Clipsal Australia Pty Ltd v Clipso Electrical Pty Ltd

Apportionment of costs in relation to Dolly Switch shape mark infringement case 4 There is an anterior question which is whether the Applicants should have all of their costs of the proceedings (apart from those costs subject to earlier costs orders). This is because the Applicants did in fact fail on one issue at trial, namely, the infringement of the Dolly Switch shape mark. 5 In some circumstances, the fact that a successful party has failed on an issue may justify the making of an order that the party bear its own costs on that issue: Tenser v Quigley [2016] FCAFC 178 at [27] (applying the dictum of Toohey J in Hughes v Western Australian Cricket Association (Inc) [1986] FCA 382; [1986] ATPR 40-736 at 48-136). The making of such an order involves the exercise of a discretion which is to be exercised, naturally enough, in a judicial fashion and cognisant that the purpose of a costs order is compensatory rather than punitive: Ibid. The circumstances in which such an order might be made are many. For example, the issue in question may be discrete from the remaining issues in the case and may have occupied sufficient time at trial that it would be unfair for the party who succeeded upon it to be required to pay the costs of the other party. 6 On the other hand, there will often be cases where a party succeeds at trial but fails on an issue which was, in reality, inextricably intermeshed in the broader case or, alternatively, sufficiently insignificant from a global perspective such that no unfairness arises from requiring the party prevailing on it nevertheless to pay the other's costs. It is impossible, of course, to be either definitive or exhaustive about these matters in advance; it will suffice to say for present purposes that these are the kinds of general themes involved. And it need hardly be said, regardless of what kind of case is involved, the assessment involved will rarely call for detailed analysis. Rather, what will be required, will be in each case an exercise of practical judgment about the way in which the issues played out at trial. 7 Here, it is true, the Respondents prevailed on the issue of whether they had infringed the Dolly Switch shape mark. The substantive reasoning which led to this result was a conclusion that the Respondents had not used their Dolly Switch as a trade mark. On this proposition, the Applicants lost. However, the Respondents' victory on this isolated issue was by no means clear cut. They had sought to buttress their case on trade mark use by seeking to prove that the Dolly Switch's design was driven by functional concerns. Mr Abdul Kader gave elaborate evidence about the circumstances in which he had created the Clipso Dolly Switch (in China; following much trial and error) but I rejected this evidence, concluding instead that Mr Abdul Kader chose the Clipso Dolly Switch shape for the more mundane reason that it looked like the Clipsal switch: see Clipso (No 3) at [148]. 8 In any event, this question was a minor issue in the scheme of the overall trial. To the extent that it involved a factual contest, it was a factual contest which the Respondents lost. Their success was therefore a minor one. I do not think that it was such as to require separate treatment from a costs perspective.

Should the Applicants have their costs on an indemnity basis? 9 This case should not have occurred. The facts, as they were found, were that the Respondents attempted to exploit the Applicants' reputation by using a product and name designed to confuse the relevant class of consumer into thinking that there was an association with the Applicants, which did not exist. When the Respondents were brought to Court by the Applicants, they pursued at trial factual allegations which in many instances I found to be false. The Applicants were put to a great deal of inconvenience in meeting these allegations which ought never to have been made. An indemnity costs order is appropriate: see Colgate-Palmolive Company v Cussons Pty Ltd [1993] FCA 801; (1993) 46 FCR 225 at 233-34 per Sheppard J.

