FEDERAL COURT OF AUSTRALIA

Roadshow Films Pty Ltd v iiNet Ltd (No 2) [2011] FCAFC 82

THE COURT ORDERS THAT:

1.    The appellants pay 60 per cent of the respondent’s costs of the appeal.

2.    The appellants pay the respondent’s costs in relation to the primary copyright infringement claim against the respondent in the proceeding at first instance, referred to in paragraphs 67A to 67F of the further amended statement of claim.

3.    The appellants pay 60 per cent of the balance of the respondent’s costs of the proceeding at first instance.

4.    There be no taxation of any costs until any application for special leave to appeal to the High Court has been determined and, if leave to appeal is granted by the High Court, until the final disposition of that appeal.

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

THE COURT

1    By its substantive orders of 24 February 2011, the Full Court, by majority, ordered that this appeal be dismissed. The Full Court made no orders as to costs at that stage. On 11 March 2011, the Court gave directions that the parties file and serve a statement of the precise issues to be determined and orders sought with respect to the costs of the appeal and the proceeding below. The parties complied with that direction and have, in addition, provided some evidentiary material that was relevant to the question of costs before the primary judge. The normal course is that costs follow the event. The question now before the Full Court is whether there should be a departure from that course, in relation to the appeal and in relation to the proceeding at first instance.

2    It is fairly clear that the issues in this proceeding are complex and of importance, not only to the parties but also generally to those involved in the dissemination of copyright material by electronic means. Nevertheless, the primary question is what the appropriate order for costs is as between these parties. While there may be continuing issues between these parties, the only question is the appropriate order as to costs of the proceeding at first instance and of the appeal.

3    Under s 43(2) of the Federal Court of Australia Act 1976 (Cth), the Court has a general discretion to award costs. Ordinarily costs follow the event, and a successful litigant receives its costs in the absence of circumstances that would justify some other order. Where a litigant succeeds on only a portion of its claim, the circumstances may make it reasonable that that litigant bear the expense of litigating the portion upon which it has failed. A successful party who has failed on certain issues may not only be deprived of the costs of those issues, but may also be ordered to pay the other party’s costs in relation to those issues. On the other hand, justice may not be served if parties are dissuaded, by the risk of an adverse costs order, from canvassing all issues that might reasonably be raised in the conduct of a proceeding. Against that consideration is the community interest in greater economy and efficiency in the conduct of litigation, which may properly be reflected in a qualification of the presumption that a successful party is entitled to all of its costs. Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion for the trial judge. Mathematical precision is illusory, and the exercise of the discretion will often depend upon matters of impression and evaluation (see Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 271-2).

4    It is fair to say that several discrete issues were raised for determination in this proceeding, both at first instance and on appeal. That the proceeding has been conducted on that basis is apparent from the preparations that were made for the trial, and from the directions that were given by the Full Court involving the preparation of statements of issues. In the reasons of the Full Court, although each judge gave separate reasons, it is clear that distinct and discrete issues were addressed.

5    The primary issue that was litigated at first instance, and on the appeal, is whether iiNet Limited (iiNet) authorised copyright infringements on the part of the iiNet users, that is, the customers of iiNet who made use of the services provided by iiNet to obtain access to the internet, and who used that access to download copies of copyright material belonging to the appellants in circumstances constituting an infringement. Tied up with the question of authorisation, to a greater extent than other issues, was the effect of s 112E of the Copyright Act 1968 (Cth) (the Copyright Act), although that was also, in a sense, treated as a discrete issue. Apart from the effect of s 112E, iiNet also raised defences based on the Telecommunications Act 1997 (Cth) (the Telco Act) and the safe harbour provisions of the Copyright Act.

6    In general terms, so far as the views of the majority are concerned, iiNet was successful in relation to the principal question of authorisation, although Jagot J would have upheld the appeal even in relation to that question. Nevertheless, iiNet advanced arguments in relation to s 112E, the Telco Act defences and the safe harbour provisions, in respect of which it was substantially – although not completely – unsuccessful. It is in the light of the determination of the issues raised under s 112E, the Telco Act and the safe harbour provisions that the Full Court is now called upon to determine whether there should be a departure from the prima facie rule that costs follow the event.

7    The appellants have proposed two possibilities in relation to the costs of the appeal. One is that there be separate orders for costs made in relation to different issues. The other is that the costs of the appeal generally be apportioned such that one party be ordered to pay a proportion of the costs of the other party. The appellants’ position in relation to the costs below is that it is appropriate to make an apportionment.

8    It has not been suggested that there was any error of principle on the part of the primary judge in making his order for costs. The basis upon which the appellants seek to have the order of the primary judge varied is that, although the result is the same, and the appeal has been dismissed, it is fair to say that the Full Court has, in relation to matters of some substance, reached different conclusions from those reached by the primary judge.

9    There is also a further question in relation to the exercise of discretion by the primary judge. Until shortly before the commencement of the proceeding, the appellants contended that iiNet was, itself, guilty of primary infringement, as distinct from being guilty of infringement by authorising the conduct of its service users. That contention was abandoned. As a consequence, iiNet sought indemnity costs before the primary judge in relation to that contention. The appellants have not suggested that there was any error of principle on the part of the primary judge in relation to the question of indemnity costs. In the circumstances, it is not appropriate to revisit that question, except insofar as it may be necessary to have regard to the costs of that issue in determining the overall costs of the proceeding at first instance.

