FEDERAL COURT OF AUSTRALIA

Keller v LED Technologies Pty Ltd (No 2) [2010] FCAFC 160

THE COURT ORDERS THAT:

1.    The orders made by the primary Judge on 24 February 2009 be varied as follows:

(a)    by deleting from Order 3 the phrase “Fourth, Sixth and Seventh” and by substituting therefor the phrase “and Fourth”;

(b)    by deleting from Order 4 the phrase “Fourth, Sixth and Seventh” and by substituting therefor the phrase “and Fourth”;

(c)    by deleting from Order 5 the phrase “incurred after 10 April 2008”;

(d)    by introducing a new Order 5A in the following terms: “The Applicant’s claims against the Sixth and Seventh Respondents in its Second Further Amended Application and Fourth Amended Statement of Claim filed 5 May 2008 be dismissed.”

(e)    by introducing a new Order 5B in the following terms: “The Applicant pay the Sixth and Seventh Respondents’ costs of resisting those claims, save for costs incurred –

(i)    in those Respondents’ challenge to the validity of Australian registered design No 302360; and/or

(ii)    in resisting the Applicant’s case that that design had been infringed by the First, Second, Third or Fourth respondent.”

(f)    by deleting from Order 6 the phrase “Fourth, Sixth and Seventh” and by substituting therefor the phrase “and Fourth”.

2.    The appeal otherwise be dismissed.

3.    The respondent pay 65% of the third appellant’s costs.

4.    As between the first and second appellants and the respondent, there be no order as to costs.

5.    The cross-appeal be dismissed with costs.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

THE COURT ORDERS THAT:

1.    The identification of the parties in the heading to the orders made by the primary Judge on 24 February 2009 be varied –

(a)    by identifying Elecspess Pty Ltd ACN 104 535 597 as the First Respondent;

(b)    by identifying Advanced Automotive Australia Pty Ltd ACN 005 955 948 as the Second Respondent.

2.    The motion of which the second appellant/second cross-respondent gave notice on 17 August 2010, as amended on 23 August 2010, be dismissed.

3.    The second appellant/second crossrespondent pay the costs of the respondent/crossappellant of and incidental to the said motion, to be taxed on an indemnity basis.

4.    Save as aforesaid, there be no order as to the costs of the said motion.

5.    The appeal of the second appellant be dismissed.

6.    The appellants pay the respondent’s costs incurred on or before 17 August 2009.

7.    The first, third and fourth appellants pay the respondent’s costs incurred after 17 August 2009.

8.    The declarations made by the primary Judge on 24 February 2009 be varied by introducing the following additional declarations:

2A.    In November 2006 or thereabouts, Elecspess Pty Ltd contravened s 65C(1)(a) of the Trade Practices Act 1974 (Cth) by supplying to LED Technologies Pty Ltd a Condor 80 mm 3-lens combination light which did not comply with –

(a)    Vehicle Standard (Australian Design Rule 1/00 – Reversing Lamps) 2005;

(b)    Vehicle Standard (Australian Design Rule 6/00 – Direction Indicators) 2005; and

(c)    (Vehicle Standard (Australian Design Rule 49/00 – Front and Rear Position (Side) Lamps, Stop Lamps and End Outline Marker Lamps) 2006;

each being a prescribed consumer safety standard within the meaning of the said section.

2B.    In October 2007, Olsen Industries contravened s 65C(1)(a) of the Trade Practices Act 1974 (Cth) by supplying to Mr Geoff Lance a Condor 80 mm 3-lens combination light which did not comply with Vehicle Standard (Australian Design Rule 1/00 – Reversing Lamps) 2005, a prescribed consumer safety standard within the meaning of the said section.

2C.    In February 2008, Elescpess Pty Ltd contravened s 65C(1)(a) of the Trade Practices Act 1974 (Cth) by supplying to Down Under Trailers a Condor 80 mm 3-lens combination light which did not comply with Vehicle Standard (Australian Design Rule 1/00 – Reversing Lamps) 2005, a prescribed consumer safety standard within the meaning of the said section.

2D.    In February 2008, Elecspess Pty Ltd contravened s 65C(1)(a) of the Trade Practices Act 1974 (Cth) by supplying to Down Under Trailers a Condor 100 mm 3-lens combination light which did not comply with Vehicle Standard (Australian Design Rule 1/00 – Reversing Lamps) 2005, a prescribed consumer safety standard within the meaning of the said section.

9.    The orders made by the primary Judge on 24 February 2009 be varied as follows:

(a)    by deleting from Order 7 the phrase “First, Second, Third, Fourth,”;

(b)    by introducing a new Order 7A in the following terms: “The First, Second, Third and Fourth Respondents pay the Applicant’s costs of its claims under ss 52 and 53 of the Trade Practices Act 1974 (Cth) in the Applicant’s Second Further Amended Application and Fourth Amended Statement of Claim filed 5 May 2008.”;

(c)    by introducing a new Order 7B in the following terms: “The First and Fourth Respondents pay the Applicant’s costs of its claims under s 65C of the Trade Practices Act 1974 (Cth) in the Applicant’s Second Further Amended Application and Fourth Amended Statement of Claim filed 5 May 2008.”;

(d)    by introducing a new Order 7C in the following terms: “The Applicant pay the Second and Third Respondents’ costs of resisting its claims under s 65C of the Trade Practices Act 1974 (Cth) in the Applicant’s Second Further Amended Application and Fourth Amended Statement of Claim filed 5 May 2008.”.

10.    The cross-appeal otherwise be dismissed.

11.    The cross-respondents pay 80% of the cross-appellant’s costs of the cross-appeal.

12.    The first and fourth cross-respondents pay 10% of the cross-appellant’s costs of the cross-appeal.

13.    The costs referred to in Orders 6, 7, 11 & 12 above not include any costs incurred in relation to –

(a)    the submission of the respondent/cross-appellant that its costs be taxed on an indemnity basis;

(b)    the application of the respondent/cross-appellant for an interim costs order.

14.    The respondent/crossappellant have liberty to apply with respect to issues arising in connection with its Offer of Compromise dated 9 April 2009.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

Emmett and Jessup JJ:

1    On 9 June 2010, we published our reasons for our conclusions in these appeals: Keller v LED Technologies Pty Ltd [2010] FCAFC 55. We directed the parties to file and serve memoranda of the terms of the orders which would give effect to our reasons published that day. As a result of those memoranda, there was substantial consensus as to the orders which should be made, but also some areas of disagreement, particularly with respect to costs, both at first instance and before the Full Court. During the period that we were reserved on those questions, the court received correspondence from the second appellant in VID 168 of 2009, Advanced Automotive Australia Pty Ltd (“AAA”), seeking an opportunity to apply for leave to withdraw its previous abandonment of certain grounds of appeal originally lodged on its behalf, and to reopen those grounds for further argument. That led to the filing by AAA of a Notice of Motion on 17 August 2010, and the amendment of that Notice of Motion on 23 August 2010. The Full Court ultimately heard the parties on the motion set out in AAA’s amended notice in the November 2010 appellate sittings of the court. These reasons deal first with AAA’s motion, and then with the orders which should be made in disposition of both appeals and the crossappeals which were filed in them, including as to costs.

2    Additionally to AAA, it is convenient to refer to the parties as follows:

    The respondent in both appeals: LED;

    The first appellant in VID 168 of 2009: Elecspess;

    The second appellant in VID 168 of 2009: AAA;

    The third appellant in VID 168 of 2009: Ren;

    The fourth appellant in VID 168 of 2009: Olsen;

    Olsen, Ren, Elecspess and AAA together: the Corporate Respondents; and

    The first and second appellants in VID 167 of 2009: the Directors.

AAA’s Application to reopen

3    The underlying facts, the parties’ claims and cross-claims, the conclusions reached, and the orders made, by the primary Judge, and the issues which arose in the appeals and crossappeals, are summarised in paras 1-14 of the reasons of Emmett J given on 9 June 2010. As appears from those reasons, the primary Judge held that the Corporate Respondents, including AAA, had infringed LED’s monopoly in its registered designs. The primary Judge also held that LED was entitled to recover damages in respect of that infringement. It is this holding, and the form of the orders which gave expression to it in the case of AAA, which has become controversial. In order to understand that controversy, it will be necessary to examine briefly certain aspects of the history of the proceeding before the primary Judge, particularly as they affected the position of AAA. For these purposes, we have had regard to material which has been filed on the present motion, much of which was, we assume, unknown to her Honour.

