FEDERAL COURT OF AUSTRALIA Telstra Corporation Limited v Royal & Sun Alliance Insurance Australia Limited [2003] FCA 979 PRACTICE AND PROCEDURE – costs – whether costs should be apportioned on the basis of how issues were determined Federal Court of Australia Act 1976 (Cth) s 43 Doric Products Pty Ltd v Lockwood Security Products Pty Ltd (2002) 54 IPR 495 - cited Madden (In his capacity as Official Liquidator of Acquanaut Constructions Pty Ltd (In liquidation)) v McConnell [2001] NSWSC 1051 - cited Innovative Agricultural Products Pty Ltd v Crawshaw [1996] AIPC 91-281 - cited TELSTRA CORPORATION LIMITED AND SENSIS PTY LTD v ROYAL AND SUN ALLIANCE INSURANCE AUSTRALIA LIMITED V 303 OF 2002 MERKEL J 19 SEPTEMBER 2003 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 303 OF 2002 BETWEEN: TELSTRA CORPORATION LIMITED (ACN 051 775 556) FIRST APPLICANT SENSIS PTY LTD (formerly PACIFIC ACCESS PTY LTD) (ACN 007 423 913) SECOND APPLICANT AND: ROYAL AND SUN ALLIANCE INSURANCE AUSTRALIA LIMITED (ACN 005 297 807) FIRST RESPONDENT WILSON EVERARD PTY LTD (ACN 007 403 349) SECOND RESPONDENT JUDGE: MERKEL J DATE OF ORDER: 19 SEPTEMBER 2003 WHERE MADE: MELBOURNE THE COURT ORDERS that the respondents pay 60 per cent of the applicants' taxed costs of and incidental to this proceeding. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 303 OF 2002 BETWEEN: TELSTRA CORPORATION LIMITED (ACN 051 775 556) FIRST APPLICANT SENSIS PTY LTD (formerly PACIFIC ACCESS PTY LTD) (ACN 007 423 913) SECOND APPLICANT AND: ROYAL AND SUN ALLIANCE INSURANCE AUSTRALIA LIMITED (ACN 005 297 807) FIRST RESPONDENT WILSON EVERARD PTY LTD (ACN 007 403 349) SECOND RESPONDENT JUDGE: MERKEL J DATE: 19 SEPTEMBER 2003 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The applicants commenced a proceeding for declaratory and injunctive relief and damages or an account of profits in respect of two television advertisements and four radio advertisements created by the respondents. The applicants claimed that the advertisements infringed their copyright, constituted passing off and contravened ss 52, 53(c) and 53(d) of the Trade Practices Act 1974 (Cth) ("the TPA"). 2 On 1 August 2003 I published my reasons for judgment in the proceeding (see Telstra Corporation Limited v Royal & Sun Alliance Insurance Australia Limited [2003] FCA 786). I declared that the first Shannons advertisement (as defined in the judgment) contravened ss 52 and 53(d) of the TPA and granted an injunction restraining the further broadcasting of that advertisement. However, I dismissed all of the applicants' claims for copyright infringement and the TPA claims in respect of the second Shannons advertisement (as defined in the judgment) and the four radio advertisements. I reserved my decision on costs and gave the parties fourteen days in which to file submissions as to the appropriate orders to be made in respect of the costs of the proceeding to date. 3 The parties have now filed their submissions as to costs. The applicants contend that an order for costs should be made in their favour. They submit that, although they were unsuccessful in their copyright claim, there was a substantial factual overlap between the TPA and passing off claims on which they succeeded and the copyright claim. The applicants also contend that, although they failed to establish their pleaded causes of action in relation to the second Shannons advertisement and the four radio advertisements, those advertisements were "nonetheless relevant, because of their effect as reminders to consumers of the first Shannons advertisement". 4 The respondents claimed that, although they might be liable for part of the applicants' costs of the proceeding, the applicants should be liable for part of the respondents' costs of the proceeding. The respondents also submitted that the applicants acted unreasonably in pursuing the copyright claim and the claims in relation to the other advertisements. In substance, the effect of the respondents' submission was that costs should follow the manner in which the various issues were decided. The respondents have also made a number of submissions in relation to the costs of particular directions hearings, discovery and amendments to the pleadings. 5 The Court has a general discretion to award costs: see s 43 of the Federal Court of Australia Act 1976 (Cth). The general rule is that costs follow the event. In Doric Products Pty Ltd v Lockwood Security Products Pty Ltd (2002) 54 IPR 495 at 497-498 Hely J observed: "Costs normally follow the event, but the Court has a general discretion to award costs, albeit the discretion must be exercised judicially. 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 it 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 party's costs: Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 at 48,136. The courts have cautioned against too ready a resort to apportionment according to issue based outcomes: see, eg, Australian Trade Commission v Disktravel (2002) ATPR 41-85. Justice may not be served if the parties are dissuaded by the risks of costs from canvassing all issues which might be material to the decision in the case: Cretazzo v Lombardi (1975) 13 SASR 4 at 16. That may be particularly so in patent cases in which one often encounters overlapping between issues." 