ASSK Investments Pty Ltd v Tyrrell

THE COURT: ASSK Investments Pty Ltd sued its former employee Mr Paul Tyrrell in May 2022 based on a claim of breach of confidence after he left to work for another smash repair business. ASSK is approved to provide repairs to Aston Martin and Jaguar cars; according to ASSK, the rival is not. The commencement of proceedings was preceded by correspondence between ASSK’s solicitor and Mr Tyrrell, which ASSK contends was insufficiently candid. ASSK seems never to have sought interlocutory relief. The only substantive relief it sought was injunctive relief and orders for delivery up. After there was disagreement about providing documents informally, ASSK issued a motion for discovery, to which Mr Tyrrell consented, and thereafter formal discovery was given. The costs of that motion were reserved. ASSK thereafter sought leave to discontinue the proceedings.

The primary judge, Henry J, gave an ex tempore judgment. Her Honour found that ASSK had not displaced the default position in r 42.19 of the Uniform Civil Procedure Rules 2005 (NSW) for it to pay Mr Tyrrell’s costs of both the proceedings and the motion: ASSK Investments Pty Ltd v Tyrrell [2023] NSWSC 271. Her Honour explained at [21] that the rule “provides a default position in relation to costs that is subject to the discretion of the Court, with the onus on the plaintiff to establish that there is some sound position or good reason for departing from the ordinary course whereby the plaintiff would be required to pay the costs of the proceedings: Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32, at [53]-[54]; see also Walton v Commonwealth Bank of Australia [2020] NSWCA 191, at [26]-[27]”. ASSK seeks leave to appeal from her Honour’s decision. It was not suggested there was any error in the formulation of the applicable principle.

Four points may be noted from the outset about the nature of this application for leave to appeal.

The first eight proposed grounds of appeal are directed to her Honour’s conclusion that Mr Tyrrell did not act unreasonably in failing to respond to ASSK’s inquiries before it commenced litigation. None asserts any error of principle in the application of the discretion conferred by the rules. In substance, all are directed to the ultimate question: whether her Honour was wrong to have reached that conclusion. But all fall well short of establishing or even asserting that this was a case where there has been an injustice which is reasonably clear, as opposed to one that is merely arguable. ASSK’s written submissions did not address any of those matters. In substance, they merely sought to reargue the matters raised before the primary judge, which her Honour considered at length, and rejected as a proper basis for departing from the default position under the rules. As much was pointed out by Mr Tyrrell’s succinct written submissions in response.

However, in oral submissions advanced by Mr Neil KC, who did not appear below and did not sign the written submissions, the case for a grant of leave was propounded on the basis of a clear injustice, to which was added a submission that a more “collegiate” as opposed to technical approach was warranted in relation to both pre-commencement correspondence and informal discovery.

At the heart of ASSK’s case on the merits is its claim that Mr Tyrrell in fact had certain information concerning the repair methods or procedures for Jaguar and Aston Martin vehicles. Before commencing proceedings, ASSK had asked somewhat different questions. ASSK’s solicitor’s letter asserted:

That letter was emailed to Mr Tyrrell at 5.34pm on a Friday afternoon. On the Sunday, he replied “I have never taken estimates, images or repair methods from your client”. It is now accepted by ASSK that that was true. At the heart of ASSK’s submissions in this Court is the proposition that Mr Tyrrell should have volunteered something already known to ASSK, namely, that he had come into possession of documents relating to the repair of Aston Martin and Jaguar vehicles from another source.

ASSK had received two emails that were forwarded to it in October and November 2020 and which suggested that Mr Tyrrell had obtained what was said to be confidential information concerning the repair of Aston Martin and Jaguar vehicles. ASSK did not notify Mr Tyrrell of the particular emails in its possession on which its concerns seem to have been based. Instead, it wrongly accused him of taking documents from it, which he denied. Only after ordered to provide discovery did Mr Tyrrell confirm that he had such documents but that they had been provided to him by his new employer.

