Microsoft Corporation & Ors v Mayhew (No.2)
[2008] FMCA 252
•6 March 2008
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MICROSOFT CORPORATION & ORS v MAYHEW (No.2) | [2008] FMCA 252 |
| COPYRIGHT – COSTS – Copyright infringement – award of indemnity costs – conduct of the respondent and his lay advocate in the proceedings – unwarranted frustration of the carriage of the matter by the respondent and his lay advocate. |
| Federal Magistrates Act 1999 (Cth), s.79 Federal Magistrates Court Rules 2001 (Cth), r.21.02(2) |
| Calderbankv Calderbank [1975] 3 WLR 586 Cummings v Lewis [1992] FCA 247 JL Holdings Pty Ltd v State of Queensland [1998] FCA 1032 Microsoft Corporation & Ors v Mayhew [2008] FMCA 121 Oshlack v Richmond River Council (1998) 193 CLR 72 |
| First Applicant: | MICROSOFT CORPORATION |
| Second Applicant: | MICROSOFT PTY LIMITED |
| Third Applicant: | MICROSOFT LICENSING, GP |
| Respondent: | RODNEY MAYHEW TRADING AS RODNEY’S COMPUTERS |
| File number: | SYG 1969 of 2007 |
| Judgment of: | Lloyd-Jones FM |
| Hearing date: | 26 January 2008 |
| Delivered at: | Sydney |
| Delivered on: | 6 March 2008 |
REPRESENTATION
| Solicitors for the Applicants: | Mr G Hansen of Harris & Company |
| Advocate for the Respondent: | No appearance |
ORDERS
The respondent pay the applicants’ disbursements in the sum of $13,465.45, exclusive of GST.
The respondent pay the applicants’ counsel fees in the sum of $1,250, exclusive of GST.
The respondent pay the applicants’ party-party costs to 22 August 2007 in the sum of $4,141.60.
The respondent pay the applicants’ costs on an indemnity basis incurred from 23 August 2007 in the sum of $24,799.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1969 of 2007
| MICROSOFT CORPORATION |
First Applicant
And
| MICROSOFT PTY LIMITED |
Second Applicant
And
| MICROSOFT LICENSING, GP |
Third Applicant
And
| RODNEY MAYHEW T/AS RODNEY’S COMPUTERS |
Respondent
REASONS FOR JUDGMENT
These are the reasons for cost orders in relation to the proceedings between the applicants and the respondent up to and including determination of liability. Judgment was given in the principle proceedings on 12 February 2007: Microsoft Corporation & Ors v Mayhew [2008] FMCA 121. The proceedings concerned an infringement of copyright by the unauthorised copy of computer software programs and operating systems onto computers for sale as a package. This made the portable computers more attractive to purchasers. The respondent’s breach was made in the knowledge of the applicants’ rights. The respondent’s computer package contained unauthorised copies of the applicants’ software when it was sold to the applicants’ investigators. The applicants succeeded in relation to liability against the respondent.
The applicants now seek an order in proceedings SYG1969 of 2007 that the respondent pays the applicants’ costs with respect to their claim up to and including the day their Calderbank offer was made. They seek costs assessed on a party/party basis and that the respondent pay their costs thereafter assessed on an indemnity basis.
Evidence
For the purposes of this cost application, the applicants tendered and applied for the following affidavits which was admitted into evidence:
a)Affidavit of Melanie Ang, affirmed on 12 February 2008. Attached to this affidavit is the schedule of costs in relation to the fees and disbursements incurred by the applicants in these proceedings together with copies of Calderbank letters provided to the respondent (first affidavit of Ms Ang).
b)Affidavit of Melanie Ang, affirmed on 26 February 2008. Attached to this affidavit are copies of the standard costs disclosure issued by Harris & Company (second affidavit of Ms Ang).
c)Affidavit of service of Melanie Ang, affirmed on 26 February which covers the first affidavit of Ms Ang (third affidavit of Ms Ang).
Award of costs in proceedings before this Court
The Federal Magistrates Court’s power to award costs is conferred by the s.79 of the Federal Magistrates Act 1999 (Cth). The relevant section states:
(2)The Federal Magistrates Court or a Federal Magistrate has jurisdiction to award costs in all proceedings before the Federal Magistrates Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs must not be awarded.
(3)Except as provided by the Rules of Court or any other Act, the award of costs is in the discretion of the Federal Magistrates Court or Federal Magistrate.
