Weller v Smith (No.2)
[2016] FCCA 3267
•15 December 2016
FEDERAL CIRCUIT COURT OF AUSTRALIA
| WELLER & ANOR v SMITH (No.2) | [2016] FCCA 3267 |
| Catchwords: PRACTICE AND PROCEDURE – Pre and post judgment interest. |
| Legislation: Family Law Act 1975 (Cth) |
| Cases cited: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 Hamlin v University of Queensland (No 2) [2013] FCCA 702 |
| First Applicant: | JOHN NEVILLE WELLER |
| Second Applicant: | JAKE HENRY WELLER |
| Respondent: | IAN SMITH |
| File Number: | BRG 1053 of 2014 |
| Judgment of: | Judge Jarrett |
| Hearing date: | In Chambers, by written submissions |
| Date of Last Submission: | 8 December 2016 |
| Delivered at: | Brisbane |
| Delivered on: | 15 December 2016 |
REPRESENTATION
| Solicitors for the Applicant: | Bennet & Philp Lawyers |
| The Respondent appeared in person. |
ORDERS
The respondent pay the applicants’ costs of and incidental to the application, including reserved costs if any, to be taxed in accordance with Part 40 of the Federal Court Rules 2011 on the indemnity basis;
The respondent pay the applicant interest on the compensatory damages ordered to be paid by the respondent to the applicants fixed in the sum of $869.72.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 1053 of 2014
| JOHN NEVILLE WELLER |
First Applicant
| JAKE HENRY WELLER |
Second Applicant
And
| IAN SMITH |
Respondent
REASONS FOR JUDGMENT
On 4 November, 2016 I delivered reasons for judgment and made orders in an application by John and Jake Weller against Ian Smith. I made certain declarations and ordered, amongst other things, that the respondent pay to the applicants damages totalling $27,350. I directed that each party file and serve short minutes of order and written submissions in support of those orders in respect of the question of pre and post judgment interest on the awards of damages and costs.
Both parties have now filed written submissions. The applicants filed their written submissions on 25 November, 2016 and the respondent filed his written submissions on 8 December, 2016.
Despite the clear directions to do so, neither party has filed short minutes of the orders that they seek to be made in these proceedings.
Costs
The applicants contend that there should be an order that the respondent pay their costs “to be assessed on an indemnity basis or in the alternative to be taxed on a party and party basis”. The respondent argues that there ought to be an order for costs on a party and party basis.
There seems to be no dispute that costs should follow the event. The respondent seems to accept that proposition. The argument between the parties is whether the costs ought to be assessed on a party and party basis or on an indemnity basis.
However, neither party has addressed the basis upon which costs are ordinarily ordered in this Court. The Court has jurisdiction to order an unsuccessful applicant to pay costs: s.79 of the Federal Circuit Court of Australia Act 1999 (Cth).
It may set the amount of the costs, the method by which the costs are to be calculated, refer the costs for taxation or set a time for payment of the costs: r.21.02(2) of the Federal Circuit Court Rules 2001. The Court’s discretion to make an order for costs is absolute and unfettered but it must be exercised judicially: Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at [400].
Schedule 1 to the Federal Circuit Court Rules 2001 is an event based costs scale. It is inapt to speak of costs fixed according to that scale as being fixed or assessed on a particular basis – either party and party or on an indemnity basis. Those terms are more apt to refer to the assessment or taxation process that occurs when costs are taxed according to either the Federal Court Rules or the Family Law Rules.
The applicants argue that costs ought to be taxed. I take that as an implicit assertion that the costs ought to be assessed according the Federal Court scale of fees and costs rather than the scale that applies under the Federal Circuit Court Rules. Mr Smith’s response seems to accept the proposition that costs ought to be taxed according to the Federal Court scale rather than the scale that applies to proceedings in this Court under the Federal Circuit Court Rules.
