REASONS FOR JUDGMENT

1                                             The remaining issue in this matter is costs. 

2                                             On 19 August 2010, in accordance with reasons published on the same date (Jack Brabham Engines Limited v Beare [2010] FCA 872), I dismissed the application and statement of claim in its entirety and allowed the cross-claim in part.  I also made the following orders in respect of costs:

4.         The applicants pay the respondents’ costs of the proceeding (including of the cross-claim), as agreed or taxed.

5.         Leave be granted to each party to notify the Associate to Jagot J within 14 days of the date of these orders whether that party wishes to be heard on costs.  If either party exercises this leave, order 4 be vacated and the following directions take effect:

(a)        any party exercising the leave file and serve written submissions on costs within 7 days from the expiry of the 14 day period;

(b)        the other parties file and serve any written submissions on which they wish to rely within 7 days after service of the written submissions in accordance with (a); and

(c)        the first-mentioned party file and serve any written submissions in reply within 7 days after service of the written submissions in accordance with (b).

3                                             Each of the applicants exercised the leave with the consequence that written submissions were filed as contemplated by order 5.  In accordance with the applicants’ request I also allocated a further hearing day, 7 October 2010, for the making of oral submissions on costs.

4                                             The applicants’ contend that: - (i) as between the fourth applicant, Sir Jack Brabham, and the respondents, there should be no order as to costs, (ii) the respondents should pay the applicants’ costs with respect to certain issues (including on an indemnity basis), and/or (iii) there should be no order as to costs generally or with respect to the issues excluded from the apportionment. 

5                                             The first proposed order relating to Sir Jack Brabham is said to be in the interests of justice because he is an elderly person of outstanding merit, his involvement was limited, and such involvement as he had was caused by the actions of the respondents in naming him on the internet and contacting him at his private residential address.  Further, that the root cause of his involvement was the respondents’ conduct in including adverse statements about him in their “chapter of truth” posted on the internet.

6                                             The second and third proposed orders, either that there be no order as to costs or for costs to be apportioned for various reasons specific to certain issues, are also said to be in the interests of justice. 

7                                             As to the apportionment, in summary, the applicants contend that:

(1)               Court ordered mediation: there should be no order for costs against the applicants.  According to the applicants the respondents (bar one, Speed of Light Pty Ltd), in effect, did not co-operate so as to enable the mediation to succeed.

(2)               Affidavits of Shirley and Frederick Muhm: the respondents should pay the applicants’ costs in connection with these affidavits on an indemnity basis as they were struck from the Court’s records.

(3)               Witnesses not called: there should be no order for costs against the applicants in connection with the affidavits of Mr Sonnenburg and Mr Balamukundan.  According to the applicants after much delay neither witness was called.

(4)               Settlement with Speed of Light: there should be no order for costs against the applicants in connection with the giving of evidence by Mr White, the principal of Speed of Light, as the applicants’ claims against Speed of Light settled.

(5)               Court fees: as the applicants paid the Court hearing fees and reside in different States it was fair to have the matter in Sydney.  Thus, each party should bear their own travel and accommodation costs.

(6)               Expert witnesses: the evidence of Dr Honnery and Ms Murone to the effect that the commercial potential and value of the Beare Head engine could not be assessed did not support Mr Beare’s cross-claim.  Instead Mr Beare relied on the applicants’ expert evidence to support his cross-claim.  Accordingly, the respondents should bear the costs incurred in connection with the evidence of Dr Honnery and Ms Murone.

(7)               Return of Mr Beare’s goods and chattels: the respondents should not have their costs of this claim because Mr Beare did not succeed on obtaining damages and did not obtain an order for return of all goods and chattels claimed.

(8)               Subpoena to Victorian Police: the applicants should not be ordered to pay costs in connection with the respondents’ application to set aside the subpoena to the Victorian Police in respect of Mr Eleftheriadis.  The application was unsuccessful as the subpoena was relevant to Mr Eleftheriadis’ credit (see Jack Brabham Engines Limited v Beare [2010] FCA 35).

(9)               Exhibit 5 (JBE accounts): the applicants should not pay the respondents’ costs in connection with the production of JBE’s financial records.  According to the applicants the discovery required by the respondents of JBE’s financial records was onerous and unreasonable having regard to the fact that JBE’s accounts are audited.  Further, much of Exhibit 5 was already available annexed to various affidavits and otherwise but the respondents persisted in serving repeated notices to produce for additional financial information.

(10)           Inaccuracies in judgment: according to the applicants certain findings in the reasons for judgment are inaccurate including findings with respect to the adequacy of available financial information, the offer information statement, the government grant, and the seed capital offer. 

