FEDERAL COURT OF AUSTRALIA

COSTS - Court’s discretion to deprive successful party of all or part of its costs - successful respondents deprived of part of their costs because of improper discovery and because of pre-trial correspondence which led applicant to believe it had good cause of action.

Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748, applied

Queensland Wire Industries Pty Ltd v BHP Co Ltd (1987) 17 FCR 211, followed

Inn Leisure Industries Pty Ltd v DF McCloy Pty Ltd (No 2) (1991) 28 FCR 172, referred to

Commissioner of the Australian Federal Police v Razzi (No 2) (1991) 30 FCR 64, referred to

Cretazzo v Lombardi (1975) 13 SASR 4, referred to

Verna Trading Pty Ltd v New India Assurance Co Ltd [1991] 1 VR 129, applied

COOGI AUSTRALIA PTY LTD v HYSPORT INTERNATIONAL PTY LTD & ORS

VG 284 OF 1993

DRUMMOND J

BRISBANE

22 OCTOBER 1998

THE COURT ORDERS THAT:

1.                  The applicant’s claims against the respondents are dismissed.

2.                  Judgment be entered for the first to sixth respondents in respect of their claim under s 202 the Copyright Act 1968 (Cth).

THE COURT DECLARES THAT:

3.                  The threats, as particularised in para 28 of the cross-claim made by Coogi Australia Pty Ltd whether by itself, its directors, officers, servants or agents or otherwise howsoever, were and are unjustified.

THE COURT ORDERS THAT:

4.                  An inquiry be held to ascertain whether:

(a)                the respondents have sustained any and if so what damages by reason of giving undertakings to the Honourable Justice Olney on 27 July 1993 in this proceeding, which the applicant ought to pay according to its undertaking contained in the said order of the Honourable Justice Olney made on 27 July 1993;

(b)               the respondents have sustained any and if so what damages by reason of the said unjustified threats made by Coogi Australia Pty Ltd in breach of s 202 the Copyright Act 1968 (Cth) whereby the respondents withdrew their HY95-style garment from sale, which Coogi Australia Pty Ltd ought to pay;

and the applicant pay to the respondents the amounts found due on such inquiry.

5.         (a)        The first to sixth respondents pay the applicant’s taxed costs under the order of 21 October 1996.

(b)               Subject to (a), the applicant pay to the first to sixth respondents four-fifths of the taxed costs of its proceeding against those respondents including all reserved costs.

(c)                The applicant pay the seventh respondent’s taxed costs of its proceeding against that respondent including reserved costs.

(d)               The applicant pay one-half of the first to sixth respondents’ taxed costs of their cross-claim.

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

REASONS FOR JUDGMENT

The applicant submits that, even though it was unsuccessful in the claims it brought against the respondents and also unsuccessful in resisting the cross claim of the first to sixth respondents, it is entitled to substantial relief from the rigour of the rule that costs ordinarily follow the event.

The broad guidelines in accordance with which the discretion to deprive a successful party of the whole or part of its costs is to be exercised are stated in Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 at 48,136, a passage approved by the Full Court in Queensland Wire Industries Pty Ltd v BHP Co Ltd (1987) 17 FCR 211 at 222.  It is sometimes said that the proper application of these guidelines requires unreasonable conduct in connection with the case on the part of the successful respondent.  But there are cases, including Inn Leisure Industries Pty Ltd v DF McCloy Pty Ltd (No 2) (1991) 28 FCR 172 at 174 and Commissioner of the Australian Federal Police v Razzi (No 2) (1991) 30 FCR 64 at 67 - 68, in which the ordinary rule has been departed from and the successful party has been deprived of part of its costs where nothing more has occurred than the failure of that otherwise successful party on a discrete issue whose litigation occupied a significant part of the hearing.  In Razzi, in particular, Wilcox J took what seems to me a different approach from that of Jacob J in his “note of cautious disapproval” in Cretazzo v Lombardi (1975) 13 SASR 4 at 16.  It is an approach which I think is in accordance with the authorities.  The discretion to deprive a successful party, including a successful respondent, of all or part of its costs is unfettered, but must be exercised judicially, ie, for some reason connected with the case:  see Cretazzo at p 11 and Verna Trading Pty Ltd v New India Assurance Co Ltd [1991] 1 VR 129 at 153 - 154.  The true nature of the discretion is shown by the abandonment of the once inflexible rule that a successful defendant would never be ordered to pay any of the costs of an unsuccessful plaintiff:  see Verna Trading at 151 - 152.

