Tucker, Barry John v Bentley, Donald Andrew

[1997] FCA 596

IN THE FEDERAL COURT OF AUSTRALIA     )
  )
NEW SOUTH WALES DISTRICT REGISTRY     )          No NG 798 of 1994
  )
GENERAL DIVISION  )

B E T W E E N:

BARRY JOHN TUCKER

Applicant

- AND -

DONALD ANDREW BENTLEY

First Respondent

- AND -

HAYCOLL PTY LIMITED

Second Respondent

- AND -

CLINTON MACKENZIE WILLIAMS

Third Respondent

Coram:   O’Loughlin J
Place:     Sydney
Date:     10 April 1997

EX TEMPORE REASONS FOR JUDGEMENT

The trial of this matter occurred in the period 1 to 5 July 1996.  Over a year earlier the respondent through his insurers and solicitors made overtures to settle the matter and to avoid the litigation which, in fact, eschewed.  The papers representing the correspondence passing between solicitors has been annexed to affidavits and put before the court for the purposes of seeking to persuade the court to make orders on the subject of costs which would favour the respondent.

In order to explain the decision at which I have arrived, it is necessary to make a brief excursion into the facts of this case because my decision is based upon those facts and the way in which the negotiations between solicitors unfolded.  The first matter of importance is to emphasise the nature of the original claim that was made by the applicant and I interpolate that when I refer to the applicant I do not distinguish between Mr Tucker and his company.

The claim was that the applicant had copyright in the plans that had been prepared by Mr Bentley for the house at 37 Hallam Street.  As to that claim the applicant failed.  It only succeeded in obtaining a declaration that it had copyright in a sketch in respect of the house that was ultimately built at 37 Hallam Street.  Indeed, contrary to the fundamental case of the applicant there was a decision favouring the respondent, Mr Bentley, that it was he who had copyright in the Hallam Street plans.

The further decision of the court which is the second point of importance in having regard to the facts of this matter is the effect that each of the parties was free to use the plans that had been prepared by Mr Bentley, without fetter or restriction in the pursuit of their respective commercial activities as a builder and a designer respectively.  Now, the third fact is in relation to those two facts, the offers of settlement that were made to the applicant.  Before I identify them, first let me put to one side any suggestion that the fact that Mr Bentley benefited from professional indemnity insurance has anything to do with the matter.

Mr Van Aalst of counsel for the applicant submitted that it was the insurer and not the respondent that made the offer and hence that would have a material effect on my decision.  It has no effect at all. The offer in its ultimate form is to be found in a letter from Blake Dawson and Waldron, the solicitors for the respondent, dated 13 June 1995 and addressed to the solicitors for the applicant.  So far as is relevant to these reasons the offer was for the sum of $20,000 inclusive of costs and damages and subject to that, the application on the cross-claim be dismissed with no order as to costs. Then follows the following offer as part of the overall package and I read from paragraph 5 of that letter:

“Each party releases the other from all claims which it now has or but for the settlement agreement would have against the other party arising from or in connection with any reproduction, adaptation or use whatever of any plans, sketches or drawings which form the basis of the construction of the dwelling on lot 37 Hallam Street, Norris Park.”

It was submitted by Mr Van Aalst that there was a vagueness in the use of the term "settlement agreement".  That may be so but it plays no part in a consideration by me of my ultimate decision.  If there was a vagueness it could have been overcome by a simple telephone call. What that offer meant was that each party would drop its litigation and its claims against the other, and that each party would be free to do that which it wanted to do in respect of the plans, and I now refer generally to any plans, relating to the dwelling at Lot 37 Hallam Street.

The applicant is a builder and the respondent as a designer would be able to use those plans unfettered and hence that offer coincides materially with one of the decisions of the court in its style of judgement.  Of course it did not give the applicant that which the applicant was seeking.  I repeat the applicant was seeking copyright in the plans for his or its exclusive use and I use the word "exclusive" to emphasise that he was denying Mr Bentley any right to the future use of the plans.

But when one considers an offer made in an attempt to settle litigation, one is more influenced by the ultimate result and its relationship to the offer than the applicant's original claim and its relationship to the offer.  I find myself therefore in a position of saying that the offer as contained in Blake Dawson Waldron's letter of 13 June 1995 would have given each party, if it had been accepted, unfettered use of the plans for Lot 37 Hallam Street and that is what they got as a result of the judgement of the court and in addition it would have given the applicant $20,000 and that is by far more than
what the judgement of the court has given.