Lump sum costs order or ordinary taxation? 10 Rule 40.02(b) of the Federal Court Rules 2011 (Cth) ('FCR') empowers the Court to award costs by way of a lump sum rather than as taxed costs. There are no indications on the face of the rule as to how that power should be exercised. I considered the circumstances in which the power might be exercised in Clipsal Australia Pty Ltd v. Clipso Electrical Pty Ltd [2016] FCA 37 at [9]-[10]: 'The circumstances in which such an order may be made are not closed but include the avoidance of the delay, expense and aggravation arising out of taxation: Beach Petroleum NL v Johnson (1995) 57 FCR 119 at 120 per Von Doussa J. I do not think that that is germane in this case since even if I make the orders sought by the applicants there will still be other costs orders at the conclusion of the trial that will likely require taxation. Such an order may also be appropriate where the proceedings are complex and where it may be more efficient for a trial judge to determine the issue of costs than to condemn the parties to a taxation: Sony Entertainment (Australia) Limited v Smith (2005) ALR 788 at [189]ff per Jacobson J. Another reason to make such an order will arise in those cases where there is a basis to think that the costs of the taxation themselves may turn out to be irrecoverable (Sony at [195]) or where one party has been particularly truculent so that it may be thought just to spare the other from the inconvenience of further engagement over the process of taxation: Ariix LLC v Mahilall (No 2) [2014] FCA 494 at [10] per Rares J. Another circumstance sometimes thought relevant is where a party has failed to appear: Sony at [193].' 11 Within these principles, it is appropriate that a lump sum costs order should be made. This is for three reasons. First, the fact that the Respondents took no part in this costs debate reasonably signals that there is risk that they will take no part in any process of taxation, and that the Applicants will be put to the trouble of preparing a bill of taxation for no reason. It is true that the Respondents did file some evidence in relation to the freezing orders, but failure to do that might have led to the arrest of the Second Respondent. I am not inclined to interpret this, therefore, as an attitude of cooperation. 12 Secondly, there is reason to think that the costs of a taxation may themselves prove to be irrecoverable. At the conclusion of the proceedings the Applicants sought, and I made, freezing orders against the Respondents, and another person, after evidence emerged of some efforts at asset dissipation. 13 Thirdly, although the case is not yet formally concluded (because the trial of the quantum issues still lies ahead), I do not think that that part of the case is likely to impact on the costs issues arising in this part. 14 Given that I am willing to make the order under FCR 40.02(b) on the current state of the authorities dealing with that rule, it is unnecessary to consider whether cl. 4.1 of the Court's Costs Practice Note (GPN-COSTS) has liberalised the principles on which such an order may be made. Clause 4.1 is as follows: 'The Court's preference, wherever it is practicable and appropriate to do so, is for the making of a lump-sum costs order.' 15 A consideration of that issue, were it to be undertaken, would need to take account of the realities of the system of taxation in this Court, as it operates in the milieu of the contemporary legal profession. This is because the principles I have outlined above, when applied to modern reality, may suggest the Practice Note merely reflects the application of traditional principles to modern practices. In that regard, it is useful to note that the modern process of taxation is very onerous and few have the fortitude to see a taxation through to its conclusion. For example in 2016, in the New South Wales Registry, 137 long form bills of costs were presented for taxation. Of those, 59 were subject to objection. 50 of those were then resolved at or before a costs conference - leaving only 9 - of which a further 6 later settled. In the end, only 3 proceeded to a full taxation; a strikingly low rate having regard to the number of costs orders likely to have been made in 2016. 16 Furthermore, the preparation of a bill of costs usually, although not invariably, involves a costs consultant whose bill appears as a disbursement. Charges in the range of 5-10% of the face value of the bill are normal (although time charging occurs too). The process thus described is slow, expensive and gruelling. 17 In this case, I propose to direct that the process of assessing the lump sum costs be carried out by a Registrar since the power in FCR 40.02 is, in fact, one which may be exercised by a Registrar: see Federal Court of Australia Act 1976 (Cth) s 35A(1)(h); FCR 3.01(1)(b) and Schedule 2 item 221. It will be observed that there are significant differences between the protracted process involved in the conduct of a taxation under 'Division 40.2 - Taxation of costs' of the FCR and a general assessment under FCR 40.02(b). 18 The Applicants also sought an order that the costs so assessed be payable forthwith. The form of the order which the Registrar will eventually make under FCR 40.02(b) will be that the Respondents pay the Applicants a fixed sum of money within a certain period of time. That order will take effect in accordance with its terms. The only prohibition in the FCR on the enforcement of a costs order - relevant to the determination of the current dispute - is the prohibition in FCR 40.13: 'If an order for costs is made on an interlocutory application, the party in whose favour the order is made must not tax those costs until the proceeding in which the order is made is finished.' 19 This is silent on the topic of what occurs in the case of a lump sum costs order under FCR 40.02(b) (or any other process under FCR 40.02 for that matter). Accordingly, it is not necessary to seek leave to enforce a lump sum costs order; the order achieves that in its own terms. 20 For completeness, I do not think that FCR 40.13 would prevent the Applicants from seeking a taxation of its costs even if FCR 40.13 somehow applied to FCR 40.02(b). Prior to hearing, on 28 March 2014, Nicholas J ordered that the quantum of any pecuniary relief be determined after the other liability and non-pecuniary relief issues. That order was made pursuant to FCR 30.01(1), which permits the separation of such issues. Consequently, as a matter of procedure, the orders which were made after the hearing, and as a result of it, are interlocutory in nature. Those orders included declarations and injunctions together with orders reflecting the cancellation of the CLIPSO trade mark. There were also orders made in relation to the destruction or delivery up of merchandise bearing the CLIPSO brand. 21 It would, I think, be correct to describe the hearing which led to those orders as an 'interlocutory proceeding'. The effect of the former Order 62 Rule 3(3) of the Federal Court Rules 1979 (Cth) (now repealed) would have been to prevent the Applicants seeking the taxation of its costs unless it first obtained an order permitting that course: 'An order for costs of an interlocutory proceeding shall not, unless the Court otherwise orders, entitle a party to have a bill of costs taxed until the principal proceeding in which the interlocutory order was made is concluded or further order' (emphasis added). 22 Under the FCR, the reference to an 'interlocutory proceeding' in former Order 62 Rule 3(3) has now been replaced with a reference to an 'interlocutory application' by FCR 40.13 (above). 23 The expression 'interlocutory application' is defined in Schedule 1 to the FCR to mean 'an application, other than a cross-claim, in a proceeding already started'. Since the hearing which took place was not the hearing of an interlocutory application, FCR 40.13 does not, on its face, apply. 24 The Explanatory Statement which accompanied the introduction of the FCR included the following: 'The new Rules do not substantially alter existing practice and procedure but rather explain it in a way that it can be more easily followed and applied.' 25 I would accept, in consequence of this aspirational statement, that it was not the purpose of the Judges who made FCR 40.13, as a replacement to the former Order 62 Rule 3(3), to alter the practice in relation to when the costs of a separate trial might be presented for taxation. 26 Thus, it is true, that if the expression 'interlocutory application' can be interpreted as meaning 'interlocutory proceeding' then s 15AA of the Acts Interpretation Act 1901(Cth) will require that interpretation to be preferred ('In interpreting a provision of an Act, the interpretation that would best achieve the purpose or object of the Act (whether or not that purpose or object is expressly stated in the Act) is to be preferred to each other interpretation.') 27 Section 15AA, in terms, applies only to Acts (which the FCR certainly are not). However, s 15AA nevertheless applies to the FCR by reason of s 59(4) of the Federal Court of Australia Act 1976 (Cth) and s 13(1)(a) of the Legislation Act 2003 (Cth). 28 A similar process of reasoning makes relevant s 15AC of the Acts Interpretation Act 1901 (Cth). It provides: 'Where: (a) an Act has expressed an idea in a particular form of words; and (b) a later Act appears to have expressed the same idea in a different form of words for the purpose of using a clearer style; the ideas shall not be taken to be different merely because different forms of words were used.' 29 I do not think that either provision can, in this case, assist. Section 15AA operates on the premise that an interpretation supporting the suggested purpose is open. I do not think in this case that it is. The short fact is that an interlocutory application is a quite different concept to an interlocutory proceeding. An interlocutory application will ordinarily give rise to an interlocutory proceeding but the converse is not true, as this case shows. There are other circumstances in which an interlocutory proceeding may arise without an antecedent interlocutory application. The trial of a separate question is one example; the determination of a stated case is another. For that reason, I do not think that 'interlocutory application' in FCR 40.13 can be read, by reason of s 15AA, as saying something it does not say. 30 Section 15AC is also unavailable to bring about a different result. The section assumes that the later enactment has expressed the same idea in a different form of words. However, for the reasons I have just given, FCR 40.13 has not expressed the same idea in a different form of words; it has expressed a different idea.

Other 31 The Applicants also sought an order that some costs awarded at an earlier stage of the proceedings on 4 February 2016 (before trial) be subject to the same regime, that is to say, on a lump sum basis and payable immediately. It is not completely obvious that this is necessary as the order that the Applicants are entitled to its costs of the proceedings by way of lump sum order may be sufficient to take account of this earlier order. However, to the extent that this is not clear, I will direct that those costs also be subject to the same lump sum costs order.

Conclusions 32 I make the following orders:

1. The Respondents are to pay the Applicants' costs of the proceedings on an indemnity basis.
2. The Applicants be awarded a lump sum for their costs (including their costs under the orders of 4 February 2016) instead of any taxed costs in a sum to be determined by a Registrar.
3. The Applicants are to file and serve within 14 days hereof any evidence upon which they propose to rely on that issue before that Registrar.
4. The Respondents are to file and serve any evidence upon which they intend to rely within a further 14 days.
5. Direct the Registrar pursuant to FCR 1.37 to determine the quantum of the Applicants' costs in such manner as he or she deems fit including, if thought appropriate, on the papers.
6. Direct the Registrar at the conclusion of that process to order the Respondents to pay whatever sum has been determined within 28 days. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.