Moroccanoil Israel Ltd v Aldi Foods Pty Ltd

Federal Court of Australia|2019-04-05|Before: Mr J, Katzmann J

Counsel for the Applicant: Mr R Cobden SC with Mr J S Cooke

Counsel for the Respondents: Mr C Dimitriadis SC with Mr A Fox

Solicitor for the Respondents: Norton Rose Fulbright

AND: ALDI FOODS PTY LTD (ACN 086 210 139) (IN ITS CAPACITY AS GENERAL PARTNER OF ALDI STORES (A LIMITED PARTNERSHIP)) First Respondent/First Cross-Claimant

ALDI PTY LTD (ACN 086 493 950) (IN ITS CAPACITY AS LIMITED PARTNER OF ALDI STORES (A LIMITED PARTNERSHIP)) Second Respondent/Second Cross-Claimant

JUDGE: KATZMANN J DATE OF ORDER: 5 APRIL 2019

The applicant pay 75% of the respondents' costs on the ordinary basis.
Pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth), the costs be paid in a lump sum.
The cross-claimants pay 90% of the cross-respondent's costs.
Pursuant to r 40.02(b) of the Rules, the costs be paid in a lump sum.
The respondents' application for additional security for costs be refused. THE COURT DIRECTS THAT:
Pursuant to r 1.37 of the Rules, the Registrar: (a) determine the amount in such a manner as he or she sees fit, including, if considered appropriate, on the papers; and (b) within 28 days of the making of the determination, make orders for the payment of the amount so determined. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BETWEEN: MOROCCANOIL ISRAEL LTD Applicant

AND: ALDI FOODS PTY LTD (ACN 086 210 139) Respondent

JUDGE: KATZMANN J DATE OF ORDER: 5 APRIL 2019

The applicant pay the respondent's costs on the ordinary basis.
Pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth), the costs be paid in a lump sum.
The respondent's application for additional security for costs be refused. THE COURT DIRECTS THAT:
Pursuant to r 1.37 of the Rules, the Registrar: (a) determine the amount in such a manner as he or she sees fit, including, if considered appropriate, on the papers; and (b) within 28 days of the making of the determination, make orders for the payment of the amount so determined. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BETWEEN: ALDI FOODS PTY LTD (ACN 086 210 139) Appellant AND: MOROCCANOIL ISRAEL LTD Respondent

JUDGE: KATZMANN J DATE OF ORDER: 5 APRIL 2019

The respondent pay the appellant's costs on the ordinary basis.
Pursuant to r 40.02(b) of the Federal Court Rules 2011, the costs be paid in a lump sum.
If the parties cannot agree within 28 days of these orders on the amount of the lump sum, the matter be referred to a Registrar of the Court to fix the amount. THE COURT DIRECTS THAT:

Pursuant to r 1.37 of the Rules, the Registrar: (a) determine the amount in such a manner as he or she sees fit, including, if considered appropriate, on the papers; and (b) within 28 days of the making of the determination, make orders for the payment of the amount so determined. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BETWEEN: ALDI FOODS PTY LTD (ACN 086 210 139) (in its capacity as general partner of Aldi Stores (A Limited Partnership)) First Appellant ALDI PTY LTD (ACN 086 493 950) (in its capacity as limited partner of Aldi Stores (A Limited Partnership)) Second Appellant AND: MOROCCANOIL ISRAEL LTD Respondent

