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[2016] FCAFC 118
respondent. Application by Lodestar to vary the Full Court's orders to obtain indemnity costs dismissed; Lodestar ordered to pay the respondent's costs of the application (orders at headnote and [29]).
2 cited instruments linked from this judgment.
Lodestar sought to vary Full Court orders to obtain indemnity costs based on two prior offers to compromise. The Full Court held that Campari's refusal of the 'walk-away' offer in the primary appeal was not unreasonable given a serious unsettled legal issue (arising from Yau) and the limited degree of compromise, so Lodestar was not entitled to indemnity costs under r 25.14(2). Although Lodestar obtained a better result than its offer in the Full Court proceedings, the Court exercised its discretion under r 1.35 and declined to award indemnity costs because of the legal uncertainty, the importance of the issue and the limited compromise; the application to vary costs orders was dismissed and Lodestar was ordered to pay the costs of the variation application.
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1,726 words · generated 05/07/2026
Lodestar Anstalt sought to vary costs orders made by the Full Court on 28 June 2016. The variation sought indemnity costs in two respects: (a) in the primary appeal to the Federal Court from the decision of the Delegate of the Registrar of Trade Marks (the "primary appeal"), and (b) in the Full Court proceedings (the application for leave to appeal and the later appeal to the Full Court). Lodestar had made two offers to compromise: 10 June 2014 (in the primary appeal) and 22 July 2015 (in the Full Court proceedings). The 10 June 2014 offer was a "walk-away" offer: consent orders that the appeal be dismissed and that there be no order as to costs (each party bears its own costs) (see [7]). The 22 July 2015 offer proposed orders that effectively track what the Full Court later ordered (granting leave, allowing the appeal, dismissing the appeal from the delegate), coupled with a costs proposal (respondent to pay certain costs, including 80% of party/party costs of the primary appeal and other limited concessions), and a non-essential concession about use of the name "Wild Geese" (see [10]). Lodestar sought indemnity costs after the Full Court ultimately allowed the appeal and ordered costs in Lodestar's favour (see [1], [11]).
The Full Court (Allsop CJ, Greenwood, Besanko, Nicholas and Katzmann JJ) refused Lodestar's application to vary its orders to grant indemnity costs. The Court held that Campari America's refusal of the 10 June 2014 offer was not unreasonable in light of a serious legal issue raised by Yau and related authorities and the limited degree of compromise. For the 22 July 2015 offer, although Lodestar achieved a result more favourable than its offer, the Court exercised its discretion under r 1.35 to decline to order indemnity costs, again having regard to the uncertainty created by the decision in Yau, the importance of the legal point, and the limited extent of the compromise in the offer (see [13]-[20], [21]-[28]). Lodestar's application was dismissed and Lodestar was ordered to pay the respondent's costs of the variation application (see Orders and [29]).
Two separate provisions of the Federal Court Rules governed the analysis: r 25.14(2) for respondent-made offers (primary appeal), and r 25.14(3) for applicant-made offers (Full Court proceedings). The text of those subrules creates a presumptive entitlement to costs on an indemnity basis after the second business day where an offer is unreasonably refused and the relevant party either fails (r 25.14(2)) or later obtains a better result than the offer (r 25.14(3)) (see [13], [22]).
For the primary appeal (r 25.14(2)), the Court focused on whether Campari America's refusal of Lodestar's "walk-away" offer was unreasonable. The Court accepted Lodestar's offer involved an element of compromise (it was foregoing its costs of the primary appeal), but found the compromise not substantial in context (see [15], [19]). Critically, the Court noted there was a serious legal question raised by Yau about an important point of law under the Trade Marks Act 1995 (Cth), and Campari reasonably relied on that legal position. That uncertainty meant it was not unreasonable for Campari to pursue the appeal despite the "walk-away" offer (see [17]-[19]). On that basis the Full Court declined to award indemnity costs on the basis of the primary appeal offer (see [20]).
