FEDERAL COURT OF AUSTRALIA

The Environmental Group Ltd v Bowd (No 2) [2019] FCA 1227

ORDERS

THE COURT ORDERS THAT:

1.    The respondent pay the first applicant nominal damages in the amount of $1.

2.    The respondent pay the applicants’ costs for the period ending on 30 August 2017.

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

ORDERS

THE COURT ORDERS THAT:

1.    The application be dismissed with no order as to costs.

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

REASONS FOR JUDGMENT

STEWARD J:

1    On 21 June 2019, I delivered reasons for judgment in this matter (“Reasons”) and ordered that the parties either agree upon the terms for relief, or failing agreement, to file submissions as to the orders I should make for final disposition of the proceeding: The Environmental Group Ltd v Bowd [2019] FCA 951 (21 June 2019). Perhaps unsurprisingly given the history of this matter, the parties could not agree upon the terms of the relief I should order. In what follows, I have used the same terminology from my earlier reasons for judgment.

2    There were two proceedings before me:

(1)    in the first one (VID 497/2017), EG, Baltec and TAPC (together, the “EG parties”) sued Mr Bowd for breach of his contract of employment, detinue and breach of copyright. The EG parties were mostly successful; and

(2)    in the second one (VID 580/2017), Mr Bowd sued EG and Mr Richardson for breaches of the Fair Work Act 2009 (Cth) (the “FW Act”) and the Corporations Act 2001 (Cth) (the “CA”). Mr Bowd was unsuccessful.

Proceeding VID 497 of 2017

3    In this proceeding I found that Mr Bowd breached his contract of employment with EG and breached the copyright of EG. I dismissed the claim in detinue; by the time of the hearing of the trial that claim had become spent or exhausted.

4    EG seeks orders for the payment of $1 as nominal damages and a further payment of $50,000 pursuant to s 115(4) of the Copyright Act 1968 (Cth) (the “Copyright Act”). The EG parties also seek an ordinary order for costs (with no reduction for the dismissal of the claim in detinue) and an order for indemnity costs for the period between 25 May 2017 and 17 August 2017. This was the period during which Mr Bowd retained the EG parties’ confidential information notwithstanding the execution on him of search orders issued by this Court.

5    Mr Bowd agrees that he should pay $1 as nominal damages but not additional damages of $50,000. He seeks indemnity costs in his favour. In essence, his contention is that because EG suffered no loss as a result of the breaches of contract and copyright, in simple terms, this proceeding should not have been pursued.

6    I agree that I should order nominal damages of $1 in accordance with the principle that a party that has breached a contract is liable to pay at least nominal damages even if the breach was not causative of any loss: Simply Irresistible Pty Ltd v Couper [2010] VSC 601 at [397] per Kyrou J (as his Honour then was).

7    I do not agree that an amount of damages should be paid pursuant to s 115(4) of the Copyright Act. That provision relevantly provides as follows:

(4)    Where, in an action under this section:

(a)    an infringement of copyright is established; and

(b)    the court is satisfied that it is proper to do so, having regard to:

    (i)    the flagrancy of the infringement; and

    (ia)    the need to deter similar infringements of copyright; and

(ib)    the conduct of the defendant after the act constituting the infringement or, if relevant, after the defendant was informed that the defendant had allegedly infringed the plaintiff’s copyright; and

(ii)    whether the infringement involved the conversion of a work or other subject-matter from hardcopy or analog form into a digital or other electronic machine-readable form; and

(iii)    any benefit shown to have accrued to the defendant by reason of the infringement; and

     (iv)    all other relevant matters;

the court may, in assessing damages for the infringement, award such additional damages as it considers appropriate in the circumstances.