JUDGE: KATZMANN J DATE OF ORDER: 5 APRIL 2019

There be no order as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT 1 This case involved two proceedings which were heard together. The first (NSD 613 of 2015) was a claim that Aldi Foods Pty Ltd had infringed MIL's registered trade marks, engaged in the tort of passing-off, and contravened the Australian Consumer Law (ACL) by engaging in misleading or deceptive conduct or conduct likely to mislead or deceive (the infringement and consumer action). The second (NSD 1297 of 2015) was an appeal from a decision of a delegate of the Registrar of Trade Marks in which the delegate declined an application by Moroccanoil Israel Ltd (MIL) to register the word mark moroccanoil (the trade mark appeal). 2 On 24 July 2017 I made orders in MIL's favour allowing its trade mark appeal with costs, the effect of which was to enable the word mark to proceed to registration. I also made findings in MIL's favour with respect to one of its misleading or deceptive conduct claims and part of a second, and on a cross-claim brought by Aldi for rectification of the Register of Trade Marks. At the same time, however, I made findings against MIL on its allegations of trade mark infringement and passing off, and dismissed the rest of its misleading or deceptive conduct claims. On 31 August 2017 I made certain declarations and orders for injunctive relief in favour of MIL and invited the parties to file submissions on costs: Moroccanoil Israel Ltd v Aldi Foods Pty Ltd [2017] FCA 823. On 29 November 2017 I ordered that Aldi pay 35% of MIL's costs in the infringement and consumer action, declined an application by Aldi to vary the costs order made in the trade mark appeal, and ordered that the costs of both proceedings be paid in a lump sum, to be determined, in default of agreement, by a Registrar of the Court: Moroccanoil Israel Ltd v Aldi Foods Pty Ltd (No 2) [2017] FCA 1393. 3 Aldi successfully appealed from the orders and judgment in the trade mark appeal and was partially successful in an appeal from some of the orders and part of the judgment in the infringement and consumer action: Aldi Foods Pty Ltd v Moroccanoil Israel Ltd [2018] FCAFC 93; (2018) 358 ALR 683. At the time the Full Court delivered its judgment, it ordered the parties to provide short minutes of order giving effect to its reasons. The parties were unable to agree on the orders, however, even after a brief extension was granted. At this late stage, Aldi applied for indemnity costs in both Full Court appeals and, after a certain point in time, of the first instance proceedings on the basis of a Calderbank letter dated 19 April 2016 (the Calderbank offer). 4 The Full Court made orders on 4 September 2018 allowing the appeal in the trade mark appeal and setting aside my orders, including my costs order, and allowing the appeal in the infringement and consumer action in part, setting aside some of my declarations, one of my orders and all of my costs orders. But the Full Court considered that it was not possible to assess the reasonableness of Aldi's Calderbank offer and so remitted the determination of costs of both the appeals and the first instance proceedings to me: Aldi Foods Pty Ltd v Moroccanoil Israel Ltd (No 2) [2018] FCAFC 147. 5 This judgment should be read with the reasons in Moroccanoil Israel Ltd v Aldi Foods Pty Ltd, Moroccanoil Israel Ltd v Aldi Foods Pty Ltd (No 2), Aldi Foods Pty Ltd v Moroccanoil Israel Ltd, and Aldi Foods Pty Ltd v Moroccanoil Israel Ltd (No 2).

The nature of the present dispute 6 There is no dispute that MIL should pay Aldi's costs of the trade mark appeal both at first instance and in the Full Court. The present dispute concerns the basis upon which those costs should be ordered, and the costs of the infringement and consumer action at first instance and on appeal. 7 In order to understand the dispute, it is necessary to refer at greater length to the claims that were brought by MIL and by Aldi at first instance, Aldi's offer of settlement, and the scope of the Full Court appeals.

The first instance proceedings 8 As I have said, there were two proceedings. Given the limited issue affecting the trade mark appeal, nothing more need be said about it at this stage. The second was the infringement and consumer action in which Aldi filed its cross-claim. 9 The infringement action related to Aldi's use of the sign moroccan argan oil on and in relation to a range of hair care products. MIL alleged that the sign, as used, was deceptively similar to its two registered trade marks, which, though stylised, incorporated or featured the word moroccanoil. I was not persuaded that it was. 10 The consumer action involved a passing-off claim and three separate causes of action under the ACL in which MIL claimed that Aldi had engaged in misleading or deceptive conduct 11 The first ACL claim and the passing-off claim were based on the same facts. They related to the trade dress or get-up of the moroccan argan oil range, which MIL alleged, amongst other things, was so similar to the get-up of MIL's moroccanoil hair care products that it could lead the relevant class of consumers into the erroneous belief that the products were, or were related to, MIL's products, and/or that they were supplied and promoted by MIL or under a licence with MIL or with MIL's approval or sponsorship. In this claim MIL was also unsuccessful. 12 The second ACL claim concerned the use of the word "naturals" on the packaging of Aldi's moroccan argan oil range, which MIL alleged was misleading or deceptive or likely to mislead or deceive since, water apart, none of the products was made wholly or substantially from natural ingredients. I upheld MIL's claim with respect to four of the 11 products. 13 The third ACL claim related to the performance benefits claimed for the products. I held that Aldi had engaged in conduct which was misleading or deceptive or likely to mislead or deceive because Aldi had represented that argan oil made a material contribution to those benefits when the amount of argan oil used in the manufacturing process was so small that it could not make such a contribution. 14 In the cross-claim Aldi sought the cancellation of the registration of MIL's composite marks on the ground that they should have been rejected for registration under s 41(2) of the Trade Marks Act 1995 (Cth) because they were not capable of distinguishing MIL's goods from the goods of another person. In the alternative, Aldi applied for the marks to be removed from the Register for non-use under s 92 of the Act with respect to certain products in the classes in which they were registered. Aldi failed with respect to its principal claim but had a measure of success on the non-use claim.