4    AAA carries on business as a wholesaler of automotive products, its customer base consisting of caravan manufacturers and automotive electrical resellers. In March 2005, it commenced to obtain rear combination lights from LED, but discontinued this source of supply in about August 2006. In about November 2006, the Condor lights were introduced to AAA by Mr Carpenter of Elecspess, and AAA subsequently placed orders for those lights through a company called Brytec Pty Ltd which appears to have been associated with Elecspess. AAA’s assumption, at the time, was that Elecspess was the importer of the Condor lights, it then being ignorant of the existence of Ren and Olsen.

5    As found by the primary Judge, however, prior to 1 July 2007, Condor lights were imported by Ren and distributed by Olsen. Ren’s only independent distributors were Brytec Pty Ltd and Elecspess. Elecspess sold the products through its own distribution network, which included other automotive electrical distributors, auto electricians and original equipment manufacturers in the caravan and trailer industry, including AAA.

6    In February 2007, LED‘s solicitors sent a letter to AAA, demanding that it discontinue the sale of the Condor lights – asserting that this constituted an infringement of the registered designs – and requiring that undertakings be given. After taking advice, AAA declined to discontinue selling the lights, and refused to give the undertakings sought by LED.

7    In May 2007, AAA was served with LED’s Application and Statement of Claim in the current proceeding. At the time, only AAA and Elecspess were respondents. It was then known to LED that each of those companies was promoting and selling Condor lights in Australia, but they had refused LED’s request to identify the manufacturer or importer of them. After service of this process, Mr Carpenter informed Mr Mark Young, of AAA, that (according to the latter) “Ren was going to defend the action and would fully indemnify AAA and Elecspess”. Mr Young also received a call from Ren’s then solicitor, who confirmed “that Ren was going to defend the action and would fully indemnify AAA for any costs or damages”. Pursuant to directions given by the Court, on 19 June 2007, Elecspess and AAA filed and served a joint Defence, in which they denied infringement.

8    With effect from 1 July 2007, Ren and Olsen effectively swapped roles, such that Olsen now imported the lights and Ren became the distributor.

9    In August 2007, LED became aware that the name “Condor” was a registered trade mark owned by Ren, and that the Condor lights were being imported and sold by Olsen and Ren. On 18 September 2007, LED filed an Amended Statement of Claim, in which Ren and Olsen were added as the third and fourth respondents. On 14 November 2007, Elecspess and AAA filed an Amended Defence to the Amended Statement of Claim (and, in the case of Elecspess, its Cross-claim), in which AAA alleged that LED’s registered designs were invalid and liable to be revoked. On 16 November 2007, Elecspess and AAA filed a notice of change of solicitor, after which they had common representation with Ren and Olsen. On 22 November 2007, Ren and Olsen filed their Defence to the Amended Statement of Claim, and their Cross-claim. Thereafter the Corporate Respondents maintained common representation throughout the proceeding before the primary Judge and conducted a single case which did not seek to differentiate as between themselves.

10    On 19 December 2007, there was a teleconference which involved Mr Young, the Directors, a director of Elecspess, and Mr Graeme Scott, special counsel with Herbert Geer and Rundle (then solicitors for the Corporate Respondents). According to Mr Young, “Scott communicated that he was confident about the prospects of defending [LED’s] claim and confirmed that AAA would be fully indemnified by Ren”.

11    On 8 February 2008, Mr Scott, wrote to AAA in the following terms:

We refer to the telephone conference call on 19 December 2007.

As you know, we act for the corporate Respondents in the above proceeding.

We note that your previous solicitor, F.R. Monotti & co, filed and served a Defence on behalf of Advanced Automotive Australia Pty Ltd (“AAA”).

We confirm that Ren International has agreed to pay the legal costs of AAA’s defence to LED’s claim.

We confirm that Ren International also agrees to indemnify AAA in respect of any adverse costs order or award of damages made against it.

Please contact the writer if you have any questions.

12    Case management conferences were held before the primary Judge on 4 December 2007, and on 4 February, 11 April, 23 April, and 2 May 2008. At various times over the course of this process, the question whether issues of liability and quantum should be split was debated. In a memorandum prepared for the purposes of the case management conference on 2 May 2008, the Corporate Respondents opposed splitting the issues of liability and quantum. They submitted that the majority of the issues in the case were concerned with matters arising under the Trade Practices Act 1974 (Cth), and that “the design infringement and invalidity parts of the case are minor by comparison”. The memorandum included a summary of the “quantum evidence” that would be led on behalf of the Corporate Respondents if no split were ordered. Evidence on their behalf was foreshadowed to the effect that there was a substantial “aftermarket” for lights of the kind in question, and that the Corporate Respondents’ customers would overlap very little with those of LED. At the case management conference, counsel for LED informed the primary Judge that his client accepted that the trial would proceed on all issues. That is what subsequently occurred.

13    In its Defence, AAA admitted that it sold Condor lights. If the design of the Condor lights was identical, or substantially similar in overall impression, to LED’s registered designs (as the primary Judge ultimately found), those sales would have constituted infringements on the part of AAA. However, in the interlocutory stages to which we have referred, no attention was given to the actual sales of Condor lights which had been made by AAA. LED now says that, for its part, this omission resulted from the assumption that the Corporate Respondents were conducting an undifferentiated case, and presumably had made appropriate internal arrangements to satisfy such damages award as might result from the trial. For its part, AAA says that it relied entirely upon Ren and Olsen, and upon the joint representation which the Corporate Respondents had, to conduct the case in its interests. Whatever may have been the reason, the fact is that no attention was given to the actual sales of Condor lights made by AAA.

14    In her Honour’s reasons of 18 December 2008, the primary Judge decided all design liability questions in favour of LED. That required attention to be given to the matter of damages. In para 95 of her reasons, her Honour recorded that LED had submitted that it was entitled to damages by reference to the number of Condor lights sold “pre-recall”, and the number of lights sold “post-recall”, as shown in the table set out in that paragraph. Her Honour observed that LED’s claim as shown in that table proceeded on the false assumption that LED lost every sale secured by Ren and Olsen. Her Honour said that that assumption was false because, among other things, the prices of the respective products were not the same, and it was not established that both sides’ products were stocked in the same places, such that a customer not able to obtain one would automatically turn to the other. Ultimately, LED properly conceded that the underlying assumption was not accurate. Her Honour concluded that, on any view, LED was not entitled to the whole of the amount claimed, and observed that LED had made no claim for general damages.

15    In para 98 of her reasons, the primary judge recorded that the Corporate Respondents contended that, if LED were entitled to damages based on the sales made by them, at the margins specified, the damages would be as shown in the table set out in that paragraph. Her Honour then said (para 99) that the difference between the two tables reflected the circumstance that LED’s figures were for products sold pre-recall, when Ren was selling a particular series, based on invoices of products purchased from the Chinese manufacturer, not the products sold. The Corporate Respondents in their calculation, on the other hand, used the number of products in fact sold. What is presently relevant is that the calculations of the Corporate Respondents, like those of LED, were based only on the commercial activities of Ren and Olsen.

