FEDERAL COURT OF AUSTRALIA
Telstra Corporation Limited v Phone Directories Company Pty Ltd (No 3) [2014] FCA 949
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IN THE FEDERAL COURT OF AUSTRALIA |
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victoria DISTRICT REGISTRY |
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VID 276 of 2007 |
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MURPHY J | |
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DATE OF ORDER: |
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WHERE MADE: |
MELBOURNE |
THE COURT DECLARES THAT:
The publication of the Advertisements (as defined in [614] of his Honour Justice Murphy’s judgment in Telstra Corporation Limited v Phone Directories Company Pty Ltd [2014] FCA 568) by the Cross-Respondents was misleading or deceptive conduct in breach of section 52 of the Trade Practices Act 1974 (Cth).
THE COURT ORDERS THAT:
1. The Applicants’ claims in the Fifth Further Amended Application dated 27 February 2013 be dismissed.
2. The Cross-Claimants’ claims in paragraphs 60 and 61 of the Fourth Further Amended Defence and Amended Cross-Claim dated 22 February 2012 (“Amended Cross Claim”)(“the Unjustifiable Threats Cross-Claim”) be dismissed.
Timetable for remaining issues in the Misleading Advertisements Cross-Claim
3. The remaining issues in the Cross-Claimants’ claim that the publication of the Advertisements (as defined) constituted misleading or deceptive conduct (“the Misleading Advertisements Cross-Claim”) are referred to a Registrar of this Court for mediation to be conducted by 17 October 2014 or as soon as possible thereafter. The Registrar is authorised to make directions as to the conduct of the mediation including with respect to the provision of any documents that the mediator considers necessary to assist with the resolution of the remaining issues. Within 14 days from the date of these orders the parties are to make submissions to the Registrar as to the documents that they consider necessary to assist in this respect. The mediator is to report the result of the mediation to the Court as soon as possible after its conclusion.
4. If the remaining issues are not resolved at mediation:
(a) by 4.00 pm on 14 November 2014, the parties give standard discovery in accordance with rule 20.14 of the Federal Court Rules 2011 (Cth);
(b) by 4.00 pm on 12 December 2014, the Cross-Claimants file and serve any affidavits upon which they intend to rely;
(c) by 4.00 pm on 23 January 2015, the Cross-Respondents file and serve any affidavits upon which they intend to rely;
(d) by 4.00 pm on 13 February 2015, the Cross-Claimants file and serve any affidavits in reply;
(e) by 4.00 pm on 23 March 2015 the Cross-Claimants prepare and provide to the Cross-Respondents a list of the factual and legal issues in respect of the remaining issues to be put before the Court. By 4.00 pm on 27 March 2015 the Cross-Respondents add any further issues to this list. The Cross-Claimants file a joint list of factual and legal issues immediately thereafter. By 30 March 2015 the Cross-Claimants file a template of submissions that has been agreed with the Cross-Respondents comprising a framework within which each party can set out its submissions on each of the factual and legal issues identified in the list. The template of submissions will substantially form the framework of any opening submissions to be made.
5. The proceeding is fixed for hearing on 13 April 2015 on an estimate of two to three days.
Costs
6. The Applicants pay the Respondents’/Cross-Claimants’ costs of and incidental to this proceeding forthwith, on a gross sum basis, including the costs of the Amended Cross Claim incurred to the date of these orders, and all reserved costs, save and except for:
(a) the Respondents’ costs incurred between 25 June 2010 and 2 November 2011 inclusive in relation to the Respondents’ application for the costs awarded by order 3 of the orders of Justice Gordon dated 12 February 2010 to be assessed on a gross sum basis (“the Copyright Claim Costs Application”) but only insofar as such costs are agreed or determined to be wasted costs by reference to the reasons of Justice Murphy of 3 September 2014; and
(b) the Cross-Claimants’ costs of and incidental to the Unjustifiable Threats Cross-Claim in paragraphs 60 and 61 of the Amended Cross-Claim.