The appeals 15 The appeal from the orders and judgment in the trade mark appeal was successful. In the other appeal, which concerned the second and third ACL claims and which the Full Court referred to as the Main Appeal, Aldi failed to persuade the Court that my findings and orders concerning the performance benefits claims were wrong but did persuade the Full Court that the use of the word "naturals" on its packaging was not a representation that the products were made either wholly or substantially from natural ingredients and that, for this reason, Aldi did not engage in conduct that was misleading or deceptive or likely to mislead or deceive. 16 The principal reason the Full Court gave for remitting the question of costs to me was that it could not determine the reasonableness of Aldi's Calderbank offer until I had determined the amount of damages to which MIL was entitled for Aldi's contraventions of the ACL with respect to the performance benefits claims. Late last year, however, MIL informed the Court that it no longer pressed its claim for damages.

The orders sought by the parties 17 In relation to the first instance proceedings, Aldi applied for an order that MIL pay its costs of the trade mark appeal and of the infringement and consumer action on an indemnity basis from 20 April 2016 and otherwise on the ordinary (party and party) basis, save in respect of the third ACL claim (the performance benefits claim). 18 In relation to the Full Court appeals, Aldi applied for an order that MIL pay its costs on an indemnity basis, save in relation to the third ACL claim. 19 Aldi also sought an order that MIL provide additional security for costs. 20 MIL opposed the claims for indemnity costs and additional security for costs. It proposed that orders be made requiring it to pay Aldi's costs on the trade mark appeal both at first instance and on appeal but on the ordinary basis, that Aldi pay 35% of MIL's costs of the infringement and consumer action, and that there be no order for costs on the Full Court appeal arising from the orders made in that action. 21 Both parties sought an order pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth) (Rules) that the costs of the trial in both proceedings and of the Full Court appeals be paid in lump sums and, if the parties were unable to agree as to the amounts, asked that the Court direct that the matter be referred to a Registrar of the Court to fix the amounts. 22 Affidavits were filed in support of the parties' respective positions. Aldi relied on an affidavit sworn on 21 December 2018 by Jacqueline Ruth O'Brien, a partner of Norton Rose Fulbright Australia (Norton Rose) and the solicitor with the care and conduct of the proceeding for Aldi. MIL relied on an affidavit affirmed on 8 February 2019 by Julie Anne Cheeseman, a solicitor employed by Ashurst Australia (Ashurst) which has acted throughout for MIL.

Aldi's settlement offer 23 Aldi's claim for indemnity costs relies on the Calderbank offer. In summary, it was an offer to settle both proceedings without admissions on the following terms: (1) that Aldi be restrained from using MIL's two registered trade marks or any mark substantially identical or deceptively similar to these trade marks, including the sign moroccan argan oil, on goods for which MIL's two trade marks were registered; (2) that Aldi consent to MIL's appeal from the decision of the Registrar as to the registration of the moroccanoil word mark; (3) that Aldi pay MIL $150,000; (4) that the proceedings be dismissed; and (5) that the parties bear their own costs. 24 In each proceeding Aldi expressly reserved its rights to challenge the validity of MIL's trade marks in the future in the event of another suit by MIL for trade mark infringement. 25 The offer was left open until 5pm on 29 April 2016 at which time it was expressed to expire. Aldi made it clear that no extension of time would be granted and told MIL's solicitors that MIL should assume that no further offers would be made. MIL rejected it on that day and made no counter-offer. True to its word, Aldi never revived its offer or made a further one. 26 Aldi relies for context on an earlier offer it had made on 2 March 2016. The offer was accompanied by a four page letter in which Aldi canvassed the perceived weaknesses of MIL's case and argued that further expenditure on the case was a waste of resources for all involved. With respect to the allegations of trade mark infringement, passing off and related claims, most of its arguments were successful at the trial. Since the Full Court's judgment, the same can now be said of its argument about the second ACL claim and the trade mark appeal. In the letter of 2 March 2016, Aldi also contended that none of the conduct with which the second and third ACL claims were concerned had caused any conceivable loss or damage to MIL or prejudiced any of its commercial interests and that these aspects of the claim were "an effort by [MIL] to enlarge and complicate the proceeding". The points Aldi made in the letter with respect to the cross-claim were no different from the points it had made about the trade mark appeal. Yet, the substance of the cross-claim was very different. In effect, the letter advanced no reason why the cross-claim would succeed. 27 There was no significant difference between the offers made on 2 March and 19 April 2016. In their letter of 19 April, Aldi rightly characterised the differences between the two offers as minor. The only one worth mentioning is that, instead of merely agreeing not to oppose the trade mark appeal, which was a term of the first offer, it was a term of the second offer that Aldi would agree to orders allowing the appeal, setting aside the Registrar's decision, and allowing the word mark to proceed to registration.