8    In Leica Geosystems Pty Ltd v Koudstaal (No 3) [2014] FCA 1129; (2014) 245 IR 422, Collier J summarised the authorities concerning the word “flagrancy”. At [96] her Honour said:

In Raben Footwear Pty Ltd v Polygram Records Inc [1997] FCA 370; (1997) 75 FCR 88 at 103 Tamberlin J described “flagrancy” within the meaning of s 115(4) in the following terms:

In ordinary usage “flagrancy” connotes conduct which could probably be described as “glaring, notorious, scandalous” or “blatant.” See the New Shorter Oxford English Dictionary, 1993 at 965.

Copinger and Skone-James on Copyright 13th edn 1991 at 344 state that:

Flagrancy implies scandalous conduct, deceit including deliberate and calculated infringement where a defendant reaps a pecuniary advantage in excess of the damages he would otherwise have to pay.

In Prior v Lansdowne Press Pty Ltd [1977] VicRp 6; [1977] VR 65, Gowans J, in considering a claim for additional damages under s 115(4) of the Act, said at 70:

I have come to the conclusion that the evidence as to the publication shows primarily a case of mistake and perhaps carelessness, but it does not show a case of flagrancy, or calculated disregard of the plaintiff’s rights or cynical pursuit of benefit, or other matter justifying the award of additional damages beyond what is required for compensation.

(Emphasis in the original.)

9    Here, I found that Mr Bowd breached copyright when he copied files onto a USB drive on 23 May 2017. I also found at [193] of my Reasons as follows:

Mr Bowd explained that he copied information because of the direction from the AFP and because, in his view, the ASIC and AFP investigations were ongoing. I accept that explanation.

10    EG relied on Mr Bowd’s conduct in taking its intellectual property, in refusing to return that property in the face of five lawful directions to so do, his lack of co-operation when search orders were sought to be served upon him (which I add included the making of a false statement that all the property was in the hands of his solicitor and the Australian Federal Police (“AFP”)), and my finding that the Australian Securities and Investments Commission (“ASIC”) complaint was made to avoid dismissal on reasonable grounds.

11    Additional damages may be awarded pursuant to s 115(4) for breach of copyright, but not for other conduct found to have been wrongful. That is not to isolate the act of copying from context. But the focus must nonetheless be on whether the act of copying was flagrant. I find that it was not. Whilst I am satisfied that Mr Bowd made his complaint to ASIC for an improper purpose (if necessary, I make the same finding about his complaint to the AFP), it does not follow from this that his belief that he should retain copies of EG’s intellectual property for the purposes of the ASIC and AFP investigation was unreasonable. I find that in May 2017, Mr Bowd subjectively believed that such investigations were taking place. He also subjectively believed that he had a right to make copies because the AFP had told him to retain the evidence. That belief was mistaken. But it was held in the context of Mr Bowd suffering from a degree of emotional upheaval. EG has not otherwise suffered any loss or damage. All of the intellectual property has been returned. In those circumstances, I am not, and with great respect, satisfied that Mr Bowd’s breach should be characterised as “glaring, notorious, scandalous” or “blatant”. Rather, the breach was the product of misconceptions held by Mr Bowd.

12    The EG parties submitted that no order should be made for costs that reflected my dismissal of the claim in detinue. They were ultimately successful in this proceeding and this was not a case where the claim dismissed was clearly dominant or separable. The EG parties relied upon Network Ten Pty Ltd v TX Australia Pty Ltd (No 2) [2019] NSWCA 51 at [13] where Bathurst CJ said:

One circumstance where the discretion may be exercised differently is where the successful party has been unsuccessful on discrete issues raised by it in the proceedings. However, generally speaking, an apportionment to take account of that fact will only be made when the issues on which the successful party was unsuccessful were clearly dominant or separable: Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at [64]; Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 at [10]-[14].

13    The EG parties also wanted an order for indemnity costs for the period set out above. During this time, Mr Bowd retained the intellectual property he had copied notwithstanding the search orders made by this Court. With respect, I decline to make that order. The retention of the EG parties’ intellectual property during this period was the result of a misconception held by Mr Bowd during a period of personal crisis.

