Futuretronics.com.au Pty Limited v Graphix Labels Pty Ltd

Judgment (4 paragraphs)

[1]

The applicant's costs in relation to the infringement of copyright claim and breach of implied term claim 10 Two submissions were made in relation to these costs. One by the respondents and the other by the applicant. 11 The respondents submitted that the one-third off rule in O 62, r 36A of the Federal Court Rules should be applied. That rule provides, relevantly: "36A(1) When 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." 12 For a number of years this Court has taken the view that copyright litigation is appropriately commenced in this Court even if the monetary claim is small. I refer to LED Builders Pty Ltd v Hope (1994) 53 FCR 10, Fasold v Roberts (unreported, Sackville J, 11 September 1997 MG942 of 1992), Australasian Performing Right Association Ltd v Pashalidis [2000] FCA 1815 and Australian Performing Right Association Ltd v Metro on George Pty Ltd (2004) 64 IPR 57. 13 I see no reason not to apply that principle in this case. Accordingly, I will order that the costs ordered to be paid, including disbursements, not be reduced by one-third under O 62 r 36A(1), for the nature of the claim being one appropriately brought in the Federal Court is "good reason" to depart from that rule: Axe Australasia Pty Ltd v Australume Pty Ltd (No 2) [2006] FCA 844 at [6] per Finkelstein J. It also follows that there is no scope for the application of O 62 r 36A(2). 14 The applicant's submission was that the aforesaid costs should be assessed on an indemnity basis because the respondents' conduct was unreasonable. The respondents conceded liability on the copyright claim on the fifth day of trial so that any submission that costs should be assessed on an indemnity basis because of an unreasonable denial of liability cannot go beyond that time. 15 The circumstances in which an unsuccessful party may be ordered to pay costs on a basis other than a party and party basis have been considered in a number of authorities. 16 In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, Woodward J said (at 401): "I believe that it is appropriate to consider awarding 'solicitor and client' or 'indemnity' costs whenever 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. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare. But when they occur, the Court will need to consider how it should exercise its unfettered discretion." 17 The matter was also discussed by Shepherd J in Colgate-Palmolive v Cussons (1993) 46 FCR 225. Shepherd J set out six principles or guidelines at 232-234 and I refer to those principles or guidelines. The discretion is a broad one and must be exercised according to the particular circumstances of the case. I have considered the submissions and I have had regard to the matters identified in my reasons as to damages: Futuretronics.com.au Pty Limited v Graphix Labels Pty Ltd (No 2) [2008] FCA 746 at [24]-[30]. I am not persuaded that the respondents' conduct was of such a nature as to justify an award of costs on an indemnity basis. The applicant was put to proof in relation to its claim for infringement of copyright, but that did not add to the length of the trial in any substantial way.

Should separate orders be made? 5 The first question is whether an order should be made that one of the parties receives the whole of the costs of the proceedings, or whether different orders should be made with respect to different issues reflecting the success of the respective parties in relation to those issues. No doubt in circumstances where one party to proceedings has been largely successful the Court will examine the facts carefully before making a separate order as to costs in favour of the party which has been largely unsuccessful with respect to those issues in relation to which it has been successful. The respondents have been largely successful, but the issues in relation to which the applicant has been successful were sufficiently separate and distinct to warrant a separate order for costs. 6 The applicant made a number of claims against the respondents. Those claims are outlined in my liability reasons: Futuretronics.com.au Pty Limited v Graphix Labels Pty Ltd [2007] FCA 1621. The applicant was unsuccessful as to the majority of its claims. It was unsuccessful as to what it presented as the main claim, namely, that there was an implied term in a contract between it and Graphix Labels Pty Ltd which prevented Graphix Labels from manufacturing and selling skins. The applicant submitted that one order as to costs should be made and it should be an order in its favour. The problem for the applicant is that if it is appropriate to make only one order as to costs, and that order should be in favour of the successful party, or the party who has been largely successful, then neither party has been wholly successful, and it is the respondents who have been largely successful. The respondents have been largely successful in that they have resisted the majority of the applicant's claims including what was the main claim advanced by the applicant. The applicant's counsel attempted to argue that in terms of witnesses and their evidence, the case and the costs associated with it would have been the same, or more or less the same, even if it had not pursued the claims upon which it was unsuccessful. He also submitted that the applicant had been successful as to some claims and unsuccessful as to others. The applicant's attempts to characterise the proceedings in that way must fail because the fact is that the applicant failed on its main claim and the bulk of its other claims. My reasons for reaching that conclusion are apparent from my liability reasons and require no further elaboration. 7 For their part, the respondents submitted that the success or benefit ultimately achieved by the applicant in pursuing the proceedings, as reflected in my orders, was slight, whereas the costs were substantial. The success or benefit was submitted to be so slight that when regard is had to the undertakings as to the artworks offered by the respondent at the outset, the success or benefit achieved by the applicant should be ignored. As I understood the submission, it was that in practical terms the respondents have been successful. It follows, so it was submitted, that an order for costs should be made in their favour albeit the costs should be assessed on different bases for different periods. 8 In my opinion, the respondents' submission should be rejected for two reasons. First, the applicant has succeeded in its claim for infringement of copyright in relation to the artworks and for breach of an implied term in relation to samples containing the artworks. In relation to the first-mentioned claim, the applicant has received an award of damages including additional damages which, although modest, were based partly on a finding that the infringement was flagrant. Secondly, the undertakings proffered by the respondents to the applicant not to use the artworks were made with a denial of liability and did not include any indication that the respondents would pay damages or consent to an order for the assessment of damages. The applicant pointed out to the respondents in correspondence that they had not explained the basis upon which they denied liability for infringement of copyright. The denial of liability was maintained in the defence and indeed it was maintained until the fifth day of trial. I was told that the reason for the denial was that the respondents were not satisfied that the artworks were original works, but even if the reason for the denial is relevant, the particular reason was not conveyed to the applicant in their correspondence or in the defence in a way that may have reduced costs. It may be that the important fact is not that the respondents did not offer to pay damages or consent to an assessment of damages but, rather, the fact that ultimately the applicant received an award of damages. 9 In my opinion, the principal submission of each party should be rejected. In my opinion the applicant should be paid its costs of the infringement of copyright claim in relation to the artworks and in relation to the breach of implied term claim in relation to the artworks. In my opinion, the respondents should otherwise receive their costs of the proceedings. Those conclusions leave two submissions to be considered in relation to the applicant's infringement of copyright claim in relation to the artworks and breach of implied term in relation to the artworks, and one submission in relation to the respondents' costs in terms of the balance of the proceedings.

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Judgment (4 paragraphs)

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