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[2019] FCA 617
Federal Court of Australia
2019-05-03
Robertson J
Original judgment source is linked above.
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.
Consideration 34 In my opinion, there is power under r 39.05(h) of the Federal Court Rules, the slip rule, to vary Order 3 of the orders made on 10 January 2019. That rule provides that the Court may vary or set aside a judgment or order after it has been entered if, relevantly, "there is an error arising in a judgment or order from an accidental slip or omission." I infer that there has been an accidental slip or omission by oversight on the part of the respondent's legal representatives in failing earlier to ask for costs on an indemnity basis. 35 In Raybos Australia Pty Ltd v Tectran Corporation Pty Ltd [1988] HCA 2; 77 ALR 190, counsel for the respondents sought no order as to costs when an order was made dismissing the application but later applied for a costs order. Toohey J, having found that this resulted from an oversight on the part of counsel, said that the weight of authority supported the submission that the slip rule was available in those circumstances. Toohey J referred to L Shaddock & Associates Pty Ltd v Parramatta City Council (No 2) [1982] HCA 59; 151 CLR 590 at 594, where the High Court referred to O 29, r 11 of the High Court Rules as reflecting the inherent jurisdiction of a court to correct an error arising from an accidental slip or omission and expressly held the rule to extend "to authorize an omission resulting from the inadvertence of a party's legal representative". This view was affirmed in Commonwealth v McCormack [1984] HCA 57; 155 CLR 273 at 277. Toohey J also referred to Rowe v Delfs [1966] WAR 49, where Hale J varied an earlier order by including a certificate for the cost of transcript which counsel had omitted to ask for, and to Coppins v Helmers & Brambles Constructions Pty Ltd [1969] 2 NSWR 279. 36 In Coppins v Helmers & Brambles Constructions Pty Ltd the Court of Appeal stated, at 282, that "a court will amend its order by including in it an order for costs which through inadvertence was not made at the hearing" and "will include in an order for costs an item of costs which was overlooked when the order for costs was originally pronounced". For the former proposition the Court of Appeal relied on Fritz v Hobson (1880) 14 Ch D 542, which provides a long-standing illustration of the scope of the slip rule in circumstances such as the present. In that case, at 561-2, Fry J, relying in part on an antecedent to r 39.05(h), awarded costs of a motion for an interim injunction which had been adjourned until the trial, those costs not having been sought until after delivery of final judgment (which included orders as to costs) due to "the accidental omission of counsel to call my attention to the adjourned motion when I pronounced my judgment". 37 In the present case, although costs were asked for before final judgment was delivered, as I have said, I find that it was through inadvertence that costs on an indemnity basis were not. 38 This leaves the question of discretion. In Grygiel v Baine (No 2), the circumstances were different but I note that at [11] and [12] the New South Wales Court of Appeal made two relevant observations. First, failure to address on costs is commonplace and, with two qualifications, may properly be taken by the Court as an indication that no special or unusual orders are required. The usual order with respect to costs is that they should follow the event, the Court thus being left to judge the precise terms of an appropriate order in the circumstances which eventuate in the judgment. Second, what was described as the first and major qualification to this principle arises where an offer of compromise or settlement has been made which properly should not be disclosed to the Court prior to judgment. The Court of Appeal went on to say that although the substance of the offer should not be disclosed, there was usually no difficulty in indicating, at least in that Court, that some form of offer had been made and that, accordingly, questions of costs may need to be reserved so that relevant material can be put to the Court, depending on the outcome and in the event that the parties cannot agree on the appropriate result. I also note in this respect the somewhat stricter terms of r 25.06(2)(b) of the Federal Court Rules, which provides that no communication about the existence or terms of an offer is to be made to this Court until, relevantly, judgment is given. 39 I now turn to consider the other authorities relied on by the applicant. In Sino Dragon Trading Ltd v Noble Resources International Pte Ltd (No 2) Edelman J held that the circumstances of the case did not justify an indemnity costs order for five reasons. One of those reasons was that, generally, a party should make submissions on costs during the hearing. I agree, but I regard it as a matter to be weighed in the exercise of the Court's discretion to permit a late application for indemnity costs where, as I have concluded, that application was not made at the appropriate time through inadvertence. 40 In Westpac Banking Corporation v Wittenberg (No 3) the issue arose in an appeal and the Full Court said, at [15], that it would not then entertain an application for any order for indemnity costs based on a 2011 offer of compromise because it fell outside the scope of the appeal. Final orders on the appeal had been entered in circumstances where Westpac failed to draw any attention to the matter in its notice of appeal or otherwise. That case is therefore clearly distinguishable as it concerned the scope of an appeal. 