14    As already mentioned, Mr Bowd wanted an order for indemnity costs in his favour. He relied upon a decision of Bell J in Actrol Parts Pty Ltd v Coppi (No 3) (2015) 49 VR 573. In that case, the plaintiff (“Actrol”) had established that Mr Coppi had breached his contract of employment for one day. It commenced proceedings and went to trial on a point of principle seeking only nominal damages. Bell J refused to awards costs in its favour. Instead, his Honour ordered that Mr Coppi’s costs should be paid on an indemnity basis.

15    Mr Bowd submitted that the case against him was “indistinguishable” from Actrol Parts. He noted that the proceeding here had commenced with claims for breach of confidentiality and for damages. These claims were later dropped. The EG parties nonetheless persisted with the proceeding even though on 17 August 2017 all of the company property had been returned and they had not suffered any actual loss or damage. Implicitly, the EG parties’ persistence was thereafter unreasonable.

16    With respect, I do not think that the decision of Actrol Parts is “indistinguishable” from the current proceeding. I think it is very different. In Actrol Parts, Bell J made findings that Actrol had breached the “overarching obligations” set out in ss 16 to 26 of the Civil Procedure Act 2010 (Vic) (the “Civil Procedure Act”). Those obligations include, in general terms, obligations of honesty, to use reasonable endeavours to resolve disputes, and to ensure that costs are incurred on a reasonable and proportionate basis. At 596 [82]-[83], Bell J refused a grant of nominal damages and instead dismissed Actrol’s proceeding pursuant to s 28 of the Civil Procedure Act because of its breach of the “overarching obligations”. His Honour said:

In my view, the court possesses power to dismiss the present proceeding under s 28(1) and, taking into account Actrol’s contravention of its overarching obligation, should exercise it. This is especially so because the nature of its contravention has some analogies with abuse of process, including abuse constituted by oppression of a relatively unequal party. The court’s new power in s 29(1) to make any order it considers appropriate should also be exercised to make an order dismissing the proceeding because it is in the interests of justice to do so. This is especially so having regard to the overarching purpose in s 7(1) (in this regard, see the court’s obligation in s 8(1)), the objects in s 9(1) and, particularly, the overarching obligation in s 24(1) of ensuring reasonable and proportionate costs.

I make the dismissal order against Actrol, not in favour of Mr Coppi. It is done by way of sanction of one party, not by way of compensation (for prejudice) of the other party. Actrol will thereby be deprived of the fruits of a pyrrhic victory that was obtained by illegitimate means: this is a purpose of the order. Mr Coppi will thereby be (somewhat) advantaged and Actrol will thereby be (somewhat) disadvantaged in relation to costs: this is a consequence not a purpose of the order.

(Footnote omitted.)

Mr Coppi, and not Actrol, was thus the successful party and entitled to his costs. As Bell J said at 601 [103]:

As Mr Coppi is the successful party in the proceeding, according to the general rule he is entitled to an order for costs unless there is some reason justifying a different result. There is no such reason. Moreover, taking into account the contravention of Actrol’s overarching obligation to ensure costs are reasonable and proportionate, it is appropriate that an order for costs should be made against Actrol.

(Footnote omitted.)

17    Because of Actrol’s contravening conduct, Bell J decided that costs should be paid on an indemnity basis. At 603-604 [112], his Honour said:

In my view, the court must appropriately sanction Actrol’s contravening conduct. That sanction would not, in the circumstances, be adequately represented by an order for costs in favour of Mr Coppi on an indemnity basis only from mid-June 2015, especially as this would have been the order under the existing rules with respect to unreasonably refusing offers of settlement and indemnity costs (see above). By way of sanction, Actrol should be ordered to pay Mr Coppi’s costs (including any reserved costs) on an indemnity basis from the commencement of the proceeding. I will so order.

