24 At no stage in this matter prior to the publication of my reasons in the principal proceedings had AMC sought declaratory relief in relation to its proprietorship and beneficial ownership of the Fuyunhon and Tuotoning marks or to its ownership of the copyright in the Hong Kong packaging and the English language product indications for Urederm. While fact findings to the above effect in relation to the trade marks are implicit in my reasons and are explicit in relation to copyright ownership, I am not prepared now to make declarations to the above effect as AMC now seeks: on the potential significance of injunctions and declarations for the purposes of the O 23 r 11(5) comparison see Sunlec International at [16]. I will later return to this.
25 The second matter to be noted arises from the fact that the O 23 offer related only to AMC's claim and not to Hamilton's cross-claim. This split could well be perceived as a tactical manoeuvre given that the cross-claim asserted Hamilton's entitlement to AMC's trade marks. A decision by AMC so to agree to split the respective proceedings, in my view, was not to be expected. It was, in the context of the litigation, quite improbable.
26 The principle to be applied to the taxation of costs in such cases was stated by Dixon J in Smith v Madden (1946) 73 CLR 129 at 133:
In such a case the taxation of the costs of the action and of the counterclaim is governed by the principle that the party receiving the costs of the claim should recover the general costs and whatever was reasonably incurred in bringing and maintaining or defending the action, as the case may be, considered as if there had been no counterclaim, and that the party receiving the costs of the counterclaim should recover the further or increased costs reasonably incurred in bringing and maintaining or defending the counterclaim.
Nonetheless, his Honour acknowledged that where the successful (or unsuccessful) party on the claim or the counterclaim was not successful (or unsuccessful) on all issues, it may be appropriate to reflect this in any cost orders made by, for example, costs according to success or failure on costs issues in the claim or counterclaim (but not as between them: at 134-136) or by making a percentage or apportionment order in relation to the costs of the claim or counterclaim: at 133; and see Dal Pont [8.4].
27 Though they could be said, if only for reasons of their timing, to raise slightly different issues, I intend to treat the two O 23 offers together - the more so as the change in the offer amount made is not material in the view I take of the matter.
28 The relief sought by AMC in its Further Amended Statement Claim sought declarations and orders in relation to the terms and effect of particular contractual provisions, rectification and damages for breach of contract, damages and injunctive relief at law and/or under the TP Act for, variously, misleading or deceptive conduct, passing off, copyright infringement and conversion as well as other ancillary relief. In light of my conclusions, it cannot be doubted that the judgment on AMC's claim will be less favourable to it than either of the offers made. In relation to the contractual claims for damages for breach of contract arising out of the parallel importation claim and for wrongful repudiation, AMC was claiming substantial damages. In relation to the parallel importation claim, only nominal damages were awarded. Given the apparent object of the claim made was to secure substantial damages and was not to establish a legal right irrespective of the monetary relief awarded, I do not consider that AMC could properly be regarded as having been successful on this issue for costs purposes. As was said in the Full Court in Nexus Minerals NL v Brutus Constructions Pty Ltd [1997] FCA 926 at 11-12:
An award of nominal damages ought not today be regarded as a "peg on which to hang costs": cf Beaumont v Greathead (1846) 2 CB 494 at 499; see McGregor on Damages, para404-para405, Sweet & Maxwell, London, (1988, 15th ed); see also Burrows, Remedies for Tort and Breach of Contract, 269-270, Butterworths, London (2nd ed 1994).
See also Mid-City Skin Cancer & Laser Centre v Zahedi-Anarak [2006] NSWSC 1149 at [48]-[52]; Dal Pont, at [8.35].
29 I would also note that AMC was awarded only nominal damages for breach of cl 11.1 of the Distribution Agreement in respect of Hamiltons refusal to supply products on two orders. Here again it ought not be regarded as successful for costs purposes.
30 As to its claims for damages and ancillary relief for breach of copyright, passing off, etc, it was entirely unsuccessful in securing any of the relief sought. However, it needs to be noted that the copyright relief sought was premised upon AMC's being the beneficial owner both of the Fuyunhon and Tuotoning trade marks and of the copyright of the Hong Kong packaging and the English language product indications. A considerable part of Hamilton's defence of AMC's claims in this respect was directed at denying AMC's beneficial ownership of any of these and at establishing misleading or deceptive conduct in relation to alleged representations concerning the marks and Chinese language translations: see FAD paras 17-30. Hamilton pleaded in its defence that the marks and the Chinese language artworks were held by AMC on constructive trust for it. In its cross-claim Hamilton claimed the trade marks (via the constructive trust) but not the artworks. It abandoned the claim to the trade marks at the beginning of final submissions. I simply note, a significant component of the hearing was devoted to the Hamilton defences and claims I have noted above. This is a matter to which I will return.
31 Given that AMC secured no relief on any of its claims other than by way of awards of nominal damages, it must on any view be said that the orders to be made will necessarily be less favourable to AMC than either of the offers made. This said, it equally has to be acknowledged that AMC was successful and Hamilton not so in relation to many of the disputed issues which occupied significant time in the protracted hearing of the matter.