10    Where any costs order that involves depriving a successful party of some of its costs is contemplated, there are two factors to be taken into account. One is that, insofar as a successful party has failed in respect of some issues, it should not get its costs of those issues. The other is that, in relation to those issues, the party who was ultimately unsuccessful, but was successful on those discrete issues, may be entitled to its costs. In determining an appropriate proportion of costs to be awarded to a successful party, both factors must be taken into account.

11    The exercise of discretion in matters such as this is not always straightforward, and reasonable minds can differ as to the appropriate apportionment. One starts, however, with the proposition that iiNet has been successful in resisting the claims made by the appellants that it authorised infringement. To that extent, even if it is not to be given all of its costs, it should have the majority of its costs. However, there should be some discount to take into account the time involved in the preparation and argument of the significant issues in respect of which it has been unsuccessful.

12    Taking all of the circumstances into account, the Full Court considers the appropriate order to be that the appellants pay 60 per cent of the respondent’s costs of the appeal. As a matter of logic, one would apply a similar approach to the costs of the proceeding before the primary judge, not because the primary judge erred in the exercise of discretion as to costs, but because the premise upon which his Honour proceeded is different from the premise upon which, by the decision of the Full Court, his Honour should have proceeded.

13    The only remaining question is whether the depriving of iiNet of all of its costs at first instance should in some way be mitigated by its success in relation to the question of the primary infringement allegation that was abandoned by the appellants. On that issue, the appropriate course is to order that the appellants pay the respondent’s costs. The appellants should pay 60 per cent of the balance of the respondent’s costs at first instance.

14    The appellants have applied for leave to appeal to the High Court of Australia. iiNet accepts that there should be no taxation of costs until any application for special leave to appeal to the High Court has been determined and, if leave to appeal is granted by the High Court, until the final disposition of that appeal.

Associate:

Dated:    28 June 2011

SCHEDULE I – THE APPELLANTS

UNIVERSAL CITY STUDIOS LLLP

Second Appellant

PARAMOUNT PICTURES CORPORATION

Third Appellant

WARNER BROS. ENTERTAINMENT INC

Fourth Appellant

DISNEY ENTERPRISES, INC

Fifth Appellant

COLUMBIA PICTURES INDUSTRIES, INC

Sixth Appellant

TWENTIETH CENTURY FOX FILM CORPORATION

Seventh Appellant

PARAMOUNT HOME ENTERTAINMENT (AUSTRALASIA) PTY LTD

(ACN 003 914 609)

Eighth Appellant

BUENA VISTA HOME ENTERTAINMENT, INC

Ninth Appellant

TWENTIETH CENTURY FOX FILM CORPORATION (AUSTRALIA) PTY LIMITED

(ACN 000 007 036)

Tenth Appellant

UNIVERSAL PICTURES (AUSTRALASIA) PTY LTD (ACN 087 513 620)

Eleventh Appellant

VILLAGE ROADSHOW FILMS (BVI) LTD

Twelfth Appellant

UNIVERSAL PICTURES INTERNATIONAL B.V.

Thirteenth Appellant

UNIVERSAL CITY STUDIOS PRODUCTIONS LLLP

Fourteenth Appellant

RINGERIKE GMBH & CO KG

Fifteenth Appellant

INTERNATIONALE FILMPRODUKTION BLACKBIRD VIERTE GMBH & CO KG

Sixteenth Appellant

MDBF ZWEITE FILMGESELLSCHAFT MBH & CO KG

Seventeenth Appellant

INTERNATIONALE FILMPRODUKTION RICHTER GMBH & CO KG

Eighteenth Appellant

NBC STUDIOS, INC

Nineteenth Appellant

DREAMWORKS FILMS L.L.C.

Twentieth Appellant

WARNER BROS INTERNATIONAL TELEVISION DISTRIBUTION INC

Twenty-First Appellant

TWENTIETH CENTURY FOX HOME ENTERTAINMENT INTERNATIONAL CORPORATION

Twenty-Second Appellant

WARNER HOME VIDEO PTY LTD (ACN 002 939 808)

Twenty-Third Appellant

PATALEX III PRODUCTIONS LIMITED

Twenty-Fourth Appellant

LONELY FILM PRODUCTIONS GMBH & CO KG

Twenty-Fifth Appellant

SONY PICTURES ANIMATION INC

Twenty-Sixth Appellant

UNIVERSAL STUDIOS INTERNATIONAL B.V.

Twenty-Seventh Appellant

SONY PICTURES HOME ENTERTAINMENT PTY LTD (ACN 002 489 554)

Twenty-Eighth Appellant

GH ONE LLC

Twenty-Ninth Appellant

GH THREE LLC

Thirtieth Appellant

BEVERLY BLVD LLC

Thirty-First Appellant

WARNER BROS ENTERTAINMENT AUSTRALIA PTY LTD

(ACN 003 773 411)

Thirty-Second Appellant

TWENTIETH CENTURY FOX HOME ENTERTAINMENT LLC

Thirty-Third Appellant

SEVEN NETWORK (OPERATIONS) LIMITED

(ACN 052 845 262)

Thirty-Fourth Appellant