18    The circumstances here are very different. I was never asked to dismiss the EG parties’ proceeding. Nor was it submitted to me that the EG parties had commenced the proceedings in breach of the equivalent “overarching obligations” found in ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth). EG, and not Mr Bowd, was plainly the successful party and as such, entitled to an award of costs in its favour.

19    In that respect, I find that the proceedings were reasonably commenced. When initiated, Mr Bowd retained company property following his dismissal. He had refused to return that property notwithstanding repeated requests. The EG parties had no alternative but to commence these proceedings and to seek urgent search orders. Mr Bowd made a partial return of property on 24 May 2017. Thereafter, the EG parties persisted with the proceedings and discovered that Mr Bowd’s compliance with the search orders had been delinquent because of the copying which had taken place in May. All of the company property was disgorged on 17 August 2017.

20    I respectfully agree with the submission that I should not discount any award of costs in favour of the EG parties because I dismissed the claim in detinue. That claim formed a very minor part of the dispute before me. I also think that the EG parties are clearly entitled to the costs of commencing the proceedings, and of obtaining and executing search orders. Mr Bowd should also pay the EG parties’ costs incurred until 17 August 2017, and for a short period thereafter to take account of any steps that needed to take place to verify that all the property had been returned. In other words, Mr Bowd should pay for the costs incurred (on an ordinary basis) to obtain full recovery of all company property. Thereafter, in my discretion, I am not satisfied that Mr Bowd should pay the EG parties’ costs of persisting with the claims. It was not clear to my why the proceeding had been kept on foot in circumstances where the EG parties accepted that they had not suffered loss or damage and had recovered all of the company property. I am left with the impression that the proceeding formed part of the pressure points which ordinarily arise in civil litigation and to which Mr Bowd was exposed. There may have been a forensic benefit in keeping all of those pressure points on foot. In my view, however, that would not justify an order of costs in favour of the EG parties for the period following the return of the company property in the circumstances of this case.

21    For these reasons, I will order that Mr Bowd pay nominal damages of $1 to EG for breach of contract and the EG parties’ costs for the period ending on 30 August 2017.

Proceeding VID 580 of 2017

22    Both parties agreed that there should be an order dismissing this proceeding.

23    Subject to an application of s 570 of the FW Act, the respondents, EG and Mr Richardson, would have also been entitled to an ordinary award of costs in their favour in these proceedings. Section 570 of the FW Act provides as follows:

(1)    A party to proceedings (including an appeal) in a court (including a court of a State or Territory) in relation to a matter arising under this Act may be ordered by the court to pay costs incurred by another party to the proceedings only in accordance with subsection (2) or section 569 or 569A.

Note:    The Commonwealth might be ordered to pay costs under section 569. A State or Territory might be ordered to pay costs under section 569A.

  (2)    The party may be ordered to pay the costs only if:

(a)    the court is satisfied that the party instituted the proceedings vexatiously or without reasonable cause; or

(b)    the court is satisfied that the party's unreasonable act or omission caused the other party to incur the costs; or

   (c)    the court is satisfied of both of the following:

(i)    the party unreasonably refused to participate in a matter before the [Fair Work Commission];

    (ii)    the matter arose from the same facts as the proceedings.

24    The respondents did not contend that any of the matters set out in s 570(2) were satisfied. Rather, they accepted that no costs should be awarded against Mr Bowd in relation to his action under the FW Act, but submitted that I should make an award of costs in relation to his claim under the CA. It submitted that where there are two statutory bases for jurisdiction, one of which restricts the Court’s ability to order costs, the approach of the Full Court of this Court in Construction, Forestry, Mining and Energy Union v Director, Fair Work Building Industry Inspectorate (No 2) (2013) 209 FCR 464 (the “CFMEU case”) is applicable. That case concerned the operation of a provision similar in content to s 570, namely former s 824 of the Workplace Relations Act 1996 (Cth) (the “Workplace Relations Act”). Two causes of action were before the Court. One concerned the Workplace Relations Act; the other arose under the Building and Construction Industry Improvement Act 2005 (Cth). At 484 [64], the Court said:

Giving the provisions a harmonious operation, in our view where the matter arises under two Acts of the Parliament, s 824 of the WR Act does not apply to the entirety of the proceeding to limit the power of the Court to make a costs order …

25    The respondents proposed that I should apportion costs between the FW Act and the CA claims on a 50-50 basis for the period until 26 April 2018. On and from 27 April 2018, by Court order, proceedings VID497/2017 and VID580/2017 ran together. For the period following this, the respondents submitted they are entitled to 75% of their costs. This was on the basis that half the dispute before me concerned proceeding VID580/2017 and the other half concerned proceeding VID497/2017. I do not agree with that premise. The far larger part of the dispute before me concerned the claims made by Mr Bowd pursuant to the FW Act and the CA.

26    Mr Bowd submitted that there should be no order as to costs in proceeding VID580/2017. I respectfully agree with that submission. Mr Bowd’s counsel pointed out that whilst former s 824 of the Workplace Relations Act and current s 570 of the FW Act are similar, the language of each is decisively different. He relied upon the subsequent decision of the Full Court of this Court in Melbourne Stadiums Ltd v Sautner (2015) 229 FCR 221 which concerned s 570. Sautner was a case involving claims made under the FW Act and the common law. After considering the decision in the CFMEU case, Tracey, Gilmour, Jagot and Beach JJ said at 253-254 [155]-[157]:

Section 570, in its present form, came into force on 1 January 2013. Unlike s 824 which applied “to a proceeding ... in a matter arising under this Act” it applied “to a proceeding ‘in relation to’ a matter arising under this Act ...”. (emphasis added).

The word “proceeding” is not defined in the Fair Work Act. In the context of s 570 it bears a different meaning from the word “matter”. “Matters”, in the sense of claims or causes of action or their underlying controversies, are raised in the “proceeding” or “proceedings” which is or are prosecuted in the Court: cf Shea v Energy Australia Services Pty Ltd (No 7) [2014] FCA 1091 at [22] (Jessup J). As Gray J said in Geneff v Peterson (1986) 19 IR 40 at 90, in dealing with the construction of s 197A of the Conciliation and Arbitration Act 1904 (Cth) (a predecessor of s 570):

[T]he section operates in relation to a ‘proceeding’. There is only one proceeding before the Court, although that proceeding involves a number of separate claims, each of which might have been the subject of a separate proceeding. ... In my view, it is impossible to split the claims within a proceeding for the purpose of the application of s 197A.

See also Qantas Airways Limited v Transport Workers Union of Australia (No 2) [2011] FCA 816; (2011) 211 IR 119 at 182 (Moore J); Grout v Gunnedah Shire Council (No 3) (1995) 59 IR 248 at 260-1 (Moore J); Goldman Sachs JBWere Services Pty Ltd v Nikolich [2007] FCAFC 120; (2007) 163 FCR 62 at 65 and 69.

There was a single proceeding which was commenced and prosecuted to judgment in the County Court. Mr Sautner made claims under the Fair Work Act and at common law. The claims under the Fair Work Act were “matters” within the meaning of s 570(1) of the Fair Work Act. The proceeding was, as a result, a proceeding in relation to a matter arising under that Act. Section 570(1) operated to preclude the Court from ordering MSL (“another party to the proceedings”) to pay any costs incurred by Mr Sautner in prosecuting his claims unless he could satisfy the Court that one of the exceptions, provided for in s 570(2), applied.

27    Sautner was a case concerning the interaction of a Federal Act and the common law. The CFMEU case concerned the interaction of two Federal Acts. So did the more recent decision of Tracey J in Health Services Union v Jackson (No 5) [2015] FCA 1467. In that case, claims were made, as here, under the FW Act and the CA. Tracey J observed that s 1335(2) of the CA provides as follows:

The costs of any proceeding before a court under this Act are to be borne by such party to the proceeding as the court, in its discretion, directs.

