ObjectiVision Pty Ltd v Visionsearch Pty Ltd (No 3)

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FEDERAL COURT OF AUSTRALIA

ObjectiVision Pty Limited v Visionsearch Pty Limited (No 3) [2015] FCA 304

Citation: ObjectiVision Pty Limited v Visionsearch Pty Limited (No 3) [2015] FCA 304
Parties: OBJECTIVISION PTY LIMITED ACN 090 253 697 v VISIONSEARCH PTY LIMITED ACN 150 067 271 and UNIVERSITY OF SYDNEY ABN 15 211 513 464
File number: NSD 2433 of 2013
Judge: PERRY J
Date of judgment: 1 April 2015
Catchwords: COSTS – application for preliminary discovery pursuant to r 7.23 of the Federal Court Rules 2011 (Cth) – where prospective applicant was substantially successful in application which was contested by prospective respondents – where wide discretion in making costs orders pursuant to s 43(2) of Federal Court of Australia Act 1976 (Cth) to be exercised judicially - whether contingent costs order appropriate – where prospective applicant awarded 50% of its costs – where liability for costs apportioned between prospective respondents to reflect different degrees of success and manner in which they ran their respective cases – where prospective applicant ordered to pay prospective respondents’ costs of complying with the preliminary discovery order
Legislation: Evidence Act 1992 (Cth) s 136
Federal Court of Australia Act 1976 (Cth) s 43(2)
Federal Court Rules 2011 (Cth) r 7.23, 7.29
Cases cited: Adidas AG v Pacific Brand Footwear Propriety Ltd (No. 4) [2013] FCA 1335; (2013) 308 ALR 143
Airways Corp of New Zealand v The Present Partners of Pricewaterhouse Coopers Legal [2002] NSWSC 521
Alstom Power Limited v Eraring Energy [2004] FCA 706; [2004] ATPR 42-009
Apache Northwest Pty Ltd v Newcrest Mining Ltd [2009] FCAFC 39; (2009) 182 FCR 124
C7 Pty Ltd v Foxtel Management Pty Ltd [2001] FCA 1864 Cappuccio v Australia or New Zealand Banking Group Ltd [1999] FCA 1188
Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261
E D Oates Pty Ltd v Edgar Edmondson Imports [2012] FCA 356
Hughes v Western Australian Cricket Association(Inc) [1986] FCA 382; [1986] ATPR 40-748
J & A Vaughan Super Pty Ltd v Becton Property Group Limited [2013] FCA 340
ObjectiVision Pty Ltd v Visionsearch Pty Ltd (No 2) [2014] FCA 1146
ObjectiVision Pty Ltd v Visionsearch Pty Ltd [2014] FCA 1087
Proctor v Kalivis (No. 3) [2010] FCA 1194
Riley in his capacity as Trustee of the Ker Trust v Jubilee Gold Mines NL [2000] WASC 114
SmithKline Beecham plc v Alphapharm Pty Ltd [2001] FCA 271
Steffen v ANZ Banking Group [2009] NSWSC 883
Date of hearing: Decided on the papers
Date of last submissions: 12 December 2014
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 39
Counsel for the Prospective Applicant: Mr R Lancaster SC with Mr C Burgess
Solicitors for the Prospective Applicant: K & L Gates
Counsel for the First Prospective Respondent: Mr C Stomo
Solicitors for the First Prospective Respondent: Lane Law
Counsel for the Second Prospective Respondent: Mr P Flynn
Solicitors for the Second Prospective Respondent: King…
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Details
Case
[2015] FCA 304
Decision Date

CaseChat Overview and Summary

In the matter of ObjectiVision Pty Ltd v Visionsearch Pty Ltd (No 3), the parties were engaged in a dispute concerning preliminary discovery orders in the Federal Court of Australia. The primary issue was the allocation of costs between ObjectiVision, Visionsearch, and the University, particularly in the context of a contested application for preliminary discovery. ObjectiVision sought access to certain documents to determine whether to proceed with litigation for copyright infringement, misuse of confidential information, and breach of a licensing agreement. The respondents, Visionsearch and the University, opposed the application on various grounds, including the breadth of the document categories sought. The Court granted preliminary discovery orders for certain categories of documents but denied others, leading to a complex cost allocation issue.