Rule 21.02(2) of the Federal Magistrates Court Rules 2001 (Cth) (“the Rules”) states:
In making an order for costs in a proceeding, the Court may:
(a) set the amount of the costs;
In ordinary circumstances, costs follow the event unless some issue is identified: Oshlack v Richmond River Council (1998) 193 CLR 72 at [63]-[67] per McHugh J. Issues that are relevant to these proceedings are:
a)An offer of compromise was made pursuant to the Rules and was not accepted. The respondent obtained a result which is not more favourable than the terms of the offer.
b)A Calderbank offer was made and unreasonably rejected.
The rejection of a Calderbank offer is a relevant factor in assessing costs, however it does not automatically attract an indemnity costs order, see JL Holdings Pty Ltd v State of Queensland [1998] FCA 1032 per Kiefel J:
The making of an offer of compromise is not itself conclusive of the question whether costs should be awarded on a basis other than that which is usual, costs as between party and party. It is but one factor to be taken into account in the exercise of the Court’s discretion: Fasold v Roberts (No. 2) (Sackville J Federal Court of Australia, 11 September 1997, unreported). In making such an order it ought usually to be shown that the conduct of the party to whom the offer was addressed was clearly unreasonable: NGICA (1992) Ltd v Kinney & Goode Pty Ltd (No. 4) (1996) 70 FCR 236.
A departure from the usual party/party costs requires consideration of whether the party to whom the Calderbank offer was addressed rejected that offer unreasonably.
The conduct of a party either before or during litigation may lead to the exercise of the discretion that costs do not follow the event. Weight may be given to the party’s conduct at the various stages of the proceedings, see Cummings v Lewis [1992] FCA 247 at [22] per Wilcox J:
…as a matter of law, the Court has an unfettered discretion as to its costs order: see s.43(2) of the Federal Court of Australia Act 1976. In that regard the situation is like that applying in Donald Campbell. But, second, as in Donald Campbell, because of the usual practice of the Court, a successful respondent has a reasonable expectation or recovering costs, in the absence of special circumstances. Third, in considering the matter of costs, the Court is entitled to look beyond the actual conduct of the case and have regard to the circumstances out of which it arose. So much is indicated by Viscount Cave’s reference to “facts…leading up to the litigation” and Atkin L.J.’s first criterion: “that the defendant brought about the litigation”. There is nothing in the Australian cases to suggest that these references are inapplicable in this country; indeed, to the extent that cases such as Verna Trading indicate that a court may refuse costs in the cases described by Atkin L.J. (at least), there is Australian support for the conclusion I have expressed. Importantly, the conclusion is consistent with the approach adopted by the High Court in Latoudis in connection with summary criminal proceedings. I have in mind particularly by their Honours’ references to the failure of the defendant to give an explanation which might have avoided the prosecution.
Conduct of the parties
I adopt Mr Hansen’s submissions in respect of the conduct of the respondent in these proceedings:
a)After several attempts of service of the original application on Rodney Mayhew, an affidavit in support of an order for substitute service was required for service on Paul Mayhew, Rodney Mayhew’s father. The application for substitute of service included additional costs (first affidavit of Ms Ang, Annexure “B”, pp.12-14).
b)The respondent was aware from the time he was served of the contents of the applicants’ claims and the accompanying evidence which remained at all times uncontested: Microsoft Corporation & Ors v Mayhew at [26].
c)The applicant offered to settle early in the proceedings on terms which were specifically more generous than that achieved in the substantive hearing, the applicants being successful on all aspects of their claim.
d)On 9 September 2007, solicitors for the applicants, Harris & Company, received an email from Leonard Clampett who stated that he held Power of Attorney for Rodney Mayhew and that he intended to represent him in the proceedings. Mr Clampett was not a legal practitioner. Harris & Company exchanged correspondence with Mr Clampett, much of which was peripheral to the issues in the proceedings: Microsoft Corporation & Ors v Mayhew at [5]-[8].
e)The applicants’ offer on 22 August 2007 contained a true and genuine offer of compromise in that its costs of the proceedings alone were already well in excess of the amount offered (first affidavit of Ms Ang, annexure B, pp. 8-16).
f)The offer made by the applicants on 24 September 2007 was a genuine offer of compromise. Mr Hansen submits that this offer was even more reasonable in light of the offer not to enforce any judgment if the respondent pay the applicants $700 and consented to the injunction set out in the application.
g)The judgement of $13,126.35 plus costs was significantly more favourable to the applicants than the offers it made in (e) and (f) above.
