Pinnacle Runway Pty Ltd v Triangl Limited

Federal Court of Australia|2022-10-19|Before: Murphy J

THE COURT ORDERS THAT:

The Second Respondent is not, at this stage, required to provide the Applicant with the source material requested by the Applicant, namely copies of tax invoices, itemised narrations and receipts for the payment of the costs and disbursements of the trademark infringement claim and the cross-claim in order to verify apportionment between the costs and disbursements of those respective proceedings.
Order 3 of the Orders of Justice Murphy dated 3 October 2022 be vacated.
The parties shall file their Costs Summary and Costs Response respectively in accordance with Orders 2 and 4 of the Orders of Justice Murphy dated 3 October 2022. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

MURPHY J: 1 In the liability judgment in this matter (Pinnacle Runway Pty Ltd v Triangl Limited [2019] FCA 1662; 375 ALR 251) the Court held that: (a) the applicant, Pinnacle Runway Pty Ltd, failed to establish its claim that the second respondent, Triangl Group Limited, had infringed its registered trade mark, DELPHINE; and (b) that Triangl failed to establish its cross-claim that Pinnacle's registration of the DELPHINE mark should be cancelled on the basis that Pinnacle was not the first to use it. In the liability judgment at [2] the Court described the litigation as "unfortunate", said that there was no clear winner, and noted the parties had expended many times more in legal costs in bringing and defending the claim and cross-claim than could have ever been payable for damages if the infringement claim had been successful. For reasons which were then unclear, the parties had been unable to reach a commercial settlement. 2 Pinnacle lodged an appeal against the order dismissing its infringement claim. While the appeal was on foot the parties sought a decision in relation to the costs of the infringement claim and cross-claim. I delayed determining that application as it seemed a better use of my time to await the decision of the Full Court in the appeal, given that costs were likely to follow the event. 3 The hearing of the appeal was, however, delayed and the parties then sought that I deliver a decision on costs before the appeal was heard. The Court delivered judgment on the question of costs in Pinnacle Runway Pty Ltd v Triangl Limited (No 3) [2020] FCA 1379), and made orders for: (a) Pinnacle to pay Triangl's costs of the infringement claim on a party-party basis from Pinnacle's commencement of that proceeding through to 12 February 2018, and thereafter on an indemnity basis; and (b) Triangl pay Pinnacle's costs of the cross-claim on a party-party basis for the period from the commencement of that proceeding through to 12 February 2018, and thereafter each party to bear their own costs. 4 On 7 December 2020, Pinnacle discontinued the appeal. Triangl consented to the discontinuance on the basis that Pinnacle pay its costs of the appeal, with the amount of such costs to be agreed or otherwise taxed. On 25 May 2021, the parties reached agreement regarding Triangl's costs of the appeal. 5 On or about 24 February 2022, the parties reached agreement regarding Pinnacle's costs in the cross-claim (which are to be met by Triangl). 6 The parties were unable to agree regarding Triangl's costs in the infringement claim (which are to be met by Pinnacle). 7 On 2 March 2022, the Court made orders by consent for the costs in the infringement claim to be the subject of a lump-sum costs award and for a timetable for Triangl to file and serve its evidence including a Costs Summary, and for Pinnacle to file and serve its evidence including a Costs Response, by way of affidavit in accordance with paragraphs [4.10]-[4.14] of the Costs Practice Note (GPN-Costs). The orders provide for the Registrar determine the amount of the lump-sum costs in such a manner as he or she sees fit, including if considered appropriate, on the papers. 8 The parties are in dispute as to whether Triangl ought provide Pinnacle with "source material, namely copies of tax invoices, itemised narrations and receipts for payment of the costs and disbursements of the infringement claim and the cross-claim in order to verify the apportionment between the costs and the disbursements of those respective proceedings which will be claimed in [Triangl's] Costs Summary". That issue was left for determination by the Court, on the papers. These reasons concern that issue.

