Hanisch, Graeme Arthur v Strive Pty Ltd & Ors [1997] FCA 303

CATCHWORDS

PRACTICE AND PROCEDURE - costs - limitation of costs - application for order under O 62A the Federal Court Rules - where action for alleged copyright infringement ought to have been brought in District Court - whether costs limitation order should apply equally to both parties.

Commonwealth Constitution - ss 76, 77

Copyright Act 1968 (Cth) - ss 115, 116, 203

District Courts Act 1966 (Qld) - ss 68, 69

Judiciary Act 1903 (Cth) - s 39

District Court Rules - Schedule 2

Federal Court Rules - O 62A

Queensland Supreme Court Rules - O 67

Cases Referred To

Maunchest Pty Ltd v Bickford (Drummond J, 7 July 1993, unreported)

Sacks v Permanent Trustee Australia Ltd (1993) 45 FCR 509

Startune Pty Ltd v Ultratune Systems (Aust) Pty Ltd [1991] 1 Qd R 192

Woodlands v Permanent Trustee Co Ltd (1995) 58 FCR 139

GRAEME ARTHUR HANISCH v STRIVE PTY LTD & ORS

QG 163 OF 1996

DRUMMOND J

BRISBANE

24 APRIL 1997

IN THE FEDERAL COURT OF AUSTRALIA No QG 163 of 1996

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION

BETWEEN: GRAEME ARTHUR HANISCH

Applicant

AND: STRIVE PTY LTD
(ACN 010 914 440)

First Respondent

AND: DAVID GREGORY McLEAN

Second Respondent

AND: RICHARD JOHN McLEAN

Third Respondent

AND: PETER BAINES

Fourth Respondent

MINUTES OF ORDERS

CORAM: Drummond J

DATE: 24 April 1997

PLACE: Brisbane

THE COURT ORDERS THAT:

1. The maximum costs that may be recovered on a party and party basis by either the applicant or the respondents shall be:

(a) those which would have been recoverable by that party, pursuant to items 1 to 101 and item 105 of the scale of fees and costs in Schedule 2 to the District Court Rules, if this action had been commenced in the District Court; and

(b) the filing and other fees paid by that party pursuant to the Federal Court Regulations; and

(c) the costs of and incidental to the hearing on 23 April 1997 assessed in accordance with the Federal Court scale of fees and costs.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA No QG 163 of 1996

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION

BETWEEN: GRAEME ARTHUR HANISCH

Applicant

AND: STRIVE PTY LTD
(ACN 010 914 440)

First Respondent

AND: DAVID GREGORY McLEAN

Second Respondent

AND: RICHARD JOHN McLEAN

Third Respondent

AND: PETER BAINES

Fourth Respondent

CORAM: Drummond J

DATE: 24 April 1997

PLACE: Brisbane

REASONS FOR JUDGMENT

When this matter came before me on a directions hearing on 4 April, I raised with the parties the question whether the case was one in which a costs budget order should be made under O 62A the Federal Court Rules. Order 62A r 1 empowers the Court to make a costs budget order on its own motion. I gave directions requiring each party to file material, to include its proposal as to the maximum costs figure that should be set, if such an order were made. I also required the applicant to provide “the best evidence he can provide on oath as to the likely amount of the damages he contends he can recover and the likely amount of the profits lost to him”, if he were to elect to have that remedy and I directed the respondents to include in their material, evidence on oath identifying the extent to which they copied the material the subject of the applicant’s complaint.

I took this course because it appeared to me from the pleadings and from what I was told in the course of argument on 4 April that the issues involved in this case are simple, because the maximum monetary compensation that the applicant was likely to recover, and which was his objective in bringing the action, was likely to be fairly limited in amount and because of what appeared to me to be the applicant’s attitude, displayed in argument on 4 April, to using the interlocutory process of this Court to its fullest in such a case, without regard to the accumulation of legal costs that that would involve.

The applicant’s case as pleaded is an uncomplicated one: he claims to be the author of, and thus the owner of copyright in, a Workplace, Health and Safety Officers’ Training Manual and alleges that the first respondent copied and distributed his copyright work to “approximately 75 trainees” who attended a particular Department of Employment, Education and Training (“DEET”) training course in or about November 1995. The second, third and fourth respondents are alleged to be either directors or officers of the first respondent who participated in the activities he complains of. By paragraph 13 of his statement of claim, the applicant alleges:

“(a) Each of the said 75 infringing manuals is an infringing copy within the meaning of s116(1) of the Copyright Act.

(b) By distributing each of the 75 infringing copies of the infringing manual to the said trainees, the respondents thereby converted the infringing copies and thereby the applicant has suffered loss and damage.”