(11)           Interlocutory orders: interlocutory orders were made on 19 December 2007 (and later amended on 15 February 2008).  Those orders are consistent with the finding that JBE owns the patents.  That finding also justifies the bringing of the proceedings.  JBE is thus the sole person entitled to exploit the patents including Australian Patent 685683.  In consequence the applicants are entitled to orders in their favour to the effect that: - (i) JBE is the owner of Australian Patent 685683 and corresponding patents in overseas countries, (ii) any future development work on Australian Patent 685683 by Mr Beare, Mr Eleftheriadis or SSED be reported annually to the directors of JBE, (iii) any testing, research or other forms of evaluation (in respect of, I infer, the patents) by Mr Beare, Mr Eleftheriadis or SSED may not be published without JBE’s permission, and (iv) Mr Beare, Mr Eleftheriadis or SSED “if any again transgress” be restrained from any advertising, marketing or future exploitation of Australian Patent 685683.

8                                             I summarised the general principles relevant to costs in Haviv Holdings Pty Limited v Howards Storage World Pty Limited (No 2) [2009] FCA 652 as follows:

[7] The award of costs is discretionary (s 43(2) of the Federal Court of Australia Act 1976 (Cth)).  The discretion is broad but not unconfined.  It is a judicial discretion to be exercised on a principled basis. 

[8] Costs are awarded to compensate the successful party.  For this reason costs ordinarily follow the event (Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11; Latoudis v Casey (1990) 170 CLR 534 and Ruddock v Vadarlis (No 2) (2001) 115 FCR 229; [2001] FCA 1865 at [33] – [36]).

[9] In Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 at 271 the Full Court of the Federal Court approved the observations of Toohey J in Hughes v Western Australian Cricket Assn (Inc) (1986) 8 ATPR 40-748 at p 48-136 as follows:

1. Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order …

2. Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which it has failed …

3. A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party's costs of them. In this sense, “issue” does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law …

[10] To these considerations, the Court in Dodds added the following observations (at 271 - 272):

The propositions enunciated in that case are subject to the further consideration that justice may not be served if parties are dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case…

…

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.

[11] In Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at the New South Wales Court of Appeal discussed the apportionment of costs in these terms:

[6] Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which the appellant was successful and those on which it failed.  Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported).

[7] As the appellants submit, the commencing position is that costs follow the event so that a successful party is entitled to costs.  In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 (at [24]).  A similar approach is adopted in the Court of Appeal. If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick & Ors (No 2) [2006] NSWCA 374 (at [27]).

9                                             On appeal (Howards Storage World Pty Ltd v Haviv Holdings Pty Ltd (2010) 182 FCR 84; [2010] FCAFC 5) Gray J in the Full Court said:

[17] The overriding principle that costs are in the discretion of the Court can also be expressed in terms of the negative proposition that no rule or principle should be applied mechanically in the determination of the question where costs should lie in any particular case.  Attention must always be paid to the particular circumstances of the individual case.  The aim is to do substantial justice in relation to costs, based on the outcomes of the various issues in the proceeding, as between the entities that are parties to that proceeding.

10                                          The difficulty for the applicants is that nothing in the submissions made on their behalf or in the circumstances of the case discloses any principled basis for departing from the ordinary principle that costs should follow the event. 

11                                          Contrary to the applicants’ case the fact of principal relevance is not that interlocutory orders were made by consent after lengthy argument before and encouragement by Bennett J.  Those interlocutory orders involved concessions by both the applicants and the respondents.  The fact of principal relevance, as the reasons for judgment disclose, is that the applicants continued the proceedings after those interlocutory orders were made and acts pursuant to them carried out, yet failed in each and every one of their claims against the respondents. 

12                                          In contrast, Mr Beare succeeded on part of his cross-claim against Mr Casey.  It may be acknowledged that Mr Beare did not obtain an order for damages in his favour.  The reason he did not do so was my conclusion that the evidence the respondents called from Dr Honnery and Ms Murone in answer to the applicants’ claims not only undermined the applicants’ main claims for damages, but also that of Mr Beare.  In other words evidence relevant to the applicants’ claims was also determinative of the part of Mr Beare’s cross-claim on which he failed.  Further, Mr Beare’s claim for damages was not defeated by reason of any evidence the applicants called.  If I had accepted any part of the applicants’ case on the value of the Beare Head engine technology (which I did not) then it would have followed, from my findings, that Mr Beare would have been entitled to an order for damages in his favour by reason of Mr Casey’s misrepresentations to Mr Beare in 2001 by which Mr Casey obtained rights in the patents (which Mr Casey then transferred to JBE in exchange for shares).  This fact exposes the inter-relationship between Mr Beare’s cross-claim (brought against the first and second applicants only) and the applicants’ claims as a whole (that is, involving all four applicants).

