FEDERAL COURT OF AUSTRALIA TCN Channel Nine Pty Limited v Network Ten Limited [2001] FCA 1282 COSTS – discretion to award costs – successful respondent found not to be in breach of television broadcast copyright - respondent failed on certain alternative defences – whether any apportionment of the successful respondent's entitlement to costs should be made – discussion of principles relevant to discretion to apportion costs – apportionment confined to percentage of the successful party's costs. Federal Court of Australia Act 1976 (Cth) s 43(2) Cretazzo v Lombardi (1975) 13 SASR 4 referred to Gladstone Park Shopping Centre Pty Ltd v Wills (1984) 6 FCR 496 referred to Hughes v Western Australian Cricket Association Inc (1986) ATPR 40-748 followed Inn Leisure Industries Pty Ltd v D F McCloy Pty Ltd (No 2) (1991) 28 FCR 172 followed Oshlack v Richmond River Council (1998) 193 CLR 72 referred to Smeaton Hanscomb & Co Ltd v Sassoon I Setty, Son & Co (No 2) [1953] 1 WLR 1481 referred to TCN Channel Nine Pty Ltd v Network Ten Pty Ltd (2001) 50 IPR 335 cited TCN Channel Nine Pty Ltd v Network Ten Pty Ltd [2001] FCA 841 cited TCN CHANNEL NINE PTY LIMITED, QUEENSLAND TELEVISION LIMITED & GENERAL TELEVISION CORPORATION PTY LIMITED v NETWORK TEN LIMITED N 105 OF 2000 CONTI J 10 SEPTEMBER 2001 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 105 OF 2000 BETWEEN: TCN CHANNEL NINE PTY LIMITED FIRST APPLICANT QUEENSLAND TELEVISION LIMITED SECOND APPLICANT GENERAL TELEVISION CORPORATION PTY LIMITED THIRD APPLICANT AND: NETWORK TEN PTY LIMITED RESPONDENT JUDGE: CONTI J DATE OF ORDER: 10 SEPTEMBER 2001 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The Applicants pay eighty per centum (80%) of the Respondent's costs of the proceedings. 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 N 105 OF 2000 BETWEEN: TCN CHANNEL NINE PTY LIMITED FIRST APPLICANT QUEENSLAND TELEVISION LIMITED SECOND APPLICANT GENERAL TELEVISION CORPORATION PTY LIMITED THIRD APPLICANT AND: NETWORK TEN PTY LIMITED RESPONDENT JUDGE: CONTI J DATE: 10 SEPTEMBER 2001 PLACE: SYDNEY REASONS FOR JUDGMENT The costs issues arising 1 The present application relates to the issue of the costs orders to be made in the proceedings otherwise now finalised at first instance. The causes of action of the Applicants ("Nine") against the Respondent ("Ten") for breach of television copyright related to the re-broadcasting of twenty excerpts from Nine television programmes, which re-broadcasts were made in the course of Ten's television programme "The Panel". Such claims for breach of television copyright on the part of Nine were originally limited to the scope of s 87(c) of the Copyright Act 1968 (Cth) (the Act), and gave rise to what I will describe as the "first decision", for which judgment was handed down on 20 February 2001. On the third day of the hearing of the proceedings, which were finalised by the first decision, Nine sought leave to amend the further amended statement of claim in order to take advantage, additionally or alternatively, of s 87(a) of the Act. This application was initially opposed by Ten, but after the conclusion of the evidence, it was mutually agreed between the parties that leave so to amend be granted, on the basis that such alternative cause of action based upon s 87(a) should be litigated at a later hearing date to be fixed after delivery of judgment in relation to the s 87(c) issue. The hearing of the proceedings for breach of s 87(a) of the Act took place on 14 May 2001, and judgment was delivered in relation thereto on 4 July 2001. 2 In relation to the first decision, Nine's complaints of rebroadcasting by Ten in breach of the copyright conferred by s 87(c) of the Act involved the consideration of whether the excerpts from each of the twenty broadcasts constituted respectively a "substantial part", within s 14(1)(a) of the Act, of the subject matter of television broadcast copyright. Ten's primary defence was a denial to the effect that any of the rebroadcast excerpts related to substantial parts of the respective subject matters of television broadcast copyright. In so doing, Ten opposed Nine's contention as to the scope of television broadcast copyright, and argued for a much wider scope. In the result, I rejected such primary contentions of both parties, but I determined as the true scope of copyright protection a somewhat middle ground, which ensured success in any event to Ten. On the basis that, contrary to its contention, Ten did not infringe Nine's copyright in respect of any of the twenty re-broadcasts from Nine's programmes, Ten contended that the rebroadcast excerpts constituted fair dealings, either for the purpose of criticism or review within s 103A of the Act, or for the purpose of the reporting of news within s 103B of the Act, or in some cases for both purposes. 