Meridian Global Vat Services Ltd v Lindelauf Consultancy BV, Roger Lindelauf and Vertex, Inc.
| Jurisdiction | Ireland |
| Judge | Mr. Justice Denis McDonald |
| Judgment Date | 27 July 2021 |
| Neutral Citation | [2021] IEHC 641 |
| Court | High Court |
| Docket Number | RECORD NO. 2020/5174P |
[2021] IEHC 641
RECORD NO. 2020/5174P
THE HIGH COURT
COMMERCIAL
Discovery – Compliance – Proportionality – Defendants seeking to vary the terms of a discovery order – Whether discovery in the form previously ordered was disproportionate
Facts: The plaintiff, Meridian Global VAT Services Ltd, claimed to be the developer of a software package that allowed clients to automate the VAT determination of complex sales and billing without manual intervention. In 2010, the plaintiff entered into a consultancy agreement with the first defendant, Lindelauf Consultancy BV, a Dutch company controlled by the second defendant, Mr Lindelauf, to provide services which the plaintiff contended played a critical role in the development of the software in issue. According to the plaintiff, that agreement imposed very comprehensive obligations on the first and second defendants in relation to confidential information among other things. The plaintiff also said that it owned the relevant copyright in the material created pursuant to that contract. In late 2019, the first and second defendants indicated a desire to bring the consultancy agreement to an end and the plaintiff said that the second defendant intimated to the plaintiff at that time that he had no alternative arrangement in place. Subsequently, in January 2020, the plaintiff discovered that the second defendant had been employed by the third defendant, Vertex, Inc, a tax technology solutions provider based in Pennsylvania. The plaintiff contended that it subsequently learned of facts which suggested that the third defendant was offering a new VAT solution for clients which the plaintiff said had the same functionality and methodology as that which was previously exclusively available from the plaintiffs and the plaintiffs contended that this could only have been achieved through the use of its confidential information and copyright material. The plaintiff's case was robustly rejected by the defendants, who strongly maintained that the claim was baseless. The defendants applied to the High Court pursuant to O. 31 r. 12(11) to revisit one aspect of the terms of a discovery order made on the 19th February 2021 on the basis that compliance with the order had proved to be significantly more burdensome than was appreciated at the time the order was made. The defendants argued that there was good reason to revisit the extent of the order and they proposed that in place of the category as formulated in the order they would instead deal with Category 6 in the manner set out in the schedule to the Notice of Motion.
Held by McDonald J that, in circumstances where the defendants could be compensated by an award of costs if they succeeded in defending the proceedings, and in circumstances where their proposal did not provide a better or an equivalent alternative to Category 6, discovery of Category 6 in the form previously ordered was not disproportionate.
McDonald J held that the application to vary the order would be refused.
Application refused.
EX TEMPORE JUDGMENT of Mr. Justice Denis McDonald delivered on 27th July 2021
This is an application by the Defendants pursuant to O.31 r.12(11) to revisit one aspect of the terms of a discovery order made on the 19th February 2021 on the basis that compliance with the order has proved to be significantly more burdensome than was appreciated at the time the order was made.
Before addressing the specific application before the Court, it may be helpful to explain the backdrop to these proceedings. The Plaintiffs claim to be the developer of a software package that allows clients to automate the VAT determination of complex sales and billing without manual intervention. In 2010, the Plaintiff entered into a consultancy agreement with the First Named Defendant, a Dutch company controlled by the Second Named Defendant, Mr. Roger Lindelauf, to provide services which the Plaintiff contends played a critical role in the development of the software in issue. According to the Plaintiff, that agreement imposed very comprehensive obligations on the First and Second Defendants in relation to confidential information among other things. The Plaintiff also says that it owns the relevant copyright in the material created pursuant to that contract.