13                                          In these circumstances, and given the limited scope of Mr Beare’s cross-claim compared to the magnitude and breadth of the applicants’ statement of claim, the nature of Mr Beare’s cross-claim as essentially responsive to the applicants’ claims and the legal and evidentiary inter-relationship of Mr Beare’s cross-claim with the applicants’ claims, it is fair to deal with the matter globally and to characterise the outcome of this proceeding as one in which the applicants wholly failed and the respondents basically succeeded.  This was the basis for the order I made on 19 August 2010 that the applicants pay the respondents’ costs of the proceeding (including of the cross-claim), as agreed or taxed. 

14                                          The applicants have not identified any principled basis from which to depart from the ordinary rule that costs should follow the event.

15                                          The decisions to which the applicants referred, on analysis, do not assist them. 

16                                          Gove v Black [2006] WASC 298 turned on its own facts.  Some of the plaintiffs succeeded against some of the defendants.  For example, some of the issues were not common to all plaintiffs.  Many of the parties were separately represented.  These facts are different from the present case as reflected in the principal reasons for judgment.

17                                          Probiotec Limited v University of Melbourne (2008) 166 FCR 30; [2008] FCAFC 5 at [59]-[60] confirms that the exercise of the costs discretion depends on the facts of the case.  This is not a case where any of the applicants were inactive (a point developed below in relation to the position of Sir Jack Brabham).  The applicants had common legal representation (as did the respondents).  The applicants’ evidence was filed in support of all of the applicants’ claims.  The applicants ran their case on the basis of their common interest in obtaining the relief sought in the application. 

18                                          Winner v Morey Haigh & Associates (A’Asia) Pty Ltd [1996] FCA 23 involved a claim for patent infringement and cross-claim for invalidity of the patent.  Both the claim and the cross-claim were dismissed.  Both parties having been unsuccessful, O’Loughlin J considered it appropriate that each pay their own costs of the proceedings.  As described above, the present case is not analogous. 

19                                          As to Sir Jack Brabham, the observations I made in the reasons for judgment at [1]-[3] do not provide any proper basis to depart from the usual approach that Sir Jack Brabham, as an unsuccessful applicant, should be jointly and severally liable for the respondents’ costs.  First, the personal merits and age of any party are beside the point.  Costs compensate the successful party.  The merits or otherwise of the unsuccessful party (at least outside the context of conduct in the proceeding) are immaterial.  Second, I said that Sir Jack Brabham had little involvement in the events which had given rise to the case (at [2]).  The fact is, despite his lack of real involvement in those events, Sir Jack Brabham was an applicant in the proceeding.  He remained an applicant after interlocutory orders were made by consent.  He claimed orders additional to those interlocutory orders.  He prepared three affidavits in support not only of his own claims but also those of the other applicants.  These considerations are a sufficient basis to reject the applicants’ submission that there should be no order as to costs against Sir Jack Brabham.

20                                          For these reasons it is not necessary to rely upon an additional fact to which the respondents referred, being the applicants’ position in response to the respondents’ application for security for costs against JBE.  On 7 May 2008, the applicants, in opposing any order for security for costs, expressly acknowledged that each of the applicants would be jointly and severally liable for the applicants’ costs.  If consideration of that fact had been necessary, it would have supported the conclusion already reached that Sir Jack Brabham, in common with the other applicants, should be subject to the costs order in the respondents’ favour.

21                                          As to the applicants generally, it is not the case that the reasons for judgment should be understood as confirming the substantial role played by Mr Beare’s cross-claim.  The cross-claim, as noted, was limited in scope and essentially defensive in nature.  Other than the claim for return of chattels, the cross-claim responded to the applicants’ claims for damages and, indeed, relied on the applicants’ evidence to support the amount of the claim.  

22                                          As to the specific matters the applicants identified in support of their contention for apportionment, nothing in the circumstances of the case provides a proper basis for attempting to separate those matters from the general result in which the applicants wholly failed and the respondents basically succeeded.  Having regard to the object of doing substantial justice in the context of the proceeding as a whole I am satisfied that none of the matters the applicants identified justify the separate treatment proposed.  If it be necessary to deal with each matter the applicants identified, my conclusions are as follows:

(1)               Court ordered mediation: mediations are part and parcel of the overall litigious process.  There is no sound evidentiary basis to support the applicants’ contention about the respondents’ lack of co-operation.  The settlement with Speed of Light cannot affect the entitlement of the other respondents to costs in all of the circumstances.

(2)               Affidavits of Shirley and Frederick Muhm: the striking out of these affidavits was also part and parcel of the overall litigious process.  The hearing involved numerous procedural rulings, some of which were decided in the applicants’ favour and some in the respondents’ favour.  It is inappropriate and unjust to attempt to isolate one procedural ruling and determine for that ruling, in isolation, a separate costs regime. 

