Arthur Rubber will have to pay its own legal costs despite winning its case. Photo: Arthur Rubber/Facebook.
A ‘’meat loaf’’ file that exposed a Wagga rubber manager’s plan to launch a rival business has ended with an expensive twist — the company at the centre of the case has spent more money fighting in court than it won.
Earlier this year, the NSW Supreme Court found former Arthur Rubber manager Andrew Petersen had improperly used confidential customer information to help establish rival operation Maxx Rubber.
The published judgment revealed Mr Petersen had downloaded sensitive company material before leaving the business, transferring Arthur Rubber’s customer list from his home desktop computer to his laptop and later renaming the document “Mum’s recipe — Meat Loaf”.
The judge found Mr Petersen gained an unfair “head start” by using his employer’s information to establish his business more quickly than he otherwise could have.
The court awarded Arthur Rubber $50,000 in damages, rather than the higher amount the company had originally sought. The court found that while the misuse of information gave Mr Petersen an advantage, he likely would have been able to establish a competing business in any event, even without taking the customer list.
But while Arthur Rubber has had a win of sorts in that court fight, it has now lost the battle over legal costs.
In a fresh judgment handed down by the NSW Supreme Court, Justice Mark Richmond ruled each party must pay its own legal bills, meaning Arthur Rubber cannot recover its legal expenses despite being the successful litigant.
“The costs of these proceedings greatly exceeded the judgment amount,” Justice Richmond noted in his decision.
Under court procedure rules, if you sue someone in the NSW Supreme Court and win less than $500,000, you do not automatically have your legal costs paid by the loser.
If the matter could have been heard by the lower District Court, then the Supreme Court cannot order the losing side to pay the winner’s legal costs unless it is convinced there was a good reason to run the case in the higher court.
Arthur Rubber argued it had tried to initiate the matter in the District Court, which directed the company to the Supreme Court instead.
The company said the case belonged in the Supreme Court because it began with search orders — court-approved searches used to secure evidence before it can be hidden or destroyed.
Arthur Rubber also argued the matter was “complex” because it involved breaches of confidence, copyright and fiduciary duty, which therefore justified Supreme Court proceedings.
However, Justice Richmond disagreed.
“In my opinion, given the nature of the claims brought and that the overall [amount] of the damages sought was well below the jurisdictional limit for the District Court, the proceedings could have been commenced in the District Court,” he ruled.
He said that even if the commencement of the proceedings in the Supreme Court was warranted, continuation of the proceedings did not need to remain in the higher court.
Justice Richmond therefore made no order as to costs, meaning Arthur Rubber will be left with a legal bill larger than the amount it won in damages.