By paragraph 14, he alleges that the respondents’ infringement of his copyright was a flagrant one and he goes on to claim, pursuant to s 115(2) the Copyright Act 1968 (Cth), an injunction restraining further infringements and damages for infringement of copyright or, at his election, an account of profits. He also claims additional damages for infringement pursuant to s 115(4), and conversion damages pursuant to s 116(1), and an order for delivery up of all infringing copies of the applicant’s work.

By their defence, the respondents admit that they produced training manuals of the kind the subject of the applicant’s complaint, but, in denying infringement, allege that that was done pursuant to an agreement between the applicant and the first respondent “that they would work together to produce a training manual which would be jointly owned by them and available to be used by each of them”. They assert in their pleading that, at the commencement of the DEET training program conducted by the first respondent in November 1995, at which the applicant alleges the infringing copies were distributed, 25 copies of the manual were provided to persons attending the course, but were all withdrawn shortly afterwards “when it was realised that the material contained in the document was out of date”.

That the dispute is of narrow scope is confirmed by the affidavit filed by the applicant in response to the directions I gave on 4 April: he says he did make an agreement with the first respondent in July 1994 to conduct, free of charge to the first respondent, training courses provided to others by the first respondent, provided it “typed up the course material that I would provide and made the material into training booklets”; he says that this was done and that he conducted training courses for the first respondent in November 1994. His case is that later, in 1995, without his authority, the first respondent made use of a number of the manuals it had produced under its 1994 agreement with him and which bear his name.

It was asserted on behalf of the applicant that, without proper discovery, it was not possible for the applicant to know precisely how many allegedly infringing copies of the applicant’s work have been produced by the first respondent. That is no doubt correct, but the applicant has had full opportunity to formulate his case and it is clear that it is based upon the first respondent’s activities associated with the November 1995 DEET training course. I have mentioned that the allegation in the statement of claim is in respect of approximately 75 infringing copies he alleges were distributed at the DEET course. In material filed on behalf of the applicant in response to my direction of 4 April, for the purpose of identifying the likely amount of monetary compensation recoverable by the applicant if he establishes his copyright and its infringement, his solicitor refers to inspecting one of the respondents’ documents that suggests that the first respondent intended to supply a training course for 75 persons “with the possibility of a further 11”. The applicant has not attempted, either in his pleading or in his affidavits, to set up a case that the respondents’ infringing activities extend beyond what he says they did in respect of this course.

The second respondent, Mr McLean, a principal of the first respondent, in response to my direction to identify the extent to which the first respondent had copied the matter the subject of the applicant’s complaint, has said on oath that the first respondent conducted the training course referred to by the applicant in November 1995 for 75 trainees; that this course was conducted in three separate groups of 25 trainees each over three consecutive weeks and that, in preparation for the project, “at least 25 copies but no more than 50 copies” of the manual the subject of the applicant’s complaint were prepared. Mr McLean says that, on the first day of the project, 25 copies of the manual were distributed to the first trainee group but were withdrawn “within the first half hour of the first day’s lesson” when it was realised that the manual was out of date; Mr McLean says no further copies of the manual were distributed at this training course and that the 25 copies recovered from the initial class were given to an identified employee of the first respondent “with instructions to dispose of them”. He provides no further information, however, about the fate of these 25 copies or the additional 25 copies that he suggests may possibly have been produced.

The applicant has particularised his damages claim as being “on a royalty basis being a licence fee payable in respect of each infringing copy”. In his affidavit, he fixes the amount of this licence fee as $600 per manual “at least”; he relies on an alternative basis for quantifying his damages as the profits he would have earned, but for the respondents’ infringements, and says that he would charge a fee of $500 per person for what I take to be the kind of course conducted by the first respondent in November 1995 at which the manual in question was distributed. He does not, however, provide any further information which would enable any assessment to be made of how much of this $500 per person fee would be profit to him. But on a course like that conducted by the respondents about which he complains, if he could have obtained the work, his profit would necessarily have been a lot less than $50,000. The applicant understandably says that he cannot calculate the profits earned by the respondents as a result of the infringements until discovery is complete and cannot say what an account of profits would be likely to yield him. But Mr McLean says the first respondent received a few dollars less than $17,000 in gross fees for the three week course involving 75 trainees that I have referred to, ie, about $250 per trainee and that its net profit from the course after costs, including payments to unidentified course presenters and administrative staff, was about $1,000.

