Centrestage Management Pty Ltd v Riedle & Ors (No.2)
[2007] FMCA 1260
•2 August 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CENTRESTAGE MANAGEMENT PTY LTD v RIEDLE & ORS (No.2) | [2007] FMCA 1260 |
| COSTS – COPYRIGHT – Claim and cross-claim – neither party wholly successful – indemnity costs on one issue. |
| Federal Magistrates Act 1999, s.79 Federal Court Rules 1979, O.62 |
| AWB Ltd v Cole(No 6) [2002] FCA 1274 Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 Dias Aluminium Products Pty Ltd v Ullrich Aluminium Pty Ltd (No 2) [2005] FCA 1400 Grbavac v Hart [1997] 1 VR 154 Robertson & Moffat v Belson [1905] VLR 555 |
| Applicant: | CENTRESTAGE MANAGEMENT PTY LTD (ACN 107 072 239) |
| Respondent: | TONY RIEDLE |
| Cross-claimant: | TONY RIEDLE |
| Cross-respondent: | CENTRESTAGE MANAGEMENT PTY LTD (ACN 107 072 239) |
| File number: | MLG 227 of 2006 |
| Judgment of: | Riley FM |
| Hearing date: | 19 July 2007 |
| Date of last submission: | 23 July 2007 |
| Delivered at: | Melbourne |
| Delivered on: | 2 August 2007 |
REPRESENTATION
| Counsel for the Applicant: | Dr R Dean |
| Solicitors for the Applicant: | R & G Lawyers |
| Counsel for the Respondent: | Michael Rivette |
| Solicitors for the Respondent: | Middletons |
ORDERS
The applicant pay the respondent $47,563.06 in costs and disbursements together with 90% of the amount properly disbursed to Mr Hodder and 100% of the amount properly disbursed to Mr Leong.
The parties have liberty to apply.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 227 of 2006
| CENTRESTAGE MANAGEMENT PTY LTD (ACN 107 072 239) |
Applicant
And
| TONY RIEDLE |
Respondent
And
| TONY RIEDLE |
Cross-claimant
And
| CENTRESTAGE MANAGEMENT PTY LTD (ACN 107 072 239) |
Cross-respondent
REASONS FOR JUDGMENT
This is an application for costs. Judgement in the principal proceeding between the parties was delivered on 19 July 2007. The application made by the applicant was dismissed and the respondent was partially successful in his cross-claim. The applicant seeks orders that each party bear his or its own costs while the respondent seeks costs on an indemnity or other special basis.
The applicant argues that the respondent substantially lost his cross-claim in that he received only about 0.5% of the damages he claimed. The applicant noted that the respondent had sought a declaration in addition to the injunction that he was granted but that the declaration was refused. The applicant argued that the issues in the case had been so intertwined that it could not be said that any particular issue prolonged the hearing.
The applicant referred to the decision of Robertson & Moffat v Belson [1905] VLR 555. In that case, the plaintiff had minimal success in its claim and substantially failed in the defendant’s counterclaim. The court ordered that the plaintiff pay all of the costs of the claim and counterclaim, saying that the small measure of success that the plaintiff had achieved was de minimis. The applicant argued that the respondent in the present case had so little success in his claim that it could also be described as de minimis.
The applicant also referred to the decision in AWB Ltd v Cole(No 6) [2002] FCA 1274 where Young J ordered each party to bear their own costs in circumstances where both parties achieved a substantial measure of success. The applicant then referred to the decision of Crennan J in Dias Aluminium Products Pty Ltd v Ullrich Aluminium Pty Ltd (No 2) [2005] FCA 1400 where her Honour, sitting in the Federal Court, noted that:
An allocation of costs in a case of mixed results when neither party is wholly successful can never be done with mathematical precision: Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272.
