Spotless Group Limited v Blanco Catering Pty Ltd

REASONS FOR JUDGMENT 1 Judgment was delivered in this matter on 24 August 2011: Spotless Group Limited v Blanco Catering Pty Ltd [2011] FCA 979. The question of costs was reserved. The parties have now exchanged written submissions on costs. 2 In my view, the appropriate order is that the second respondent (Mr Reynolds) pay to the applicants (collectively, Spotless) 60% of their costs to be taxed, less $45,000. The costs order is expressed that way because, as recorded in the primary reasons for decision, the claim against the first respondent, Blanco Catering Pty Ltd (Blanco Catering) was dismissed by consent on 28 October 2010, but on the basis that Blanco Catering pay to Spotless $75,000 on account of its costs. Spotless submitted that such an approach was unnecessary because the costs order could and would be confined to costs of the proceeding that related solely to him and to his proportion of any costs incurred by Spotless common to the claims against Blanco Catering. 3 However, that formulation, in my view, does not provide an easy path for a taxing officer. The order I propose to make does not invite detailed debate about whether particular work was carried out in relation only to the claim against Mr Reynolds, or only to the claim against Blanco Catering, or to the claim against both of them. It allows for costs to be routinely taxed. It then requires Spotless to give credit for 60% of the amount it recovered for costs from Blanco Catering, as Mr Reynolds himself is being required to pay only 60% of the costs of Spotless. I am satisfied that the formulation designed to properly reflect the costs payable by Mr Reynolds will not result in any unfairness to him or Spotless, but will nevertheless enable Spotless to recover as against Mr Reynolds 60% of its costs. 4 It is appropriate to explain why, in exercise of the costs discretion under s 43 of the Federal Court Act 1976 (Cth) I have reached the view that Mr Reynolds should pay 60% of the costs of Spotless notwithstanding that Spotless succeeded in large measure its claims against him. 5 The starting point is the general rule that costs follow the event so that Spotless should be entitled to have its costs paid on a party and party basis. In some instances, it is appropriate to apportion costs as between an unsuccessful party and the successful party, and sometimes (but not routinely) to allocate costs on particular issues having regard to the success or otherwise of a particular party on an issue or the extent of its success. I also accept that the Court should not readily disallow costs simply because a party has failed upon an issue. The contention by Spotless that the Court should not do so unless it be a quite separate and distinct issue from the issues on which it succeeded, or unless there is some element of unreasonableness or inappropriate conduct in relation to that issue, in my view overstates the law. There is no firm rule directing that outcome. It is necessary to have regard to the justice of the case in all the circumstances. The failure to succeed on a particular and discrete issue may more readily enable a costs order to be made to reflect that fact. Unreasonable or inappropriate conduct by a generally successful party in relation to a particular and discrete issue on which it did not succeed may also more readily enable a costs order to be made to reflect that fact. But the converse proposition, that the exercise of the costs discretion must or should be favourable to a successful party unless either or both of those alternatives is shown to exist, as already stated, overstates the position. The discretion is to be exercised in each case according to the particular circumstances: Thompson v Mastertouch TV Services Pty Ltd (No 2) (1977) 29 FLR 281 at 281. It is an unfettered discretion provided it is exercised judicially: Oshlack v Richmond River Council (1998) 193 CLR 72 per McHugh J at [65]; Ruddoch v Vardarlis (No 2) (2001) 115 FCR 229 at [9]; Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 42 FLR 213. 6 Spotless succeeded on each of the heads of liability that it asserted; breach of employment duties (confidential, contractual and statutory), breach of confidence and breach of copyright. It did not succeed in respect of each of the alleged breaches of those obligations, but it did succeed in respect of the two most significant alleged breaches, namely Mr Reynolds' conduct in relation to the Zoo project and his conduct in relation to the Botanic Gardens project. It recovered damages which were assessed at $100,000 for breach of the employment duties, and separately damages for breach of copyright of $45,000 (but subsumed within the larger award of damages), and injunctive orders were made in a little more limited terms than sought by Spotless. I note that Mr Reynolds has made no submissions, in the circumstances, about the application of r 40.08 of the Federal Court Rules 2011 (previously O 62 r 36A of the Federal Court Rules 1979). Nor has any question arisen under Pt 25 of the Federal Court Rules 2011. 7 However, the damages claimed by Spotless were much more extensive than that. In the primary judgment at [121]-[122], the damages claimed were described as being about $1.2m. Spotless did not succeed to that extent, principally because the claim for the "wasted expenditure" was unsuccessful and because the claim for loss of expected profits from the Zoo project of up to $1.1m was not made out. An allowance was made in the general damages awarded for the loss of opportunity on its part to secure the Zoo project. The damages awarded for breach of copyright were included within the wider award of damages, as the conduct amounting to breach of copyright was in essence the same conduct as that which gave rise to the breach of employment obligations. I have had regard to those matters in deciding that it is appropriate for Mr Reynolds to pay Spotless 60% of its costs to be taxed. In reaching that view I have taken into account, the evidence of each of the witnesses called by Spotless. I reject Mr Reynolds' submission that their evidence was "of no avail". It was to a degree directed to establishing the very substantial claim for loss of profits in respect of the Zoo project, but it also supported the establishment of the employment relationships and the breach of copyright claims. There was also evidence directed to a number of other specific but in the overall picture fairly minor breaches of employment duties which were not made out. There was also significant evidence directed to establishing that in relation to the Botanic Gardens project, Spotless suffered loss by Mr Reynolds' failing to attend to his employment duties but nevertheless being paid for them; that claim was unsuccessful. 8 Having regard to all those matters, in my view the appropriate order for costs is that Mr Reynolds pay to Spotless 60% of its costs of the application to be taxed, reduced by $45,000 for the reasons given above. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.