Comité Interprofessionnel du Vin de Champagne v Network Nutrition Pty Ltd

Procedural background 2 In brief, the proceeding is an appeal from a decision of the Registrar of Trade Marks (made by a delegate (the Delegate)) in relation to an application to register a trade mark comprising a crown device and the words "Champagne seed extract" in respect of class 5, comprising herbal remedies, herbal medicine, herbal dietary supplements, medicinal herbs, medicinal herbal preparations and medicinal herbal infusions. The applicant for registration of the mark was Network Nutrition Pty Ltd (NN). The application was opposed by Comité Interprofessionnel du Vin de Champagne (CIVC) and Institut National de l'Origine et de la Qualité (INAO). 3 In a decision dated 26 April 2023, the Delegate rejected CIVC/INAO's grounds of opposition and decided that the trade mark could proceed to registration. 4 CIVC and INAO appealed to this Court, filing a notice of appeal dated 10 May 2023. The appeal to this Court is in the Court's original jurisdiction and takes place by way of a hearing de novo. 5 In December 2023, the proceeding was set down for hearing on 8 July 2024, on an estimate of three days. 6 On 1 July 2024, I heard an application by CIVC/INAO to vacate the hearing. I gave oral reasons for judgment (later revised from the transcript) in respect of that application on 2 July 2024. I decided to reject the application. In the course of its written submissions in connection with that application, NN flagged that it would apply to amend its application for a trade mark "to include a condition that the trade mark will only be used on goods containing grape seed extract manufactured from the seeds of grapes grown in the wine-making region of Champagne, France". 7 Subsequently, on the evening of Wednesday, 3 July 2024, NN lodged electronically an interlocutory application formally seeking to amend its application for a trade mark by adding an endorsement. The amendment was sought pursuant to s 197(e) of the Trade Marks Act 1995 (Cth). The wording of the proposed endorsement was very similar to, but slightly tighter than, the condition flagged in the earlier submissions. The wording of the proposed endorsement was: "It is a condition of registration that the trade mark will only be used on goods containing grape seed extract manufactured only from the seeds of grapes grown in the wine-growing region known as Champagne, France." 8 On 3 July 2024, CIVC and INAO filed their outline of opening submissions. NN filed its outline of opening submissions on 5 July 2024. 9 The hearing was due to commence on Monday, 8 July 2024. On the evening of Sunday, 7 July 2024, the parties notified my chambers by email that the parties had reached a position which they considered would resolve the proceeding and attached draft orders. The email from the parties included: In summary, the Appellants will not oppose the amendment to the trade mark in suit as set out in paragraph 1 of the attached orders. This amendment is a modified version of the amendment sought in the Respondent's interlocutory application dated 3 July 2024. If the Court is minded to make that order and the order in paragraph 2, then the Appellants seek leave to file and serve a notice of discontinuance with the costs of the proceeding being reserved. If convenient to his Honour, the parties propose that a hearing on the issue of costs take place on the last day of the hearing as currently listed (being 10 July 2024) with some short submissions to be filed on Tuesday evening (limited to 2 pages). 10 Subsequently, on 8 July 2024, I made orders substantially in the terms proposed by the parties. The orders were as follows: THE COURT NOTES THAT: 1. The appellants do not oppose paragraphs 1 and 2 of these orders. 2. The appellants consent to paragraphs 3 to 6 of these orders. THE COURT ORDERS THAT: 1. Pursuant to s 197(e) of the Trade Marks Act 1995 (Cth) and upon the respondent's application dated 3 July 2024, the Registrar of Trade Marks be directed to amend trade mark application number 2039529 to include the following endorsement: It is a condition of registration that the trade mark will only be used in relation to goods: (a) consisting of or containing grape seed extract; and (b) where the grape seed extract used in the goods comes only from the seeds of grapes grown in the wine-growing region known as Champagne, France. 2. By 4.00 pm on 8 July 2024, the respondent notify the Registrar of Trade Marks of paragraph 1 of these orders. 3. Upon compliance with paragraph 2 above, the appellants be granted leave to file a notice of discontinuance, subject to the question of costs being reserved to be determined in accordance with paragraphs 5 and 6 below. 4. The appellants file the notice of discontinuance pursuant to leave granted in paragraph 3 by 12.00 pm on 9 July 2024. 5. The hearing listed at 10.15 am on 8 July 2024 be vacated. The question of the costs of the proceeding, and issues of confidentiality, be listed for hearing at 10.15 am on 10 July 2024. 6. By 4.00 pm on 9 July 2024, the parties file and exchange submissions (limited to 2 pages) on the questions of costs and confidentiality. 11 On 9 July 2024, CIVC and INAO filed a notice of discontinuance pursuant to the leave granted in the above orders. The notice included a statement that the discontinuance was subject to paragraphs 5 and 6 of the orders made on 8 July 2024 in relation to the determination of the costs of the proceeding.

