FEDERAL COURT OF AUSTRALIA

Forty Two International Pty Limited v Barnes [2014] FCA 217

THE COURT ORDERS THAT:

1.    Judgment entered for the second applicant against the first and second respondents in the amount of $3,062,406.93 comprising damages of $2 million together with interest calculated to 14 March 2014 inclusively in accordance with s 51A of the Federal Court of Australia Act 1976 (Cth) in the amount of $1,062,406.93.

2.    The further amended application filed on 5 May 2011 be otherwise dismissed.

3.    The cross-claim filed on 17 February 2012 be dismissed.

4.    The respondents pay 75% of the applicants’ combined costs of the proceedings, including the costs of the cross-claim save for:

a)    the costs of and in relation to the notice of motion filed by the applicants on 19 November 2009;

b)    the costs of and in relation to the notice of motion filed by the respondents on 4 December 2009;

c)    the costs of and in relation to the notice of motion for security for costs filed by the respondents on 17 November 2009;

d)    the costs of and in relation to the notice of motion filed by the respondents on 16 February 2011;

e)    the costs of the notice of motion filed by the respondents on 8 April 2011;

f)    the costs of the interlocutory application filed by the applicants on 17 November 2011 (relating to the confidentiality of certain documents produced on subpoena by the National Australia Bank);

g)    the costs of and incidental to the interlocutory hearing on 28 February 2012; and

h)    the costs of the applicants’ interlocutory application filed on 29 February 2012.

5.    The applicants pay the respondents’ costs as previously ordered by the Court, including the costs of and incidental to the interlocutory hearing on 28 February 2012.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    Reasons for judgment in the substantive proceedings were handed down on 18 February 2014 (see Forty Two International Pty Limited v Barnes [2014] FCA 85). The parties have been unable to agree on the final orders, but they have exchanged written submissions in support of their respective proposed final orders, including as to costs. I will briefly summarise those submissions before explaining the reasons for the final orders which will be made.

The applicants’ submissions summarised

2    The applicants propose the following final orders:

1.    Judgment be entered for the second applicant against the first and second respondents in a sum of [insert sum] comprising damages of $2,000,000 together with interest calculated in accordance with s 51A of the Federal Court of Australia Act 1976 and practice note CM 16 in the sum of [insert sum] (interest calculation to 28 February 2014 is $1,057,420.69 and $356.16 per day thereafter).

2.    The further amended application filed on 5 May 2011 be otherwise dismissed.

3.    The respondents’ cross-claim filed on 17 February 2012 be dismissed.

4.    The respondents pay the applicants’ costs of the proceedings, including their costs of the cross-claim save for:

4.1    The costs of and in relation to the notice of motion filed by the applicants on 19 November 2009.

4.2    The costs of and in relation to the notice of motion filed by the respondents on 4 December 2009.

4.3    The costs of and in relation to the notice of motion for security for costs filed by the respondents on 17 November 2009.

4.4    The costs in relation to the respondents’ notice of motion filed on 16 February 2011.

4.5    The costs of the respondents’ notice of motion filed on 8 April 2011.

4.6    The costs of the applicants’ interlocutory application filed on 17 November 2011 (relating to the confidentiality of certain documents produced on subpoena by National Australia Bank).

4.7    The costs of and incidental to the interlocutory hearing on 28 February 2012.

4.8    The costs of the applicants’ interlocutory application filed on 29 February 2012.

3    In support of their proposed orders regarding costs, the applicants made the following submissions:

(a)    their claims of copyright infringement and breach of confidence were abandoned before the hearing commenced;

(b)    existing orders as to costs concerning interlocutory matters should remain;

(c)    although the applicants were unsuccessful in some of their causes of action, they had substantial success in recovering damages and interest in excess of $3,000,000 and successfully resisted the cross-claim; and

(d)    they also successfully resisted the respondents’ attack upon the credibility of the applicants’ witnesses, especially Mr McDonnell.

4    The applicants submit that the Court should adopt a broad and not “an over-technical approach” to the question of costs, which they say favours the making of an order that the respondents pay their costs with some limited exceptions.

5    The applicants also oppose any stay of proceedings for 21 days to allow the respondents to consider an appeal in circumstances where no evidence has been filed in support of such a stay and no ground of appeal has been identified.

The respondents’ submissions summarised

6    The respondents propose the following final orders:

1.    Judgment be entered for the second applicant against the first and second respondents in the sum of $3,057,420.69 comprising damages of $2,000,000 together with interest calculated to 28 February 2014 in accordance with s 51A of the Federal Court of Australia Act 1976 (Cth) and practice note CM 16 in the sum of $1,057,420.69.

2.    Order 1 be stayed for 21 days.

3.    The first applicant’s claim be dismissed with no order for costs of the proceedings.

4.    The third applicant’s claim be dismissed with the third applicant to pay the respondents’ costs of that claim, as agreed or assessed.

5.    The respondents’ cross-claim filed on 17 February 2012 be dismissed.

6.    The respondents pay 30% of the second applicants’ costs of the proceedings, including its costs of the cross-claim save for:

6.1    The costs of and in relation to the notice of motion filed by the applicants on 19 November 2009.

6.2    The costs of and in relation to the notice of motion filed by the respondents on 4 December 2009.

6.3    The costs of and in relation to the notice of motion for security for costs filed by the respondents on 17 November 2009.