7. The Respondents pay the Applicants/Cross-Respondents the following costs forthwith, on a gross sum basis:
(a) the Applicants’ costs incurred between 25 June 2010 and 2 November 2011 inclusive in relation to the Copyright Claim Costs Application but only insofar as such costs are agreed or determined to be wasted costs by reference to the reasons of Justice Murphy of 3 September 2014; and
(b) the Cross-Respondents’ costs of and incidental to the Unjustifiable Threats Cross-Claim.
8. By 4.00 pm on 10 October 2014:
(a) the Respondents/Cross-Claimants file and serve their affidavits in relation to the quantification of the gross sum costs referred to in Order 6;
(b) the Applicants/Cross-Respondents file and serve their affidavits in relation to the quantification of the gross sum costs referred to in Order 7.
9. By 4.00 pm on 31 October 2014, each party file and serve any affidavit in reply to the affidavits filed and served pursuant to Order 8.
10. The quantification of the gross sum costs payable is referred to a Registrar of this Court for mediation to be conducted in November 2014 if practicable. The Registrar is authorised to make directions as to the conduct of the mediation including with respect to the provision of any documents that the mediator considers necessary to assist with the resolution of the costs dispute. The mediator is to report the result of the mediation to the Court as soon as possible after its conclusion.
11. If the issue of the quantification of the gross sum costs amounts payable is not resolved at mediation the matter is to be listed for hearing on 15 December 2014 on an estimate of ½ to 1 day.
12. The parties have liberty to apply on three days’ notice.
13. Costs otherwise be reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
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victoria DISTRICT REGISTRY |
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general DIVISION |
VID 276 of 2007 |
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BETWEEN: |
TELSTRA CORPORATION LIMITED (ACN 051 775 556) First Applicant SENSIS PTY LTD (ACN 007 423 912) Second Applicant |
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AND: |
PHONE DIRECTORIES COMPANY PTY LTD (ACN 059 776 091) First Respondent AUSTRALIAN LOCAL DIRECTORIES PTY LTD (ACN 078 856 318) Second Respondent ADAM HARGRAVES Third Respondent GLENN HARGRAVES Fourth Respondent DANIEL STOTEN Fifth Respondent LOCAL DIRECTORIES PTY LTD (ACN 130 550 971) Sixth Respondent |
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JUDGE: |
MURPHY J |
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DATE: |
3 SEPTEMBER 2014 |
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WHERE MADE: |
MELBOURNE |
REASONS FOR JUDGMENT
1 On 30 May 2014 and 11 July 2014 I published reasons for decision in this matter. In summary I held that:
(a) the applicants/cross-respondents, Telstra Corporation Limited and Sensis Pty Ltd (collectively “Telstra”), failed to make out their claims of misleading or deceptive conduct and passing off against the first, second and sixth respondents, Phone Directories Company Pty Ltd, Australian Local Directories Pty Ltd and Local Directories Pty Ltd (“the Misleading Conduct and Passing Off Claim”). This meant that Telstra’s claims of accessorial liability against the third, fourth and fifth respondents, Adam Hargraves, Glenn Hargraves and Daniel Stoten, also failed. For the purposes of this judgment there is no need to draw any distinction between the corporate and personal respondents, and I will describe them collectively either as “the respondents” or “the cross-claimants”;
(b) the cross-claimants failed to establish their claim that Telstra made unjustifiable threats of proceedings for copyright infringement (“the Unjustifiable Threats Cross-Claim”); and
(c) the cross-claimants established that Telstra’s conduct in publishing the Advertisements (as defined in [614] of my reasons dated 30 May 2014) constituted misleading or deceptive conduct (“the Misleading Advertisements Cross-Claim”).
2 Initially the proceeding also included a claim by Telstra that the respondents had breached its copyright in their use of Telstra’s information in the creation of their directories (“the Copyright claim”). That claim was not before me because Gordon J held on 8 February 2010 that no copyright subsisted in Telstra’s directories. Her Honour’s decision was upheld by the Full Court on 15 December 2010 and the High Court refused special leave to appeal on 2 September 2011.
