Austin, Nichols & Co Inc v Lodestar Anstalt

Federal Court of Australia|2011-05-06|Before: Cowdroy J

00 Oshlack v Richmond River Council (1998) 193 CLR 72 Review 2 Pty Ltd v Redberry Enterprise Pty Ltd (No 2) [2008] FCA 1805 Roadshow Films Pty Ltd & Ors v iiNet Ltd (No 4) (2010) 269 ALR 606 Ruddock v Vardarlis (No 2) (2001) 115 FCR 229 Seven Network Ltd and Anor v News Ltd and Ors (2007) 244 ALR 374 The Ritz Hotel Ltd v Charles of the Ritz Ltd (1989) AIPC 90-567 Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 28 ALR 201 Uniline Australia Ltd v SBriggs Pty Ltd (No 2) and Anor [2009] FCA 920 Vawdrey Australia Pty Ltd v Krueger Transport Equipment Pty Ltd (2009) 261 ALR 269 Waters v PC Henderson (Australia) Pty Ltd (1994) 254 ALR 328 Wimmera Industrial Minerals Pty Ltd v RGC Mineral Sands Ltd [1997] FCA 1337 Winton Shire Council v Lomas (2002) 56 IPR 243

Solicitor for the Applicants: Mallesons Stephen Jaques

Austin, Nichols & Co Inc v Lodestar Anstalt (No 2) [2011] FCA 450 CORRIGENDUM

In paragraph 32 of the Reasons for Judgment, in the first sentence, 'CGU Insurance' should read 'CGU Insurance Limited v Corrections Corporation of Australia Superannuation Pty Ltd [2008] FCAFC 173'. I certify that the preceding one (1) numbered paragraph is a true copy of the Corrigendum to the Reasons for judgment herein of the Honourable Justice Cowdroy.

Associate: Dated: 6 June 2011 IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 518 of 2009

JUDGE: COWDROY J DATE OF ORDER: 6 MAY 2011 WHERE MADE: SYDNEY

The Respondent pay the Applicants' costs with respect to the issues of standing and the obstacles to use of the trade mark.
The Applicants pay the costs of the Respondent with respect to the costs pertaining to the issue of discretion.
Each party pay their own costs of and incidental to the applications for costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 518 of 2009

JUDGE: COWDROY J DATE: 6 MAY 2011 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 On 13 May 2009 a delegate of the Registrar of Trade Marks ('the delegate') rejected two applications of the first and second applicants (collectively referred to hereunder as 'Austin Nichols') made under the provisions of the Trade Marks Act 1995 (Cth) ('the Trade Marks Act') to remove the respondent's trade mark from the Register of Trade Marks ('the register'). 2 Austin Nichols challenged the delegate's decision in this Court: see Austin, Nichols & Co Inc v Lodestar Anstalt [2011] FCA 39. The Court upheld two claims of Austin Nichols, namely that Austin Nichols had standing to bring the proceedings pursuant to s 92 of the Trade Marks Act and that the factors relied upon by the respondent ('Lodestar') under s 100(3) of the Trade Marks Act as constituting obstacles to the use of the trade mark 'Wild Geese' ('the trade mark') were not sustained. However, the Court upheld Lodestar's submission that pursuant to s 101(3) of the Trade Marks Act, the discretion of the Court should be exercised to allow the trade mark to remain on the register. 3 Accordingly orders were made by the Court on 4 February 2011 rejecting the applications made by Austin Nichols, but reserving the issue of costs. Both Austin Nichols and Lodestar make competing claims for costs and this decision is confined to such issue.