The costs of the first instance proceedings 28 The first question is whether an order for indemnity costs should be made. 29 The Court's discretion to award costs is undoubtedly broad. Its source is s 43 of the Federal Court of Australia Act 1976 (Cth) (FCA Act). I summarised some of the relevant principles in Moroccanoil Israel Ltd v Aldi Foods Pty Ltd (No 2). Neither side suggested that there was any error in that summary. But at that time, Aldi relied only on an offer of compromise purportedly made under the Rules. 30 Having regard to what I said in Moroccanoil Israel Ltd v Aldi Foods Pty Ltd (No 2), it is sufficient to make the following observations. 31 The ordinary principle is that costs follow the event. In other words, the Court will order the unsuccessful party to pay the costs of the successful party. The ordinary basis upon which costs are ordered is the party and party basis, which falls short of a complete indemnity. Having regard to the breadth of the Court's discretion, however, indemnity costs may be awarded "where there is some special or unusual feature in the case" which justifies the exercise of the discretion in this way: Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151 at 152 (Black CJ). 32 While there is a presumption that a party who betters an offer of compromise made under the rules of court will recover indemnity costs, there is no such presumption where an offer is not made under the rules or does not conform to the rules: CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Ltd [2008] FCAFC 173; (2008) 15 ANZ Insurance Cases ¶61-785 at [75] (per curiam). 33 Aldi submitted that, in general, an unreasonable failure to accept a Calderbank offer involving a real element of compromise entitles the offeror to an order for its costs on an indemnity basis. That proposition was said to have been drawn from the reasons of Greenwood J in Perry v Comcare (2006) 150 FCR 319 at [57], but it overstates what his Honour said in that case. 34 The relevant principles are neatly encapsulated in the judgment of Sundberg and Emmett JJ in Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 at [7]: The mere making of an offer of compromise and its non-acceptance, followed by a result more favourable to the offeror, does not automatically lead to an order for payment of costs on an indemnity basis: John S Hayes & Associates Pty Ltd v Kimberley-Clark Australia Pty Ltd (1994) 52 FCR 201 at 204-206; MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236 at 239. The applicant for a more generous award must show that the rejection of the offer was imprudent or plainly unreasonable: NMFM Property Pty Ltd v Citibank Ltd (No 2) ("NMFM") (2001) 109 FCR 77 at 98; Australian Competition & Consumer Commission v Australian Safeway Stores Pty Ltd (No 3) [2002] FCA 1294 at [28]; Sydney Markets Ltd v Sydney Flower Market Pty Ltd [2002] FCA 283 at [16]-[17] and [23]. 35 Aldi submitted that it was unreasonable for MIL not to accept the Calderbank offer because it would have given MIL a substantial commercial victory, which it has not achieved following the Full Court appeals. Not only would Aldi not have opposed the trade mark appeal, it would have been restrained from using MIL's trade marks and Aldi's challenge to the registration of those trade marks would have been abandoned. Aldi submitted that this would have given MIL "the heart of its case (in both proceedings)". It argued that this submission is reinforced by the fact that MIL did not press for damages in the third ACL claim. 36 There is no doubt that the Calderbank offer involved a genuine compromise on Aldi's part. I also accept that, at the time of the Calderbank offer, there was no reason why MIL could not adequately assess the reasonableness of the offer. Before the offer was made, the pleadings had closed and most of the evidence had been filed. After the offer, MIL made minor amendments to its statement of claim, Aldi made some amendments to its cross-claim, and both parties filed their evidence in reply, which included both lay and expert evidence. Be that as it may, MIL would have been in a good position to assess its prospects of success. 37 In hindsight, Aldi's offer was a generous one. It was also clever because it targeted what Aldi perceived, for good reason, was MIL's predominant concern - Aldi's sale of products using a similar get-up to the MIL get-up and a similar name. It would also have allowed the word mark to proceed to registration. It would therefore have given MIL success in two of the three claims on which it ultimately failed. 38 But the question of whether it was imprudent or unreasonable not to accept the offer is not to be determined on the basis of hindsight, but by reference to the circumstances at the time the offer was made: CGU Insurance Ltd at [75]; Anchorage Capital Partners Pty Limited v ACPA Pty Ltd (No 2) [2018] FCAFC 112 at [6] (per curiam). 39 As things stood at the time the Calderbank offer was made, I am not persuaded that MIL's failure to accept Aldi's offer was imprudent or plainly unreasonable. 