The parties' positions on costs 12 The parties filed short submissions on costs in accordance with the orders set out above. A hearing on the issue of costs took place on 10 July 2024. 13 The parties' respective positions on costs can be summarised as follows. (a) CIVC and INAO submit that the proceeding was resolved by the Court granting NN an indulgence which should have been sought, at the very latest, shortly after the commencement of this proceeding. On this basis, CIVC and INAO submit that they should be awarded their costs of the proceeding in this Court and of the proceeding before the Registrar of Trade Marks; alternatively, they submit that the parties should bear their own costs. (b) NN submits that, in circumstances where CIVC and INAO have withdrawn their appeal, NN should have its costs of the proceeding. NN relies on an affidavit of Benjamin Lee Miller, a partner of Maddocks, the solicitors for NN, dated 9 July 2024. In its submissions, NN relies on a series of facts and matters. One of these is that CIVC/INAO did not accept a "Calderbank Offer". This is a reference to a letter dated 28 June 2024 from Maddocks to Corrs Chambers Westgarth, the solicitors for CIVC/INAO (annexure "BM-28" to Mr Miller's affidavit). This letter contained an offer by NN to amend its application for a trade mark to include a condition in the same terms as that flagged in NN's outline of submissions in opposition to the application to vacate the hearing date.

Applicable principles 14 Section 43(3)(e) of the Federal Court of Australia Act 1976 (Cth) provides that an award of costs may be made in favour of, or against, a party whether or not that party is successful in the proceeding. 15 In general, the starting point in considering the question of costs is the success or failure of the relevant party: see Queensland North Australia Pty Ltd v Takeovers Panel (No 2) [2015] FCAFC 128; 236 FCR 370 at [11] per Dowsett, Middleton and Gilmour JJ. However, there are a number of categories of situation in which a successful party may be deprived of costs, or even ordered to pay the costs of the other side. 16 In the present case, a notice of discontinuance has been filed with the leave of the Court (and in circumstances where the order granting leave was made by consent). Rule 26.12(7) of the Federal Court Rules 2011 provides that, unless the terms of a consent or an order of the Court provide otherwise, a party who files a notice of discontinuance is liable to pay the costs of each other party to the proceeding in relation to the claim, or part of the claim, that is discontinued. CIVC and INAO submit that the effect of this rule is that they must put forward an explanation as to why costs should be awarded in a manner different to that provided for in r 26.12(7), relying on Taylor v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2020] FCA 1760 (Taylor) at [9] per Flick J. Although the effect of r 26.12(7) has been expressed in different ways in other cases (as referred to in Taylor at [8]-[9]), it is not necessary for present purposes to reach a conclusion on this issue, as it would not affect the outcome in the present case. I will therefore proceed on the basis (as submitted by CIVC/INAO) that a discontinuing party must put forward some explanation as to why costs should be ordered in a manner different to that provided for in r 26.12(7). 17 It is common ground, and I accept, that in determining the appropriate costs order it is not appropriate for the Court to conduct a "mini-trial" as to how the issues in the proceeding would have been resolved at final hearing: see Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; 186 CLR 622 at 624-625 per McHugh J.

Consideration 18 In summary, CIVC and INAO submit that there is a good reason for CIVC/INAO to be awarded their costs against NN. They submit that, before the Delegate, and at the commencement of the appeal, the specification in NN's application for a trade mark permitted use of the mark across a broad range of herbal products. They submit that, even at an early stage (and, in particular, following observations of the then-docket Judge, O'Bryan J, at a case management hearing on 22 June 2023) it ought to have been apparent to NN (properly advised) that the specification was too broad, and that the notional use of the mark across the breadth of all the specified goods raised a significant risk that the mark would be successfully opposed. CIVC and INAO refer to the commentary on notional use contained in Burrell, R & Handler, M, Australian Trade Mark Law (LexisNexis, 3rd ed, 2024) at p 236 (fn 86). CIVC and INAO submit that NN's application permitted use of the mark on products that had no connection with the wine-making region of Champagne, France, and that CIVC/INAO's notice of appeal identified this error (ground 9). 19 CIVC and INAO submit that the landscape of the case fundamentally changed when NN filed its amendment application (on 3 July 2024). They submit that the scope to pursue their contentions was substantially reduced in light of NN's amendment application (which CIVC/INAO would not have opposed, had the matter gone to a final hearing). As Mr Caine KC put it in oral submissions, once NN filed its amendment application "the case … substantially changed, and we would have been confronted - and we were confronted - with a case of [a] completely different complexion" (T6). 