16    Her Honour said that, for the period in which Ren and Olsen sold the Condor lights, LED estimated the number of products sold by taking the actual monthly sales of each product recorded in the Corporate Respondents’ expert report, and then dividing those sales by the average cost of each product in a stock report to obtain an estimate of the number of products sold. On the other hand, the Corporate Respondents used the monthly sales for Ren and Olsen since July 2005. Her Honour said that, unsurprisingly, the number of products sold did not coincide, and that the discrepancy could not be resolved on the evidence before the Court. Her Honour did not consider that it would be a useful expenditure of the Court’s time to seek to arrive at a precise number, but considered that the better approach was to assess damages, even though such quantification necessarily involved a degree of speculation and guesswork. Her Honour said ([2008] FCA 1941 at [101]):

Applying that approach, I consider that it is fair, based on the evidence to which I have referred, to assess damages at the amount contended for by the Respondents, rounded up to $200,000.00. I do so for a number of reasons. First, the figures in the table at [98] were submitted by the Respondents on the basis that the sum of $193,045 was the “limit (maximum) of the … monetary relief as far as the evidence permits.” Secondly, although even the Respondents’ evidence appears to proceed on the incorrect one-to-one assumption identified earlier, having regard to the summary of sales attached to the expert’s report, the number of units included in the table appears to be a conservative assessment of the number of units in fact sold by Ren and Olsen. In other words, I consider that the actual sales were higher and thus to award only $200,000 would in fact give the Respondents a discount in recognition of the fact that not all sales by them can properly be deemed lost sales of LED Tech.

17    For present purposes, there is no issue as to the appropriateness of $200,000 as a measure of LED’s damages suffered as a result of the infringing conduct which it had proved at trial. However, the primary Judge was obliged to consider by whom this $200,000 should be paid. Although it was based upon an assessment rather than a calculation, the underlying basis of that assessment, and the factum which made it rational in the circumstances confronting her Honour, was the level of sales of Ren and Olsen. AAA had admitted that it sold the Condor lights, but the level of its sales was not referred to by her Honour and, so far as we can see, played no part in the assessment of damages which she undertook.

18    Her Honour said (at [102]):

Before proceeding, I should note that none of the Corporate Respondents attempted to raise a claim of proportionate liability, nor was any evidence led in an attempt to segregate the sales on an individual company basis with respect to Elecspess and AAA. Subject to any agreement among the parties as to the form of final orders, I consider that in the circumstances the proper course at this stage is to proceed on the basis that damages should be assessed jointly and severally. Whether the Respondents come to some agreement among themselves is a matter for them.

It was this paragraph in her Honour’s reasons which has now become controversial. It is pointed out on behalf of AAA that the products sold by AAA were only a part of the total number of products imported and distributed by Ren or Olsen, and that there was no evidence before the primary Judge upon which any finding could have been made as to how many products were sold by AAA.

19    The only order made by the primary Judge on 18 December 2008, when she published her reasons, was to require the parties to bring in short minutes of final orders. By 2 February 2009, LED’s solicitors had notified Mr Scott of the orders which they proposed. On that day, Mr Scott forwarded a copy of LED’s proposal to Mr Young, on which he had endorsed his own, underlined, comments. That communication included the following:

17.    The First, Second, Third, Fourth, Sixth and Seventh Respondents pay to the Applicant damages in the sum of $200,000.00 for infringement of the Applicant’s monopoly in the Registered Designs up to and including May 2008, such payment to be made by 2 March 2009. [Remove First and Second Respondents. The quantum of damages was determined by reference to sales made by the Third and Fourth Respondents. There was no evidence of sales made by the First and Second Respondents at the trial of these proceedings. The Applicant’s evidence of loss was premised upon sales of the Infringing Products by Olsen (the Fourth Respondent) and no other Respondent. The report of Mr Meredith was in respect of sales of the Infringing Products made by the Third and Fourth Respondents. There was no finding that the First and Second Respondents were joint tortfeasors in respect of the sales if Infringing Products made by the Third and Fourth Respondent. Accordingly, there is no basis for the First and Second Respondents being jointly and severally liable for the damages awarded. There should be no order in respect of the First and Second Respondents.

18.    The First, Second, Third, Fourth, Sixth and Seventh Respondents pay to the Applicant damages in the sum of $100,000.00 for infringement of the Applicant’s monopoly in the Registered Designs from June 2008 up to and including the date of this Order, such payment to be made by 2 March 2009. [Delete – there was no finding in relation to such damages. Further, the Applicant did not plead or claim such damages].

19.    The First, Second, Third Fourth, Sixth and Seventh Respondents be jointly and severally liable for damages for infringement of the Applicant’s monopoly in the Registered Designs. [Remove First and Second Respondents. See comment in paragraph 18 above. Further, the proposed order should be in the form of a declaration and positioned in the declarations section of this order.]

20    On 4 February 2009, Mr Young sent an email to Mr Scott referring to the reference made by the primary Judge, at para 102 of her Honour’s reasons (see para 18 above), to the possibility of there being an “agreement between parties” which might result in the assessment of damages otherwise than jointly and severally. In his email, Mr Young said that the primary Judge “needs to be aware of indemnity of AAA”. In a response on the same day, Mr Scott told Mr Young that the indemnity was “a matter between Ren and AAA/Elecspess. It will not impact on the final orders made”. He noted the submission of the Corporate Respondents that the evidence and the judgment did not support an order for damages against AAA or Elecspess, adding: “That is one of the issues that may have to be debated”.

21    The filing by the parties of their various proposals as to the terms of the orders which should be made led to a further hearing before her Honour on 18 February 2009, and to further reasons published on 24 February 2009. In those reasons, her Honour recorded that the Corporate Respondents contended that the damages order should be limited to Ren and Olsen. Her Honour rejected that contention, saying([2009] FCA 141 at [18]): “This issue was addressed in the Reasons for Decision at [95] to [102]. It is too late to raise these issues now”.

22    The Corporate Respondents filed their joint Notice of Appeal on 17 March 2009. In that notice, Elecspess, Ren and Olsen (but not AAA) challenged the primary Judge’s determinations as to the validity of the registered designs, as to their infringement of the registered designs, and in respect of the designs case generally. Additionally, Elecspess and AAA relied upon the following grounds:

8.    Her Honour erred in finding (Principal Judgment para 102) and in making an order (in respect of such matter at para 4 of the Orders) that the First and Second Appellants were joint tortfeasors with the Third and Fourth Appellants in respect of infringements of each of the Designs in relation to the Condor products.

9.    Her Honour instead should have found on the evidence that if the First and Second Appellants were liable at all (which is denied) they were liable as infringers on the basis only of s.71(1)(d) or (e) of the Act and not liable for any (or at most nominal) damages.

10.    Her Honour should have found there was no evidence of sales by the First and Second Appellants and therefore no basis to assess damages against them.

11.    Her Honour erred in refusing to consider the issues raised in paragraphs 8, 9 and 10 above (at Final Judgment paragraph 18) when raised on 18 February 2009.

12.    Alternatively, Her Honour erred in failing to find that the Respondent had not discharged its burden of proving all the elements necessary to recover damages (or damages more than nominal damages) against the First and Second Appellants.

13.    Alternatively, Her Honour erred in failing to make findings apportioning liability between the First and Second Appellants on the one hand and the Third and Fourth Appellants on the other hand.

As will be apparent, these were the only grounds upon which AAA relied in the appeal. However, AAA was a cross-respondent – equally with the other Corporate Respondents – in LED’s crossappeal dated 6 April 2009 (amended on 20 July 2009). At the hearing of the appeal, AAA participated with the other Corporate Respondents in resisting that crossappeal.

23    On 25 March 2009, the operation of so much of the orders made by the primary Judge as required the Corporate Respondents and the Directors to pay $200,000 damages to LED was stayed by order of the court pending the hearing and determination of the appeals.

24    According to the evidence of the solicitor for LED given by affidavit filed in opposition to the present motion, he was surprised to read grounds 8-13 of the Corporate Respondents’ Notice of Appeal. He suspected that Ren and Olsen might be taking steps to wind up their affairs, leaving LED to look to “insolvent companies” to satisfy any judgment debt and costs orders. Therefore, he caused a Notice of Motion to be filed and served, in which LED sought (amongst other things) the provision of $50,000 security for the costs of the appeal. That Notice of Motion was filed on 12 May 2009. It seems that LED served a Notice to Produce upon the Corporate Respondents, since Mr Scott (now with Cornwall Stoddart Lawyers) wrote to LED on their behalf foreshadowing a concession that Ren and Olsen “will not be able to meet any adverse order for costs of this appeal”. It was added that, if an order for security were made, “Ren and Olsen will be unable to proceed with their appeal.” That concession was duly made, and the hearing of LED’s Notice of Motion for security proceeded in accordance with it. In his affidavit sworn for the purposes of the present motion, Mr Young stated that, at the time, he knew nothing about LED’s application for security. He learned of it only when conferring with his new solicitors on 2 August 2010.

