Monte v Fairfax Media Publications Pty Ltd (No.2)
[2015] FCCA 2787
•27 October 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MONTE v FAIRFAX MEDIA PUBLICATIONS PTY LTD (No.2) | [2015] FCCA 2787 |
| Catchwords: COPYRIGHT – Costs – competing costs applications – offers of settlement – consideration of whether the successful applicant should receive an indemnity costs order – consideration of whether there should be a departure from the general principle that costs follow the event. |
| Legislation: Copyright Act 1968 (Cth), s.115 |
| Aristocrat Technologies Australia Pty Limited v DAP Services (Kempsey) Pty Limited (in liquidation) (2007) 157 FCR 564 Brewer & Anor v Martin & Ors (No.2) [2014] FCCA 1341 Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 40 Kassem and Secatore v Commissioner of Taxation (No.2) [2012] FCA 293 Kembla Coal Terminal Ltd v Braverus Maritime Inc (No.2) (2004) 212 ALR 281 Monte v Fairfax Media Publications Pty Ltd [2015] FCCA 1633 Russo v Westpac Banking Corporation (No.2) [2015] FCCA 1668 Sydney Attractions Group Pty Ltd v Schulman (No.3) [2013] NSWSC 1544 |
| Applicant: | FRANK MONTE |
| Respondent: | FAIRFAX MEDIA PUBLICATIONS PTY LTD |
| File Number: | SYG 1604 of 2014 |
| Judgment of: | Judge Driver |
| Hearing date: | Decided on the papers |
| Date of Last Submission: | 2 October 2015 |
| Delivered at: | Sydney |
| Delivered on: | 27 October 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr C Evatt, with Ms L Andelman |
| Solicitors for the Applicant: | Beazley Boorman Lawyers |
| Counsel for the Respondent: | Mr P Flynn |
| Solicitors for the Respondent: | Banki Haddock Fiora |
ORDERS
The respondent shall pay the applicant’s costs of the proceedings, which if not agreed, are to be assessed and, if necessary, taxed in accordance with the Federal Court Rules.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1604 of 2014
| FRANK MONTE |
Applicant
And
| FAIRFAX MEDIA PUBLICATIONS PTY LTD |
Respondent
REASONS FOR JUDGMENT
On 7 August 2015 I gave judgment for the applicant (Mr Monte) in the principal proceedings in this matter[1]. I awarded Mr Monte damages for breach of copyright in the sum of $10,001 comprising $1 pursuant to s.115(2) and $10,000 pursuant to s.115(4) of the Copyright Act 1968 (Cth) (Copyright Act).
[1] Monte v Fairfax Media Publications Pty Ltd [2015] FCCA 1633
The parties have since made competing applications for costs orders. They have agreed to my determination of the dispute as to costs on the papers.
Section 79 of the Federal Circuit Court of Australia Act 1999 (Cth) (Federal Circuit Court Act) applies in the determination of this matter. Section 79 of the Federal Circuit Court Act is, relevantly, in the following terms:
(2) The Federal Circuit Court of Australia or a Judge has jurisdiction to award costs in all proceedings before the Federal Circuit Court of Australia (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 Circuit Court of Australia or Judge.
The power conferred by ss.79(2) and (3) is in similar terms to ss.43(1) and (2) of the Federal Court of Australia Act 1976 (Cth).
Mr Monte’s claim for costs
Mr Monte relies on the affidavit of Joshua Boorman made on 7 September 2015 (Boorman Affidavit) and seeks that the following orders be made as to costs:
1. The respondent pay the applicant's costs as follows:
a)as to the costs the applicant incurred before 11.00am on 15 April 2015 - on a party and party basis; and
b)as to the costs the applicant incurred after the time mentioned in (a) - on an indemnity basis.
Mr Monte seeks indemnity costs after 15 April 2015 because of an offer of compromise made by him.
On 13 April 2015, Mr Monte made an offer to compromise pursuant to rule 25.01(1) of the Federal Court Rules 2011 (Cth) (Federal Court Rules) for $10 000 plus costs as agreed or assessed (the Offer)[2].