Submissions of Austin Nichols 4 Austin Nichols seeks an order that Lodestar pay Austin Nichols' costs on a party/party basis. Alternatively, Austin Nichols seeks an order that each party bears its own costs. 5 Austin Nichols submits that its application to remove Lodestar's mark failed only due to the exercise of the Court's discretion. Austin Nichols was successful in establishing its standing to make its application for removal of the trade mark, and that the grounds relied upon by Lodestar for its non-use of the trade mark were inadequate to found obstacles to its use in the relevant statutory period. Accordingly, Austin Nichols claims that Lodestar should pay Austin Nichols' costs and relies upon the decision of McLelland J in The Ritz Hotel Ltd v Charles of the Ritz Ltd (1989) AIPC 90-567. Austin Nichols relies upon the submission that his Honour in The Ritz Hotel Ltd would have ordered the successful defendant pay the costs of the losing plaintiff but for the fact that the plaintiff had litigated some time consuming issues in respect of which the plaintiff was ultimately unsuccessful. 6 Alternatively, Austin Nichols submits that if the Court considered that a proportion of the costs should be paid by Austin Nichols to Lodestar with respect to the issue of discretion, such costs would be substantially outweighed by the costs incurred by Austin Nichols in relation to the issues on which Austin Nichols succeeded. 7 Austin Nichols submits that the three principal issues in the principal proceedings were distinct and that Lodestar unreasonably contested issues upon which it was unsuccessful, namely Austin Nichols' standing and whether there existed obstacles to Lodestar's use of the trade mark. 8 Austin Nichols has provided its estimate of the proportion of costs expended with regard to each discrete issue in the proceedings. Austin Nichols submits that the Court should make 'a best estimate of the proportion of time and cost devoted to each, and make a single proportionate costs order to reflect that estimate'. Austin Nichols refers the Court to ICI Chemicals & Polymers Ltd v Lubrizol Corporation Inc (2000) 106 FCR 214 in support of such proposition. Emmett J at [17] said: It is undesirable, in my view, to endeavour to make a costs order in respect of each separate issue that arises in the proceedings. While such an approach may, theoretically, result in a more ideal result, it is costly and extraordinarily difficult for a taxing officer to determine the costs that are attributable to particular issues. 9 Further, Austin Nichols submits that, if the Court should be minded to award costs in favour of Lodestar in respect of the issue of discretion, since more than 50% of the parties' time was expended in the preparation and presentation of the evidence, submissions and cross-examination of witnesses in relation to the issues of standing and obstacles to use, no order should be made, as any such order would be outweighed by the costs in favour of Austin Nichols in respect of its costs thrown away.

Lodestar's Submissions 10 Lodestar seeks an order that Austin Nichols pay its costs of the proceedings on an indemnity basis in consequence of four offers of compromise which were not accepted by Austin Nichols. Alternatively, Lodestar seeks an order that Austin Nichols pay its costs on a party/party basis. 11 On 9 December 2009 Saunders & Dolleymore LLP, a firm based in the United Kingdom, wrote to the principal of Davide Campari-Milano SpA, which was believed by Lodestar to be the ultimate proprietor of the applicants, suggesting a settlement ('the First Offer'). The First Offer is set out more fully below at [20]. 12 Subsequently on 10 August 2010, Lodestar's Australian solicitors served on Austin Nichols' solicitors a Notice of Offer to Settle ('the Second Offer'), stated to be pursuant to O 23 of the Federal Court Rules ('the Rules'). It was made clear that the Second Offer was made in accordance with the principle in Calderbank v Calderbank [1975] 3 All ER 333. The Second Offer is detailed, and it is unnecessary to state all of its terms, except to observe that it asked Austin Nichols to withdraw the applications made against it, required Austin Nichols not to challenge the use, protection or renewal of Lodestar's WILD GEESE Rare Irish Whiskey trade mark, and proposed that each party pay its own costs in the proceedings. A document entitled 'Respondent's Notice of Offer to Settle' accompanied the letter. Such document stated that it was delivered under O 23 of the Rules. 13 By letter dated 16 August 2010 ('the Third Offer'), Lodestar's solicitors informed Austin Nichols' solicitors that the offer contained in the Second Offer was now to be converted into an open offer. Otherwise its terms remained unchanged. 14 Further correspondence took place between the parties, but it is only necessary to observe that the above offers were not accepted by Austin Nichols. A 'Fourth Offer' was made by Lodestar on 24 August 2010, but its provisions were virtually identical to its previous offer. 15 Lodestar submits that had the First Offer been accepted by Austin Nichols, the result would have been more favourable to Austin Nichols compared to the Court's decision. 16 Lodestar submits that the circumstances are analogous to those considered by Logan J in Granitgard Pty Ltd v Termicide Pest Control Pty Ltd (No 6) [2010] FCA 381. Lodestar relies upon the following similarities: namely that the First Offer was a serious and genuine offer; it provided that both parties could cease the litigation with no costs penalties; it would have avoided incurring solicitor-client costs; the offer was made against a background in which both parties could consider their relative strength and weaknesses; the offer was an open offer; and there was no basis for any submission that the offer was unreasonable. 17 As to the Second Offer, Lodestar submits that it was also a genuine offer but made specifically pursuant to O 23 r 11 of the Rules. 18 Lodestar acknowledges that the Third and Fourth Offers were open offers and were not expressly made pursuant to O 23 of the Rules. Irrespective, Lodestar submits that the Third and Fourth Offers should nevertheless attract an order of indemnity costs against Austin Nichols.