The respondent argued that he had been substantially successful. He argued that a special costs order, such as indemnity costs, was appropriate in this case because the applicant had brought the proceeding in disregard of a known fact, namely, that it did not own the copyright in the 2002 version of the computer program under consideration because it had been assigned to the Salvation Army. Moreover, the respondent argued that the applicant's contention that the respondent was its employee was untenable.
The respondent referred to the decision of Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233 where his Honour noted that indemnity costs have been awarded in cases where the proceedings were commenced or continued in wilful disregard of known facts or clearly established law and in cases where allegations had been made which should never have been made or where groundless contentions had prolonged the case.
The respondent also referred to the decision of Hayne J in Grbavac v Hart [1997] 1 VR 154 where his Honour referred to the public interest in the early settlement of litigation. The respondent submitted that the substance of the cross-claim was successful and that very little court time and very little of the paperwork was devoted to the aspect of the respondent's cross-claim that was unsuccessful. The respondent emphasised that he did not know that the copyright in the 2002 version of the program had been assigned to the Salvation Army until Mr Roberts and Mr Boyle were being cross-examined.
In reply, the applicant submitted that its case had always been that it owned the copyright in the program under consideration only because the respondent was its employee.
In fact, the applicant’s statement of claim contained the allegation that the applicant was and remains the owner of the copyright in the original 2000 version of the program and said it had been updated from time to time on behalf of the applicant. In the applicant's opening, it said that, in descending order of importance, its first point was that the respondent was its employee, its second point was an implied license and its third point was that the respondent had adapted the 2002 version of a program written by Mr Roberts that was owned either by the applicant or the Salvation Army, but probably by the Salvation Army. The applicant's affidavit evidence on this point was equivocal but the oral evidence eventually made it clear that the applicant was not the owner of the copyright in the 2002 version of the program and probably the Salvation Army was the owner or entitled to become the owner.
The respondent did not succeed in his claim for a declaration about the ownership of the copyright in the program that he had written primarily because the court was not satisfied that all interested parties were before the court. Both the Salvation Army and the liquidator of the precursor of applicant may have had a claim to ownership of the copyright in the 2002 version of the program and hence to the upgrade of the program written by the respondent. In response to the applicant's claim to be the owner of the relevant copyright, it was reasonable for the respondent to seek the declaration that he did. Although the respondent did not succeed in relation to the declaration, that was through no fault of his own.
The damages claim brought by the respondent was in a different category. That claim was almost totally unsuccessful and the bulk of the damages claim was close to untenable. I accept the applicant's argument that to the extent that the respondent succeeded in his damages claim, his success falls within the de minimus principle. However, I also accept the respondent's argument that his damages claim represented a relatively small part of the time and effort that went into the proceeding.
All in all, and recognising that these matters cannot be resolved with mathematical precision, I consider that the respondent was 90% successful in the proceeding, based on the time and effort that would have been involved in dealing with the different issues.
Section 79 of the Federal Magistrates Act 1999 gives the court power to award costs. Rule 21.10 of the Federal Magistrates Court Rules 2001 relevantly provides that, unless the court otherwise orders, a party entitled to costs is entitled to their costs in accordance with the scale in Part 1 of Schedule 1 and disbursements properly incurred. In the Federal Magistrates Court scale, counsel’s fees are not treated as a disbursement but are calculated on the basis of the daily hearing fee plus 50%. Rule 21.02 of the Federal Magistrates Court Rules 2001 permits the court to refer the costs for taxation under Order 62 of the Federal Court Rules 1979, and, if that is done, Rule 21.11 of the Federal Magistrates Court Rules 2001 requires the taxing officer, in a proceeding such as this, to apply the Federal Court scale.
The court has a broad discretion in relation to costs which is to be exercised judicially. The usual rule is that costs are awarded on a party party basis and in accordance with the scale of the court in which the matter was heard. Solicitor client costs or indemnity costs may be awarded in an appropriate case. Additionally, this court has power to award costs on the scale of the Federal Court. Sometimes, this court has ordered costs to be calculated on the basis of a particular percentage of the Federal Court scale.