20 In support of the costs order it seeks, NN relies on the following facts and matters: (a) the condition that was introduced following NN's amendment application did not deal with all appeal grounds; (b) CIVC and INAO made clear from the outset (in particular, at the case management hearing on 22 June 2023) that a condition to that effect would not resolve the dispute; (c) at no time did CIVC/INAO suggest that a condition to that effect might resolve the dispute; (d) CIVC/INAO's evidence did not deal with the provenance of the seeds (but did raise other matters); (e) CIVC/INAO ran, and lost, two interlocutory applications directed to challenging the evidence as to the provenance of the seeds; (f) CIVC/INAO's outline of opening submissions raised other grounds of objection that were not addressed by the condition; and (g) CIVC/INAO did not accept a Calderbank offer. I note that whether CIVC/INAO "lost" the two interlocutory applications is contested; I deal with this further below. 21 It is convenient to start with the interlocutory applications in respect of which costs were reserved. There were four interlocutory applications in the proceeding, as identified in paragraph 35 of Mr Miller's affidavit. The third interlocutory application (being the application to vacate the hearing date) does not need to be dealt with now, as a costs order was made in respect of that application. The fourth interlocutory application (being NN's application to amend) should form part of the overall costs of the proceeding. Neither party suggested otherwise. 22 The first interlocutory application (dated 23 May 2024) was an application by CIVC/INAO to relax the confidentiality regime to enable them to investigate NN's supply chain. This application was dealt with by District Registrar Luxton at a hearing on 29 May 2024. There was a live issue at the hearing before me as to which party had been successful in that application. Having reviewed the transcript and orders, it seems to me that CIVC and INAO enjoyed only limited success in obtaining the orders that they sought. Given that the application concerned adjustment of the confidentiality regime, I consider it appropriate for the costs to form part of the overall costs of the proceeding (rather than making an order reflecting the success - or extent of success - of the parties). 23 The second interlocutory application concerned security for costs. The matter was resolved without a hearing. Each party had a degree of success in the outcome. I consider that these costs should also form part of the costs of the proceeding. 24 I now address the costs of the proceeding generally. The costs orders that I make will apply up to the date of those orders. There is still an outstanding issue of confidentiality to be dealt with. I will deal with the costs of that matter that are incurred after the orders separately in due course. 25 In my opinion, having considered the parties' written and oral submissions, the appropriate costs order is that CIVC and INAO be ordered to pay half of NN's party-party costs of the proceeding. While NN has been successful in the outcome of the proceeding, in the sense that CIVC and INAO have discontinued the proceeding, this only occurred after NN filed its amendment application dated 3 July 2024. I accept that the amendment application substantially changed the case and that it largely undercut one of the principal contentions that CIVC/INAO would have advanced had the matter gone to hearing (without the amendment application). I do not consider there to be a proper basis to award CIVC/INAO their costs of the proceeding (or of the proceeding before the Registrar of Trade Marks). In circumstances where the matter did not go to a hearing, it is unclear what the result would have been on the various issues. As indicated above, it is not appropriate to conduct a mini-trial. It is therefore not known whether CIVC/INAO would have succeeded (in particular, in relation to their notional use contention) had the matter gone to a hearing (absent the amendment application). 26 Further, I consider that an order that each party bear its own costs of the proceeding would be unduly favourable to CIVC/INAO. This is because much of the legal work done by the parties in preparing this case for hearing (in particular, the preparation of evidence) concerned contentions made by CIVC/INAO that were independent of the contentions that were addressed by NN's amendment application. In respect of the parts of the case not addressed by NN's amendment application, CIVC and INAO have effectively abandoned their case. In these circumstances, it is appropriate that CIVC/INAO pay NN's costs referable to that work. On the other hand, to the extent work was done on CIVC/INAO's contentions that were addressed by the amendment application, I consider that each party should bear its own costs. This is because it is not known how these issues would have been resolved at hearing (absent the amendment application). 27 In the circumstances, and having regard to the affidavit material filed by the parties for the final hearing, I consider that a fair resolution of the above considerations is for CIVC/INAO to pay half of NN's costs of the proceeding. I do not consider it appropriate to disturb the costs order made in the proceeding before the Registrar of Trade Marks. 28 I do not consider that NN's solicitors' letter dated 28 June 2024 assists in the resolution of the question of costs. The offer in the letter was open for only a short period of time and NN sought a payment of costs. I am not satisfied that it was unreasonable for CIVC/INAO not to accept the offer in the letter. 29 There is no issue between the parties that whatever costs may be awarded should be determined on a lump sum basis. Although Mr Miller's affidavit sets out some information relevant to the amount of any lump sum, CIVC/INAO require time to respond. I propose to order that the determination of a lump sum amount be dealt with by a Registrar. 30 For these reasons, I will make orders as outlined above. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Moshinsky.