3 Upon handing down my reasons I directed the parties to confer with a view to providing draft orders to give effect to them, and to provide draft orders as to costs. Unfortunately, although several extensions of time were granted, the parties were unable to agree except on several straightforward issues.
4 The parties have only been able to agree as to the form of orders with respect to:
(a) the order dismissing the Misleading Conduct and Passing Off Claim against the respondents;
(b) the order dismissing the Unjustifiable Threats Cross-Claim against Telstra; and
(c) the declaration to be made in the Misleading Advertisements Cross-Claim in which the cross-claimants were successful against Telstra.
I have made the declaration and orders 1 and 2 essentially in the form agreed between the parties.
5 The parties remain in dispute in relation to:
(a) the timetable for the remaining steps in the Misleading Advertisements Cross-Claim, and in particular whether the proceeding should be referred to mediation before any further steps are taken;
(b) whether the respondents should be allowed to recover their costs, and be ordered to pay Telstra’s costs, incurred in the respondents’ earlier application for a gross sum costs order in respect of the Copyright claim (“the Copyright Claim Costs Application”); and
(c) whether the Court should now order the respondents’/cross-claimants’ costs to be assessed on a gross sum basis in respect of the claims and cross-claims dealt with in my reasons of 30 May and 11 July 2014 and order that they be paid forthwith.
I now deal with these issues.
Timetable for the remaining steps in the Misleading Advertisements Cross-Claim
6 The issues of liability and quantum were separated in the Misleading Advertisements Cross-Claim. Having determined the issue of liability, so far as the court is aware the only issue remaining is a relatively straightforward assessment of quantum. However, the cross-claimants say that there is a fundamental disagreement between the parties as to the cross-claimants’ entitlement to damages and the quantum of their claim. The cross-claimants therefore seek a timetable which includes discovery and evidence on affidavit before any mediation is attempted.
7 The cross-claimants argue that they have participated in a number of mediations over the course of the seven years that this dispute has been before the courts, none of which have been successful in settling the dispute or narrowing the compass of the issues in contention. In light of what they say is a fundamental disagreement between the parties they submit that mediation has little prospect of success until discovery and the exchange of evidence.
8 At the risk of being overly optimistic as to the prospects of the parties resolving this issue of quantum I do not accept the cross-claimants’ contentions. I consider that the parties should attempt mediation before embarking on further expensive and time-consuming interlocutory steps and a trial. I do so for the following main reasons:
(a) It appears from correspondence between the parties that discovery may involve a significant volume of documents. It is appropriate to conduct mediation prior to discovery in an attempt to resolve the dispute more quickly, inexpensively and efficiently: ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth) (“Federal Court Act”).
(b) The significant further work and corresponding cost involved in discovery and preparation of affidavit evidence will be wasted if the issue of quantum can be resolved at mediation. While mediation may not be successful, preparation for and attendance at a mediation is significantly less expensive than the discovery process and the preparation of affidavit evidence. Again, in my view a referral to mediation before preparing for a trial on quantum is consistent with the overarching purpose in ss 37M and 37N of the Federal Court Act.
(c) I do not accept that the parties are completely in the dark as to the likely quantum of the Misleading Advertisements Cross-Claim. Some aspects of the evidence presented in the liability trial provide insight into this issue. In any event, the mediation order provides that the parties may make submissions as to the documents that they consider necessary for an effective mediation and authorises the Registrar to make directions to require the parties to produce any documents that the Registrar considers necessary in this respect. This should ensure that a suite of essential documents is available for the mediation, albeit short of full discovery.
(d) The previous mediations have been conducted at a time when there were three claims or cross-claims before the Court and the outcome on liability was unknown. The Court has now handed down its judgment on liability in each of the claims and the only issue remaining is that of quantum in one cross-claim. As the scope of the dispute has been significantly narrowed the prospects of resolution of the dispute as to the quantum of the Misleading Advertisements Cross-Claim should be substantially enhanced.