In late 2019, the First and Second Defendants indicated a desire to bring the consultancy agreement to an end and the Plaintiff says that the Second Defendant intimated to the Plaintiffs at that time that he had no alternative arrangement in place. Subsequently, in January 2020, the Plaintiff discovered that the Second Defendant had been employed by the Third Defendant, which is a tax technology solutions provider based in Pennsylvania. The Plaintiff contends that it subsequently learned of facts which suggested that the Third Defendant was now offering a new VAT solution for clients which the Plaintiff says has the same functionality and methodology as that which was previously exclusively available from the Plaintiffs and the Plaintiffs contend that this can only have been achieved through the use of its confidential information and copyright material.
I should explain that this is a very truncated description of the case made by the Plaintiff. I should also explain that the Plaintiff's case is robustly rejected by the Defendants, who strongly maintain that the claim is baseless. This can be seen from the terms of paragraphs 1 to 8 of the defence where the following case is made by way of preliminary objection.
In paragraph 1, it is said that the Plaintiff advances a series of extremely serious allegations against the Defendants without any basis or evidential foundation whatsoever. In paragraph 2 it is alleged that, despite request, the Plaintiff has failed or refused to identify what confidential information or intellectual property was allegedly disclosed by the Second Defendant to the Third Defendant, when it was disclosed or how it was disclosed. In paragraph 3 it is suggested that the claims made against the Defendants have been put forward without providing any proper particulars. In paragraph 4, it is said that the Plaintiff's claim is frivolous, vexatious or bound to fail and the Defendants reserve the right to apply to strike out the Plaintiffs claim in limine by way of interlocutory application or at the trial of the action. In paragraph 5 it is alleged that, prior to the commencement of these proceedings, the Defendants' solicitors wrote to the Plaintiff's solicitors refuting the allegations made by the Plaintiff in pre action correspondence and explaining in clear terms why such allegations were wholly misconceived and without foundation. Notwithstanding this correspondence, the Plaintiff issued these proceedings in which they advance the same allegations knowing them to be without foundation. Then in paragraph 6, it is alleged that the Plaintiff's wholly unfounded claim has caused significant inconvenience and burden to the First and Third Defendants inherent in the requirement to defend these proceedings and has caused unwarranted distress to the Second Defendant, constituting, as it does, a wholly unjustified attack upon him. And then in paragraphs 7 and 8 the Defendants go on to say that they will, upon the dismissal of the Plaintiff's action seek an order for costs on a legal practitioner and own client basis, and that the Plaintiff is put on notice of the Defendants' intention to make such an application. The Defendants also reserve the right in paragraph 8 to issue their own proceedings against the Plaintiff arising out of what they describe as the malicious abuse of the process of the Irish Court on the part of the Plaintiff in seeking to prosecute these proceedings.
The latter paragraphs from 5 to 8 are said by the Plaintiffs to be of some relevance for present purposes, in that it is suggested that, in order to put forward the pleas made in those paragraphs, the Third Defendant, in particular, must have undertaken some level of inquiry at the time these proceedings were commenced in relation to the development of their own VAT offering and checked with the personnel who were involved in the design of the VAT offering, and it is further suggested that, in doing so, the Defendants would have identified the number of people involved and, also, at least in broad terms, the extent of the material relating to the development of that offering.
Now, having outlined in very general terms the substantive positions of the parties, I should next address the order for discovery previously made in these proceedings on 19th February, 2021.
By that order, the court directed the Defendants to make discovery of two additional categories of discovery over and above the categories agreed by them. These were Category 5, which is not in issue today, and Category 6 which is in issue. By Category 6 the Defendants were ordered to make discovery of:
“All documentation created on or after 26th June 2019 recording the Third Defendant's development of a VAT offering, especially utilising the chain flow tool and SAP VAT add on, including, but not limited to, all versions of the Third Named Defendant's strategy and road map for development of VAT determination; and all code, meeting notes, agendas, procedural and briefing documents relating to the chain flow tool, VAT add on; and documents relating to new connectivity, functionality for connecting with legacy SAP systems.”
The Defendants say that, at the time that the order of 19th February was made, they did not appreciate how burdensome Category 6 would be and they now estimate that it will cost them something of the order of €710,000 to comply with this element of the order.
That order was made following a contested application which I...
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