28    In that case, there were thus two provisions potentially affecting an award of costs: s 570 of the FW Act and s 1335(2) of the CA. The same two provisions are engaged in the proceedings here. Faced with the same dilemma, Tracey J followed the CFMEU case as it was the most relevant authority before his Honour. His Honour said at [35]:

The Full Court in [the CFMEU case] was concerned to ensure that two Commonwealth Acts were read and applied harmoniously. In order to do this it was necessary, not merely to bring into account, but to give effect to the statutory proscription, contained in one of the Acts, against the awarding of costs. The award of full or substantial costs would have accorded paramountcy to one Act over the other rather than promote their concordant operation.

Earlier at [32], Tracey J said:

This is not the occasion to seek to reconcile (if this is possible) the many conflicting decisions on the construction and application of s 824 and its predecessors. Sitting as a single judge I consider myself to be bound by the most recent and considered judgment of the Full Court, that being the decision in [the CFMEU case]. That decision is directly on point given that it involved causes of action, pursued in reliance on provisions of two Acts of the Commonwealth Parliament, which were based on the same substratum of facts. The present is such a case …

29    With the greatest of reluctance, I respectfully disagree with this reasoning. In my view, the decision in Sautner binds me. That is because it deals with the language used in s 570 and not with the different language used in former s 824 of the Workplace Relations Act. As I read the reasons of the Court in Sautner, what was critical to the reasoning of the Court was the identification of what proceeding was before it. In that case, as here, there was only one relevant proceeding. One then asks whether the proceeding was in relation to a “matter” arising under the FW Act. If the proceeding is of that kind, s 570 is engaged.

30    In my view, s 1335(2) of the CA may be reconciled with s 570 of the FW Act on the basis that the former is a general rule which must give way to the more specific rule expressed by the latter. As O’Connor J said in Goodwin v Phillips (1908) 7 CLR 1 at 14:

Where there is a general provision which, if applied in its entirety, would neutralize a special provision dealing with the same subject matter, the special provision must be read as a proviso to the general provision, and the general provision, in so far as it is inconsistent with the special provision, must be deemed not to apply.

It follows that, for the foregoing reasons, I will make no order as to costs in proceeding VID580/2017.

31    In written submissions filed in accordance with the directions of the Court, Mr Bowd raised the application of s 1317AH of the CA, introduced with effect from 1 July 2019. That section provides as follows:

1317AH Costs only if proceedings instituted vexatiously etc.

(1)    This section applies to a proceeding (including an appeal) in a court in relation to a matter arising under section 1317AE in which a person (the claimant) is seeking an order under subsection 1317AE(1).

(2)    The claimant must not be ordered by the court to pay costs incurred by another party to the proceedings, except in accordance with subsection (3) of this section.

  (3)    The claimant may be ordered to pay the costs only if:

(a)    the court is satisfied that the claimant instituted the proceedings vexatiously or without reasonable cause; or

(b)    the court is satisfied that the claimant’s unreasonable act or omission caused the other party to incur the costs.

32    The Court asked for, and received, further written submissions from the parties about this new provision. I am grateful for that assistance. However, because of the conclusion I have reached concerning s 570 of the FW Act it is unnecessary for me to form a view about the reach of this provision. There is no necessary conflict between s 570 of the FW Act and s 1317AH of the CA in the circumstances of this case especially because the respondents did not press any reliance on s 570(2), which contains similar exceptions to those found in s 1317AH(3) (acting vexatiously or committing an unreasonable act). The application and reach of s 1317AH should, therefore, be considered on another occasion.

33    For these reasons, proceeding VID 580 of 2017 is dismissed with no order as to costs.

Associate:

Dated:    9 August 2019