FEDERAL COURT OF AUSTRALIA Pro-Pac Packaging (Aust) Pty Ltd v Penn (No 2) [2020] FCA 710 File number: NSD 126 of 2020 Judge: BURLEY J Date of judgment: 25 May 2020 Catchwords: PRACTICE AND PROCEDURE – preliminary discovery – costs – whether application for preliminary discovery should be dismissed – where prospective respondents agreed to provide preliminary discovery – where dismissal of proceedings would not prevent the prospective applicant from later commencing substantive proceedings – whether prospective applicant should pay the prospective respondents' costs of these proceedings Legislation: Federal Court Rules 2011 (Cth) r 7.23 Corporations Act 2001 (Cth) s 183 Cases cited: Harman v Secretary of State for the Home Department [1983] 1 AC 280 Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd (No 2) [2019] FCA 657 Date of hearing: 22 May 2020 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Category: Catchwords Number of paragraphs: 16 Counsel for the Prospective Applicant: J. Dooley Solicitor for the Prospective Applicant: Allens Counsel for the First and Second Prospective Respondents: D. Larish Solicitor for the First and Second Prospective Respondents: Abadee Dresdner & Freeman Pty Ltd Solicitor for the Third Prospective Respondent: S. Bolzon of Lynch Meyer Lawyers ORDERS NSD 126 of 2020 BETWEEN: PRO-PAC PACKAGING (AUST) PTY LTD (ACN 059 499 660) Prospective Applicant AND: BRANDON PENN First Prospective Respondent NENAD MILINKOVIC Second Prospective Respondent GORDON FENBOW Third Prospective Respondent JUDGE: BURLEY J DATE OF ORDER: 25 May 2020 THE COURT ORDERS THAT: 1. The Prospective Applicant is to pay the First and Second Prospective Respondents' costs of giving preliminary discovery, and of these proceedings. 2. The Prospective Applicant is to pay the Third Prospective Respondent's costs of giving preliminary discovery. 3. Within seven days of the date of this order, the Prospective Applicant may file a submission of no more than two pages in relation to whether it should pay the Third Prospective Respondents' costs of these proceedings. 4. Within seven days thereafter, the Third Prospective Respondent may file a submission in response of no more than two pages. 5. The proceedings otherwise be dismissed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT BURLEY J: 1 The prospective applicant in the present proceedings is Pro-Pac Packaging (Aust) Pty Ltd. Brandon Penn, Nenad Milinkovic, and Gordon Fenbow are, respectively, the first, second and third prospective respondents. In its Originating Application Pro-Pac sought orders pursuant to r 7.23 of the Federal Court Rules 2011 (Cth) that the respondents, who were each former employees of Pro-Pac, give preliminary discovery of certain communications. In an affidavit in support of the application affirmed on 11 February 2020 Johnathan Light, a solicitor employed by Allens, the solicitors for Pro-Pac, gave evidence that the prospective proceedings in respect of which the relief was sought concerned proposed causes of action for breach by the respondents of their respective employment contracts, breach of confidence owed to Pro-Pac, contravention of s 183 of the Corporations Act 2001 (Cth) and their knowledge of and involvement in potential statutory contraventions by other parties, such as misleading or deceptive conduct. 2 On 5 March 2020 I made orders that Mr Penn and Mr Milinkovic give preliminary discovery in accordance with paragraphs 1 and 2 of the Originating Application by 12 March 2020. On 1 April 2020 I made an order that Mr Fenbow give preliminary discovery in accordance with paragraph 3 of the Originating Application by 9 April 2020. The respondents consented to the making of these orders. 3 On the same dates, I also ordered: (a) that Pro-Pac pay Mr Penn and Mr Milinkovic's costs of these proceedings, together with their costs of complying with the requirement to give preliminary discovery, unless, on or before 15 May 2020 (which I refer to below as the "trigger date"), Pro-Pac commences substantive proceedings substantially as foreshadowed. In the event that such an action is commenced, the orders provide that the costs will be costs in that action. (b) That Pro-Pac pay Mr Fenbow's costs of providing preliminary discovery unless by the trigger date, Pro-Pac commences substantive proceedings substantially as foreshadowed. In the event that such an action is commenced, the orders provide that the costs of compliance will be costs in that action. Those orders were made by consent, save as to the trigger date in (a). Messrs Penn and Milinkovic submitted that the appropriate trigger date was 16 April 2020, while Pro-Pac submitted that given that it was involved in a related dispute (being Federal Court proceedings NSD 127 of 2020), which was then being conducted on an expedited basis, a trigger date of 15 May 2020 was appropriate. 4 Each of the respondents have now given preliminary discovery by filing affidavits in response to the discovery sought. Mr Penn and Mr Fenbow have discovered no documents. Mr Milinkovic discovered one document of approximately 300 pages on 12 March 2020. 5 Pro-Pac now applies to "extend the time for commencement of proceedings to 19 June 2020". The application concerns the liability of Pro-Pac to pay the respondents' costs of providing preliminary discovery, and Mr Penn and Mr Milinkovic's costs of the preliminary discovery application. There is no doubt that if an extension of the trigger date is refused, Pro-Pac can commence proceedings against the respondents at a later time. 6 The respondents oppose the grant of the extension of time. They submit that Pro-Pac has had adequate time. They further submit that the proceedings should be dismissed. Pro-Pac opposes an order that the proceedings be dismissed. 7 Pro-Pac relies on two affidavits affirmed by Mr Light on 20 May 2020 and 21 May 2020. The respondents refer to their affidavits of discovery to support the contention that they have provided preliminary discovery in accordance with the Court's orders, and have tendered an email chain relevant to an aspect of the argument. 8 Pro-Pac initially advanced four submissions in chief in support of their application. The second, to which I refer below, was subsequently withdrawn. 9 First, on the basis that the "same legal teams" are involved in NSD 127 and that there is significant on-going work in that other case, in combination with the altered environment resulting from the COVID-19 pandemic, Pro-Pac's ability to consider the "totality of the documents in its possession" has been impacted. 