Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd

[2004] FCA 1461

FEDERAL COURT OF AUSTRALIA

Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd

[2004] FCA 1461

COSTS – costs of contested copyright proceedings and related commercial issues – two respondents one of whom alone cross-claimant for copyright relief – issues resolved in favour of applicant for relief and respondent to cross-claim – whether adverse costs orders should be made against both respondents despite one only cross-claiming for copyright relief – Calderbank offer earlier made by applicant – respondents’ response to Calderbank offer by form of extravagant monetary demand – costs orders made against both respondents – indemnity costs to apply from time of extravagant response to Calderbank offer

CONCRETE PTY LIMITED v PARRAMATTA DESIGN & DEVELOPMENTS PTY LIMITED AND GHASSAN FARES

N 1509 OF 2003

CONTI J
12 NOVEMBER 2004
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1509 OF 2003

BETWEEN:

CONCRETE PTY LTD
APPLICANT

AND:

PARRAMATTA DESIGN & DEVELOPMENTS PTY LTD
FIRST RESPONDENT

GHASSAN FARES
SECOND RESPONDENT

PARRAMATTA DESIGN & DEVELOPMENTS PTY LTD
CROSS-CLAIMANT

CONCRETE PTY LTD
CROSS RESPONDENT

JUDGE:

CONTI J

DATE OF ORDER:

12 NOVEMBER 2004

WHERE MADE:

SYDNEY

THE COURT DECLARES THAT:

1.The applicant has not infringed any copyright of the first and/or second respondents in the architectural plans that accompanied Development Application No. 16-2000-103-1 to Port Stephens Council in respect of the property known as number 5 Laman Street Nelson Bay in the State of New South Wales or in any earlier architectural plans lodged with that Council.

THE COURT ORDERS THAT:

1.The respondents pay the costs of the applicant up to and including 18 March 2004 (being the expiry date of Concrete’s Calderbank offer) inclusive of all interlocutory proceedings within that period of time, on a party and party basis.

2.The respondents pay the costs of the applicant of the proceedings thereafter, inclusive of all interlocutory proceedings within that period of time, on an indemnity basis.

Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 1509 OF 2003

BETWEEN:

CONCRETE PTY LTD
APPLICANT

AND:

PARRAMATTA DESIGN & DEVELOPMENTS PTY LTD
FIRST RESPONDENT

GHASSAN FARES
SECOND RESPONDENT

PARRAMATTA DESIGN & DEVELOPMENTS PTY LTD
CROSS CLAIMANT

CONCRETE PTY LTD
CROSS RESPONDENT

JUDGE:	CONTI J
DATE:	12 NOVEMBER 2004
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. On 13 October 2004, I made the following declaration and orders in these proceedings:

   ‘THE COURT DECLARES THAT:

   (i)The respondents’ threats, or either of them (as contained in the letters dated 9 September and 1 October 2003 from Barrak Lawyers and further defined in the Statement of Claim), are unjustifiable within the meaning of s 202 of the Copyright Act 1968 (Cth).

   THE COURT ORDERS THAT:

   (ii)Each of the respondents by itself, himself and its or his servants or agents be restrained from making any further threat in the form substantially of the respondents’ threats.

   (iii)There be an enquiry into the quantum of damages sustained by the applicant by reason of the respondents’ threats.

   (iv)      The amended cross-claim of the cross-claimant be dismissed.

   (v)       The costs of the proceedings to date be reserved pending:

   (a)the receipt of written submissions of the applicant/cross-respondent on the issue of costs, and against whom such orders should be made, within three working days; and

   (b)the receipt of written submissions of the respondents/cross-claimant in reply, on the issue of costs, and against whom such orders should be made, within three working days thereafter.

   (vi)Liberty to apply as to the making of orders as to costs, including as to default in complying with directions as to costs.’

   Those first three orders reflected the relief sought in the original application filed in the proceedings.

2. The following written submissions as to the costs of the proceedings were thereafter furnished by the parties:

   (i)        Those of Concrete Pty Limited (‘Concrete’) as applicant on 21 October 2004;

   (ii)Those of Parramatta Design & Development Pty Limited (‘PDD’) and Ghassen Fares (‘Mr Fares’) as respondents and of PDD as cross-claimant; and

   (iii)Those of Concrete in reply as cross-respondent.

