that an issue is: "that which, if decided in favour of the plaintiff, will itself give a right to relief, or would, but for some other consideration, in itself give a right to relief; and if decided in favour of the defendant will in itself be a defence": see Howell v Dering [1915] 1 KB 54 at 62, per Buckley LJ; also Ferne v Wilson [1901] VicLawRp 117; (1901) 26 VLR 829 at 830-1, per Hood J. Likewise, as was said by Diplock LJ in Fidelitas Shipping Co Ltd v V/O Exportchleb [1966] 1 QB 630 at 642 ; [1965] 2 All ER 4 at 10: "While an issue may thus involve a dispute about facts, a mere dispute about facts divorced from their legal consequences is not an 'issue'."

70. On the other hand, for the purpose of a derogation from the general rule that costs follow the event, and that a party other than the successful party may have or not be required to pay the costs of an issue or issues, the word "issue" does not have such a meaning, for that is, in fact, generally what leads to "the event". Rather, it means any disputed question of law or fact as identified by Bray CJ in Cretazzo v Lombardi (1975) 13 SASR 4 at 12, by reference to Foster v Farquhar [1893] 1 QB 564 at 570, where Bowen LJ referred to "separate heads of controversy" which, as his Lordship remarked, "were different issues, though not different issues, not even issues at all, in the sense in which pleaders use the term".

71. This is not an easy area. Although made in 1992, the comment of Thomas J in Colburt v Beard [1992] 2 Qd R 67 at 69 is apposite, where his Honour commented;

... I do not think that the identification of "issues" or of separating discrete parts of the litigation capable of being separately taxed as to which it is reasonable for the trial judge to make separate orders has ever satisfactorily been resolved.

72. That cry of frustration has, if heard, not been satisfied since then. It is, however, perhaps helpful to understand the purpose served by such costs orders. Thus, Wilcox J pointed out in Commissioner of Australian Federal Police v Razzi (No 2) [1991] FCA 267; (1991) 30 FCR 64 at 69:

In these days of extensive court delays and high legal costs the courts should use all proper means to encourage parties to consider carefully what matters they will put in issue in their litigation. If parties come to realise that they will not necessarily recover the whole of their costs, even though they have unsuccessfully raised a discrete issue, they are likely better to consider whether the raising of that issue is a justifiable course to take.

73. On the other hand, there is a need to recognise the chilling effect that too ready an application of the power to make separate orders as to the costs of issues may have. As Jacobs J pointed out in Cretazzo v Lombardi at 16:

... trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law. The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike. I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues.

74. The only matter that could be so described was in respect of the order sought for delivery up of documents. VTS did not proceed with that order, which it had originally sought, and no order was made in consequence. There was, however, no evidence of substance addressed to that question, no separate hearing, no extra time taken to deal with it. In terms of how the authorities define a separate issue, it was not a separate issue for which a separate costs order should be made.

75. Further, the added complexity of considering such questions is a matter to be taken into account. As the Western Australian Court of Appeal explained in Bowen v Alsanto Nominees (Pty Ltd) [2011] WASCA 39 (S) at [6]- [7]:

The court may, in the exercise of its discretion, order that a successful party recover only a portion of its costs where that party has been unsuccessful in respect of certain discrete issues. But that should not be done as a matter of course. To embark as a general practice upon an analysis of which party was successful on each issue, or necessarily to deprive a successful party of some portion of its costs if it has lost on a particular issue, would be likely to add further uncertainty and complexity to the outcome of litigation, derogate from the prospect of settlement, and oblige the court to hear lengthy and frequent arguments in relation to costs as an additional burden on its resources and the costs of the parties: see MacKinnon v Petersen (Unreported, NSWSC, 19 April 1989) (Cole J); Oshlack v Richmond River Council [1998] HCA 11 ; (1998) 193 CLR 72 [67]-[68] (McHugh J). Litigation is time-consuming, expensive and burdensome enough already.
In addition, while parties should be encouraged to consider carefully what matters they put in issue, justice may not be served if by too ready a resort to deciding questions of costs according to success on particular issues, parties are dissuaded by the risks of costs from canvassing all issues which might be material to the decision in the case: Doric Products Pty Ltd v Lockwood Security Products Pty Ltd [2002] FCA 282; NRMA Ltd v Morgan (No 3) [1999] NSWSC 768 [24].

76. The general approach to the decision on whether a costs order should be made as to specific issues has been carefully articulated by the Western Australian Court of Appeal in Amaca Pty Ltd (formerly known as James Hardie & Co Pty Ltd) v Hannell [2007] WASCA 158(s) at [7], namely that the discretion to apportion costs or make separate orders as to costs of issues will generally or be exercised

where there are discrete and severable issues upon which the generally successful party has failed, and which have added to the cost of the proceedings in a significant and readily discernible way.

77. In this case, there were a number of areas where, during the course of the litigation, VTS was not successful in what it asked of the Court. These matters, in themselves, were not "discrete and severable issues" and in no case did they add to the cost of proceedings "in a significant and readily discernible way". Finally, such a test was not addressed by Mr Pattenden at all.

78. Indeed, the ultimate order was simply a truncated version of the original order. That, of itself, is insufficient to activate the "costs of issues" approach. This is particularly relevant in injunction proceedings where the making of the initial ex parte order often has the effect of bringing the parties to a negotiation, as clearly occurred here, where the final result is not necessarily indicative of the successful effect of earlier orders which may have caused some change in conduct or activities also.

79. The significant thing, however, is that none of the matters raised by Mr Pattenden could realistically be described as a significant issue which added to the costs of the proceedings in a substantial way. Mr Patterden has not made out his case for costs or in opposition to the VTS application.

80. At one stage, it was submitted for Mr Russell that he was entitled to damages under the usual undertaking as to damages that had been given by VTS.

81. The usual undertaking is set out in Supreme Court Practice Direction No 3 of 1999, "Shortened Forms of Orders" as follows:

The "usual undertaking as to damages" if given to the Court in relation to any interlocutory order made by it or any interlocutory undertaking given to it, is an undertaking:

(a) to submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person, whether or not a party, adversely affected by the operation of the interlocutory order or undertaking or any continuation (with or without variation) thereof; and

(b) to pay the compensation referred to in (a) to the person there referred to.

82. As expressed, it could be argued to be applicable by Mr Russell, whose employment was terminated by MIT Services as a result of the injunction.

83. Such damages, however, are only payable if the injunction is discharged or held to be invalidly or improperly made. It is only necessary to quote what Dr ICF Spry said in his important text, Equitable Remedies (Thomson Reuters, Lawbook Co: Sydney, 2014) 9th ed, 680-1:

In order that the court may conclude that the defendant should be compensated pursuant to an undertaking earlier given by the plaintiff, it is generally necessary that he should be able to show that the interlocutory or interim injunction in question has been wrongly obtained, wrongly, that is, in the sense that if the matters in issue had been able to be fully investigated at the interlocutory application it would have appeared that the plaintiff was not entitled to relief and accordingly no injunction would have been granted or, alternatively, that an injunction would have been granted in materially narrower terms.

84. Given that the injunction has been continued, and by consent, there is no occasion for the court to consider the applicability of the undertaking as to damages.

85. Having carefully considered the evidence adduced and the submissions made, I have come to the view that Mr Russell must pay the costs of VTS. I shall so order.

I certify that the preceding eighty-five [85] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Refshauge.

VTS IT Pty Limited v Russell [2015] ACTSC 230

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Judgment (129 paragraphs)

VTS IT Pty Limited v Russell [2015] ACTSC 230 (14 August 2015)

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Cases Cited (9)