FEDERAL COURT OF AUSTRALIA

Aristocrat Technologies Australia Pty Ltd v DAP Services (Kempsey) Pty Ltd (in liquidation) [2006] FCA 487

PRACTICE AND PROCEDURE – Costs – Whether partial costs order should be made in a case where the award of damages was well short of the amount claimed by the applicants but exceeded an offer made by the respondents – Whether the costs associated with the evidence of an expert should be excluded in a case where the experts’ opinions were unsupported by any evidence.

ARISTOCRAT TECHNOLOGIES AUSTRALIA PTY LIMITED and ARISTOCRAT INTERNATIONAL PTY LIMITED v DAP SERVICES (KEMPSEY) PTY LIMITED (IN LIQUIDATION) and DAVID ALLAN PARRY and RHONDA DENISE PARRY

NSD 490 OF 2005

WILCOX J

5 MAY 2006

SYDNEY

THE COURT ORDERS THAT:

1.         The respondents pay the applicants’ costs of the proceeding, including any reserved costs, but excluding all costs associated with the report or evidence of Stuart Robertson of Ernst and Young, Chartered Accountants.

2.         Order 1 be enforceable against the third respondent only to the extent of two-thirds of the said costs, as taxed or assessed.

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

REASONS FOR JUDGMENT ON COSTS

WILCOX J:

1                     When judgment was delivered in this matter on 22 March 2006, I reserved the matter of costs: see Aristocrat Technologies Australia Pty Limited v Vidtech Gaming Services Pty Limited [2006] FCA 275.  I invited submissions as to the appropriate costs order.

2                     The applicants seek a general order for costs of the proceeding.  They argue there is no reason to depart from the general rule that costs follow the event.  Their clients have succeeded in establishing liability.  Although the applicants failed to obtain injunctive relief, they obtained awards of damages against all the respondents.  In the case of the first and second respondents for $139,200 and, in the case of the third respondent, for $99,200.

3                     The respondents made an offer of settlement in the sum of $150,000.  This figure was inclusive of costs. The offer was put on the basis that $100,000 would be a reasonable estimate of the costs to date, leaving $50,000 for damages.  In essence, therefore, the applicants argue that, although the damages award fell well short of their claim, they beat the respondents’ offer and should have the costs of doing so.

4                     The respondents rely on the considerable discrepancy between the applicants’ claim for $6,350,145 and the damages awarded.  Counsel suggest that the general costs order should be limited to 25% of the costs incurred.  However, I am not aware that a discrepancy of this nature has ever been regarded as a justification for diminished costs, in the absence of specific applicable provisions such as Order 62 rule 36A(1) or (2) of the Federal Court Rules.  Of course, the situation may be different where the discrepancy flows from an applicant’s failure in relation to a discrete part of his or her claim.  In the present case the applicants failed on a trade marks claim and they also made a trade practices claim which I did not find it necessary to determine.  However, these claims did not extend the hearing or add materially to its cost.  Neither did the unsuccessful claim for an injunction.  Consequently, subject to one matter, I see no principled basis for reducing the general costs order below 100%.

5                     The qualification I have in mind is that Order 62 rule 36A(1) applies to the recovery against the third respondent.  That sub-rule provides that, where a party is awarded judgment for less than $100,000 in a money claim, ‘any costs ordered to be paid, including disbursements, will be reduced by one-third of the amount otherwise allowable … unless the Court or a Judge otherwise orders’.  I see no reason to make a contrary order in relation to the third respondent.  Consequently, the costs recoverable against her will be limited to two-thirds of the amount of the taxed or assessed costs.

6                     There is a subsidiary issue.  Counsel for the respondents argue that any general costs order should exclude all costs associated with the report or evidence of Stuart Robertson of Ernst and Young, Chartered Accountants.  I do not know the amount of these costs but they are probably substantial.

7                     In my earlier reasons for judgment, I stated why I declined to accept Mr Robertson’s estimate of damages.  My decision to do so was not an implied criticism of Mr Robertson but, rather, arose out of the fact that the matters he assumed were unsupported by evidence.  The applicants ought to have known that there was no evidence to support Mr Robertson’s calculations and, therefore, that his conclusions would be of no value.  In the circumstances, it was unreasonable for them to incur the expense of retaining Mr Robertson and procuring his report and attendance at court.

8                     Counsel for the applicants argued that the matters addressed by Mr Robertson ‘were entirely apposite to the issues arising in the proceeding’.  I agree.  However, an expert’s opinion, even on a matter fairly arising out of the pleadings, is of no value unless it is grounded in facts that are either admitted or proved.  It may be true, as counsel submitted, that ‘the need for expert forensic accounting assistance is plain’.  However, the need for evidence, upon which such assistance might fasten, is even more plain.

9                     The applicants should have a general costs order in their favour but it should exclude all costs associated with the report or evidence of Mr Robertson.

Associate:

Dated:              5 May 2006