3. On the footing largely of those submissions, orders as to the costs of the proceedings are made and my reasons published today. 

4. I will first deal with the outstanding issue as to the costs of the proceedings the subject of my interlocutory judgment delivered on 1 March 2004, which related to the respondents’ unsuccessful application to cross-vest the whole of the subject proceedings to the Supreme Court of New South Wales.  In my opinion the costs of that application should coincide in point of time with the costs orders to be made in relation to the principal proceedings, and that in the circumstances no different order should be made, given that the respondents were unsuccessful in that application. 

5. The next matter concerns the outstanding issue as to the costs of the interlocutory proceedings of 8 April 2004, to which proceedings I referred in [7] of my reasons for judgment of 13 October 2004 following the conclusion of the final hearing.  Again the same course must be adopted by reference to the point in time of the proceedings when that controversy occurred.  Perhaps I should add that particularly should that be so, in the circumstance that no prior notice of the application was given to Concrete (or of course to the Court), and consequently Concrete’s legal representatives had prepared themselves for the continuation on that day of the principal hearing by bringing intended witnesses to the Court in that anticipation.  Counsel for Concrete sought to place significance adversely to the respondents in respect of the cessation of the appearance of Mr Murr SC in the proceedings on their behalf on and from the commencement of that disqualification application, but I do not think that in the circumstances I should do likewise. 

6. Concrete’s principal submission is that PDD and Mr Fares should be ordered jointly and severally to pay Concrete’s costs of the proceedings, inclusive of course of the cross-claim and of all interlocutory proceedings for which no costs orders have yet been made, such costs to be quantified on an indemnity basis.

7. Upon the basis of my findings the subject of my reasons for judgment of 13 October 1994, to which I will hereafter refer as the ‘principal judgment’, Concrete submitted that its Calderbank offer, being the offer made by its Solicitors’ open letter dated 11 March 2004 addressed to the respondents’ Solicitors, involving as it did an offer of the sum of $33,000 plus costs to be agreed or taxed, represented ‘an eminently reasonable offer by [Concrete]’, and that ‘[e]ven if the respondents had been successful on the factual dispute relating to the nature of the agreement between the joint venturers and PDD/Mr Fares, the respondents would not have achieved any greater sum in terms of PDD’s claim for copyright infringement  advanced in the amended cross-claim’.  Consistently with my reasons for judgment delivered recently on 13 October 2004, I think that the submission is correct.  Incidentally that letter of offer was written in the context of the earlier letter of Concrete’s solicitors’ letter of 3 October 2003 to Barrak Lawyers, which is extracted at [39] of my principal reasons for judgment (13 October 2004), and in relation to which I made the observations appearing in the following [40] of those reasons. 

8. Concrete further placed reliance upon the earlier letter of Barrak Lawyers of 15 October 2003, endorsed ‘without prejudice save as to costs’ (a copy whereof is attached), whereby it was stated that ‘our client’s instructions solely for the purposes of a without prejudice offer in this matter in the interests of limiting the need for unnecessary litigation…’ was, by way of extraordinary contrast, a requirement for payment of ‘… a sum of $5,000,000 in exchange for the written license to utilise our client’s copyright’.  It was further stated in that context that ‘… [PDD] regards its plans and copyright in those plans as being a work of considerable commercial worth and architectural merit’.  Put in its conceivably most favourable light, that offer was an extravagant response, to which understandably there is no evidence of any further correspondence in terms of settlement discussions or offers.  That letter of Barrak Partners further demonstrated the inappropriateness of a person principally involved in the proceedings (albeit not directly though indeed financially indirectly so involved) acting as a solicitor in the proceedings. 

9. It was submitted on behalf of the respondents that Mr Fares ought not to be the subject of any adverse costs order for the following reasons:

   (i)        Mr Fares was not joined with PDD as a cross-claimant in the proceedings;

   (ii)the defence filed on behalf of Mr Fares and PDD together made no assertion or clams to copyright on Mr Fares’ part;

   (iii)all of the relevant plans and drawings in evidence in the proceeding ‘carried the corporate name Parramatta Design and Developments Pty Limited’;

   (iv)by at least the time of filing of defences in these proceedings, Mr Fares had disavowed any claims to copyright at all in the plans and drawings to the extent that it could ever have been said that he asserted otherwise (no particulars were given as to any such disavowal), other than what appears in the preceding subparagraph; and

   (v)Mr Fares did not seek any relief in the proceedings on his own account and made no claims in the proceedings at all (presumably that refer to ‘claims’ were intended to refer to claims for curial relief).

