FEDERAL COURT OF AUSTRALIA Qualify Me Pty Ltd v Get Qualified Australia Pty Ltd (No 2) [2016] FCA 309 File number: NSD 756 of 2015 Judge: MARKOVIC J Date of judgment: 31 March 2016 Catchwords: COSTS – where each party enjoyed a measure of success – whether the court should depart from the rule that costs follow the event – respondent ordered to pay a percentage of the applicant's costs Legislation: Federal Court of Australia Act 1976 (Cth) ss 43(1), 43(2), 43(3) Federal Court Rules 2011 r 1.39 Cases cited: DSE (Holdings) Pty Limited v InterTAN Inc [2004] FCA 1251 Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 Qualify Me Pty Ltd v Get Qualified Australia Pty Ltd [2016] FCA 192 Spotwire Pty Limited v Visa International Service Association [2004] FCA 1481 Date of hearing: 9 December 2015 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Category: Catchwords Number of paragraphs: 16 Counsel for the Applicant: Mr S C G Burley SC with him Mr B Le Plastrier Solicitor for the Applicant: Birchall Legal Counsel for the Respondents: Mr J O'Sullivan Solicitor for the Respondents: & Legal ORDERS NSD 756 of 2015 BETWEEN: QUALIFY ME PTY LTD ACN 165 025 874 Applicant AND: GET QUALIFIED AUSTRALIA PTY LTD ACN 144 813 543 First Respondent ADAM WADI Second Respondent JUDGE: MARKOVIC J DATE OF ORDER: 31 March 2016 THE COURT ORDERS THAT: 1. The applicant to pay 30% of the respondents' costs of the interlocutory application filed on 6 November 2015. 2. The applicant to pay the respondents' costs thrown away by reason of the leave granted on 4 March 2016 to the applicant to replead paragraphs 3A to 17 of the further amended statement of claim and to file a second further amended statement of claim. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT MARKOVIC J: introduction 1 Following a hearing of the respondents' interlocutory application, I made orders that paragraphs 3A to 17 of the further amended statement of claim (FASOC) be struck out and that the applicant have leave to replead those paragraphs and to file a second further amended statement of claim by 25 March 2016. At the parties' request, I did not deal with the issue of costs of the interlocutory application. The parties were given leave to file and serve submissions in relation to that issue, which they have done. The parties do not wish to be heard further and have agreed that I can determine the issue on the papers. 2 By their interlocutory application the respondents sought orders for summary judgment in relation to the whole of the applicant's claim and, in the alternative, that the FASOC be struck out. They opposed any leave being given to replead. In the result, the respondents were partially successful in that a part of the further amended statement of claim was struck out. Over their objection, leave was granted to the applicant Qualify Me to replead that part of the FASOC. legal principles 3 Section 43(1) of the Federal Court of Australia Act 1976 (Cth) (the FCA Act) provides that the Court or a judge has jurisdiction to award costs in all proceedings before the Court other than those in respect of which the FCA Act or any other Act provides that costs must not be awarded. This jurisdiction is subject to a number of exceptions, none of which apply in the instant proceedings. The Court has a broad discretion in making an order for costs: see s 43(2) of the FCA Act. A non-exclusive list, which is not intended to limit the discretion conferred, of what a Court or a Judge may do in awarding costs is set out in s 43(3). 4 It is accepted that s 43 is a broad power that is not to be read down otherwise than by judicial principle conformable with its amplitude: see DSE (Holdings) Pty Limited v InterTAN Inc [2004] FCA 1251 at [14]. In Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 at 48,136 Toohey J set out a summary of decisions at the time which, in his view, shed light on the way in which the discretion in respect of costs was to be exercised. The principles that emerged were: (1) ordinarily costs will follow the event and, in the absence of special circumstances justifying some other order, a successful litigant will receive his or her costs; (2) where a litigant succeeds on a portion of his or her claim circumstances may make it reasonable that he or she should bear the expense of litigating the unsuccessful portion of the claim; (3) a successful party may be ordered to pay the other party's costs of issues upon which that successful party has failed. Parties' submissions 5 The applicant submits that the appropriate order for costs of the interlocutory application is that the respondents pay 75% of its costs. In summary, it says that is so because: (1) in relation to paragraphs 3A to 17 of the FASOC the respondents failed on their application for summary dismissal. The applicant submits that had the respondents properly applied the authorities in relation to s 31A of the FCA Act in relation to the materials supplied by it then the application for summary dismissal would not have been pursued and that this ought to be recognised in the apportionment of costs. The applicant says that the same can be said in relation to a letter dated 4 September 2015 from its solicitors to the respondents' solicitors which identified eight points from which "a range of inferences can be drawn … such as to establish a reasonable cause of action to the civil standard of proof founded on circumstantial evidence". Thus the applicant says that from 4 September 2015, when the letter was provided, the threatened summary dismissal and strike out with no liberty to replead aspect of the application