Xero Linear Lighting Systems NSW Pty Ltd v Benson [2024] NSWSC 916

Supreme Court New South Wales

Medium Neutral Citation: Xero Linear Lighting Systems NSW Pty Ltd v Benson [2024] NSWSC 916 Hearing dates: 31 May 2024 Date of orders: 29 July 2024 Decision date: 29 July 2024 Jurisdiction: Equity Before: Kunc J Decision: No order as to costs Catchwords: COSTS — Party/Party — General rule that costs follow the event — Proceedings resolved by consent — No issue of principle — Observations concerning treatment of costs in settlement negotiations Legislation Cited: Civil Procedure Act 2005 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Edwards Madigan Torzillo Briggs Pty Ltd v Gloria Stack [2003] NSWCA 302 Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 ONE.Tel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 Re Minister for Immigration and Ethnic affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 Category: Costs Parties: Xero Linear Lighting Systems NSW Pty Ltd (Plaintiff) Patrick James Benson (Defendant) Representation: Counsel: D Ratnam (Plaintiff) A Ahmad (Defendant)

Solicitors: Coleman Grieg Lawyers (Plaintiff) Bateman Battersby Lawyers (Defendant) File Number(s): 2020/229514

JUDGMENT

Summary 1. Judicial experience, and perennial community concern about the costs and delays of litigation, suggest that it cannot be repeated too often that parties, and their lawyers, should always have under consideration whether and how their dispute may be able to be resolved without going to a final hearing. That admonition is not merely aspirational, but is embodied in the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). UCPR Pt 42, Division 3 gives binding force to the same policy which informs the principles outlined in Calderbank v Calderbank [1975] 3 All ER 333 that adverse costs consequences may follow if a party unreasonably fails to accept a settlement offer. It is also consistent with parties' obligations to facilitate the overriding purpose of case management in s 56 of the Civil Procedure Act 2005 (NSW) (CPA). 2. Where parties are able to settle proceedings without a final hearing on the merits of the dispute, and both parties have acted reasonably in commencing and defending a proceeding, and their conduct continued to be reasonable until the proceeding was settled or further prosecution became futile, the Court will generally exercise its broad discretion as to costs by not making any order for the costs of the proceedings (Re Minister for Immigration and Ethnic affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6). Even where the Court may have concerns as to the reasonableness of the actions of the parties, the Court should avoid traversing the merits of the dispute to come to a determination as to the costs of the proceedings and any finding can only be made by reference to circumstances not in contention between the parties (Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84). 3. The plaintiff, Xero Linear Lighting Systems NSW Pty Ltd and the defendant, Patrick James Benson (Mr Benson) agreed to consent orders on 15 March 2024 (amended by orders made on 20 March 2024). The consent orders resolved the matter prior to its hearing fixed before me for 18 to 20 March 2024. Therefore, this is a matter where prima facie the principles in Lai Qin would apply and there would be no order as to costs. 4. In summary, the underlying dispute concerned allegations by Xero that Mr Benson (a former employee of Xero) had impermissibly downloaded Xero's confidential information to personal devices. Xero commenced these proceedings in 2020 (initially by way of summons filed on 6 August 2020) seeking, among other orders, that Mr Benson be permanently restrained from using, disclosing and reproducing any confidential information and intellectual property belonging to Xero. 5. The dispute resolved in substance at a directions hearing on 12 March 2024, in the days before the final hearing, after my Associate was emailed on 7 March 2024 by Mr Benson's solicitors with a request that a directions hearing occur to narrow the issues in dispute. Attached to that email was an open letter to Xero's solicitor which included an offer by Mr Benson to be permanently restrained from using or disclosing any confidential information, intellectual property, written materials and information acquired during or after his employment with Xero and an offer to delete an agreed set of documents from his personal device. In circumstances where the parties accepted at the 12 March 2024 directions hearing that only 32 documents were in dispute and Mr Benson was willing to provide the aforementioned undertakings, the parties accepted my suggestion that they should attempt to devise a consent arrangement to destroy the 32 documents which formed the basis of the consent orders. 