41 Apache Northwest Pty Ltd v Newcrest Mining Limited (No 2) also involved an appeal. At [2], the Full Court dismissed the application for an order varying the costs order made by the Full Court to remove any uncertainty about the order applying to its costs in complying with an order for a preliminary discovery by saying: "We did not intend that are costs order would cover steps taken by the successful applicant to comply with the order requiring preliminary discovery." That is not the present case. 42 I would not exercise the Court's discretion so as to prevent the respondent from now applying for costs on an indemnity basis. I note, but do not rely in this respect on, the fact that consent orders were made, as noted at [4] above, facilitating the present respondent's application. 43 I turn then to consider the first offer. In my opinion the applicant did unreasonably fail to accept the offer and there are no discretionary reasons why r 25.14(2) should not apply according to its terms. I therefore find that the respondent's costs should be paid on an indemnity basis from 11.00 am on 5 April 2018. 44 I take into account that even at that early point in the proceedings, the applicant was in a position to give proper consideration to the offer by reference to the existing evidence. On the applicant's side the most important witness whose evidence could affect the ultimate result was the applicant herself. It was her appeal from the decision of the Registrar. I find that the first offer was a genuine offer of compromise and was nonetheless so by reason that the costs of the parties would have been relatively small at that point. One of the purposes of offers to settle and the regime of Part 25 of the Federal Court Rules is to promote the early settlement of proceedings. 45 I do not accept the propositions put on behalf of the applicant to the effect that it was not unreasonable for her not to accept the offer because the offer was made only six weeks after the appeal was commenced and prior to the first case management hearing, and amounted to a walk-away offer inviting the applicant to capitulate. I consider that the offer was made at an appropriate point of time, the applicant had a reasonable opportunity to consider it (it being open to be accepted for 14 days after service) and that the offer was one of substance. 46 As I have already indicated, I do not regard it as weighing in favour of the applicant in the assessment of whether she unreasonably failed to accept the offer that the offer was made at a time when neither party had incurred significant costs. I also do not accept the submission on behalf of the applicant that she faced difficulties in considering the offer and that those difficulties were apparent when the Court's orders made on the next day were considered. In my opinion, the applicant had both the necessary information and the necessary time to consider the offer. She unreasonably failed to accept it. 47 It is therefore unnecessary for me to consider the terms of the second offer and whether the applicant unreasonably failed to accept that offer. 48 I turn then to the amount of costs claimed by the respondent as a lump sum costs order. 49 In broad terms, I accept the basis of the calculations, and the calculations, in Ms Owen's affidavit. I do not accept the submission on behalf of the applicant that "any lump sum costs orders should be made for a far lower amount" than the amount claimed by the respondent. In particular I do not accept the applicant's submissions that it has not been shown to be appropriate for a senior associate and partner to undertake the bulk of the work and that a junior lawyer or more junior counsel should have undertaken that work. Further, I do not accept the submission on behalf of the applicant that there was a significant overlap between the work conducted by solicitors and counsel. I accept that there was some overlap, and I have taken this into account in reducing the claimed amount. 50 It is necessary for the Court to do the best that it can on the material available. 51 In relation to the costs of the present application, I do not accept the submission on behalf of the applicant that there should be no order as to the costs of this interlocutory application, apparently because they had not been sought, or that they should not be assessed on the same indemnity basis. I note in these respects the terms of the letter dated 5 February 2019 from the solicitors for the respondent offering to resolve the issue of costs by payment of $130,000, that offer being open for 14 days from 5 February 2019. That same letter states that, failing the applicant's agreement to that proposal, the respondent would also seek that the applicant pay the respondent's costs of bringing the present interlocutory application on an indemnity basis. 52 In my opinion, the amount allowed in respect of the present interlocutory application does exceed an appropriate amount in relation to indemnity costs as those costs appear to me to been calculated on the basis that the costs application would involve a hearing listed for half a day. I consider the appropriate figure for the costs (including counsel fees) of the interlocutory application, on an indemnity basis, to be $7500. 53 The appropriate amount for a lump sum costs order is, in my opinion, $140,000. 54 I make orders in accordance with these reasons. I certify that the preceding fifty-four (54) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.
Notaras
Barcelona Pty Limited