FEDERAL COURT OF AUSTRALIA COSTS - proceedings in which several causes of action were litigated - several parties to the proceedings - application successful on one cause of action only - whether costs to be considered on each cause of action separately - whether costs to be awarded on indemnity basis - whether on a party and party basis - relationship between "Calderbank Letter" and Federal Court Rules, O 23 - apportionment of costs. Federal Court of Australia Act 1976 (Cth), s 43. Federal Court Rules, O 23, O 62, r 36. Henderson v Amadio Pty Ltd (Fed Ct/Heerey J, 22 March 1997, unreported). Fasold v Roberts (1997) 145 ALR 548. LED Builders v Hope (1994) 53 FCR 10. John S Hayes & Associates Pty Ltd v Kimberley-Clark Australia Pty Ltd (1994) 52 FCR 201. MGICA (1992) Ltd v Kenny & Good Pty Ltd (No 4) (1996) 140 ALR 707. DAVID FASOLD & ANOR v ALLEN ROBERTS & ANOR NG 942 of 1992 Sackville J Sydney 11 September 1997 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 942 of 1992 BETWEEN: DAVID FASOLD FIRST Applicant IAN RUTHERFORD PLIMER SECOND APPLICANT AND: allen roberts AND: first Respondent AND: ark search association incorporated second respondent allen roberts first cross claimant ark search association incorporated second cross claimant david fasold first cross respondent ian rutherford plimer second cross respondent JUDGE(S): sackville j. DATE OF ORDER: 11 SEPTEMBER, 1997 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The first respondent pay the costs of the first applicant in respect of the claim for infringement of the first applicant's copyright, such costs not to be reduced under FCR, O 62, r 36A(1). 2. The applicants pay the costs of the respondents in respect of the applicants' claim under the Fair Trading Acts and the Trade Practices Act 1974 (Cth). 3. Each party bear his or its own costs of the cross-claim. 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 NG 942 of 1992 BETWEEN: DAVID FASOLD FIRST Applicant IAN RUTHERFORD PLIMER SECOND APPLICANT AND: ALLEN ROBERTS and: FIRST Respondent AND: ARK SEARCH ASSOCIATION INCORPORATED SECOND RESPONDENT allen roberts first cross claimant ark search association incorporated second cross claimant DAVID FASOLD FIRST CROSS RESPONDENT IAN RUTHERFORD PLIMER SECOND CROSS RESPONDENT JUDGE(S): SACKVILLE J. DATE: SEPTEMBER, 1997 PLACE: SYDNEY REASONS FOR JUDGMENT In these proceedings I gave judgment on 2 June 1997 (see Fasold v Roberts (1997) 145 ALR 548). I made the following orders: 1. Judgment in favour of the first applicant (Mr Fasold) against the first respondent (Dr Roberts) in the sum of two thousand five hundred dollars ($2,500). 2. The application otherwise be dismissed. 3. The cross-claim be dismissed. 4. Direct the respondents to file and serve any submissions on costs within 14 days. 5. Direct the applicants to file and serve their submissions on costs within 14 days from receipt of the respondents' submissions. Paragraph 1 of the orders reflects the fact that the first applicant succeeded against the first respondent on the former's claim for infringement of copyright. Paragraph 2 reflects the failure of the applicants on the other aspects of the case pleaded by them, namely, claims against the respondent under the Fair Trading Acts of the States and the Trade Practices Act 1974 (Cth) ("TP Act"). (I shall describe these aspects of the case as "the non-copyright claim"). I shall refer to the cross-claim later. The respondents filed their written submissions on costs, in accordance with the orders, on 16 June 1997. The submissions were followed, within a day, by the filing of an affidavit sworn by Mr Burke, the solicitor for the respondents. That affidavit annexed correspondence containing offers of settlement made to the applicants on behalf of the respondents. The respondents relied on the offers, which were rejected by the applicants, in relation to costs. In particular, the respondents submitted that any costs awarded in their favour on the non-copyright claim should be on an indemnity basis. The first and second applicants (Mr Fasold and Professor Plimer, respectively) are represented by the same firm of solicitors, but separate written submissions were filed on behalf of each of them. Both sets of submissions were filed on 29 July 1997 some four weeks later than the time specified in the orders of 2 June 1997. The applicants' submissions did not dispute that I should take account of Mr Burke's affidavit. However, the first applicant submitted that the offers made on behalf of the respondents did not provide a reason for depriving him of his costs in relation to the claim for breach of copyright. Both applicants submitted that the offers did not justify an award of costs against them on an indemnity basis in respect of the non-copyright claim. The Principles Section 43 of the Federal Court of Australia Act 1976 (Cth) gives the Court jurisdiction to award costs and provides, in subs (2), that the award of costs is at the discretion of the Court. The discretion to award costs is unfettered, but is to be exercised judicially. The principles have recently been reviewed in Henderson v Amadio Pty Ltd (Fed Ct/Heerey J, 22 March 1997, unreported), at 492-494. Heerey J's analysis was approved by the Full Court in Hanpost Pty Ltd v Mita Copiers Australia Pty Ltd (1996) 67 FCR 416 (Fed Ct/FC), at 431, per Branson J (with whom Sheppard and Spender JJ agreed). I do not repeat