25    On 21 May 2009, Mr Young became aware of the offer of compromise made by LED (with which we shall deal below). It seems that there were negotiations between the parties in an attempt to settle the appeal of the Corporate Respondents and the separate appeal of the Directors. These questions also went to mediation. At about that time (June-July 2009) Mr Young made it clear to Mr Scott on a number of occasions that AAA would like to settle with LED if at all possible. In an email of 3 July 2009 (in response to Mr Young’s earlier request for an update), Mr Scott said that LED’s solicitors had indicated that it may be possible to settle with AAA. On 7 July 2009, Mr Young emailed Mr Scott as follows:

As per our discussions at mediation with Laurie, can we put to them 2½ % of costs as per the figure Griffith Hack came up with when apportioning our share of the 200k judgment. They themselves said our involvement was minimal. As for terms the thing that concerns me is that if we do settle are we admitting design infringement and where might this leave us?

On 14 July 2009, Mr Scott emailed Mr Young as follows:

At this stage, Anthony and Laurie are not inclined to make any further offers to achieve a global settlement.

It is unclear whether LED will settle with AAA independently for $12,500. In my view, it is unlikely. Although, no formal offer has been put. We have had off-the-record discussions thus far. I will formulate an offer (which will also deal with the issue of joint and several liability and apportionment of costs) and forward to you, Anthony and Laurie shortly.

If the matter is capable of settlement, it is likely to require the original judgment to stand. So, the finding of design infringement will stand. To the extent that LED can exploit that any more in the marketplace is unknown. Having a the [sic] finding of infringement stand against AAA, of itself, will not create any further liabilities. They would be extinguished by any payment.

“Anthony” and “Laurie” referred to in this passage were, of course, the Directors.

26    On 28 July 2009, Mr Young emailed Mr Scott, stating that he had been told by one of the Directors (Mr Keller) that the appeal was going ahead, but that he was “trying to get AAA … out of proceedings”. He asked Mr Scott for an update. Mr Scott replied on the same day, stating that he had no update “thus far”.

27    At about this time, Mr Young’s own inquiries “confirmed that Ren’s website was no longer operating and that most of Ren’s business was being conducted through APG”. “APG” was presumably a company related to Ren. In his affidavit sworn in support of the present Notice of Motion, Mr Young said that he deeply regretted not seeking his own legal advice “about the integrity of the indemnity and AAA’s exposure”.

28    On 4 August 2009, Mr Scott wrote a letter to the Corporate Respondents which, because of its importance, should be set out in full:

As you know, Justice Gordon gave judgment in the design infringement aspect of the case in favour of LED Technologies Pty Ltd, including declarations of infringement and injunctions restraining, inter alia, each of you from infringing the designs in suit and a money judgment in the nature of damages for $200,000.

The reasons for judgment made it clear that the money sum was ordered on the basis of joint and several liability as between the Respondents.

This joint and several liability finding was made despite submissions that the only evidence of quantum of sales was on behalf of Ren and Olsen and that there was no evidence of quantum of sales on behalf of Elecspess and AAA (notwithstanding the fact that Elecspess and AAA had admitted to having dealt with and offered for sale the infringing articles).

Our Notice of Appeal includes grounds complaining about this finding of joint and several liability for the money judgment. The Notice of Appeal seeks, instead, orders for nominal damages against AAA and Elecspess.

We have briefed Mr McGowan to appear at the hearing of the appeal. In beginning his preparation for the appeal, Mr McGowan had alerted us to a potential conflict of interest.

The appeal, in so far as it complains about the joint and several liability of the four corporate Respondents, is one which, if successful, can only benefit Elecspess and AAA and adversely affect Ren and Olsen. Our instructions to pursue this line of appeal came from Elecspess and AAA, and also Ren and Olsen motivated by a desire to look after their distributors.

Mr McGowan has advised that if he is to act for all four companies at the hearing, he is obliged to ensure protection of the interests of Ren and Olsen (because they will suffer if the argument is successful) and Elecspess and AAA (because they may suffer if the argument is not successful). In order to protect each of your interests, you would need to be independently advised of your rights and the consequences of this appeal point if it is to succeed or not succeed.

Mr McGowan had informed us that he requires written instructions acknowledging that the parties have been independently advised and that they each instruct that the point be argued. Otherwise, the two groups of companies (Ren and Olsen on the one hand and Elecspess and AAA on the other hand) will need to be separately represented at the appeal.

However, overriding all these issues is the question of the practical utility of the appeal point. Since, Elecspess and AAA have been offered a complete indemnity in respect of damages and costs arising from the proceedings, the finding of joint and several liability is moot. Accordingly, if the parties are content with this arrangement, it is unnecessary to pursue the joint and several liability point on appeal.

If this course is taken, there is also no need to brief Mr McGowan to appear at the appeal, because this (joint and several liability) point is the only issue unique to your appeal which would not already be covered by the Appellants in VID 167 of 2009 (represented by Deacons).

We understand that Deacons have briefed “silk” from Sydney to lead Garry Fitzgerald at the appeal. Subject to your instructions, we would propose to notify Deacons of our intention to rely on and adopt the submissions made by them at the appeal.

Please contact us to discuss the matter and provide your further instructions at your earliest convenience.

That letter was sent by email, and Mr Young replied the following day, stating only: “Agree with your assessment, point is moot and there is no need to brief Mr McGowan”.

29    On 17 August 2009, the Corporate Respondents filed their outline in their appeal, VID 168 of 2009. That outline contained the following paragraph:

The Appellants in this proceeding hereby give notice that they abandon their grounds of appeal 8-13 (both inclusive), concerning the findings of joint and several liability of AAA and Elecspess.

The consequence was that the appeal in VID 168 of 2009 proceeded, in effect, without AAA as an appellant. Notwithstanding that, the hearing of the appeals proceeded and was concluded on the basis that there was no issue as to the conclusion reached by the primary Judge, nor as to the orders made by her Honour, in relation to the question of joint and several liability of the Corporate Respondents for the damages of $200,000 (assuming those damages should stand).

30    After the publication of the reasons of the Full Court on 9 June 2010, there was a teleconference in which Messrs Young, Scott and Armstrong participated. Mr Scott advised that the only respect in which the appeals had succeeded was that which related to the directors’ “accessorial liability”. He advised also that the Corporate Respondents had become responsible for LED’s costs of its claims under the Trade Practices Act. According to Mr Young’s affidavit on the present motion:

Armstrong made statements to the effect that we should investigate winding up AAA and setting up a new entity. I was not at all comfortable with this of course and requested Armstrong leave the room so I could discuss the legalities of setting up another company privately with Scott. Scott requested that his comments be ‘off the record’. Scott made comments to the effect that judgment was against AAA and not Mark Young or any other entity we establish in the future.

31    In a separate telephone conversation on 9 June 2010, Mr Keller told Mr Young “that the best course of action would be for all parties to wind up”. In another conversation on the same day, however, Mr Keller assured Mr Young that “the indemnity for the $200,000 in damages would be honoured”. Subsequently, AAA commenced to obtain its own advice, initially from its accountant, and then from an insolvency expert.

32    On 20 June 2010, at a meeting which involved Messrs Young, Carpenter and Keller (amongst others), Mr Keller (according to Mr Young in his affidavit) “expressed words to the effect that he would commit to paying the $200,000 judgment but encouraged us to set up different companies.” Mr Keller also said that, “if he was left to bear all costs his ‘well would run dry’ ”.

33    At another meeting involving Messrs Young, Scott and Keller (amongst others) on 1 July 2010, Mr Young impressed upon Mr Keller his concern about the indemnity. Mr Keller reiterated (in Mr Young’s words) “his statements to the effect that he would give AAA a personal indemnity for the costs and damages”. But Mr Keller also encouraged Mr Young to set up another company and to wind up AAA. After this meeting, Mr Young prepared a written form of indemnity (both as to damages and as to costs) for execution by Mr Keller, and sent it to the latter. However, Mr Young did not receive a response to this communication.