(e) There has been a change in the ownership structure of the second applicant, Sensis Pty Ltd, which means that there are now different decision-makers involved.
(f) Finally, my preliminary view is that the quantum of the cross-claimants’ claim is unlikely to be large. The evidence in the liability trial tends to show that the cross-claimants enjoyed a great deal of success in the marketplace and were able to obtain a significant share of the print and online telephone directory markets in the geographical areas in which they competed with Telstra’s directories. I express no final view, and I may have a different view after hearing the evidence and properly considering the question, but I presently doubt that many potential advertisers have been dissuaded from advertising with the cross-claimants as a result of Telstra’s contravening conduct.
9 I do not accept Telstra’s contention that the matter should be referred to a case management conference following mediation. In my view mediation is more likely to be successful if the parties understand that the matter is fixed for trial if not resolved.
10 Accordingly, I have made orders which provide for mediation by 17 October 2014 if practicable or as soon as possible thereafter. I have selected this date as it will allow time for the exchange of a limited suite of documents. The orders then provide for a pre-trial timetable allowing for discovery and service of affidavits prior to a trial on 13 April 2015. This means that the mediation will be conducted in the knowledge that a trial is imminent should the case not be settled.
The wasted costs of the respondents’ previous application for a gross sum costs order
11 This issue arises out of the respondents’ Copyright Claim Costs Application which sought a gross sum costs order in respect of costs incurred in the Copyright claim, which was heard and determined by Justice Gordon in December 2011. The respondents’ Notice of Motion was filed on 30 June 2011 but correspondence on this issue had been exchanged between the parties since 25 June 2010.
12 Between 25 June 2010 and 2 November 2011 there was a dispute between the parties on the question of whether a gross sum costs order was appropriate for the period when the costs incurred in the Copyright claim were ‘blended’ with costs incurred in respect of the other issues in the proceeding. The period when the costs were so ‘blended’ is the period between the commencement of proceedings in 2007 and when the Copyright claim was set down for hearing as a separate question on 16 June 2009. Telstra describe the costs during this period as “Blended Costs” and describes the respondents’ claim for gross sum costs incurred in the period prior to 16 June 2009 as “the Blended Costs application”. For convenience I will adopt Telstra’s descriptions.
13 The respondents seek their costs with respect to the Copyright Claim Costs Application which include claims in respect of Blended Costs. However, Telstra contends that the Blended Costs application caused it significant wasted costs which it says should be paid by the respondents. On the same basis it contends that the respondents are not entitled to recover from Telstra their costs with respect to the Blended Costs application.
14 The background to the parties’ differing submissions include the following matters:
(a) The proceeding herein was commenced in 2007 and it was initially conducted on the basis that all of the claims and cross-claims would be heard together. The matter was listed for trial on all issues on 3 December 2008 with an estimate of 8-10 days. However the trial was vacated about one week before it was due to commence.
(b) On 16 June 2009 Gordon J set down for hearing the separate question of whether copyright subsisted in Telstra’s directories.
(c) The separate question in relation to Telstra’s Copyright claim was heard in October 2009. On 12 February 2010 her Honour dismissed the claim and ordered Telstra to pay the respondents’ costs of the claim.
(d) On 25 June 2010 the respondents’ solicitors wrote to Telstra’s solicitors proposing that the costs of the Copyright Claim be determined on a gross sum basis and paid forthwith.
(e) Telstra’s solicitors rejected this proposal on numerous grounds including:
(i) the timing of the application and the fact that the applicants’ appeal to the Full Court had not yet been heard;
(ii) a concern that the respondents would not be able to repay any costs that may have been ordered if Telstra’s appeal was successful;
(iii) difficulties with identifying and separating the work which related solely to the Copyright claim in the period prior to 16 June 2009 in which the costs of the copyright and trade practices part of the proceeding were “blended”, arguing that this was inappropriate where the other claims had not yet been determined;
(iv) that insufficient information had been provided to Telstra to determine whether the respondents’ method for identifying apportioning costs of the Copyright claim was appropriate;
(v) some costs had been claimed on an indemnity basis; and
(vi) the proposal might create a duplication of costs assessment processes.