For the Full Court offer (r 25.14(3)), the rule creates a rebuttable presumption that an applicant who obtains a better result than its offer is entitled to indemnity costs. The Court recognised that but also pointed to the Court's power under r 1.35 to make orders inconsistent with the Rules (see [23], [26]). Applying that discretion, the Court again highlighted the uncertainty surrounding Yau, the importance of the issue, and that Lodestar's offer did not involve a substantial compromise. For those reasons the Court concluded it was appropriate to decline to depart from its prior orders to award indemnity costs even though the applicant had obtained a judgment more favourable than the offer (see [26]-[27]).
The outcome was shaped by the dual themes of legal uncertainty on an important statutory point (Yau's decision) and the limited degree of compromise in Lodestar's offers, the combined weight of those factors made refusal reasonable in the one case and justified the Court's exercise of discretion in the other (see [19], [27]).
Before this decision, the Rules provided clear presumptions in favour of indemnity costs in the two scenarios (respondent offers where applicant unreasonably refuses; applicant offers where applicant obtains a more favourable judgment) but recognised the Court retained a general discretion to depart from that outcome. The Full Court's decision reinforces that the presumptions in r 25.14 are not absolute; where there is genuine legal uncertainty on an important point and the offer involves only a limited compromise, the Court may find it reasonable to refuse an offer or may exercise its discretion to decline indemnity costs despite the mechanical operation of r 25.14(3). The decision applies the textual rules in r 25.14(2)-(3) but emphasises the contextual assessment of reasonableness and the careful exercise of r 1.35 power to depart from the Rules (see [13], [22]-[27]).
Practitioners should take from this that the existence of a serious legal issue that justifiably motivates pursuit of litigation can outweigh otherwise apparently attractive offers that are limited in compromise. Conversely, a substantial compromise will more readily support an adverse costs consequence where an offer is unreasonably rejected.
Paragraph 13 (r 25.14(2) text): The Court repeated the rule that if a respondent makes an offer and an applicant unreasonably refuses and the applicant's case is dismissed, then indemnity costs follow after the second business day. Plain English: the rule sets up a penalty for rejecting reasonable offers made by respondents, but only if refusal is unreasonable and the applicant loses.
Paragraph 19: "It is sufficient to say that there was a serious issue raised by Yau about an important point of law under the Trade Marks Act 1995 (Cth)." Plain English: there was a real, unsettled legal question in prior authority which made the appeal worth pursuing; that uncertainty matters when deciding whether refusal of an offer was unreasonable.
Paragraph 27: "Nevertheless, we think that this is such a case bearing in mind the uncertainty surrounding the decision in Yau, the importance of the point, and the degree or extent of the compromise offered." Plain English: even though Lodestar got a better result than its offer, the Court decided not to award indemnity costs because the law was uncertain, the issue was important, and Lodestar's offer did not give up much.
Paragraph 22 (r 25.14(3) text): The rule gives an applicant who wins a better result than its offer a presumptive entitlement to indemnity costs. Plain English: winning more than you offered usually gets you indemnity costs, but it's not automatic if the Court exercises its discretion.
This judgment is instructive for cases where:
This decision itself is a Full Court reasons judgment dealing with application of r 25.14 and the proper exercise of discretion under r 1.35. It cites and applies prior authorities such as Barnes and Sagacious for the proposition that walk-away offers can be genuine compromises (see [17]); it also relies on the need for caution in departing from presumptive rules as discussed in Robinson v Kenny (No 2) and Bradken (see [26]-[27]). Future courts will treat this decision as authoritative on the point that the existence of a substantial legal question may justify refusal of an offer and justify exercise of the court's discretion against indemnity costs even where an applicant obtains a better result than its offer.
Practitioners should be prepared to address the legal merits (including unsettled authorities such as Yau in this matter) when advising on the reasonableness of accepting or refusing offers, and both offerors and offerees should quantify the degree of compromise clearly.