Save for the submissions made by the applicants in support of their application for an indemnity costs order, no submissions have been made about why it is appropriate in this case to depart from the event based costs scale that, prima facie, applies in this Court. As I pointed out in Hamlin v University of Queensland (No 2) [2013] FCCA 702, before one moves to consider the basis upon which any assessment or taxation of costs should occur pursuant to the Federal Court Rules 2011 (or for that matter in applications under the Family Law Act 1975 pursuant to the Family Law Rules 2004) it is necessary to first decide that there ought to be a departure from the event based costs scale prescribed by the Rules of this Court.
The matters raised by the applicants in support of their claim for an indemnity costs order are relevant to that consideration. The applicants point to my reasons for decision and in particular what I said at [136], [138] and [139] of those reasons. Those paragraphs are as follows:
136. I find that Mr Smith’s infringements were flagrant. I reject Mr Smith’s denials that he did not know that he could not use the photographs at issue. The products sold by Mr Smith in the trap purchase were sold with almost exact reproductions of the applicants’ photographs, but with Mr Smith’s eBay Seller ID crazytownbrisbane added to the photographs. I am satisfied that the addition of that identifier to the photographs was a knowing attempt to usurp to himself the work of the applicants.
…
138. Mr Smith continued to infringe the applicants’ copyrights despite being put on notice of the applicants’ rights, first in 2013 and again in October, 2014. I have set out the relevant facts earlier in these reasons. There is an imperative to impose a sanction which will have both a general and a specific deterrent effect.
139. Additionally, when he had the opportunity to do so, Mr Smith disparaged the applicants by referring to them as “shady carictors (sic)” and suggesting that the applicants’ website was fake and their product inferior.
The applicants argue that the respondent has displayed no remorse or contrition and has put the applicants to the cost and expense of formally enforcing their rights. I accept that submission. As the applicants point out, the respondent did not put on a proper defence to the proceedings which necessitated the applicants taking steps to compel the respondent to comply with his obligation to file a defence.
The applicants point out that they served the respondent with a notice of offer to compromise on 13 January, 2015. The offer required the respondent to:
a)cease using the applicants’ intellectual property and passing off his products as theirs; and
b)pay the applicants the sum of $7,000.
In response, the respondent rejected that proposal and made a counter-offer whereby he suggested that the applicants should pay to him $10,000 and he would “consider deleting the EBay ID: crazytownbrisbane”.
The orders that I have made were significantly more advantageous to the applicants than the position that would have been, had the respondent accepted their offer of 13 January, 2015.
Having regard to the facts of the case and the findings that I have set out in the reasons for my primary judgment I am satisfied that the refusal by the respondent of the applicant’s offer of January, 2015 was imprudent. The imprudent refusal of an offer to compromise is a matter which tends towards the making of an indemnity costs order: Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225. The result of the respondent’s refusal to accept that offer was a continuation of the proceedings that had been instituted by the applicants against the respondent ultimately concluding in a two day trial and judgment. The applicant’s first requests for the respondent to cease his conduct were made in 2013.
I am satisfied that it is appropriate in this case that the applicant’s costs be taxed according to the Federal Court Rules 2011. I am also satisfied that the costs ought to be taxed on an indemnity basis. The respondent’s refusal of the applicants’ offer to compromise the proceedings was, in all of the circumstances, imprudent. The ability to make an offer to compromise proceedings is one of the few weapons in the arsenal of a litigant that might be used to avoid the continuation of proceedings through the unreasonable conduct of the other party. It is appropriate that proper recognition be given to the appropriate use of offers to compromise when those offers are made and imprudently refused.
Pre and Post Judgment Interest
The Federal Circuit Court of Australia Act deals with interest up to judgment. Where a party has applied for interest up to judgment and the Court is not satisfied that good cause has not been shown for not making an order for prejudgment interest then the Court must order that there be included in the sum for which judgment is given, interest for the whole or any part of the period between the date when the cause of action arose and the date on which the judgment was entered: s.76(3) of the Act. Mr Smith does not satisfy me that there is no cause for not making an order for interest.
