Notaras v Barcelona Pty Limited

1. Order 3 of the orders made on 10 January 2019 be set aside.
2. In place of that order, the applicant pay the respondent's costs of the proceeding on a party-party basis up to 11.00 am on 5 April 2018 and on an indemnity basis thereafter.
3. The applicant pay the respondent's costs in a lump sum amount of $140,000. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ROBERTSON J: 1 These reasons concern an application by the successful respondent for certain costs orders, subsequent to the orders made in the substantive proceedings on 10 January 2019: see Notaras v Barcelona Pty Limited [2019] FCA 4; 138 IPR 304. 2 Those orders were: 1. The appeal is dismissed. 2. Trade Mark Application No. 1686087 proceed to registration. 3. The appellant pay the costs of the respondent, as agreed or assessed. 3 By an interlocutory application filed on 20 February 2019, the respondent seeks the following orders: 1. An order that order 3 of the orders made 10 January 2019 be set aside and in lieu thereof, an order that the Applicant pay the Respondent's costs of the proceeding: a. on a party-party basis up to 11 am on 5 April 2018; and b. on an indemnity basis thereafter. 2. An order that, pursuant to rule 40.02(b) of the Federal Court Rules 2011, and in satisfaction of order 1, the Applicant pay the Respondent's costs in a lump sum amount of $148,000. 3. In the alternative to order 1, an order that order 3 of the orders made 10 January 2019 be set aside and in lieu thereof, an order that the Applicant pay the Respondent's costs of the proceeding: a. on a party-party basis up to 11 am on 13 July 2018; and b. on an indemnity basis thereafter. 4. In the alternative to order 2, an order that, pursuant to rule 40.02(b) of the Federal Court Rules 2011, and in satisfaction of order 2, the Applicant pay the Respondent's costs in a lump sum amount of $145,000. 5. In the alternative to orders 1 to 4, an order that pursuant to rule 40.02(b) of the Federal Court Rules 2011, the Applicant pay the Respondent's costs in a lump sum amount of $130,000. 6. Such further orders as the Court thinks fit. 4 Consent orders were made on 12 March 2019 for the filing of short written submissions and for the filing and serving by the respondent of a bundle of underlying documents. 5 By consent, the application is to be determined on the papers. 6 The respondent relied on an affidavit of Ms Jane Owen, solicitor for the respondent, sworn on 20 February 2019. 7 That affidavit annexed a notice of offer of compromise served on 3 April 2018 (the first offer). The time for acceptance of that offer expired on 17 April 2018. The offer was not accepted. 8 On 11 July 2018, the respondent served a further notice of offer of compromise (the second offer). This offer expired on 25 July 2018. It was not accepted by the applicant. 9 On 5 February 2019, after judgment was delivered, the solicitors for the respondent made an offer to the applicant to settle the issue of costs without the respondent having to make this application to the Court. That offer was open for 14 days from the date of the letter. It was not accepted. 10 The respondent submitted that the first offer formed an appropriate basis for an order for indemnity costs but, failing that, its alternative submission was that the second offer did so. 11 The respondent submitted that under r 25.14(2), if the applicant unreasonably failed to accept the offer made in accordance with r 25.01 and the proceeding was dismissed, it was entitled to an order that its costs be paid on an indemnity basis from 11.00 am on the second business day after the offer was served. The presumption of entitlement to indemnity costs under r 25.14 was enlivened, the respondent submitted, where the applicant had "unreasonably" failed to accept the offer of compromise: Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2011] FCAFC 141 at [18]. The respondent submitted that the applicant's conduct was indeed "unreasonable". The first offer was a genuine offer of compromise and it was unreasonable for the applicant not to accept it, the respondent submitted. It was made approximately six weeks after the applicant filed her notice of appeal and immediately before the first case management hearing. The offer was to discontinue the proceeding by consent, with each party to bear their own costs of and incidental to the proceeding. Under this offer, the respondent gave away a right to recover its costs under r 26.12. The offer demonstrated a willingness on the part of the respondent to settle the proceedings at the earliest opportunity. Accordingly, the respondent submitted, its costs should be paid on an indemnity basis from 11.00 am on 5 April 2018. 12 The respondent submitted that the second offer was made approximately two weeks after the evidence in the proceeding was complete. At this time, there was nothing preventing the applicant from making a realistic assessment of the evidence and her prospects of success. This offer was in summary that: (a) the respondent would narrow significantly the categories for which registration of the trade mark was sought; (b) the applicant pay the respondent's costs of the proceedings on a party/party basis; and (c) the proceedings be dismissed. The respondent submitted this offer was a genuine offer of compromise and it was unreasonable for the applicant not to accept it. The respondent submitted that the goods and services that it offered to remove from its trade mark specification were the ones which, on the applicant's evidence taken at its very highest, were the goods she had allegedly provided under the mark in suit, even though this may have