Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd

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FEDERAL COURT OF AUSTRALIA

Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd [2008] FCA 1051

COSTS – challenge to an exercise of discretion by a Federal Magistrate to fix costs in a lump sum figure – rationale of avoidance of “expense, delay and the protraction of litigation” – no error disclosed

Federal Court of Australia Act 1976 (Cth) s 25(1A)
Federal Magistrates Act 1999 (Cth) s 79
Copyright Act 1968 (Cth) s 120
Federal Court Rules O 62 r 4(2)(c)
Federal Magistrates Court Rules rr 1.03, 13.10, 21.02(2)(a), 21.10

Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd [2007] FMCA 2156 affirmed
Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 cited
Australasian Performing Rights Association Ltd v Marlin [1999] FCA 1006 cited
Nine Films & Television Pty Ltd v Ninox Television Ltd [2006] FCA 1046 cited
Leary v Leary [1987] 1 All ER 261 cited
Sony Entertainment (Australia) Ltd v Smith (2005) 215 ALR 788 cited
Universal Music Australia Pty Ltd v Miyamoto [2003] FCA 812 cited
House v The King (1936) 55 CLR 499 cited

Dal Pont, Law of Costs (2003)
Quick on Costs

GINOS ENGINEERS PTY LTD v AUTODESK AUSTRALIA PTY LTD

No SAD 23 OF 2008

FINN J
16 JULY 2008
ADELAIDE


IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY

SAD 23 OF 2008
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:

GINOS ENGINEERS PTY LTD
Appellant

AND:

AUTODESK AUSTRALIA PTY LTD
Respondent

JUDGE:

FINN J

DATE OF ORDER:

16 JULY 2008

WHERE MADE:

ADELAIDE

THE COURT ORDERS THAT:

1.The appeal be dismissed. 

2.The appellant pay the respondent’s costs of the appeal. 

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


IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY

SAD 23 OF 2008
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:

GINOS ENGINEERS PTY LTD
Appellant

AND:

AUTODESK AUSTRALIA PTY LTD
Respondent

JUDGE:

FINN J

DATE:

16 JULY 2008

PLACE:

ADELAIDE

REASONS FOR JUDGMENT

  1. The appeal in this matter from a decision of a Federal Magistrate is one in which the grounds of appeal have assumed heightened significance. The reason for this is that in opening his oral submissions counsel for the appellant commenced to raise issues which went far beyond the very prosaic grounds in the Notice of Appeal and the appellant’s written submissions. In short, counsel sought to raise issues fundamental to the scope and limits of the jurisdiction of the Federal Magistrates Court or of a Federal Magistrate to award costs under s 79 of the Federal Magistrates Act 1999 (Cth). Needless to say none of these matters had been raised before the Federal Magistrate; they appeared to turn on, to say the least, arresting constructions of the FM Act and the Federal Magistrates Court Rules;  and they formed no part of the appeal that either counsel for the respondent or I understood was to be prosecuted. 

  2. Under s 25(1A) of the Federal…

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Details
Case
[2008] FCA 1051
Decision Date

CaseChat Overview and Summary

Ginos Engineers Pty Ltd appealed against a costs order made by the Federal Magistrate in favour of Autodesk Australia Pty Ltd. The appeal was heard by a single judge of the Federal Court, who dismissed the appeal and ordered the appellant to pay the respondent’s costs of the appeal. The appellant, Ginos Engineers, had made unauthorised use of Autodesk’s software, infringing its copyright. Autodesk Inc, a member of an international family of companies, and its local representative, Autodesk Australia, had engaged in correspondence and negotiations with Ginos regarding the infringement. These did not result in a satisfactory conclusion, leading to legal proceedings in Adelaide and New South Wales. The Federal Magistrate rejected Ginos’ application for costs and ordered it to pay Autodesk Australia’s costs in a lump sum of $22,500. The appellant argued that the Federal Magistrate had effectively taxed the costs, resulting in a much larger sum than would have been awarded through proper taxation. The court, however, found that the Federal Magistrate had exercised his discretion appropriately in making a lump sum order, and that the appellant had not demonstrated an error in this exercise of discretion. The appeal was dismissed, and the appellant was ordered to pay the respondent’s costs of the appeal.

