Airways Corporation of New Zealand & Anor v The Present Partners of Pricewaterhouse Coopers Legal & Anor [2002] NSWSC 521

New South Wales Supreme Court

CITATION : Airways Corporation of New Zealand & Anor v The Present Partners of Pricewaterhouse Coopers Legal & Anor [2002] NSWSC 521 FILE NUMBER(S) : SC 13787/01 HEARING DATE(S) : 4 March 2002 8 March 2002 JUDGMENT DATE : 11 June 2002

Airways Corporation of New Zealand (1st Plaintiff) PARTIES : Craig John Sinclair (2nd Plaintiff) The Present Partners of Pricewaterhouse Coopers Legal (1st Defendant) Pricewaterhouse Coopers Legal Services Pty Ltd (2nd Defendant) JUDGMENT OF : Simpson J

COUNSEL : R Glasson (Plaintiffs) WH Nicholas QC (Defendants) SOLICITORS : Neil Scott (Plaintiffs) Mallesons Stephen Jaques (Defendants) CATCHWORDS : preliminary discovery - SCR Part 3, Rule 1 - adversarial litigation - costs and expenses associated with location and production of information sought CASES CITED : Totalise Plc v The Motley Fool Ltd & Interactive Investor Ltd, unreported, 19 December 2001 DECISION : undertakings given on behalf of the defendants to the plaintiffs to preserve materials until 11 December 2002 noted; liberty to parties to apply for a variation of or release from that undertaking on two days' notice; defendants to pay plaintiffs' costs of litigating the application; plaintiff to pay defendants' reasonable costs and expenses of providing information to the plaintiffs

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

SIMPSON J

Tuesday 11 June 2002

13787/01 Airways Corporation of New Zealand v Paul Gustav Koenig – T/A Pricewaterhouse Coopers Legal & 40 Ors