been decades earlier, and goods and services which could be seen as being associated with those. As the covering letter made clear, the respondent submitted, the offer was intended to address the applicant's concern about "coffee-related goods" including ground coffee, coffee beans, coffee grinding and roasting services. The respondent submitted that under this offer, it gave up all the "coffee-related goods" within the specification apart from coffee beverages (and café services). The respondent submitted that the other factors relied on in support of the first offer also applied here. 13 As to quantum, the respondent submitted that Ms Owen had calculated the costs claimed by the respondent in three scenarios: (a) party party costs until 11 am on 5 April 2018 and indemnity costs thereafter as a result of the First Offer - $148,000; (b) party party costs until 11 am on 13 July 2018 and indemnity costs thereafter as a result of the Second Offer - $145,000; or (c) party party costs only - $130,000. (Footnotes omitted.) 14 In each scenario, the calculation had been made on the following basis: (a) party party costs on the basis of an approximately 80% recovery of the fees incurred by the respondent's solicitors; (b) indemnity costs on the basis of a 100% recovery of the fees incurred by the respondent's solicitors; (c) 100% recovery of counsel fees; (d) 100% recovery of disbursements; and (e) an estimate of $12,500 for the costs of the present interlocutory application. (Footnotes omitted.) 15 The applicant submitted that: a. the Court should not entertain a late application for indemnity costs where there is no legal or factual basis for varying the costs orders already made; b. alternatively, there was nothing unreasonable about Ms Notaras's failure to accept the offers of compromise made by Barcelona on 3 April 2018 (First Offer) and on 11 July 2018 (Second Offer); and c. in any event, the amounts sought by Barcelona are too high, and the Court should only make a lump sum costs order in a considerably lower amount. 16 The applicant submitted that there was no power to vary the costs order already made. The respondent had not identified any legal or factual basis for setting aside Order 3 made on 10 January 2019. It was submitted that none of the grounds in r 39.05 for varying an order which had been entered had been established. In particular, costs orders which are made as part of the final orders for the determination of the proceedings were final, not interlocutory: Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27; 247 FCR 61 at [291]. 17 Even if it were open to the respondent to seek to vary the costs order already made, the applicant submitted that power should not be exercised because the time for seeking indemnity costs was during the hearing or prior to orders being made, and not afterwards. The applicant submitted that a party that wishes to seek a special costs order must indicate that at the hearing, prior to final orders being made, and should not file a motion to do so after determination of the proceedings: Grygiel v Baine (No 2) [2005] NSWCA 434. 18 The applicant submitted that in this Court, it has been held that "[g]enerally, a party should make submissions on costs during a hearing", "[n]ormally the Court would assume that a successful litigant desired that costs would follow the event. If some different course was to be urged then it should be foreshadowed", and "the Court should be in a position to deal with the question of costs in its judgment unless there is a particular reason to reserve that question for later, and separate, consideration": Sino Dragon Trading Ltd v Noble Resources International Pte Ltd (No 2) [2015] FCA 1046; 339 ALR 446 at [31] per Edelman J and cases there cited. 19 The applicant submitted that where a party has sought indemnity costs orders after judgment, their application had been refused: Westpac Banking Corporation v Wittenberg (No 3) [2016] FCAFC 51 and Apache Northwest Pty Ltd v Newcrest Mining Limited (No 2) [2009] FCAFC 58. 20 Here, the applicant submitted, the respondent had proffered no reasons for why it did not seek a special costs order during the hearing or prior to judgment, nor for why it did not raise the issue before. It should be inferred, the applicant submitted, that any such explanation would not assist the respondent. The Court should therefore dismiss the respondent's application for indemnity costs because it was not brought in a timely manner or in accordance with usual practice. 21 The applicant also submitted that it was not unreasonable for her not to accept the first offer. That offer was made only six weeks after the appeal was commenced, prior to the first case management hearing, and amounted to a walk-away offer inviting the applicant to capitulate. The lack of any real element of compromise is reinforced by the respondent's acceptance in its written submissions that the offer was made at a time when neither party had incurred significant costs, such that no weight should be given to the mere fact that the respondent gave away a right to recover its costs. The difficulties faced by the applicant in considering the offer are apparent when the Court's orders made on the next day were considered: the applicant was to amend her grounds of appeal, the respondent was to file a notice of contention, and the parties were to identify what previous evidence they would rely upon and serve additional evidence. 