CLAIM FOR INDEMNITY COSTS 19 The Court will consider firstly Lodestar's claim for indemnity costs arising from the four offers made by Lodestar to settle the proceedings.

First Offer 20 After stating the client for whom Saunders and Dolleymore LLP acted, the letter included the following paragraphs: We understand that David Campari Milano SpA (Campari) and Rare Breed Distilling LLC (Rare Breed) are now the owners of the WILD TURKEY brand. We have been passed your name and advised that you are now responsible for the co-ordination of the numerous actions Austin Nichols & Co Inc/Pernod Ricard (Austin/Pernod) filed against Lodestar Anstalt's (Lodestar) WILD GEESE brand. Lodestar began defending their brand against opposition by Austin/Pernod in 2001. Since 2001 there have been approximately 36 actions lodged against applications Lodestar have filed, or registrations they have obtained. Out of the 36 actions, Austin/Pernod withdrew 7 before a decision could be made. Lodestar withdrew 1 application in Canada. From the remaining 29 actions, 7 cases are still pending and in the evidence rounds, 18 decisions have been given in Lodestar's favour, 1 decision by the Benelux Courts found that, although Lodestar did not have sufficient use of their product in the Benelux territories so as to defend its position against revocation action, the Courts did find that in those proceedings the marks WILD TURKEY and WILD GEESE are not confusingly similar. Of those 18 decisions, Austin/Pernod filed appeals against 9 of them. Decisions on the Appeals have been taken in respect of 5 cases. Those 5 appeals were dismissed, therefore allowing Lodestar to protect/maintain their rights in the WILD GEESE mark. Austin/Pernod withdrew 1 appeal in the UK, and decisions are awaited on the remaining 3. The only territory where Austin/Pernod has had any success is the USA, the home of the WILD TURKEY brand. It is clear to see from decisions taken around the world, particularly English speaking territories such as the UK, New Zealand and Australia, that there is absolutely no risk of consumers confusing the WILD GEESE and WILD TURKEY brands. 21 The letter also included the following: Lodestar are prepared to make an open offer to the new brand owners, in order that both parties can concentrate on their own brands and finally settle this ongoing dispute. The offer is made for commercial reasons and in the interest of both parties and is in no way an indication that Lodestar considers the marks to be similar or there to be a risk of confusion or association within the market place. In order to settle all matters, Lodestar is prepared to enter into an Agreement with the new brand owners, subject to contract, [emphasis added] not to sell "bourbon whiskey" under the WILD GEESE mark or any marks incorporating the words WILD GEESE. In return, the new brand owners, Campari, undertake to withdraw all actions against Lodestar's WILD GEESE marks, or marks incorporating the element WILD GEESE; not to challenge applications, nor registrations filed by Lodestar for the WILD GEESE marks; not to complain of the use of the WILD GEESE marks by Lodestar, provided such applications, registrations or use is not in respect of "bourbon". The Agreement is to be binding on the parties' successors and assigns. 22 There is no evidence before the Court of any response to such letter nor whether Davide Campari-Milano SpA is in fact the ultimate proprietor of either or both of the applicants. Although Austin Nichols submitted that there was no proven relationship between the addressee and one of the two applicants, it is unnecessary for the Court to decide such issue. 23 The First Offer was not made pursuant to O 23 r 11 of the Rules. Accordingly, the Court cannot attach to it the consequences which would otherwise have been applicable had the Rules applied to such offer. However, the offer must be considered pursuant to the principle arising from Calderbank in which an offer of compromise had been made to settle the matrimonial proceedings but rejected in circumstances where the offer should have been accepted. 24 The First Offer constituted an offer to settle all proceedings worldwide. It was not confined to the proceedings in this Court. Further, the settlement was required to be binding upon the parties, successors and assigns. The terms of such offer accordingly went well beyond what could have been achieved in this litigation and was therefore an offer to which the principle in Calderbank does not apply.

