FEDERAL COURT OF AUSTRALIA

TS & B Retail Systems Pty Ltd v 3Fold Resources Pty Ltd (No 4) [2007] FCA 635

COSTS – solicitor and client costs – whether warranted – Bullock order – Sanderson order – when applicable

PRACTICE & PROCEDURE – interest on judgment – rate to be applied – when State penalty interest rate to be applied – period of interest – relevance of delay

Penalty Interest Rates Act 1983 (Vic)

Besterman v British Motor Cab Co Ltd [1914] 3 KB 181

Bullock v London General Omnibus Company [1907] 1 KB 264

Cirillo v Consolidated Press Property Ltd (No 2) [2007] FCA 179

Clarke v Foodland Stores Pty Ltd [1993] 2 VR 382

ECML Pty Ltd v Essanda Finance Corp Ltd [1999] FCA 978

GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 201 ALR 55

Gould v Vaggelas (1984) 157 CLR 215

Hamod v New South Wales (2002) 188 ALR 659

Harbutt’s Plasticine Ltd v Wayne Tank and Pump Co Ltd [1970] 1 QB 447

Johnson’s Tyne Foundry Pty Ltd v Maffra Shire Council (1948) 77 CLR 544

Namol Pty Ltd v AW Balderstone Pty Ltd (No 2) (1993) 47 FCR 388

Marsh v Ruby [1975] VR 191

Riches v Westminster Bank Limited [1947] AC 390

Sanderson v Blyth Theatre Company [1903] 2 KB 533

Walker v Citigroup Global Markets Pty Ltd [2005] FCA 1866

TS & B RETAIL SYSTEMS PTY LTD v 3FOLD RESOURCES PTY LTD, PETER VANDERZAAG, FRANCIS D'MELLO and GARY WILLIAM SMITH

VID 147 of 2003

FINKELSTEIN J

4 MAY 2007

MELBOURNE

THE COURT DECLARES:

1. That the first respondent has:

(a)    infringed the applicant’s copyright subsisting in the drawings listed by number in Annexure A (the Drawings) and in the five tables of data listed by name in Annexure B (the Data) ;

(b)   breached the applicant’s confidence in the information contained in that part of the five tables of data  listed in Annexure B comprising kit numbers, item numbers, sequence numbers, quantities of parts in a unit and references to drawings of Trollope Silverwood & Beck Pty Ltd (the Confidential Data).

2. That the second and third respondents (and each of them) have:

(a)   authorised and procured the infringement by the first respondent of the applicant’s copyright subsisting in the Drawings and the Data;

(b)   breached the applicant’s confidence in the information contained in the  Confidential Data.

THE COURT ORDERS:

3. Each of the first, second and third respondents be, and it or he is, restrained, whether by it or his servants, agents or otherwise, without the licence of the applicant, from:
4. 1. reproducing or authorising the reproduction in a material form;
   2. making, authorising or causing the making of an adaptation or derivation of;
   3. publishing or authorising the publication of;

the Drawings or the Data.

4. Each of the first, second and third respondents be, and it or he is, restrained, whether by it or his servants, agents or otherwise, without the licence of the applicant, from:
5. 1. communicating;
   2. in any way disclosing;
   3. causing procuring or suffering the publication, communication or disclosure in any way to any person of        

any of the information contained in the Confidential Data.

5. Each of the first, second and third respondents deliver up upon oath to the applicant  all copies of the Drawings and the Data (whether in hard copy or electronic form) which are in the possession, power, custody or control of the first, second or third respondents or their servants and agents as the case may be.

6. The first, second and third respondents pay to the applicant:

a.       Damages in the sum of $200,000;

b.      Interest in the sum of $66,000;

c.       Additional damages of $50,000.

7.    The first, second and third respondents pay the applicant costs of the proceeding, such costs to be taxed in default of agreement.

8.    The applicant pay the fourth respondent’s costs of the proceeding, such costs to be taxed in default of agreement.

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

ANNEXURE A

ANNEXURE B

Five Tables of data stored in electronic form contained on the Applicant’s database management system with the following names:

REASONS FOR JUDGMENT

1                     The two outstanding issues to be resolved in this action are interest and costs.  Each gives rise to some nice points but, in the end, I am clear as to the course that should be taken.

2                     As regards interest, TS&B Retail, the successful applicant, seeks interest on damages in the amount of $200,000 for which judgment will be given.  A successful plaintiff is entitled to interest on a judgment debt for the period between the date when the cause of action arose and the date as of which judgment is entered unless good cause is shown to the contrary:  Federal Court of Australia Act 1976 (Cth), s 51A.  The rate of interest is not specified in the section but is left to the judge’s discretion.  The practice of the Federal Court is to apply the rate applicable in the jurisdiction in which the court is sitting unless that rate is penal or not “commercial”:  see generally GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 201 ALR 55; ECML Pty Ltd v Essanda Finance Corp Ltd [1999] FCA 978; Namol Pty Ltd v AW Balderstone Pty Ltd (No 2) (1993) 47 FCR 388; Walker v Citigroup Global Markets Pty Ltd [2005] FCA 1866. 

3                     The cases have left at large what is meant by a “commercial” rate of interest.  It could refer to what the plaintiff could earn on the money it has recovered if it had the money to invest or it could mean what it would cost the plaintiff to borrow the money.  Another question is whether the rate should be the wholesale or retail rate each of which may be properly described as a “commercial” rate. 

