Legend Corporate Services Pty Limited & Anor v Rimes & Ors

1. [1]

   This matter concerns a question of costs arising from a Summons for preliminary discovery filed in this Court on 21 June 2023. The plaintiffs contend that each party should bear his or its own costs. The defendants contend that the plaintiffs should pay their costs on the ordinary basis.

2. [2]

   Several matters are not in dispute. All parties agree that orders were made by consent giving preliminary discovery to the plaintiff on 12 September 2023. All parties agree that there was no hearing on the merits. All parties agree that if I make no order as to costs, I should make an order noting that, in the event that the plaintiff commences substantive proceedings against the defendants as a result of the production of documents the subject of the orders made on 12 September 2023, the order with respect to costs is made without prejudice to the right of the parties to apply to the Court for relief in any future substantive proceedings that have the effect of varying the order.

Evidence

1. [3]

   Mr Furlan, who appeared for the plaintiffs, relied on its submissions which appended the consent orders filed by the parties and a copy of the Summons marked-up to indicate the differences between the orders the plaintiffs sought in their application and the orders that were ultimately agreed to by all parties. Those documents indicate that there was some considerable negotiation between the parties between 21 June 2023 and 12 September 2023.

2. [4]

   Mr Caillard, who appeared for the first and second defendants, read parts of the affidavit of Scott Rimes and 22 pages of annexures. That evidence discloses that there was correspondence between the plaintiffs and the first and second defendants in March 2021 seeking to narrow the issues in dispute, and confirming undertakings previously given to the plaintiff by the first and second defendants. Correspondence from the first and second defendant’s solicitors denied that there was a proper basis for the plaintiffs to bring an application for preliminary discovery.

3. [5]

   Mr Skender, who appeared for the third defendant, read the affidavits of Julian John Anderson sworn on 21 August 2023 and the affidavit of David Kingsley John Skender sworn on 21 August 2023. That evidence discloses that the third defendant had significant concerns about the disclosure of confidential and commercially sensitive information to the first plaintiff who is its competitor. It also discloses that the third defendant cooperated with the plaintiffs in attempting to address those concerns without the need for a contested hearing.

Plaintiffs’ Submissions

1. [6]

   The plaintiffs’ essential submission was that the authorities (to which see below) are clear in the sense that if there is no hearing on the merits, and the plaintiff has not acted unreasonably, the inevitable costs order would be no order as to costs.

First and Second Defendants’ Submissions

1. [7]

   Mr Caillard, who appeared for the first and second defendants, submitted that the plaintiffs had behaved unreasonably prior to filing the Summons and that had they continued to negotiate with the first and second defendants, the need for commencing the proceedings would have been avoided. He submitted that the plaintiffs’ conduct was such that they ought to pay his client’s costs.

Third Defendant’s Submissions

1. [8]

   Mr Skender submitted that the plaintiffs’ conduct was not unreasonable. Rather, he relied on a decision of Barrett J in Bio Transplant Inc v Bell Potter Securities Ltd [2008] NSWSC 694 (‘Bio Transplant’) (a preliminary discovery case resolved prior to hearing), to submit that because a binding confidentiality regime had to be put in place by a Court, and as the plaintiffs and the third defendant were trade competitors, the plaintiffs ought to pay the third defendant’s costs.

Consideration

1. [9]

   In Renton v Kelly [2018] NSWSC 1377 (‘Renton’), a case in which an application for preliminary discovery was resolved without the need for a contested hearing (as is the case here), the plaintiff sought its costs whilst the defendant sought an order that there be no order as to costs. At [55] – [56] Ward CJ in Eq, as her Honour then was, said:-

2. [10]

   It is uncontroversial that costs are within the discretion of the court and that the general rule is that costs follow the event, which is typically a hearing on the merits.

3. [11]

   In Re Minister for Immigration & Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622 at 624 – 625; [1997] HCA 6 (‘Lai Quin’):-

4. [12]

   As Ward CJ in Eq said in Renton at [56], the word “so” used by McHugh J in the expression “so unreasonably”, indicates a level of unreasonableness which is to be established by the circumstances in which the costs were incurred.

5. [13]

   In Ainsworth & Anor v Stapleton Johnson & Partners [2020] NSWSC 252 (another preliminary discovery case resolved prior to hearing), Campbell J said at [24] – [25]:-

6. [14]

   The real question on this application, in my opinion, is whether or not there is evidence that the plaintiff acted “so unreasonably that the other party should obtain the costs of the action”.

7. [15]

   The evidence discloses that the parties negotiated, at length, prior to the filing of the Summons. They were unable to resolve their differences prior to the filing of the Summons, which is not unusual. They were able to resolve their differences after the filing of the Summons which is also not unusual, and is commendable. Neither the plaintiffs nor the defendants, in my opinion, behaved unreasonably. On the contrary, after the Summons was filed, so far as I can glean on the (appropriately) limited evidence before me, the parties continued to negotiate until they came to a concluded position with which each was satisfied. They are to be congratulated for resolving their differences without resorting to a contested hearing, and achieving a just, quick, and cheap resolution. As to Mr Skender’s submissions, I observe that in this case negotiations between the parties led to the implementation of a confidentiality regime prior to and leading up to the entry of orders made by consent. I do not understand the decision of Barrett J in Bio Transplant to mean that in every preliminary discovery application in which a confidentiality regime is put in place, an order will inevitably be made that a plaintiff pay the defendant’s costs of the application. Such an outcome would be contrary to the principle stated in Lai Qin, to which Barrett J was apparently not referred and which he did not consider in Bio Transplant.

8. [16]

   In my view, there having been no hearing on the merits and there being no evidence of unreasonableness by any party, there should be no order as to the costs of the preliminary discovery application (including this costs application).

9. [17]

   I make the following orders:-

   1. (1)

      There be no order as to costs to the intent that each party bear his or its own costs of the preliminary discovery application.

   2. (2)

      Order (1) above is made without prejudice to the right of any party to apply to the Court, if the plaintiff commences substantive proceedings against any or all of the defendants as a result of the production of documents the subject of the orders made by consent on 12 September 2023, for relief in those proceedings that has the effect of varying this order.