VERGOLA PTY LTD v VERGOLA ASIA PACIFIC SDN BHD AND ORS No. SCCIV-01-1293 [2002] SASC 5

PERRY J. These proceedings were instituted in the District Court by the filing of a statement of claim on 23 November 2000. By order of a Judge of that court made on 3 August 2001, pursuant to s 24(2) of the District Court Act 1991, the proceedings were transferred to the Supreme Court.

The first defendant, Vergola Asia Pacific Sdn Bhd ("Vergola Asia Pacific"), is a company incorporated in Malaysia and carrying on business in that country. The third defendant, Neata Aluminium and Glass Pty Ltd ("Neata Aluminium"), is incorporated in Singapore and carries on business there. The fourth defendant Gallant Capital Sdn Bhd ("Gallant Capital") is a Malaysian company of which Vergola Asia Pacific is a subsidiary. The second defendant, Ho Ma Kang ("Ho"), is alleged to be the principal shareholder and director of the three companies to which I have referred and is said to be in control of their operations.

The plaintiff, Vergola Pty Ltd, is the owner of patents and trade marks relating to an adjustable louvre roof or ceiling screen ("the product"). In the proceedings, the plaintiff seeks damages for breach of a licence agreement pursuant to which Vergola Asia Pacific was authorised to manufacture and sell the product in Malaysia. Essentially, the breach was said to be the sale and supply of the product by Vergola Asia Pacific to various customers in Singapore.

The defendants apart from Vergola Asia Pacific, are said to be liable to the plaintiff for infringing the latter's intellectual property rights over the product, conspiracy to cause economic harm, and related causes of action.

On 23 November 2000, on an ex parte application brought by the plaintiff, a judge of the District Court made an order in the nature of an interim injunction restraining the defendants from selling, supplying, installing, marketing or in any way dealing with the product, or from copying or attempting to copy any equipment and machinery which might have been supplied by the plaintiff to Vergola Asia Pacific. Subsequently the order was, on several occasions, extended to 29 March 2001.

On that date, the judge heard argument from counsel for the parties. The defendants sought to discharge the interim injunction, asserting, for various reasons, that it should not have been made in the first place. The plaintiff, on the other hand, sought an interlocutory order in the same terms as the interim order.

The defendants contentions were upheld. The learned judge delivered ex tempore reasons and pronounced an order which was subsequently sealed in the following form:

1. The injunction granted in this action by the order dated 23 November 2000 and extended to various dates whereby the defendants were restrained whether by themselves, agents, servants, workmen or otherwise from:

1.1 selling, supplying, installing, marketing or in any way dealing with the plaintiff's patented adjustable louvre roof or screen known as and bearing the trademark "Vergola".

1.2 copying or attempting to copy any equipment and machinery supplied by the plaintiff to the first defendant

2. The plaintiff pay the defendants' costs of the application.

3. The question of an assessment of any damages incurred by the defendants and payable under the undertaking as to damages given by the plaintiff on 23 November 2000 be reserved.

Following the making of that order and purportedly in pursuance of paragraph 2 of the order, the defendants delivered to Vergola's solicitors a short form bill of costs.

The costs sought by the defendants are very substantial. The short form bill as drawn comes to approximately $187,000.

On 18 September 2001 the plaintiff took out an application in this Court seeking orders as follows:

"1. That pursuant to Rule 101.16(i) the costs ordered by Her Honour Judge Vanstone on 29 March 2001 in favour of the Defendants be included in the Defendants' final bill of costs in respect of these proceedings.

2. Alternatively, that pursuant to Rule 101A.02(1B) the requirements of Rule 101A.02(1) be dispensed with.

3. That pursuant to Rule 101A.02(6) and Rule 101 the Defendants do lodge with the Court and serve on the Plaintiff particulars in taxable form of their bill of such costs as were ordered against the Plaintiff by Her Honour Judge Vanstone on 29 March 2001.

4. Alternatively to 1-3, pursuant to Rule 101A.02(2) that the time for the Plaintiff to respond to the Defendants' short form bill of costs filed herein be extended by twenty-one days from the date of this order.