Second Offer 25 The Second Offer dated 10 August 2010 was made specifically pursuant to O 23 of the Rules. Such letter referred to an email forwarded by solicitors for Austin Nichols and to their assertion that Lodestar's denial of Austin Nichols' standing to bring the proceedings was 'hopeless' in view of the decision of the High Court of Australia in Health World Ltd v Shin-Sun Australia Pty Ltd (2010) 240 CLR 590. The Second Offer required Austin Nichols to withdraw the proceedings in this Court and to acknowledge to the Registrar of Trade Marks that Austin Nichols would not 'in the future be challenging that Mark should it be registered' and with each party to pay its own costs. 26 The letter accompanying the Second Offer also included the following requirements: Your clients will not at any time in the future challenge the use, protection or renewal of the Wild Geese Rare Irish Whiskey Trade Mark should it proceed to registration following the withdrawal of the opposition and nor will they counsel, aid, abet or procure any person or entity to do any of those things. … The expression "your clients" in this offer includes reference to each of your clients' "related persons", "related entities" and "related bodies corporate" as each of those terms are used in the Australian Corporations Act. 27 The Second Offer, after referring to the proposed consent orders and providing for a mutual release, contained the following intended provisions: 6. The Applicants jointly and severally undertake to the Respondent that they will not at any time in the future within Australia challenge the use, protection (including any application for registration) or renewal of the Respondent's "Wild Geese" Australian Trade Mark No 839740 or any Mark incorporating those two words and which is or may be protected in respect of either: (a) "alcoholic beverages [except beers]; but excluding bourbon, bourbon-based beverages, wine, fortified wine and wine-based spirits, namely, brandy, grappa and cognac or whiskey"; or (b) products of Irish origin, and nor shall they or either of them counsel, aid, abet or procure any person or entity to do any of those things. 7. The settlement agreement that will come into effect by the written acceptance of this Offer binds (and also inures for the benefit of) each party's administrators and assigns. 28 The Second Offer was specifically made 'without prejudice' and was received by Austin Nichols' solicitors at 3.26 pm on 10 August 2010. Lodestar submits that Austin Nichols should be ordered to pay Lodestar's costs (subject to the costs order made by Lindgren J on 4 November 2009) up to 11 August 2010 on a party/party basis and thereafter on an indemnity basis.

Third and Fourth Offers 29 The Third Offer made on 16 August 2010 contained the same terms as those contained in the Second Offer except that the Third Offer was converted to an open offer. Such offer was received by Austin Nichols' solicitors at 2.10pm on 16 August 2010. The Fourth Offer contained essentially the same terms as the Third Offer.

