Cortis Exhaust Systems Pty Ltd v Kitten Software Pty Ltd

[2002] FCA 314

FEDERAL COURT OF AUSTRALIA

Cortis Exhaust Systems Pty Ltd v Kitten Software Pty Ltd [2002] FCA 314

PRACTICE AND PROCEDURE – injunctive relief – costs – whether costs should be reduced – abandonment of issues – whether costs should be awarded for preparatory work

Federal Court of Australia Act 1976 (Cth) s 52

CORTIS EXHAUST SYSTEMS PTY LIMITED v
KITTEN SOFTWARE PTY LIMITED, JOHN MILSON AND IRENE COOK
N 639 OF 1998

TAMBERLIN J
SYDNEY
27 MARCH 2002

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N639 OF 1998

BETWEEN:

CORTIS EXHAUST SYSTEMS PTY LIMITED
(ACN 003 923 911)
APPLICANT

AND:

KITTEN SOFTWARE PTY LIMITED
(ACN 052 040 247)
FIRST RESPONDENT

JOHN MILSON
SECOND RESPONDENT

IRENE COOK
THIRD RESPONDENT

JUDGE:

TAMBERLIN J

DATE OF ORDER:

27 MARCH 2002

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The respondents be restrained from making any statement in trade or commerce to the effect:

(a)that the first respondent’s ServiceMaster product is an upgraded version of the applicant’s SIM computer software; or

(b)       that the first respondent is associated in business with the applicant.

2.Judgment be entered for the applicant against each of the first, second and third respondents for $97,751.22 comprising damages in a sum of $80,000, together with interest totalling $17,751.22 calculated from 28 January 2000 until judgment.

3.        The cross-claim is dismissed.

4.The respondents pay sixty percent of the applicant’s costs of the proceedings.

5. Security for costs provided on behalf of the applicant be released by the Registrar.

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	N639 OF 1998

BETWEEN:

CORTIS EXHAUST SYSTEMS PTY LIMITED
(ACN 003 923 911)
APPLICANT

AND:

KITTEN SOFTWARE PTY LIMITED
(ACN 052 040 247)
FIRST RESPONDENT

JOHN MILSON
SECOND RESPONDENT

IRENE COOK
THIRD RESPONDENT

JUDGE:	TAMBERLIN J
DATE:	27 MARCH 2002
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. In this matter I delivered judgment on 28 August 2001.  The dispute presently before me concerns the formulation of appropriate relief and in particular, whether injunctive relief should be granted and as to the costs which should be granted.

2. In relation to injunctive relief I am satisfied that it is appropriate to grant injunctive relief on the basis that the applicant was successful in establishing that there had been a deliberate course of misleading and deceptive conduct over a substantial period.  This is not a case of an isolated act which has terminated and which may never be repeated.  While it is correct to note that there has been no recent complaint of the conduct continuing, I have  nevertheless formed the view that the imposition of a restraint would serve a useful purpose in that the applicant would have an immediate remedy in the event that the conduct were to be resumed. 

3. Having regard to my findings, the appropriate order as to damages in this matter is that the respondents should pay an amount of $97,751.22 to the applicant comprised of damages of $80,000 together with interest totalling $17,751.22 calculated from 28 January 2000 until judgment. Thereafter, interest will be paid on that amount pursuant to s 52 of the Federal Court of Australia Act 1976 (Cth) (“the FC Act”).

4. The main outstanding issue in this proceeding is in relation to costs.  The applicant seeks all its costs and points out that it has received a series of adverse orders as to costs totalling an amount of $21,472 in the course of interlocutory proceedings and that these have been paid.  The applicant submits that from the outset to the determination of the proceedings, the respondents challenged the operation of the 1997 Deed.  Most of the hearing, it is said, was occupied with cross-examination of witnesses with respect to the circumstances before and surrounding the execution of the Deed and this was largely the focus of the parties’ submissions.  The applicant’s witnesses were accepted.  Although there was an attack on the credibility of one of the applicant’s witnesses, this failed.  It is said that this was not a case in which the respondents put forward any acceptable offer of compromise before the conclusion of the proceedings.  It is also pointed out that the parties co-operated to reduce the scope of the proceedings and it was concluded in four days, despite the fact nine days had been set aside.  A potentially lengthy issue concerning the similarity of the two source codes of the Service Industry Management (“SIM”) and ServiceMaster computer program was abandoned in February 2001, before the hearing.  It is said by the applicant that from March 2001 until conclusion of the hearing on 12 July 2001, the preparation and conduct of the hearing was confined to the contractual issues, the misleading and deceptive conduct claim and minor claims for infringement of copyright in respect of the logo and the operating manual.  The evidence concerning the use of the SIM logo was brief and the presentation in relation to the copyright of the SIM was also confined. 