[2] Annexure B to the Boorman Affidavit
The Offer was not accepted by Fairfax. The consequences of not accepting an offer to compromise for an amount below that awarded by the Court is found in rule 25.14(3) of the Federal Court Rules, which states:
If an offer is made by an applicant and not accepted by a respondent, and the applicant obtains a judgment that is more favourable than the terms of the offer, the applicant is entitled to an order that the respondent pay the applicant's costs:
(a)before 11.00 am on the second business day after the offer was served--on a party and party basis; and
(b)after the time mentioned in paragraph (a) - on an indemnity basis.
In Russo v Westpac Banking Corporation (No 2)[3], Judge Manousaridis dealt with an application for indemnity costs in circumstances where the applicant made an offer to settle for an amount less than the amount ordered by the Court. At [4] his Honour said:
Sub rule 25.14(3) of the FCR applies to proceedings in this Court because of r.l.05(3)(b) of the Federal Circuit Court Rules 2001 (Cth) (FCC Rules). That paragraph provides that the provisions of the FCR set out in Part 2 of Schedule 3 apply with necessary changes, to general federal law proceedings
[3] [2015] FCCA 1668
Like in Russo, in this case Mr Monte offered to compromise the proceedings. Fairfax did not accept the Offer. The consequences of not accepting an offer to compromise in these circumstances is said to be a presumption in favour of indemnity costs.
Mr Monte advances two other reasons why the Court may consider ordering costs be paid on an indemnity basis following the Offer. First, based on the evidence before the Court, he contends that it was unreasonable for Fairfax to argue that its admitted infringement of copyright was not flagrant. Secondly, Mr Monte submits that Fairfax should not have submitted that damages should be limited to the price of an equivalent image that it could purchase for a market price. He also asserts that he was at all times compliant with Court orders and Court Rules.
Fairfax’s contentions
Fairfax seeks an order that each party bear their own costs of the proceedings or, in the alternative, an order that it should pay Mr Monte’s costs in accordance with the Federal Circuit Court scale. Fairfax relies on the affidavit of Alisdair James Doctor made on 21 September 2015.
Reasons for making an order inconsistent with rule 25.14(3)
Fairfax notes that Mr Monte relies on the operation of rule 25.14(3) of the Federal Court Rules (Rule) in support of his application. Whilst under the Rule an offeror is entitled to indemnity costs, by virtue of the operation of rule 1.35 of the Federal Court Rules, it has been held that this is in fact a rebuttable presumption. The party that is prima facie required to pay costs under the Rule may persuade the Court to order otherwise[4].
[4] Kassem and Secatore v Commissioner of Taxation (No 2) [2012] FCA 293
In Kembla Coal Terminal Ltd v Braverus Maritime Inc,[5] Hely J stated that this prima facie position can be departed from “for proper reasons which, in general, only arise in an exceptional case”. This passage was confirmed by the Full Federal Court in Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd[6]. Whilst these authorities deal with order 23 rule 11(4) under the Federal Court Rules 1979 (Old Rule), it was held in Kassem at [11] that for such purposes, the Old Rule and the Rule are to the same effect.
[5] (No 2) (2004) 212 ALR 281 at [17]
[6] [2009] FCAFC 40 at [10]
In Sydney Attractions Group Pty Ltd v Schulman (No 3)[7], in considering a similar provision to the Rule under the Uniform Civil Procedure Rules 2005 (NSW), Sackar J at [37] stated that exceptional circumstances may include “a combination of ordinary factors, which, although individually of no particular significance, when taken together are seen as exceptional”. Fairfax submits that the factors set out below should be seen collectively as exceptional, such that the Rule does not apply.
[7] [2013] NSWSC 1544
The offer
At the point at which the Offer was made, ownership of copyright in the photograph the subject of the proceedings had not been established. This is despite that fact that Fairfax’s solicitors requested that ownership be substantiated as early as 1 October 2013[8] (prior to the proceedings being brought), to which there was no substantive response. The 1 October 2013 letter was again sent to Mr Monte’s solicitor following the commencement of proceedings[9]. Despite this, Mr Monte only established (by affidavit evidence) that he owned the copyright six weeks after the Offer was made.
[8] Annexure D to the Doctor Affidavit
[9] Annexure E to the Doctor Affidavit
Fairfax submits that it could not properly consider the Offer in such circumstances.
