FEDERAL COURT OF AUSTRALIA Aristocrat Technologies Australia Pty Ltd v Global Gaming Supplies Pty Ltd (No 2) [2016] FCAFC 76 Appeal from: Aristocrat Technologies Australia Pty Ltd v Global Gaming Supplies Pty Ltd [2013] FCA 986 File number: NSD 2154 of 2013 Judges: NICHOLAS, YATES AND WIGNEY JJ Date of judgment: 1 June 2016 Catchwords: COSTS – where appellants only partially successful in proceeding for copyright infringement and trade mark infringement – where appellants successful against various respondents for trade mark infringement but not copyright infringement – where declarations and injunctive relief granted but no damages or other pecuniary relief awarded – apportionment of costs – relevant principles – appellants ordered to pay proportion of various respondents' costs – other respondent ordered to pay proportion of appellants' costs excluding any costs that solely relate to appellants' claims against other respondents Legislation: Copyright Act 1968 (Cth) s 115(4) Trade Practices Act 1974 (Cth) s 52 Cases cited: Aristocrat Technologies Australia Pty Ltd v Global Gaming Supplies Pty Ltd [2016] FCAFC 22 Commissioner of Taxation v AusNet Transmission Group Pty Ltd (No 2) [2015] FCAFC 124 Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (Solar Tint case) (1993) 26 IPR 261 EMI Songs Australia Pty Limited v Larrikin Music Publishing Pty Ltd [2011] FCAFC 92 Knott Investments Pty Ltd v Winnebago Industries Inc (No 2) (2013) 103 IPR 395 Oshlack v Richmond River Council (1998) 193 CLR 72 Roadshow Films Pty Ltd v iiNet Ltd (2011) 91 IPR 482 Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 University of New South Wales v Moorhouse (1975) 133 CLR 1 Date of hearing: Determined on the papers Registry: New South Wales Division: General Division National Practice Area: Intellectual Property Sub-area: Trade Marks Category: Catchwords Number of paragraphs: 42 Counsel for the Appellants: Mr JM Hennessy SC Solicitor for the Appellants: Gilbert + Tobin Counsel for the First, Second, Third and Fifth Respondents: Mr MLD Einfeld QC with Mr AC Harding Solicitor the First, Second, Third and Fifth Respondents: Paul Bard Lawyers Counsel for the Fourth and Sixth Respondents: Mr M Green SC Solicitor for the Fourth and Sixth Respondents: Bruce & Stewart Lawyers ORDERS NSD 2154 of 2013 BETWEEN: ARISTOCRAT TECHNOLOGIES AUSTRALIA PTY LTD (ACN 001 660 715) First Appellant ARISTOCRAT INTERNATIONAL PTY LIMITED (ACN 000 148 158) Second Appellant ARISTOCRAT TECHNOLOGIES INC Third Appellant AND: GLOBAL GAMING SUPPLIES PTY LTD (ACN 008 548 589) First Respondent ANTHONY EDWARD ANDREWS Second Respondent IMPACT GAMING PTY LTD (ACN 109 299 461) (and others named in the Schedule) Third Respondent JUDGES: NICHOLAS, YATES AND WIGNEY JJ DATE OF ORDER: 1 June 2016 THE COURT ORDERS THAT: 1. The costs orders made by the primary judge on 25 November 2013 be set-aside. 2. The appellants pay 50% of the first, second, third and fifth respondents' costs of the proceeding excluding the costs of the remittal hearing. 3. The sixth respondent pay 25% of the appellants' costs of the proceeding (including their costs of proceeding NSD 133 of 2007) excluding the remittal hearing and excluding any costs that solely relate to the appellants' claims against the first, second, third and fifth respondents. 4. The first, second, third, fifth and sixth respondents pay the appellants' costs of the remittal hearing. 5. The first, second, third, fifth and sixth respondents pay the appellants' costs of the appeal. 6. There be no order as to costs of the cross-appeal. 7. There be no order as to costs as between the appellants and the fourth respondent. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT THE COURT: Background 1 It is necessary for us to deal with a number of costs issues arising out of our previous judgment of 4 March 2016 (Aristocrat Technologies Australia Pty Ltd v Global Gaming Supplies Pty Ltd [2016] FCAFC 22). In particular, it is necessary for us to decide who should pay the costs of: the proceeding heard and determined by the primary judge (including the costs of the five week trial) but excluding the costs of the remittal hearing; the costs of the remittal hearing; and the costs of the appeal and the cross appeal. 2 In these reasons we shall refer to the appellants as "the Aristocrat parties", the first, second, third and fifth respondents as "the Global/Impact parties" and the fourth respondent ("Tonita") and the sixth respondent ("Mr Allam") as "the Tonita parties". 3 As we mentioned in our previous judgment, the primary judge ordered that: the Aristocrat parties' claim against the Global/Impact parties be dismissed with costs; the Aristocrat parties claim against Tonita be dismissed with costs; Mr Allam pay 35% of the Aristocrat parties' costs of the proceeding excluding the costs of the remittal hearing; and the Aristocrat parties pay Mr Allam's costs of the remittal hearing. 