Key Logic Pty Ltd v Blue Groper Investments Pty Ltd

Introduction 1 On 7 February 2019, the principal reasons for judgment in this action were delivered: Key Logic Pty Ltd v Blue Groper Pty Ltd (2019) 139 IPR 140 (Key Logic (No 1)). The applicants were successful in general terms against all of the several respondents. The actions pursued were for breach of copyright as well as misleading or deceptive conduct under the Australian Consumer Law. 2 The parties could not agree upon the appropriate costs orders following the handing down of reasons and on 5 March 2019 costs orders were made and reasons for making those orders were delivered: Key Logic Pty Ltd v Blue Groper Investments Pty Ltd [2019] FCA 275 (Key Logic (No 2)). The result was that the applicants were entitled to an order that the respondents pay their costs of the proceedings on a standard basis. 3 The applicants raised the possibility of a lump sum costs order being made. It comes as no surprise that the parties were not able to agree upon the appropriateness of that process. Subsequently, written submissions have been filed by reach of the parties on that issue and they are content for me to determine it on the papers.

Consideration 4 Item 17.1 of the Central Practice Note: National Court Framework and Case Management (CPN-1) provides: 17. Costs 17.1 The Court recognises that the determination of the quantum of costs for a successful party should not be delayed. To this end the Court will: • where appropriate, facilitate the making of lump-sum costs orders at the determination of, or as soon as possible after determination of, liability and quantum, with the assistance of registrars (as taxing officers, referees or mediators); or • where a lump-sum costs order is not made the Court will endeavour to deal with costs issues promptly upon the filing of bills of costs (within 30 - 60 days, depending upon their complexity) using, where possible, ADR processes to resolve issues. 5 Particulars as to the operation of assessing costs as a lump sum are found in the Costs Practice Note (GPN-COSTS). 6 The power in s 43(3)(d) of the Federal Court of Australia Act 1976 (Cth) to award a party costs in a specified sum is supported by r 40.02(b) of the Federal Court Rules 2011 (Cth) which provides: A party or a person who is entitled to costs may apply to the court for an order that costs: … (b) be awarded in a lump sum, instead of, or in addition to, any taxed costs; … 7 It is beyond doubt that the purpose of this rule is to "avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation": see Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 120. 8 The principles upon which this Court now acts in relation to the determination of whether it should make a lump sum award of costs were considered by the Full Court in Paciocco v Australia and New Zealand Banking Group Ltd (No 2) (2017) 253 FCR 403, 406-407, [16]-[20] where it said: 16 On 25 October 2016 the Chief Justice issued the Central Practice Note: National Court Framework and Case Management (CPN-1) ("Central Practice Note") and the Costs Practice Note (GPN COSTS) ("Costs Practice Note"). The Central Practice Note states that the determination of the quantum of costs of a successful party (in a proceeding) should not be delayed and, to this end, the Court will, where appropriate, facilitate the making of lump sum costs orders. The Costs Practice Note provides that the Court's preference, wherever it is practicable and appropriate to do so, is to make a lump sum costs order so as to finalise costs and avoid potentially expensive and lengthy taxation hearings. It makes clear that the Court should now proceed on the basis that taxation "should be the exception" and confined to matters which are unable to be determined otherwise: Costs Practice Note at [3.3]. The guiding principles are to reduce delay and cost when quantifying costs: Costs Practice Note at [3.1]. 17 The Costs Practice Note provides for the Court to make use of sophisticated costs orders and procedures, and to take such steps as it considers necessary to ensure that it has the requisite level of detail to make a costs determination that is fair, logical and reasonable and to avoid orders that lead to potentially expensive and lengthy taxation hearings: Costs Practice Note at [3.3]. 18 We emphasise that in making a lump sum award of costs, the Court in undertaking the task of assessing costs is not precluded from undertaking a close inquiry of costs relating to a particular issue or category of costs, should the Court consider it appropriate to do so: see e.g. Hudson v Sigalla (No 2) [2017] FCA 339 at [30] (Sigalla). The Court is able to adopt its own procedures in inquiring into costs, is able to be flexible in how it conducts that inquiry, including by the obtaining of suitable assistance whether by referee's report or other reporting, and is able to acquire the level of detail needed to make a determination that is fair, logical and reasonable. 19 Whilst the Costs Practice Note now suggests that most cases should have a lump sum costs order approach applied unless there is some characteristic that would make it unsuitable, a lump sum costs order is not mandated in all instances. In all cases it is a matter for the Court to exercise the discretion given to the Court by the Federal Court Act and the Rules as appropriate: see Sigalla at [18]-[19]. 20 There is no particular characteristic that a case must possess for it to be suitable for the making of a lump sum costs order. Particular circumstances that may make a lump sum order especially appropriate include where in a large and complex commercial matter it would save the time, trouble, expense and aggravation of a taxation; where a taxation would require the parties to consume additional time and incur additional expenditure prolonging already protracted litigation; and generally to avoid an ongoing, counter-productive dispute as to costs, in the interests of achieving finality. 