The legal issues before the Court included the appropriate exercise of discretion in making costs orders under s 43(2) of the Federal Court of Australia Act 1976 (Cth) and the Federal Court Rules 2011 (Cth), particularly in light of the contested nature of the preliminary discovery application. The Court also had to consider the precedents for contingent costs orders in cases where preliminary discovery was successful but substantive litigation was not pursued. The Court examined whether ObjectiVision's partial success justified a costs order in its favour and how the costs should be apportioned between the respondents, given their differing degrees of success and conduct during the proceedings.

The Court exercised its discretion by awarding ObjectiVision 50% of its costs, reflecting its substantial success in obtaining preliminary discovery orders for certain document categories. The costs were apportioned between Visionsearch and the University based on their respective conduct and the degree of success. Visionsearch was held liable for 35% of ObjectiVision's costs, while the University was liable for 15%. The Court also ordered that ObjectiVision pay the respondents' costs of complying with the preliminary discovery order. This decision emphasised the need for a judicial approach to costs orders, taking into account the unique circumstances of each case and the precedents regarding the discretionary nature of such orders.

The final orders included that the prospective applicant, ObjectiVision, pay the prospective respondents' reasonable costs and expenses of giving discovery and production. Visionsearch was to pay 35% of ObjectiVision's costs for the application for preliminary discovery, while the University was to pay 15% of those costs. These orders reflect the Court's balanced approach to cost allocation, recognising ObjectiVision's success while also considering the contested nature of the proceedings and the specific conduct of the parties involved.

Orders

Orders of the court

1. The prospective applicant is to pay the prospective first and second respondents’ reasonable costs and expenses of giving discovery and production in compliance with the orders made on 27 October 2014.

2. The first prospective respondent is to pay thirty five percent (35%) of the prospective applicant’s costs of the application for preliminary discovery as agreed or assessed.

3. The second prospective respondent is to pay fifteen percent (15%) of the prospective applicant’s costs in the application for preliminary discovery as agreed or assessed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

For the reasons set out below, I consider that Visionsearch and the University are entitled to their costs associated with the giving of preliminary discovery and production as agreed or assessed. However, in all of the circumstances, including that the orders were contested and that ObjectiVision was largely successful but only on categories amended on the second day of the hearing, I consider that ObjectiVision should receive a total of 50% of its costs as agreed or assessed. Those costs should be apportioned between the two prospective respondents reflecting the different manner in which they ran their respective cases and ObjectiVision’s failure on a distinct ground against the University. In the result, I would hold VisionSearch liable for 35% of ObjectiVision’s costs and the University liable for 15% of those costs. 2. BACKGROUND As I explained at [3] in ObjectiVision (No. 1), the documents sought by ObjectiVision fell into two primary categories: current and historical versions of computer source code; and software development documentation, including documents that it contends are often or usually associated with the development of software and are the products of software development process, based upon the evidence of its expert witness, Mr Sizer. These documents were said to be directly relevant to the question of whether ObjectiVision should decide to commence proceedings:(1)against Visionsearch and the University for relief for copyright infringement subsisting in its OPERA software and misuse of confidential information embodied in the OPERA software; and (2)against the University for relief for breach of the Licensing Agreement between the University and ObjectiVision. ObjectiVision submitted that access to these documents would provide the necessary information on the basis of which it could assess whether or not to commence proceedings against Visionsearch and/or the University. Both Visionsearch and the University denied any breach of copyright, misuse of confidential information, or other breach. They resisted the application for preliminary discovery on the grounds that none of the prerequisites to the discretion in r 7.23(1) were made out. Visionsearch and the University also submitted, in the alternative, that the categories of documents sought were too broad. To some extent, this appears to have been accepted with ObjectiVision reducing the categories for preliminary discovery and submitting amended categories on the second day of the hearing which addressed to some extent the concerns of the prospective respondents. In the event, I held that orders should be made for pre-action discovery with respect to certain of the categories of documents sought on the ground that they were relevant to the question of whether ObjectiVision should decide to commence proceedings against Visionsearch and the University for relief for copyright infringement and misuse of confidential information. In reaching that view, I did not accept the University’s submission that ObjectiVision had not demonstrated a reasonable belief that it owned copyright (ObjectiVision (No. 1) at [50]). Nor were submissions by VisionSearch and the University that ObjectiVision’s belief that its copyright may have been infringed was unreasonable upheld (ObjectiVision (No. 1) at [64]). In addition, the prospective respondents did not succeed on the arguments put by either or both that:(a)reasonable inquiries had not been undertaken (ObjectiVision (No. 1) at [72]-[81]);(b)ObjectiVision had failed to identify the information that was lacking (ObjectiVision (No. 1) at [82]-[83]); (c)ObjectiVision had failed to establish that it had insufficient information to decide whether or not to start proceedings (ObjectiVision (No. 1) at [84]-[92]); and (d)preliminary discovery should be refused on the grounds of delay (ObjectiVision (No. 1) at [134]).