40 First, despite what was written in the 2 March 2016 letter, it may be inferred from the fact that Aldi had changed the names of its products from moroccan argan oil to argan oil of morocco and from the terms of the Calderbank offer that Aldi believed that MIL had a reasonable chance of succeeding in the infringement and first ACL claims, which went to the heart of MIL's dispute with Aldi. Had MIL succeeded, it is likely that it would have recovered much more than $150,000 plus costs. Ms Cheeseman estimated that, by the time the Calderbank offer had been made, MIL had incurred costs with respect to those parts of its case upon which it ultimately succeeded of about $563,000 and disbursements of over $130,000. While these amounts are likely to reflect a bias in MIL's favour, I accept that the costs MIL had incurred in relation to the matters upon which it succeeded would more probably than not have been significantly greater than the money Aldi offered. 41 Second, although, as I acknowledged in Moroccanoil Israel Ltd v Aldi Foods Pty Ltd (No 2) at [38], the history of the proceedings suggests that the second and third ACL claims were afterthoughts, neither was insubstantial. Yet, the Calderbank offer proceeded on the premise that MIL was indifferent to them. On the face of things it made no allowance for them. In particular, it failed to address the third ACL claim which was determined in MIL's favour. 42 Third, the offers in the two proceedings were conjoined. That is to say, MIL was unable to accept one without the other. Thus, even if it could be said that MIL was foolish not to accept the offer to settle the trade mark appeal, it did not have that option unless it also settled the infringement and consumer action on Aldi's terms. Aldi's proposed orders also carve out the third ACL claim from the indemnity costs order. That was a course MIL was unable to take at the time the offer was made. It was incapable of being accepted in part. 43 Fourth, the offer left the door open for future litigation. Paragraph 10 of the offer reads: It is to be noted (by way of acceptance of this term) in relation to this proposal in respect of the Proceeding that it is 'without admissions' by Aldi Foods and Aldi in respect of the claims made against them in each of the Further Amended Statement of Claim filed 28 August 2015 and the Second Further Amended Statement of Claim filed 1 March 2015, and that Aldi Foods and Aldi expressly reserve their rights to challenge the validity of the Moroccanoil Trade Marks in the event they are sued, in any later or subsequent proceedings, for infringement of the Moroccanoil Trade Marks. 44 Having gone as far as it had with the litigation at this point and facing the prospect of having to do it all again even if it accepted the offer, it was not imprudent or unreasonable for MIL to settle the case on such terms. 45 The next question, then, is who should pay whose costs and in what amount. 46 As I said earlier, the ordinary rule is that costs follow the event. The outcome of the litigation is "by far" the most important consideration: Oshlack v Richmond River Council (1998) 193 CLR 72 at [66] (McHugh J; with whom Brennan CJ agreed at [3]). In the present case, however, the identity of the successful party is open to debate. MIL was the moving party and it has had some, albeit limited, success. For the most part, however, it has been unsuccessful. 47 In Moroccanoil Israel Ltd v Aldi Foods Pty Ltd (No 2) at [65] I wrote: [A]s MIL was partially successful in the infringement and consumer action and obtained relief against Aldi, it should recover costs in that proceeding as well as the appeal, but that the costs of the former should be substantially reduced in recognition of the extent to which it failed. Taking all relevant matters into account, I conclude that, in addition to the costs of the appeal, Aldi should pay 35% of MIL's costs of the infringement and consumer action. Such an award gives due weight to the primacy in the litigation of the infringement and first ACL/passing off cases but recognises MIL's success in the other two ACL cases. It also recognises that a good deal of the costs incurred by MIL in successfully fending off the s 41 arm of Aldi's cross-claim will be picked up by the costs order in the appeal. In other words, I expect that the costs associated with the retainer of Professor Zuckerman and in responding to the evidence of Ms Butler, Aldi's lexicographer, would be recovered in the costs of the appeal. Since the reputation of the registered marks was relevant to the issues under s 41(5) and (6) of the Trade Marks Act, I also expect that MIL's concerns about the costs associated with proving that matter would be largely, if not entirely, alleviated by that costs order. 48 MIL maintains that, despite Aldi's partial success in the Main Appeal and complete success in the Full Court trade mark appeal, there should be no change to the orders I made at that time. The basis for this apparently extraordinary submission is that, with the success of the Full Court trade mark appeal, one of the premises for the earlier orders - that a good deal of MIL's costs in resisting Aldi's cross-claim for cancellation of the registered marks would be picked up by the costs order in the word mark appeal - no longer applies. According to Ms Cheeseman, two-thirds of Professor Zuckerman's fees were generated by issues arising on the cross-claim and only one-third by issues relevant to the trade mark appeal. 