(f) Telstra later also expressed concern as to how the respondents could maintain privilege in respect of their file if they sought to claim and apportion costs in respect of items of work performed which related both to the Copyright claim and other parts of the proceeding.
(g) The parties continued to correspond on the issue in 2010. The Full Court heard Telstra’s appeal in the Copyright claim in August 2010 and handed down judgment dismissing the appeal in December 2010.
(h) In early March 2011 the respondents again wrote to the applicants. They endeavoured to address Telstra’s concerns and sought an “in principle” agreement regarding the methodology to assess the Blended Costs. Telstra rejected the proposal and said that the application should not proceed while the balance of the proceeding was yet to be determined. Telstra also argued that the respondents may be unable to repay any costs ordered if they ultimately lost the Copyright claim on appeal to the High Court.
(i) On 30 June 2011 the respondents filed the Copyright Claim Costs Application seeking an order that the costs in the Copyright claim be determined on gross sum basis and paid forthwith, including the costs incurred before 16 June 2009 which were blended with costs incurred in the other parts of the proceeding. The application was supported by:
(i) a lengthy affidavit of the respondents’ solicitor, Tony Watson, who deposed that he had conducted a detailed analysis of the respondents’ files as to the costs attributable to the Copyright claims alone. Mr Watson deposed that this analysis had taken 250 hours and incurred $92,000 in costs to undertake; and
(ii) an affidavit of a costs consultant, Judith Hedstrom, who deposed that she had taken the apportionment of costs provided by Mr Watson and estimated the proportion of those costs that would be recoverable a party-party basis in a taxation.
(j) On 18 July 2011 Telstra wrote to the respondents objecting to this course and proposing that the Court should determine, as a threshold matter, whether this was an appropriate case for a gross sum costs order, having regard to the difficulties identified by the applicants, including the issue of apportioning Blended Costs incurred prior to 16 June 2009.
(k) The respondents accepted this proposal and orders were made on 2 September 2011 for the parties to file evidence and submissions on the question of whether the Court should order the costs of the Copyright claim be assessed on a gross sum basis. The applicants filed the affidavit of a costs consultant, Elizabeth Harris, dealing with whether it was practicable to assess the costs of the Copyright claim on a gross sum basis before the remaining issues in the proceeding been determined. The respondents filed an affidavit in response by their solicitor, Lisa Egan. The parties then exchanged submissions on the question.
(l) At a directions hearing in the Copyright Claim Costs Application before Justice Gordon on 2 November 2011 her Honour reached the view that there were difficulties with dealing with the application for costs in respect of the period pre-16 June 2009. The application proceeded by consent on the basis that the hearing be limited so that any gross sum costs order made would only cover the period after 16 June 2009 when the Copyright claim had proceeded as a separate question and the costs incurred were discrete from the costs in other aspects of the proceeding.
(m) On 14 December 2011 Justice Gordon heard the Copyright Claim Costs Application and assessed the respondents’ costs for the period from 16 June 2009 to 8 February 2010 in the amount of $326,931.75, ordering that amount to be payable forthwith.
(n) Notwithstanding that the respondents’ application for a gross sum costs order had been, at least partially, successful Telstra sought that there be no order as to the costs incurred in the Copyright Claim Costs Application. The respondents successfully sought an order for the costs of the application to be reserved.
(o) It appears that because the balance of the claims in the proceeding were listed for trial before Justice Gordon in November 2012 determination of the remaining Blended Costs component of the gross sum costs application (i.e. the Blended Costs application) was adjourned to a date to be fixed after the trial.
(p) The Blended Costs application was never again listed for hearing.