5. That pursuant to Rule 101.01(1)(c) costs ordered in favour of the Defendants by Her Honour Judge Vanstone on 29 March 2001 be set off against the Plaintiff's claim and costs in this action."

When the application came on for hearing before me, I permitted the plaintiff to pursue paragraph 1 of the application, leaving aside for the time being the remaining paragraphs.

For convenience, I set out again the terms of the costs order in question which was that:

2. The plaintiff pay the defendants' costs of the application."

Essentially, the plaintiff's argument is that on a proper construction of DCR r 101.16(i), and given the form of the costs order in favour of the defendants, the defendants must wait until the conclusion of the litigation before either taxing the costs to which it is entitled under the order, or pursuing payment of the costs when taxed.

"Costs of interlocutory orders may be included in the final bill. All costs to which any party is entitled under any interlocutory order shall be included in the final bill of costs unless the costs have already been paid; ......"

Obviously there is some tension between the "heading" of the sub-rule and the text of it, in that the heading uses the word "may", whereas the text uses the word "shall".

At all events, the annotation in Lunn's Civil Procedure South Australia[1] reads as follows:

[R 101.16.40] Costs on interlocutory orders - para (i) It is similar in part to O 65 r 20(22) except 'bill of costs' is substituted for 'final judgment'. There is no authority on its meaning. Presumably it means that a party who has an order for costs in his favour on an interlocutory order, and subsequently obtains an order for the costs of the action, may include all of those costs in the one bill. It does not seem to affect the rule that where the words 'in any event' are not added to an interlocutory order for costs those costs are payable immediately: How v Winterton (No 4) (1905) 91 LT 763."

I must say, with respect, that insofar as the learned author refers to How v Winterton (No 4),[2] that case does not support the proposition for which its citation is advanced.

That case concerned costs payable to the plaintiff, who was the respondent to an interlocutory application by the plaintiff, a trustee. The trustee's application was unsuccessful, and the plaintiff obtained an order for costs payable "in any event".

In his judgment, Kekewich J did not decide the question of timing, that is to say, when it is that costs payable "in any event" may be taxed and payment enforced, or for that matter, the position in that respect where the costs order is unqualified by the words "in any event". He simply made the observation during the course of his judgment:

"The application was refused with costs in any event - that is to say, the costs were to be paid by the applicant, the defendant."

Without the assistance of other authority, one might be pardoned for thinking that that is all that the words mean. In their ordinary grammatical meaning, the words "in any event" would seem to have nothing to say about the question of when costs may be taxed and payment enforced.

However, apart from How v Winterton, there is a long line of authority which supports the view that despite the ordinary grammatical meaning of the words "in any event", the inclusion of those words in an order for costs postpones the entitlement of the party obtaining the costs order to tax and enforce payment of the costs, until the conclusion of the action. More importantly, for present purposes by way of corollary to that principle, the authorities establish that in the absence of the words "in any event", costs of interlocutory proceedings may be taxed and payment enforced forthwith.

In Allied Collection Agencies Ltd v Wood and Anor,[3] Neill J observed:

"Counsel for the defendants submitted that there was a well-recognised distinction between 'defendants' costs' and 'defendants' costs in any event'. Under the first form of order the defendants are entitled to proceed to tax their costs immediately; under the second form of order taxation is postponed until the conclusion of the proceedings. ........ Counsel also drew my attention to Bullen and Leake's Precedents of Pleadings (9th Edn, 1935, p 53, note 6) which included these words:

'If the Master orders the costs to be "Defendant's costs in any event," the Plaintiff will have to pay the costs of the application on both sides, whatever the result of the action, but not at once: they will be taken into account in the ultimate taxation. It is only where the application is dismissed "with costs" that the successful party is entitled to an immediate taxation.'

I am satisfied that in the course of time the words "defendant's costs" have acquired a special meaning. The words constitute, as counsel for the plaintiff company put it, a formula. The formula is used where the court or, as in this case, the parties intend or must be deemed to intend that the defendant should be entitled to tax his costs immediately."