34    On 16 July 2010, Mr Scott sent an email to Mr Young and others in which he referred to an affidavit which he had received from LED, the burden of which was that LED had incurred costs in the sum of approximately $1.2m.

35    On 19 July 2010, AAA engaged new solicitors to represent it in the matters which have now become controversial. On 23 July 2010, those solicitors wrote a letter to Mr Scott, in which they sought written confirmation that AAA was “fully indemnified for all costs incurred, damages and costs awarded as indicated in your letters to AAA on 8 February 2008 and 4 August 2009”. The solicitors further sought an acknowledgement that the award of damages, and potentially of costs, on a joint and several basis, “will not prejudice or affect this indemnity”. There was, it seems, no response to this letter. Neither, it seems, was there a response to an email from Mr Young to Mr Keller on 19 July 2010, in which the former sought to “get indemnity in place as a matter of urgency”.

36    It was in this state of things that AAA served its Notice of Motion dated 17 August 2010. As amended on 24 August 2010, the Notice of Motion sought leave to withdraw the abandonment of Grounds 8 and 9 (see para 22 above) and the reopening of the appeal for the purpose of hearing submissions and, if necessary, of receiving further evidence, with respect to those grounds. We heard the motion initially on 27 August 2010, at which time we took the view that we would be in a better position to consider it if we had the benefit of knowing AAA’s case on the merits with respect to the grounds of appeal which it sought to reinstate. Accordingly, we stood the matter over and gave directions for AAA and LED to file detailed written submissions on the matter. We also made orders dismissing the appeals of Elecspess, Ren and Olsen and, in relation to those companies only, dissolved the stay on the operation of the primary Judge’s damages award. We also note that, at this hearing, AAA accepted that, whatever the outcome of its motion, it would have to pay LED’s costs on an indemnity basis. Given the circumstances which led to the abandonment of the grounds which AAA now seeks to reinstate, and LED’s conspicuous lack of involvement in those circumstances, we consider that this was an appropriate position for AAA to accept.

37    Between 27 August 2010 and the resumed date for the hearing of AAA’s motion to reinstate, a significant event occurred. On 29 October 2010, the Corporate Respondents other than AAA paid the full amount of the damages due to LED under the orders of the primary Judge. In the circumstances, AAA was no longer under any obligation (pursuant to the orders) in damages to LED.

38    AAA’s case on the motion proceeded at three broad levels. First, it submitted that it abandoned the grounds of appeal in question as a result of advice received from its solicitor who, in the circumstances as they then existed, was confronted with a clear conflict of interest which he should have recognised. Secondly, it was submitted that the grounds themselves had obvious merit. There had in fact been no evidence of the extent of the sales of Condor lights by AAA, and there was no basis upon which the primary Judge might have made AAA jointly and severally liable for LED’s damages, to the same extent as Ren and Olsen. Thirdly, it was submitted that LED would suffer no prejudice if AAA were now to be permitted to rely upon the grounds which it abandoned, save in the questionbegging sense of having to confront the grounds themselves. There was no suggestion that AAA should now be permitted to advance a case different from that which it put before the primary Judge: all that was being proposed was that grounds of appeal, originally taken and of which LED had fair notice, should now be reinstated to what was, in the submission of AAA, their rightful position, a position which they would always have occupied were it not for the advice upon which AAA acted in abandoning the grounds immediately before the hearing of the appeal.

39    By the time AAA’s motion came to be heard by the Full Court on 16 November 2010, LED resisted the motion on two main bases. First, it was submitted that to reinstate the contentious grounds of appeal would be to permit AAA to prosecute its appeal by reference to assumptions which differed from those under which the trial was conducted. LED said that it had, from an early stage, noted the potential for conflict of interest in the joint representation of the Corporate Respondents, and assumed that the Corporate Respondents had made the appropriate internal arrangements to deal with the contingency that LED might succeed in its claim for damages. Both the pretrial stages of the proceeding, and the trial itself, having been conducted by the Corporate Respondents on the footing that their positions were indistinguishable, LED had refrained from taking the steps, and leading the evidence, that would normally have been appropriate if it were perceived to be necessary to quantify the individual contribution of each of the Corporate Respondents to the damages suffered by itself (LED). According to LED, it was wrong, therefore, for AAA to assert that the reinstatement of these grounds of appeal would be unprejudicial to LED. Secondly, LED relied upon the circumstance that its damages had by then been fully paid, and submitted that the application for reinstatement had become “moot”.

40    We propose to consider first AAA’s substantive grounds for having its original grounds of appeal reinstated, commencing with the second point referred to in para 38 above, namely, that its abandoned grounds had obvious merit. Only by appreciating the underlying strength of these grounds may a solid foundation be built upon which to place the various layers of discretionary factors to which the parties have urged us to have regard.

41    Neither as pleaded nor, as we understand it, as run before the primary Judge was LED’s case against AAA that it had participated in a joint enterprise of conduct which was unlawful under the Designs Act 2003 (Cth). Indeed, as mentioned above, AAA and Elecspess were respondents in LED’s proceeding before the joinder of Ren and Olsen. The allegation against AAA was that it had offered for sale, and sold, Condor lights in infringement of LED’s registered designs. These were allegations of freestanding infringements under s 71 of the Designs Act. They were effectively admitted by AAA in its Amended Defence. LED then alleged (specifically) that it had suffered loss and damage as a result of AAA’s conduct. That allegation was denied by AAA. These propositions are based on the state of the pleadings at the time of the trial, and, subject only to the point about AAA’s joint representation with the other Corporate Respondents, no suggestion was made by LED on the present occasion that AAA departed from its pleaded Defence in the conduct of the trial as such.

42    At trial, LED sought to prove its damages by reference to the commercial activities of Ren and Olsen only. As noted above, the Corporate Respondents joined issue at that level, and ultimately the primary Judge ruled that $200,000 was the appropriate figure. On any view, however, the calculation of that figure was rooted in the evidence which related to Ren and Olsen. No attention, it seems, was given to the question of AAA’s separate contribution to the damages suffered by LED. This was, no doubt, in part the result of the way the Corporate Respondents conducted their case; but it was also in part the result of LED’s omission – we infer, its choice – to lead no evidence of the sales of Condor lights made by AAA. We were informed by counsel for AAA – without any dissent being heard from counsel for LED – that AAA had given discovery of documents that related to its sales of Condor lights. The conclusion that LED had the wherewithal to establish as a matter of evidence what were the sales of Condor lights by AAA, but chose not to do so, should be considered the most obvious one in the circumstances. LED was, of course, entitled so to proceed, and to act by reference to the view that all of its damages would be reflected in the commercial activities of Ren and Olsen, but the result was that, as the moving party, LED did not lead the evidence which would have been necessary to quantify the damages which it claimed to suffer as a result of the design infringements admitted by AAA.

43    The explanation now proffered by LED for the conduct of its case in this way is as we have summarised in para 39 above. The question with which we are presently concerned is whether that would have amounted to a sufficient answer to the grounds of appeal now sought to be reinstated if they had never been abandoned. We do not think so. Unless it could be said that AAA had conducted its case in a way that justified the assumption that, if it failed on liability, it was content to participate jointly and severally (with the other Corporate Respondents) in the payment of LED’s damages calculated by reference to the commercial activities of Ren and Olsen only, the (undisclosed) conclusion which LED drew as to the internal arrangements made as between those respondents would not provide a proper basis for an award of damages on such a joint and several basis as against AAA. And it seems quite clear that AAA did not conduct its case in a way that would have justified any such assumption.

