Comcare v Grimes

[1994] FCA 1054

1054   q.4-

.- JUDGMENT No. ........ ..,..... J ,,-.

LN THE FEDERAL COURT OF AUSTRALIA )

)

NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 466 of 1991

)

GENERAL DIVISION )

BETWEEN:

JNTERNATIONAL . WRITING

INSTITUTE INC

Applicant

AUSTRALIA AND : PIMILA PTY LIMITED & ANOR

Respondents

REASONS FOR JUDGMENT

LOCKHART 3.

Earlier today, after hearing argument from counsel on the question of damages and in particular as to interest up to the date of judgment, I ordered that judgment be entered in favour of International Writing Institute Inc (IWI) in the sum of $35,506 plus interest of $14,115.58, a total of $49,621.58.

Argument on the question of costs then ensued. Critical to that question is a letter of 5 August 1993 from the solicitors for the respondents to the solicitors for IWI, which was described in argument as making a "Calderbank offer", a subject to which I shall return in a moment. The letter covers three and one-quarter pages; but in essence it constitutes an offer by the respondents, without prejudice, save as to costs, to consent to the injunction sought by IWI to pay damages of $47,500 and to pay the party and party costs of IWI as taxed. The letter from the solicitors for the

respondents makes the offer on behalf of both respondents (I

glean that from the use of the plural). Although it was

suggested by counsel for IWI that there may be some degree of . . m '

uncertainty as to whether the offer was really made on behalf of Rimila alone or both Rimila and Mr Tubbs, in my view there is no uncertainty about it; it was made on behalf of both respondents.

The respondents contend that the case proceeded on three causes of action: copyright infringement, breach of fiduciary duty, and wrongful disclosure of confidential information. It was argued for the respondents that Rimila admitted the infringement of copyright, subject to licence. If IWI succeeded on the licence question, but failed on the questions of confidential information and fiduciary duty, the respondents have through their counsel contended that the traditional approach would be to order IWI to pay the costs of the respondents on the questions of confidential information and a breach of fiduciary duty, the respondents to pay IWI's

costs of the copyright issues before 6 August 1993. It was said (and sensibly so) that if that were the case the submission would lead to a complicated taxation approach. It was then submitted by counsel for the respondents that the preferable approach was to make an order as to costs but prior

-, to 6 August 1993.

It was also submitted that IWI should pay the costs of the respondents of the proceeding on and after 6 August 1993. IWI submits through its counsel that the respondents should pay IWI's costs up to 19 August 1993 and that thereafter there should be no order as to costs.

It was submitted on behalf of IWI that it was relevant to consider the terms of 0 23, r 5 of the Court's Rules which as presently in force include (apart from provisions as to payment into court) provisions as to the serving of an offer of compromise upon a party and allowing some 14 days after the offer has been made for its consideration by the party to whom it is made. Reference was made to a number of cases which I have considered, but to which I do not find it necessary to refer. Order 23, as in force at the relevant time, (that is the making of the offer) was not in those terms but in a different form, the new form occurring this year. The Rules as then in force did not provide for the making of an offer of compromise as such, but did provide for payment into court.

Irrespective of that however, in my view, for reasons I shall develop more fully soon, the critical question is what the Court should do in the exercise of its discretion. None of those rules, to which reference has been made, are directly applicable to the facts of this case.

Another matter relied on by counsel for IWI on the question of costs was that Rimila had accumulated losses and suffered operating losses. So there may be some room for doubting the capacity of Rimila to pay moneys in litigation of this kind, whether in settlement of it or otherwise.

other submissions have been put by the parties, which I have taken into account but I need not address each one of them. First, I seek to dispel any illusion that there is some stereotype form of offer that can be categorised as a "Calderbank offer". A "Calderbank offer" is simply the name given to a particular form of offer of compromise in litigation as decided in Calderbank v Calderbank (1975) 3 WLR

586. It is a very useful case to refer to for guidance on

questions like this, but it must not be taken as having any

significance beyond this.

The fundamental question in this case is how the Court, in the exercise of the wide powers conferred upon it by s 43 of the Federal Court of Australia Act 1976, should exercise its discretion.

All judgments with respect to costs must, of course, be

made judicially. A relevant matter is that an undertaking was

proffered by each of the respondents to the Court on 17 June

..

1993 in essence not to further infringe the copyright of IWI. The undertaking gave IWI substantially the injunctive relief

that it sought in its claim for copyright, although it did not cover the question of damages. In the proceedings, IWI also sought relief in respect of alleged breach of confidential

" information and for breach of fiduciary duty, but it failed in . . . .

relation to those two counts, while succeeding on the question

:-

of copyright.