the analysis here. General Observations In the judgment, I made several general points, two of which are particularly relevant on the question of costs. First, I noted that the parties had apparently incurred very substantial costs in preparing the case for hearing. I attributed "a significant proportion of the costs...to the propensity of each side to prepare and file affidavits and voluminous documentary evidence, without always paying careful attention to relevance or to matters of form" (at 559). I made it clear that I did not necessarily lay this at the feet of counsel or solicitors appearing or instructing at the trial. However, I said that the parties must bear the primary responsibility, although not necessarily in equal proportions, for the unusual delay and expense in bringing the proceedings to finality. The affidavit of Mr Burke confirms that the respondents, at least, incurred very substantial costs. According to his estimate, the respondents have incurred costs of $300,000, and disbursements of $110,000 from the commencement of his instructions in April 1993. This seems, on the face of it, a very high figure, given the issues in the proceedings and the fact that the case occupied only seven hearing days rather than the estimated four weeks. As I indicated in the judgment, I am not in a position to apportion responsibility between the parties for the apparently high level of costs in this case. It may be that, upon careful scrutiny, it will be found that, having regard to the way the applicants prepared and conducted their case on the non-copyright claim, the respondents were justified in incurring the expenditure they did in resisting that claim. Similarly, it may be that the costs incurred by the first applicant in supporting his copyright claim were reasonably incurred. Nonetheless, I note that, under the Federal Court Rules ("FCR"), O 62, r 36, it is the taxing officer's duty to look into the question of whether costs have been "improperly, unreasonably or negligently incurred". It follows that the issue will be addressed by the taxing officer. The second point was as follows (at 559): "Secondly, it should be apparent from what has been said thus far that the application seeks relief in respect of two quite distinct causes of action. The cause of action for breach of copyright is available (if at all) only to Mr Fasold. The cause of action founded on the Fair Trading Acts and the TP Act, although said to be brought on behalf of both applicants, in substance seeks relief that can only benefit Professor Plimer. While there is some overlap in the evidence relevant to each cause of action, it is not entirely clear that the test provided by the [FCR] for the two claims to be joined in the one set of proceedings is satisfied: see FCR, O 6, r 2. However, the respondents did not suggest that the two claims should be heard separately and, in the event, they were heard together." In the circumstances of this case, I think that the appropriate course is to consider separately the question of costs in respect of each of the causes of action litigated. The proceedings not only involved two distinct causes of action, but the parties seeking to benefit from each cause of action were not the same. Moreover, as I have pointed out, while the first applicant succeeded in his copyright claim, the applicants failed in their non-copyright claim. I appreciate that the evidence showed that the second applicant had agreed to meet the costs incurred by the first applicant in the litigation. But this does not seem to me a reason for overlooking the fact that the case required the resolution of two distinct causes of action in the sense to which I have referred. The Copyright Claim The respondents submitted that the copyright claim could and should have been brought in the District Court of New South Wales. Accordingly, it was a case that attracted FCR, O 62, r 36A(2), which provides as follows: "(2) If the Court or a Judge is of the opinion that a proceeding (including a cross-claim for a money sum or damages) brought in this Court could more suitably have been brought in another court or in a tribunal and so declares, then any costs to be paid, including disbursements, will be reduced by one-third of the amount otherwise allowable under this Order." The respondents submitted that, in any event, FCR, O 62, r 36A(1) should apply to reduce the costs that otherwise might be awarded in favour of the first applicant, since the damages awarded were less than $100,000. FCR, O 62, r 36A(1) provides as follows: "Where a party is awarded judgment for less than $100,000 on a claim (not including a cross-claim) for a money sum or damages any costs ordered to be paid, including disbursements, will be reduced by one-third of the amount otherwise allowable under this Order unless the Court or a Judge otherwise orders." In LED Buildings Pty Ltd v Hope (1994) 53 FCR 10 (Fed Ct/Tamberlin J), Tamberlin J considered it inappropriate to apply FCR, O 62, r 36A in a copyright case in which the applicant accepted a sum of $5,000, paid into Court by the respondent. His Honour said this (at 12): "This is not a case where the proceedings could have been more suitably brought in a District or Local Court. The proceedings relate solely to copyright infringement and it appears to me that there is no jurisdiction in those courts to deal with such questions. Moreover, the