Pinnacle's submissions 9 Pinnacle contends that Triangl performed a substantial level of work in relation to its cross-claim which Triangl is not entitled to recover from Pinnacle in the infringement claim. It submits that a significant proportion of the costs incurred by Triangl are likely to be mixed costs, attributable in part to both the infringement claim and the cross-claim. It says that while 80% of the liability judgment dealt with the infringement claim only, and 20% dealt with the cross-claim, that division does not reflect the extent of work which was done by the parties in respect of the two claims, particularly in light of the withdrawal of various aspects of Triangl's cross-claim shortly prior to and during the trial. 10 Pinnacle submits that an order requiring Triangl to provide the source material will permit it to meaningfully assess Triangl's costs in the infringement claim and carefully apportion Triangl's costs between the infringement proceeding and the cross-claim. It says that the source material should be provided so that it can assess the degree of apportionment applied between the two proceedings as that will have a significant impact on: (a) Pinnacle's formulation of an appropriate settlement offer in relation to costs; and/or (b) Pinnacle's ultimate costs liability. 11 Pinnacle submits that it has a genuine concern that the apportionment applied by Triangl in relation to costs in the infringement claim (which Triangl is entitled to recover) and costs in the cross-claim (which Triangl is not entitled to recover) will not be reflective of the actual and appropriate division of the costs and disbursements incurred and may significantly inflate the total costs sought by Triangl, and thus influence Triangl's view as to an acceptable settlement of the costs dispute. 12 Pinnacle does not seek the source material so as to facilitate a lump-sum assessment of costs by the Registrar, or at least that is not the dominant purpose. Rather, it seeks the source material for the purpose of formulating an offer of settlement in relation to costs, which it says is likely to reduce the time and resources demands on the parties and the Court. It says that it seeks provision of the source materials with a genuine view to settling the remaining costs question, and that the provision of the source material is reasonable and in keeping with the guidance provided to parties in the Costs Practice Note, particularly when Triangl's approach to apportionment of costs between the infringement claim and the cross-claim will have a material impact on the appropriate quantum of costs in the infringement claim. It contends that the Court should be satisfied that it has a genuine belief that there is a prospect the parties can resolve the outstanding costs issue, and it is appropriate to explore that through an order for provision of the source material. It notes that the parties have been able to resolve the other costs disputes. 13 Pinnacle further argues that even if Triangl's costs entitlement in the infringement claim cannot be resolved between the parties, production of the source material will nonetheless assist the parties to prepare informed evidence in relation to the lump-sum assessment by the Registrar. 14 On Pinnacle's submissions, provision of the source materials will not place an undue burden on Triangl, nor its solicitors. It argues that Triangl's solicitors will have records of its invoices and evidence of payment of the same in its files, and as part of the assessment process it must verify to the Court that this material is available for inspection, in its Costs Summary. It says that the prudent approach would be for Triangl to gather this material now, essentially against the event that it is called upon to make production to the Registrar.