JUDGMENT 1 HER HONOUR: On 8 March 2002 I delivered judgment upon an application by the plaintiffs pursuant to SCR Part 3 Rule 1, seeking against the defendants an order for preliminary discovery. In short, the plaintiffs, by the application, sought information or documents that would enable them to ascertain the identity of a person who had published on the internet material they claimed defamed them. The defendants resisted the application on two bases, each of which ultimately proved to be unsuccessful, and I indicated that I would make orders, in substance, as sought by the plaintiff. However, I required the parties to bring in short minutes of orders reflecting the intention I stated. 2 Today, 11 June 2002, the matter was re-listed before me because the parties had been unable to reach agreement upon the precise terms of the order to be made. 3 The defendants adduced evidence establishing that, in the meantime, they had provided to the plaintiffs a signed statement made by a person identified as Ezekiel Trumper, confirming that he was the author and transmitter of the email messages. In those circumstances, the defendants argued, it was no longer necessary that orders be made. 4 Having regard to the purpose of SCR Part 3, Rule 1, I accepted that this was so and that an order would now be superfluous. Counsel for the plaintiffs, however, persisted, requiring the production of relevant documentation. I indicated that I was not favourably disposed to this position, since the purpose of Part 3 Rule 1 is limited to ascertaining the identity of a person, and that purpose had been, effectively, fulfilled. It seemed to me, as it still does, that what counsel was seeking was not material by which to identify a person, but evidence which might be used against that person, and that this was outside the scope and intent of the Rule. 5 However, it seemed to me appropriate that, in order to avoid unnecessarily incurring additional costs, that appropriate undertakings could be formulated for the preservation of such materials. Eventually the parties were able to reach agreement on the formulation of such undertakings, and this was done. The undertakings were read onto the transcript and recorded and are to be reduced to writing and a copy placed in the file. It is unnecessary here to reproduce them. I am satisfied that to make an order in the terms originally prepared would be of no utility. 6 The parties had also been unable to reach agreement on the appropriate order in relation to costs of the original application. As it eventuated, each party sought an order that the other pay its costs of the proceedings. Senior counsel for the defendants relied upon a decision of the English Court of Appeal, Totalise Plc v The Motley Fool Ltd & Interactive Investor Ltd: unreported, 19 December 2001. 7 In that case, an application of a similar nature to that which was before me was made. Owen J had, at first instance, made an order equivalent to an order for preliminary discovery under Part 3 Rule 1, and had ordered that the unsuccessful defendants pay the successful claimant's costs of the application. The Court of Appeal reversed that order. Inter alia, the Court said that applications of this sort: "are not ordinary adversarial proceedings, where the general rule is that the unsuccessful party pays the costs of the successful party." 8 The Court held that, in general, costs incurred should be recovered from the wrongdoer rather than from an innocent party. The Court then said: "The Court when considering its order as to costs, after a successful … application should consider all the circumstances. In a normal case the applicant should be ordered to pay the costs of the party making the disclosure including the costs of making the disclosure. There may be cases where the circumstances require a different order, but we do not believe they include cases where: (a) the party required to make the disclosure had a genuine doubt that the person seeking the disclosure was entitled to it; (b) the party was under an appropriate legal obligation not to reveal the information, or where the legal position was not clear, or the party had a reasonable doubt as to the obligation; or (c) the party could be subject to proceedings if the disclosure was voluntary; or (d) the party would or might suffer damage by voluntarily giving the disclosure; or (e) the disclosure would or might infringe a legitimate interest of another." 9 A party who is defendant to an application for preliminary discovery is, in one sense, in a difficult position. That party ordinarily has no involvement in what is intended or anticipated to be the substantive proceedings, and is, often enough, caught up in a skirmish between two other parties. One can sympathise with such a position. However, that does not, in my opinion, reflect the reality in the present case. 10 It was accepted that Mr Trumper had been, at the relevant time, an employee of the defendants (or one or other of them). There was ample evidence that the defendants' computers had been used for the purpose of the transmission of the allegedly defamatory emails. The solicitors for the plaintiffs had engaged in detailed correspondence with the defendants, seeking access to the information that would enable them to ascertain the identity of the person responsible for writing and/or sending the emails. The defendants had persistently refused to cooperate. They defended the application on two bases that were not in the result sustained. It would have been a simple matter for them to have provided the plaintiffs with the information the plaintiffs sought, and which the defendants ultimately yielded. In my opinion, the defendants must live with the consequences of their decision to defend the proceedings. I appreciate that this view may not be in accordance with that of the English Court of Appeal in Totalise Plc, and in particular the view of that Court that a costs order would not ordinarily be made where: "the party required to make the disclosure had a genuine doubt that the person seeking the disclosure was entitled to it". 11 However, in my opinion, the litigation as it proceeded was adversarial in nature, or at least akin to adversarial litigation. The plaintiffs were, as I decided, entitled to the information they sought; while the defendants were equally entitled to resist the production of that information, the consequences of their making a judgment which turned out to be wrong are the same as such consequences for any other unsuccessful litigant. 12 It is important, however, to observe that the costs of the litigation do not include the costs and expenses associated with the location and production of the information sought by the plaintiffs. Plainly, those costs should not be the costs of the defendants. The position is comparable with the position of a third party receiving and complying with a subpoena. Ordinarily, that person is entitled to be reimbursed for the costs of locating and providing whatever is the subject matter of the subpoena. Counsel for the plaintiffs did not demur to the proposition that his clients would be liable to pay those costs. 13 The orders I make, therefore are: 1. I note the undertakings given on behalf of the defendants to the plaintiffs, which have been read onto the Court transcript, and a copy of which is to be supplied to the Court; 2. I grant liberty to the parties to apply for a variation of or release from that undertaking on two days' notice; 3. I order the defendants to pay the plaintiffs' costs of litigating the application under Part 3, Rule 1; 4. I order the plaintiffs to pay the defendants' reasonable costs and expenses of providing the information to the plaintiffs to enable them to ascertain the identity of the author and/or publisher of the material the subject of the application; 5. I make no order as to the costs of today's proceedings. **********