considerable experience and expertise of this Court and the complexity inherent in copyright proceedings clearly makes it more suitable that the proceedings be brought in the Federal Court.... In my opinion r 36A, unless applied with discretion and caution can lead to harsh results. Especially is this so in relation to claims for small monetary amounts in matters such as copyright. If the rule is allowed to apply automatically in all cases where a sum, less than $100,000, is recovered, this can lead to harsh results in situations where there is no other more appropriate court." The respondents submitted that, contrary to Tamberlin J's views, the copyright claim could have been brought in the District Court. This submission is correct. State courts, within the limits of their respective jurisdictions, are invested with federal jurisdiction in all matters in which original jurisdiction can be conferred on the High Court: Judiciary Act 1903 (Cth), s 39(2). This includes matters arising under the Copyright Act 1968 (Cth): see Constitution, ss 76(ii), 77(iii). Nonetheless, I do not think that the fact that the proceedings could have been brought in the District Court is a ground for reducing the first applicant's entitlement to costs by one third. As Tamberlin J said in LED Builders, it is appropriate that copyright infringement cases be brought in this Court. In the circumstances of the present case, there was a good deal to be said for the copyright claim being severed from the non-copyright claim. But even if that had been done, it still would have been appropriate for the copyright claim to have been brought and heard in this Court. For similar reasons, I do not think that the fact that the first applicant recovered only $2,500 should result in a reduction of the costs to which he would otherwise be entitled. If this Court is the appropriate forum for the vindication of copyright claims, the fact that the applicant's claim does not exceed $100,000 should not ordinarily deprive him or her of the benefit of a costs order otherwise available. The first applicant established that his copyright had been infringed and I think it appropriate that he should receive the costs of establishing his claim. Accordingly, I think it appropriate to order, pursuant to FCR, O 62, r 36A(1), that the first applicant's costs should not be reduced. I should note a further argument put by the first respondent. It was said that the first applicant should be deprived of his costs because the evidence suggested that the second applicant had agreed to meet the first applicant's costs. Despite such an agreement, the first applicant remains liable to his legal representatives for the costs incurred in the proceedings. I do not think that the arrangement with the second applicant is sufficient to deprive him of a costs award that is otherwise appropriate. The Non-Copyright Claim The applicants failed in their non-copyright claim. The second applicant, although he was not the only applicant pursuing this claim, submitted that he should be treated as a member of the public who saw it as his duty to challenge the actions of the respondents, in particular the first respondent. Whatever the motivation of the second applicant, the case was conducted on the basis that the relief he sought included damages by reason of what was said to be the respondents' misleading or deceptive conduct in trade or commerce. The second applicant never resiled from this position. I do not think it appropriate to regard this as public interest litigation, with the second applicant as the self-appointed guardian of the public interest. Even if acting in the public interest is a ground for depriving a successful respondent of his or her costs, there is no sound basis in this case for depriving the respondents of their costs on the non-copyright claim. (As to costs in public interest litigation generally, see Richmond River Council v Oshlack (1996) 39 NSWLR 622 (NSW CA) (the High Court has granted special leave to appeal in Oshlack); Qantas Airways Ltd v Cameron (1996) 68 FCR 387 (Fed Ct/FC).) Indemnity Costs The respondents submitted that costs should be awarded in their favour in respect of the non-copyright claim on an indemnity basis. They based this submission on the offers contained in the correspondence annexed to Mr Burke's affidavit. It was said that the offers should be taken into account as "Calderbank" offers: Calderbank v Calderbank [1976] Fam 93; Messiter v Hutchinson (1987) 10 NSWLR 525 (S Ct NSW/Rogers J); Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97 (Fed Ct/Spender J). In June 1993, the respondents offered to settle "these proceedings" on the basis that each party bear his and its own costs. On 8 March 1995, the respondents offered to accept the sum of $150,000 already paid into Court by way of security for the first applicant's costs, together with costs already awarded in favour of the respondents in earlier interlocutory proceedings. A letter of 1 February 1996 contained a further offer, but this related to both the proceedings in this Court and a defamation action between the first applicant and second respondent in Victoria. The view which has been taken in this Court is that the mere writing of a Calderbank letter does not of itself justify an order for costs in favour of a successful party being taxed on a solicitor and client or an indemnity basis. The making of