29 Aug 2016

A Series Of Rather Unfortunate Events – Or Why Litigating On Principle Can Be Costly

Ingmar Taylor SC

This morality tale involves over $900,000 in combined legal costs, an employee who breached his contract for one day, and an employer who could prove no loss.

The Actrol Parts v Coppi saga started when Mr Coppi resigned his employment as State Sales Manager for the refrigeration and air-conditioning wholesaler and was immediately sent home to work out his notice period. His employer’s suspicions were first raised when, asked to return his iPad and phone, he reset them (wiping them). Those suspicions were apparently confirmed when Mr Coppi started work with a competitor, before his notice period had expired.

Ex parte orders were obtained to seize Mr Coppi’s home computer. That revealed that Mr Coppi had at various times emailed to himself confidential information.

Unfortunately for Actrol Parts, it had directed Mr Coppi return his company car on the day he resigned. The car was part of his remuneration, which meant the act of requiring its return during the notice period was a breach of his contract, providing Mr Coppi with the right to elect to terminate the contract.

Unfortunately for Mr Coppi, he did not communicate his acceptance of the repudiation before starting work for the competitor. As a result, for one day he had been in breach of contract.

Unfortunately for Actrol Parts, it could prove no loss. There was no evidence Mr Coppi had provided the confidential information to anyone, nor ultimately that he had emailed it home for any improper purpose.

By the time the trial was to start both parties had spent hundreds of thousands of dollars in costs.

Mr Coppi, pointing to the fact that Actrol Parts had provided no evidence of loss, asked Actrol Parts to settle the matter on the basis that it pay part of his costs.

What did Actrol Parts do? It decided to press on, seeking only nominal damages and its costs.

The net result? After 7 days of hearing Bell J held that Mr Coppi had breached his contract for one day, which had resulted in no actual loss to Actrol Parts.

Other than a loan of $12,500 made by his new employer, Mr Coppi had funded the costs himself, signing a charge over his family home to cover the fees owing to his solicitors. He had rejected a number of offers to settle the matter on a ‘walk away’ basis.

Having decided the substantive case Bell J turned to the question of costs. The Judge held that Actrol Parts should pay Mr Coppi’s entire costs on an indemnity basis.

Bell J concluded the saga with the following cri de coer:

Actrol is a wholly owned subsidiary of a publicly listed company (Reece Australia Ltd). Mr Coppi is an individual – married with two children, earning about $100,000 per annum and funding his own legal fees. The family home is charged with those fees. There is great disparity of resources between the parties. On the information provided to the court, Actrol has expended in the vicinity of $600,000 in legal costs in conducting the proceeding. Mr Coppi has expended in excess of $300,000 in legal costs in defending the proceeding. Having regard to the complexity and importance of the issues in dispute, which are no more than moderate and minor respectively, and the amount in dispute, which is actually nominal, these amounts are totally unacceptable.

I accept that Actrol conducted the proceeding against Mr Coppi because it was thought necessary in the best interests of the company in managing apprehended risks to those interests. But the legal system is not an infinite resource for the management and mitigation of business risks of whatever nature and degree. Modern case management principles and the provisions of the Civil Procedure Act insist upon reasonable proportionality between the achievement of litigious objectives (having regard to the issues raised in the proceeding) and the legal costs that are expended in the pursuit of those objectives. There must be reasonable proportionality between those ends and those means.

I must draw the attention of all parties to civil litigation to their responsibilities under the case management principles of the court and the Civil Procedure Act. Let not the course of this proceeding ever be repeated unless the complexity and importance of the issues, and the amount, in dispute makes this reasonably necessary. Let it be understood that the court is prepared to exercise its enhanced and new powers in relation to civil proceedings in quite fundamental ways when this is called for, especially where the overarching obligation to ensure costs are reasonable and proportionate is contravened.

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