Orders

Orders of the court

1. The appeal be dismissed.

2. The appellant pay the respondent’s costs of the appeal.

Background

Background to the litigation

Under s 25(1A) of the Federal Court of Australia Act 1976 (Cth), the appellate jurisdiction of this Court in relation to an appeal from a non-migration decision of the Federal Magistrates Court is to be exercised by a Full Court unless the Chief Justice considers that it is appropriate for that jurisdiction to be exercised by a single judge. Both the appellant and the respondent informed me in directions hearings prior to the appeal that the matter was an appropriate one to be heard by a single judge. Such was my own appreciation of the appeal. I recommended accordingly to the Chief Justice who later determined that the appeal be heard by a single judge. In consequence I indicated to counsel that the appeal would proceed on the grounds in the Notice of Appeal. Though counsel for the appellant strayed on occasion from the grounds of appeal, I made plain then that I would not determine issues that were not properly before me.BACKGROUND Though the appeal relates to a costs order made by the Federal Magistrate, it is necessary to refer in a little detail to the circumstances giving rise to that order. (i) The appellant, Ginos Engineers Pty Ltd, an Adelaide based company, had made unauthorised use of Autodesk Inc’s software, so infringing its copyright. Autodesk Inc is a member of an international family of companies of which the respondent, Autodesk Australia Pty Ltd, is the local representative. Autodesk Inc and its solicitors entered into correspondence and negotiations with Ginos in relation to its acts of infringement. These did not proceed to a satisfactory conclusion and Autodesk Inc’s solicitors wrote to Ginos’ lawyers asking them to confirm they would accept service on behalf of Ginos. (ii) Ginos’ lawyers did not respond to that letter but rather instituted the present proceedings in Adelaide. I will refer to this as the Adelaide proceedings. The apparent object of the proceedings was to bring matters to a head. It sought a declaration allegedly under the Copyright Act 1968 (Cth) as to the liability of Ginos in respect of its own infringement of Autodesk Australia’s software. The grounds of the application were stated to be that:The applicant and the respondent are unable to agree as to the liability that the applicant has as to the respondent on account of the applicant’s copyright infringement of the respondent’s software in the circumstances deposed to in the affirmation [sic] of its director Zisis Ginos made on the 4th of August 2007. (iii) Quite apart from any question as to whether a proceeding against Autodesk Australia alone as the alleged exclusive licensee could be said to be properly constituted: see Copyright Act s 120; the claim itself was – and should have been seen by Ginos’ lawyers to have been – wholly misconceived. The Copyright Act gave no such cause of action as alleged. And the relief sought was not itself an appropriate subject of declaratory relief. (iv) Some time after the Adelaide proceedings were instituted proceedings were brought in New South Wales by Autodesk Australia, Autodesk Inc and Autodesk Asia Pte Ltd (for the need for these three parties, see Copyright Act, s 120) against Ginos and its director alleging breaches of copyright for which appropriate relief was sought.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

FINN J
(xi) On 6 December 2007 his Honour rejected Ginos’ application for costs and had “no hesitation”: Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd [2007] FMCA 2156 at [30]; in acceding to Autodesk Australia’s request for costs. In the event he awarded costs in a lump sum in the figure of $22,500. The appeal is against that order. There is no appeal against the Federal Magistrate’s order rejecting Ginos’ application for costs.THE FEDERAL MAGISTRATE’S COSTS DECISION I preface my consideration of this matter with the observations that, for present purposes, the award of costs was in his Honour’s discretion: FM Act s 79; and that under r 21.02(2)(a) of the FMC Rules an order could be made setting the amount of the costs to be awarded. I would also note, as did the Federal Magistrate, that r 1.03 (insofar as presently relevant) provides:1.03 Objects(1)The object of these Rules is to assist the just, efficient and economical resolution of proceedings. (2)… the Rules aim to help the Federal Magistrates Court:·to operate as informally as possible·to use streamlined processes·to encourage the use of appropriate dispute resolution procedures. …(4) To assist the Court, the parties must:·avoid undue delay, expense and technicality·consider options for primary dispute resolution as early as possible. In quoting the above, his Honour highlighted the word “economical” in r 1.03(1). For reasons I give below, I quite understand why he did. Having quoted the above provisions (at [32]-[34]), the Federal Magistrate went on to say (at [35]):Given the objects to the rules and costs r.21.02, I have no hesitation in deciding to award costs here and calculated on a lump sum basis.Importantly, I would note in passing, his Honour had put the parties on notice at the 4 December 2007 hearing that he was predisposed to fix the costs himself and he indicated his reasons for so doing as the following exchange with the appellants’ counsel illustrates:HIS HONOUR: Mr Scragg, this matter has come to an end. MR SCRAGG: Yes, I know, your Honour. The simple way is the usual order, that costs be taxed. That’s a simple way – be agreed or taxed.HIS HONOUR: Mr Scragg, you’ve addressed me on that and I’ve also heard from Mr Hennessy about that. Given the way that this matter has progressed since it was commenced, the amount of time that has been spent at every step, I’m not disposed at the moment to make an order that the costs be taxed. Because I can see that it’s simply going to result in one or other of the parties – or perhaps more accurately both – incurring considerable extra expense in sorting out the question of costs.I will return to this matter. The Federal Magistrate then indicated in his reasons that he was assisted in determining the appropriate costs order by the affidavit of Mr Williams whom, he noted, had given similar evidence which was accepted in “other similar intellectual property cases”. Mr Williams had been involved in numerous copyright infringement cases in this Court and in the Federal Magistrates Court. It is unnecessary for me to comment on the degree of similarity between the case before his Honour and those to which he referred. The case before him clearly was an appropriate one for a lump sum order irrespective of whether it could be said to be a complex one. The discretion given in r 21.02(2)(a) is not circumscribed. I would emphasise that no ground of appeal challenged directly the decision to make a lump sum order as such although ground 7 (which must fail as I will indicate) might be said to do so obliquely. Mr Williams’ evidence was that in his experience costs are assessed for between 50 per cent and 70 per cent of the professional costs and disbursements expended on a matter. He was familiar with the work undertaken on the file and the accounts rendered in respect of this work; he provided an estimate of the costs that in his view were likely to be recoverable by the respondent in an assessment process, having regard to his experience of costs awards made in complex cases in the Federal Magistrates Court; he listed the items of work that had been undertaken; and, in the exhibit to his affidavit, he provided an itemised invoice of professional costs. He concluded that the total professional costs and disbursements that had been incurred or made (whether or not billed) totalled $24,558. He applied a 60 per cent recovery figure to that sum to produce a “taxed amount” of approximately $14,734.80. When account was taken of professional costs incurred after the date of Mr Williams’ affidavit the total of professional costs became $45,136.39. A reduction of $380 was made to this figure (it represented work in the New South Wales proceeding) as were other minor reductions so reducing the total to $44,693.64.