15 Now that the respondents/cross-claimants have been largely successful in the proceeding they seek their costs including the costs of the Copyright Claim Costs Application, and including the costs of that aspect of the application which related to the Blended Costs. Telstra resists this and contends that significant costs incurred by the parties have been wholly wasted on the question of whether a gross sum costs order was appropriate for the period during which the costs of the proceeding were ‘blended’. Telstra says that these costs have been wasted because the remaining issues in the proceeding have now been determined, and there is no longer any need to separate out the costs in the Copyright claim from other costs. It argues that the costs were wasted when the respondents “abandoned” their application for the costs of the Copyright claim to be assessed for the whole of the period of that claim, and instead (on 2 November 2011) confined their application to the Copyright claim costs incurred after 16 June 2009.
16 Telstra argues that the wasted costs include:
(a) the costs of extensive correspondence on the issue of Blended Costs;
(b) the costs of the affidavits of Mr Watson and Ms Hedstrom (which were in the order of $100,000);
(c) the costs of the affidavit of Ms Harris on the question of whether a gross sum costs order in relation to the Blended Costs period was appropriate, and the respondents’ affidavit in response;
(d) the costs of the submissions prepared by the parties in relation to the issue of Blended Costs; and
(e) at least some of the costs of preparation and appearance in relation to the hearing on 2 November 2011.
Telstra contends that this wastage occurred in circumstances where the respondents were warned from the outset of the difficulties with their approach.
17 Against this I note that the respondents were successful in obtaining, through their Copyright Claim Costs Application, a gross sum costs order for the period from 16 June 2009 to 8 February 2010 in the sum of almost $327,000. No orders were made in respect of the Blended Costs initially sought in the application and the application was not otherwise dismissed. The respondents argue that the Blended Costs aspect of the application was never abandoned and it remained to be heard at the appropriate stage. They contend that the Court should follow the usual course where the costs of an interlocutory application have been reserved and no further order is made, namely that costs follow the event: r 40.03 of the Federal Court Rules 2011 (“the Rules”).
18 The respondents note that their success in the proceeding has meant that the costs do not now need to be apportioned between the Copyright claim and the other claims and cross-claims, and contend that it would be unjust for them to be penalised for their success in respect of the Misleading Conduct and Passing Off Claim and the Misleading Advertisements Cross-Claim.
19 I accept Telstra’s contention that the costs incurred which related primarily to the Blended Costs were wasted. I say this because the respondents’ application in respect of the blended pre-16 June 2009 costs was never determined, and it is now unnecessary to do so. The difficulties in respect of the Blended Costs were such that the straightforward part of the application was carved off and determined by Justice Gordon, with the balance left in abeyance. In my view the respondents were on notice of the difficulties associated with the Blended Costs part of their Copyright Claim Costs Application. The difficulties which the respondents faced, and the fact that the application was never brought back before the Court, are in my view a sufficient justification for departure from the usual rule that reserved costs follow the event.
20 In my view, because the respondents’ Copyright Claim Costs Application for a gross sum costs order was, at least partially, successful the respondents are entitled to the costs of and incidental to that application, but I do not accept that they are so entitled insofar as that application involved wasted costs incurred by the parties. I consider “wasted costs” are those costs incurred by the parties between 25 June 2010 and 2 November 2011 which primarily related to whether a gross sum costs order was appropriate in respect of the Blended Costs incurred prior to 16 June 2009.
21 It is though necessary to understand that, in my view, a proportion of the respondents’ costs incurred in the Copyright Claim Costs Application are likely to have related to the costs of legal work undertaken in the Copyright claim after 16 June 2009. As an example, the lengthy affidavit of Mr Watson (referred to at [14](i) above) is likely to have related to legal work performed throughout the period the Copyright claim was on foot, and on that assumption some of the costs of its preparation are likely to relate to the period after 16 June 2009. Similarly, the affidavit of Ms Hedstrom is likely to have related in part to costs incurred in the period after 16 June 2009. Insofar as the costs incurred in the Copyright Claim Costs Application related to the respondents’ legal work in the period post-16 June 2009 the respondents are entitled to recover those costs from Telstra.
