Costs - Offer to compromise - Consent to judgment - Meaning of offer "not more favourable" - Turns on own facts

Alltrans Express Ltd v CVA Holdings Ltd [1984] 1 WLR 394

Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873

Blackie & Sons Ltd v Lothian Book Publishing Co Pty Ltd [1921] HCA 27; (1921) 29 CLR 396

Canterbury Park Racecourse Co Ltd v Hopkins (1932) 49 WN (NSW) 27

Colgate Palmolive Ltd & Anor v Markwell Finance Ltd & Anor [1990] 8 RPC 197

Evans Marshall & Co v Bertola SA [1973] 1 All ER 992

Fortuity Pty Ltd v Barcza (1995) 32 IPR 517

Hawkes & Son (London) Ltd v Paramount Film Services Ltd (1934) 1 Ch 593

Maclean v Rottnest Island Authority [2001] WASCA 323

Permanent Building Society v Wheeler (1993) 10 WAR 569

Prior v Lansdowne Press Pty Ltd [1977] VicRp 6; [1977] VR 65

Roache v News Group Newspapers Ltd & Ors [1992] TLR 551

Sydney Organising Committee for the Olympic Games v Clarke (1998) 41 IPR 403

Thiess Contractors Pty Ltd v Placer (Granny Smith) Pty Ltd [2001] WASCA 166

University of London Press Ltd v University Tutorial Press Ltd (1916) 2 Ch 601

1 The present application is concerned solely with the costs of this action, orders with respect to liability and damages having been made by consent.

2 The plaintiff is a company incorporated to market and distribute Grafoplast, an electrical wire marking product, in Australia. Since 1989 the plaintiff has distributed Grafoplast in Australia under an exclusive licence from the parent manufacturing company in Italy. In 1989 the plaintiff contacted a number of distributors and agents around Australia to set up a distribution network. One of those ultimately appointed as distributor and agent was the defendant.

3 In 1990 the plaintiff held a national conference in Sydney to train agents and distributors in marketing Grafoplast. It produced a brochure dated 18/19 June 1990 entitled "Grafoplast - Training Including Marketing Warfare". Another brochure entitled "Grafoplast - 1995 - Conference - Closing the Loop" was distributed among attendees of a further conference held in 1995.

4 In 1996 the defendant's distribution agreement with the plaintiff was terminated and, it seems, the defendant became a distributor for a rival wire marking product. Later that year the plaintiff came into possession of a document produced by the defendant entitled "The Fast Solution to Cable Marking" which caused the plaintiff to form the view it reproduced substantial parts of the plaintiff's 1990 and 1995 brochures. Legal advice confirmed this view and on the plaintiff's instructions a letter was sent on 27 February 1997 by its solicitors to the defendant requiring it to undertake to cease publication and distribution of the defendant's brochure and to deliver up the impugned materials.

5 No response was received from the defendant and in mid-1997 the plaintiff caused a writ to issue against it, claiming relief for infringement of copyright in the 1990 and 1995 brochures. The plaintiff claimed injunctive relief, an order for delivery up of infringing copies, an enquiry into damages or at the plaintiff's option an account of profits, and an order for payment of all sums due upon the taking of an enquiry or account. On 24 October that year the defendant filed a defence. In 1998 the defendant made the first of a number of offers of settlement.

6 I have been provided with a number of affidavits which purport to deal with settlement negotiations between the parties. Objection is taken to parts of those on the basis that they reveal without prejudice material, and there is, further, a factual dispute in relation to those matters which were not the subject of written offers. It is not I think necessary for me to determine those matters. It is necessary only to refer to the written offers, apparently without prejudice save as to costs, which appear not to be the subject of objection or dispute.

7 By offer dated 1 July 1998 pursuant to O 24A of the Rules of the Supreme Court, the defendant offered to compromise the plaintiff's claim on the basis that the defendant pay to the plaintiff the sum of $2,000 and costs to date of acceptance of the offer. By letter dated 19 August the plaintiff's solicitors rejected that offer. The letter read, in full:-

"We refer to your letter dated 3 June 1998 in respect of your client's offer to settle this claim for the sum of $2,000 plus party/party costs to be taxed. [The reference to a letter is apparently to a communication apparently pre-dating the O 24A offer, but identical in terms].

At this stage our client is unable to make an accurate assessment of whether or not your client's offer is reasonable. We are not in a position to make that assessment until we have examined your client's discoverable documents."