should not have been pursued. Alternatively, it contends that at the latest by the time that the evidence was filed the respondents ought to have realised that this aspect of the application could not succeed; (2) in relation to paragraphs 18 to 25 and 26 to 36 of the FASOC, which relate to Google AdWords and a claim for passing off, the applicant observes that the Court declined to strike out any of these paragraphs noting the conclusions in the judgment that, among other things, the arguments put by the respondents fail on their own evidence, that the respondents' assertion that the claim is vexatious due to its low quantum was unsupported by authority and that there were real issues of fact to be determined. On that basis, the applicant submits that the respondents should pay the entirety of its costs incurred in preparing evidence, written submissions and appearing for this aspect of the interlocutory application; (3) in relation to paragraphs 37 to 44 of the FASOC, which deals with the alleged trademark infringement, the applicant again observes that the Court declined to strike out that part of the claim because of the number of legal and factual issues that were to be resolved and the finding that a reasonable cause of action was disclosed. The applicant contends that aspect of the interlocutory application failed and that the respondents should pay its costs incurred in relation to that aspect of the interlocutory application; and (4) the applicant submits that the respondents did not, prior to filing their submissions, articulate their criticisms of the FASOC with any precision. They contend that the applicant was willing to amend had it been provided with detailed correspondence which articulated the perceived deficiencies. 6 Against that, GQA and Mr Wadi submit that the appropriate orders to be made on the interlocutory application are that: (1) the applicant pay their costs thrown away by reason of any further amendment to the FASOC or application as taxed or agreed forthwith; (2) the costs payable pursuant to order 2 made on 28 September 2015 (being an order that the applicant is to pay the respondent's costs thrown away by reason of the further amendments on an ordinary basis as assessed or agreed) be ordered to be made payable forthwith pursuant to r 1.39 of the Federal Court Rules 2011 (the Rules); and (3) the applicant pay the respondents' costs of the interlocutory application as taxed or agreed on a party and party basis forthwith. 7 The respondents submit, in relation to the first order, namely that the applicant should pay their costs thrown away by reason of the amendment, that such an order is uncontroversial in the circumstances and that an order in those terms has been made on two previous occasions where leave was given to the applicant to amend the statement of claim. Insofar as that order is sought on the basis that the costs be payable forthwith the respondents rely on the fact that the proceedings were commenced on 30 June 2015 with the pleadings yet to crystalize, that the main cause for the delay in the progress of the proceedings has been the applicant's failure to properly plead or particularise its claim, there does not seem to have been any good reason why the applicant could not have done that earlier given it was in possession of Ms Robson's affidavit since September 2014 and, in circumstances where the applicant has conducted the proceedings in a dilatory manner, it would be oppressive for the respondents to have to carry the legal costs which they are entitled to eventually recover until the end of the proceedings. 8 In relation to the costs of the interlocutory application, the applicants rely on the principle that ordinarily costs should follow the event and the fact that they were partially successful. They submit that the paragraphs that have been struck out appear to be the main or dominant portion of the applicant's claim and that the evidence relied on to make out those allegations largely overlaps with the evidence relied on for the balance of the claims. Related to that they also contend that a large portion of the applicant's evidence filed on the application and a large portion of the oral submissions related to those paragraphs which were struck out. The respondents submit that the remaining allegations in the FASOC rely upon the same evidence relied upon to support the allegations that have been struck out. The respondents say that they gave notice of the interlocutory application and that the applicant's attitude was to signal an intention to vigorously defend any application. It was only at the hearing of the interlocutory application that the applicant disclosed that it would have to further amend its claim. The respondents could not fairly deal with such an assertion on short notice and in the absence of a draft proposed pleading and were expected to take the assertion that the amendments would only add to and not change the existing pleading on faith. In those circumstances the respondents say it was reasonable for them to bring and contest the interlocutory application. consideration 9 In this matter both sides have enjoyed some success. As I have already noted, a number of paragraphs of the FASOC were struck out and the applicant was given leave to replead, over the objection of the respondents. On the other hand, the respondents were not successful in their claim that the FASOC be summarily dismissed, and while it was successful in having a substantial part of the FASOC struck out, it was not successful in relation to the whole of it and a number of claims survived