10. I observe however that Mr Fares did not at any stage of the proceedings make application for his dismissal as a respondent to the proceedings upon the basis of misjoinder.

11. The first basis for Concrete’s contention as to Mr Fares’ exposure to costs, as the second respondent to the proceedings, is that the proceedings were conducted on behalf of both PDD and Mr Fares by the same legal representatives.  It was pointed out that the written and oral submissions were purportedly made on behalf of both of them together as respondents to the proceedings, and in aid of the defence filed on behalf of both of them in the proceedings, and further, that those submissions were advanced on behalf of PDD and Mr Fares relevantly without distinction, and further that in the upshot, PDD and Mr Fares were unsuccessful in relation to all material issues explicitly and implicitly raised by their defence and which were the subject of evidence and of the respondents extremely lengthy written submissions (see [9] above), which were supplemented by oral submissions.  It was therefore submitted by Concrete that ‘the usual order should apply, and each of PDD and Mr Fares should be made jointly and severally liable for [Concrete’s] costs of the proceedings’.

12. The second basis for Concrete’s contention as to an order for costs to be made against both respondents is that the Court has determined that it is appropriate to restrain each of the respondents (and has in fact of course so ordered formally) from making further threats to the effect appearing in the letters of 9 September 2003 and 1 October 2003 of their legal representative Barrak Lawyers (see [53] of my reasons for judgment).  In that regard, it was emphasised by Concrete that by those points in time, Mr Fares was officially recorded by ASIC as PDD’s sole director and shareholder, Mr Barrak having earlier resigned his co-directorship.  The immediate context to those letters was a letter of 4 September 2003 from Concrete’ solicitors addressed to ‘Mr Gus Fares, Parramatta Design and Development, PO Box 4020, Parramatta NSW 2124’, followed by the letter of 9 September 2003 sent by Barrak Lawyers in purported response commencing ‘We are instructed by Mr Fares to respond to you’, and referred thereafter to ‘our client’s copyright’ (in purporting to reproduce that last mentioned letter in [36] above, I inadvertently omitted that opening sentence thereof).  In other words, from the early stages of the proceedings commenced by Concrete, which took place on 7 October 2003, no decision appears to have been made by or on behalf of Mr Fares and PDD, as to whether PDD and Mr Fares would lay claim to the contentious copyright, or whether that claim would be exclusively advanced by PDD. 

13. Understandably Concrete is concerned as to the recoverability of any costs order which is made in its favour against PDD alone, PDD having a paid-up share capital of two dollars, and its income tax return in evidence for the financial year ended 30 June 2000 recording a deficit of assets in relation to liabilities, and a trading result for that year of $18,759 (which thereby increased PDD’s accumulated losses to $21,284).  Those financial statements were tendered by Concrete into evidence and accepted by the Court on the issue as to costs orders.  The implications of Mr Fares avoiding exposure personally to any order for costs would appear from the evidence to be that he would personally avoid any financially adverse outcome to any costs order made in favour of Concrete, despite the circumstances that the existence of the proceedings placed Concrete in a position of uncertainty as to proceeding or otherwise with the development of the Nelson Bay land before the existing development consent expires. 

14. Concrete’s submission therefore was that the order for costs in its favour should be made on an indemnity basis against Mr Fare and PDD as Mr Fares’ alter ego, having regard to all the relevant circumstances, including the respondents’ conduct, the nature of certain of the findings already made by the Court adversely to the respondents, in particular as to the credibility of Mr Fares and Mr Barrak, as recorded in my reasons for judgment of 13 October 2004, the rejection by the respondents of the Calderbank offer made by Concrete prior to the hearing, and the equivocal manner whereby both PDD and Mr Fares defended together Concrete’s proceedings in Mr Fares’ case without seeking of course his removal from the proceedings upon the footing of wrongful joinder. 

15. Concrete’s Calderbank offer of settlement was thus made to the respondents about three weeks prior to the commencement of the hearing on 1 April 2004, and was faxed by Concrete’s solicitors to ‘Messrs Barrak’ on that day.  A copy thereof is attached to those reasons.  A subsequent letter on behalf of Concrete was faxed on 15 April 2004, a copy whereof is also attached to these reasons, merely purported to make clear that the offer of settlement earlier made by Concrete was ‘without prejudice except as to costs’. 