Consideration 30 Rogers CJ Comm D (NSWSC) in AWA Ltd v George Richard Daniels, t/as Deloitte Haskins and Sells (unreported, No 50271 of 1991, NSWSC Comm D, 8 October 1992, BC9201567) conveniently summarised numerous relevant authorities relating to indemnity costs. His Honour observed that one of the circumstances in which indemnity costs had been awarded was the following: Litigation which had such a remote prospect of success that the action should not have been brought or continued. In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1998) ALR 397 Woodward J said (at 410): "I believe that it is appropriate to consider awarding 'solicitor and client' or 'indemnity' costs whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion." 31 Order 23 rule 11(6) of the Rules makes provision for the payment of indemnity costs in certain circumstances where an offer of compromise made pursuant to O 23 r 11 of the Rules is not accepted. Order 23 rule 11(6) provides: (6) If: (a) an offer is made by a respondent and not accepted by the applicant; and (b) the respondent obtains an order or judgment on the claim to which the offer relates as favourable to the respondent, or more favourable to the respondent, than the terms of the offer; then, unless the Court otherwise orders: (c) the respondent is entitled to an order that the applicant pay the respondent's costs in respect of the claim incurred up to 11 am on the day after the day the offer was made, taxed on a party and party basis; and (d) the respondent is entitled to an order that the applicant pay the respondent's costs in respect of the claim incurred after that time, taxed on an indemnity basis. 32 As was observed by the Full Court in CGU Insurance Ltd at [75], the following principles should apply where an offer is made not in accordance with the Rules but which is purportedly a Calderbank offer: From the tenor of claims which have come before the court in recent years, there appears to be a view abroad that the failure of a party who has rejected a Calderbank offer ultimately to achieve a better outcome than provided for in the offer leads to a presumptive entitlement to indemnity costs with respect to the period subsequent to the offer. Such a view would be mistaken. Where a moving party (including a cross-claimant) offers to settle for a sum which is less than he or she eventually achieves at trial, there is a presumptive entitlement to indemnity costs under O 23 r 11(4) of the Federal Court Rules. However, where recourse is not had to the O 23, but reliance is placed upon the court's general discretion, it is necessary for the party seeking indemnity costs to demonstrate that the other party's refusal of the Calderbank offer was unreasonable: Black v Lipovac (1998) 217 ALR 386, 432; Maniotis v JH Lever & Co Pty Ltd (No 2) [2006] FCAFC 28. It is not sufficient that the offer was a reasonable one: Alpine Hardwoods (Aust) Pty Ltd v Hardys Pty Ltd (No 2) (2002) 190 ALR 121, 128 [35]; Dais Studio Pty Ltd v Bullet Creative Pty Ltd [2008] FCA 42, [11]. In considering this question in a particular case, the matter of unreasonableness will be judged by reference to the circumstances facing the offeree at the time of the offer. While the eventual outcome in the case may go part of the way in this regard, there is no presumption that ultimate success in the proceeding for the offeror necessarily renders the offeree's rejection unreasonable. 33 The Full Court has also held that the offeree bears the onus of proving that 'exceptional circumstances' exist to justify its rejection of the offer: see Futuretronics.com.au Pty Ltd v Graphix Labels Pty Ltd [2009] FCAFC 40 per Tamberlin, Finn and Sundberg JJ at [10]; IFTC Broking Services Ltd v Commissioner of Taxation (2010) 268 ALR 1 per Stone, Edmonds and Jagot JJ at [9], [16]; Vawdrey Australia Pty Ltd v Krueger Transport Equipment Pty Ltd (2009) 261 ALR 269 per Lindgren J at [187]. 34 In Uniline Australia Ltd v SBriggs Pty Ltd (No 2) and Anor [2009] FCA 920, Greenwood J referred to several authorities which considered circumstances where an offeree who rejects a genuine offer to compromise would not incur an award of indemnity costs: see Uniline at [46]-[50]. 35 Greenwood J in Uniline at [51] concluded that: It therefore seems to me to follow that the rejection of Uniline's offer by SBriggs occurred in circumstances where SBriggs failed to demonstrate compelling and exceptional circumstances to relieve SBriggs from the natural consequences of O 23 r 11(4)… 36 In New South Wales Insurance Ministerial Corporation v Reeve (1993) 42 NSWLR 100 Gleeson CJ at 102 observed in respect of provisions analogous to O 23 r 11 of the Rules that merely because a defendant had a good chance of successfully defending the action, it was not necessarily reasonable to refuse a settlement: see Uniline at [47]; John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd (1994) 52 FCR 201 at 206 per Hill J. 37 Further, in Morgan v Johnson (1998) 44 NSWLR 578 at 582 the New South Wales Court of Appeal found that the mere fact that 'it was reasonable for the litigant to take the view that he or she did in rejecting the offer is not enough to displace the rule …' (see also Uniline at [48]; Reeve at 102). 