6 In Madden (In his capacity as Official Liquidator of Acquanaut Constructions Pty Ltd (In liquidation)) v McConnell [2001] NSWSC 1051 at [3] Hamilton J observed: "On interlocutory proceedings as well as final proceedings the general rule is that costs follow the event. This rule will be departed from only for good reason. In general terms, the fact that the moving party obtains only some of the relief originally sought does not detract from the proposition that the event is in the moving party's favour, albeit it fails on other issues. There is a rule, however, that, where there are quite discrete issues and the time taken on each at the hearing can be identified or realistically estimated, then the costs may flow in opposite ways according to the different events and an order may be made which will encompass those opposing flows." 7 The applicants were successful in obtaining a declaration and an injunction in respect of the first Shannons advertisement, which was the main issue in the litigation. However, they failed in respect of their copyright claim and in respect of the other advertisements, albeit that they were subsidiary issues in the litigation. Significant costs were incurred during the interlocutory stages and at trial in dealing with the issues upon which the applicants failed. The respondents, however, went further than seeking a discounting in respect of the costs they should pay on the basis of the applicants' failure on a number of issues. Claiming that it was unreasonable and inappropriate for the applicants to have raised those issues the respondents relied upon the following passage by Lee J in Innovative Agricultural Products Pty Ltd v Crawshaw [1996] AIPC 91-281 at 37,829: "If pleading of multiple issues is embarked upon as a matter of course, thereby obliging a court to spend considerable time upon those issues, inappropriate use of limited Court resources may result and the delivery of justice to the parties before the Court may be put at risk in so far as that concept relies upon the prompt resolution of a case at minimal cost. 'Nine-pin' pleading is not appropriate in modern litigation and parties in suit are obliged to do their best to identify promptly the real issues of the case that will warrant the use of the Court's resources to resolve them. Where that has not occurred the Court may consider making an order for costs that makes appropriate variation to the usual or expected order. In some cases the parties may be required to bear their own costs, or costs on particular issues will be divided between the parties or apportioned." 8 I do not accept the premise upon which the respondents' submission was based, namely that the applicants acted unreasonably or inappropriately in prosecuting the copyright and TPA claims on which they failed. The litigation and the factual and legal issues raised in it are complex and I am not satisfied that the applicants acted unreasonably or inappropriately in bringing and prosecuting all of the issues raised by them. 9 Although the respondents also submitted that a number of directions hearings, aspects of discovery and amendments to pleadings should be dealt with separately, the present case is one in which the Court should take a "broad brush" approach to its costs discretion. 10 In my view the factual overlap between the various claims is such that the copyright claim should not, relevantly, be regarded as an entirely discrete claim. Similarly, although the applicants were also unsuccessful in relation to the second Shannons advertisement and the four radio advertisements, the factual issues concerning those claims substantially overlapped with many of the factual issues concerning the first Shannons advertisement. Also, the copyright claim was restricted to the first Shannons advertisement, and may, to some extent, be viewed as an alternative cause of action for injunctive relief. Further, although the copyright claim was the subject of extensive submissions the time taken at trial in adducing evidence on that claim was not substantial. In all the circumstances I regard the applicants' failure in respect of the copyright claim and certain of the TPA claims as warranting a discount in respect of the costs they should receive, rather than as warranting an order that they pay the costs in respect of those claims. 11 I am of the view that the respondents should pay 60 per cent of the applicants' costs of and incidental to the proceeding to date. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel J. Associate: Dated: 18 September 2003 The Applicants filed submissions on: 15 August 2003 The Respondents filed submissions on: 19 August 2003 The Applicants replied to the Respondents' submissions on: 20 August 2003 Date of Judgment: 19 September 2003