Caporaso Pty Ltd v Mercato Centrale Australia Pty Ltd

1. The applicant is to pay 80% of the first respondent's costs of and incidental to the originating application and the cross-claim, to be taxed if not agreed.
2. The applicant is to pay the second respondent's costs of the originating application on a party-party basis, to be taxed if not agreed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

1. The Full Court has remitted this matter for the resolution of a costs dispute. The remitted issue is whether the costs of the trial should be apportioned in the manner proposed by the applicant, Caporaso Pty Ltd as Trustee for the Diversity Trust.
2. Caporaso contends that it should be liable to pay 50% of the costs of the first respondent, Mercato Centrale Australia Pty Ltd having regard to the outcomes at trial in Caporaso Pty Ltd v Mercato Centrale Australia Pty Ltd [2024] FCA 138 (Trial Reasons) and on appeal in Caporaso Pty Ltd v Mercato Centrale Australia Pty Ltd [2024] FCAFC 156 (Appeal Reasons). Familiarity with those judgments is assumed and some abbreviations contained in them will be employed here.
3. At the time that it commenced this action, Caporaso was the registered owner of three trade marks (Caporaso Marks) including a Plain Word Mark, a Fancy Word Mark and a Red Man Logo. Each of the Caporaso Marks incorporated the word mercato in respect of certain goods and services. It was not disputed that Mercato Centrale had used or intended to use certain marks incorporating the word mercato in respect of the same or similar goods and services. Caporaso sought relief under the Trade Marks Act 1995 (Cth) (TMA) for infringement of each of the Caporaso Marks, as well as damages for breach of the Australian Consumer Law (ACL) and under the general law of passing off. The claims founded in tort and breach of the ACL were abandoned in the course of the trial, as were all claims for relief against the second respondent (Mr Eddie Muto) personally.
4. By its cross-claim, Mercato Centrale sought the cancellation of the Plain Word Mark and the Fancy Word Mark and a limitation on the registration of the Red Man Logo.
5. The issues that arose at the trial are summarised at [27] - [46] of the Trial Reasons and will not be discussed at length here.
6. The Full Court made orders dismissing the originating application and allowing the cross-claim, and a further order to the effect that the Register of Trade Marks be rectified by cancelling the Plain Word Mark in its entirety. The latter order followed from the Full Court's acceptance of Mercato Centrale's submissions relating to the proper construction of s 62(b) of the TMA and its application to the facts. The Full Court concluded that two of the marks used or threatened to be used by Mercato Centrale were deceptively similar to the Plain Word Mark however the cancellation of that mark meant that Caporaso's originating application alleging infringement could not succeed: Appeal Reasons, [157] and [164].
7. Caporaso's submissions as to infringement of the Fancy Word Mark and the Red Man Logo were otherwise rejected on appeal: Appeal Reasons, [166] - [169].
8. Ordinarily, Mercato Centrale would be awarded costs, proceeding from the starting point that costs usually follow the event. However, the Court has the discretion to apportion costs between the parties in cases where it is appropriate to do so. In Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27; (2016) 247 FCR 61 the Full Court confirmed that there may be an apportionment having regard to the degree to which the parties have been successful or unsuccessful on discrete disputed issues (in that case regarding revocation of a patent on alternate asserted grounds).
9. Caporaso points to its success on the issue of deceptive similarity with respect to the Plain Word Mark. It submits that the issue determined by the Full Court turned largely upon a concession made by Mercato Centrale on the appeal with respect to the ordinary signification of the word centrale, a concession it had not made in the course of the trial. I accept that the resolution of the deceptive similarity question on the appeal turned in part on that concession. However, the Appeal Reasons disclose that the enquiry on the question of deceptive similarity was multifaceted (as it was first instance) such that it could not be said that the outcome was wholly referable to a change of position on Mercato Centrale's part. As a discrete issue, the meaning of the word centrale did not consume a significant portion of the trial in any event. The fact of the concession bears little weight in the exercise of the costs discretion.
10. Caporaso further submits that it should not be required to pay Mercato Centrale's costs associated with the briefing of two Senior Counsel, there being no explanation or apparent reason as to why the cross-examination of a key witness could not have been undertaken by the same Counsel who presented the bulk of Mercato Centrale's case. I accept that the expense associated with the briefing of two Senior Counsel was not a necessary expense. However, I consider that the unreasonableness of any such expense can be considered in the context of an assessment or taxation in the ordinary course and should not form a part of any percentage-based apportionment of the kind sought by Caporaso.
11. Caporaso further relies on Mercato Centrale's failed arguments under s 41 and s 88(2)(c) of the TMA founded on the ordinary signification of the word mercato in the minds of the Australian consumer. The conclusions on that topic were not challenged on appeal. Caporaso submits (correctly) that a significant part of the evidence adduced at trial was directed to that issue, identified in its written submissions as comprising the whole of each of the affidavits of Mr Nicholas Basile (96 pages), Ms Caterina Borsato (seven pages), Ms Noelene Smythe (361 pages), and [19] - [27] of the first affidavit of Mr Muto with exhibits (over 30 pages), as well as 128 pages of additional documents. An expert witness was cross-examined on the topic and a sizable portion of oral and written submissions were devoted to the issue. I accept Caporaso's submissions concerning the scope and significance of that issue at the trial stage.
12. Caporaso further submits that Mercato Centrale's case asserting ownership of the Plain Word Mark was founded in large part on asserted facts that were not established at trial specifically relating to a business trading as "MERCATO @ daylesford". Mercato Centrale's success on the ownership question rested on a narrow factual basis, being the prior use of a website name: Trial Reasons, [198] - [199]. It is submitted that Caporaso should not pay Mercato Centrale's costs of pursuing the balance of the factual enquiry in respect of which it was unsuccessful. I accept that Mercato Centrale's success on the ownership issue rested on a factual finding significantly more confined to the evidentiary case it put forward and I afford that circumstance some weight.
13. Mercato Centrale points to its measure of success and further submits that Caporaso's conduct of the trial itself was wasteful of costs. It relies upon the abandonment of the claims founded in passing off and under the ACL (including claims for pecuniary relief and exemplary damages) as well as the late abandonment of claims against Mr Muto personally and some claims for trade mark infringement.
14. The abandonment of the claims against Mr Muto requires separate consideration. Mr Muto was not a cross-claimant nor was he party to the appeal. Before the Full Court, Caporaso sought an apportionment of the trial costs against Mercato Centrale only. In my view, Caporaso should be required to pay Mr Muto's costs of the trial without any apportionment referable to any discrete legal or factual issue. Given that Mr Muto will have the benefit of that award, I do not consider the abandonment of the claims against him to be a factor affecting the proportion of Mercato Centrale's costs that Caporaso should be liable to pay. Neither party suggested that the costs of Mr Muto on the one hand and the costs of Mercato Centrale on the other should be the subject of any separate apportionment outside of the taxation procedures and I therefore make no finding as to how the total costs of the two respondents should be apportioned between them. That is a matter that can be left to taxation, if not agreed.
15. Mercato Centrale further submits that whilst its success in pursuing the ground for cancellation of the Plain Word Mark under s 62(b) and s 88(1)(a) of the TMA achieved the purpose of defending the infringement action, it does not follow that that should be the only ground for which it is compensated for its costs. It otherwise submits that the issues arising at trial were not easily separated.
16. I accept that the narrowing of Caporaso's case occurred after Mercato Centrale would have incurred expenses in preparing its case in answer to discrete allegations that were abandoned.
17. The claims founded in passing off and contravention of the ACL were the subject of a significant body of evidence including a large part of Mr Giovanni Caporaso's lengthy affidavit, and that aspect of the claim was not abandoned until after he had been cross-examined.
18. The greater portion of the time expended at trial related to the validity of the Plain Word Mark (including questions of ownership) and questions as to deceptive similarity by reference to it.
19. The Appeal Reasons show that the claim for infringement of the Plain Word Mark would have been upheld in most relevant classes were it not for the cross-claim securing its cancellation under s 62(b) and s 88(1)(a) of the TMA. Mercato Centrale's choice to defend the originating application on the basis that certain marks were not deceptively similar to the Plain Word Mark is relevant on the question of costs, given the result on the appeal.
20. I accept that the cross-claim was defensive in the sense that it was commenced in answer to Caporaso's claim of infringement, however that circumstance should be afforded little weight in a case where the numerous bases for the cross-claim were legally and factually distinct. In the present case, they are capable of apportionment having regard to the Court's familiarity with the conduct of the trial as a whole. As the Full Court said in Apotex (at [301]):