44    That brings us to para 102 of the reasons of the primary Judge which we have set out in para 18 above. With respect to her Honour, we cannot appreciate how issues of “proportionate liability” might have arisen on the parties’ cases as reflected in their pleadings. As we have mentioned, at least as between the Corporate Respondents, LED’s case was not that they had participated in a joint enterprise, the result of which was that undifferentiated damages had been suffered by LED. Rather, each of those respondents was alleged to have engaged in activities from which loss and damage arose. The fact that none of them raised a claim of proportionate liability ought not to have been regarded as sufficient to impose an obligation on AAA to pay damages which were in no way related to the infringing conduct which had been alleged against it. Furthermore, the observation made by her Honour that no “evidence [was] led in an attempt to segregate the sales on an individual company basis with respect to Elecspess and AAA” would, in our respectful view, have been better rendered in the form: “LED led no evidence in an attempt to segregate the sales on an individual company basis with respect to AAA” (we say nothing of the position of Elecspess, as that was the subject of neither argument nor evidence before us).

45    We were informed that “joint and several liability” for design infringement damages which encompassed AAA as a party subject to that liability was not an outcome for which LED pressed in its submissions at trial. Although it may be said, with some justification, that AAA itself was not blameless by likewise remaining silent as to the absence of evidence which would have quantified its sales of Condor lights, ultimately it was LED that had both the onus of proof and the carriage of the case in relevant respects. Strictly, AAA was entitled to remain silent and to assume that, in the absence of any such evidence, it would be held that LED had not made good its case for damages (other than nominal damages) against it. We can, with respect, well appreciate that her Honour would have regarded the situation thus produced to be an unsatisfactory one (as seems to be implicit in the way she expressed para 102 of her reasons). AAA did attempt to deal with the subject on 18 February 2009, but that attempt was rejected in the terms to which we have referred in para 21 above. We are bound to say that we cannot see anything in paras 95-102 of her Honour’s original reasons which addressed the specific position of AAA. Given the omission of LED to press for joint and several liability at the trial, we do not agree with her Honour that the hearing on 18 February 2009 was too late an occasion for AAA to have raised the absence of any evidence which would justify imposing that kind of liability on it.

46    For the above reasons, we take the view that the grounds of appeal now sought to be reinstated would, had they never been abandoned, most likely have succeeded. Save to refer to the assumptions which it drew from AAA’s joint representation with the other Corporate Respondents, we do not understand LED to have seriously contended otherwise.

47    We turn next to a consideration of AAA’s submission that its decision to abandon the grounds of appeal was based on advice received from a solicitor who had a conflict of interest. Here counsel for AAA referred us to Murphy v Doherty (Supreme Court of Victoria, Appeal Division, 4 February 1994), in which the time for appealing against an adverse summary judgment was extended by a considerable period. Tadgell J (with whom Cummins J agreed) noted that there were arguments which had the potential to raise an arguable defence which had not been put before the original Judge, and that the party in default had been wrongly advised that no appeal lay. His Honour said:

For myself, I would regard the explanation given for the delay as one which in the circumstances excuses it. The court does not like to see parties to litigation penalized because of default, through incompetence or negligence, or for any other reason, of their legal advisers.

Murphy v Doherty was, however, a very different case from the present one. There, the question related to the quality of representation which the party in default had at first instance, and to the quite inaccurate advice which he had received about the absence of a right to appeal. In the present case, by contrast, Mr Scott’s advice was essentially pragmatic. The existence of a conflict as between the Corporate Respondents was explicitly recognised. It is as clear as may be that, in August 2009, AAA’s choice was either to engage its own representation, with the expense that that would have involved, or to treat the “joint and several liability” point as moot because of the indemnity from Ren. This was the choice which AAA made and, subject only to what we say in the next paragraph, the making of it appears to have been unaffected by what should now be regarded as incompetence or negligence in the Murphy v Doherty sense.

48    It was implicit rather than explicit in the submissions made on behalf of AAA on the present motion that things would have been different had Mr Scott acted otherwise than as he did. Exactly what alternative course events would have followed was never articulated. Perhaps AAA would now desire to be understood as proposing that Mr Scott should have withdrawn from representing either AAA on the one hand or Ren and Olsen on the other, or at least should have made clear to AAA that it should consider obtaining independent advice. But, although the proposal came from Mr McGowan rather than from Mr Scott himself, this is effectively what was put to AAA in Mr Scott’s letter of 4 August 2009. It seems that, although prompted by Mr McGowan and perhaps concerned more with the position of counsel than with that of himself, Mr Scott left no doubt but that, if the actual quantum of damages for which AAA was to be liable was to be contested, this could not be done by way of joint representation.

49    As events have transpired, the real difficulty with the position which AAA, for pragmatic reasons, chose to adopt is that it involved accepting a liability that may, if tested, have been shown to be legally problematic under the protection of a promise of indemnity made by Ren. That promise was, of course, of considerable value to AAA, and we did not hear a suggestion by counsel for AAA that, even with independent advice, it would have turned its back on it. Neither was it suggested that Mr Scott, while facilitating the promise of indemnity, should at the same time have cautioned AAA against relying on it. It may be that the criticisms of Mr Scott on which the present motion is based are informed by the wisdom of hindsight apropos the pragmatic choice which AAA made – to save the legal costs which separate representation would have involved, and to rely upon the indemnity promised by Ren. We are not persuaded that that choice, and the circumstances in which it was made, contributes to AAA’s entitlement to the favourable exercise of our discretion on the present motion.

50    AAA’s submission that LED would suffer no prejudice if the grounds of appeal were reinstated was not seriously resisted by LED. It did submit that, had AAA’s intention to resist the allegation that it had made a joint and several contribution to LED’s loss and damage been clearly articulated at first instance, it would have conducted the case differently. This point, however, is more appropriately dealt with as part of our consideration of the strength of the grounds as such; and we have dealt with it in that setting above. LED will not, of course, be disadvantaged by the hearing and determination of the present motion, as AAA will pay its costs on an indemnity basis. Our attention was not drawn to any respect in which LED would be the worse off if the grounds were now to be reinstated, by comparison with the situation which it would have occupied had the grounds never been abandoned. No change of position, for example, was suggested. For our own part, we can think of no respect in which LED would be worse off.

51    The other major discretionary consideration which arises on the present motion is LED’s second point referred to in para 39 above, namely, that the payment of the damages in full by the other Corporate Respondents effectively cancelled out the force of the other discretionary considerations with which we are here concerned.

52    AAA had four answers to this point. First, while accepting that it was no longer at risk of enforcement proceedings taken by LED, AAA submitted that it was not immune to a claim for contribution being made by one of the other Corporate Respondents. Secondly, it was said that the damages judgment against it was a commercial embarrassment which, since it did not reflect the evidence in the case and should not have been made, it should not have to bear into the indefinite future. Thirdly, if the Full Court were to uphold the grounds of appeal which it seeks to reinstate, it was said that this would have an effect upon the costs orders proper to be made with respect to the proceeding at first instance. And fourthly, it was said that the upholding of those grounds would necessarily have a bearing on the costs orders that ought to be made on appeal.

53    Although the possibility of a claim for contribution being made against AAA by one of the other Corporate Respondents was mentioned by counsel for AAA on the present motion, little emphasis was given to it. Counsel accepted that, in the light of the indemnity which it offered, Ren would be in no position to succeed on any such claim. No doubt because of the close relationship between Ren and Olsen, counsel effectively treated Olsen as being in the same position as Ren in this regard. A claim by Elecspess against AAA remains a theoretical possibility, but, as counsel for AAA accepted, there is no evidence that Elecspess, as distinct from Ren and Olsen, paid any part of LED’s damages. On balance, we are disposed to regard the concerns faintly expressed by counsel for AAA in this regard as altogether too conjectural to assist in any useful way to the making of the discretionary judgment which the present motion requires.

54    The detriment brought about by the existence of the judgment per se, as distinct from the need to make any payment under it, was also a consideration but faintly pressed by counsel for AAA. The point was briefly mentioned rather than developed. We are not disposed to give it any weight.

55    That brings us to deal with the costs aspect of AAA’s submissions. As to the costs of the proceeding at first instance, however the present motion is determined, the fact remains that AAA resisted LED’s case on the merits, and did so unsuccessfully. It was, admittedly, engaged in the sale of Condor lights which infringed LED’s registered design. A permanent injunction was appropriately granted to LED against the Corporate Respondents generally, and that will stand, however the present motion is determined. Presumably, some part of LED’s costs at first instance were incurred in the quantification of the damages which it had suffered as a result of the infringements proved against the Corporate Respondents. If AAA is otherwise correct in what it says on the present motion, it may be that that aspect of LED’s costs ought to be paid by Elecspess, Ren and Olsen (possibly only by Ren and Olsen, although no such submission was made on behalf of Elecspess), but, save for that minor qualification, there seems to be no respect in which AAA’s presumptive liability to contribute to LED’s costs at first instance would be affected by the grant of the relief which it presently seeks.