4 We set aside the first and second of those orders on 4 March 2016. The third and fourth orders, which were made by the primary judge on 25 November 2013, have yet to be set-aside. The Aristocrat parties and the Tonita parties accepted that those orders would also need to be set-aside with all questions of costs to be considered afresh by this Court. 5 The Aristocrat parties seek an order that the Global/Impact parties pay 35% of the Aristocrat parties' costs of the proceeding excluding the remittal hearing, their costs of the remittal hearing and their costs of the appeal. Mr Allam has cross-appealed against the primary judge's order requiring him to pay 35% of the costs of the proceeding excluding the remittal hearing. 6 Counsel for the Tonita parties submitted that the Aristocrat parties should pay 90% of Mr Allam's costs of the proceeding excluding the remittal hearing and that there should be no other order as to costs as between Mr Allam and the Aristocrat parties. In respect of Tonita's costs counsel submitted that the Aristocrat parties should be required to pay Tonita's costs of the proceeding (including the remittal hearing) and of the appeal. 7 The Global/Impact parties submitted that: the Aristocrat parties should be ordered to pay 75% of the Global parties' costs of the proceeding excluding the remittal hearing; the Global/Impact parties should be ordered to pay 75% of the Aristocrat parties' costs of the remittal hearing; the Global/Impact parties should be ordered to pay the Aristocrat parties' costs of the appeal. 8 The appeal and cross-appeal in relation to costs must now be considered in light of (inter alia) our judgment of 4 March 2016 which saw the Aristocrat parties achieve some measure of success on the trade mark issues and, as against the Tonita parties, some measure of success in relation to the copyright issues. That change of outcome requires us to exercise our own discretion with respect to costs. The relevant principles 9 The relevant principles are not in dispute. They are discussed by the Full Court in Roadshow Films Pty Ltd v iiNet Ltd (2011) 91 IPR 482 at [3], EMI Songs Australia Pty Limited v Larrikin Music Publishing Pty Ltd [2011] FCAFC 92 at [9], Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (Solar Tint case) (1993) 26 IPR 261 at 271-272, and Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at [11]. 10 In Ruddock v Vadarlis Black CJ and French J (as his Honour then was) said at [11]: Within the general discretion of the courts to award costs it is accepted by decisions in both Australian and English jurisdictions that: • Ordinarily costs follow the event and a successful litigant receives costs in the absence of special circumstances justifying some other order. • Where a litigant has succeeded only upon a portion of the claim, the circumstances may make it reasonable that the litigant bear the expense of litigating that portion upon which he or she has failed. • A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other parties' costs of them. In this sense "issue" does not mean a precise issue in the technical pleading sense but any disputed question of fact or law. See Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 at 48,136; approved by the Full Court in Queensland Wire Industries Pty Ltd v Broken Hill Pty Co Ltd (1987) 17 FCR 211 at 222. 11 The fundamental purpose of a costs order is to compensate a successful party not punish an unsuccessful party: EMI Songs Australia Pty Limited v Larrikin Music Publishing Pty Ltd [2011] FCAFC 92 at [9]. 12 We were also referred by counsel for the Tonita parties to the Full Court's decision in Knott Investments Pty Ltd v Winnebago Industries Inc (No 2) (2013) 103 IPR 395 where Allsop CJ (with whom Cowdroy and Jagot JJ agreed) remarked (at [29]) that "costs should be looked at realistically as to which party has won and which has lost." The Chief Justice observed that the appellants had lost on almost all issues. They were ordered to pay 75% of the respondent's costs of the trial and the appeal. 13 Counsel for the Tonita parties also relied upon the following passage in the judgment of Oshlack v Richmond River Council (1998) 193 CLR 72 at [69]: The traditional exceptions to the usual order as to costs focus on the conduct of the successful party which disentitles it to the beneficial exercise of the discretion. In Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [[1951] 1 All ER 873 at 874], Devlin J formulated the relevant principle as follows: 'No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct.' "Misconduct" in this context means misconduct relating to the litigation [King & Co v Gillard & Co [1905] 2 Ch 7; Donald Campbell & Co Ltd v Pollak [1927] AC 732 at 812], or the circumstances leading up to the litigation [Bostock v Ramsey Urban District Council [1900] 2 QB 616]. Thus, the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation [Jones v McKie [1964] 1 WLR 960; [1964] 2 All ER 842; Bostock [1900] 2 QB 616 at 622, 625, 627]; unnecessarily protracts the proceedings [Forbes v Samuel [1913] 3 KB 706]; succeeds on a point not argued before a lower court [Armstrong v Boulton [1990] VR 215 at 223]; prosecutes the matter solely for the purpose of increasing the costs recoverable [Hobbs v Marlowe [1978] AC 16]; or obtains relief which the unsuccessful party had already offered in settlement of the dispute [Jenkins v Hope [1896] 1 Ch 278]. 