49 Aldi, on the other hand, maintained that it was "the substantial victor" and that, with a modest reduction to allow for MIL's success on the third ACL claim (it suggested 20%), MIL should pay its costs. 50 This argument rested on the notion that there were four distinct claims in the infringement and consumer action: the trade mark infringement claim; the first ACL claim; the second ACL claim; and the third ACL claim, and that MIL succeeded on the third ACL claim only. Aldi characterised the trade mark infringement claim and the first ACL claim as the heart or centrepiece of MIL's case. There is something to be said in favour of this characterisation. But it overlooks the importance of Aldi's cross-claim. The cross-claim put at risk the continued registration of MIL's two composite marks. It was no trivial matter and it was hard-fought. Aldi maintained, however, that it was brought defensively in response to the infringement claim - as if that mattered. 51 The mere fact that MIL had some measure of success does not mean that it should not be required to pay the costs of those matters upon which it failed. A power of the same breadth as the power in s 43 of the FCA Act has been held not to preclude a court from ordering a successful party to bear the costs of the unsuccessful party: see Oshlack at [40] (Gaudron and Gummow JJ). 52 In Moroccanoil Israel Ltd v Aldi Foods Pty Ltd (No 2) at [17] I referred to the observation by Bray CJ in Cretazzo v Lombardi (1975) 13 SASR 4 at 12 (cited with approval by Toohey J in Hughes v Western Australian Cricket Association Inc (1986) ATPR ¶40-748 at 48-136) that a successful party who has failed on some issues may not only be deprived of his own costs of those issues, but may also be ordered to pay his opponent's costs of them. I also referred to the statement by Finkelstein and Gordon JJ in Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [5] that fairness should dictate how the Court should exercise its discretion and that, "if an issue by issue approach will produce a result that is fairer than the traditional rule, it should be applied". 53 I toyed with this approach on the last occasion. For the reasons I gave then, however, I remain of the view that it is undesirable. 54 Having wrestled with the contentions of the parties and the various options, I have decided that the orders should reflect the fact that Aldi was the victor in three of the four claims MIL advanced against it and that MIL was the victor in Aldi's cross-claim against MIL. I therefore propose to order that MIL pay 75% of Aldi's costs of the infringement and consumer action (excluding the cross-claim), and that Aldi pay 90% of MIL's costs of defending the cross-claim. The 10% discount in the latter case is to reflect the extent of Aldi's partial success in the s 92 claim. I appreciate that this is a reversal of the course I took on the last occasion but the landscape has changed since then and the matter should be approached with fresh eyes. 55 To avoid any further argument, I should make it clear that MIL's recoverable costs in the cross-claim should include a proportion of Professor Zuckerman's fees and the costs associated with retaining him. 56 Aldi argued that Professor Zuckerman's evidence essentially dealt with the word mark and was at best of secondary relevance to the cross-claim. That is true. But that does not mean that some of the costs incurred by MIL in retaining him did not relate to the cross-claim. Professor Zuckerman was asked to consider the frequency with which each of the terms "Moroccanoil" and "Moroccan Oil" had been used in the English language in Australia at three points in time corresponding to the priority dates of the three marks. Only the evidence he gave about the position at the last date, which was the priority date for the word mark, was relevant to the trade mark appeal. The other evidence was adduced in response to Aldi's case on the cross-claim. In the cross-claim Aldi argued that a significant feature of both of MIL's composite marks was that they contained the words moroccan and oil joined in the single word moroccanoil, which was merely descriptive, and that the use of the letter M and the colour turquoise were not elements of either of the registered trade marks which gave the mark, considered as a whole, the requisite capacity to distinguish: see Moroccanoil Israel Ltd v Aldi Foods Pty Ltd at [241]-[242]. This approach to the cross-claim encouraged MIL to mount a case as part of its defence that at the priority dates for the two composite marks the word mark alone was inherently adapted to distinguish MIL's marks from the marks of other traders. 57 In these circumstances, I consider that Aldi should pay 60% of Professor Zuckerman's fees and the costs associated with his retainer. 58 I accept the parties' joint position that costs should be awarded in a lump sum and that the amount should be determined by a Registrar of the Court.