The Offer was served on Fairfax on 15 April 2015, and open for acceptance for 14 days, being until 5.00pm on 29 April 2015. The Offer was exclusive of costs. On 28 April 2015, Fairfax’s solicitor wrote to Mr Monte’s solicitor requesting clarification of the amount of Mr Monte’s costs at that point of the proceedings[10]. A response was not forthcoming until 20 May 2015[11], 21 days after the Offer had already expired.
[10] Annexure C to the Boorman Affidavit
[11] Annexure D to the Boorman Affidavit
Fairfax submits that it could not properly consider the Offer without an indication of the quantum of costs; which was only forthcoming after the Offer was no longer open. Mr Monte’s solicitors did not offer to extend the Offer at any point, and would have been within their rights to reject any acceptance of the Offer after 29 April 2015.
Conduct of proceedings
Mr Monte has submitted that he was compliant with Court orders and Court Rules[12]. Fairfax disputes this. Pursuant to order 2 of the orders made on 21 April 2015, Mr Monte was to file and serve his affidavit evidence by 15 May 2015. No affidavit evidence was served by that date. Fairfax’s solicitors wrote to Mr Monte’s solicitors on 21 May 2015[13] and 26 May 2015 regarding his affidavit evidence; to which there was no response. After Fairfax’s solicitors contacted my chambers about the default[14], I granted a short extension till 3 June 2015. It was on this date that Mr Monte served his only affidavit. Mr Monte did not seek an extension, contact Fairfax or offer any reason why the affidavit was filed and served late. Further, Fairfax asserts that the late filing of the evidence left it at a distinct forensic disadvantage of being unable to put on evidence in response to Mr Monte’s claim (a matter raised by Fairfax’s counsel at the hearing). In fact, as submitted by Fairfax’s counsel at the hearing, Fairfax’s evidence was prepared on the assumption that there was to be no evidence from Mr Monte[15].
[12] Mr Monte’s submissions at [8]
[13] Annexure A to the Doctor Affidavit
[14] Annexure C to the Doctor Affidavit
[15] Transcript, page 4, lines 26-28
The parties were ordered on 15 July 2014 to attend mediation. On 18 July 2014, the parties were asked by the registry to provide five dates for a mediation conference that were mutually available to all parties[16]. On 29 July 2014, Fairfax’s solicitors emailed Mr Monte’s solicitors providing eight possible dates for mediation, and asking if any of these dates were suitable[17]. Fairfax’s solicitors received no response to this email. It was not until 28 October 2014, that the registry was asked for possible mediation dates in November, December 2014 and January, February 2015[18].
[16] Annexure F to the Doctor Affidavit
[17] Annexure G to the Doctor Affidavit
[18] Annexure H to the Doctor Affidavit
The mediation was held on 24 March 2015; Mr Monte’s delay in dealing with the matter is said to have resulted, at least in part, in the mediation being held eight months after it was ordered.
Fairfax asserts that it complied with all Court orders. Further, Fairfax saved both parties significant time and costs by agreeing to limit the issues in the proceedings solely to damages[19].
[19] see amended defence filed 5 May 2015
Counsel’s fees
Mr Monte instructed both senior and junior counsel in what Fairfax says was a very straightforward copyright infringement case. The combined total of Mr Monte’s counsels’ invoices[20], $28,050, is said to be prima facie an unreasonable amount of counsels’ fees for Mr Monte to have incurred having regard to the simplicity of the matter and the limited compass of the evidence and issues. The total counsel’s fees incurred by Fairfax, $5,940, is said to provide a good guide as to a reasonable amount of counsel’s fees to incur for a matter of this kind[21].
[20] Annexures F and G to the Boorman Affidavit
[21] Annexure I to the Doctor Affidavit
Other matter raised in Mr Monte’s submissions
Paragraph 7 of Mr Monte’s submissions states that his submissions on s.115(2) damages should be taken into account in determining whether indemnity costs should be ordered. However, I accepted Fairfax’s submissions on s.115(2) damages having regard to Aristocrat Technologies Australia Pty Limited v DAP Services (Kempsey) Pty Limited (in liquidation)[22]. Fairfax’s position on s.115(2) damages was therefore vindicated.