22 As a result the wastage of costs is unlikely to be as great as Telstra appears to contend. Without attempting to be exhaustive the wasted costs will include:
(a) the costs of the correspondence primarily relating to the dispute about pre-16 June 2009 Blended Costs;
(b) the portion of work undertaken by Mr Watson primarily relating to the Blended Costs;
(c) the portion of work undertaken by Ms Harris primarily devoted to the difficulties assessing the Blended Costs;
(d) the portion of the parties’ submissions relating to the difficulties regarding the Blended Costs; and
(e) some of the costs of preparation and appearance for the directions hearing on 2 November 2011.
Having said this, I do not attempt to finally identify the wasted costs. Within the parameters of these reasons, a dispute as to whether particular cost items within the application is properly to be seen as wasted can be dealt with as part of the gross sum costs application.
23 The orders are intended to provide for the respondents to recover the costs of their Copyright Claim Costs Application, except insofar as the application involved wasted costs where the respondents were primarily pursuing the Blended Costs.
24 Because the scope of wasted costs is narrow it is hard to see this question as particularly significant within the overall gross sum costs to be sought by the respondents. I direct the parties to take a proportionate approach in dealing with the issue. If either of the parties does not do so I presently intend to impose cost consequences on that party.
The respondents’/cross-claimants’ application for a gross sum costs order
25 The respondents/cross-claimants seek orders for assessment of the costs of the proceeding to date on a gross sum costs basis, with such costs to be paid forthwith. They do so even though quantum in the Misleading Advertisements Cross-Claim has yet to be decided.
26 Telstra accepts that the proceeding may well be one in which a gross sum costs order is ultimately appropriate, but does not agree that it is appropriate for the assessment to be undertaken before all issues have been finally determined. It relies on the general rule that costs should not be taxed or otherwise assessed until the proceeding is concluded and the rights of the parties have been fully determined.
27 It also points to r 40.13 of the Rules which provides:
If an order for costs is made on an interlocutory application, the party in whose favour the order is made must not tax those costs until the proceeding in which the order is made is finished.
Note: The Court may order that costs of an interlocutory application be taxed immediately.
28 Telstra says, and I accept, that the purpose of the rule is to avoid the need for multiple taxations in a proceeding and to avoid unfairness such as where a party is unable to set off an order for costs in its favour against an earlier liability to pay costs: Brasington v Overton Investments Pty Ltd [2001] FCA 571 at [13] per Emmett J; Orrcon Operations Pty Ltd v Capital Steel and Pipe Pty Ltd (No 2) [2008] FCA 24 at [18] per Besanko J.
29 The rule is also aimed at avoiding the inconvenience and possible oppression involved in a series of taxations where there are successive interlocutory applications. Another part of the rationale for the rule is that it is usually inappropriate to require the unsuccessful party in interlocutory proceedings to pay costs immediately, since that party might ultimately succeed in the substantive proceeding: Australian Mud Company Pty Ltd v Coretell Pty Ltd (No 4) [2013] FCA 567 (“Coretell”) at [29] per Barker J; Courtney v Medtel Pty Ltd (No 3) [2004] FCA 347 at [20] per Sackville J.
30 I accept that the discretion to order that costs be assessed and payable forthwith should only be exercised where the interests of justice in the particular case require a departure from the general practice: Spotwire Pty Ltd v Visa International Service Association (No 2) [2004] FCA 571 at [104] per Bennett J. In this regard Telstra contends, and I accept, that there has been no unreasonableness in its conduct of the proceeding, and it points out that it is unlikely there will be a long further delay until the proceeding is concluded. It argues that there is no prejudice to the respondents if they are required to wait until then and that there is no suggestion that Telstra will be unable to meet any final costs order ultimately made: Rafferty and Others v Time 2000 West Pty Ltd (ACN 127 893 270) and Others (No 3) (2009) 257 ALR 503 at [20]-[21] per Besanko J; Playcorp Group of Companies Pty Ltd v Peter Bodum A/S (No 2) [2010] FCA 455 at [24] per Middleton J.