The costs of the appeals 59 In the appeals Aldi sought a special costs order also based on the Calderbank offer of 19 April 2016. 60 In Aldi Foods Pty Ltd v Moroccanoil Israel Pty (No 2) the Full Court expressed the opinion that, in the absence of an effective Calderbank offer, it would make no order as to costs in the Main Appeal and would order MIL to pay Aldi's costs in the trade mark appeal. For the reasons that follow, I am of the opinion that there has been no effective Calderbank offer. In those circumstances, I see no reason to differ from the Full Court's opinion. Indeed, notwithstanding an argument to the contrary, Aldi ultimately agreed that, in the event that I were to determine that the Calderbank offer was ineffective, these were the orders that should be made. 61 It is common ground that a Calderbank offer made during the trial continues to be relevant to the costs of an appeal and may justify a special costs order. Aldi cited Woodtree Pty Ltd v Zheng (No 2) [2008] FCA 2; (2008) 75 IPR 98 at [8] (Heerey J) to support their claim for indemnity costs on this basis. In case after case, however, the NSW Court of Appeal has been loath to award indemnity costs based on an offer to settle made before the trial: see, for example, Monie v Commonwealth (No 2) [2008] NSWCA 15 at [4] (Beazley JA, with whom Mason P agreed at [1]); Amaca Pty Ltd v Novek [2009] NSWCA 50; (2009) Aust Torts Reports ¶82-001 at [108] (Campbell JA, with whom Giles and Tobias JJA agreed at [1] and [2] respectively); Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [23] (Basten JA); McKeith v Royal Bank of Scotland Group PLC; Royal Bank of Scotland Group PLC v James (No 2) [2016] NSWCA 260 at [35] (Tobias AJA); and AV8 Air Charter Pty Ltd v Sydney Helicopters Pty Ltd (No 2) [2014] NSWCA 238 at [29] (Hoeben JA, with whom Barrett and Ward JJA agreed at [1] and [36] respectively). 62 In Amaca v Novek Campbell JA said that, while the making of an order for indemnity costs on the basis of a Calderbank letter is always a matter for the court's discretion, in the exercise of that discretion it is a matter of great importance whether a fresh offer was made to settle the appeal proceedings. In Miwa Basten JA said that an offer made before the trial and open for a limited time will rarely carry significant weight on an appeal. In McKeith Tobias AJA described the failure to renew an offer of compromise made at first instance for the purposes of an appeal as "a factor militating against an award of indemnity costs on appeal". Tobias AJA said that the failure to signify an intention to rely on a pre-trial offer of compromise was an important consideration. In AV8 Air Charter Hoeben JA said that a party to an appeal who wishes to rely on an offer of compromise or a Calderbank offer made before the trial should at the very least provide clear notice to the other party or parties of that intention. 63 Aldi's offer was expressed to expire soon after it was made. It was never renewed. No fresh offer was made on the appeal. No notice was given to MIL that Aldi intended to rely on the Calderbank offer for the purposes of the appeal. In these circumstances, MIL was entitled to think that it was unlikely to have any bearing on the costs of the appeal. 64 I therefore reject Aldi's application for indemnity costs of the appeals. Furthermore, given that in the Main Appeal Aldi lost one challenge and won the other, there is nothing obviously unfair about the order that MIL proposed and the Full Court suggested, the effect of which is that each party pays its own costs.