14 For the purpose of determining whether a successful party should be deprived of a portion of his or her costs, the concept of "misconduct" is not limited to the specific situations referred to by McHugh J in Oshlack: see Commissioner of Taxation v AusNet Transmission Group Pty Ltd (No 2) [2015] FCAFC 124 at [12]-[14]. The costs of the remittal hearing 15 As we have mentioned, the Global/Impact parties contended that the Aristocrat parties should receive only 75% of their costs of the remittal hearing. This was said to be the appropriate order because although the Aristocrat parties alleged some 80 registered trade marks were infringed, the declaratory and injunctive relief ultimately obtained related to only 11 such marks. 16 Counsel for the Tonita parties submitted that the declaratory relief granted in respect of copyright infringement were made in relation to "an assumed state of affairs" that was akin to the declaratory relief granted by the High Court in University of New South Wales v Moorhouse (1975) 133 CLR 1 at 25. In that case the High Court made an order that there be no order as to the costs of the trial. The Tonita parties also submitted that the Aristocrat parties should be deprived of their costs of the remittal hearing on account of misconduct. We do not accept either of these submissions. 17 We do not consider there is any reason to reduce the costs payable to the Aristocrat parties in relation to the remittal hearing on account of misconduct or any lack of success on particular issues. The fact that the relief ultimately awarded related to 11 marks is of little consequence. The principal focus of the argument before the primary judge related to the same matters of principle that were considered by us on appeal and upon which the Aristocrat companies were successful. We will therefore order the Global/Impact parties and Mr Allam to pay the Aristocrat parties' costs of the remittal hearing. 18 The Tonita parties were jointly represented throughout the proceeding including in the remittal hearing and the appeal to this Court. It is not apparent to us how these parties have allocated, or propose to allocate, costs between themselves. If it was Tonita which incurred the costs, or at least a large part of them, then we can see the potential for some unintended and unjust consequences if we were minded to order Mr Allam to pay the Aristocrat parties' costs while also ordering the Aristocrat parties' to pay Tonita's costs. Given that Tonita is Mr Allam's alter ego, we think it would be quite unjust if costs ordered to be paid to the Aristocrat parties by Mr Allam simply flowed back to Tonita. This is especially so in circumstances where the principal arguments relied upon by both of the Tonita parties were rejected by us. 19 We think the appropriate order as to the costs of the remittal hearing as between the Aristocrat parties and Tonita is that there be no order as to costs. The Costs of the Proceeding EXCLUDING THE REMITTAL HEARING The Global/Impact parties 20 We will first consider the position of the Global/Impact parties with respect to the costs of the proceeding excluding the costs of the remittal hearing. 21 The principal focus of the proceeding until the first of the Full Court decisions was on the allegations of copyright infringement which the Aristocrat parties made against all six respondents. 22 The case against the Global/Impact parties was that they were each knowingly concerned in copyright infringement on an enormous scale. Very substantial damages were sought by the Aristocrat parties pursuant to s 115(4) of the Copyright Act 1968 (Cth) ("the Act") from each of the Global/Impact parties on the basis that their infringements were flagrant. The copyright case against the Global/Impact parties was wholly unsuccessful. 23 In their submissions, the Aristocrat parties contended that the overwhelming focus of the proceeding (excluding the remittal hearing) as between the Aristocrat parties and the Global/Impact parties was the factual contest as to whether the joint venture had in its possession counterfeit gaming machine components and whether the joint venture sold machines that contained such components. 