To much the same effect is the dictum of Denning MR in Stratford & Son v Lindley and Ors:[4]

"..... 'plaintiff's costs in any event' means that, no matter who wins or loses when the case is decided, the plaintiff is to have the costs of those interlocutory proceedings. 'The plaintiff's costs' mean that the plaintiff is to have the cost of the interlocutory proceedings without waiting for a decision." (emphasis added)

The same view appears to have been applied in a number of jurisdictions in Australia. For example, in Bertram v Beaurepaire Tyre Service Pty Ltd, Master Allen adopted with approval the statement made in successive editions of the Annual Practice:

"..... that a bare order for the payment of costs entitles the party having that order to have the costs taxed and paid at once."[5]

See also Stowe v Stowe[6] and Bull Nominees Pty Ltd trading as Grassy Car Hire v McElwee.[7]

In this jurisdiction, Lander J observed in QFS Aust Ltd v Bailey and Parts Masters Ltd[8] observed:

"The second defendant has submitted that the order for costs ought to be costs in any event, such that the order does not operate until the matter has been disposed of. Counsel for the plaintiff argues that the order ought to be costs before the event, such that the order for costs operates in favour of the plaintiff immediately."

In Legal Costs South Australia,[9] the matter is put in this way:

'Costs in any event' means that the party who has obtained this order will receive the costs no matter what the final result of the action. However, the costs are not payable until the 'event' has occurred which is usually final judgment in the action. Accordingly, an order for 'plaintiff's costs simpliciter' is more advantageous than 'plaintiff's costs in any event', as the former order entitles the plaintiff to immediate payment of the costs, whereas the latter order requires the plaintiff to await the completion of the action before payment can be obtained. In the Federal Context, see FCR O 62 r 15.

The reason for such an order is that it is sometimes not until the final disposal of the action that the issue out of which the costs arise will have been decided."

Against the line of authority to which I have referred, and in support of his argument, Mr Morcombe QC of counsel for the plaintiff referred to the judgment of Olsson J in The State of South Australia and Anor v Peat Marwick & Co and Ors.[10] In that case, Olsson J observed:

"It remains only to consider the contention of the defendants that the plaintiffs ought to be directed to pay the costs awarded against them forthwith, upon the footing that it is clear that this litigation will not be finalised for some years and that, having incurred very substantial costs for no good reason, it would be unjust that they should have to bear the burden of those costs for a long period of time.[11]

It is beyond question that the normal rule is that, where an order for costs is made on an interlocutory application, such costs are not to be taxed and paid until the principal proceedings are concluded. It is only in exceptional cases that the court will order taxation and payment forthwith (see Thunderdome Racetiming and Scoring Pty Ltd and Another v Dorian Industries Pty Ltd and Another,[12] Navellan Pools Pty Ltd and Ors v Compass Ceramic Composite Pty Ltd [13] This is because it would be "highly inconvenient and may be oppressive if, before proceedings are finally concluded, there is a series of taxations of costs of a series of interlocutory applications"[14] and, dependent upon the outcome of the principal proceedings, it might well deny a successful party of the right of set off."

But in that dictum, Olsson J does not refer to the form of order, only to the effect of orders for costs.

This case is all about the form of the order. It seems to me that the overwhelming weight of authority is in favour of the view that an order for payment of costs simpliciter entitles the party in whose favour the order is pronounced to immediate payment of the costs.

The only remaining question is whether or not the terms of DCR r 101.16(i) are such as to change the long-standing practice.

The plaintiff contends that the words "shall be included in the final bill of costs", where those words appear in DCR r 101.16(i), mean that, given that the order for payment of costs is silent as to the time when the costs may be taxed and payment enforced, the defendants must wait until the "final bill of costs" and may not either tax the costs or seek payment of them at this stage.

In my opinion, the rule should not be so construed. In particular, the words "unless the costs have already been paid" make it plain that the purpose of the rule is to ensure that parties bring in to their final bill of costs any outstanding costs to which they are entitled pursuant to any interlocutory order, so that the taxation of the final bill of costs will define the amount due on all outstanding costs orders.