Conclusion Lodestar Anstalt v Campari America LLC (No 2) demonstrates that the presumptions in r 25.14(2)-(3) are significant but not absolute. The Full Court emphasised the importance of context: the presence of a serious unsettled legal issue and the degree of compromise in an offer are pivotal to whether indemnity costs follow. Practitioners must therefore combine careful assessment of legal risk, explicit quantification of compromise in offers, and strategic consideration of whether the legal question justifies pursuing or refusing settlement proposals given the costs consequences signalled by r 25.14.
THE COURT: 1 On 9 June 2015, Lodestar Anstalt ("Lodestar") made an application under s 195(2) of the Trade Marks Act 1995 (Cth) for leave to appeal from orders made by a judge of this Court. An order was subsequently made that the applicant's amended application for leave to appeal be heard concurrently with the appeal, should leave be granted. On 28 June 2016, this Court made the following orders: 1. The application for leave to appeal be granted. 2. The appeal be allowed. 3. The respondent pay the appellant's costs of the appeal. 4. Paragraph 1 of the orders made by the primary judge on 26 May 2015 and paragraphs 1, 2, 3 and 4 of the orders made by the primary judge on 12 June 2015 be set aside. 5. In lieu of the orders identified in paragraph 4, the appeal to this Court from the decision of the delegate of the Registrar of Trade Marks be dismissed with costs. (Lodestar Anstalt v Campari America LLC [2016] FCAFC 92). It will be seen that the orders in paragraph 3 and 5 deal with costs. The reasons which follow deal with an application by Lodestar to vary those orders so as to provide for indemnity costs. The reasons should be read with the principal reasons of the Court. As with the principal reasons it is not necessary for us to detail the different respondents at relevant times. We will refer to the respondent as Campari America. 2 Lodestar has applied for a variation of the orders made by this Court in relation to the application for leave to appeal and appeal to this Court (paragraph 3) and the costs of the appeal to a judge of this Court from the decision of the delegate of the Registrar of Trade Marks (paragraph 5). We will refer to the latter as the primary appeal. 3 In lieu of paragraph 3, Lodestar seeks the following order: The Respondent pay the Appellant's costs of the appeal on the following bases:- (a) before 11.00am on 27 July 2015 - on the party and party basis; and (b) from 11.00am on 27 July 2015 - on the indemnity basis. 4 In lieu of paragraph 5, Lodestar seeks the following order: (a) The appeal to this Court in the action NSD 2340/2013 from the decision of the Delegate of the Registrar of Trade Marks be dismissed; and (b) The Respondent pay the Appellant's costs of action NSD 2340/2013 assessed on the following bases:- (i) before 11.00am on 13 June 2014 - on the party and party basis; and (ii) from 11.00am on 13 June 2014 - on the indemnity basis. 5 Lodestar filed an affidavit of its solicitor (Mr Kenneth Philp) in support of its application. The affidavit and other evidence before this Court establishes the following matters which we set out in chronological order. 6 First, the delegate of the Registrar of Trade Marks made his decision on 25 October 2013. He held that the applications for the removal of the relevant trade marks under s 92(4)(b) of the Trade Marks Act 1995 (Cth) had been successful. On 15 November 2013, the registered owner of the trade marks (then Skyy Spirits LLC) filed an appeal with this Court against the decision. 7 Secondly, on 10 June 2014, Lodestar, then the respondent to the appeal, served on the appellant a Notice of offer to compromise pursuant to Part 25 of the Federal Court Rules 2011 (Cth). The offer was to the effect that the parties consent to orders that the appeal be dismissed and that there be no order as to costs. The offer involved a proposal that each party would bear their costs of and incidental to the appeal. The offer of compromise was expressed to be open to be accepted for 14 days after service of the offer. It is this offer which forms the basis of Lodestar's application for a variation of the order in paragraph 5. 8 Thirdly, the primary judge heard the appeal by the registered owner of the relevant trade marks on 1 and 2 December 2014 and handed down his judgment on 26 May 2015. His Honour made orders on 26 May 2015 and on 12 June 2015. His Honour allowed the appeal and made the other orders summarised in the principal reasons (at [23]). 9 Fourthly, as we have said, on 9 June 2016 Lodestar applied for leave to appeal from the orders made by the primary judge. 10 Fifthly, on 22 July 2015, Lodestar served a Notice of offer to compromise in the application for leave to appeal proceeding. The offer was to the effect that the respondent consent to orders that the application for leave to appeal to this Court be granted, that the appeal be allowed, and that an order be substituted that the appeal to this Court from the decision of the delegate of the Registrar of Trade Marks be dismissed. The offer in relation to costs was as follows. The respondent would pay the applicant's costs of the proceedings before the delegate and 80% of the applicant's party and party costs in the primary appeal. There would be no order as to the costs of the applicant's application for leave to appeal and, if granted, appeal. As an additional, but non-essential part of the offer, the applicant offered to allow the respondent to use the name "Wild Geese" on certain terms and conditions. It is not necessary for us to set out the details of the terms and conditions. It is this offer which forms the basis of Lodestar's application for a variation of the order in paragraph 3. 11 Finally, as we have said, this Court handed down its decision and made orders on 28 June 2016. 12 Lodestar, through Mr Philp, has put forward evidence of the costs which would have been saved by Campari America had it accepted the offer made on 10 June 2014 and had it accepted the offer made on 22 July 2015.