24 However, it is clear that there was another important factual contest which concerned the issue of knowledge, including, in particular, whether the Global/Impact parties knew, or ought to have known, that the gaming machines sold to their South American customers included counterfeit EPROMs and counterfeit compliance plates. The Aristocrat parties were wholly unsuccessful on those issues. 25 There are other matters that must be considered when determining what is the appropriate orders for costs: The Aristocrat parties alleged that a total of 618 gaming machines included "counterfeit" compliance plates and EPROMs but were only able to make that allegation out in relation to a comparatively small number of machines. The Aristocrat parties also advanced a case based upon the tort of conversion that was rejected. The Aristocrat parties also advanced a case of copyright infringement based upon artwork. That case was abandoned shortly prior to final submissions. The Aristocrat parties also advanced a case under s 52 of the Trade Practices Act 1974 (Cth) and for passing off that was not pressed. A considerable amount of time and expense was devoted to the Aristocrat parties' data matching evidence, which the primary judge found to be unreliable and of no assistance. 26 As to the data matching exercise, the primary judge said in his judgment of 8 March 2010 at [10] that "the data matching exercise was an enormous one and … a huge amount of time and painstaking effort was put into meeting that part of the Aristocrat companies' case." 27 The Aristocrat parties succeeded in obtaining injunctive relief in respect of a number of their trade marks (including the Aristocrat word marks) against the Global/Impact parties over what was at all stages of this litigation forceful opposition from the Global/Impact parties. The Aristocrat parties are entitled to their costs of that aspect of the proceeding recognising, at the same time, that for them the trade mark infringement case was a fall back case that was only faintly argued, and that did not result in the award of any damages, much less the very substantial damages that they had sought. 28 We are mindful that the principal case that was advanced by the Aristocrat parties was one of copyright infringement no doubt because it might, if successful, result in an award of substantial damages pursuant to s 115(4) of the Act. The copyright case against the Global/Impact parties failed in its totality. The modest success achieved by the Aristocrat companies on their trade mark claims against the Global/Impact parties was limited to an award of declaratory and injunctive relief. 29 On the other hand, we accept the Aristocrat parties' submission that, so far as the factual allegations were concerned, there was a considerable amount of overlap between the copyright case and trade mark case. In particular, in order to succeed in their claims for trade mark infringement, it was necessary for the appellants to establish that one or more of their registered trade marks was applied, without their consent, to second-hand gaming machines that were exported by the joint venture, and that included counterfeit EPROMs and compliance plates. 30 We do not think the costs orders proposed by either the Aristocrat parties or the Global/Impact parties are appropriate in the circumstances of this case. We have given consideration to other forms of orders including, in particular, an order that each party pay its own costs, but in our view an order to that effect pays insufficient attention to the scope of the Global/Impact parties' overall success and the very limited relief obtained against them compared to the scale of the case that the Aristocrat parties set out to prove. 31 All things considered, in our opinion the preferable order is that the Aristocrat parties pay 50% of the Global/Impact parties' costs of the proceeding excluding the remittal hearing. The Tonita parties 32 We turn now to the position of the Tonita parties. 33 The Tonita parties' written submissions filed in support of Mr Allam's cross-appeal contain an analysis of the pleadings and particulars of his contention that show the Aristocrat parties succeeded on only a small fraction of the causes of action pleaded and particularised. We do not find the Tonita parties' arithmetical analysis of the causes of action relied upon of much assistance in resolving the question of costs in this case. The principal cause of action relied upon against Mr Allam was copyright infringement for which he was held liable. 