It would be a strained interpretation of the rule to give to it an operation which would effectively postpone the entitlement of a party to immediate taxation and payment of costs, when the order for costs is unqualified.

What I have said so far is sufficient to dispose of paragraph 1 of the application. However, for the sake of completeness I refer to a further argument put by the defendants. They sought to derive support for their contention from the terms of DCR r 101.07(5), which reads:

"No order required for the taxation of costs ordered to be paid Unless the Court orders to the contrary, any orders for costs, whether made by consent or otherwise, is sufficient authority for a taxation of costs."

That rule does not have the effect contended for by the defendants. It was introduced against the background of a long-standing practice which required the words "to be taxed" to appear in a costs order before a party could proceed to taxation. The effect of DCR r 101.07(5) is to make it unnecessary for those words to be part of an order for costs. Costs may be taxed even though the order does not so direct. The common form orders of the court have been amended accordingly.

That rule has no application to the question now in issue.

Before parting with the matter, I should note that the situation under the Federal Court Rules is somewhat different, and authorities in that court cannot be taken to govern the interpretation of the rule in question.

Order 62 r 3 of the Federal Court Rules provides:

(1) The Court may in any proceeding exercise its powers and discretions as to costs at any stage of the proceeding or after the conclusion of the proceeding.

(2) Where the Court makes an order in any proceeding for the payment of costs the Court may require that the costs be paid forthwith notwithstanding that the proceeding is not concluded.

(3) An order for costs of an interlocutory proceeding shall not, unless the Court otherwise orders, entitle a party to have a bill of costs taxed until the principal proceeding in which the interlocutory order was made is concluded or further order." (emphasis added)

There remains the question of how the present application should be disposed of.

The main purpose lying behind the plaintiff's present application was to avoid payment of the costs in question until conclusion of the litigation. It seemed to me in those circumstances that there was no reason why a taxation of the costs should not proceed now. This would have the benefit that the quantum of the costs would be fixed, leaving me to rule on the question whether or not the costs should be paid at this stage.

Accordingly, on 16 November 2001, at the completion of the argument on the application, I ordered, inter alia:

"That the defendants be at liberty to proceed with the taxation of their costs before a Master of this Court, without prejudice to the arguments advanced by the plaintiff in respect to paragraph 1 of the application, and to that end I refer paragraphs 2, 3 and 4 of the plaintiff's application to the Master dealing with the said taxation."

In light of these reasons, I now dismiss paragraph 1 of the application.

Given that the taxing master is to deal with paragraphs 2, 3 and 4 of the application, this leaves only paragraph 5 in which Vergola seeks an order that the costs "be set off against the plaintiff's claim and costs in this action".

I have not heard full argument on this aspect of the plaintiff's application. It is incumbent upon me to do so, before I rule on that part of the application.

After delivery of these reasons, I will fix a time when argument on that aspect of the matter will be received.

[2] How v Winterton (No 4) (1905) 91 LT 763, 765.

[3] [1981] 3 All ER 176 at 179.

[4] [1969] 3 All ER 1122, 1123.

[5] Bertram v Beaurepaire Tyre Service Pty Ltd (1986) 4 NSWLR 685, 686.

[6] Western Australia (Full Court) 16 October 1995.

[7] [1997] TASSC 148; (1997) 7 Tas R 339.

[8] (Unreported) Judgment No S6631, 15 April 1998 at page 10.

[10] (Unreported) Judgment No 6243, 9 July 1997 at page 13.

[11] Cf Allstate Life Insurance Co and Ors v Australia and New Zealand Banking Group Limited and Ors (Federal Court of Australia, Full Court, 17 August 1995, unreported).

[12] [1992] FCA 291; (1992) 36 FCR 297.

[13] Lehane J, 18 April 1996, unreported.

[14] Vasyli v AOL International Pty Ltd and Anor, Lehane J, 2 September 1996, unreported.