Sullivan v FNH Investments Pty Ltd t/as Palm Bay Hideaway

JUDGMENT ON COSTS 1 At [108] of my judgment of 10 April 2003, I expressed the provisional view that an order for indemnity costs should be made because, on a proper consideration of its position, it should have been apparent to the respondent ("FNH") that it had no defence to this claim. I set out my reasons for this view at [109] to [110] of my judgment. 2 Counsel for FNH had submitted that I should order costs on a party and party basis for three reasons. 3 First, he submitted that it was not unreasonable for FNH to litigate the question of whether additional damages should be ordered in an amount which exceeded the balance of the contract price. He said that this was the real issue between the parties and he relied in this regard on an offer of compromise made under O 23 of the Federal Court Rules which he tendered on the question of costs. 4 Two offers of compromise were made. The applicant's offer made on 16 July 2002 was to accept $5,000 for the balance of the contract price, $50,000 for additional damages under s 115(4) of the Copyright Act 1968 (Cth) and $15,000 for costs. FNH's offer made on 11 October 2002 was to pay the balance of the contract price and $10,000 for costs. 5 The applicants tendered two without prejudice letters which had passed between the solicitors in an effort to settle the proceedings. The first was a letter of 25 September 2002 from FNH's solicitors offering to pay the balance of the contract price inclusive of costs together with some "acknowledgments as to some of your client's other claims." This was rejected by the applicants' solicitors in a letter of 2 October 2002. The letter made an offer to accept $55,000 calculated as follows:- Settlement of the outstanding contract price $ 5,000 Additional damages $25,000 Reimbursement of costs $25,000 Total $55,000 6 The letter observed that the applicants' costs to that date were in the order of $40,000. 7 The second submission made by counsel for FNH was that it was not unreasonable to litigate the question of whether there was a breach of contract because of the expert evidence as to the quality of the photos and whether they conformed with the brief. 8 The third submission was that it was not unreasonable to litigate the question of quantum of any claim for breach of contract. This was said to justify defending the proceedings upon the basis that the maximum amount of any award would be the balance of the contract price of $7,425 but it was argued that there was a proper basis for awarding less than this sum. 9 In my opinion, the submissions put by FNH's counsel do not answer the proposition that FNH had no defence to the claim for copyright infringement. Moreover, it should have been plain to FNH and its advisers that the infringement was flagrant. It was therefore not reasonable to defend the proceedings upon the basis contended by FNH, namely, that no additional damages were payable because the claim was in substance a claim for breach of contract. 10 In any event, the claim was not defended upon the footing that only $7,425 was payable. Thus, the defence was not conducted solely upon the basis that the only real issue was whether additional damages over that amount were payable. Nor does FNH's offer of compromise of 11 October 2002 establish that the only real issue was whether the additional damages were payable. 11 It follows in my view that there are special features in this case which justify me in departing from the ordinary practice of ordering costs on a party and party basis. Accordingly, the order which I will make is that the respondent pay the costs of the applicants of these proceedings on an indemnity basis. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.