The only thing missing is that the offer did not address the issue of copyright and ownership of copyright in the plans or the sketches. The offer did not suggest that the parties go to the court seeking orders by consent - that one or other of them was  entitled to a declaration that copyright in some piece of paper vested in one of those parties. But the parties were then discussing settlement of a commercial clause and the settlement was being discussed in a commercial atmosphere.  The applicant was entitled to make a value judgement on how important the subject of copyright was to him.  He obviously did make a judgement that the subject of copyright was of vital importance to him and so he rejected the offer and pursued the litigation but pursued it unsuccessfully.  The question now is whether costs should be visited upon him and, if so, the description of those costs.

Mr Cobden of counsel for the respondent not only says that the applicant should pay the respondent's costs as from, I think he said 30 May, the date of the first and earlier offer to which I have not made an earlier reference, but he also submitted that those costs should be assessed upon an indemnity basis.  I must reject the latter submission. If there is to be an order for costs it should, in my opinion, be party and party costs.  Indemnity costs, in my opinion, are to be preserved and reserved for cases where the nature of the conduct of the party against whom costs are awarded is such that it is appropriate that there be a punitive element in the costs award.

Short of making a complete summary of the relevant facts of this case, I think it is sufficient to say that it is not a case which would otherwise warrant indemnity costs.  I am grateful to counsel for drawing my attention to the competing attitudes  emanating from single judges of this Court and the New South Wales Supreme Court. In the interest of comity I support my fellow judges who also happen to favour the view that indemnity costs do not automatically follow the event.  It is unfortunate that there are differing views in the two jurisdictions and hopefully that matter will be resolved in the not too distant future, but I think it will take a Full Court if not the High Court to bring about the resolution. Hence, any discussion of costs will be on the conventional party and party costs.

My assessment of the matter is that the offer that was made by the  respondent to the applicant was, after a balancing of all relevant factors, an offer that exceeded in commercial value the judgement that ultimately was published by the Court and to the extent that it favoured the applicant.  There is therefore a prima facie case justifying an order on the subject of costs which favour the respondent.  There are however some additional matters which should be taken into consideration:

The first of those is the date from which any such costs order would take effect.  The offer in its final form was dated 13 June 1995. In my opinion, even though there had been earlier correspondence on the subject of settlement, the applicant was entitled to a period of time thereafter within which to consider his position, make his decision, confer with his solicitors and have his solicitors respond.  I will allow a period of 14 days and hence any costs order will run as from 27 June 1995.

The second matter is one which has concerned me from the outset and, that is the fact that the respondent vigorously submitted and failed dismally in his attempts to persuade the

Court that the applicant had been guilty of fraud in the prosecution of his case.  Fraud is a most serious allegation to be made and any party who makes it must be aware of the consequences which flow if, as is the case here, there is a finding that the allegation of fraud was made without justification.  Although I am of the opinion that the respondent should benefit to a degree in costs as a result of the attempts that were made to settle this matter, the award of those costs is to be balanced both as to time, which I have already mentioned, and as to the failed allegation of fraud.

I could make orders which would give the respondent its costs as from 27 June 1995 and then separately make an order giving the applicant a nominated part of his costs equal to my assessment of the time taken to dispose of the issue of fraud.  If I adopted that approach I would merely be incurring the parties in yet further costs of taxation and arguments important, but nevertheless sterile, as to how much time was taken up in dealing with the fraud issue.  Exercising an element of discretion, tempered by a touch of intuition, what I propose to do is to save the parties that costly exercise by using a percentage approach.

On the subject of costs the order is that the respondent have two thirds of its costs of and incidental to these proceedings as and from 27 June 1995 to this date. 

I  certify that this and the preceding       pages are a true copy of the Ex Tempore Reasons for Judgment of the Honourable Justice O’Loughlin.

Associate:

Dated             

Counsel for the Applicant  :     Mr J  S Van Aalst
Solicitor for the Applicant  :     Fleming Muntz & Summons

Counsel for the Respondent  :     Mr R Cobden
Solicitor for the Applicant  :     Blake Dawson Waldron

Date of Hearing  :     10 April 1997