Supreme Court New South Wales Medium Neutral Citation: Skytraders Pty Ltd v Meyer [2023] NSWSC 857 Hearing dates: On the papers Date of orders: 21 July 2023 Decision date: 21 July 2023 Jurisdiction: Equity - Duty List Before: Richmond J Decision: The costs of the Notice of Motion filed on 9 May 2023 will be costs in the cause Catchwords: COSTS — party/party — costs orders in interlocutory proceedings — whether costs should be the defendant's costs in the cause Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW), r 42.7 Cases Cited: His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand v The Macedonian Orthodox Community Church St Petka Incorporated (No 2) [2007] NSWCA 142 Category: Costs Parties: Skytraders Pty Ltd (Plaintiff) Ian Wallace Meyer (Defendant) Air Affairs (Australia) Pty Ltd (Non-party) Representation: Counsel: Mr A Zahra SC (Plaintiff) Mr M Davis (Defendant) Mr B Mostafa (Non-party) Solicitors: Gilbert + Tobin (Plaintiff) Arnold Bloch Leibler (Defendant) Ashurst (Non-party) File Number(s): 2021/00075965 JUDGMENT 1. On 3 July 2023, I made orders disposing of the plaintiff's Notice of Motion filed on 9 May 2023. The orders provide for a procedure to secure the production of confidential documents of the plaintiff stored on various devices of the defendant, and the removal of those documents from the devices. As to costs, I indicated on 3 July 2023 that I thought the appropriate order was that the costs of the Notice of Motion should be costs in the cause. However, at the request of the defendant, I made orders allowing each party to make submissions on costs because the defendant wished to apply for a different order. Both parties have now filed submissions in which the defendant seeks an order that the costs of the Notice of Motion be the defendant's costs in the cause and the plaintiff seeks an order that each party's costs of the Notice of Motion be costs in the cause. 2. Although costs are always in the discretion of the Court, the usual position in interlocutory applications is that the costs of the parties should be costs in the cause, as reflected in r 42.7 of the Uniform Civil Procedure Rules 2005 (NSW). This provision is discussed in His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand v The Macedonian Orthodox Community Church St Petka Incorporation (No 2) [2007] NSWCA 142 at [16]-[28]. 3. An order that costs be in the cause means that the costs of the interlocutory application correspond with the final order for costs in the proceedings so that the successful party at the final hearing will also be entitled to their costs of the interlocutory application. The rationale for making such an order is that, at the stage of determining the interlocutory application, the Court is not in a position to adjudicate on the ultimate outcome of the proceeding, and justice often requires that the party required to bear the costs of the interlocutory application be determined by the ultimate outcome of the proceedings. Alternatively, the appropriate order may be that the costs of the interlocutory application be a particular party's costs in the cause, which means that if that party succeeds on the final hearing, then it will be awarded the costs of the interlocutory application, but if that party loses on the final hearing, it will not be liable for the other party's costs of the interlocutory hearing. I note that an order of the latter kind was the order ultimately made in Macedonian Orthodox Church in relation to the costs of an interlocutory hearing. Ordinarily, the making of an order of the latter kind rather than the former would be based on there being a good reason why the other party should not recover its costs of the interlocutory hearing if it is ultimately successful. 4. The defendant advanced two reasons why the costs of the plaintiff's Notice of Motion should be the defendant's costs in the cause. First, he submits that the substantive issue in dispute was what regime should be adopted and implemented for the protection of confidential documents of Air Affairs (Australia) Pty Ltd (Air Affairs) which is a competitor of the plaintiff and the defendant's current employer, but is not a party to these proceedings. He submits that the plaintiff refused to directly engage with Air Affairs and that this resulted in significant costs being incurred by him as a consequence of his solicitors having to act as an intermediary between the plaintiff and Air Affairs in having to prepare for and appear at the hearing of the Notice of Motion. This could have been avoided had the plaintiff acted reasonably and engaged with Air Affairs prior to filing the Notice of Motion once it became aware of Air Affairs' interest in the matter on 4 April 2023. (I note that Air Affairs sought and was given leave to appear at the hearing of the Notice of Motion and does not seek its costs of that appearance.) 5. Second, the defendant submits that Air Affairs had proposed orders prior to the hearing of the Notice of Motion that were, in respect of the main issues in dispute between Air Affairs and the plaintiff, ultimately accepted by the Court and the plaintiff acted unreasonably in not accepting those orders and requiring the parties to proceed to a hearing of the interlocutory application. 