56    As to the costs of the appeal (but not of LED’s crossappeal), since we are here considering costs in the setting of AAA’s motion to reinstate its abandoned grounds of appeal, we should consider what costs orders would most likely be made if those grounds were reinstated, and succeeded, in comparison with the costs orders that would most likely be made if AAA’s appeal remained in its present configuration. For present purposes, we are prepared to make the assumption, favourable to AAA, that, if its grounds were reinstated, the appeal would be treated as having been heard on 16 November 2010, and would be upheld in the orders we are about to make.

57    If AAA’s abandoned grounds were reinstated, and succeeded, and if costs followed the event to that extent (remembering that these were the only grounds on which AAA appealed), AAA would be entitled, as against LED, to its costs of the appeal. LED itself, of course, would secure no costs order against AAA. But this assumes a scenario in which the AAA appeal existed as a matter of reality and caused AAA to incur costs. As we know, this was not the case. To the extent that AAA has now incurred costs in seeking to persuade us, on the present motion, that the abandoned grounds of appeal would have succeeded, it made no suggestion that it would ever be entitled to those costs, since the motion, and all aspects of it, have proceeded on the basis that AAA will indemnify LED for its costs in relevant respects. What costs did AAA in fact incur in the prosecution of its abandoned grounds? As far as we can see, the answer should be that AAA incurred only the costs of and incidental to the preparation of the Notice of Appeal itself. It would not be entitled to the costs of preparing its outline on the appeal, since it was in that document that the grounds were abandoned.

58    LED’s position also needs to be considered. As against AAA, LED would receive none of its own costs and would pay AAA’s costs of the preparation of the Notice of Appeal. LED would, however, continue to be entitled to all its costs of the appeal abandoned by Elecspess. It is likely, therefore, that LED would be little disadvantaged by the reinstatement of the grounds abandoned by AAA. If AAA’s appeal remained in its present configuration, the appeal would be dismissed, and LED would be entitled, as against AAA, to its costs in relevant respects. However, that entitlement would not extend beyond costs incurred prior to receipt of AAA’s outline, in which the grounds were abandoned. It would not include so much of the costs of the preparation of LED’s outline as were incurred after that event.

59    In the result, although the reinstatement of AAA’s abandoned grounds would be likely to have some consequences to the benefit of AAA and to the detriment of LED with respect to the costs of the appeal, the general dimensions of the differences in entitlements to which we have referred is not such as would make a significant contribution – either way – to the discretionary factors which we must consider on the present motion. On any view, the contribution which these differences make to AAA’s case on the motion should be viewed as a weak one.

60    As will be apparent from what we have written above, a number of the considerations which bear upon the disposition of the present motion do, upon analysis, make little contribution to the discretionary judgment we are required to make. However, commencing with the proposition that the grounds sought to be reinstated are good ones which would be likely to succeed, there are nonetheless several factors which, in combination, have persuaded us that AAA’s motion to reinstate should be refused.

61    First, the grounds were abandoned not by accident, mishap or oversight. They were abandoned as the result of a conscious, eyesopen, decision made after legal advice. Counsel for AAA frankly conceded that this would normally stand as a substantial impediment to the grant of the relief which his client seeks. We agree. It is only one factor, of course, but it is a powerful one.

62    Secondly, as we have attempted to explain above, we are unconvinced by AAA’s attempt to cast itself in the role of an innocent who has suffered at the hands of a solicitor who failed to recognise that he had a conflict of interest. At the time, before the outcome of the appeal was known, and when there was, apparently, no reason to doubt the solvency of Ren, AAA made a pragmatic choice which led to the saving of considerable legal costs, while at the same time being able to rely upon the submissions of senior counsel engaged by the Directors. Properly understood, the making of this choice was not vitiated by any conflict which affected the position of Mr Scott: to the contrary, it was the patent existence of the conflict which was laid before AAA as one of the circumstances which it should take into account when making that choice.

63    Thirdly, AAA is unlikely to be financially disadvantaged by the refusal of its present motion, save possibly with respect to some relatively minor costs aspects to which we have referred (and even then, it seems, only if Ren does not make good on its indemnity). In particular, AAA will not be exposed to a claim by LED to make an inappropriately – or inequitably – large contribution to its damages, and we are not persuaded, on the material put before us, that the prospect of Elecspess claiming contribution from AAA is sufficiently established to affect what would otherwise be our decision on the motion.

64    For the reasons stated above, we would refuse AAA’s motion to reinstate the grounds of appeal which it abandoned on 17 August 2009. As accepted by AAA (see para 36 above), AAA should pay LED’s costs of the motion on an indemnity basis, but otherwise there should be no order as to costs in respect of the motion.

Disposition of appeals and crossappeals

65    It follows from our reasons of 9 June 2010 that the Directors’ appeal in VID 167 of 2009 should be upheld to the extent of excluding them from any liability under the Designs Act. This would conventionally carry the consequence that the Directors would be entitled to their costs at first instance. However, we are attracted by a submission made on behalf of LED that much of the energies of the Directors and their legal advisers were expended with respect to discrete issues upon which they failed, namely, their challenge to the validity of the registered design and their resistance to the respondent’s case that the companies had infringed that design. This is, in our view, a circumstance in which the narrow basis of the Directors’ presumptive success at first instance should be recognised by giving them no entitlement to the costs incurred prosecuting issues upon which they failed. Mr Morrison’s appeal should be upheld to the extent of giving him his costs at first instance generally. The appeal should otherwise be dismissed. The crossappeal should also be dismissed, and costs should follow the event.

66    In the Corporate Respondents’ appeal in VID 168 of 2009, we propose first to correct an obvious error in the court heading to the orders made by the primary Judge on 24 February 2009, about which there was no present controversy. The appeal of Elecspess, Ren and Olsen was dismissed by orders which we made on 27 August 2010, and the stay of judgment which existed in relation to those appellants was dissolved. AAA’s appeal should now likewise be dismissed. The stay, to the extent that it related to AAA, will lapse in accordance with its own terms upon the determination of the appeal generally. On the crossappeal, declarations should be made reflecting our decision under s 65C of the Trade Practices Act, with consequential adjustments to the costs orders made by the primary Judge. LED should also have the costs of its case at first instance under ss 52 and 53 of the Trade Practices Act. Otherwise, the crossappeal should be dismissed.

67    With respect to the costs of the appeals as such, it was submitted on behalf of the Directors that, as the successful appellants, they should be entitled to their costs of the appeal in VID 167 of 2009 generally. Counsel for LED submitted, however, that the Directors had undertaken the lion’s share of the work for both appeals, in which regard they had devoted both time and energy – and presumably incurred considerable costs – to grounds which were unsuccessful in the Full Court (validity and infringement on the design case). It was submitted that the Directors had succeeded only because it was held that they ought not to have been regarded as joint tortfeasors in relation to design infringement, and that it would be both unfair and inappropriate to require LED to pay the whole of the costs, or even any substantial measure of the costs, of the Directors in their appeal. LED pointed to the circumstance that, in the appeal, the Directors were represented by senior and junior counsel who took the major part of the running on all questions arising out of the Designs Act. The Corporate Respondents, whose appeal was wholly unsuccessful, were represented by their solicitor, who made no submissions under the Designs Act at all. He contented himself with adopting the submissions made on behalf of the Directors.

68    We consider that the submissions here made on behalf of LED are persuasive. Although counsel for the Directors recognised that some small discount in his clients’ presumptive entitlement to costs might be allowed in recognition of the matters upon which counsel for LED relied, in our view this is a case in which an issuesbased approach to costs both can and should be taken. If the Directors were of the view that the primary Judge was in error to have treated them as joint tortfeasors, they could easily have appealed against that finding alone. Rather, they undertook the burden of making good grounds of appeal which involved a fundamental attack upon the core of her Honour’s judgment under the Designs Act. They were entitled so to proceed, of course, but LED is likewise entitled to rely upon the circumstance that this attack was wholly unsuccessful. We consider that any costs order on the appeal which did not recognise the reality of that approach by the Directors, and of that outcome in our judgment of 9 June 2010, would be both inappropriate and unjust.