[22] (2007) 157 FCR 564
Mr Monte submits at [5] of his written submissions that Fairfax has replaced the photograph the subject of these proceedings with a different photograph to which it also does not own the copyright. These proceedings do not concern this other photograph. There has been no evidence adduced concerning this other photograph. Fairfax submits that this submission should be given no weight at all.
Award of damages
The Offer was for $10,000; the amount of the additional damages awarded.
Fairfax made its own offer of compromise for $10,500 on 30 March 2015 (inclusive of costs) at a time when the costs of the proceedings would have been “quite low”, being before the preparation of evidence and the substantive hearing.
In addition, Fairfax notes that the amount of s.115(4) damages is a matter in the discretion of the Court and was thereby difficult to predict in advance. Fairfax’s offer of 30 March 2015 of $10,500 (inclusive of costs) is said to have been a reasonable and realistic offer having regard to the costs which had been incurred at that time. Fairfax asserts its offer should have been accepted.
Federal Circuit Court scale
Mr Monte is seeking party/party costs prior to the Offer. It is unclear how Mr Monte wishes the costs to be assessed or taxed. It has been held that in normal or routine Federal Circuit Court proceedings the Federal Circuit Court scale of costs should apply[23]. Fairfax contends that these proceedings were “very straightforward”. Considering this, Fairfax submits that, should any party/party costs order be made, it be done on the Federal Circuit Court scale.
[23] Brewer & Anor v Martin & Ors (No 2) [2014] FCCA 1341 at [14]
Mr Monte’s reply
Mr Monte takes issue with the submissions by Fairfax in his submissions in reply. He submits that the Court should disregard the settlement offer made by Fairfax because it was inclusive of costs and the filing fee alone was $515. He contends that scale costs would not properly compensate him for the legal costs incurred in obtaining judgment in his favour.
Reasoning
What is remarkable in this case is that both parties made an offer of compromise around the figure of $10,000 which was also approximately the amount of damages I awarded. That suggests to me that both parties made a fair assessment of the likely damages outcome. The offer made by Fairfax was above the award of damages but was inclusive of costs. I agree with Mr Monte that $500 in respect of costs, even at that stage, would not have been adequate compensation for the costs and disbursements he had incurred. There was, accordingly, a reasonable basis for Mr Monte not to accept that offer. Mr Monte’s offer of $10,000 plus costs was $1 less than the amount of damages I awarded. While, technically, he has achieved a better outcome, it would, in my opinion, be artificial to impose indemnity costs in respect of a $1 difference in that outcome. Further, the offer made was unquantified in relation to costs. In my opinion, it may be reasonable for a party not to accept an offer of compromise that is exclusive of costs which are unquantified. In my opinion, it was not unreasonable for Fairfax to fail to accept Mr Monte’s offer of compromise because the costs component was unquantified and Mr Monte’s costs may have been, and indeed have been proven to be, out of proportion to Fairfax’s costs.
There is, in my view, nothing in the conduct of these proceedings by either party that would warrant the Court departing from the general principle that costs should follow the event. However, costs should be paid on a party/party basis. Mr Monte resists the application of scale costs on the basis that it would not provide adequate recompense. The affidavit of Mr Boorman establishes that the solicitor and own client costs incurred by Mr Monte exceed $11,000 and counsels’ fees exceed $28,000. While it is reasonable to expect that not all of those costs would be recoverable on a taxation, I do accept that costs pursuant to the Federal Circuit Court’s scale would not provide adequate recompense in this instance. This is, indeed, a common position in intellectual property proceedings in the Court.
I have concluded that costs should be awarded in favour of Mr Monte on a party and party basis. It is open to me to fix costs in a specific amount but I am reluctant to do so in circumstances where I have not heard argument from the parties. I have concluded that the most appropriate outcome is to make a simple costs order with the proviso that if costs are not agreed, they are to be assessed and, if necessary, taxed in accordance with the Federal Court Rules.
I certify that the preceding thirty-four (34) paragraphs are a true copy of the reasons for judgment of Judge Driver
Associate:
Date: 27 October 2015
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