the application for strike out. 10 The context in which the interlocutory application was brought is relevant. The procedural history is more fully set out in Qualify Me Pty Ltd v Get Qualified Australia Pty Ltd [2016] FCA 192 (Qualify Me No. 1). In summary the respondents had raised issues in relation to the FASOC (and previous iterations of it) and, indeed, the FASOC was the third iteration of the applicant's claim. While perhaps the issues raised could have been raised with more precision they were nonetheless raised. Requests for particulars were made, the answers to some of which I found to be unhelpful. The applicant has now been granted leave to file a fourth iteration of its claim allowing it to address the deficiencies identified in Qualify Me No. 1. The applicant filed a significant amount of evidence in response to the interlocutory application which disclosed that it has been aware of matters which could have found their way into earlier formulations of the statement of claim. The applicant foreshadowed an amendment on the filing of its submissions for the interlocutory application but did not provide a draft of the proposed amendment. On one view, the interlocutory application has allowed the applicant to put its house in order. 11 It is accepted that the Court can make orders for costs which reflect the partial success of respective parties. In Spotwire Pty Limited v Visa International Service Association [2004] FCA 1481 (Spotwire), Bennett J considered a number of applications, including an application that the applicant's amended statement of claim be struck out or that the proceedings be summarily dismissed. Bennett J also considered an application for leave to tax costs forthwith of a previous notice of motion which was declined. In that matter, as in the case before me, Bennett J declined to strike out the relevant pleading but determined that certain paragraphs should be repleaded. Her Honour also made orders for the provision of particulars. 12 The submissions made by the applicant in Spotwire were not dissimilar to those now made before me, namely, the applicant there submitted that it had "won the event" in that the relevant pleading was not struck out nor was there an order for summary dismissal. In the result of that case, Bennett J found at [14] that the issues raised were discrete and the subject of separate orders sought. It followed that, if costs were to follow the event, there were separate events in relation to which such orders could be made. However, upon considering all of the matters relevant to the applications including the time devoted at hearing, where the respondent attempted to reargue a previous decision of Bennett J, to various issues, she determined at [15] that the respondent should pay a percentage of the applicant's costs of the notices of motion. 13 I do not think this is a matter where either party is entitled to an order for payment of all of their costs of the interlocutory application. Indeed, the applicant, by its submissions, concedes that at least in its case. In the circumstances of this matter I am inclined to an order which recognises the partial success of a party. There is only one interlocutory application and effectively two events, namely, the application for summary dismissal under s 31A of the FCA Act and r 26.01(1) of the Rules and the application to strike out the FASOC under r 16.21 of the Rules. The respondents were substantially successful in relation to the second event, namely, the strike out of a part of the FASOC. While that claim may be only one of four of the claims made, it constitutes a significant portion of the applicant's claim. 14 Taking all of the matters to which I have referred into account I am of the view that the applicant should pay 30% of the respondents' costs of the interlocutory application. I do not propose to make those costs payable forthwith. I am not persuaded that there are special reasons to make an order in those terms. Those costs can be dealt with at the conclusion of the proceedings. Nor do I propose to vary the order made on 28 September 2015 such that the costs ordered in favour of the respondents should be made payable forthwith pursuant to r 1.39 of the Rules. That order was made some time ago by consent between the parties. I am not persuaded that such a variation is required in order to do justice between the parties. 15 Finally, the respondents now seek an order that the applicant pay their costs thrown away by reason of the leave granted to amend paragraphs 3A to 17 of the FASOC and to file a second further amended statement of claim. That order is also sought on a forthwith basis. The only submission made in support of such an order is that it is uncontroversial that a party seeking to amend its pleadings would be required to make good any costs thrown away of the affected parties by reason of the amendments. So much is true. I note that this order was not sought at the time of the hearing of the interlocutory application and while it may not strictly be an order related to the costs of the interlocutory application, it is closely enough connected to be considered. This will be the fourth version of the statement of claim that the respondents need to address. There may well be some costs thrown away by reason of the amendments that are made. In the circumstances I propose to accede to that order. However, for the reasons already stated I am not persuaded to make those costs payable forthwith. 16 I will make orders accordingly. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Markovic. Associate: Dated: 31 March 2016