ASSK says that it was reasonable for it to commence proceedings, and reasonable for it to discontinue them following the receipt of Mr Tyrrell’s discovery.

The primary judge gave careful consideration to this claim at [29]-[35] (the two emails are the “Emails”, and the allegedly confidential information is the “Repair Methods”):

None of that reasoning is demonstrably wrong so as to give rise to a clear injustice. To the contrary, it is correct. In particular, we do not accept that there was any basis for departing from the default position in the rules because of Mr Tyrrell’s failure to volunteer fuller information concerning the materials in his possession when he had given a square answer to the questions he had been asked and in circumstances where ASSK had not only made an incorrect assumption but had also declined to put to him candidly the matters of which it was aware. We also note that no error was contended in other circumstances mentioned by the primary judge, which we also regard as clearly correct, namely, that there were difficulties in ASSK’s case based on the employment contract, and on whether if indeed the documents were at any time confidential, ASSK was entitled to enforce that confidentiality (these points are now academic, since ASSK tendered them at the hearing without any confidentiality, a further point made by Mr Tyrrell at the hearing).

At the forefront of ASSK’s oral submissions was a separate issue which gave rise to proposed grounds 9 and 10. This is a complaint about a particular aspect of the litigation. For around five weeks in late June and July 2022, there was correspondence concerning the provision by Mr Tyrrell of the documents claimed by ASSK to be confidential. ASSK’s solicitor sought production informally, and offered confidentiality undertakings. Mr Tyrrell’s solicitors sought a formal order for discovery. A notice of motion was filed seeking discovery, to which Mr Tyrrell consented, and pursuant to that regime provided an affidavit and documents. ASSK says that this was unreasonable, and should not have been necessary. It relied on statements made by Kunc J in Tugrul v Tarrants Financial Consultants Pty Ltd ACN 086 674 179 [No 5] [2014] NSWSC 437 at [64]-[77] to the general effect that legal practitioners should minimise the need for interlocutory disputes, and complained that although this decision was cited to the primary judge, her Honour did not refer to it.

There is nothing in this point. First, the primary judge gave a careful ex tempore judgment, at the parties’ request, noting at the time she offered to do so that if she took that course, her reasons would be briefer. ASSK acceded to that course. Secondly, this was, self-evidently, a case where formal discovery was appropriate. Mr Tyrrell was employed by a rival to ASSK. There are obvious difficulties in him voluntarily providing ASSK with documents in his possession which were owned by his employer. Thirdly, the consent regime did not appreciably delay the litigation. Fourthly, consistently with what was said by Kunc J, the evidence discloses that the solicitors were in communication with one another, and not merely by formal correspondence (which was courteous) but also informally in order to minimise the time and costs on both sides. Fifthly, there was no evidence as to the costs involved in this minor aspect of the case (nor was there any evidence about the parties’ costs overall) but there seems no reason to doubt that the additional costs of obtaining discovery by a consent motion as opposed to a regime agreed in correspondence were relatively small (and vastly exceeded by the costs of the application for leave).

The primary judge addressed this point at [36]:

Once again, no error is contained in those reasons.

ASSK relied on the decision of In the matter of 1st Fleet Pty Ltd (in liq) and other companies [2017] NSWSC 506 where a liquidator commenced proceedings shortly before the expiry of a limitation period and where it was held that the defendant should have responded to the liquidators’ inquiry. The facts were different, including that the liquidator had little choice before the limitation period expired to commence proceedings. This decision does not greatly assist ASSK to say that the discretion of the primary judge miscarried, let alone that there should be a grant of leave.

No basis has been made for the grant of leave from a decision not to depart from the ordinary operation of the rules as to costs when a party discontinues proceedings. Leave should be refused. There is no reason to displace the ordinary operation of the rules as to the costs of this appeal. ASSK must pay Mr Tyrrell’s costs in this Court.