New South Wales Supreme Court CITATION : Woolworths Limited v Mark Konrad Olson & Anor [2004] NSWSC 896 HEARING DATE(S) : 27/09/04 JUDGMENT DATE : 27 September 2004 JURISDICTION: Equity Division Commercial List JUDGMENT OF : Einstein J DECISION : Indemnity costs orders made against defendant in respect of identified sections of the proceedings. CATCHWORDS : Costs - Indemnity costs - Whether indemnity costs order may be made in respect of the obtaining and executing of an Anton Pillar order - Principles - See paragraph 22 as to all orders LEGISLATION CITED : Industrial Relations Act 1996 (NSW) Degmam Pty Ltd (in liquidation) v Wright (No 2) (1983) 2 NSWLR 354 CASES CITED : Harrison v Schipp [CA 40208/98; CA 40761/98] Court of Appeal, unreported, 22 February 2001 [BC 200100344] Oshlack v Richmond River Council (1998) 193 CLR 72 Woolworths Limited ACN 000 014 675 (Plaintiff) PARTIES : Mark Konrad Olson (First Defendant) Dianne Olson (Second Defendant) FILE NUMBER(S) : SC 50116/04 COUNSEL : Mr RM Smith SC, Mr MA Jones (Plaintiff) Mr RM Goot SC, Mr SEJ Prince (Defendants) SOLICITORS : Clayton Utz (Plaintiff) Maddocks (Defendants) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST Einstein J Monday 27 September 2004 ex tempore Revised 28 September 2004 50116/04 Woolworths Ltd v Mark Konrad Olson & Anor JUDGMENT The state of the proceedings 1 A reserved judgment was delivered on 22 September 2004. The proceedings are presently before the Court for the purpose of dealing with costs and short minutes of order. Costs The principles 2 Although the parties addressed in some detail on the appropriate legal principles which underpin the proper exercise of the Court's discretion as to costs, it does not seem to be necessary other than shortly to revisit the authorities. However one matter of principle not previously examined does arise. 3 The general principles were revisited by the High Court of Australia in some detail in Oshlack v Richmond River Council (1998) 193 CLR 72. McHugh J pointed out at paragraph 67 that by far the most important factor which courts have viewed as guiding the exercise of the costs discretion, is the result of the litigation and that a successful litigant is generally entitled to an award of costs. As McHugh J said: "The expression the "usual order as to costs" embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation." Indemnity Costs 4 Woolworths seeks to make good an entitlement to receive 90 percent of its costs on an indemnity basis. 5 In Harrison v Schipp [CA 40208/98; CA 40761/98] Court of Appeal, unreported, 22 February 2001 [BC 200100344] the Court of Appeal had occasion to revisit the proper approach to the award of indemnity costs. Giles JA at [132]-[137], with whose judgment Handley and Fitzgerald JJA agreed, emphasised the type of delinquency in the conduct of the proceedings necessary to be established in order to make good a departure from the ordinary basis on which costs should be assessed. The making of deliberately false allegations in a defence [which may occur together with prolixity, prevarication, and/or the gross prolonging of the litigation], may give rise to an occasion for the exercise of the Court's principled discretion by the making of an indemnity costs order. 6 In Harrison even although the evidence of the particular parties was not accepted and they were found to have given false evidence and to have propounded false documents, the Court of Appeal holding was that the type of delinquency demonstrated did not approach that considered to justify a special order as to costs in Degmam Pty Ltd (in liquidation) v Wright (No 2) (1983) 2 NSWLR 354, but was rather a suggested form of delinquency in terms of the defendant's legal wrongdoing anterior to the litigation [albeit becoming the subject of the litigation]. Anton Pillar Orders and indemnity costs 7 The plaintiff has, inter alia, sought an indemnity costs order with respect to its costs of the Federal Court proceedings up to and including 12 July 2004 [that is to say the costs of obtaining and executing the Anton Pillar order]. Neither party has referred the Court to any authority concerning the proper and principled approach to be taken by the Court to that portion of a set of proceedings up to and including the obtaining and executing of an Anton Pillar order, likely comprising the most extreme form of ex parte relief known to the law. As explained in Meagher, Gummow and Lehane's Equity Doctrines and Remedies 4th ed., Butterworths 2002 at 21-495, an Anton Pillar order "either illustrates the recognised equitable jurisdiction to preserve in existence until trial property which is the very subject matter of the trial, or else … is genuinely ancillary to the vindication of a recognised legal or equitable claim". 8 Clearly, as it seems to me, the principles which have been enunciated in terms of the proper approach to an award of indemnity costs, have not had to deal with the special and extraordinary circumstances justifying the making of an Anton Pillar order. The application is one where the strength of the prima facie case to an ex parte order directed at the preservation of property must be considerable. An applicant for relief of this type must be in a position to put forward strong proof of the highest justifiable suspicion of misconduct which, absent the making of the order sought, would extremely likely lead to irreparable loss or damage. 