31 Telstra contends that the most efficient way to deal with the assessment of any gross sum costs application is to wait until all of the remaining issues in the proceeding have been determined and then make orders for all of the remaining costs to be assessed at the same time.
32 Telstra’s contentions have some force. However, in my view the orders sought by the respondents/cross-claimants should be made.
33 The authorities establish that an order for gross sum costs may in particular circumstances be appropriate to avoid the expense, delay and aggravation of a taxation of costs: Beach Petroleum NL and Another v Johnson and Others (No 2) (1995) 57 FCR 119, 123 per von Doussa J. As Lander J said in Smoothpool & Anor v Pickering & Ors [2001] SASC 131 at [7]:
I think it is clear enough, as von Doussa J suggested in Beach Petroleum NL v Johnson & Ors, that the Court’s procedures for the assessment of costs in favour of successful parties, in long and complex matters, are no longer appropriate. They put successful parties to further expense in recovering that which the courts have already awarded. (Citation omitted.)
34 This proceeding has been large and complex, and it has been on foot for over seven years. Leaving aside the Copyright claim which was concluded in September 2011, the proceeding included Telstra’s Misleading Conduct and Passing Off Claim and the cross-claimants’ Misleading Advertisements and Unjustifiable Threats Cross-Claims.
35 The respondents/cross-claimants initial list of documents comprised 2,345 documents filling approximately 70 boxes, and their supplementary list of documents comprised a further 219 documents. Telstra’s discovery comprised 11,546 documents. Telstra prepared and served 73 affidavits in support of its claims and the respondents/cross-claimants prepared and served 52 affidavits in defence of Telstra’s claim and their prosecution of the cross-claims.
36 If a gross sum costs order is not made the respondents/cross-claimants will be required to draw a bill of costs in taxable form. If Telstra objects to the quantum of the assessment a full taxation will be required. Each stage of the taxation will incur significant cost and will take a long time. Even if they rigorously pursue the taxation process the respondents/cross-claimants are likely to be forced to wait for more than a year before the quantum of costs is determined. In that event the substantial costs that they have expended will not be recouped until more than eight years after Telstra commenced the proceeding against them. While the respondent/cross-claimant corporations are not small their legal costs will have been very high. In all the circumstances I consider that they should not be out of pocket for longer than is absolutely necessary.
37 In my view r 40.13 is not directed at circumstances of the type before me. The judgments in the Misleading Conduct and Passing Off Claim, and the the Misleading Advertisements and Unjustifiable Threats Cross-Claims do not fall within the definition of an “interlocutory application” in the rule: Coretell at [27]. But even if r 40.13 is seen as applicable I consider that the circumstances of the present case justify a departure from the general rule that a taxation or assessment of costs should wait until the case is completely finalised.
38 I say this largely because:
(a) of the protracted nature of this litigation and because the likely huge legal expense weighs in favour of an order that costs be assessed and paid forthwith; and
(b) there is little of the proceeding remaining to be dealt with as all of the claims have been concluded save for quantum in the Misleading Advertisements Cross-Claim, which does not appear to be large.
39 I note that in Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (No 2) [2007] FCAFC 172 at [20]-[21] per Heerey, Sundberg and Bennett JJ, their Honours ordered the unsuccessful party to pay costs forthwith notwithstanding the existence of outstanding matters for determination, including damages. The Full Court treated the fact that the litigation was protracted as a major consideration underpinning the decision. The same considerations apply in the present case.
40 Nor is the prospect of any appeal relevant to my decision in this regard. I can see no reason why payment of the respondents’ costs should be delayed until the determination of any appeal, and I can see no basis for any concern that the respondents would be unable to repay the costs received should Telstra ultimately be successful in any appeal.
41 I make the orders sought by the respondents in this regard.
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I certify that the preceding forty-one (41) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Murphy. |
Associate:
