Eat Media Pty Ltd v Mulready Media Pty Ltd

Depending on circumstances, where the applicant has acted reasonably in commencing proceedings, has an arguable case, and it is reasonable to conclude that the respondent has acted in consequence of the commencement of proceedings, the court may be prepared to make an order as to costs in favour of the applicant. Both of these observations were most recently addressed by Lander J in Consolidated Byrnes Holdings Ltd v Hardel Investments Pty Ltd [2009] FCA 399 at [353] to [354], 176 FCR 348 at 364. His Honour said at [359], 176 FCR at 364: … I disagree with respect with Debelle J's decision in Boscaini … A party may behave so unreasonably in the bringing or conducting of proceedings so that an order for costs against that party is required in the interests of justice without ever deciding whether the party had a good cause of action. See also: Residential Property Conveyancers v Bagnato [2009] SASC 71 at [22] to [25] per Layton J. Reservation has also been expressed as to the constraint suggested by Finkelstein J in Gribbles that in the absence of a hearing on the merits it is difficult to see how any order, other than an order that each party bear its own costs, can be made except in"special circumstances":Champagne View Pty Ltd v Shearwater Resort Management Pty Ltd [2000] VSC 214 at [47]. Each case, it was there correctly observed, "must depend upon its own circumstances". See also: Tervonen v Minister for Home Affairs (No 2) [2008] FCA 872 at [19]. 12 The observations of Finkelstein J in Gribbles and those of Hill J in Aust-Home Investments Ltd nevertheless remain a useful guide to the general principles that may be relevant to the exercise of the discretion conferred by s 43 of the 1976 Act. The general and unconfined content of that discretion, however, remains to be exercised by reference to the facts and circumstances of each individual case. No constraint can be imposed upon the exercise of that discretion that precludes consideration of each individual case on its own merits or which seeks to give any one or other consideration any preconceived significance or weight in the exercise of that discretion. 13 In seeking an order in the present proceeding that there be no order as to costs, Counsel on behalf of the Respondents contended that there had been no hearing on the merits and that there were presently no "special circumstances". 14 Those submissions are rejected. 15 On 31 August 2009 declarations of contravention of s 52 of the Trade Practices Act 1974 (Cth) and s 42 of the Fair Trading Act 1987 (NSW) were made. On the day these declarations were sought, an outline of written submissions was provided by Counsel for the Applicant. Written reasons in support of the decision to grant declaratory relief were not sought by the parties. No written reasons have thus been published in support of the relief then granted. But, when granting the declaratory relief, the Court's attention was drawn to the observations of Reeves J in Australian Competition and Consumer Commission v Grove and Edgar Pty Ltd [2008] FCA 1956 at [18] to [21], [2008] ATPR 42-269 at 49,818 to 49,819 and the approach that should be taken before granting such relief. Reference was also made to the summary of the authorities by Moore J in Australian Competition and Consumer Commission v AMV Holding Ltd [2009] FCA 605. 16 This was the approach pursued on 31 August 2009. Indeed, express reference was made during the course of that hearing to the observations of both Reeves J and Moore J. Whether such a hearing constitutes a hearing on the merits may be left to one side. The facts of the present proceeding were considered with sufficient care to ensure that the granting of declaratory and injunctive relief was appropriate. 17 The present proceeding is thus not considered to be one where the Court has not sufficiently considered the merits of the claim sought to be litigated by an Applicant that it is not in a position to form a view as to prospects of success. Indeed, relief in the form of declarations and injunctions - albeit relief not opposed by the Respondents - would not have been granted in the absence of such a view being formed. 18 The present proceeding is thus not one where it is appropriate to make no order as to costs. Neither any general principle nor the merits of the proceeding warrant such a conclusion. The Applicant commenced its proceeding and has been successful in obtaining significant relief. The fact that it has obtained that relief without the necessity for a fully contested hearing does not diminish the success it has obtained. 19 The potentially more difficult question to resolve is whether the Applicant is entitled to its costs on an indemnity basis. 20 To warrant an order for costs on an indemnity basis the circumstances must be "special" and such as to take the case out of the "ordinary" category. It "must involve behaviour associated with the conduct of the proceeding … which is so unreasonable as to make it unjust that the other party should be limited in its recovery to party and party costs": Sony Computer Entertainment Australia Pty Ltd v Dannoun (No 2) [2001] FCA 1530 at [4] per Lindgren J (citing NMFM Property Pty Ltd v Citibank Ltd (No 11) [2001] FCA 480, 109 FCR 77 and Waverley Council v Refkin Pty Ltd [2001] FCA 1469). 21 One instance of such "special" circumstances emerges where "it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success": Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401 per Woodward J. Conversely, such an order may be appropriate where a view can be formed that a Respondent has no reasonable prospect of resisting the claims being advanced by an Applicant: Albarran v Theodorou [2006] NSWSC 9. The plaintiff had there commenced proceedings to remove a lapsing notice concerning a caveat and Campbell J (as His Honour then was) observed: [5] Today, the lapsing notice has been withdrawn. [6] It is quite clear that the plaintiffs had a caveatable interest. There was no basis for seeking its lapsing. That there was no basis has been amply demonstrated by the conduct of the second defendant, in withdrawing the lapsing notice today. [7] The defendants have not appeared in the proceedings, but I am satisfied that the service of process has occurred. [8] Requiring proceedings to begin, when there is no basis upon which those proceedings could be opposed, is one circumstance in which an indemnity costs order can be granted. I am satisfied that this is an appropriate case for making such an order. Another instance is where a so-called "Calderbank" offer of settlement has been made and rejected: MGICA (1992) Pty Ltd v Kenny and Good Pty Ltd (No 2) (1996) 70 FCR 236 at 238 to 239 per Lindgren J. 22 In the present proceeding there was undoubtedly a basis upon which an application for indemnity costs was properly made by Counsel on behalf of the Applicant. In very summary form it was contended on behalf of the Applicant that: · letters had been forwarded to the Respondents by the solicitors then acting for the Applicant on 4 and 11 June 2009 alleging, amongst other things, misrepresentations being made by the Respondents and requesting undertakings that such conduct cease; · a further letter was sent on 29 June 2009 from the new solicitors now acting for the Applicant to the solicitors acting for the Respondents stating that the Respondents had "refused to provide the written undertakings requested" in the 4 and 11 June 2009 letters and advising that the new solicitors had been "instructed to commence proceedings against your client". Confirmation was sought that the Respondents' solicitors had "instructions to accept service on your client's behalf". No distinction was sought to be drawn by reference to whether the 4 and 11 June letters had been sent to one or other of the Respondents; · the proceedings were then commenced on 2 July 2009; and · on 31 August 2009 declaratory and injunctive relief was granted substantially in the form as sought in the Applicant's letters to the Respondents. On this approach, it was contended that repeated offers had been made to accept the provision of undertakings - as the 4 June 2009 letter stated - "to avoid … a legal dispute …". In contrast to the steps being taken by the Applicant to address the claims being advanced on its behalf, Counsel on behalf of the Applicant contended that: · the only substantive response to the 4 June 2009 letter was a letter dated 10 June 2009 from the solicitors acting for the Respondents admitting that the emails in question were sent, but denying that "the contents of these emails have caused any damage to Eat Media's goodwill and reputation. Accordingly, our client will not be providing to you the undertakings requested". 23 Rejected are attempts by Counsel on behalf of the Respondents to characterise the 4 and 11 June 2009 letters as involving a claim for damages and to then erect this aspect of the claim as the matter that really divided the parties. Certainly claims were made in those letters to the Applicant having suffered damage and claims made that ongoing damage would be suffered if the misrepresentations were to continue. But a central "demand" being made in those letters was the demand for an undertaking that the Respondents "cease making the representations" and an undertaking to forward corrective emails. Had those undertakings been provided, the distinct probability is that the present proceeding would not have been commenced. The Applicant expressly stated that it wished "to avoid … a legal dispute …". 24 Also rejected is a contention that the Respondents as late as 1 July 2009 were attempting to avoid the prospect of litigation. An email sent from a partner of the Respondents' solicitors to his counterpart in the Applicant's camp stated: I am endeavouring to obtain instructions from my client and should be in a position to respond to you shortly. Read in context, this email was referring to instructions with respect to acceptance of service rather than instructions with respect to the prospect of avoiding litigation. 25 It is nevertheless not considered that the Respondents have acted in such an "unreasonable" manner that an indemnity costs order should now be made against them. The lapse of time as between 4 June 2009 (when the claims of the Applicant were first raised) and 2 July 2009 (when the present proceeding was commenced) is a comparatively short period. The basis upon which the undertakings were refused on 10 June 2009 may well have been ill-founded. And it may further be noted that there was an absence of any real explanation provided by the Respondents as to either any alternative steps being proposed "to avoid … a legal dispute …" or steps being taken to obtain more constructive instructions prior to the commencement of proceedings four weeks after the 4 June 2009 letter had been forwarded. 