9 Clearly each application for an order for indemnity costs with respect to the obtaining and execution of an Anton Pillar order must be determined on a case and circumstance specific basis. The Court could not lay down any hard and fast rule of practice or procedure in that regard. The point of principle which requires examination concerns the undoubted fact that up to the point in time when the defendant becomes aware of the pendency of the proceedings [which will only take place when the order is executed], there simply cannot be delinquency of a defendant in relation to those proceedings. Hence some point of reference other than delinquency in the conduct of the proceedings must be the touchstone for any exercise of the power to make an indemnity costs order with respect to the obtaining and execution of an Anton Pillar order. That touchstone must inhere in the interests of justice. 10 Returning to the proceedings at hand, the special circumstances saw the obtaining of the Anton Pillar relief in entirely justifiable, indeed extraordinary circumstances. The whole of the judgment requires to be read in this regard. 11 Notwithstanding that, as I readily accept, the application of indemnity costs orders to the obtaining and execution of an Anton Pillar order moves beyond decided authority, to my mind the interests of justice and the principled approach to the exercise of the relevant discretion mandate the making of an order for indemnity costs in respect of so much of the costs of Woolworths of the Federal Court proceedings as involve the period up to and including 12 July 2004 [that is to say, the costs of obtaining and executing the Anton Pillar order]. 12 The submissions by the defendant that the obtaining and executing of the Anton Pillar order was an inappropriate and unfair procedure have been resoundingly rejected in the judgment. The particular nature of the misconduct of the defendant referred to in the judgment does not require to be repeated . An indemnity costs order will follow in relation to that segment of the Woolworths' costs. Dealing with the proper exercise of the Court's principled discretion as to costs in the present proceedings 13 The following matters put forward by the plaintiff are of substance and are adopted: · The effect of the Court's orders will be that: - Woolworths has secured a measure of relief in the case brought by it; - Mr Olson will have entirely failed on the amended cross claim and amended s 106 summons for relief prosecuted by him. · All of the evidence led at the hearing concerned those matters in respect of which Woolworths was successful in the proceedings, cross claim and amended summons for relief. · The findings which have been made have in effect vindicated in large measure the factual matters put forward by Woolworths which Olson put in issue. · Those matters were: - all matters concerning the demotion meeting in February, [noting however that although the unreasonableness of the demotion had been pleaded in the s 106 summons for relief, the issue was removed when the application was amended prior to the hearing] ; - the content of the service agreement between the parties at the time Mr Olson was summarily dismissed; - the reasonableness of Woolworths' decision to summarily dismiss Mr Olson, particularly the fact that it was not unfair to dismiss without following a counseling procedure; - the confidentiality of the attachments to the two emails (in issue on the pleadings; the plans being conceded as confidential by Mr Olson at the start of the hearing; the "Rod presentation" being conceded as confidential during the course of the hearing after most of the evidence going to confidentiality had been led); - that Woolworths held copyright in the attachments and that Mr Olson breached that copyright; - the dishonest and fraudulent intent held by Mr Olson at the time he sent the emails to his home computer; - the fact that Mr Olson received the $200,000 offer before he sent the emails to his home computer (a matter in respect of which the Court found that Mr Olson had deliberately fabricated his evidence). Indemnity Costs justified in relation to a portion of the litigation 14 Mr Olson's fabricated evidence in relation to a critical parameter of the case [concerning the occasion when he was informed of the $200,000 Franklins offer having been made] was given in respect of an issue which plainly occupied substantial time during the hearing. The occasion is shown to justify the making of an indemnity costs order against Mr Olson at least with respect to a portion of the time occupied with that issue before and during the hearing. The matter will be dealt with in the reasons which follow below. 15 At a more general level it is apparent that Mr Olson succeeded at least in resisting Woolworths' claims to wide reaching relief so that only limited relief was ultimately forthcoming. 16 In what follows I have taken into account the terms of the letter from the defendant's solicitors to the plaintiff's solicitors of 15 July 2004. I have also taken into account the 11 August 2004 form of proposed undertaking to the Court proffered to the plaintiff's solicitors. Second tranche costs 17 It is appropriate to commence by dealing with the second tranche costs. 18 The circumstances concerning the application for leave to re-open the defendant's case in order to call evidence from Ms Macdonald also justifies an order for indemnity costs against Mr Olson for the reasons given in the judgment [NSWSC 871] granting that leave. That judgment makes clear that the decision not to call Ms Macdonald was a calculated and conscious decision made by the defendant's legal advisors. 