Litigating for nominal damages is risky

12 May, 2017

Where a client wants to pursue a claim on a matter of principle for nominal damages, practitioners need to consider their overarching obligations under the Civil Procedure Act 2010 (Vic).

In Actrol Parts Pty Ltd v Coppi (No 3) [2015] VSC 758, Mr Coppi, an employee of Actrol Parts Pty Ltd (Actrol), was put on gardening leave after resigning. Actrol then commenced an action alleging breaches of Mr Coppi’s employment contract, fiduciary duty and obligation of confidentiality when it became suspicious that Mr Coppi was going to work for a competitor.

Mr Coppi denied the allegations and spent over $300,000 defending the litigation. The court found that during the 14-month period before trial:

  • Mr Coppi twice requested details of Actrol’s loss and damage, which were not provided
  • Actrol amended its statement of claim to delete allegations of misuse of confidential information and wrongful solicitation, and abandon claims based on breach of fiduciary duty, equitable obligations of confidence and equitable compensation. It inserted a claim for nominal damages only
  • Actrol rejected Mr Coppi’s settlement offers to have the proceeding dismissed by consent and for it to pay a sum towards Mr Coppi’s legal costs
  • Actrol made settlement offers on a walk-away basis and only after it knew any damages would be nominal and Mr Coppi had spent over $100,000 defending himself.

After a seven-day trial, Mr Coppi was found to have breached his contract of employment as he didn’t inform Actrol he was going to work for another company until after his first day at his new employer. However, the court also found that Actrol ‘fought the proceeding to final judgment for nominal damages on a point of only modest principle’ and ‘it should not be allowed to enjoy even the nominal fruit of its entirely pyrrhic victory’.

Actrol’s costs of around $600,000 in conducting the proceeding were not reasonably proportionate to the issues in dispute. It could have taken reasonable endeavours to ensure those costs were not incurred such as making reasonable settlement offers and having a disposition hearing rather than an expensive trial.

Bell J said that Actrol’s ‘egregious contravention of its overarching obligation to ensure costs are reasonable and proportionate…is deserving of strong sanction by the court’. Consequently he dismissed the proceeding and ordered Actrol to pay Mr Coppi’s costs on an indemnity basis. He remarked:

‘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.’