Mr Smith argues that interest should only run from the date of the judgment. However, ordinarily interest would run from the date upon which the cause of action arose. Nonetheless, in the present circumstances, I am satisfied that interest ought to run from the date upon which the applicants instituted their proceedings. There was a significant period of time which elapsed between when the cause of action arose and when the applicants instituted their proceedings. Interest should not run for that period in my view. However, once proceedings were commenced and Mr Smith was on notice that the applicants intended to pursue their claims against him, and having regard to the discussion above in relation to Mr Smiths’ imprudent refusal of an offer to compromise the proceedings, it is appropriate that interest run from the date that the proceedings were instituted.
As the applicants point out, no rate of interest is fixed or prescribed in the Federal Circuit Court Rules or the relevant regulations for prejudgment interest. The Court has discretion as to the rate of interest it should apply. Pre judgment interest, however, is dealt with in the Federal Court of Australia Act 1976. General guidance to the appropriate interest rate can be obtained from the practice note issued in the Federal Court which deals with prejudgment interest (Interest on Judgments Practice Note (GPN-INT) 25 October, 2016) having regard to that practice note, it is appropriate in this Court to have regard to the rates agreed upon by the Discount and Interest Rate Harmonisation Committee established following a referral by the council of Chief Justices of Australia and New Zealand:
a)in respect of the period from 1 January to 30 June in any year – the rate that is 4 per cent above the cash rate last published by the Reserve Bank of Australia before that period commenced;
b)in respect of the period from 1 July to 31 December in any year – the rate that is 4 per cent above the cash rate last published by the Reserve Bank of Australia before that period commenced.
Section 76(5) of the Federal Circuit Court of Australia Act, however, affects the incidence of pre-judgment interest on certain amounts awarded by the Court. Section 76(5) is in the following terms:
76 Interest up to judgment
(5) If:
(a) the sum for which judgment is given (the relevant sum) includes; or
(b) the Federal Circuit Court of Australia in its absolute discretion, or a Judge in that Judge’s absolute discretion, determines that the relevant sum includes;
any amount for:
(c) compensation in respect of liabilities incurred which do not carry interest as against the person claiming interest or claiming a sum in lieu of interest; or
(d) compensation for loss or damage to be incurred or suffered after the date on which judgment is given; or
(e) exemplary or punitive damages;
interest, or a sum in lieu of interest, must not be given under subsection (3) in respect of:
(f) any such amount; or
(g) so much of the relevant sum as, in the opinion of the Federal Circuit Court of Australia or the Judge, represents any such amount.
The immediate question which arises is whether the award of additional damages, being $20,000 in this particular case, is a sum which includes an amount for exemplary or punitive damages. No submissions were addressed to this issue. Although I do not purport that the research I have conducted is by any means comprehensive, I have not found any orders made by judges of this Court that award interest upon additional damages assessed for the purposes of the Copyright Act 1968.
I decline to order interest up to judgment on the additional damages that I have assessed in the applicants’ favour. I assess interest from the date of the commencement of the proceedings to judgment on the sum of $7,350.00 using a rate of 4% and 6% above the cash rate for the applicable periods as follows:
a)25 November 2014 to 30 June 2015 (6.5%) $284.03
b)1 July 2015 to 31 December 2015 (6%) $221.10
c)1 January 2016 to 30 June 2016 (6%) $218.69
d)1 July 2016 to 4 November, 2016(5.75%) $145.89
e)Total $869.72
Thereafter interest should accrue on the whole of the outstanding judgment sum in accordance with the Federal Circuit Court Rules 2001 on so much of the judgment sum as might from time to time be outstanding. No order for that is necessary.
I make the orders set out at the commencement of these reasons.
I certify that the preceding twenty four (24) paragraphs are a true copy of the reasons for judgment of Judge Jarrett delivered on 15 December, 2016.
Date: 15 December 2016
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