The application for additional security for costs 65 On 17 September 2015 I made the following order by consent: Without prejudice to [Aldi's] position to make such application as it may be advised to make concerning additional or further security, [MIL] provide security for [Aldi's] costs, to be held in the trust account of [MIL's] solicitors pending further order of the Court or by consent of [Aldi], in the following amounts and stages: (a) AUD$150,000.00 in respect of, and until the close of, pleadings (which the parties acknowledge has already been provided); and (b) in respect of subsequent stages, as may be agreed between the parties. 66 On 15 March 2016 I noted undertakings to the parties and the Court made by Privity Pty Ltd, an Australian company, to pay any and all adverse costs orders made against MIL in the two proceedings. Evidence in the first instance proceedings revealed that Privity is a company which was founded in 1975 and trades under the name "Haircare Australia". It is an importer, manufacturer and distributor of hairdressing supplies, beauty products, and salon equipment across Australia and New Zealand. As at December 2015 it had approximately 175 employees in this country. Since September 2009 it has been the exclusive importer and distributor of MIL's moroccanoil products in Australia. 67 Aldi did not file an interlocutory application seeking additional security. Nevertheless, Ms O'Brien's affidavit foreshadowed an application which was advanced in Aldi's submissions. The affidavit referred to correspondence sent by Norton Rose more than four months after the Full Court had published its reasons. 68 On 1 November 2018 Norton Rose wrote to Ashurst claiming that they were confident that Aldi would be awarded a significant amount in costs, including indemnity costs from 20 April 2016, and that this would make MIL liable to pay Aldi approximately $3.6 million. They expressed concern that the security was no longer sufficient to cover MIL's costs and to ensure that it was they asked Ashurst to provide them within seven days with "documents setting out Privity's current financial information including the current and signed versions of the most recent Directors Report, Compilation Report and Directors' Declaration". The request was made on the basis that a confidentiality undertaking would be given by Aldi's Buying Administration Director. 69 On the seventh day, Ashurst replied to this letter, arguing about the likely costs orders. They also asserted that MIL did not consider that Aldi would be entitled to any additional security at that late stage and that they were therefore instructed that MIL did not agree to provide them with Privity's financial information. Norton Rose renewed their request for the documents on 12 November 2018. MIL refused to budge. Aldi submitted that the Court should infer that such evidence would not have assisted MIL. 70 Aldi's written submissions on this question were brief and, apart from referring to the source and terms of the Court's power, nothing else of substance was put during oral argument. It is convenient to reproduce the written submissions in full: 21. Security for costs: To date MIL has paid $150,000 into trust as security for costs, and has procured an undertaking from a third party, Privity Pty Ltd (Privity), to pay any adverse costs orders made against it.24 It is not in dispute that Aldi is entitled an award of costs in its favour at least on the Trade Mark Claim and the Trade Mark Appeal, and irrespective of any effect of the Aldi Offer. Aldi estimates that its recoverable costs would be about $3,600,000 if its Proposed Orders are made, and about $412,000 if MIL's orders are made. Those amounts clearly exceed the security paid by MIL. 22. There is no evidence of the value of the undertaking given by Privity. Aldi requested such information, which MIL declined to provide. It can be inferred that such evidence would not have assisted MIL. MIL ought provide further security for costs. 71 It is true, as Aldi argued, that the Court's discretion to order security for costs is broad. Section 56 of the FCA Act, upon which Aldi relied, provides that: (1) The Court or a Judge may order an applicant in a proceeding in the Court, or an appellant in an appeal under Division 2 of Part III, to give security for the payment of costs that may be awarded against him or her. (2) The security shall be of such amount, and given at such time and in such manner and form, as the Court or Judge directs. (3) The Court or a Judge may reduce or increase the amount of security ordered to be given and may vary the time at which, or manner or form in which, the security is to be given. (4) If security, or further security, is not given in accordance with an order under this section, the Court or a Judge may order that the proceeding or appeal be dismissed. (5) This section does not affect the operation of any provision made by or under any other Act or by the Rules of Court for or in relation to the furnishing of security. 72 I also accept that the discretion to order security is unfettered and should be exercised having regard to all the circumstances of the case: KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 197-198 (Beazley J). 73 Nevertheless, for the following reasons I am not persuaded that an order for additional security should be made now. 74 First, it is well established that applications for security for costs should be made promptly and that delay in making an application is "a most important" factor to be taken into account in the exercise of the Court's discretion: Southern Cross Exploration NL v Fire & All Risks Insurance Co Ltd (1985) 1 NSWLR 114 at 123 (Waddell J). That is the case, whether it be a first application or an application for additional security, and whether the application is made under the FCA Act or not: Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 at 514 (French J); KP Cable Investments at 197 (Beazley J). Far from being brought promptly, this application was brought after the appeal and when the case was almost over. Neither counsel was able to refer the Court to a case in which security had been ordered at such a late stage. 75 Second and more importantly perhaps, at no stage did Norton Rose identify any cause for Aldi's concern that Privity would not be able to honour its undertaking. The fact that MIL chose not to agree to their request is too flimsy a basis to infer that it would not. Indeed, it is a bootstraps argument. If the concern had a basis in fact, then it should have been disclosed in the correspondence. Little wonder, in those circumstances, that MIL declined to agree to it. 76 Third, if there were a genuine basis for the alleged concern, there was nothing preventing Aldi from issuing a subpoena to Privity to produce the records that MIL declined to provide voluntarily. The fact that no such subpoena was issued rather suggests that it would have been a fishing exercise. 77 Fourth, the delay is wholly unexplained. Not only did Norton Rose not demonstrate why Aldi was worried that Privity would be able to pay its costs, it did not reveal when or how it became concerned.

Conclusion 78 Costs in both the first instance proceedings and the appeals should be awarded on the ordinary basis. 79 For the first instance proceedings, MIL should pay Aldi's costs of the trade mark appeal and 75% of Aldi's costs of defending the infringement and consumer action. Aldi should pay 90% of MIL's costs of defending the application brought by way of cross-claim in the latter proceeding. Those costs should be paid in a lump sum in amounts determined by a Registrar of the Court. 80 For the appeals, MIL should pay Aldi's cost of the Full Court trade mark appeal. The parties should bear their own costs in the Main Appeal. 81 Aldi's application for security for costs is refused. 82 There will be orders accordingly. 83 Aldi also sought orders that MIL be given leave to discontinue its claim for pecuniary relief in respect of the third ACL claim and that MIL pay Aldi's costs thrown away by reason of it discontinuing its claim for damages. No argument was advanced in support of these orders and they should not be made. MIL does not require leave to not press a claim for relief. I certify that the preceding eighty-three (83) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katzmann.

Trade Marks Act 1995(Cth)ss 41, 92

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