10 I find this submission unpersuasive and it should be given little weight. Whilst the Court has considerable sympathy for the constraints under which practitioners are operating because of the restrictions caused by COVID-19, the fact of the matter is that the proposed proceedings against these respondents are limited in compass. Only one document, albeit that it is 300 pages in length, has been produced, and it was discovered two months ago. Two of the respondents produced no documents. Furthermore, it was Pro-Pac who proposed that the trigger date be 15 May 2020. Mr Penn and Mr Milinkovic opposed that order. I accepted Pro-Pac's submission that further time was appropriate. In effect, the time sought was granted. Furthermore, the fact that Pro-Pac is engaged in separate proceedings, against different parties (save for Mr Penn, who is a respondent in both) is not material. Pro-Pac chose to commence two separate proceedings. Mr Milinkovic and Mr Fenbow are not party to the other proceedings. Mr Penn is being burdened by both. It is a matter for Pro-Pac to determine the appropriate resourcing for both proceedings. 11 Secondly, Pro-Pac submitted that by reason of the production of documents by third parties under subpoena in NSD 127, it formed the view that there may have been incomplete discovery by the second and/or third prospective respondents. That submission, and the part of the affidavit of Mr Light upon which it was based, appeared to involve the use of documents in a manner that was contrary to the implied undertaking arising from the principles in Harman v Secretary of State for the Home Department [1983] 1 AC 280. Upon this being pointed out to counsel for Pro-Pac, the submission, and the affidavit material, were withdrawn. 12 Thirdly, Pro-Pac contended that access to the document produced in these proceedings had until recently been limited to its solicitors and counsel. They submit that it is desirable that Ms Forbes of Pro-Pac be granted access to consider that document. However, as it transpires, access for Ms Forbes was not sought by Pro-Pac until 8 May 2020. On 11 May 2020 the solicitors for Mr Milinkovic responded. It is no doubt appropriate in most cases for a client representative to have access to information relevant to the decision of whether or not to commence legal proceedings prior to that decision being made. Sometimes the information can be provided in a manner that does not betray the confidential material sought to be protected. In others, it is unavoidable that it be supplied. However, whilst this factor may be given some weight, Mr Light offers no explanation in his affidavit as to why it took over seven weeks after the receipt of the information, and seven days before the expiry of the time allotted to commence proceedings without a costs order, to ask for Ms Forbes to be permitted to see the document. Nor, as I have noted, would the refusal of the extension sought have the effect of precluding Pro-Pac from making a decision to commence the proceedings. 13 Fourthly, Pro-Pac contends that there is no identifiable prejudice to the respondents. That is likely to be true in the context of the costs position, but not in respect of the continuation of the proceedings. Preliminary discovery is an invasive process. It takes place at a point in time when no cause of action has been formulated against a person, and by process of compulsion requires the production of documents: see Pfizer Ireland Pharmaceuticals v Samsung Bioepis AU Pty Ltd (No 2) [2019] FCA 657 at [25] – [27]. It is in the interests of the administration of justice that a prospective applicant commence proceedings expeditiously upon compliance with the orders made. One means of encouraging that outcome is to provide a reasonable, but not overly generous time frame for the prospective applicant to commence proceedings, failing which it should bear the costs of the application. These matters were relevant to the decision to allocate the trigger date provided in the orders that I made. They are also relevant to consideration of whether or not to extend the time sought. 14 Having regard to the arguments raised by the parties, I am of the view that the trigger date in the orders made on 12 March 2020 and 1 April 2020 have provided Pro-Pac with a reasonable time within which to commence any proceedings. I do not consider that the circumstances that it now raises are sufficient to warrant a further extension of one month. Nor do I consider that there is any good reason why the proceedings should not be dismissed. As I have noted, the refusal of the extension of time does not prevent Pro-Pac from bringing the proposed proceedings. It has previously agreed that the date nominated was sufficient. The reasons advanced for further time to be allowed are unpersuasive. There is an interest in disposing of preliminary discovery applications once the orders sought have been granted. The respondents each co-operated with Pro-Pac to answer the request without contest. Each is a private individual, who is entitled to see a resolution of the matter with relative expedition. 15 The position in relation to Mr Penn and Mr Milinkovic on the one hand and that of Mr Fenbow on the other is slightly different insofar as it concerns costs. The orders made in relation to Mr Penn and Mr Milinkovic provide that the costs of their provision of preliminary discovery and of the proceedings be ordered in their favour if the trigger date passes with no commencement of proceedings. For Mr Fenbow, it is only the costs of the provision of preliminary discovery that are addressed in the 1 April 2020 orders. 16 In my view it is appropriate that the proceedings against all respondents be dismissed. To avoid any further disputation, given that 15 May 2020 has come and gone without the commencement of proceedings by Pro-Pac, I will order that it pay Mr Penn and Mr Milinkovic's costs of giving preliminary discovery and of the proceedings. I will order that it pay Mr Fenbow's costs of giving preliminary discovery. It seems to me that there is no good reason for Pro-Pac not to pay Mr Fenbow's costs of the proceedings too, but I will give Pro-Pac seven days in which to make a submission on the point in the event that it wishes to, and Mr Fenbow seven days thereafter to respond, in the event that there is a point to be made. If no submission is made by Pro-Pac an order that it pay Mr Fenbow's costs will also be made. Otherwise the question will be separately determined on the papers. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Burley. Associate: Dated: 25 May 2020