16. Concrete submitted that its offer was ‘eminently reasonable’ and that even if successful, ‘… the respondents would not have achieved any greater sum in terms of PDD’s claim for copyright infringement advanced by PDD’s amended cross-claim’.  In that regard, I was referred to the expert testimony of Mr Brooks, which I have partly recorded in [105] and again at [211] of my reasons for judgment, and in particular, Mr Brooks’ view as to a ‘reasonable fee’ there appearing ‘in the range of $28,000 to $30,000’ for preparation of the subject plans and drawings and associated architectural work, and my acceptance of Mr Brooks’ expert evidence to the exclusion of that of Mr Farrugia (see [271] of my reasons for judgment).

17. The course adopted by Concrete of bringing the proceedings against Mr Fares personally, as well as against PDD, as respondents was in my opinion appropriate and justifiable in all the circumstances of the case.  It may be reasonably concluded that Mr Fares and Mr Barrak, both of whom I thought to demonstrate, in the course of their cross-examination, a clear understanding of the issues directly and indirectly arising in the proceedings, consciously withheld earlier from committing either Mr Fares or PDD to any written retainer as architect to the venture, both in relation to the initially proposed eight unit development and subsequently to the proposed fourteen unit development.  No such commitment was made despite the fact that it was Mr Fares personally who was qualified to practice in Australia as an architect (see in that regard [31] of my reasons for judgment of 13 October 2004).  Nor of course was there any agreement in writing in the nature of a joint venture agreement, as recorded in [112] of those reasons for judgment (see also what appears in [169] of those reasons). 

18. As I have further recorded in my reasons for judgment of 13 October 2004, while no reference to Mr Fares personally appears on the architectural plans, which bore reference to ‘Parramatta Design and Developments’ purportedly as author, without the addition of ‘Pty Limited.  In any event, there is no doubt, as Concrete rightly emphasised, that PDD was Mr Fares’ alter ego (see for instance Mr Fares assertion as to ‘my standard specification’ in [16] of those reasons, and see also Mr Fares’ oral testimony recorded at [184] of those reasons).  As I said in [151] of those reasons for judgment, ‘[t]he absence of any written retainer of Mr Fares as architect for the joint venture, and any invoice or account for architectural fees, renders the task of precise identification of the architect (ie PDD or Mr Fares) a difficult one’.  There was almost an entire absence of evidence of any documentary kind emanating from Mr Fares and PDD, as to their respective formal status in professional and business contexts of relevance, except perhaps as to Mr Fares’ business card, which read ‘Gus Fares BA Architecture’.  Mr Fares appears not to have been engaged in professional activities of a regular or formal nature as an architect per se.  It would seem from the evidence that such income earning activities, as he was engaged in, were predominantly of building construction relating to projects in which he had a proprietary interest, directly or indirectly.  The written material in evidence concerning yearly financial results of Mr Fares/PDD activities disclosed relatively modest gross earnings and shortcomings in net earnings. 

19. Further submissions advanced by Mr Hall of Counsel for PDD and Mr Fares against the making of an order for costs against each of those respondents were as follows:

    (i)the letter of offer of 11 March 2004 sent by Costa & Associates to Messrs Barrack ‘… discloses an offer on the part of [Concrete] to pay the Respondent’s (sic) the sum of $33,000 for the use of the plans plus costs as agreed or assessed.  On the face of the offer, the letter discloses an offer more favourable to [PDD] than it obtained in proceedings’; and

    (ii)‘Notwithstanding, the letter at paragraph 3 proposes the entry into of (sic) a form of express license between [PDD] and presumably Mr Fares and Concrete Pty Limited as to the use by Concrete of the subject plans and drawings.  In the light of the outcome of these proceedings it may be seen that Concrete Pty Limited has not achieved an express license, but rather an implied license by operation of the general law.  An express license is an outcome that was simply not available to Concrete in the context of this litigation and it is therefore suggested that Concrete Pty Limited is not entitled to ask for an express license of a ‘Calderbank offer’ when the purpose of a Calderbank offer is to settle claims arising in the context of the proceedings, not to seek or assert other rights that do not arise or cannot arise in the proceedings before the Court…’

20. The thrust of those submissions is as confusing as the submissions appear to be misconceived.  No rational or reasonable basis is thereby advanced as to why Concrete’s request for an express license of copyright would have been less advantageous, and of less utility, to Concrete than what it was seeking in the proceedings by way of an implied license of copyright, the principles and parameters whereof have been settled by many authoritative judicial dicta.  Moreover the Concrete settlement offer was ‘to pay to your clients (referring thereby implicitly to the respondents Mr Fares and PDD) the sum of $33,000 plus costs…’.