I do not consider that the applicant's case on whether the respondent was an employee or an independent contractor and on whether there was an implied license was untenable, although it is clear with hindsight that the applicant's case on these issues was weak. On the other hand, the question of adaptation could only have been relevant if the respondent were not the applicant’s employee and if the applicant were the owner of the copyright in the 2002 version of the program. The applicant knew all the relevant facts which should have made it clear that the adaptation argument would not be relevant. It was incumbent upon the applicant’s legal advisers at an early stage to ascertain whether there was evidence to support the applicant’s claim to be the owner of the copyright in the 2000 and 2002 versions of the program. This need should have been apparent in circumstances where the applicant was not incorporated until 2003. Both parties engaged experts on the question of adaptation and a significant amount of court time was devoted to that issue.
I consider that the applicant should pay the respondent’s costs on an indemnity basis in relation to the question of adaptation. I do not consider that the applicant's case otherwise was so untenable or so contrary to the known facts that it would be appropriate to order indemnity costs in relation to the remainder of the case.
I do not consider that it would be appropriate to order costs on the Federal Court scale in relation to the other issues in this proceeding. It seems to me that the complexity of this matter, except in relation to the adaptation issue, was well within the range appropriate for this court and the scale set in the rules of this court should apply. Counsel’s fees are provided for in that scale. The specified amounts seem to me to be appropriate for a case of this nature, except perhaps in relation to the adaptation question. If it had not been appropriate to order indemnity costs in relation to the adaptation issue, I would have been inclined to order costs on a percentage of the Federal Court scale in relation to that issue only.
The issues in the case were intertwined. It seems clear that the costs specifically relating to the adaptation question could never be precisely quantified. My best estimate is that the adaptation question represented about 20% of the time and effort that went into the case. The respondent’s solicitor has said that the actual costs incurred by the respondent, apart from the costs associated with expert witnesses, were a little over $105,000.
I consider that the fairest and most practical course, bearing in mind that these matters cannot be determined with mathematical precision, is to award the respondent:
a)$21,000 by way of indemnity costs for the adaptation issue;
b)90% of his other costs on the scale of this court;
c)all of his proper disbursements on the expert in relation to the adaptation question; and
d)90% of his other disbursements properly incurred.
The respondent’s costs on scale are as follows.
Stage 1
Opposing application up to completion of first court day: $2,005
Stage 5
Preparation for first 2 days: $6,770
Preparation for additional 2 days: $2,850
Stage 6
Final hearing for solicitor 4 days: $6,000
2 half days: $1,500
Judgment: $205
Advocacy: 4 days $9,000
Half day: costs hearing $1,125
Total costs: $29,455
The disbursements claimed by the respondent include:
Court fee for counterclaim: $288
Photocopying the court book: $150
Transcript: $5,518.66
Facsimile, telephone, postage etc: $1,481.50
Total general disbursements: $7,438.16
It seems to me that all of those disbursements were properly incurred in this matter. The respondent engaged one expert on adaptation and one on general industry practice. Neither has provided an invoice yet. I do not wish to determine costs based on an estimate made by the respondent’s solicitor of the amount of those disbursements when invoices could be expected to arrive in the near future. Accordingly, I will reserve liberty to apply in case there is any issue about the proper amount of those disbursements, and otherwise make orders reflecting these reasons. The total of the costs and disbursements set out above is $36,893.16. 80% of that figure, being the amount not referable to the adaptation question, is $29,514.52. 90% of that figure, being the amount the respondent should receive on scale, is $26,563.06. The additional $21,000 by way of indemnity costs makes $47,563.06.
I certify that the preceding twenty-two (22) paragraphs are a true copy of the reasons for judgment of Riley FM
Associate: Melissa Gangemi
Date: 3 August 2007
4
5
3