6.4    The costs in relation to the respondents’ notice of motion filed on 16 February 2011.

6.5    The costs of the respondents’ notice of motion filed on 8 April 2011.

6.6    The costs of the applicants’ interlocutory application filed on 17 November 2011 (relating to the confidentiality of certain documents produced on subpoena by National Australia Bank).

6.7    The costs of and incidental to the interlocutory hearing on 28 February 2012.

6.8    The costs of the applicants’ interlocutory application filed on 29 February 2012.

7.    The applicants pay the respondents’ costs as previously ordered by the Court, including the costs of and incidental to the interlocutory hearing on 28 February 2012.

7    The respondents’ submissions in support of their proposed orders relating to costs and a stay may be summarised as follows:

(a)    costs should be apportioned to reflect the applicants’ limited success in obtaining an award of damages of $2,000,000, as opposed to the $22,000,000 sought by them in their primary damages case;

(b)    the applicants were only successful in 2 of the 10 causes of action brought by them. Two of those causes of action were abandoned shortly before the hearing and the other 6 were dismissed;

(c)    this is an appropriate case to apportion costs consistently with the principles stated in cases such as Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 3) [2007] FCAFC 119 at [11] (Cadbury Schweppes) and, more recently, REA Group Ltd v Real Estate 1 Ltd (No 2) [2013] FCA 968; and

(d)    a substantial part of the evidence and discovery was directed to the applicants’ primary case, upon which it was ultimately unsuccessful, however, the respondents also accept that that evidence and discovery process was relevant to their cross-claim. Accordingly, they submit that each party should bear their own costs of litigating these issues.

8    Taking account of these and other matters raised by them, the respondents submit that the second applicant should be awarded only 30% of its costs. They also submit that the third applicant’s claims concerning an alleged contravention of s 42 of the Fair Trading Act 1987 (NSW), which was not pursued, should be dismissed and the question of costs in respect of that matter be reflected in the costs order made in favour of the second applicant.

9    A similar submission is made in respect of the first applicant’s failure to establish any of its primary claims, however, the respondents acknowledge that the first applicant was successful on the cross-claim. To avoid complexity in any taxation, the respondents say that these matters could be reflected in the overall costs awarded to the second applicant.

10    Finally, in order to further maximise simplicity in any taxation, the respondents propose an alternative, namely that the Court should order the respondents to pay to all of the applicants 30% of their combined costs of the proceedings as agreed or assessed.

Disposition

11    As is well settled, the Court has a wide discretion under s 43 of the Federal Court of Australia Act 1976 (Cth) in making costs orders, but that discretion must be exercised judicially.

12    I accept the respondents’ submission that this is an appropriate case in which to apportion costs in circumstances where, although successful overall, the applicants abandoned some claims shortly before the trial began and were unsuccessful in many of their other claims. As the Full Court observed in Cadbury Schweppes at [11]:

It is appropriate that, where one party, although successful overall, raised and pursued unsuccessful grounds or abandoned grounds that the other party was expected to meet in preparation of and in the course of the hearing, and as a consequence costs have been thrown away or incurred, such costs should be paid by the successful party.

13    Some practical difficulty is presented, however, by the fact that the Court was not provided with any material to estimate the amount of costs or time spent in preparation and presentation of each of the relevant claims by the applicants which were either abandoned or unsuccessful. Moreover, as the respondents acknowledged, part of the discovery and much of the evidence of the parties in respect of the applicants’ primary claim was also relevant to the respondents’ unsuccessful cross-claim. Accordingly, the matter is best assessed on the basis of a broad evaluative judgment by the Court.

14    There is considerable attraction in the respondents’ alternative submission as described in [10] above, the essence of which is to treat all of the applicants on a global basis, which reflects their shared representation and common interest in the outcome of each claim and which fairly reflects the overall measure of the individual applicant’s success on a combined basis.

15    Adopting this approach and taking into account all the matters advanced by the parties, I consider that the appropriate order as to costs is that the respondents should pay to the applicants 75% of their combined costs of the proceeding, as agreed or assessed. The 25% reduction reflects the matters raised by the respondents as disentitling the applicants to have all their costs paid. However, I consider that the respondents’ suggested reduction by 70% grossly overvalues the significance of those matters. In particular, I consider that the respondents’ approach inadequately recognises that much of the evidence adduced in relation to the applicants’ primary case, which failed, was also relevant to the respondents’ cross-claim, which also failed. Moreover, while it is true that the applicants abandoned 2 causes of action and failed in another 6, I do not accept that significant additional time and costs were expended on those claims. The bulk of the trial was focussed on whether or not the respondents had engaged in misleading or deceptive conduct, on which the applicants succeeded. The cross-claim also took up significant time and resources and the respondents failed.

16    On the question of whether there should be a stay of proceedings for 21 days, it is to be noted that the respondents have now had slightly more than that time to consider an appeal although, of course, the time for an appeal has not yet commenced to run. No material has been put before the Court in support of any such stay and I am not inclined to grant it. As the applicants pointed out, if an appeal is lodged it will be open to the respondents to make an appropriate application for a stay based on proper evidence.

17    Otherwise, the parties are in general agreement as to the terms of other final orders. I will make orders accordingly.

Associate:

Dated:    14 March 2014