Reckitt Benckiser (Australia) Pty Ltd v GlaxoSmithKline Australia Pty Ltd

1. The appellant pay the respondents' costs of the appeal on a party and party basis. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THE COURT: 1 On 24 August 2018, this appeal was dismissed. In the reasons for judgment published that day (Reckitt Benckiser (Australia) Pty Ltd v GlaxoSmithKline Australia Pty Ltd [2018] FCAFC 138), we expressed our conclusion that Reckitt should pay Glaxo's costs. There is no dispute about that matter. However, at the time that judgment was given, Glaxo indicated that it wished to be heard further on that question. An order was therefore made that the parties have leave to file submissions on costs, and that the question of costs be determined on the papers. 2 Glaxo seeks an order that Reckitt pay its costs of the appeal: (a) before 11.00 am on 29 June 2018, on a party and party basis; and (b) after 11.00 am on 29 June 2018, on an indemnity basis. 3 The basis for this order is that, on 27 June 2018, Glaxo served a Notice of offer of compromise on Reckitt under r 25.01 of the Federal Court Rules 2011 (Cth). The substance of the offer was that: (a) the appeal be dismissed; and (b) there be no order as to costs in relation to the appeal. 4 The offer of compromise was expressed to be open for acceptance for a period of 14 days after service of the offer. Reckitt did not respond to this offer. 5 Rule 25.14(2) provides: If an offer is made by a respondent and an applicant unreasonably fails to accept the offer and the applicant's proceeding is dismissed, the respondent is entitled to an order that the applicant pay the respondent's costs: (a) before 11.00 am on the second business day after the offer was served - on a party and party basis; and (b) after the time mentioned in paragraph (a) - on an indemnity basis. 6 Glaxo submits that its offer - which was, in essence, a "walk-away" offer - was a genuine compromise. It had incurred legal costs in excess of $35,000, although this particular fact was not communicated to Reckitt. Also not communicated was the fact that the costs covered solicitors and counsel reviewing and assessing the notice of appeal and the prospects of success of the appeal; conferences and telephone calls with solicitors, counsel and clients in relation to prospects of the appeal; correspondence between solicitors, counsel and clients in relation to progress of the appeal; correspondence with the Court Registry in relation to setting down the appeal for hearing, and associated correspondence with counsel; correspondence in relation to the preparation of the appeal book index; preparation of a draft opening outline of submissions; and preparation of, and advice in respect of, the Notice of offer of compromise. 7 Glaxo argues that the offer was made almost four months after the filing of the notice of appeal; that Reckitt had been given 14 days to consider it; that the offer, if accepted, would have obviated the need for Glaxo to incur additional costs in preparing for, and attending, the appeal; that, at the time the offer was made, Reckitt's prospects of success were "low"; that the terms of the offer were clear; and that, at the time the offer was made, an application for indemnity costs was foreshadowed. 8 Despite these submissions, we are not persuaded that an order for indemnity costs is warranted. We are not persuaded that Reckitt's rejection of the offer was unreasonable in the circumstances. 9 Although, ultimately, the appeal was dismissed, the grounds of appeal were genuinely raised and were reasonably arguable. They also concerned a matter of obvious commercial importance for Reckitt. It is to be borne in mind that, on 28 February 2018, following the publication of reasons on 8 January 2018 in relation to the principal claims (GlaxoSmithKline Australia Pty Ltd v Reckitt Benckiser (Australia) Pty Limited (No 2) [2018] FCA 1), the primary judge granted a declaration that Reckitt had engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, and had made false representations, in contravention of the Australian Consumer Law. These are serious contraventions. The primary judge also made orders permanently restraining Reckitt from, in substance, publishing the impugned material and from making representations substantially to the same effect as the contravening representations. We are not persuaded that it was unreasonable for Reckitt to persist with its appeal with a view to vindicating its commercial conduct and legal position on reasonably arguable grounds, particularly in light of the contraventions found. Reasonableness did not require Reckitt to abandon its appeal. 10 This is so even though Glaxo was prepared to bear its own costs. As we have noted, the quantum of those costs was not communicated to Reckitt. Had the quantum been communicated, Reckitt might have reasoned, justifiably, that, in monetary terms, the compromise offered was modest compared to its commercial and legal interests that were at stake. 11 In the circumstances, the appropriate order is that Reckitt pay Glaxo's costs of the appeal on a party and party basis. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices McKerracher, Yates and Gleeson.