3 In the first decision delivered on 20 February 2001 (TCN Channel Nine Pty Ltd v Network Ten Pty Ltd (2001) 50 IPR 335), I held that no re-broadcast of a substantial part within s 14(1)(a) of the Act, had occurred in relation to any of the excerpts from Nine's twenty television programmes. Since a full hearing, including argument supported by written submissions, had taken place and been provided (as the case may be) in relation to the fair dealing defences, I considered it to be appropriate to make findings in respect thereof, particularly since the hearing of Nine's adjourned s 87(c) case was yet to take place. In any event, it was inevitable that the proceedings, being in the nature of a test case concerning the operation of ss 87(a) and 87(c) of the Act, would proceed in due course on appeal, and avoidance of the possibility of an ultimate further hearing at first instance was desirably to be avoided. In the course of producing its written submissions, Ten withdrew its fair dealing defences in relation to one of the twenty excerpts (the so-called 'Gosper Interview'). I concluded in the course of my first decision that Ten would have succeeded on either or both of the fair dealing defences in relation to eleven out of the remaining nineteen rebroadcasts. Thus it follows that if Nine had succeeded on the issue of breach of television copyright, Ten would have failed to establish a defence in relation to the remaining eight rebroadcasts, in addition of course to the Gosper Interview. 4 As already indicated above, the primary issue at the second hearing related to breach of copyright conferred by s 87(a) of the Act concerning all twenty excerpts, again by reference to substantial part provisions of s 14(1)(a) of the Act, but this time directed to a different form of conduct on the part of Ten said to have constituted such breach. Additionally, Ten raised a substantial alternative defence, to all alleged breaches of copyright under s 87(a) based upon the alleged existence of an implied licence common to commercial television broadcasters in Australia, which was said to have permitted the making of video tapes by Ten of footage of other television broadcasters in Australia, in circumstances which would defeat claims otherwise valid for breach of television broadcast copyright conferred by s 87(a). 5 On 4 July 2001, I delivered judgment in relation to the second decision (see TCN Channel Nine Pty Ltd v Network Ten Pty Ltd [2001] FCA 841). I again rejected Nine's case for breach of alternative television copyright conferred by s 87(a), but I further determined that if Nine had succeeded on the s 87(a) issue, Ten would have failed to sustain its alternative defence of implied license. 6 By reason of the orders made in relation to the first decision on 20 February 2001, I invited both parties to make submissions as to costs, but as matters transpired, the same were not provided before I handed down my reasons for judgment in relation to the second decision. After I delivered judgment in the second decision, the parties were directed to provide written submissions as to the costs of the second set of proceedings, which in due course took place. This brings me to the issue now arising for determination, namely whether costs should wholly follow the events of the first and second decision, or whether Ten, albeit as the entirely successful party in relation to the ultimate outcome the subject of both the first and second decisions, should nevertheless be deprived of some proportion thereof in the events which happened. Ten has submitted that it should receive the entirety of its costs of the proceedings, whilst Nine has contended that the costs orders in favour of Ten should be limited to 75% of Ten's costs of the proceedings up to and including 20 February 2001, and 50% of Ten's costs incurred subsequently thereto. The Court's discretionary jurisdiction as to costs 7 Section 43(2) of the Federal Court of Australia Act 1976 (Cth) provides the Court with a general discretion as to the awarding of costs, in similar terms to most jurisdictions. In Oshlack v Richmond River Council (1998) 193 CLR 72 at 97, McHugh J (with whom Brennan CJ agreed), albeitthat both were in the minority in the decision which was made, enunciated the following general principles, in pursuance of the judicial policy that costs should normally follow the event: "The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation. As a matter of policy, one beneficial by-product of this compensatory purpose may well be to instil in a party contemplating commencing, or defending, litigation a sober realisation of the potential financial expense involved. Large scale disregard of the principle of the usual order as to costs would inevitably lead to an increase in litigation with an increased, and often unnecessary, burden on the scarce resources of the publicly funded system of justice." 8 The circumstances of a particular case, as was recognised by his Honour, may nevertheless be of such a nature as to warrant a variation to the principle that costs should follow the event. Legal principles have emerged over the years to provide some precedents in assisting the courts to determine the circumstances in which the discretion to award the successful party his her or its costs should not be apply. Members of the judiciary have expressed from time to time concern that the enunciation of applicable principles too rigidly tends to impose a fetter upon the exercise of the traditional discretion. In Oshlack at 96, McHugh J entered the following caveat in relation to such expressions of concern in the following terms: "… the law has gradually developed principles to guide the proper exercise of the discretion and, in some cases, to highlight extraneous considerations which, if taken into account, will cause the exercise of the discretion to miscarry. Consistent with the aim of justice, the law could not have developed otherwise. As Mason CJ said in Latoudis: "It does not follow that any attempt to formulate a principle or a guideline according to which the discretion should be exercised would constitute a fetter upon the discretion not intended by the legislature. Indeed, a refusal to formulate a principle or guideline can only lead to exercises of discretion which are seen to be inconsistent, a result which would not have been contemplated by the legislature with any degree of equanimity."" See also Gladstone Park Shopping Centre Pty Ltd v Wills (1984) 6 FCR 496 at 505 per Davies J, where his Honour cited established English authority to the effect that there must exist grounds, as distinct from no ground at all, for depriving successful litigants of their costs. 