22 As to the second offer, the applicant submitted it was not unreasonable for her not to have accepted the offer. Rather, the terms of the offer and its timing just prior to the hearing made it reasonable for the applicant to proceed to the hearing for the determination of her appeal by the Court. The applicant submitted that the offer was an attempt by the respondent to achieve substantial success in the proceedings, and required the applicant to pay the respondent's costs just before the hearing, when the parties would already have incurred the bulk of their costs. The applicant submitted the offer therefore did not amount to a realistic compromise by the respondent. Further, the amendments proposed by the respondent to its trade mark application would not have afforded the applicant any real measure of success. In particular, the applicant submitted, the proposed substitution of "Coffee beverages" in the place of coffee beans, grounds and other products in Class 30 of the respondent's trade mark application would not have addressed the applicant's concern that the respondent's use of the trade mark to sell coffee machines and coffee products, including beverages, would tend to confuse purchasers. In this connection the applicant referred to the substantive reasons for judgment at [242]. 23 For each of these reasons, the applicant submitted, the indemnity costs application should be dismissed. 24 As to the making of a lump sum costs order, the applicant accepted she must pay costs on the ordinary basis and did not oppose the making of a lump sum costs order. However, she submitted the costs claimed by the respondent were too high and any lump sum costs order should be made in a far lower amount. The applicant submitted there was no explanation for why it was appropriate for a senior associate and the partner to undertake the vast bulk of the work. It would have been considerably cheaper for a junior lawyer or more junior counsel to undertake that work. There was nothing to suggest why that could not have been done. 25 In light of the significant overlap between the work conducted by solicitors and counsel, and the use of very senior lawyers to undertake the bulk of the work, Ms Owen's use of an 80% discount to estimate costs recoverable on the ordinary basis in her affidavit was not appropriate here, regardless of whether or not it might accord with her experience in other proceedings. 26 In addition, the applicant submitted that, despite being permitted to do so under the orders made on 12 March 2019, the respondent had not produced any costs agreements between it and its solicitors. It might be inferred from certain paragraphs of Ms Owen's affidavit that at least two such written agreements existed, but they were not before the Court. 27 The applicant summarised certain matters relied upon in the respondent's submissions to support its amounts claimed, and responded to those matters, as follows: a. Barcelona's complete success (which should not affect the reasonableness of the amounts claimed substantially or at all); b. the straightforward nature of the matter and the clear parameters of the case (which should weigh against the reasonableness of the amounts claimed); c. the fact that Ms Notaras had four grounds of opposition (without suggesting that those grounds were legally or factually complex), and d. the length of the judgment (which is irrelevant to reasonableness of the costs). 28 On this application, the applicant submitted, the Court must do the best that it can on the material available. The low amount in question made a detailed assessment of quantum inappropriate. The best way of achieving a fair result was to apply a discount to the amounts claimed by reference to the type of work performed and the rates charged for that work. The applicant submitted that the respondent should have its costs on the ordinary basis at the rate of 50% of its solicitors' costs, because of the significant overlap between work conducted by solicitors and that conducted by counsel (especially in preparing evidence, researching, preparing submissions and chronologies, and otherwise preparing for the hearing) and because most of the work could have been undertaken at a much lower charge-out rate by junior solicitors or more junior counsel. 29 If the Court awarded indemnity costs, the applicant submitted that the respondent should have such indemnity costs at the rate of 75% of what it incurred, for those same reasons. 30 Finally, the applicant submitted that the respondent's application for indemnity costs should be dismissed with costs, and lump sum costs orders should be made in the amount of 50% of solicitors' fees plus disbursements up to and including when judgment was delivered on 10 January 2019. 31 All of the time entries after 10 January 2019 related to matters after judgment was handed down, mostly involving this application for costs. Those amounts cannot relate to the costs order originally made by the Court which is the subject of this application. They could only be included as costs of this application. 32 The respondent's interlocutory application does not seek, and the respondent's submissions did not address, costs of this application. The respondent's estimate of $12,500 for costs of this application was clearly excessive, the applicant submitted. It is not clear how it could justify incurring costs of that amount on such a simple application. 33 The applicant submitted there should either be an order for costs of this application in favour of the applicant (in which case, the total lump sum costs payable by the applicant should be reduced by a rough estimate of her costs on this application, such as $5,500) or, alternatively, there should be no order as to the costs of this application (in which case, the respondent should not be entitled to any costs incurred after 10 January 2019.