26 The Applicant unquestionably had an entitlement to commence its proceeding and to have its claims resolved expeditiously. But neither the lapse of four weeks nor the absence of any constructive steps being taken by the Respondents to avoid the present litigation is sufficient to characterise the conduct of the Respondents as "unreasonable". Although unnecessary litigation is to be avoided and parties encouraged to resolve disputes in advance of litigation, an Applicant need not give any advance notice of an intention to commence proceedings. In the present proceeding, the Applicant acted reasonably in giving such advance notice as it did to the Respondents. But the Respondents cannot be said to have acted so "unreasonably" as to attract an order for the payment of costs on an indemnity basis. From the outset the Applicant was claiming to have suffered damages - damage was claimed to have been suffered in the 4 and 11 June 2009 letters and in the Application as filed on 2 July 2009. But it was only on 14 September 2009 that the claim for loss or damage was formally not pressed. Part of the claim being resisted by the Respondents, not unreasonably, was the claim for loss or damage. 27 Any basis for an indemnity costs order is only further diminished if attention is focussed upon the conduct of the Respondents after the present proceeding was commenced. Thereafter the Respondents consented to an amendment to the Statement of Claim to take into account representations made to entities other than those initially particularised in the initiating Statement of Claim. Whether an amendment was required to further particularise those additional entities to whom false and misleading emails had been sent, as opposed to the more simple course of providing further particulars, is an issue which need not be resolved. Whatever course was pursued, the Respondents did not oppose the additional recipients of the offending emails being included within the ambit of the present proceeding. Nor did the Respondents oppose the grant on 31 August 2009 of declaratory and injunctive relief. Such conduct on the part of the Respondents has considerably assisted in the resolution of the present dispute. 28 Albeit after the commencement of the proceeding, it is noted that the solicitors for the Respondents wrote to the Applicant's solicitor communicating an offer of settlement and expressly invoked "the principles set out in Calderbank v Calderbank …". The offer included an offer to send corrective emails and an offer to pay the Applicant's costs up to the date of the letter. Thereafter the declaratory and injunctive relief was granted, albeit relief which was not addressed (perhaps unsurprisingly) in the letter. At the very least, the letter evidences reasonable steps being taken by the Respondents to resolve the present litigation. 29 Neither before nor after the commencement of the present proceeding is there considered to be any basis upon which to conclude that the Respondents acted so unreasonably as to attract an order for the payment of costs on an indemnity basis. 30 The Respondents sought to rely upon O 62 r 36A of the Federal Court Rules as a basis for further resisting or minimising the effect of any order for costs that may be made in favour of the Applicant, but this submission was subsequently abandoned. That Rule provides as follows: Reduction in costs otherwise allowable (1) 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. (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. (3) This rule does not apply to a proceeding under the Admiralty Act 1988. The operation of that Rule, however, is "triggered by a money judgment" for less than $100,000: Collier Constructions Pty Limited v Foskett Pty Limited (1992) 33 FCR 591 at 593 per French J (as His Honour then was). His Honour further stated that "[i]n my opinion, the operation of subr (1) is not triggered by the simple grant of final declaratory relief". His Honour, as has subsequently been held, "said nothing about the situation … where damages, declarations and injunctions were sought, but where the only final relied awarded … is by way of a money judgment": Shahid v Australasian College of Dermatologists (No 2) [2008] FCAFC 98 at [14]. The Rule is not excluded where damages are sought together with declaratory or injunctive relief: Nokia Corporation v Liu [2009] FCA 20 at [32], 80 IPR 286 at 298 per Jessup J. Rule 36A, it is considered, has no application where the only substantive relief that is granted is declaratory and injunctive relief and where any claim for monetary relief is not pursued. 31 It is thus considered that the Applicant is entitled to an order for costs - but not on an indemnity basis.

ORDERS 32 The Orders of the Court are: 1. The Further Amended Application is dismissed. 2. The Respondents are to pay the costs of the Applicant of and incidental to the proceeding. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick.

Associate: Dated: 21 September 2009 Counsel for the Applicant: Mr C Bova