9 Despite the existence of an array of cases where a successful party was deprived wholly or partly of their costs, such a course has been described as an "exceptional measure": Smeaton Hanscomb & Co Ltd v Sassoon I Setty, Son & Co [No 2] [1953] 1 WLR 1481 at 1484. Many of the more common of such examples, such as conduct calculated to occasion unnecessary litigation and expense, and success upon only portion of a claim, are not reflected in the circumstances of the subject litigation. Rather the circumstances here are somewhat special, involving distinct and severable issues which both parties were content to litigate as such, notwithstanding that it might have been unnecessary so to do, if the primary issues concerning breach of television copyright were not to be resolved favourably to Ten. Given the inherent likelihood that each of my decisions upon the two breach of television broadcast copyright issues would have been mutually anticipated to be the subject of appeal, particularly given the absence of existing judicial authority upon the scope of such copyright, the parties mutually recognised, as I have already stated, the convenience of avoiding the possible occasion for further proceedings at first instance following upon the conclusion of the appellate process. 10 I am of the opinion that the principle I should apply is one that detracts fractionally from Ten's entitlement to the whole of its costs of the proceedings relating to the first and second decisions, but does not require Ten to pay any of Nine's costs relating to my resolution of the issues in Nine's favour, namely eight of the fair dealing defences raised by Ten, and the implied license defence raised by Ten. An order as to costs of the latter kind would present too complex a task for a taxing officer. Set out is an apposite extract from the judgment of French J Inn Leisure Industries Pty Ltd v D F McCloy Pty Ltd (No 2) (1991) 28 FCR 172 at 174: "And I extract from that that even where an applicant is not successful on all issues, the usual rule that governs the discretion is that costs will follow the event, but that, according to the circumstances of the case and where there are special circumstances, an apportionment may be made of the amount of costs to be paid. In my opinion, in this particular case which occupied at trial, although listed for some five days, only half a day of evidence and half a day of argument, there was a common substratum of fact applicable both to the misleading and deceptive conduct claim and to the claim of mistake at law. There were certain elements of the factual matters to which I have already referred which were canvassed at the hearing and were distinct and severable from those issues on which the applicant succeeded. I am of the view that in this particular case, it is appropriate to recognise that fact. I propose therefore to make a minor apportionment of the costs recoverable by the applicant from the first respondent." 11 A similar approach to that which I think should here be applied was adopted by Toohey J, at the conclusion of his lengthy judgment in the well known professional cricket litigation involving player Kim Hughes. In his judgment relating solely to the issue of costs, separately reported as Hughes v Western Australian Cricket Association (Inc) & Others (1986) ATPR 40-748 at 48,134, his Honour referred to the circumstance that the applicant Hughes had raised unsuccessfully a number of causes of action, apart from that on which he had achieved substantial success, with the result that he failed on more causes of action than he succeeded. It followed therefore that in his Honour's view, there should have been some measure of compensation to the respondents to the proceedings for the time taken in meeting those unsuccessful causes of action, both prior to and at the hearing. In the result, his Honour awarded the applicant Hughes only 75% of his costs. In so doing, he duly recognised the kind of considerations enunciated by McHugh J in Oshlack (see [7] above), citing as he did dictum to similar effect of Jacobs J in Cretazzo v Lombardi (1975) 13 SASR 4 at 12. 12 In my view, the particular circumstances of the present proceedings, which I have recounted above, bear some analogy to those in Hughes albeit that the applicant was successful in Hughes but not in the present proceedings. I think that justice would be served by awarding Ten 80% of its costs of the totality of the proceedings, save those (if any) where a special order has already been made in favour of either party. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti. Associate: Dated: 10 September 2001 Counsel for the Applicant: Mr AJL Bannon SC and Dr DT Kell Solicitor for the Applicant: Gilbert & Tobin Counsel for the Respondent: Mr R Cobden Solicitor for the Respondent: Blake Dawson Waldron Date of Written Submissions: Last written submissions received on 6 August 2001 Date of Judgment: 10 September 2001