4                     As a general rule the interest which a successful party is entitled to expect is the rate it would pay to borrow the money in the retail market.  The average bank overdraft rate of interest charged to small businesses over the relevant period was close to 9% per annum.  I have taken the trouble of checking the figures with the Reserve Bank of Australia’s records to save the parties the time and trouble of obtaining what, on any view, is uncontroversial information.

5                     The statute dealing with interest on claims in Victoria is the Penalty Interest Rates Act 1983 (Vic).  The rate fixed under this Act is determined by reference, first, to what is described as an “appropriate institutional rate of interest”.  This rate is required to be a rate charged for loans or paid for borrowings by a public or commercial institution and which, in the opinion of the Victorian Treasurer, reflects prevailing commercial rates of interest.  The institutional rate of interest may then be adjusted to include a penalty element in order to set the penalty interest rate.  The penalty interest rate currently fixed under the Penalty Interest Rates Act is 12% per annum.  This is well above a commercial rate of interest and so will not be applied here. 

6                     The unsuccessful respondents, while not contending that TS&B Retail should not have any interest, say that the period for which interest should run ought be less than the period mentioned in s 51A.  The reason they say the period should be reduced is that TS&B Retail failed to bring the action on for trial with due diligence. 

7                     One policy behind the award of interest is to reimburse the plaintiff for having been kept out of his money by a defendant who has had the use of it himself in the meantime.  Riches v Westminster Bank Limited [1947] AC 390, 400; Harbutt’s Plasticine Ltd v Wayne Tank and Pump Co Ltd [1970] 1 QB 447, 468.  In general, therefore, a defendant will not establish that he has been disadvantaged by any delay because he has had the use of the plaintiff’s money longer than he should have been allowed to keep it:  Marsh v Ruby [1975] VR 191, 193.  But, as the cases show, delay can be relevant and certainly would have been relevant were a penalty rather than “commercial” rate of interest applied:  Clarke v Foodland Stores Pty Ltd [1993] 2 VR 382.

8                     In my reasons for judgment I explained that the damages awarded to TS&B Retail flowed from breaches of copyright committed between March 2003 and February 2004.  While copyright infringement had taken place much earlier and continued much later, this infringement did not result in TS&B Retail suffering any compensable loss.  Strictly speaking, the unsuccessful respondents should be charged interest on the damages as they accrued during the period from March 2003 to February 2004.  I have not, however, broken down the damages by, say, a month to month calculation.  It is, in my view, far simpler to allow interest to run from September 2003.

9                     Accordingly I propose to award interest on $200,000 at 9% per annum (based on the average bank overdraft lending rates to small business during the relevant period) for the period 1 September 2003 to the date of judgment, rounded to the nearest thousand dollars. 

10                  As regards costs, two separate questions arise.  The first is whether TS&B Retail should have its costs on a solicitor and client basis.  In my reasons for judgment I said this might be appropriate and explained why that might be so.  On further reflection I think there is no warrant for an order that costs be awarded on a solicitor and client basis.  In particular I do not believe that they are warranted by the manner in which the unsuccessful respondents conducted their case.  At one point I was tempted to conclude that TS&B Retail had been put to unnecessary expense because the unsuccessful respondents did not early on admit copying the drawings and confidential data.  But Mr Cawthorn makes two good points by way of answer.  First, TS&B Retail’s claim in its original formulation was so confusing and broad that it did not encourage a sensible admission.  Second, the broad claim was coupled with a claim in damages of around $3.5 million and was so unreasonable that the respondents had no real choice but to put TS&B Retail to its proof on every issue.  As Mr Cawthorn said the respondents did nothing that was illegitimate in that regard.  Moreover, as soon as TS&B Retail narrowed its claim, the admission of copying was made. 

11                  In these circumstances if I were to award costs on a solicitor and client basis that would only be by way of punishment and that is not permitted:  Hamod v New South Wales (2002) 188 ALR 659, 665; Cirillo v Consolidated Press Property Ltd (No 2) [2007] FCA 179.

12                  The second question is whether a Bullock or Sanderson order should be made in respect of the costs awarded in favour of Smith.  Those orders derive from Sanderson v Blyth Theatre Company [1903] 2 KB 533 and Bullock v London General Omnibus Company [1907] 1 KB 264.  The basis for the court’s exercise of its discretion to make such an order in favour of a plaintiff is that he should be indemnified for all expenditure reasonably and properly incurred by him in procuring judgment:  Besterman v British Motor Cab Co Ltd [1914] 3 KB 181, 186-187; Johnson’s Tyne Foundry Pty Ltd v Maffra Shire Council (1948) 77 CLR 544, 572-573.  The classic case is where the plaintiff is for reason of lack of knowledge unable to make an informed judgment of the party liable to him.  So, for example, if two defendants blame each other for the plaintiff’s loss, it is reasonable for the plaintiff to join them both and the unsuccessful defendant will be required to bear the costs of the successful defendant.  In Gould v Vaggelas (1984) 157 CLR 215, 230 Gibbs CJ said that the test was whether the suing of the successful defendant was reasonable, namely that the conduct of the unsuccessful defendant has been such as to make it fair to impose some liability on it for the costs of the successful defendant. 

13                  In my view there is nothing in the conduct of the unsuccessful respondents that makes it fair to shift to them the costs that must be paid to Smith to them.   

14                  There will be orders substantially in the form of the minutes submitted by the parties, to which will be added the appropriate orders for interest and costs.

Associate:

Dated:              4 May 2007