Directed Electronics OE Pty Ltd v Isuzu Australia Limited (No 3)

This decision sits in the middle of a larger Federal Court dispute between Directed Electronics and Isuzu. It is not the final ruling on the underlying copyright or commercial claims. Instead, it deals with the costs consequences of an unsuccessful interlocutory application in the 2020 proceeding.

The Court explained that Isuzu had applied to dismiss or permanently stay that 2020 proceeding. The application was first heard in September 2021. In March 2022, Rofe J stayed the application until after the liability judgment in a related 2017 proceeding. Beach J later delivered that liability judgment in November 2022, with Directed largely successful. After that, the stay on Isuzu's application lifted. The matter then returned for case management in March 2024 and a further interlocutory hearing in August 2024. In October 2024, the Court dismissed Isuzu's application. This No 3 judgment, delivered in December 2024, deals only with the remaining question of costs.

That sequence matters. The Court was not deciding the whole dispute from scratch. It was deciding who should pay for a failed procedural attempt to stop or halt the 2020 case, and whether any part of those costs should be paid on the more serious indemnity basis.

The judgment gives a useful timeline for understanding how the 2017 and 2020 proceedings interacted.

First, Isuzu brought an application in the 2020 proceeding seeking dismissal or a permanent stay. That application was heard on 14 September 2021. Second, on 23 March 2022, the Court stayed that application until 28 days after the liability judgment in the 2017 proceeding. The reason for that earlier stay was a concern that Directed might lose in the 2017 proceeding and then try to re-litigate the same issues in the 2020 proceeding.

Third, Beach J delivered the liability judgment in the 2017 proceeding on 24 November 2022, and Directed was largely successful. The stay on Isuzu's application therefore lifted on 22 December 2022. Fourth, the 2020 proceeding was listed before Rofe J for case management on 13 March 2024. Fifth, it was listed again for a further interlocutory hearing on 30 August 2024 so Isuzu could reagitate the application. Sixth, on 17 October 2024, the Court dismissed the application in the stay judgment. Seventh, on 9 December 2024, the Court delivered this costs judgment.

The Court also noted that, despite the age of the 2020 proceeding, it had not yet been case managed in any meaningful way toward trial. By the time of this costs decision, the proceeding had only recently reached the close of pleadings, with Isuzu filing a defence to the further amended statement of claim on 29 November 2024. That procedural immaturity was central to the Court's view that the application had been premature.

The legal issue in this judgment was narrow but commercially important. The Court had to decide what costs order should follow Isuzu's failed interlocutory application. That involved three linked questions.

First, should Directed, as the successful party on the application, receive its costs in the ordinary way? Second, should any part of those costs be awarded on an indemnity basis because of Isuzu's conduct? Third, should those costs be assessed immediately on a lump sum basis and payable before the end of the whole proceeding, rather than being left until final judgment?

The Court approached those questions under the Federal Court's broad costs discretion. It referred to the ordinary position that costs on interlocutory applications follow the event unless the Court orders otherwise. It also referred to the Court's powers and obligations concerning case management and the overarching purpose of civil procedure. The judgment emphasises that indemnity costs are not punitive. They are used where the Court considers it was unreasonable for one party to have put the other to the expense in question.

So the real issue was not whether Isuzu had ever been entitled to worry about overlap between the two proceedings. The issue was whether, after the application failed, the circumstances justified ordinary costs only, or a stronger and more immediate costs response.

This judgment is especially useful because it draws a clear line between ordinary costs and indemnity costs.

The Court ordered Isuzu to pay Directed's costs of and incidental to the interlocutory application on a party-party basis. That was the ordinary result because Directed had successfully opposed the application. In other words, costs followed the event. The Court did not accept Isuzu's argument that the costs should simply be costs in the cause.

But the Court did not award indemnity costs for the whole period Directed wanted. Directed had sought indemnity costs from 1 March 2024 onward. The Court refused to go that far. It said Isuzu's first agitation of the application was not frivolous conduct. The Court accepted that there had been a genuine concern about overlap with the 2017 proceeding and that Isuzu was entitled to review amended pleadings and reassess its position after the liability judgment.

The Court instead made a narrower indemnity costs order for a specific category of wasted work: Directed's costs of reviewing and considering the affidavit of Ms Emma Lee-Anne Iles affirmed on 2 August 2024. That affidavit was 460 pages long with 21 annexures. The Court found that Isuzu had filed it contrary to an express direction given at the March 2024 listing that no further evidence could be filed unless the matter was relisted to explain why the evidence was necessary. The Court also found the affidavit was not seriously relied on at the second hearing. Directed still had to read it, analyse it and prepare for the possibility it would be used. That wasted time and expense justified indemnity costs for that review work.