8 On 7 November this year the plaintiffs solicitors served an O 24A offer on the defendant offering to accept orders for damages of $25,000 plus costs to be taxed, judgment for the plaintiff, a declaration that the defendant infringed the plaintiff's copyright in the plaintiff's brochures, (I note that a declaration was not at that time claimed in the statement of claim) an injunction restraining the defendant from publication, and an order that the defendant deliver up all infringing copies. Two days later, the plaintiff delivered to the defendant a letter offering to compromise in terms identical to the previous O 24A but substituting the sum of $95,000 inclusive of costs, for the previous $25,000 plus costs.

9 By a letter dated 20 November, the defendant counter-offered. The offer was that the defendant pay the plaintiff the sum of $2,000, plus costs to be taxed if not agreed, and that the action be otherwise dismissed with no admission of liability by the defendant.

10 On 22 November the plaintiff offered to settle on the basis that the defendant paid it $350 plus costs and that there be injunctive and declaratory relief and an order for deliver up of the type which I have already described. There were apparently further negotiations in relation to costs, which were unable to resolve that issue. In the end, it was agreed that the question of costs should be left to the Court.

11 On 4 December therefore, with the consent of the parties I made orders tidying up the pleadings (including an amendment to the statement of claim seeking a declaration), declaring that the plaintiff was the owner of the copyright in the 1990 and 1995 brochures and that the defendant's brochure infringed that copyright, restraining the defendants from further publication of the infringing material, ordering delivery up of the defendant's brochure and awarding damages to the plaintiff in the sum of $350. I also heard argument in relation to the question of costs.

12 It seems clear enough that, the plaintiff having been broadly successful in seeking the relief sought, and leaving aside for the moment the question of quantum of damages, that it should have its costs in the ordinary way up to the date of the defendant's first offer to compromise, that being 1 July 1998. The difficult question obviously concerns the issue of what costs should be awarded after that date. The competing contentions are: on the one hand, that the plaintiff, being the "successful party" should have its costs of the whole action; and, on the other, that the judgment obtained was "not more favourable" than the defendant's original O 24A offer and that the defendant should therefore have the costs after the date of that action or that alternatively the defendant should have the costs in any event by reason of the plaintiff's conduct of the litigation or alternatively that there should be no order as to costs.

13 There are a number of matters which can and should be put aside, but which were raised during the course of submissions. These issues revolved around the questions of whether there was or was not a good defence to the claim for breach of copyright, and around the question of whether it was "reasonable" for either the defendant or the plaintiff to make certain choices during the course of the litigation. So far as the first of the issues is concerned, that was resolved by the consent judgment. In my view, it is not open to a party who consents to an order the effect of which is that it is held liable for breach of copyright, to maintain at the same time that it was not so liable and that the plaintiff should therefore not have it's costs.

14 So far as the "reasonableness" of each party's action is concerned, that is of limited significance. It may be that the discretion as to costs should be exercised in some cases so as to penalise a party to litigation who has acted in a way which is wholly unreasonable, but the purpose of O 24A is to encourage the saving of public and private costs by promoting early and realistic offers, and early and realistic consideration of offers, of compromise. A party may well be acting "reasonably" in terms of its assessment of the facts or legal issues involved, or in relation to what it perceives as a tactical advantage in the course of litigation, and nevertheless refuse a fair and reasonable offer, with the consequences which flow pursuant to O 24A. Another way of putting this might be, broadly, that O 24A is concerned with the objective reasonableness of the offer in the light of the judgment ultimately pronounced, and not with the subjective reasonableness of a party's position at any particular time during the course of litigation. So, too, pursuant to the general discretion under O 66, a successful party may properly be deprived of an award of costs, and even on occasion ordered to pay the costs of an opponent in whole or in part where the successful party unnecessarily protracts the proceedings or otherwise by its conduct impedes the identification of real issues and the conduct of the trial in a way which increases costs. Again, the Court is concerned with the objective reasonableness of the parties' conduct.

15 I do not accept the defendant's first submission that the judgment obtained by the plaintiff is "not more favourable" than the original O 24A offer. That was an offer which did not include any element of injunctive relief. Acceptance of that initial offer would have entitled the plaintiff to judgment ordering the defendant to pay it the sum of $350, but would not have entitled the plaintiff to the order for injunctive relief or the order for delivery up which it sought. The relevant questions are:

"Who is a matter of substance and reality, had won? Had the plaintiff won anything of value or anything he could not have won without fighting the action through to a finish? Had the defendant substantially denied the plaintiff the prize which the plaintiff fought the action to win?"