h)The applicants issued notices to produce to the respondent on 28 September and 9 October 2007. Nothing was produced in respect of these notices: Microsoft Corporation & Anor v Mayhew at [51(iv)]. The notices to produce required several attendances by Harris & Company. Due to the respondent’s failure to produce documents on any return date, the notice to produce was adjourned on 14, 17 and 31 October 2007.
i)The respondent did not detail any defence in his response, Microsoft Corporation & Ors v Mayhew at [51(iii)].
j)The applicant’s approach to resolve this matter was consistent with the public interest in the party’s compromising litigation rather than embarking on time consuming and costly litigation.
k)The applicants submit that the respondent unreasonably rejected their offers in (e) and (f) as the applicants achieved a substantially more favourable judgment than contained in those offers.
l)Mr Hansen submits that the respondent’s failure to put forward any defence in relation to the applicant’s claims is indicative of the fact that the respondents did not have any defence and that their rejection of the offer to settle the proceedings fully and finally was plainly unreasonable.
In Microsoft Corporation & Ors v Mayhew, I expressed concern about the manner in which the respondent and his lay advocate, Leonard Clampett, conducted themselves in these proceedings. I do not feel it necessary to reproduce those concerns in this decision. However Mr Mayhew’s conduct of initially avoiding service which required the applicants to seek substituted service, the subsequent failure to comply with orders of this Court and to respond to notices or offers of settlement have all unnecessarily frustrated the carriage of this matter. Harris & Company had to develop an alternative approach to proving damages which required briefing a suitably qualified expert to prepare such material. They were also forced to abandon the licence fee approach to assessing damages due to the considerable risk of disclosing commercially confidential information to the respondent or his representative because they had concerns regarding their credibility.
Nature of costs and disbursements incurred by the applicants
The first affidavit of Ms Ang, Annexure “A”, pp.6-7, contains a breakdown of the disbursements incurred by the applicants. This is in the amount of $13,465.45, exclusive of GST.
The applicants’ solicitor/client costs up to 22 August 2007 were in excess of $1,500. That was the date a Calderbank letter containing an offer by the applicants to settle the proceedings fully and finally on the basis that the respondent pay the applicants $1,500 in damages for past infringement of the first and third applicants’ copyright and agree to the injunctions set out in the application filed on 26 June 2007 (first affidavit of Ms Ang, Annexure H, pp.66-68).
In respect of party/party costs, I take into account the fact that Federal Magistrates Court procedures are less complicated than those of the Federal Court and I consider it appropriate and reasonable to exercise my discretion and order party/party costs at 80%. I fix the applicants’ solicitor/client costs at $4,141.60, exclusive of GST.
The applicants’ offer of 22 August 2007 was open until 24 August 2007 and made in accordance with the principles enunciated in Calderbankv Calderbank [1975] 3 WLR 586. The respondent did not accept the offer.
On 24 September 2007, the applicants made a further offer to the respondent to settle the proceedings fully and finally if he consented to a judgment in the sum of $15,000 (inclusive of costs) and the terms of the injunctions set out in the application. Upon acceptance of the respondent’s offer, the applicants agreed that they would not enforce judgment provided the respondent paid the Harris & Company trust account $700 and the respondent not infringe the orders made pursuant to paragraphs [1] and [5] of Annexure “A” of the application. On 25 September 2007, the applicants reiterated their offer of 24 September 2007 to both Mr Mayhew and Mr Clampett’s email addresses. The offer of 24 September 2007 was open until 28 September 2007 but was not accepted by the respondent.
The solicitor/client costs incurred by the applicants after 23 August 2007 amounted to $24,799. As I indicated in Microsoft Corporation & Ors v Mayhew, the conduct of the respondent and Mr Clampett unnecessarily frustrated these proceedings by failing to comply with orders of the Court and offering no defence to the applicants’ claims. Further the failure to respond to offers of settlement was unreasonable in light of the applicants succeeding in relation to liability against the respondent. The actions of Mr Clampett further complicated the matter by entering into “considerable volumes of correspondence” with Harris & Company which were peripheral to the issues. Mr Clampett also filed proceedings in the District Court of Queensland in relation to matters arising from these proceedings. That application was dismissed: Microsoft Corporation & Ors v Mayhew at [9]-[14].
I also believe that the applicants’ costs incurred in respect of dealing with Mr Clampett’s correspondence, whether peripheral to the proceedings or not, and any enquiries or research carried out in respect of Mr Clampett’s right to appear, are reasonable. In the circumstances I believe that the applicants’ costs incurred from 23 August 2007 amounting to the sum of $24,799 should be paid on an indemnity basis.
I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Lloyd-Jones FM.
Associate:
Date: 6 March 2008
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