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

However, I did not consider that ObjectiVision had established that it had any doubt about the question of whether it should institute proceedings for relief for an alleged breach of the Licensing Agreement between the University and ObjectiVision, and did not make orders for preliminary discovery on this ground. 3. CONSIDERATION3.1 General Principles The Court has a wide discretion under s 43(2) of the Federal Court of Australia Act 1976 (Cth) in making orders for costs. That discretion is to be exercised judicially: Hughes v Western Australian Cricket Association(Inc) [1986] FCA 382; [1986] ATPR 40-748 (Hughes) at 48,136. This power is supplemented by FCR, r 7.29, in Division 7.3 concerning preliminary discovery, which relevantly provides that:A person against whom an order is sought or made under this Division may apply to the Court for an order that:…(b)the prospective applicant pay the person’s costs and expenses. It has been doubted that there is as yet a “conventional approach” as to the manner in which the discretion as to costs and expenses is to be exercised in preliminary discovery applications: Apache Northwest Pty Ltd v Newcrest Mining Ltd [2009] FCAFC 39; (2009) 182 FCR 124 (Apache) at 146-147 [90]-[91] (Flick J (in dissent but on issues not presently relevant)); J & A Vaughan Super Pty Ltd v Becton Property Group Limited [2013] FCA 340 (Vaughan Super) at [16] (Kenny J). Any order for costs must necessarily be dictated by the facts and circumstances of the proceeding: Apache at 146 [89]; Vaughan Super at [16]. The decided cases are therefore illustrative only of the manner in which the discretion has been exercised in the circumstances of the particular case and provide guidance in that sense.3.2 Support for the parties’ respective approaches in the authorities Support can be found for each of the approaches to costs urged by the parties. The contingent orders sought by the University with respect to its Other Costs and by Visionsearch in the alternative to an award of its costs, find some support in Cappuccio v Australia or New Zealand Banking Group Ltd [1999] FCA 1188 although that was a case where the application for preliminary discovery was resolved by consent. In that case, Burchett J at [3] considered that the appropriateness of the costs order:…depends very much on the consequences of the discovery obtained. If the applicant for preliminary discovery uncovers enough to enable that applicant to bring proceedings which are successful, there may be much to be said for the proposition that the costs of the preliminary discovery should form part of the costs of the action. On the other hand, if the applicant proceeds, brings an action, fails, and is ordered to pay the costs of that action, there seems every reason why, generally speaking, the costs of the preliminary discovery should be included in the costs payable to the respondent. In the circumstances, his Honour considered that, if substantive proceedings are commenced, the costs of the preliminary discovery application should be at the discretion of the tribunal hearing the substantive application. That approach has also been adopted in a number of other authorities, including: SmithKline Beecham plc v Alphapharm Pty Ltd [2001] FCA 271 at [32] (Finkelstein J); and E D Oates Pty Ltd v Edgar Edmondson Imports [2012] FCA 356 at [59] (Kenny J) where the application for preliminary discovery was opposed and evidence was led both in support of and against the application.