Analysis 15 Pinnacle's submissions are not entirely without force, but for the reasons I explain I do not consider it appropriate to order that Triangl provide Pinnacle with the source materials it seeks. 16 First, as Triangl submits, the purpose of the lump-sum costs procedure is to "streamline and expedite determination or resolution of the quantum of costs question and not replicate the taxation process": Costs Practice Note at [4.11]. The Costs Practice Note provides that the party seeking a lump-sum costs order (Costs Applicant) shall file a Costs Summary in the form of an affidavit that succinctly addresses the relevant matters set out in Part B of "Annexure A - Guide for Preparing a Costs Summary". It expressly states that "[t]he Costs Applicant is not required to exhibit to the Costs Summary the source material verifying the costs and disbursements claimed. However, such material must be available at the costs hearing": Costs Practice Note at [4.12]. 17 As Foster J observed in Bayley & Associates Pty Ltd v DBR Australia Pty Ltd [2014] FCA 346 at [17(e)] "a broad brush approach should be taken by the Court in deciding whether to make a lump-sum costs order and in arriving at the quantum thereof. The task is one of estimate or assessment and not arithmetic. The Court should avoid, in effect, carrying out a taxation under the guise are performing a lump-sum costs assessment". As the Full Court observed in Coshott v Burke (No 3) [2019] FCAFC 23 at [31], in making a lump-sum costs order "the Court does not conduct a line-by-line assessment of the costs claimed, and the Court does not require the Costs Summary to exhibit the source material verifying the costs and disbursements claimed." 18 By providing that the source material must be available at the costs hearing, but not requiring its production before that point, the Costs Practice Note essentially leaves it to the Court or the Registrar to decide whether it is appropriate to order production of the source materials in order to be satisfied in relation to any disputed matters. That will be at a point after the Costs Summary and Costs Response have been filed and the Court or the Registrar is in a position to decide whether it is appropriate to require production. If it were the intention of the Costs Practice Note to allow for the Costs Respondent, as a matter of course, to require production of the source material so that it can undertake its own close inquiry, the Costs Practice Note could have explicitly so provided. It does not do so. 19 It is for the Court or the Registrar to apply the appropriate and necessary level of scrutiny to the costs in reliance on the evidence in the Costs Summary and Costs Response, and then decide whether to require production of the source material. The Court or the Registrar is not constrained in any way from ensuring that there is sufficient information to make "a logical, fair and reasonable determination": Paciocco v Australia and New Zealand Banking Group Ltd (No 2) [2017] FCAFC 146 at [26]-[31]. 20 Second, and relatedly, Pinnacle's application for production of the source materials is premature. The purposes of the lump-sum costs procedure will be better served if the question of whether the source materials ought be provided is left until after the parties have filed their Costs Summary and Costs Response. If, at the point of filing its Costs Response, Pinnacle considers that the evidence will be insufficient to enable the Registrar to undertake the required broad brush assessment, including a broad brush apportionment of Triangl's costs between the infringement claim and the cross-claim, it can make that contention with supporting evidence. It can ask the Registrar to require production of the source material. That approach better reflects the purpose of the lump-sum costs procedure and, more generally, the overarching principle in ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth). 21 In the circumstances of the present case, it would be inconsistent with the Costs Practice Note and the overarching principle to require Triangl to now undertake the work of producing the source material when it is unknown what the Costs Summary will include. That is particularly so when Triangl says that it will adduce comprehensive evidence from an independent costs consultant, a course of action which it considers will be more than adequate for Pinnacle to: (a) formulate an appropriate settlement offer; and/or (b) assess its ultimate cost liability and prepare a Costs Response in accordance with the Costs Practice Note. 22 Third, I do not accept Pinnacle's submission that production of the source material will not be straightforward and not onerous. Although I found Triangl's submissions as to the level of work likely to be involved in producing the source material somewhat overstated, I accept that requiring it to produce all of the tax invoices, itemised narrations and receipts for the payment of costs and disbursements will be more than insubstantial, and that such work is precisely the type of expense which the lump-sum costs procedure was intended to avoid. 23 I accept Triangl's submission that the tax invoices rendered by its solicitors do not relate solely to either the infringement claim or the cross-claim; as the costs and disbursements relating to the two claims were charged in the same invoices. They are not split up. The proceeding was commenced in July 2016 and the liability judgment was handed down in October 2019. Triangl is correct in contending that, at least insofar as the costs dispute is concerned, it is continuing to incur costs which will form part of its costs claim. Thus the time frame over which Triangl would be required to locate and produce source materials extends over six years. 24 If an order to produce the source materials is made the task that will confront Triangl will not only be to produce its solicitor's tax invoices and itemised narrations and receipts for the payment of costs and disbursements. I accept Triangl's submission that it will be necessary for its solicitors to review its solicitor's tax invoices and perhaps counsel's invoices to ascertain whether they disclose, directly or indirectly, the instructions given by Triangl to its solicitors and/or the legal advice provided by its solicitors. Triangl's solicitors will be required to provide advice as to whether Triangl has a claim for legal professional privilege, and whether it should maintain that claim. Triangl says that there are approximately 2,000 time entry narrations in its solicitor's tax invoices. If legal professional privilege is asserted then the narrations may require some redaction. 25 Having said that, the fact that substantial work may be required does not mean that the source material should not be produced. The short point is that it is a matter for the Registrar. Upon reviewing the Costs Summary and the Costs Response, the Registrar may decide that to make the required broad brush assessment, the source materials must be produced. While such an order would not be the norm, that is a question for another day. 26 For these reasons, I made the attached orders. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Murphy.

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