69    We consider that the circumstances to which we have referred above would be fairly reflected if we made no order as to costs as between the Directors and LED.

70    On the cross appeal in VID 167 of 2009, LED should pay the Directors’ costs.

71    On Mr Morrison’s appeal, we consider that an order requiring LED to pay 65% of his costs would be appropriate having regard to the fact that he succeeded in having the costs order made in his favour by the primary Judge varied, but he failed with respect to his claim that his costs should be taxed on an indemnity basis.

72    In the appeal of the Corporate Respondents in VID 168 of 2009, the Corporate Respondents should pay LED’s costs, save that AAA should be under no such liability in relation to costs incurred after 17 August 2009. Having regard to the extent to which LED succeeded on its crossappeal, we consider that justice would be done if the Corporate Respondents were required to pay 80% of LED’s costs thereof. Additionally, since LED succeeded on the crossappeal under s 65C of the Trade Practices Act as against Elecspess and Olsen only, those cross-respondents should pay a further 10% of LED’s costs of the crossappeal.

LED’s offer of compromise

73    By Notice dated 9 April 2009, LED offered that it would compromise both the proceeding at first instance and the appeals and cross-appeals in VID 167 and VID 168 of 2009 upon certain terms. That offer was addressed to the other parties by group, namely, (1) to Elecspess, (2) to AAA, (3) to Ren, Olsen and the Directors and (4) to Mr Morrison. It was said that the offer could be “accepted by the party (or parties) … in [the group concerned] … independently of whether or not an offer [to the parties in another group] is accepted”. LED now contends that, in each respect, it obtained judgment on the appeal not less favourable than the terms of the offer, and that it is entitled to have its subsequently-incurred costs taxed on an indemnity basis pursuant to O 23 r 11(4) of the Federal Court Rules.

74    Under each of its offers of compromise, LED proposed that the other party or parties should admit that the registered designs were valid, and that certain of the Condor lights were substantially similar in overall impression to the corresponding LED lights. It was proposed also that LED and the other party or parties should waive all other claims against each other relating to the subject matter of the proceeding. It was proposed that Elecspess should pay damages in the sum of $103,000 and costs in the sum of $75,000, that AAA should pay damages in the sum of $5,000 and costs in the of $75,000 and that Ren, Olsen and the Directors should make up to $200,000 the damages received by LED after taking account of what had been paid by Elecspess and AAA, and pay costs in the sum of $150,000.

75    LED’s offer of compromise gives rise to issues of some complexity, not least because it was, as we have indicated, addressed to multiple parties by group, when some of those parties who were not all in the same group (the Corporate Respondents) were jointly and severally liable for a single sum by way of damages. We do not, however, need to address those issues at this point, since we consider that LED’s submission that we should order that its costs be paid on an indemnity basis is both misconceived and premature. The submission is misconceived because, if LED has achieved a result no less favourable than that proposed in its offer, O 23 r 11(4) operates according to its terms. In the absence of an order to some other effect, LED is entitled to have its costs taxed on an indemnity basis. The submission is premature because, until it is known for what sum the other parties are liable to LED in costs (taxed as between party and party), it will not be possible to determine whether LED has achieved a result no less favourable than that contained in its offer.

76    For the foregoing reasons, we are not disposed to treat LED’s submission on indemnity costs as an application for costs to be taxed on an indemnity basis, but, recognising that there may be questions which may yet require the attention of the Full Court on the subject, liberty to apply should be granted.

77    LED’s claim to an entitlement to indemnity costs as against Mr Morrison may, however, be dealt with at this stage. Neither damages nor costs were sought from him: LED required only that he make the admissions, and participate in the waivers, to which we have referred. Why Mr Morrison should have felt under any obligation to make the admissions proposed by LED was made clear neither in the offer itself nor in the submissions made on the present occasion. As we indicated in our earlier reasons, LED announced at trial that it was not prosecuting its case against Mr Morrison, and ultimately that case was dismissed. There was no appeal, crossappeal or notice of contention in relation to that dismissal. Mr Morrison participated in the proceeding before the Full Court only for the purpose of challenging the limited costs order made by the primary Judge in his case. Save that he did not get his costs on an indemnity basis, that challenge was successful. The submission that LED secured a result no less favourable than that proposed in its offer of compromise to Mr Morrison is quite without substance, and should be rejected.

78    Any costs to which LED would otherwise be entitled should not include costs incurred on its present submission for indemnity costs.

LED’s application for an interim costs order

79    LED sought the making of what it described as an “interim costs order”, by which it is contemplated that we would, here and now, require Ren and Olsen to make a payment on account of the costs that they will be obliged to pay to LED, notwithstanding that those costs have not yet been taxed. We were assured that the making of such orders was a common practice in the English Patents Court and the Patents County Court, and we were referred to the judgment of Jacob J in Mars UK Limited v Teknowledge Limited [2000] FSR 138, wherein the relevant principles were said to be stated.

80    There is no occasion for us to consider the content of those principles, or the discretionary grounds upon which LED now relies for the making of an interim costs order. That is because orders of the kind referred to in Mars UK are made pursuant to a specific provision of the Civil Procedure Rules 1998 (UK), namely, r 44.3(8): “Where the court has ordered a party to pay costs, it may order an amount to be paid on account before the costs are assessed.” In Mars UK, Jacob J observed that, before this provision existed, “if costs were sent off to taxation there was no power to order interim payment”: [2000] FSR at 152. Our attention was drawn to no provision in the Federal Court Rules which would authorise the making of an order of this kind and, for our part, we have found none. Neither was our attention drawn to any occasion upon which this court (or, for that matter, any Australian court) has exercised a power of this kind. In the absence of detailed argument on the subject (which was not advanced on the present occasion), we are not prepared to assume that an interim order of the kind sought by LED could be made consistently with the terms of O 62 r 4(1) of the Federal Court Rules, which provides: “Subject to this Order, where by or under these Rules or any order of the court costs are to be paid to any person, that person shall be entitled to his taxed costs.”

81    The application for an “interim costs order” should be rejected.

82    Any costs to which LED would otherwise be entitled should not include costs incurred in its application for an indemnity costs order.

Associate:

Dated:    23 December 2010

REASONS FOR JUDGMENT

BESANKO J:

83    I have had the advantage of reading the reasons for judgment of Emmett and Jessup JJ.

84    I agree that the notice of motion issued by Advanced Automotive Australia Pty Ltd dated 17 August 2010 should be dismissed. It should be dismissed because the decision to abandon the grounds of appeal was a deliberate decision made after taking legal advice and because the applicant will not suffer any serious financial detriment if the grounds of appeal are not reinstated. In the circumstances, I do not need to address the extent to which Advanced Automotive Australia Pty Ltd contributed to the approach to damages taken at the trial or the role the company’s solicitor played in the company’s decision to abandon the grounds of appeal. I refrain from expressing a view on those matters.

85    I agree with the approach taken in the reasons for judgment of Emmett and Jessup JJ to the issues which arise in relation to the Offer of Compromise by LED Technologies and I agree that the application by LED Technologies for an “interim costs order” should be rejected.

86    I agree with the orders proposed by Emmett and Jessup JJ in relation to the appeal by the corporate respondents (VID 168 of 2009).

87    I am unable to join in all the orders proposed in relation to the appeal by Messrs Morrison, Keller and Armstrong (VID 167 of 2009). I would have made an order dismissing Mr Keller’s appeal but allowing Mr Morrison’s appeal and Mr Armstrong’s appeal (see my reasons in Keller v LED Technologies Pty Ltd [2010] FCAFC 55). As I am in the minority in relation to Mr Keller, it is unnecessary for me to set out the orders I would have made in that appeal.

Associate:

Dated:    23 December 2010