The material now before me confirms my initial impression that, however the applicant’s claim for compensation is ultimately quantified, assuming he is successful in proving infringement, the maximum amount of compensation recoverable will be fairly modest. Mr Hensler, who appeared for the applicant, perfectly correctly, in my opinion, accepted that, even allowing for the fact that the applicant is claiming additional damages under s 115(4) for flagrancy and in respect of the harm to his reputation resulting from the first respondent distributing an out of date training manual with his name upon it, the applicant could not hope to recover more than $200,000. When pressed, Mr Hensler proffered a figure of about $70,000 as that which the applicant might expect to recover. I do not, of course, take that to be a precise indication, nor is it in any way binding on the applicant. But all the material before me confirms my initial belief that something very considerably less than $200,000 is likely to be the maximum amount recoverable, on any basis, by the applicant, if he is able to make out his claim of copyright infringement.

I have already referred to the quite simple nature of the case. It is neither factually nor technically complex. Mr Hensler submitted the contrary, but could only point to the mere fact that the applicant was claiming damages in respect of an alleged flagrant infringement and in respect of injury to his reputation as indicating that complex issues were likely to arise for determination. I reject that submission.

The principal object of O 62A is to arm the Court with power to limit the exposure to costs of parties engaged in litigation in the Federal Court which involves less complex issues and is concerned with the recovery of moderate amounts of money, although it may be appropriate for an order to be made under O 62A in other cases, of which Woodlands v Permanent Trustee Co Ltd (1995) 58 FCR 139 is an example. See Sacks v Permanent Trustee Australia Ltd (1993) 45 FCR 509 at 512. That the case, for the reasons given, does not involve issues of any particular complexity and is brought to obtain monetary compensation quite limited in amount are, in my opinion, powerful factors that justify the making of an order under O 62A. Despite the directions I gave, none of the parties has attempted to put before me information which would enable me to fix a particular amount as the maximum costs recoverable on a party and party basis.

This case, in my opinion, is one which should have been brought in the District Court. That Court has wide civil jurisdiction up to a monetary limit of $200,000: see s 68 the District Courts Act 1966 (Qld). It is common ground that it has jurisdiction to deal with an action in respect of copyright infringement. It has this jurisdiction not, as the applicant suggests, pursuant to s 68(1)(a)(iv) the District Courts Act, but rather because of the operation of s 39(2) the Judiciary Act 1903 (Cth) and ss 76(ii) and 77(iii) the Commonwealth Constitution: see Lahore, Copyright and Designs, para 36,455. I think, in view of the limitations on the Queensland Parliament’s legislative power, the expression “any Act” in s 68(1)(a)(iv) must be read as meaning only an Act of that Parliament.

It was submitted on behalf of the applicant that the action could not have been brought in the District Court because that Court lacks power to grant the relief sought by way of an account of profits and reference was made to s 203 the Copyright Act. However, s 69 the District Courts Act provides:

“(1) Subject to this Act and to the rules of court, a District Court … has, for the purposes of exercising the jurisdiction conferred by this part, all the powers and authorities of the Supreme Court … and may in any proceeding in like manner and to like extent -

(a) grant such relief or remedy; and

(b) …

(2) Without affecting the generality of subsection (1), a District Court … shall, in any proceedings in which jurisdiction is conferred under this part, have power to grant relief -

(a) by way of a declaration of rights of the parties;

(b) by way of injunction, whether interim, interlocutory or final, in the proceedings;

(d) by appointing a receiver including an interim receiver.

(3) Subject to this Act and the rules of court, the practice and procedure of a District Court or a judge thereof -

(a) in exercising the jurisdiction conferred by this part; and

(b) …

shall so far as practicable be the same as the practice and procedure of the Supreme Court or a judge thereof in like matters.

(4) Without affecting the generality of subsection (3), the appropriate officer of the District Court shall, …discharge -

(a) any duty which an officer of the Supreme Court would be required under the practice of the Supreme Court to discharge in the like circumstances;

(b) any duty imposed on the officer by any order of the court.

(5) For the purposes of subsection (4) the appropriate officer of the District Court shall have the powers of the relevant officer of the Supreme Court.”

Since the District Court has jurisdiction under s 68 to grant the applicant the relief by way of damages for infringement of copyright which he seeks, if he had sued in that Court for a specific sum, as he could have, that would be sufficient, by force of s 69(1)(a), to attract to the District Court power to make the same kind of order for an account in lieu of an award of damages that the Supreme Court could make, if the action had been brought in the Supreme Court: see Startune Pty Ltd v Ultratune Systems (Aust) Pty Ltd [1991] 1 Qd R 192. By force of s 69(3) the District Courts Act, the procedure to be followed where an account is ordered by a District Court would be that prescribed by O 67 of the Queensland Supreme Court Rules and, in view of O 67 r 15, it would be the District Court Registrar who would take any such account, a function he is authorised to perform by s 69(4) and (5) the District Courts Act.