This is the practical distinction. The failed application itself attracted ordinary costs because losing parties usually pay. The affidavit-related work attracted indemnity costs because the Court considered that particular conduct unreasonable and productive of wasted expense.

The Court's reasoning on this point is important for any business considering aggressive procedural tactics. Directed argued that indemnity costs should run for a broad period from March 2024 because Isuzu had delayed the proceeding by pressing a meritless application, largely repeated earlier submissions, filed unnecessary evidence and shifted its oral case at the hearing.

The Court accepted some of Directed's criticisms, but not all of them to the extent needed for a broad indemnity order. Rofe J said two years of delay in the 2020 proceeding had to be discounted because the matter was tied to the 2017 proceeding and could not really progress until that earlier proceeding had been substantively heard and determined, including its appeal. The Court also noted that the timing of the second hearing was partly affected by senior counsel availability. Those points reduced the force of any argument that Isuzu alone had caused all relevant delay.

The Court further said Isuzu's first agitation of the application was not frivolous. Isuzu had been trying to address what was then a hypothetical risk that Directed might circumvent earlier determinations by reintroducing issues already adjudicated in the 2017 proceeding. The Court also considered it appropriate for Isuzu to take time to review amended pleadings and reevaluate its position after Beach J's liability findings.

Even so, the Court criticised two aspects of Isuzu's later conduct. First, it said Isuzu's failure to put Directed on notice that it would pivot at the second hearing toward a case management argument was not satisfactory. Ambushing the other side by deviating from the written case was criticised. Second, and more concretely, the Court found that filing the Iles affidavit contrary to directions caused wasted costs. Directed had to review and consider the affidavit in preparing for the hearing, even though the affidavit was not seriously relied on. The Court said significant preparation time and effort would have been saved if the affidavit had not been filed.

The result was a calibrated order. The Court did not use indemnity costs to punish Isuzu for losing the application. It used indemnity costs to compensate Directed for a specific pocket of wasted work caused by conduct the Court regarded as unreasonable.

The formal orders were straightforward but commercially significant.

First, Isuzu was ordered to pay Directed's costs of and incidental to the interlocutory application on a party-party basis. Second, Isuzu was ordered to pay Directed's costs of reviewing and considering the affidavit of Ms Emma Lee-Anne Iles on an indemnity basis. Third, the amount of those costs was to be determined by a Registrar immediately on a lump sum basis and payable forthwith after determination. Fourth, those costs orders were stayed until 28 days after the appeal in Federal Court proceeding VID 1179 of 2024, Isuzu Australia Limited v Directed Electronics OE Pty Ltd, was determined.

The immediate assessment point is worth noting. The Court accepted Directed's submission that the application involved a discrete issue separate from the main proceeding and that the final determination of the 2020 proceeding was still far away. That made it appropriate to deal with these costs now rather than leave them to the end. However, the Court still built in a practical pause by staying the operation of the costs orders pending the separate appeal.

For business owners and in-house teams, this case is a reminder that litigation strategy has to be managed like any other commercial project. A procedural application can be worthwhile if it genuinely narrows the dispute, avoids duplication or prevents unfairness. But if the pleadings are still evolving, the Court may see the application as premature and prefer ordinary case management instead.

The case also shows that courts distinguish between a party who loses an application and a party who behaves unreasonably in running it. Losing usually leads to ordinary costs. Unreasonable conduct can lead to indemnity costs for the wasted work it causes. That means businesses should pay close attention to how their lawyers prepare evidence, comply with directions and communicate any change in position before a hearing.

If your business is considering a stay, strike-out or abuse of process application, ask practical questions early. What exact problem does the application solve? Is the issue ripe for determination on the current pleadings? Could the same concern be addressed through pleadings, admissions, staged hearings or other case management orders? What is the likely cost exposure if the application fails? And are there any directions about evidence or hearing preparation that must be followed to the letter?

Finally, remember that interlocutory costs can become payable before the main case ends. That can affect litigation budgets, settlement strategy and cash flow. A business that treats procedural skirmishes as low-risk side issues may be surprised by the financial consequences.

This page is based on the Federal Court's judgment in Directed Electronics OE Pty Ltd v Isuzu Australia Limited (No 3) [2024] FCA 1413, delivered on 9 December 2024. The judgment clearly supports the procedural timeline, the costs orders, the distinction between party-party and indemnity costs, and the Court's criticism of the affidavit filing and late shift in argument.

The judgment itself says it assumes familiarity with earlier decisions and does not repeat the full background of the 2017 and 2020 proceedings. For that reason, this explainer focuses on the costs ruling and the procedural conduct discussed in this judgment, rather than attempting a detailed retelling of the underlying substantive dispute.