Polygram Records Inc & Anor v Raben Footwear Pty Ltd [1996] FCA 634

CATCHWORDS

COSTS - indemnity basis - failure to admit certain matters for tactical reasons - whether costs of proving those matters should be awarded on an indemnity basis. POLYGRAM RECORDS INC and POLYGRAM PTY LIMITED v RABEN FOOTWEAR PTY LIMITED No. NG 699 of 1994

CORAM: FOSTER J DATE: 27 SEPTEMBER 1996 PLACE: SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA) ) NEW SOUTH WALES DISTRICT REGISTRY) No. NG 699 of 1994 ) GENERAL DIVISION ) BETWEEN: POLYGRAM RECORDS INC First Applicant POLYGRAM PTY LIMITED Second Applicant

AND: RABEN FOOTWEAR PTY LIMITED Respondent JUDGE MAKING ORDERS: FOSTER J DATE: 27 SEPTEMBER 1996 PLACE: SYDNEY MINUTE OF ORDERS

THE COURT ORDERS THAT: 1. The respondent pay the applicants' costs on an indemnity basis so far as they were occasioned by proof of matters covered by paragraphs 8, 10, 15, 19 and 20 of the Notice to Admit Facts dated 8 December 1994 served by the applicants on the respondent on 8 December 1994 as agreed or failing agreement as taxed in accordance with the Rules. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA) ) NEW SOUTH WALES DISTRICT REGISTRY) No. NG 699 of 1994 ) GENERAL DIVISION ) BETWEEN: POLYGRAM RECORDS INC First Applicant POLYGRAM PTY LIMITED Second Applicant

AND: RABEN FOOTWEAR PTY LIMITED Respondent CORAM: FOSTER J DATE: 27 SEPTEMBER 1996 PLACE: SYDNEY REASONS FOR JUDGMENT (Extempore) HIS HONOUR: I gave judgment in this matter on 6 September 1996, and in that judgment gave directions that the parties should bring in short minutes of orders to give effect to the findings that I made and published on that day. Pursuant to that direction, the applicants have brought in short minutes of order today, as to which there is agreement between the parties save for one paragraph. That paragraph is a proposed order that the respondent pay the applicants' costs, on an indemnity basis so far as they were occasioned by proof of matters covered by the Notice to Admit Facts dated 8 December 1994 served by the applicants on the respondent on 8 December 1994, and otherwise on a party/party basis, as agreed, or, failing agreement, as taxed in accordance with the rules. The respondent has not agreed that an order should be made in those terms, and has contended that the case is not an appropriate one for the ordering of costs on an indemnity basis in the spectrum of matters referred to. Counsel have taken me to the Notice to Admit Facts of 8 December 1994, which is annexure A to the affidavit of Simon Fentiman Gilchrist of 24 September 1996, filed in respect of this part of the proceedings. The relevant paragraphs of this Notice, which were not the subject of admission, are paragraphs 8, 10, 15, 19 and 20. Paragraphs 8, 10 and 15 relate to what might be described as the chain of title of copyright from the original maker of the Polygram record through to the applicants. Paragraphs 19 and 20 sought admissions that the Pilz recordings embodied copies of the whole or a substantial part of the original record. Discussion as to the non-admission of those paragraphs took place between the solicitors. Ultimately the respondent's solicitors indicated, on the instructions of the respondent, that "We are putting you to proof of these matters". The general thrust of the submission made by the applicants for the award of indemnity costs is that that attitude evinced a desire on the part of the respondent simply to raise the matters in dispute in a tactical sense, when there was no true basis for their being raised as genuine disputes between the parties. The applicants submit that this tactical approach, together with certain findings that were made in the case as to the credibility of the two principals of the respondent and the dubious nature of certain documents as to title relied upon by them, and also the fact that an award of damages was made on the basis of flagrancy, should lead the Court to conclude that it is appropriate that orders for indemnity costs in respect of these aspects of the trial should be made. So far as the chain of title argument is concerned, it would appear that the decision not to admit paragraphs 8, 10 and 15 was based upon the availability to the respondent of certain documents, which were admitted into evidence, and which I found to be, at best, a colourable indication of title to the Pilz recordings. These documents were not supported in any fashion by evidence which might have authenticated them, or provided a basis upon which they could, in any satisfactory sense, display a countervailing chain of title. For example, no evidence was called from the vendor of the Pilz records to indicate that it found a proper root of title in the documents. Ultimately, therefore, I held that the documents should have raised suspicion rather than the reverse. In those circumstances I am quite satisfied that it is appropriate to make the order sought for costs to be payable on an indemnity basis in respect of the failure to admit the matters in paragraphs 8, 10 and 15. I have experienced somewhat more doubt, however, in relation to the failure to admit the matters as sought in paragraphs 19 and 20. These paragraphs relate to evidence given by the only expert called in the case, Ms Brooks. It is clear that both sides sought to obtain expert evidence on the question of whether the Pilz recordings embodied copies of the very sounds of the Polygram recordings. It appears that expert testimony on that subject was sought by the respondents. However, no expert witness was called in their case. What was done was to make use of certain reports provided by way of discovery, these being earlier reports given by Ms Brooks, in an endeavour, first of all, to undo the significance of her evidence as to relevant similarities between the recordings, and also to raise the suggestion that there may indeed have been an earlier basic recording upon which the Pilz recordings were made, that is, a recording emanating from a different recording session. Some support for that approach might have been gained from the report of 25 January 1994 annexed to Mr Gilchrist's affidavit. However, a report apparently provided at the same time is, to say the least, strongly suggestive that Ms Brooks had changed her mind as to that particular matter when she considered the recordings afresh, and that she had come to the view that they did not so emanate. Although her evidence was at some stages somewhat difficult to follow, it ultimately emerged with clarity that she was of the view that the Pilz recording was "significantly and definitely" one embodying copies of the very sounds to be found in the Polygram recording. The question I have to decide is whether the approach taken, that is, of merely cross-examining Ms Brooks upon the material that had been supplied, and not calling any evidence countervailing the thrust of her evidence that the recordings were, for practical purposes, the same, should be stigmatised as simply a tactical device which, when engaged in in the circumstances of this case, was necessarily engaged in at the risk of an award of costs on an indemnity basis if it failed. My mind has fluctuated somewhat during the course of careful argument from the representatives of both sides, as to this matter. I think, however, that the approach must be viewed within the general framework of what the respondent's solicitor averred would be done on his client's instructions, namely, that the applicant was to be "put to proof". In the circumstances in which litigation in these commercial areas must now be conducted, that is, of issues being clearly defined and refined into issues which are those seriously in dispute and no others so that hearing time and preparation time can be confined within appropriate bounds, I have come to the conclusion that I can properly regard this aspect of the case also as a tactical exercise carrying with it the risk of the award of indemnity costs. In the circumstances I consider it appropriate that I also order that costs on an indemnity basis be paid in respect of failure to admit paragraphs 19 and 20 in the Notice.