(3)               Witnesses not called: forensic decisions about which witnesses are necessary to be called are also part and parcel of the overall litigious process.  The mere fact that certain witnesses were not ultimately called is not a sufficient reason, at least not in the circumstances of this case, to warrant any separate treatment of that part of the costs incurred.

(4)               Settlement with Speed of Light: Mr White’s evidence related to the claims against the other respondents.  In these circumstances the fact of settlement with Speed of light is beside the point.

(5)               Court fees: this contention is without merit.  The applicants commenced the proceeding well aware of the fact that Mr Beare resided in South Australia and Mr Eleftheriadis in Victoria.  There is no basis upon which the successful respondents would be deprived of travel and accommodation costs merely because the matter was heard in Sydney mid-way between the applicants (effectively residing in Queensland) and the respondents.

(6)               Expert witnesses: the evidence of Dr Honnery and Ms Murone, which I accepted, undermined the applicants’ main claims for damages.  The fact that I concluded their evidence also undermined Mr Beare’s claim for damages does not mean that it would be just to deprive the respondents of this aspect of their costs.

(7)               Return of Mr Beare’s goods and chattels: Mr Beare’s claim for damages was separate from his claim for the return of goods and chattels.  The reasons Mr Beare’s failure on that part of the cross-claim involving damages should not deprive the respondents of the costs of the proceeding as a whole have already been given.  Otherwise, as to the goods and chattels, Mr Beare succeeded but for one item (due only to inadequate identification of the item in question).  The applicants’ defence to Mr Beare’s claim for return of his goods and chattels was wholly rejected.  Hence, there is no basis for the applicants’ contention for separate treatment of those costs.

(8)               Subpoena to Victorian Police: applications to set aside subpoenas are also part and parcel of the overall litigious process.  Moreover, and as the respondents submitted, orders were made limiting access to the documents to legal representatives and no use was made in the proceeding of any document produced under the subpoena.  In common with the position on affidavits, numerous procedural and other rulings were made during the course of the hearing.  There is no principled basis arising from the circumstances of the case justifying their separate treatment.

(9)               Exhibit 5 (JBE accounts): the applicants’ submissions are not supported by the available evidence.  Moreover, they are inconsistent with the fact that I accepted the whole of Ms Murone’s evidence about the inadequacy of the financial records of JBE made available to the respondents.  The documents in Exhibit 5 were relevant to the issues in dispute and there is no basis supporting the suggestion that it was improper or unreasonable for the respondents to have sought production of those documents and pressed for further production to address perceived inadequacies.

(10)           Inaccuracies in judgment: these submissions cannot support the applicants’ case on costs.  First, the submissions attempt to cavil with findings of fact made in the reasons for judgment.  An argument about costs is not the appropriate vehicle for any such submission.  Second, and as the respondents said, the submissions are themselves inaccurate.  Third, it is not apparent how those matters could be relevant to costs in any event.  The order for costs must be made on the basis of the actual outcome of the case (which was based on the actual findings made), not the outcome for which the applicants hoped but failed to obtain (based on other findings the applicants proposed but which were not made).

(11)           Interlocutory orders: the interlocutory orders were made by consent.  Ultimately, and as noted, the applicants failed on each and every claim they made against the respondents.  There was no need to discharge the interlocutory orders, however, because they either became defunct on the making of final orders automatically or were exhausted in the sense that nothing more remained to be done under them.  For this reason, the making of the interlocutory orders does not justify any separate treatment of the costs of that aspect of the matter.

23                                          Finally, the applicants’ contention that certain other orders should be made in their favour is misconceived.  The contention does not relate to the issue of costs and thus is outside the scope of the leave granted.  More to the point, the applicants did not seek such orders in their application.  Nor could they.  The applicants abandoned all claims of patent infringement before the hearing.  Nothing in the application or statement of claim could justify the making of orders as now sought by the applicants (outside the scope of the leave granted in respect of costs only). 

24                                          Insofar as the respondents made any positive case in respect of costs (as opposed to contending that the substantive order as made on 19 August 2010 should be reinstated), I do not accept that there is a proper basis for an indemnity costs order in respect of the discontinued claim against Mrs Beare.  As the respondents did not press for any other costs on an indemnity basis (submitting that it was a matter for the Court to decide whether the applicants had so far departed from their obligations to justify an indemnity costs order) it is not appropriate to address that issue further.

25                                          For these reasons I am satisfied that in all of the circumstances of the case the order I made on 19 August 2010 does substantial justice between the parties.

Associate:

Dated:         8 October 2010