an offer of compromise is one of the factors to be taken into account in the exercise of the Court's judicial discretion: John S Hayes & Associates Pty Ltd v Kimberley-Clark Australia Pty Ltd (1994) 52 FCR 201 (Fed Ct/Hill J), at 205-206. In MGICA (1992) Ltd v Kenny & Good Pty Ltd (No 4) (1996) 140 ALR 707 (Fed Ct/Lindgren J), Lindgren J held (at 707-708) that it was not appropriate to award indemnity costs unless the conduct of the party against whom the order is sought is plainly unreasonable. His Honour pointed out that a Calderbank letter may be less protective of the offerees' position than an offer of compromise and payment into Court made pursuant to FCR, O 23. Had the respondents followed the regime in FCR, O 23, they would have had to comply with O 23, r 2(2). This provides that, if an offer to compromise the separate claims of several parties to the proceedings is made in a single notice of offer, the notice of offer must specify separately the offer made to each party. The letter of 8 March 1995, on which the respondents principally rely, did not differentiate between the offer made to the first applicant and that made to the second applicant. I think that this is of some significance, because, as I have explained, the proceedings involved two distinct causes of action. It was only the first applicant who could pursue (successfully as it turned out) the claim for infringement of copyright. The letter not only failed to specify the offer made to each of the applicants, but did not specify whether the respondents accepted that the first applicant was entitled to succeed in respect of his copyright claim and, if so, the quantum of damages he should receive. The respondents did not submit that the applicants, or either of them, had acted unreasonably in conducting the litigation, in the sense discussed in Hayes v Kimberley-Clark and MGICA v Kenny & Good. I have already said that the costs incurred by the parties in these proceedings appear to be very high having regard to the issues pleaded and the hearing time required. But I have not been asked to and I am not in a position to apportion responsibility between them for the state of affairs. For these reasons, I think that the applicants should pay the costs of the respondents in relation to the non-copyright claim only on a party and party basis. Apportionment The respondents said that a study of transcript showed that the copyright claim occupied 10.8 per cent of the hearing time. They submitted that any costs awarded to the first applicant in respect of the copyright claim should be offset against the costs awarded to the respondents in the claim under the Fair Trading Acts and the TP Act. Accordingly, on the assumption that the costs orders in favour of the first applicants should not be reduced by one third, the respondents should simply be awarded 89.2 per cent of their costs. I do not think that this is the appropriate course. I have already said that the question of costs should be considered separately in respect of each cause of action. Moreover, any costs order in relation to the copyright claim is for the benefit of the first applicant alone; any costs order in respect of the claim under the Fair Trading Acts and the TP Act is against both applicants. The costs order in respect of the copyright claim is against the first respondent only; the costs order in respect of the claims under the Fair Trading Acts and the TP Act is for the benefit of both respondents. I appreciate that the first and second applicants have an arrangement as to costs, but I do not think that warrants simply setting off the costs in respect of one claim against the costs awarded in respect of the other. In my view separate costs orders should be made in respect of each claim. It is true that there is some limited overlap in the evidence relevant to the copyright claim and that relevant to the claims under the Fair Trading Acts and the TP Act. However, it will be a matter for the taxing officer, exercising a common sense approach, to allocate costs between the two claims. The Cross-Claim Nothing was said about the respondents' cross-claim at the hearing of the principal proceedings. As the applicants' submissions acknowledged, the cross-claim related to the copyright claim and was essentially of a defensive nature. It is difficult to see how there could be any significant costs in respect of the cross-claim. I think the appropriate course is that each party bear his or its own costs of the cross-claim. Conclusion The following orders should be made: 1. The first respondent pay the costs of the first applicant in respect of the claim for infringement of the first applicant's copyright, such costs not to be reduced under FCR, O 62, r 36A(1). 2. The applicants should pay the costs of the respondents in respect of the applicants' claim under the Fair Trading Acts and the TP Act. 3. Each party should bear his or its own costs of the cross-claim. I certify that this and the preceding eight (8) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Sackville Associate: Dated: 11 September, 1997 Counsel for the Applicants: Mr S.L. Walmsley and Mr M.G. Vincent Solicitor for the Applicants: Blessington Judd Counsel for the Respondents: Mr A. Radojev and Mr M.B. Duncan Solicitor for the Respondents: Bush Bourke & Company. Date of Hearing: 7,8,9,10,14,15 and 17 April, 1997 Date of Judgment: 11 September, 1997