6. The plaintiff submits that the appropriate order is that the costs of the Notice of Motion be the parties' costs in the cause because there are no countervailing circumstances warranting the exercise of the discretion in r 42.7 to order otherwise. The plaintiff draws attention to the following matters in particular: 1. Each party had some success in relation to the Notice of Motion (in other words, the final orders made reflected in part the position put by the plaintiff and in part the position put by Air Affairs). I do not understand there to be any dispute that this is correct. 2. The form of orders put forward by the plaintiff on the Notice of Motion reflected a position which it had agreed with the defendant prior to Air Affairs becoming involved and the defendant subsequently resiled from this position on the basis that he simply deferred to Air Affairs. 3. The Notice of Motion was filed in circumstances where, relevantly: there was evidence that the defendant had downloaded files from the plaintiff's computer system without its authorisation; a search of the defendant's computer devices for documents containing specific (agreed) terms by an independent expert had revealed that he had possession of more than 330,000 documents that contained those terms; the defendant was in breach of the Court's orders originally made on 22 July 2022 requiring that he provide disclosure by verified discovery of those documents by 7 January 2023 (the time for compliance with the 22 July orders having previously been extended more than once); and there ensued lengthy correspondence between the parties to resolve the dispute as to the defendant's failure to comply with the 22 July orders. All of this was in circumstances where the defendant acknowledged that the plaintiff was entitled to have its documents returned. 4. The plaintiff disputes the defendant's assertion that he had to act as an intermediary for Air Affairs. Rather, the plaintiff says that this was the position which the defendant chose to adopt, no doubt because Air Affairs is his current employer, and thereby chose to incur costs consequential upon doing so. Further, rather than seeking to contest the orders sought by the plaintiff, the appropriate course for the defendant to adopt would have been to comply with the 22 July orders for verified discovery which had inbuilt provisions protecting the confidentiality of documents of third parties, including Air Affairs. The defendant should have drawn the Notice of Motion to Air Affairs attention and refrained himself from taking an active part in the disposition of the Notice of Motion. Indeed, the plaintiff points out that at the hearing of the Notice of Motion this is broadly what occurred, as counsel for the defendant said that his client's role was ("for the most part") to interplead between the plaintiff and Air Affairs. 1. In my opinion, the appropriate order is that the costs of the Notice of Motion be each party's costs in the cause. 2. First, I do not consider that the plaintiff's approach in bringing to a head the dispute regarding the regime for production of the documents by filing the Notice of Motion was unreasonable or inappropriate. The background to the Notice of Motion is relevantly summarised in the plaintiff's submissions referred to at [6(c)] above. At the hearing of the Notice of Motion, broad agreement had been reached as to the regime for production of the relevant documents, but three areas of dispute remained. I preferred the Air Affairs' version for two of those areas. However, the plaintiff's approach was not unreasonable, and the differences were matters of degree, given that each version was directed to the same end - the timely production of the plaintiff's documents while protecting the confidentiality of Air Affair's documents which have been mixed with the plaintiff's documents on the defendant's devices through no fault of the plaintiff. For these reasons I do not agree with the submissions referred to at [4] and [5] above. 3. Second, it is clear from the evidence before the Court that there has been a long-standing debate (including lengthy correspondence) between the plaintiff and the defendant regarding the procedure for disclosure, extending for many months prior to 4 April 2023 (which is when the plaintiff became aware that Air Affairs had a concern about protection of the confidentiality of its documents). Some or all of each party's costs in respect of that debate will be that party's costs in the cause and will not be either party's costs of the Notice of Motion. I do not see any reason for treating the parties' costs in relation to the Notice of Motion differently from their costs leading up to the dispute which was resolved through the Notice of Motion. 4. Third, a very significant question remains as to the explanation for the downloading onto the defendant's devices of a very significant number of the plaintiff's documents on and after the date he resigned from his employment with the plaintiff. In his affidavit filed on 11 May 2023, in answer to an order made by the Court on 4 May 2023, the defendant says he does not recall creating the folders on his devices which contain those documents or copying and pasting those documents into the folders. Having declined to explain how the unauthorised downloading of the plaintiff's documents onto his devices occurred, coupled with the fact that the defendant was in default of the 22 July orders, the defendant can hardly complain that the plaintiff saw it as necessary to seek a resolution of the dispute as to the form of the regime to protect its legitimate interests through the Notice of Motion. 5. Accordingly, the Court will order that each party's costs of the Notice of Motion filed on 9 May 2023 will be costs in the cause. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 July 2023