38 In Granitgard Logan J specifically considered the circumstances envisaged by O 23 r 11(6) in the phrase: 'unless the Court otherwise orders'. In Granitgard an offer had been made by the respondent but not accepted by the applicant who was ultimately unsuccessful in the proceedings. Logan J held at [51] that the unsuccessful party must: … demonstrate compelling and exceptional circumstances or … must show that it was not imprudent or unreasonable not to have accepted the offer. 39 For similar observations, see Review 2 Pty Ltd v Redberry Enterprise Pty Ltd (No 2) [2008] FCA 1805 at [23]-[24]. 40 It has been recognised that there is no presumption that the rejection of an offer, followed by a more favourable result to the offeror, automatically leads to an indemnity costs order against an offeree being made: see Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 per Sundberg, Emmett and Conti JJ at [7]. This is but one factor to be considered: see Seven Network Ltd and Anor v News Ltd and Ors (2007) 244 ALR 374 at [66]. 41 Applying the reasoning of the Full Court in CGU Insurance and Logan J in Granitgard, the terms of the offer and the reasons for its rejection must be considered. If there are 'compelling and exceptional circumstances' justifying the refusal of the offer, going beyond the mere fact that the offeree considered that it might have reasonable prospects of success in the litigation, the requisite test would be satisfied. 42 The First Offer was conditional (see [20] above), since it states that Lodestar 'is prepared to enter an Agreement … subject to contract'. At its highest, the First Offer was no more than an invitation to treat and therefore did not satisfy the requirements of a Calderbank offer which must be one capable of ready acceptance. In addition, the First Offer both geographically and as to its legal effect, extended well beyond the optimum result which could have been achieved in this litigation by Lodestar. 43 The Second Offer and subsequent offers were restricted to the cessation of the proceedings in Australia, but sought to extend the prohibition to any challenges to Lodestar's trade mark by Austin Nichols' 'related persons', 'related entities' and 'related bodies corporate' as defined by the Corporations Act 2001 (Cth). 44 The legal effect of such a settlement as proposed extended beyond the immediate litigation in this Court and sought to prevent future action being taken in respect of Lodestar's trade mark not only by Austin Nichols but by any of its unidentified associated companies or entities. The uncertainty of such course may have been wholly unacceptable to Austin Nichols for commercial reasons. Further, the indefinite restriction upon the applicants from instituting proceedings against Lodestar in respect of any bourbon, whiskey or related goods having the trade name 'WILD GEESE' or 'WILD GEESE Irish Whiskey' extends far beyond what could have been achieved in the present proceedings. 45 The restrictions upon further litigation would also have prevented Austin Nichols taking action to remove Lodestar's trade mark if it failed to use the trade mark for the relevant statutory period. It would also have prevented Austin Nichols from taking action should, for example, the packaging or labelling of its product potentially confuse the public regarding Austin Nichols products. Further, the acceptance of the terms of the Second Offer, Third Offer and Fourth Offer would have operated to prevent the assigns and successors of Austin Nichols from taking any such proceedings. 46 In these circumstances, it is impossible for the Court to determine whether in fact the result of the proceedings has been less favourable to Austin Nichols than it would have been had it accepted any of the offers of Lodestar. As was observed by Spender J in Winton Shire Council v Lomas (2002) 56 IPR 243 at [7] it would appear that Lodestar sought to obtain more than what could have been achieved in commercial terms in the current proceedings. 47 The discretion of the Court to award costs is 'absolute and unfettered' but must be exercised judicially (see Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (1979) 28 ALR 201 at 207). The power of the Court pursuant to s 43 of the Federal Court of Australia Act 1976 (Cth) ('the Court Act') is available to award costs in favour of a successful party and the grant of indemnity costs is part of the exercise of the Court's power in appropriate circumstances. (See consideration of the relevant authorities by Sheppard J in Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 at 227-230). 48 In conclusion, the Court is unable to determine whether Austin Nichols has achieved a less favourable result than it would have done had it accepted any of the four offers of Lodestar. Further, the Court concludes that because of the broad scope of the offers relied upon by Lodestar, Austin Nichols has established sound and convincing reasons to justify the Court making a different order to that which would be made had the offers been ones which the Court considered reasonable and should have been accepted under O 23 r 11(6) of the Rules or the Calderbank principle. 49 Accordingly the Court will not order Austin Nichols to pay Lodestar's costs on an indemnity basis.