The costs of the primary appeal 13 Lodestar was a respondent to the primary appeal and the relevant rule of Court which applies in the case of its offer dated 10 June 2015 is r 25.14(2). That subrule is in the following terms: If an offer is made by a respondent and an applicant unreasonably fails to accept the offer and the applicant's proceeding is dismissed, the respondent is entitled to an order that the applicant pay the respondent's costs: (a) before 11.00 am on the second business day after the offer was served - on a party and party basis; and (b) after the time mentioned in paragraph (a) - on an indemnity basis. 14 Lodestar submits that Campari America unreasonably failed to accept its offer dated 10 June 2014 in circumstances where, as a result of this Court's orders, the primary appeal has been dismissed. It submits that by operation of r 25.14(2) it is entitled to its costs on an indemnity basis after 11:00 am on 13 June 2014. 15 The element of compromise in Lodestar's offer dated 10 June 2014 was the foregoing of its costs of the primary appeal. The question posed by the subrule is whether it was unreasonable for Campari America not to accept the offer. 16 Mr Philp has given evidence which is not contradicted by Campari America that Lodestar's costs in relation to the primary appeal before 13 June 2014 were $19,054.68 and that he estimates that of that figure an amount of approximately $14,737.21 would be recoverable as party and party costs. As at the date of the offer, that is the extent to which it was more favourable to Campari America than the ultimate result. 17 Lodestar submits that the refusal of Campari America to accept the offer was unreasonable. It submits that a "walk-away" offer on costs can constitute a genuine offer of compromise and in that respect it refers to Barnes v Forty-Two International Pty Ltd (No. 2) [2015] FCAFC 19 and Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53. It points out that at the time of the offer Campari America had all the information it needed to make an informed decision about the prospect of its appeal succeeding. Both sides had filed their evidence and Campari America had the benefit of advice from solicitors and counsel experienced in the field. 18 In response Campari America submits that its refusal of the offer was not unreasonable in all the circumstances. The two particular circumstances upon which it relies are as follows. First, it submits that it reasonably took the view that the decision in Yau's Entertainment Pty Ltd v Asia Television Ltd [2002] FCAFC 78; (2002) 54 IPR 1 ("Yau") applied to the circumstances of its appeal and that that would lead to the success of its appeal. It points to the fact that this is in fact what happened before the matter reached this Court. It also points to the fact that (on its argument) Yau did not stand alone and that a similar approach to the interpretation it advanced was taken by Sundberg J in Global Brand Marketing Inc v YD Pty Ltd [2008] FCA 605; (2008) 76 IPR 161. Secondly, it submits that the degree or extent of the compromise offered is a relevant factor in terms of assessing the reasonableness of an applicant's conduct in refusing to accept an offer and that the offer in this case did not involve a substantial compromise. 19 We will not repeat what we said about Yau in our earlier reasons (at [1] per Allsop CJ; at [3] per Greenwood J; at [85]-[94] per Besanko J; at [112] per Nicholas J; at [165] per Katzmann J). It is sufficient to say that there was a serious issue raised by Yau about an important point of law under the Trade Marks Act 1995 (Cth). We agree with the submission of Campari America that although Lodestar's offer involved an element of compromise, it was not a substantial compromise. In saying that, we acknowledge that it is difficult to see what else Lodestar could have offered in the circumstances. Nevertheless, we think that both matters, but particularly the first, are such that we do not think that Campari America's refusal to accept the offer was unreasonable. 