Ratio Decidendi

Legal Principle Established

Established by: FINN J

It is not uncommon, particularly, but not only, in intellectual property cases, for the court to take as its starting point the evidence of the charges for professional costs incurred and disbursements made by the lawyers of the party awarded costs – and this irrespective of whether the costs are to be estimated on an indemnity basis: cf Beach Petroleum NL at 120; or on a party and party basis: cf Universal Music Australia Pty Ltd v Miyamoto [2003] FCA 812 at [29] ff. That figure is then characteristically adjusted to take account of the acceptability of the charges made, the conduct of the proceeding, the measure of success on issues etc, to produce a sum which as a matter of judgment is neither overcompensatory nor prejudicial to the successful party. Consistent with the broad brush approach, that adjustment ordinarily is effected through the application of a discount to the figure accepted by the court on the available evidence as appropriately reflecting actual professional costs charged and disbursements made. The case law evidences wide variations in the percentages of discount sought and/or applied to reflect the exigencies of the matter in question: cf Sony Entertainment (Australia), 60%; Beach Petroleum NL, 39%, Nine Films & Television, 23%. What is clear is that a lump sum award may be in an amount that is greater or smaller than would have been the taxed costs payable: see Dal Pont at [15.20]. CONSIDERATION As best I understand it, the appellant’s case, though multipronged in its detail, was in essence that the Federal Magistrate in effect engaged in a taxation of costs in his treatment of Mr Williams’ invoice. If he had engaged in a proper taxation in accordance with r 21.11 of the FMC Rules, it is contended, his Honour would have arrived at a far smaller sum for costs, hence the reference in ground 6 of the grounds of the appeal that a proper charge for work done, whether taxed or otherwise, would have been approximately $5,000 to $8,000. In essence, and considered in light of the oral submissions of the appellant’s counsel, the complaint appears to be that the sum ordered was not just. The various grounds of appeal are, in a sense, illustrative of the central proposition. The respondent’s case, put shortly, is that the appeal is against an exercise of a “judicial discretion”: cf House v The King (1936) 55 CLR 499 at 504; but neither the grounds of appeal nor the appellant’s submissions disclose an appellable error in the circumstances. Before dealing with the appellant’s grounds, four general and/or contextual matters should be mentioned. First, it is clear from his Honour’s reasons and from the transcript of the costs hearings on 4 and 6 December 2007 that the Federal Magistrate made plain to the parties that he was disposed to make a lump sum award to bring to an end what already had been a protracted litigation. As I earlier indicated, the appellant has not challenged his Honour’s decision to make such an award, although it has been impugned obliquely by the repeated assertions that taxation should have been ordered and, if it had, a much lesser sum would have been payable by way of costs.