34 The primary judge made a number of observations in relation to costs in his judgment of 25 November 2013 which are worth repeating. His Honour said at [13]-[15]: [13] It seems to me that a good deal of weight in the apportionment process must be given to the outcome of the factual dispute between the Aristocrat Companies and Mr Allam. The focus of the Aristocrat Companies' case was upon Mr Allam's infringing conduct in manufacturing counterfeit components, including fake compliance plates, for second hand Aristocrat gaming machines. I found that Mr Allam's denials of his conduct were false. [14] The extent of the factual dispute and the substantial body of evidence which underlay it can be seen in the primary judgment at [667] to [676]. My factual findings against Mr Allam are set out in my primary judgment at [710] to [712]. I made further findings adverse to Mr Allam at [724] to [750]. These findings were upheld by the Full Court at [133]. [15] Notwithstanding the passage of time that has elapsed since the trial, I have a good recollection of the time that was devoted to addressing, in cross-examination and submissions, the substantial body of evidence which related to this issue. Allowance must be made for other issues on which the Aristocrat Companies were not successful. But the attention that was devoted to unravelling this central aspect of the factual claim against Mr Allam weighs strongly in favour of the Aristocrat Companies in the apportionment process. 35 As the primary judge's observations make clear, a large amount of time and resources were devoted to responding to Mr Allam's denials on the central question of whether he engaged in the manufacture of counterfeit compliance plates and counterfeit EPROMs. That is, in our view, a matter that must carry significant weight when deciding questions of costs. 36 We do not accept the submission that taking a "realistic" or "commercial" view of the outcome, Mr Allam should be considered to be the successful party. While it is true that the Aristocrat parties failed to obtain an award of damages against Mr Allam, it did obtain declaratory and injunctive relief which cannot be dismissed (as counsel for Mr Allam's submissions suggested it might be) as trivial or unimportant. We do, however, take into account the fact that the declarations and injunctive relief, particularly with respect to copyright infringement, was considerably narrower than what the Aristocrat parties would have been awarded had they made good all other allegations of infringement that failed for lack of proof. 37 Another matter that we consider should be taken into account when determining costs as between the Aristocrat parties and Mr Allam is the injustice that might be occasioned by requiring Mr Allam to pay for any part of the Aristocrat parties' costs that were incurred solely in relation to their case against the Global/Impact parties. The cost order which we will make takes this into account. 38 In all the circumstances, we consider that justice is best served by requiring Mr Allam to pay 25% of the Aristocrat parties' costs of the proceeding excluding the remittal hearing and excluding any costs that solely relate to the Aristocrat parties' claims against the Global/Impact parties. It is our intention that this order include the costs of proceeding NSD 133 of 2007 which was consolidated with proceeding NSD 1271 of 2006 on 22 June 2007. 39 For reasons previously explained in relation to the remittal hearing, we consider that there should be no order as to costs of the proceeding as between the Aristocrat parties and Tonita. Costs of the appeal 40 In our opinion the costs of the appeal should be awarded to the successful parties. We do not see any basis for reducing their costs on account of any lack of success on particular issues or misconduct of any kind. The costs of the appeal should be payable as follows: the Global/Impact parties and Mr Allam should pay the Aristocrat parties' costs of the appeal; there should be no order as to the costs of the appeal as between the Aristocrat parties and Tonita. 41 Since it was necessary for us to consider the question of Mr Allam's costs for ourselves independently of the matters raised in the cross-appeal, there should be no order as to costs of the cross-appeal. Disposition 42 The orders of the Court will be as follows: (1) The costs orders made by the primary judge on 25 November 2013 be set-aside. (2) The Aristocrat parties pay 50% of the Global/Impact parties' costs of the proceeding excluding the costs of the remittal hearing. (3) Mr Allam pay 25% of the Aristocrat parties' costs of the proceeding (including their costs of proceeding NSD 133 of 2007) excluding the remittal hearing and excluding any costs that solely relate to the Aristocrat parties' claims against the Global/Impact parties. (4) The Global/Impact parties and Mr Allam pay the Aristocrat parties' costs of the remittal hearing. (5) The Global/Impact parties and Mr Allam pay the Aristocrat parties' costs of the appeal. (6) There be no order as to costs of the cross-appeal. (7) There be no order as to costs as between the Aristocrat parties and Tonita. I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Nicholas, Yates and Wigney. Associate: Dated: 1 June 2016 SCHEDULE OF PARTIES NSD 2154 of 2013 Respondents Fourth Respondent: TONITA ENTERPRISE PTY LTD (ACN 120 737 402) Fifth Respondent: FRANCIS GEORGE BERNARD CRAGEN Sixth Respondent: RIAD ALLAM