COSTS OF THE PROCEEDINGS 50 Austin Nichols submits that an unsuccessful party may be entitled to the costs of the whole proceedings if the other party succeeded solely on the issue of discretion, and relies upon Holt v Wynter (2000) 49 NSWLR 128 at 145; Wimmera Industrial Minerals Pty Ltd v RGC Mineral Sands Ltd [1997] FCA 1337; The Ritz Hotel Ltd v Charles of the Ritz Ltd (1989) AIPC 90-567.

Apportionment of Costs 51 It is a well established principle that the power of the Court to award costs is unfettered provided it is exercised judicially: see Oshlack v Richmond River Council (1998) 193 CLR 72 per McHugh J at [65]; Ruddock v Vardarlis (No 2) (2001) 115 FCR 229 at [9]; Howards Storage World Pty Ltd v Haviv Holdings Pty Ltd (2010) 182 FCR 84 at [58]-[61]. 52 It is also accepted that it is not the function of a costs order to involve any punitive punishment. Rather, the purpose of an award for costs is compensation: Latoudis v Casey (1990) 170 CLR 534 at 567. 53 A successful party is prima facie entitled to an order that its costs be paid: see Dias Aluminium Products Pty Ltd v Ullrich Aluminium Pty Ltd (No 2) (2005) 225 ALR 569 per Crennan J at [2]. 54 As was stated in Roadshow Films Pty Ltd & Ors v iiNet Ltd (No 4) (2010) 269 ALR 606 at [30], authorities exist for the proposition that where a party has succeeded on some issues but not on others, apportionment is appropriate: see for example Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 at 48,136; Cretazzo v Lombardi (1975) 13 SASR 4 at 16; H Lundbeck A/S v Alphapharm Pty Ltd (No 2) [2009] FCAFC 118 at [8]; Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 at 271; Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) (referred to at [49] above); Aristocrat Technologies Australia Pty Ltd v Global Gaming Supplies Pty Ltd (No 2) [2010] FCA 277; JMVB Enterprises Pty Ltd (formerly A 'Van Campers Pty Ltd) v Camoflag Pty Ltd (No 2) [2007] FCAFC 6 at [7]; In Re Elgindata (No 2) [1993] 1 All ER 232 at 237, 239 per Nourse LJ. 55 However, authorities have also indicated that apportioning costs is not necessarily desirable: see Cretazzo v Lombardi in which Jacobs J, having expressed 'a note of cautious disapproval' said at [16]: But trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law. The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case. 56 Similarly, some authorities have declined to readily make an order for costs based upon the success or failure of a party in litigation: see ICI Chemicals & Polymers Ltd referred to above at [8]; Waters v PC Henderson (Australia) Pty Ltd (1994) 254 ALR 328 at 330-331; Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 at [6]-[7]; Doric Products Pty Ltd v Lockwood Security Products Pty Ltd (2002) 54 IPR 495 where Hely J observed at [10]: The courts have cautioned against too ready a resort to apportionment according to issue based outcomes: see, eg, Australian Trade Comission v Disktravel (2002) ATPR 41-85. 57 However, with the advent of more complex and lengthy litigation where discrete issues arise and which, of themselves, give rise to substantial preparation, evidence and submissions, it is increasingly common for separate awards of costs to be made in respect of such issues. These proceedings exemplify such an instance. 58 The issues in the principal proceedings were distilled into three separate issues and were summarised at [19] of the principal decision: 1. Whether the applicants have established standing as a 'person aggrieved' in respect of all of the goods of registration at the date of the application, being 27 June 2005 or 6 September 2005. 