20 We would not vary the fifth order made by this Court on 28 June 2016. The Costs of the application for leave to appeal and the appeal to this Court 21 In the case of Lodestar's offer dated 22 July 2015, Lodestar made the offer in its capacity as applicant and the relevant subrule is r 25.14(3). 22 That subrule provides as follows: If an offer is made by an applicant and not accepted by a respondent, and the applicant obtains a judgment that is more favourable than the terms of the offer, the applicant is entitled to an order that the respondent pay the applicant's costs: (a) before 11.00 am on the second business day after the offer was served - on a party and party basis; and (b) after the time mentioned in paragraph (a) - on an indemnity basis. 23 In the case of r 25.13(3) it is not necessary for the Court to conclude that the respondent's refusal to accept the offer was unreasonable. If the applicant achieves a judgment more favourable than the offer of compromise, then there is a rebuttable presumption in favour of indemnity costs. The Court is able to exercise the power in r 1.35 to make an order which is inconsistent with the rules and the Full Court in Kooee Communications Pty Ltd v Primus Telecommunications (No. 2) [2011] FCAFC 141 at [14] considered that this was equivalent to the "unless the Court otherwise orders" provision in the previous Rules. 24 The principal element of compromise in the offer compared with the judgment obtained again relates to costs. We say that because we do not think that it is possible to compare the offer relating to the use of the name with what Campari America and WGW might or might not now be able to do under the general law. 25 Lodestar offered to accept 80% of its party and party costs of the primary appeal and to forgo any order for costs in its favour on the application for leave to appeal and appeal. Mr Philp's estimate of the "costs savings" to Campari America in relation to the primary appeal had Lodestar's offer been accepted by Campari America is approximately $14,500. His estimate of the costs savings in relation to the applications for leave to appeal and appeal is less precise. As we understand it, Lodestar's costs at the time of the offer in terms of its obligation to its solicitors were in the region of $11,000. 26 Notwithstanding the principles and approach discussed in Bradken Limited v Norcast S.ár.L [2013] FCAFC 123; 219 FCR 101, we do not think that, in the circumstances here, there is anything in Campari America's submission that in some way its conduct in refusing to accept the offer was justified because this Court would not have made the consent orders without submissions identifying error in the primary judge's approach. That was not a matter raised at the time and in any event we cannot see how that would have been an insurmountable barrier to the resolution of the matter. 27 We think that in the result Campari America relies on the same two matters it relied on to avoid an order for indemnity costs in relation to the primary appeal. Its position is stronger because at the time of the second offer it had the primary judge's decision in its favour. We recognise that the power to make an order inconsistent with the Rules should be exercised for proper reasons which will generally only arise in exceptional circumstances (Robinson v Kenny (No 2) [2015] FCA 2 and the cases cited therein). Nevertheless, we think that this is such a case bearing in mind the uncertainty surrounding the decision in Yau, the importance of the point, and the degree or extent of the compromise offered. 28 We would not vary the third order made by this Court on 28 June 2016. 29 Lodestar's application to vary the orders made by this Court on 28 June 2016 should be dismissed and Lodestar should pay the costs of the application. I certify that the preceding twenty nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Chief Justice Allsop, the Honourable Justices Greenwood, Besanko, Nicholas and Katzmann.
Lodestar Anstalt
Campari America LLC
Application by Lodestar to vary the Full Court's orders to obtain indemnity costs dismissed; Lodestar ordered to pay the respondent's costs of the application (orders at headnote and [29]).