The applicant went to trial on an amended pleading claiming copyright in a range of works.  It was only late in the hearing that it confined its claims to copyright in the XYZ fabric and garments and in the computer program (and certain information incorporated in that program).  It succeeded in establishing ownership of copyright in respect of the fabric, but on a significantly narrower basis than claimed; it failed to establish infringement of that copyright.  It also established ownership of copyright in the computer program, but once again failed on the issue of infringement.

If as I think is the correct approach to the exercise of the discretion, costs can be apportioned between issues on which the successful party succeeded and those on which it failed, even in the absence of unreasonable conduct by that party, I consider that the only discrete issue which added in any significant way to the protraction of the litigation was those respondents’ challenge to the applicant’s claim that the computer program in which it claimed copyright was a “computer program” for the purposes of the Copyright Act 1968 (Cth).  A modest reduction in the respondents’ party and party costs of defending the claim, might therefore be justifiable.  But when regard is had to the way the applicant narrowed, in a significant way, its own claim during the course of the hearing, ie, after the respondents had prepared to meet the wider case, the justification for this limited apportionment is much weakened.

In any event, but subject to one qualification, I do not think that, in view of the way in which the applicant framed and prosecuted its case, any of the first to sixth respondents can be regarded as having themselves conducted their defences so unreasonably in raising a number of issues which they failed to make out as to justify depriving them of part of their costs.  The qualification is this:  in my opinion, the applicant is entitled to recover from the first to sixth respondents the costs incurred due to the deliberate decision of the fourth respondent, in which the other Hysport respondents are implicated, not to make proper discovery before trial of the correspondence with Shima Seiki.

The undertakings given by the respondents to the Court on 27 July 1993 are not, in my opinion, capable of being construed as in any way suggesting that the applicant’s claims might be justifiable:  a reading of the order incorporating this undertaking shows that the undertaking was given to avoid a dispute over whether an interlocutory injunction pending trial should be granted; this occurred in circumstances where it was plain both parties intended to test their respective positions by a trial for the conduct of which the Court gave detailed directions at the same time as it accepted the respondents’ undertaking.

But I accept that the applicant is entitled to a reduction in the costs recoverable by the first to sixth respondents in defending the applicant’s claims on the ground that, by the first respondent’s letter of 22 April 1993, the respondents led the applicant reasonably to believe that it had a good cause of action which it was justified in bringing and pursuing.  In this letter, the fourth respondent, writing on behalf of the first respondent, said that “We at Hysport, have, however, compared our garment [ie, Hysport’s HY95 design] with the Coogi design and are satisfied that they have been produced from the same knitting program”; Hysport went on to accept that Coogi, not Shima Seiki, was the owner of copyright in the program.  I have found that Coogi was justified in its belief that Hysport’s HY82 style was also generated from the same Shima Seiki program.  Hysport’s statements in this letter (though incapable, for the reasons given in my judgment, of being probative of copyright infringement) entitled Coogi to believe that it was justified in starting and, to a lesser extent, in expanding and continuing the litigation.  Hysport’s conduct in publishing its letter can thus be said to have contributed, in part, to causing Coogi to seek vindication of its copyright entitlements by litigation.

Having regard to this consideration and to the fact that the first to sixth respondents were all involved in a deliberate decision to withhold discovery with respect to a not insignificant matter in the litigation, a default that imposed some additional, but hard to quantify costs on the applicant, I consider that those respondents should be deprived of one-fifth of their costs of defending the applicant’s claim.

There is no basis upon which I consider the seventh respondent should be deprived of the benefit of the ordinary order as to costs.  The quantification of those costs is, of course, a matter for the taxing officer and it is really to that official that I think the applicant’s submissions here are more appropriately directed.

So far as the costs of the cross-claim by the first to sixth respondents are concerned, they obtained only part of the relief they sought, viz, a declaration and a limited inquiry as to damages.  They failed to obtain injunctive relief in respect of the threats cross-claim, a more general inquiry as to damages and they also failed to obtain the injunction sought restraining the applicant from representing itself as owner of copyright in respect of the XYZ design fabric:  the applicant was successful in establishing its ownership of that copyright in furtherance both of its own claims and of its defence to the cross-claim.  The first to sixth respondents should therefore recover only one-half of their costs of the cross-claim.  These costs may not be great.  But it is for the taxing officer to determine what they are.

Associate:

Dated:              22/10/98