Stefanovski v Digital Central Australia

The principles 2 The principles upon which the discretion to award costs are to be exercised in this Court are not in doubt. They were recently referred to by the Full Court in GlaxoSmithKline Consumer Healthcare Investments (Ireland) (No 2) Limited v Generic Partners Pty Limited (No 2) [2018] FCAFC 100 where their Honours, Middleton, Nicholas and Burley JJ said at [5] - [7]: [5] The discretion of the Court in relation to costs is well established. As the Full Court recently observed in Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd (No 2) [2018] FCAFC 7 (Idenix) at [3]: …Section 43 of the Federal Court of Australia Act 1976 (Cth) gives the Court a wide discretion in awarding costs. The exercise of the Court's discretion is not without principles or practices; it must be exercised judicially (Les Laboratoires Servier v Apotex Pty Ltd (2016) 247 FCR 61 at [305] per Bennett, Besanko and Beach JJ). The ordinary rule is that costs follow the event, although a successful party may be awarded less than its costs, or costs may be apportioned, based upon success on the issues (Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 327 ALR 192; [2015] HCA 53 at [6] per French CJ, Kiefel, Nettle and Gordon JJ; Les Laboratoires Servier at [297] to [298] and [303]). [6] Every case must be decided on its own facts. There is no doubt that this Court could address the costs of the appeals and the cross appeals compendiously. In Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd (No 3) (Sanofi-Aventis) the Full Court addressed the costs of the appeal and cross-appeal together at [26], despite Apotex failing in its challenge to validity on various grounds (see at [8]). In Tramanco Pty Ltd v BPW Transpec Pty Ltd (No 2) (Tramanco) the Full Court similarly dealt with costs compendiously (at [13]), and noted the difficulties with disentangling the costs of different issues (at [12]). [7] Further, a percentage reduction approach may also be appropriate in some cases. Such an approach was adopted in Idenix and in Sandvik Intellectual Property AB v Quarry Mining & Construction Equipment Pty Ltd (No 2) [2017] FCAFC 158.

The parties 3 Digital Central Australia (Assets) Pty Ltd (DCA) was the applicant at first instance. Whilst there were a number of respondents to the action, the litigation against all of them has not been entirely successful and various levels of success has been achieved. The action against the fourth respondent was dismissed by the learned trial judge and there was no appeal from that order. However, all of the respondents were represented by the same Solicitor and Counsel and it would be extremely difficult to disentangle any individual respondent's peculiar interests on the question of costs. That being so, it is appropriate to treat the respondents, four of which are now the appellants, as having coordinate interests. Neither party suggested to the contrary.

The costs at first instance 4 As the reasons for judgment of 9 March 2018 disclose, DCA sought to protect its business interests and, in particular, the misuse of its confidential information by the appellants. Before the learned primary judge it sought and obtained wide orders, including orders restraining the appellants from engaging in any competing business whatsoever. Those wide injunctions were not justified and have been set aside. Other injunctions restraining the use of confidential information had been granted by the learned primary judge although this Court has pared those back slightly. Further, the damages granted by the trial judge were also reduced. Despite that, overall, DCA did have substantial success in its action. 5 In the circumstances where there were a number of different issues (the anti-competition injunctions, the injunctions to restrain a breach of confidential information and the damages claim) on which the parties had various levels of success it is difficult disentangle the "event" or "events" which an order for costs might follow. Similarly, it is difficult to disentangle the several issues in the case and attribute to each an appropriate quantification of the level of success achieved by the various parties. On that basis, a broader approach to the making of the cost orders can be adopted, although it is necessary to ensure that the orders are reflective of a general level of success or failure of each party. An approach which awards a percentage or fraction of the costs incurred by a party is the most efficacious in such situations. 6 Following this approach when weight is given to the fact of success by DCA at trial, an order that the appellants pay DCA 80% of its costs of the action to trial is appropriate. This reflects DCA's substantial success at trial, a significant portion of which withstood the appeal. It needs to be recognised that DCA was required to litigate this matter so as to protect its rights in its confidential information. However the figure of 80% also reflects the appellants' success in defeating DCA's claims for injunctions preventing them from conducting competing businesses. That was a both a significant forensic and practical victory.