5. It is conceded for the applicant that some small adjustment might appropriately be made to the normal costs order to which it is entitled as a result of it having lost on relatively minor issues and that this reduction could be in the range of ten per cent maximum. 

6. The respondents submit that there were a number of significant issues raised in the course of lengthy interlocutory proceedings in respect of which it was necessary to carry out detailed preparation and that this preparation was wasted or thrown away as a consequence of the applicant not pursuing the foreshadowed issues raised in the pleadings beginning with the original Statement of Claim filed on 26 June 1998.  In a schedule to their Submissions, the respondents have set out the matters raised in the various paragraphs of the Statement of Claim and have indicated those which were not pursued.  The central issue in this respect concerns the effect of the abandonment of matters at a later stage of the case brought in relation to the source code program.  This raised complex technical issues which led to the respondents preparing a large amount of material including expert evidence which was rendered unnecessary because of the late abandonment of this issue by the applicant. 

7. There was a particular dispute as to when in 2001 the respondents ought to have ascertained the abandonment of this issue and ceased to carry out preparatory work in relation to it.  The applicant says that the abandonment of this issue should have been appreciated by the respondents by the end of March 2001 because by the date fixed for filing of affidavit material in March, no evidence had been filed in relation to the source code issue.  The respondents contend that they were not formally made aware of the abandonment of the claim and it remained a live issue on the pleadings until shortly before the hearing and say that they were entitled to continue preparatory work until there was a formal indication as opposed to the mere non-filing of evidence.  The respondents say that, particularly having regard to the recasting of the applicant’s case on previous occasions they were entitled to assume that they would be required to meet the source code issue, although no evidence had been filed. 

8. In my view, a diligent respondent ought to have made inquiries when the timetable for affidavits expired or shortly thereafter to see if the issue had been abandoned.  Accordingly, I do not think that the respondents are entitled to claim in respect of any costs thrown away in relation to the source code issue which were incurred after the end of March 2001.

9. It is evident from the material to which I was taken by counsel for the respondents that a great deal of work and technical preparation had been undertaken in relation to meeting the source code issue up to the end of March 2001.  It is proper in my view to make a substantial adjustment to the order for costs in favour of the applicant in this matter having regard to the abandonment of this central issue which involved substantial preparation of work and was the subject of a number of interlocutory hearings.  In these circumstances, taking into account all the claims abandoned by the applicant, including the source code issue, and also taking into account the two smaller copyright issues on which the applicant failed, I think the appropriate order is that the applicant should be awarded sixty per cent of its costs on the application.

10. An additional and independent ground on which I consider the applicant ought to receive sixty per cent of its costs is the provision in O 62 r 36A of the Federal Court Rules.  That rule provides that when a party is awarded judgment for less than $100,000 on a claim, for a money sum or damages, any costs ordered to be paid, including disbursements, will be reduced by one third of the amount otherwise allowable under O 62 unless the Court otherwise orders.  In the present case the amount awarded is less than $100,000.  If one allows a modest amount for the failure of the applicant on the minor copyright grounds, which were in fact pursued, of ten per cent, then there would be an entitlement to ninety per cent of the costs.  If O 62 r 36A is then applied, this figure reduces to sixty per cent of the costs which is a figure I consider appropriate in all the circumstances as a consequence of the lack of success of the applicant on particular issues, the abandonment of the major copyright issue and the other claims which were not pressed.

11. Accordingly, the orders which I will make will include the grant of interlocutory relief, the award of damages and interest to the date of judgment.  The cross-claim will be dismissed with costs.  The applicant is to receive sixty per cent of its costs on the application.

I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tamberlin.

Associate:

Dated:             27 March 2002

Counsel for the Applicant:	Mr Ireland QC
Solicitor for the Applicant:	Staunton & Thompson
Counsel for the Respondent:	Mr Turner
Solicitor for the Respondent:	Yandell Wright Stell
Date of Hearing:	14 March 2002
Date of Judgment:	27 March 2002