FEDERAL COURT OF AUSTRALIA

Career Step, LLC v TalentMed Pty Ltd (No 3) [2018] FCA 411

ORDERS

THE COURT ORDERS THAT:

1.    The respondents pay 80% of the applicant’s costs of the proceedings up to and including 21 July 2017.

2.    The applicant’s application that its costs be taxed and paid immediately is refused.

3.    In the alternative to order 2, order that the applicant must not tax its costs under order 1 until the proceeding is finished or further order.

4.    Without prejudice to any further application for security by the respondents in respect of the remaining claims pursued by the applicant, the amount of $165,000 paid into court by the applicant as security for costs be returned to the applicant in full by transfer into the trust account of the applicant’s solicitor.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

ROBERTSON J:

1    On 28 February 2018, I delivered judgment in Career Step, LLC v TalentMed Pty Ltd (No 2) [2018] FCA 132 and made orders for the parties to bring in short minutes of order to give effect to those reasons for judgment. For a full understanding, these reasons should be read with those reasons. Terms defined in those reasons have the same meaning when used here.

2    By way of brief background, as a result of an order made on 23 May 2017, for reasons of urgency, the entirety of the controversy between the parties has not been determined. Nevertheless the parties agree that, to give effect to the judgment of 28 February 2018, it is appropriate to make the following orders and to note the following undertaking:

THE COURT DECLARES THAT:

Copyright

1    By creating and distributing course materials from about 6 September 2016 until on or about 24 February 2017 to its students enrolled in the 10478NAT Diploma of Healthcare Documentation course (TalentMed v1), the First Respondent has infringed the Applicant’s copyright in the Applicant’s course materials, being Exhibit JR3 to the Affidavit of Jerolyn Robertson sworn 6 June 2017 (Career Step Course Materials), by reproducing and communicating a substantial part of the literary works contained in the Career Step Course Materials, without the licence of the Applicant (TalentMed v1 Infringement).

2    The Second Respondent has infringed the applicant’s copyright in the Career Step Course Materials by authorising the TalentMed v1 Infringement.

3    The Third Respondent has infringed the applicant’s copyright in the Career Step Course Materials by authorising the TalentMed v1 Infringement.

Breach of contract

4    By creating and distributing TalentMed v1, the First Respondent has breached clause 4.1 of the Academic Partner Agreement dated 1 September 2006 (Academic Partner Agreement) by using the Career Step Course Materials for a purpose other than the sales and marketing of the Career Step Course, without the prior written consent of the Applicant.

THE FIRST RESPONDENT, SECOND RESPONDENT AND THIRD RESPONDENT UNDERTAKE TO THE COURT:

5    Further to the undertaking given to the Court on 15 May 2017, the Respondents, whether by themselves, their servants, agents or otherwise howsoever, will not:

a.     reproduce or authorise the reproduction of;

b.     communicate to the public, or authorise the communication of; or

c.     distribute articles embodying,

TalentMed v1.

3    The parties are in agreement that the proceedings be referred to mediation, to take place on or before 26 May 2018.

4    The parties have not been able to agree on all the orders appropriate to be made and these reasons deal with the three areas of dispute, all of which relate to costs. I shall refer briefly to the parties’ submissions on each of these issues and state my consideration of the competing contentions.

The parties’ costs

5    The applicant submitted there should be an order that the respondents pay its costs up to and including 21 July 2017, with no discount. I was told that the significance of that date is that a settlement offer was then made, after the hearing of the separate question but before final written submissions had been completed. I was not told the detail of that offer but counsel on each side accepted that I should not concern myself with costs after that date.

6    The respondents submitted that the parties’ costs should be reserved. In the alternative counsel for the respondents submitted that in light of the mixed success of the applicant, particularly in relation to TalentMed v2, there should be some level of discounting so that the applicant, if costs were not reserved, should be awarded only 65% to 70% of its costs.

7    In my opinion it is not appropriate to reserve costs. A distinct and complex phase in the proceedings has been concluded after a three day hearing and further lengthy written submissions. Underlying questions of liability have been determined: see the orders set out at [2] above. The course of the hearing so far is relatively fresh in people’s minds.

8    The more complex question is whether there should be some level of discounting and, if so, what level.

9    A question of substance in the proceedings concerned TalentMed v2 in respect of which the applicant failed to obtain relief. I do not accept the submissions on behalf of the applicant that there should be no discount because the primary issue on the separate question was liability; that TalentMed v2 involved the same issues as TalentMed v1 and that the comparison with TalentMed v2 did not take long. However, on the other side, I do not think that it is correct to reason that because the early hearing date was fixed so as to avoid an application for an interlocutory injunction in relation to TalentMed v2, this means that a large degree of discounting is appropriate.

10    I do not accept that either side acted unreasonably. No doubt, with hindsight, it is easy now to see what claims or defences have or do not have merit, but that is not the test. It is true to say that the respondents disputed the applicant’s claims, including ownership and authorship of the applicant’s materials, but in my opinion they did not act unreasonably in doing so.

11    In so concluding I have considered, but not accepted, the applicant’s submission that there should be no apportionment of costs because the respondents acted unreasonably in refusing to admit that the first respondent had copied the applicant’s material and that the respondents, through their lack of candour, had significantly added to the length and costs of the proceeding. Again, in my opinion, the respondents did not act unreasonably in these respects.