(Timms v Clift [1997] QCA 61; (1998) 2 Qd R 100 at 107).

16 It is difficult to compare an offer of $2,000 damages with an offer of $350 damages plus an injunction and delivery up. The defendant submits that the value of the injunction must be assessed against the amount awarded in damages for past infringement of copyright, so that it is unlikely that the injunction itself could be seen as worth more than $350. However, the orders for injunctive relief and for delivery up would have the effect of saving the plaintiff any possible future proceedings, in addition to preventing future damage. In my view, the injunctive relief must be seen as of considerable value in this action and I am unable to form the view in this case that the judgment is "not more favourable" than the terms of that offer.

17 However, I reject the submission made on behalf of the plaintiff, relying in part on assertions in an affidavit sworn by Mr Ellard on behalf of the plaintiff, that, in effect, the injunctive relief was of primary importance to the plaintiff and that "this case has never been about the amount of money that the plaintiff may recover in damages or by an account of profits". The first difficulty with that view is that it was never communicated to the defendant. Indeed, in rejecting the defendant's offer of 1 July 1998, the plaintiff did so in terms which suggested that it was concerned about the appropriate quantum of damages. It did not suggest that the O 24A offer would be acceptable if it were coupled injunctive relief. In the period following its rejection of that offer, it made numerous applications to the Court the sole purpose of which was to obtain information which would assist it in evaluating the quantum of damages, including discovery applications of August 1998, January 1999, May 1999 and July 1999.

18 However, this is not a case in which it has always been clear that the plaintiff could have had injunctive relief purely by asking for it. Rather, this was a case where, at least on occasion, the defendant appeared determined to deny the plaintiff that part of the relief. Instead, in response to a notice to admit facts, dated 10 August 2001, the defendant on 17 October declined to admit that copyright existed in favour of the plaintiff in respect of the 1995 brochure, or that the plaintiff owned the copyright in the plaintiff's brochures or that the defendant's brochure had been utilised in the course of it carrying on its business without the permission at or licence of the plaintiff. Further, as I have already noted, the defendant's counter-offer of 20 November 2001 was expressed to be without any admission of liability.

19 From a consideration of the materials to which I have referred, my conclusions are as follows. It follows from the consent orders which were made that the defendant had infringed the plaintiff's copyright and that the plaintiff had suffered damage which was very small, but was not "nominal" as the cases dealing with nominal damages would define that term. The plaintiff's reason given at the time for rejecting an offer of damages substantially in excess of the damages actually recovered, was that it was not satisfied as to the adequacy of that sum, rather than that it was concerned to obtain injunctive relief. At no time did the plaintiff suggest to the defendant that injunctive relief was its prime concern. However, at no time prior to 9 November 2001 did the defendant offer to consent to injunctive relief and associated orders. Indeed, the defendant opposed an application for splitting the issues of liability and quantum and when that application was granted on 21 February 2000, the defendant continued to contest issues of liability.

20 In the end, in my view, the interests of justice in this case are best served by treating issues of liability and quantum as distinct. Having regard to the fact that the sum recovered by way of damages was significantly less than that originally offered by the defendant and was very significantly less than that which was the subjects of the plaintiff's O 24A offer, and having regard to the fact that issues of quantum apparently occupied a great deal of the parties' time and attention - quite unnecessarily, as the amount awarded by consent reveals - it is my view that the plaintiff should pay the defendant's costs associated with that issue. However, so far as liability is concerned, it is my view that the defendant should pay the plaintiff's costs. I realise that it is not possible to arrive at a perfect separation between the costs associated with these two issues, and that to attempt that course would be likely to be productive of a great deal of further expense and inconvenience. However, it seems to me that a broadly similar result can be obtained by ordering as follows:-

1. The defendant to pay the plaintiff's costs of the action to be taxed on a party and party basis, up to 1 July 1998;

2. That the defendant pay the plaintiff's costs of the action, to be taxed on a party and party basis, from 21 February 2000 (the date of the ordering of trial as to a preliminary issue of liability) until judgment;

3. That the plaintiff pay the defendant's costs from 1 July 1998 to 21 February 2000, to be taxed on a party and party basis.