19 Notwithstanding that the leave was granted in the interests of justice, it is quite plain that the particular forensic decision did constitute delinquency in the conduct of that part of the proceedings. Hence, the proper exercise of the Court's principled discretion is to order that Mr Olson pay on an indemnity basis, the costs of and occasioned by the second tranche of the hearing, including the costs of the application for leave to re-open. 20 Returning to the question of the appropriate exercise of the Court's discretion in relation to all costs otherwise than occasioned by the second tranche of the hearing, in my view the proper orders are as follows: · As already indicated, that Mr Olson pay, on an indemnity basis, Woolworths' costs of the Federal Court proceedings, up to and including 12 July 2004 [that is to say the costs of obtaining and executing the Anton Pillar order]. · That Mr Olson pay 30 per cent of the costs of Woolworths on an indemnity basis. 21 It should be noted that in relation to the order for the payment of 30 per cent of Woolworths' costs on an indemnity basis, I have taken into account the fact that Mr Olson failed in his application for relief pursuant to s 106 of the Industrial Relations Act 1996 (NSW) and failed on the amended cross claim. I do not see it as appropriate to make separate orders with respect to costs of the cross claim or of the s 106 proceedings. To make separate orders would pose real difficulties for a Registrar and the Court is in a far better position presently [in making the global order for the payment of 30 per cent of Woolworths' costs], to simply take into account where each party succeeded or failed [and in that regard to take into account the respective periods of time expended upon the several suits or issues within the suits]. Orders 22 The Court orders: 1. Orders that the Plaintiff's claim against the Second Defendant is discontinued, with no order as to costs. 2. Declares that copyright subsists in the original works identified in Appendix 1 to these Orders (the "Works"). 3. Declares that the Plaintiff is the owner and exclusive licensee of the copyright subsisting in the Works. 4. Declares that the First Defendant infringed the Plaintiff's right of reproduction in respect of the Works. 5. Orders the First Defendant to pay nominal damages to the Plaintiff in respect of the First Defendant's infringement of the Plaintiff's right of reproduction in respect of the Works in the sum of $1.00. 6. Declares that the Works contain information which is confidential to the Plaintiff (the "Confidential Information"). 7. Orders that the First Defendant , whether by himself, his servants or agents, or otherwise, be restrained from disclosing to any person or organisation or company or from making use of or copying or reproducing in any form any of the Confidential Information ("the conduct the subject of the restraint"), without first giving four weeks notice to the Plaintiff of an intent to engage in the conduct the subject of the restraint. 8. Declares that clause 10 of the Executive Service Agreement between the Plaintiff and First Defendant, dated 1 February 2003 (the "Executive Service Agreement"), is invalid. 9. Orders the First Defendant to return to the Plaintiff monies paid to the First Defendant under clause 10 of the Executive Service Agreement and that return of the uncashed cheque provided by the Plaintiff to the First Defendant on 12 July 2004 will discharge this Order. 10. Orders that the First Defendant be released from the undertaking given to the Court on 14 September 2004. 11. Orders that the First Defendant pay the Plaintiff's costs of the Federal Court Proceedings up to and including 12 July 2004 on an indemnity basis. 12. Orders that the First Defendant pay on an indemnity basis the costs of and occasioned by the First Defendant's application to reopen its case in order to call evidence from Ms McDonald including the costs of Friday 17 September 2004. 13. Orders that with respect to all costs otherwise than the costs the subject of Orders 11 and 12, the First Defendant pay on an indemnity basis 30 percent of the costs of the Plaintiff of the Federal Court Proceedings, the proceedings before the Industrial Relations Commission and the proceedings before the Supreme Court. 14. Orders that the matter be remitted to the Master for a determination of the damages payable by the Plaintiff to the First Defendant pursuant to the Plaintiff's undertaking as to damages, for the period 13 July 2004 up to and including 27 September 2004. 15. Orders that the Amended Cross-Claim is dismissed. 16. Orders that the Amended Summons for Relief Pursuant to Section 106 of the Industrial Relations Act 1996 (NSW) is dismissed. 17. Orders that, until further Order, Orders 9, 11, 12, 13 and 14 be stayed. 18. Orders that, upon the Plaintiff, by its Counsel, giving the usual undertaking as to damages, for the period up to and including midnight on Tuesday, 5 October 2004, the First Defendant be restrained from directly or indirectly, whether alone or otherwise and whether as employee or otherwise, carrying on or being engaged, involved or otherwise interested in, or concerned with, Franklins Pty Limited or any other business with which the Plaintiff competes in Australia and New Zealand. 19. The Court orders that these orders be entered forthwith. I certify that paragraphs 1 - 22 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 27 September 2004 ex tempore and revised 28 September 2004 ___________________ Susan Piggott Associate 28 September 2004 Last Modified: 10/05/2004 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.