1. The outcome of my reasons for judgment is that Concrete has the benefit of an implied license for no monetary consideration to be outlaid on its part in favour of both respondents to the proceedings, and is entitled in principle to an order for costs in its favour in relation to the proceedings generally, and against both respondents, irrespective of the cross-claim, which involved no issue in reality to the defence) being framed by PDD as cross-claimant alone. 

2. A further submission advanced by Mr Hall of Counsel for Mr Fares and PDD on the issue as to costs, which I think I should record, cavilled with my findings adversely to Mr Fares and PDD on the issue as to implied license.  In that regard Mr Hall submitted unspecifically that ‘… there was not an established body of authority of law that closely took the question of implied license as far as His Honour has taken the matter in the context of these proceedings’.  What relevance the submission has as to costs is not explained.

3. Mr Hall then submitted (literally) ‘… there was nothing inherently wrong with [PDD’s] testing through the legal process on existence or otherwise of an implied license.  The testing of such complex commercial arrangements and applications is the very thing the court process is there for and is designed to accommodate’.  How the submission could have assisted his clients on the issue of an award of costs, which would normally to follow the event of the outcome, quite escapes me.

4. Mr Hall yet further submitted, in relation to the position of Mr Fares personally, that he was not a cross-claimant in the proceedings, and that ‘the defence as filed in the proceedings made it clear that Mr Fares made no assertion or claim to copyright in the proceedings’, and further that ‘[a]ll of the relevant plans and drawings arising in the proceedings carried the corporate name [PDD]’.  I have already referred to that subject matter.  Whilst it is of course true that Mr Fares was not joined as a cross-claimant, essentially the same issues, and in particular evidentiary issues, arose in relation to the Mr Fares/PDD defence as on the PDD cross-claim.  Understandably Mr Fares would seek to have PDD alone to shoulder the totality of any adverse order for costs, in the light of PDD’s apparently unsatisfactory financial condition.  However for reasons I have already indicated, I do not think that any such confined order as to costs would be appropriate or realistic, much less equitable, in the circumstances. 

5. I am of the opinion that the principal orders for costs to be made in favour of Concrete should be in outline as follows:

   (i)for the period of time from Concrete’s commencement of the proceeding by application filed on 7 October 2003 (see [1] of my reasons for judgment of 13 October 2000), and thereafter up until 18 March 2004 (being the expiry date of Concrete’s Calderbank offer), an order that the respondents Mr Fares and PDD pay Concrete’s costs of and incidental to the proceedings so commenced on a party and party basis, inclusive of all interlocutory proceedings conducted up to that time;

   (ii)for the period of time thereafter until the conclusion of the proceedings following upon the making by the respective parties of their written submissions, an order that the respondents Mr Fares and PDD pay Concrete’s costs of and incidental to the proceedings on an indemnity basis, inclusive of all interlocutory proceedings and the submissions as to costs.

6. I will formally make orders  principally in conformity with that outline.

7. Since the publication of my reasons for judgment, Concrete has pointed out that I have not made any declaratory relief appropriately consequential to my finding as to non-infringement, reference being made (inter alia) to authority referred to [51] of my reasons.  I think that it is appropriate in the circumstances that I should do so, and will make a declaration accordingly forthwith, in addition to the orders as to costs of the proceedings.

I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Conti.

Associate:

Dated:            12 November 2004

Counsel for the Applicant/Cross-Respondent:	BW Rayment QC with DT Kell
Solicitor for the Applicant/Cross-Respondent:	Oliveri Attorneys
Counsel for the Respondents/Cross-Claimant:	TA Hall
Solicitor for the Respondents/Cross-Claimant:	Proctor & Associates
Dates of Hearing:	On the papers
Date of Judgment:	12 November 2004