6. Before the Court are two notices of motion, one from each party, where each seeks to displace what might be referred to as the prima facie outcome suggested by Lai Qin. Xero's notice of motion dated 9 April 2024 sought these orders: 1. Mr Benson pay Xero's costs of the proceedings as agreed or assessed: 1. On the ordinary basis up until 1 September 2023; 2. On the indemnity basis on and from 2 September 2023. 1. In the alternative to order 1, Mr Benson pay Xero's costs of the proceedings as agreed or assessed: 1. On the ordinary basis up until 20 October 2023; 2. On the indemnity basis on and from 21 October 2023. 1. In the alternative to orders 1 and 2, Mr Benson pay Xero's costs of the proceedings as agreed or assessed: 1. On the ordinary basis up until 1 February 2024; 2. On the indemnity basis on and from 2 February 2024. 1. In the alternative to orders 1, 2 and 3, Mr Benson pay Xero's costs of the proceedings on the ordinary basis as agreed or assessed. 2. Such further or other order as the Court deems fit. 1. Mr Benson's amended notice of motion filed in Court on 31 May 2024 sought these orders: 1. Xero pay Mr Benson's costs on the ordinary basis as agreed or assessed up to and including 8 December 2020 and on the indemnity basis as agreed or assessed from 9 December 2020. 2. In the alternative to Order 1, that Xero pay his costs on the ordinary basis up to and including 12 February 2022 and indemnity costs thereafter. 3. In the alternative to Order 1 and 2, Xero pay Mr Benson's costs of the proceedings on the ordinary basis as agreed or assessed. 4. (3A) [added by leave at the hearing on 31 May 2024] In the alternative to 3, that the plaintiff pay the defendant's costs of the proceedings on the ordinary basis until the filing of the statement of claim on 7 July 2022 and thereafter each party pay their own costs of the proceedings. 5. In the alternative to Order 1, 2 and 3 each party pay their own costs of the proceedings. 1. The motions were heard together on 31 May 2024. Mr D Ratnam of Counsel appeared for Xero and Mr A Ahmad of Counsel appeared for Mr Benson. The Court received extensive written submissions which were supplemented by two hours of oral submissions, a 469 page court book containing several affidavits as well as an expert report and a 206 page exhibit. Without any disrespect intended, the parties' detailed submissions can be distilled to two propositions in support of their respective motions for the other party to pay their costs: 1. The consent orders reflected a capitulation by the other party of their initial position in the litigation; and 2. The other party acted unreasonably by failing to accept earlier settlement offers. 1. For the reasons which follow, the Court does not accede to either proposition in relation to either party. The Court will dismiss both notices of motion and make no orders as to the costs of these proceedings (including the motions and not overlooking that this is the fifth and final alternative alternative advanced by Mr Benson). In summary, this is a paradigm case for the rule in Lai Qin to apply. Consent orders were agreed over four years after the dispute commenced. Again without disrespect and putting it somewhat colloquially, the proceedings might be described as having become a "zombie action" since a mediation occurred on 26 July 2023: a dispute ultimately concerning only 32 documents which had begun in August 2020 and never progressed to a final hearing. By the time it came before me, the passage of time and events had rendered any substantive hearing of the proceedings futile. In my view it had always been, and certainly after the mediation, a case which was a very obvious candidate for resolution in accordance with the matters discussed in [1] above. 2. Without traversing the merits of the dispute the Court cannot satisfy itself that there has been a capitulation by a party agreeing to the consent orders in the sense that one party was almost certain to have succeeded if the matter had been fully tried or that the parties acted unreasonably by not accepting settlement offers. The volume of material before the Court demonstrates that it was inevitable the Court would have had to undertake an impermissible, hypothetical assessment of the merits to be satisfied that any costs order should be made.