12    Neither do I accept that the form of undertaking now given in relation to TalentMed v1, as compared to the qualified undertaking given on 15 May 2017, has a significant bearing on costs. It seems to me to be clear that TalentMed v2 had replaced TalentMed v1 by late February 2017.

13    I put out of account as insubstantial in relation to costs that the applicant failed on part of its contract case and in relation to its claim that each of the second and third respondents was a joint tortfeasor. In relation to the latter point, I did find that each of the second and third respondents authorised the infringement in respect of TalentMed v1.

14    In my opinion the appropriate discount is 20%, having regard to the relationship between the applicant’s claims for relief in respect of TalentMed v1, where it was successful, and TalentMed v2, where it was unsuccessful. I take into account that apart from the question of the extent of the copying, the issues were the same in respect of each of TalentMed’s two versions.

15    I therefore order that the respondents pay 80% of the applicant’s costs of the proceedings up to and including 21 July 2017.

Whether the costs should be taxed immediately

16    The Federal Court Rules 2011 (Cth) provide:

40.13    Taxation of costs awarded on an interlocutory application

If an order for costs is made on an interlocutory application, the party in whose favour the order is made must not tax those costs until the proceeding in which the order is made is finished.

Note:    The Court may order that costs of an interlocutory application be taxed immediately.

17    The applicant submitted that there should be an order that its costs be taxed and paid immediately, in reliance on Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International BV (No 5) [2018] FCA 19, especially at [9], where Perram J said:

Thirdly, a range of factors may justify departure from the ordinary rule: where the final determination of the proceedings is far away: Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 13) [1995] FCA 1459 at [5] (‘It would be wrong if the successful parties do not enjoy the fruits of their order for costs for such a long time.’); where a party has been required to incur significant costs over and above those which it would have incurred had the opposing party acted in handling the proceeding with competence and diligence (Life Airbag Company of Australia Pty Ltd v Life Airbag Company (New Zealand) Ltd [1998] FCA 545 (‘Life Airbag‘)); where, following a successful amendment application, a case is essentially a new proceeding (McKellar v Container Terminal Management Services Ltd [1999] FCA 1639 at [19] and [40]); where a discrete issue has been resolved (Australian Flight Test Services v Minister for Industry, Science and Technology [1996] FCA 1425 at [7]); or where there is some reason to think that interlocutory disputation is having the effect of draining the ability of one side to conduct the litigation (Clipsal at [12]).

The respondents opposed that course. I note that the applicant accepted as true that an order that there be a taxation of costs of the 26-28 June 2017 hearing “would lead to multiple taxations and there is the possibility of a set off at a later date”, but submitted that there were circumstances present in this case to justify an order that the costs be payable forthwith.

18    I shall assume that r 40.13 applies, as that was the footing on which the issue was addressed by the parties. So much seems to have been assumed in Nichia Corporation v Arrow Electronics Australia Pty Ltd (No 2) [2015] FCA 824. On that basis, as referred to by Perram J in Federal Treasury Enterprise at [8], the dominant considerations in relation to these proceedings are that they are part heard and the Court should avoid exposing the parties to multiple taxation proceedings and should keep in mind that subsequent events in the litigation may generate costs orders going in the opposite direction and in respect of which set-offs may ultimately be available (Bailey v Beagle Management Pty Ltd [2001] FCA 60; 105 FCR 136 at 145 [37]). I do not accept the applicant’s submission that any of the factors referred to in Federal Treasury Enterprise at [9] has been made out or should prevail.

19    I therefore decline to order that the applicant’s costs be taxed immediately.

20    The decision in Clipsal Australia Pty Ltd v Clipso Electrical Pty Ltd (No 4) [2017] FCA 436 at [22]-[30] suggests that the assumption that r 40.13 applies is not correct. Alternatively, therefore, I would make an order under r 1.35 inconsistent with r 40.12 to the effect that the applicant must not tax the costs I have ordered until the proceeding is finished or further order.

Security for costs

21    The applicant submitted that the purpose of the orders for security for costs had been fulfilled, that purpose being the completion of the litigation thus far. It followed that the security in the amount of $165,000 should be returned to the applicant in full by transfer into the trust account of the applicant’s solicitor. The applicant submitted that the respondents could seek further fresh security in relation to any outstanding claims in its statement of claim.

22    The respondents submitted that it was perhaps premature to decide this issue and it could be stood over until the next case management hearing in the Court, after the proposed mediation, on 13 June 2018.

23    It was common ground that the claims arising out of the respondents’ cross-claim would not justify retaining the security as in that instance the present applicant would be in substance in the position of a respondent.

24    The security for costs was originally ordered on 20 April 2017 by Perram J in respect of the applicant’s claim for urgent interlocutory relief and in the amount of $25,000. A second order was made by me on 13 June 2017 “in respect of the hearing commencing on 26 June 2017” and was for further security in the amount of $140,000.

25    In my opinion, the purpose for which security was ordered is spent and the amount should be returned to the applicant. The respondents may, if so advised, seek a fresh security in respect of any remaining claims pursued by the applicant.

Orders

26    I make orders accordingly.

Associate:    

Dated:    3 April 2018