Interlocutory costs 7 A number of interlocutory disputes occurred in this matter, both before and after the hearings before the learned primary judge. The parties have sought to agitate questions of costs arising from those disputes. Each of these are dealt with separately. 8 The appellants now seek their costs of an application for an interlocutory injunction brought by DCA which was set down for an urgent hearing on 19 December 2016. Apparently, the application did not proceed and the learned primary judge made an order that the costs "of and incidental to the hearing on 19 December 2016 are costs in the cause". Given that order disposing of the costs by making them payable according to the orders for costs of the proceedings generally, the question has already been determined. There is no need to reopen that settled order. 9 It appears that in early 2017, DCA sought to re-agitate its application for the broad interlocutory injunctive relief set out in the Originating Application. A hearing date of 3 March 2017 was given to the matter. Whilst the appellants assert that on the day DCA abandoned its application, it denies that and asserts that the trial judge dismissed the application because his Honour was willing to set the matter down for an urgent hearing in six weeks' time. His Honour reserved the costs of the application. His Honour's willingness to hear the matter necessarily removed any urgency in the hearing of the interlocutory application. On 3 March 2017, his Honour made comprehensive directions for the conduct of the trial. In that sense it is clear that the costs of the day were not wasted. In the absence of evidence it is not possible to effectively analyse and reach conclusions as to the causes of the application not proceeding. Nor is it possible to say what the likely outcome would have been had the learned trial judge engaged with it on 3 March 2017. 10 Taking into account the circumstances of that hearing, the difficulty in ascertaining the causes of the application not proceeding and the outcome of the trial, it is appropriate that the costs of and incidental to the hearing of 3 March 2017 be each party's costs in the cause and, therefore, follow the order for costs of the action generally. 11 Subsequent to the initial delivery of reasons by the learned trial judge, on 1 August 2017 a further hearing was held in relation to the terms of the orders which might appropriately flow from the conclusions his Honour's had reached. The learned trial judge reserved those costs and they were not subsequently dealt with. That hearing must, necessarily, be regarded as part of the hearing of the trial and the costs of that hearing ought follow the orders made in relation to the action generally. 12 The appellants make an application for an order for the costs of an application for a stay of the decision of the learned trial judge pending the hearing of the appeal. That application was partly successful and Derrington J ordered that the costs of the application be costs in the appeal. It follows that the question of the costs of that application has been dealt with and those costs are dealt with as per the order for costs of this appeal.

Costs of the appeal 13 The appellants had substantial success on the appeal and, in particular, the orders granting injunctions restraining them from carrying on a competing business to that operated by DCA were set aside. However, DCA correctly submits that of the 27 grounds of appeal, the appellants succeeded on only 9. They failed on 13 grounds, did not pursue one and 4 others were not necessary to decide. It is also correct to observe that a substantial portion of the appeal concerned the question of whether or not the appellants had misused DCA's confidential information and the appellants were generally unsuccessful in relation to that issue. 14 Although DCA submits that because it and the appellants were both partially successful on the appeal there ought to be no order as to the costs of the appeal that does not sufficiently acknowledge the appellants' success. It is appropriate that the nature of any order for costs go some way to compensating the appellants for the necessity of having to institute and prosecute the appeal: Ruddock v Vadarlis (No 2) (2001) 115 FCR 229: although that is necessarily subject to the circumstances of the litigation. For instance, where a party has been successful in the litigation generally but has failed to comply with the requirements of ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth), they can have no cause for complaint if they are denied an order for costs in their favour. That is not the case here. 15 As was the position in relation to the order for costs of the trial, an order adopting a percentage of the appellant's incurred costs is appropriate and is the best method of providing the right level of compensation for their partial success. In the present circumstances, again adopting a broad brush approach, an order that DCA pay 66.6% or two thirds of the appellants' costs of the appeal is appropriate. Such an order recognises the level of the appellants' success and that it is entitled to a compensatory order to some degree whilst acknowledging that a not insubstantial number of the grounds of appeal were not made out.

Interest 16 At paragraph 17 of the second reasons for judgment of the learned judge below, consideration was given to the amount of interest which ought be paid to DCA. The learned judge held that it was permissible, pursuant to s 51A of the Federal Court of Australia Act, to have regard to the Reserve Bank of Australia cash rate to which could be added a rate of 4%. His Honour identified that during the 2016 financial year the RBA cash rates were 2% and during the 2017 financial year they were 1.5%. His Honour accordingly allowed interest on $30,000 (which he attributed to past loss) at a rate of 5.5% for a period of 18 months. That pre-judgment interest totalled $2,475. There has been no real challenge to the method by which the learned trial judge calculated interest and, given that it was limited to past economic loss, no alteration to that figure is required as a result of the appeal. It follows that the appellants are to pay to DCA the sum of $2,475 as pre-judgment interest. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices McKerracher, Robertson and Derrington.

SCHEDULE OF PARTIES QUD 426 of 2017 Appellants Fourth Appellant: TK SIGN INSTALLATIONS PTY LTD AS TRUSTEE OF THE STEFANOVSKI FAMILY TRUST (ACN 605 654 706)