9 By contrast, the respondents had relied upon some earlier decisions: Bobb v Wombat Securities Pty Ltd (No 2) [2013] NSWSC 863 and Bitek Pty Ltd v IConnect Pty Ltd (2012) 290 ALR 288; to suggest that some reason ought to be shown why the lump sum costs order regime ought be applied. It was submitted that as this case is neither overly complex nor overly simple the making of a lump sum costs order was inappropriate. However, as is apparent from the above extract from Paciocco, and particularly at [20], such an approach in inapposite. Rather, the current position is that a lump sum costs order ought be made unless there is some characteristic of the particular proceeding which would make it unsuitable. Such orders are particularly apt in cases where the parties would be required to engage in protracted additional litigation in addition to already lengthy proceedings or where the costs proceedings are likely to generate further and additional counterproductive disputes. 10 The circumstances of the present case warrant the making of a lump sum costs order. 11 First, if not primarily, the parties are bitterly engaged in litigation. In Key Logic (No 1) various observations were made as to the manner in which the parties, but in particular the respondents, had conducted the litigation. It was observed that the respondents had vigorously denied various matters of fact which ought not have been denied at all: [71]; made concessions in final address which ought to have been made in the pleadings: [128]-[130]; and sought to obfuscate in relation to the allegations made against them. This conduct called for an expression of opprobrium in the reasons for costs. In Key Logic (No 2) at [41] it was observed: [41] As appears from the above paragraphs, at the trial the respondents acknowledged the existence and ownership of the applicants' copyright in two of the three photographs specified in the Statement of Claim. They also conceded the infringement. No explanation was given as to why the concession was made so late. The material before the Court rather suggested that it would have been apparent to the respondents that copyright ownership had been assigned to Key Logic. Indeed, as appears from the affidavit of Mr Coates filed on the application for costs, the respondents were provided with the documentation showing the assignment of intellectual property rights to Key Logic on 6 October 2016, shortly after the proceedings were commenced. Whilst the defence filed in the proceedings sought to undermine the veracity of the assignment by reason of its close proximity in time to the liquidation of Exlites, nothing came of that matter. That said, it is not clear when the issues surrounding the liquidation of Exlites and the veracity of the Deeds of Assignment were resolved, at least in the mind of the respondents. Whilst there exists a strong suspicion that the respondents maintained their denial of copyright infringement unreasonably until the trial, the circumstances of this matter do not allow the Court to be satisfied of that to the requisite degree. If the level of satisfaction had been reached sufficient grounds would probably have existed for making an order of the type sought by the applicants. 12 That paragraph indicates the respondents' conduct in the proceedings edged close to that point where an order for indemnity costs may have been appropriate. Their conduct fell just short of warranting that order. However, there can be no doubt that the respondents' approach has focussed on delay and disputation whenever the opportunity arises. It cannot be doubted that they would seek to do the same in the future. 13 Secondly, there is nothing in the nature of the action which might disqualify it from an order for a lump sum costs assessment. Whilst, ultimately, the action may have been more complex than necessary, it was important to the applicants, even if by the time of trial it was not possible to quantify any monetary damages. In general terms the applicants vindicated their rights in respect of the respondents' conduct which occurred in a relatively small market. As the respondents' conduct in the proceedings demonstrates, it was necessary for the applicant to bring the action even though the quantum involved would not have been great. To expose the applicants to the additional costs and expenses of a full-blown taxation would not be appropriate in these circumstances. The making of a lump sum costs order would avoid the delay, expense and aggravation which is attendant upon a taxation. 14 Thirdly, there is no injustice to the respondents in granting an order that there be a lump sum order for costs. The material already filed, being the affidavit of Mr Coates of 17 April 2019, adequately sets out a costs summary identifying the costs incurred and the work in respect of which they were generated. If the respondents can justify the provision of further information, an appropriate order may be made. 15 In the result, it is appropriate that a lump sum assessment of the costs orders made on 5 March 2019 should occur.

Facilitation of final costs orders 16 In this matter where the criteria which might affect the amount of any lump sum award are identified in the principal reasons for judgment and the material on which the applicants rely is in fairly short compass, it is appropriate that the assessment be undertaken by the District Registrar. 17 I shall leave it to the discretion of the District Registrar as to what further directions, if any, ought be given to the parties in relation to the filing of material in respect of the assessment.

Conclusion 18 As a result, the orders at the commencement of these reasons ought to be made. The costs of the application ought be part of the applicants' costs of the proceedings. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Derrington.