... Courts have been increasingly concerned, generally, to use all proper means to encourage parties to consider carefully what matters they will put in issue in their litigation. This has led to decisions whereby the successful party does not recover all of its costs where it has been unsuccessful on a discrete issue or in what is decided to be an unmeritorious objection. While it is acknowledged that, ordinarily, costs follow the event, the wide discretion in awarding costs has led to circumstances where a successful party who has failed on certain issues may be ordered to pay the other party's costs of them (as discussed in Hughes v Western Australian Cricket Association (Inc) [1986] FCA 382; [1986] ATPR 40-748 per Toohey J), although warnings have been stated that care should be taken in such a course and consideration be given to whether the issues on which the successful party failed are clearly dominant or separable (Waters v PC Henderson (Australia) Pty Ltd [1994] NSWCA 338; (1994) 254 ALR 328 at 330-331 per Mahoney JA) and to whether the issues involved different factual enquiries in the one proceeding or multiple causes of action, even if based on a common substratum of fact.

1. In conclusion, I am satisfied that the issues arising at trial are sufficiently discrete to enable some identification of broad issues in respect of which Mercato Centrale was unsuccessful in the presentation of its defence and the prosecution of its cross-claim such that it would not be appropriate for Caporaso to pay all of Mercato Centrale's costs. However, in determining the appropriate apportionment, it is also necessary to have regard to the extent of Caporaso's abandoned claims (as against Mercato Centrale) and the wasted costs associated with them. Ordinarily I would have granted Caporaso the 50% apportionment by reference to the outcome, having regard to the time expended on the distinctiveness and ownership issues discussed above. However, in light of the abandoned claims the more appropriate order is that Caporaso pay 80% of the costs.
2. The Full Court has already made an order that Mercato Centrale's costs of the trial be assessed on a party-party basis.
3. In accordance with the orders of the Full Court, costs are to be assessed on a party-party basis.

I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Charlesworth.