The offer conveyed by the letter of 5 August 1993 was for the payment of $47,500 by both respondents. The 5th of August was a Thursday and it appears that the letter was sent by fax shortly after 2.00 pm that day. Although there is no evidence, apart from evidence as to the financial position of Rimila filed by IWI in relation to this costs question, I accept that the principal executive of IWI, Mr Albert Joseph, did not arrive in Australia from the United States until the weekend on Saturday, 7 August 1993. It was necessary that he conferred with his counsel and solicitors which he did on the evening of Saturday, 7 August.

There were fairly strict time constraints placed upon the parties with respect to the hearing of liability in the following week, commencing 9 August, and no doubt the preparation of the case for hearing was itself a matter that required a considerable degree of effort on the part of all concerned, effort that was increased by considering the offer of settlement. However, settlement offers are part and parcel of litigation and rightly or wrongly, they tend to arise at

the eleventh hour, because that is when parties and particularly their lawyers are able to address themselves fully and intensively to the case in hand.

I am not persuaded that due consideration could not have been given to these matters on or before the date on which the trial commenced, the Monday, 9 August. However, I should say that I accept that it would not be reasonable in the circumstances that the benefit of any order for costs which IWI might obtain by reason of the proceedings up to and about that time should exclude the first day of the trial. Counsel had obviously been briefed; and if it be otherwise right that IWI's costs up to that time should be paid by the respondents then they should be paid up to and including the first day of the trial.

The offer was of the kind that is ordinarily made between parties without prejudice, with a view to bringing litigation to an end. I think it is unreal to suggest that there is a need for some 14 days or so for IWI to give proper consideration to the making of the offer of settlement before it could make up its mind. The offer expired immediately before the commencement of the trial according to the terms of the offer itself. There is no evidence to suggest that IWI wanted more time or sought more time from the respondents to consider the offer; but there is material to suggest that it was simply rejected, although I am not sure at precisely what

time.

I take into account the fact that IWI failed to establish breach of confidential relationship and breach of fiduciary duty by the respondents, but on the other hand a cross-claim was brought by the respondents against IWI which was abandoned at the commencement of the trial. I also note the undertaking proffered to the Court, as I have indicated, in June 1993.

In my opinion, the proper order for costs should be that the respondents pay the costs of IWI up to and including 9 August 1993.

I turn now to consider what should happen with costs thereafter. IWI chose to continue the case and rejected the offer of settlement. It succeeded on the copyright issues but failed, as I have said, on breach of confidential information and breach of fiduciary duty.

I note that the undertakings proffered in June 1993 were still operative at the date of the making of the offer of 5 August, and indeed that offer made it clear that the respondents would give an open undertaking to the Court in terms of the injunctions sought by IWI, but that that would add nothing to the undertaking previously given. That is an assertion which appears to me to have substance. The question of damages was heard separately from the question of liability

and it resulted, as I mentioned a short time ago, in judgment being entered in the sum of $49,621.58 in favour of IWI, that calculation being made out as at today.

I..

The offer of 5 August was for $47,500. If one takes 9 August 1993 as the relevant date then, in the light of the figure for which judgment has been entered, it results in there being an offer made for a sum which exceeded the amount for which judgment has been obtained or deemed to have been obtained as at 9 August 1993. That figure would have been (inclusive of interest) something in the order of $45,000. It certainly would have been less than $47,500. IWI continued the proceedings at its own risk as to costs and it recovered less than it was offered.

In my view IWI must pay the costs of the respondents from 10 August 1993 onwards, but not the costs of today's hearing, as to which there shall be no order as to costs, as each party has been partly successful.

In the result the Court makes the following orders as to

costs:

(1) that the respondents pay the costs of the applicant of

-, the proceeding up to and including 9 August 1993;

(2) that the applicant pay the costs of the respondents of

the proceeding from 10 August 1993 and thereafter, but

not the costs of today's hearing;

(3) that there be no order as to the costs of -today's

hearing;

(4) exhibits may be handed out unless an appeal is lodged from the Court's judgment within 21 days of today;

( 5 ) liberty to apply is reserved to any party to restore the matter to the list on seven days' notice. It may be, for example, that in the result of the taxation of costs, failing agreement as to costs, one party or the other may wish to seek an order for set off against the other. I say nothing about that at this stage except that it should be open to the parties to argue that question if they wish and any other question that arises from the working out of the orders.

I certify that this and the preceding eight (8) pages are a true copy of the reasons for judgment herein o f the Honourable Mr. Justice Lockhart.

Associate &A	~~
Dated: 12 December 1994

Counsel for the Applicant	Mr C J Bevan
Solicitors for the Applicant	Anisimoff Davenport
Counsel for the Respondents	Mr R Cobden - .
Solicitors for the Respondents	Baker & McKenzie
Date of Hearing	12 December 1994
Date of Judgment	12 December 1994