Since this action should have been brought in the District Court and the applicant could have there obtained all the relief which he claims to be entitled, I regard the scale of fees and costs contained in Schedule 2 to the District Court Rules as an appropriate guide to the maximum costs which I propose to fix by order under O 62A the Federal Court Rules. In the absence of a court order, District Court r 365 limits the costs recoverable on a party and party taxation in an action in that Court to the fees fixed in that scale for the various items listed in the scale. In comparison with the party and party costs recoverable in respect of proceedings in this Court, the costs recoverable on that basis in the District Court are much more modest.

I will therefore order that, subject to one qualification, the maximum costs that may be recovered on a party and party basis by either the applicant or the respondents shall be those which would have been recovered, if this action had been commenced in the District Court, by that party pursuant to items 1 to 101 and item 105 of the scale of fees and costs in Schedule 2 to the District Court Rules. The qualification is that those maximum costs should include, in addition, the filing and other fees paid by that party pursuant to the Federal Court of Australia Regulations: the action has been commenced in this Court and cannot be transferred to the District Court and each party will necessarily have to pay fees fixed by the Regulations to bring this matter to trial in this Court, even though it is the applicant who will incur by far the larger burden in that regard.

The effect of this order is that, in all probability, a different amount will be recoverable for costs by the applicant, if he succeeds, from that which will be recovered by the respondents, if they succeed. The parties’ failure to put any information before the Court which would enable it to consider fixing a specific figure deprives the Court of the ability to make any sensible judgment on what that figure might be fixed. But the parties, by their conduct, should not be able to deprive the Court of the capacity to exercise the power conferred by O 62A. And I do not think O 62A r 1 requires the Court to fix a specific dollar amount, so long as the order is one which operates equally. The order I will make operates equally in limiting the costs recoverable by whoever turns out to be the successful party to those recoverable under the District Court scale.

The respondent submitted that O 62A, properly construed, empowered the Court to limit the maximum costs recoverable on a party and party basis by one party only, in the event of that party’s success, while leaving it open for the other party, in the event of its being successful, to recover all the costs provided for by the scale of fees and costs referred to in Federal Court O 62 r 12; the respondent also submitted that an order should only be made here that fixes the maximum costs recoverable by the applicant, in the event of its succeeding in the action.

In Sacks,Beazley J, at 513, said that the rule was designed to treat parties equally and rejected a submission by one party that the Court was empowered to make an order under O 62A that would fix the maximum costs recoverable by one party, should that party succeed, but leave it open to the other party to recover its full costs, should it succeed. I expressed the same conclusion as to the operation of O 62A in Maunchest Pty Ltd v Bickford (7 July 1993, unreported). I adhere to that view.

Woodlands was a representative action brought under Part IVA the Federal Court of Australia Act 1976 (Cth) with a considerable public interest element in it; the applicants had obtained legal aid under the Legal Aid Commission Act 1979 (NSW). Wilcox J made an order pursuant to O 62A that fixed the maximum costs recoverable on a party and party basis as between the applicants and any one respondent as the maximum amount that would have been recovered by that respondent from the Legal Aid Commission if the applicants had sued in the Supreme Court, rather than the Federal Court. Contrary to the submissions on behalf of the respondent, the order made by Wilcox J under O 62A applied equally to applicants and respondents.

I do not think that O 62A r 2, and in particular r 2(d), provides any ground for thinking that O 62A empowers the Court to limit the costs recoverable by one party only. Rule 2, in my opinion, proceeds on the assumption that the order made under r 1 will apply equally by fixing the maximum costs recoverable by the successful party in the action, but recognises that such a limit would operate unfairly where the ultimately unsuccessful party has acted in a way which has unjustifiably increased the costs incurred by the ultimately successful party and provides that, to that extent, the successful party can recover party and party costs additional to those it may ultimately may be able to recover under the order made under r 1.

While it has not been necessary for me to form a concluded view on the applicant’s conduct of the litigation before deciding to make an order under O 62A, there may be cases in which one party blatantly uses court procedures to impose an unreasonably heavy cost burden on the other in which it might be appropriate to take that into account as a reason favouring the making of an order under O 62A. But, in such case, an order operating equally can still be expected to provide real benefit to the innocent party by enabling it to conduct the litigation on its side in much the same economical way that it could be expected to have done, but for the other side’s tactic.

I certify that this and the preceding 12 pages are a true copy of the reasons

for judgment herein of the Honourable Justice Drummond.

Associate: Date: 24 April 1997

Solicitor for the applicant: Clayton Utz

Counsel for the respondents: P Hack

Solicitor for the respondents: Bridge Brideaux

Date of hearing: 23 April 1997

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