Fire Containment Pty Ltd v Robins

Judgment 1Following the Plaintiff's acceptance of undertakings proffered by the Defendants that they would cease to use the word "Trafalgar" in the conduct of their business and the abandonment of the claims for damages or an account of profits, Ms Painter who with Mr Nash appeared for the Plaintiff, sought an order for costs on an indemnity basis. 2The Civil Procedure Act 2005, s 98 provides that subject to rules of court costs are in the discretion of the court; the court has full power to determine by whom, to whom and to what extent costs are to be paid; and the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. 3The Uniform Civil Procedure Rules 2005, Pt 42 r 42.1 provides that if the court makes any order as to costs it is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. 4Ms Painter's submission was a simple one: the event was the acceptance of the undertakings, the plaintiff was successful in that event and the plaintiff should have its costs. The costs should be awarded on an indemnity basis because by letter dated 24 May 2011 the Plaintiff offered that the Defendants do all things necessary to relinquish the use of the name "Trafalgar"; that the parties mutually agree the form of a press release; that the Plaintiff pay the Defendants $25,000.00; and that the usual release provisions apply with respect to confidentiality, non-disparagement etc. The offer was rejected. It was a better result for the Defendants than the undertakings proffered by them. 5Mr Leggat SC who with Ms Nolan appeared for the Defendants pointed out that there had been no hearing on the merits and the usual course in those circumstances was that each party pay its own costs unless one of the parties acted so unreasonably that the other party should have an order for costs. 6Reference was made to Australian Securities Commission v Aust-Home Investments Ltd [1993] FCA 401; (1993) 44 FCR 194 at [31]; 201 where Hill J observed: " It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a Court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial: Stratford. This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue." 7Hill J's reference to Stratford was to JT Stratford & Son Ltd v Lindley (No 2) [1969] 1 WLR 1547; [1969] 3 All ER 1122. 8To like effect are the statements of McHugh J in Re The Minister for Immigration and Ethnic Affairs Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 at 624: " In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action." 9McHugh J went on at 625: "If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases." 10Ward J recently considered these principles in Nauru Phosphate Royalties Trust (Rec & Mgr Apptd) v Wily [2011] NSWSC 281. Her Honour concluded at [40] that in McHugh J's reference to a party who had acted so unreasonably that the other party should obtain the costs of the action, the use of the word " so" indicated a level of unreasonableness that would warrant an order for costs being made having regard to the circumstances in which the costs were incurred. 11What lies at the heart Lai Qin is that, without a hearing on the merits, there is no event to enliven Pt 42 r 42.1 of the Uniform Civil Procedure Rules . That may be concluded from the above passages. Success in an action or on particular issues is the fact that usually controls the exercise of the discretion as to costs. That is the event. But when there has been no hearing on the merits, there is no event. The court is deprived of the factor that usually determines whether or how it will make a costs order. 12On this analysis, the Plaintiff's basis for seeking an order for costs, that acceptance of the undertakings was the event for the purposes of Pt 42 r 42.1 of the Uniform Civil Procedure Rules , must be rejected. 13There should be no order as to costs, or an order that each party bear its own costs, unless a party has acted so unreasonably in relation to the incurrence costs as would justify an order that it pay the other party's costs. 14It was not submitted that the Plaintiff had acted unreasonably in seeking declaratory and injunctive relief with respect to the Defendants' use of the name "Trafalgar." 15Nor was it submitted that the Defendants had acted unreasonably in defending the proceedings, beyond the failure to walk away after giving the undertakings and receiving $25,000.00 in May 2011. 16Trafalgar Building Products Pty Ltd used the name "Trafalgar" in the conduct of its business. Norfolk Group Ltd, its holding company, divested Trafalgar Building Products Pty Ltd of its business, portion of which, including intellectual property rights, was sold to the Plaintiff. 17In submitting that the Defendants had not acted unreasonably in defending the proceedings, Mr Leggat pointed to the demand by the Norfolk Group Ltd that the corporate Defendants change their names or face a passing off action. The second Defendant took the view that this was a hollow threat because Norfolk Group Ltd had earlier represented that it was going to cause Trafalgar Building Products Pty Ltd to cease to trade. 18The second Defendant said there was no intent to pass off on the reputation of Trafalgar Building Products Pty Ltd as no reputation was understood to subsist in the name of that company as it was intending to cease to trade. 19The second Defendant said that the Defendants owned the business named "Trafalgar Fire & Safety" and in the course of trade by the third Defendant, Trafalgar Fire & Safety Pty Ltd, they have repeatedly represented that they are not affiliated with Trafalgar Building Products Pty Ltd and they have at no time represented that they were affiliated with the Plaintiff. 20It was pointed out that the Trade Practices Act 1974 (Cth), s 52 and s 53 were provisions designed to protect members of the public who were consumers of goods and services from unfair trade practices. It was submitted that the Plaintiff's case appeared to misconceive this purpose and invoked the provisions for its own protection to secure and advance its own business objectives. 21Reference was made to what Barwick CJ said in Hornsby Building Information Centre Pty Ltd v Sydney Building Information Centre Ltd [1978] HCA 11; (1978) 140 CLR 216 at [3]; 220: "Section 52 is concerned with conduct which is deceptive of members of the public in a capacity as consumers of goods or services: it is not concerned merely with the protection of the reputation or goodwill of competitors in trade or commence." 22Norfolk Group Ltd did not sell its shares in Trafalgar Building Products Pty Ltd to the Plaintiff. It divested the business of that company in three sales and closed it down. The Defendants maintained that any confusion would relate to the former Trafalgar Building Products Pty Ltd's business and not that of the Plaintiff. 23The Defendants maintain that the only name acquired by the Plaintiff and in unregistered form was "Trafalgar Passive Fire Solutions" but Trafalgar Business Products Pty Ltd did not trade under that name. There was no market association between that name and the business of Trafalgar Business Products Pty Ltd. The fourth Defendant, Trafalgar Passive Fire Solutions Pty Ltd was registered and the Defendants maintain that there was no illegitimate or false use of that name. 24These arguments are sufficient to justify continuation of the defence to the proceedings. I do not regard the failure to accept $25,000.00 upon the giving of undertakings and failing to walk away from the proceedings as conduct so unreasonable that the Defendants should be ordered to pay the Plaintiff's costs. 25In Fire Containment Pty Ltd v Robins [2011] NSWSC 533 at [14] - [15] I said that it was more likely than not that the court would have made orders consistent with the proffered undertakings if there had been a hearing on the merits, but that cross-examination might have altered that scenario. 26By that statement I did not mean to imply that the Plaintiff must have won. As indicated above, there are significant issues of fact and law that would need resolution before a verdict could be entered. 27An alternative submission was made that upon the coming into force of the Uniform Civil Procedure Rules , Pt 42 r 42.34 the Plaintiff should have applied for a transfer of the proceedings to the District Court. But in light of the above it is not necessary for me to address that issue. 28There will be no order as to costs.