2. Whether Lodestar has established that there were obstacles preventing its use of the WG trademark within the meaning of s 100(3)(c) of the Trade Marks Act in the relevant non-use period. 3. Whether the Court should exercise its discretion under s 101(3) of the Trade Marks Act to refuse to remove the WG trade mark. 59 The first issue was decided in favour of Austin Nichols. Following the delegate's decision, the HCA delivered judgment in Health World, the effect of which was to substantially alter the pre-existing law concerning standing. The principal decision in these proceedings was, so far as the Court is aware, the first decision to apply Health World in this context and consider its scope. 60 Austin Nichols submits that Health World made it clear that standing was an issue which should have been conceded by Lodestar. Lodestar submits in response that Austin Nichols' standing was not readily established and that the decision of Crennan J in Health World raised valid issues that required this Court's consideration. 61 The Court is satisfied that neither Austin Nichols' nor Lodestar's positions regarding the issue of standing were misconceived or unreasonable and that it was necessary for both parties to make complete submissions with regard to such issue. In these circumstances, the Court considers that since this was an issue upon which Lodestar did not succeed, the Court orders that Lodestar bear Austin Nichols' costs related to such issue. 62 As to the second issue, it was conceded by Lodestar that the relevant period of non-use existed. However, Lodestar relied extensively upon factors which it claimed posed obstacles to the use of the trade mark, namely, world wide trade mark litigation in which it was involved; problems with the sourcing and the promotion of whisky and difficulties concerning the appointment of an agent in Australia to market its whisky. The Court found against Lodestar in respect of all claimed obstacles and found that none justified the non-use of the trade mark in the requisite period. 63 Lodestar submits that much of the evidence prepared and heard in respect of the second issue was relevant to the issue of discretion, and accordingly the costs of the second issue should not be borne by it. However the issues are discrete, and the principal purpose of adducing such evidence was to prove the asserted obstacles. Since this is a discrete issue and one in respect of which the finding was adverse to Lodestar, the Court orders that Lodestar pay Austin Nichols' costs borne by this issue. 64 As to the third issue, namely, the issue of discretion, Lodestar succeeded. Austin Nichols relies on McLelland J's judgment in The Ritz Hotel. However his Honour does not state his reasons in sufficient detail to enable the Court to establish any precedent value for his Honour's conclusion. 65 The issue of discretion was an integral part of proceedings and was clearly a matter to be raised and argued extensively on both sides. The Court exercised its discretion in favour of Lodestar, and in these circumstances the Court considers that there is no reason not to hold Austin Nichols liable to pay Lodestar's costs in relation to this issue. The Court will so order. 66 Since the results of the parties' applications for costs have been mixed, each party is to pay their own costs of their application for costs. I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cowdroy.

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