32 I should add that offers made by Hamilton were stated to be "in full and final satisfaction of the Applicant's claim". The term "claim" as used in O 23 is intended to refer to any "legal or equitable claim" in the proceeding: cf Federal Court of Australia Act 1976 (Cth), s 22. For this purpose the proceeding on AMC's claim and that on Hamilton's cross-claim are separate proceedings: O 5 r 11. Nonetheless, the term "claim" as used in Hamilton's offers of compromise on its proper construction clearly encompassed all claims made by AMC and is to be so understood.
33 In the circumstances I am satisfied that the O 23 r 11(5) presumption is raised in respect of all the claims made in AMC's proceeding. I would add that AMC assumed the risks and vicissitudes of litigation in relation to its claims but with ultimately adverse consequences. Further, I consider AMC's expectation of very substantial damages from its contract claims was, in any event, unrealistic. I simply note here that I did not explore - or have to explore - the assumptions informing Mr Jorgensen's Report in my reasons in the principal proceedings. I need not reiterate my understatement about them: see Reasons [375]. Nor do I consider it necessary to dissect the quantum claims here.
34 The remaining question is whether this is an exceptional case in which there are proper reasons for my ordering otherwise. I am satisfied that it is. In my view, it is of crucial importance to understand the context both of the litigation itself and of the O 23 offers. As I indicated in my earlier reasons the parties were involved in the bitter unravelling of a long term (about 16 year) business relationship. In 2000, after 10 years of relatively informal dealings under short form agreements, a lengthy Distribution Agreement was executed. It was by no means apt to describe all the elements of the parties' relationship. This explains the difficulty particularly Hamilton experienced in attempting to bring AMC's actions, contributions, etc within the terms of the agreement. It also contributed to the controversy over the intellectual property rights AMC claimed, but which Hamilton asserted, were its own. What is clear is that from about 2000 the parties' business relationship began to fray. By 2006 (when I found it came to an end) there was a total failure of mutual trust and confidence between the principals of the two companies and very real animosity between them. I would comment in passing that, while Hamilton seeks to portray AMC as the aggressor in AMC's proceeding, it seems to be oblivious, or else indifferent, to its being a catalyst to AMC's resentment and, I would add, occasional but unpardonable duplicity.
35 What is clear is that each party in the process of the breakdown acted unreasonably, intransigently, engaged in forms of self-deception and sought to practise deception upon the other. As to the last of these, I need not reiterate what I have said of some of Dr Keung's actions. In Hamilton's case I would simply note that it sought to appropriate to itself advantages from the relationship (ie Chinese language trade marks) which, on facts known to it, it clearly ought to have appreciated belonged to AMC and which were essential to AMC's business. Further, it asserted its entitlement to these advantages in its defence and counterclaim. The characteristics of unreasonableness, intransigence and self-deception were evident in the proceedings themselves in varying degrees.
36 I have already indicated that the breach of confidence action apart, there were two clusters of issue in this litigation - the one revolving around essentially contractual issues; the other about intellectual property issues. In the context, not only were the two clusters part of the same matter, they ought properly to be seen as inseparable elements in the unravelling of the parties' relationship which it was the purpose of the claim and counterclaim to effectuate. In that part of the matter that AMC lost - its own claim - AMC can be said to have proceeded with unrealistic expectations, at least in relation to the quantum of contract damages it sought. But so too did Hamilton in its defence to that claim, at least in relation to its claims to be beneficial owner of the AMC's intellectual property and in relation to the misleading and deceptive conduct said to have been engaged in by AMC in relation to that intellectual property. This defence to that extent was wholly without substance and Hamilton ought to have understood this. In relation to the cross-claims, there were two minor matters of little costs significance. Hamilton's constructive trust claim to the trade marks was live until final submissions. Its TP Act s 87 claim to them was lost.
37 While AMC did not seek all of the relief it might have in relation to its intellectual property, each party secured the best and probably the warranted outcome from the disputed issues they raised and the claims respectively prosecuted by them. The two clusters of issues to which I have referred did not raise identical issues, though there were points of intersection between the contract and issues of intellectual property. Nonetheless, the nature and purpose of the litigation put in context was not one which it could reasonably be expected would be solved piecemeal, the more so because of the ambiguity inherent in the outcome in relation to AMC's copyright ownership if either of the offers were accepted. While it might be said that that ambiguity still remains despite my finding of copyright in AMC's favour, the proper view of the two proceedings as I have described them is that they should for O 23 purposes be seen compositely. Rejecting either of the O 23 offers ought not attract the indemnity costs presumption.
38 Save in relation to the breach of confidence action and one specific issue mentioned below, the justice of the matter is, rather, that not only that no indemnity costs order should be made on AMC's claim in Hamilton's favour but also no costs order should be made on the claim or the cross-claim. Considering and balancing the successes and failures on the multitude of issues raised by the claim, the cross-claim and the respective defences - and they were many and often complex - and having regard to their relative significance, I consider this pragmatic result to be the fair and appropriate outcome to what has been an acrimonious litigation in which agreement on almost any matter - and not the least on an offer of compromise of only a part of it - could not reasonably be expected.
39 The one specific issue I would except from the above relates to the issue of the damages claimed by AMC. Not only was AMC unsuccessful in its various claims, the quantum of relief sought for its principal claims can properly be considered to be improbable at best. Hamilton is entitled to be paid its costs on that issue in AMC's proceeding on a party and party basis.