Kismet International Pty Ltd v Guano Fertilizer Sales Pty Ltd

REASONS FOR JUDGMENT 1 This matter is before the Court on the interlocutory application of the applicants' seeking orders that: (a) the costs to be paid by the applicants/cross-respondent to the respondents/cross-claimant pursuant to my orders on 19 July 2013 be set off against the costs to be paid by the respondents to the applicants pursuant to the same orders; and (b) that the Taxing Officer be directed to issue a Certificate of Taxation for the balance of costs payable (which I take to mean the difference between the costs orders which the competing parties have the benefit of) pursuant to Order 1 of my orders of 19 July 2013, and otherwise not issue any other Certificate of Taxation in respect of the Bills of Costs filed. By consent the matter is to be determined on the papers. 2 I handed down the substantive judgment in this matter on 29 April 2013 (Kismet International Pty Ltd v Guano Fertilizer Sales Pty Ltd [2013] FCA 375) and made orders in relation to all matters other than costs on 27 May 2013. I delivered my judgment on costs on 19 July 2013 (Kismet International Pty Ltd v Guano Fertilizer Sales Pty Ltd (No 2) [2013] FCA 705) ("the costs judgment"). I will treat the application before me as an application to vary my earlier costs orders, which have not yet been entered. 3 For the purposes of the application it is unnecessary to differentiate between the two applicants, which include the cross-respondent Kismet International Pty Ltd, as both are controlled by their sole director, John Jashar. Nor is it necessary to differentiate between the first, second and third respondents, which include the cross-claimant Grain Haul Pty Ltd, as all are controlled by the fourth respondent, John McMahon. For convenience I will usually identify the applicants/cross-respondent as "the applicants" and the respondents/cross-claimant as "the respondents". 4 The substantive proceeding involved: (a) the applicants' claims of false and misleading representations, misleading and deceptive conduct, and passing off by the respondents' marketing and sale of organic fertiliser under or by reference to the applicants' Guano Gold trade marks ("the misleading conduct claims"). This was the central claim in the proceeding. Although not doing so initially, the respondents admitted liability for these claims and the Court was required to assess damages for two claims, described in the substantive judgment as the Lost Sales claim and the Reputational Damages claim; (b) the respondents' cross-claim seeking payment of unpaid fees for warehousing the applicants' guano ("the Warehousing Fees cross-claim"); and (c) the applicants' response to the cross-claim in which they made claims described in the substantive judgment as the Lost Guano claim, the Lost Bulk Bag claim, the Steel Strut Damage claim and the Defective Bulk Bags claim. 5 The respondents enjoyed substantial success in the proceeding as: (a) in an unfortunate result for the applicants, I declined to award them any damages under the Lost Sales claim and I only made a modest award of $5,000 under the Reputational Damages claim; (b) in the Warehousing Fees cross-claim there was no contest that the applicants owed $19,301 in such fees. The applicants merely sought to set off their own claims; and (c) the applicants' claims in response to the cross-claim were largely unsuccessful. In opening submissions or during the trial they abandoned the Lost Bulk Bag claim, the Steel Strut Damage claim, the Defective Bulk Bags claim and a claim for exemplary damages ("the Abandoned Claims"). They were successful in the Lost Guano claim only to the extent of $1,950. 6 In the costs judgment I ordered: (a) the respondents to pay the applicants' costs (except for the Abandoned Claims) on a party/party basis on the Federal Court scale from commencement until 13 June 2012, and thereafter the applicants to pay the respondents' costs of defending those claims on an indemnity basis; (b) the applicants/cross-respondent to pay the respondents/cross-claimant's costs of the cross-claim on a party/party basis on the Federal Court scale from commencement until 13 June 2012, and thereafter on an indemnity basis; and (c) the applicants to pay the respondents' costs of defending the Abandoned Claims on a party/party basis on the Federal Court scale until 13 June 2012, and thereafter on an indemnity basis. 7 I made indemnity costs orders because the respondents had made an effective offer of compromise and the respondents were prima facie entitled to indemnity costs. I awarded indemnity costs from a date later than when the offer of compromise become effective because, in effect, the applicants could not have understood the difficulties that they faced in the proceeding until about 13 June 2012. It was then that they should have closely considered (and taken) the offer of compromise. 8 Following the costs orders there was some delay while the parties sought to agree the costs, but the parties could not reach agreement. 9 The respondents then prepared and filed two bills of costs. On 16 September 2014 Registrar Hetyey issued estimates of the respondents' bills of costs in a total of $131,865. The time for objection to these estimates has expired and the respondents are set on pursuing recovery of this amount. If Certificates of Taxation are issued the costs will become immediately payable and interest will accrue at the rate of 8.5%. 10 The applicants initially moved slowly in the preparation of their bill of costs, but in response to the respondents' bills they then moved with some alacrity to follow suit. They prepared and filed a bill of costs and on 10 October 2014 Registrar Hetyey estimated the applicants' costs in a total of $127,633. 11 When I was made aware of the second costs estimate, which showed a difference between the parties' cost entitlements of only $4,232 I thought it unlikely that there would be an ongoing dispute between the parties. I requested them to confer in an effort to resolve the interlocutory application, but they have been unable to reach agreement. Unfortunately it has become necessary to deliver judgment on the small issue of whether one costs order should be set off against the other.