Redbubble Ltd v Hells Angels Motorcycle Corporation [2021] FCA 1467 | Case summary

Whether orders should be made disposing of the appeal by consent 7 Section 25(2B)(b) of the Federal Court of Australia Act 1976 (Cth) (FCA) provides that a single Judge or a Full Court may 'make an order by consent disposing of an appeal to the Court (including an order for costs)'. In inviting the Court to make orders in the terms agreed, neither party specifically referred to this section, or the circumstances under which it is appropriate for the Court to exercise the power contained therein. It remains a somewhat open question whether the Court, in considering whether to make orders under s 25(2B)(b), must be satisfied of the existence of appellable error in the decision appealed from and what the requisite standard of any such satisfaction should be, in circumstances where the merits of the appeal have not been considered. 8 In Telstra Corporation Ltd v Minister for Broadband, Communications and the Digital Economy [2008] FCAFC 7; 166 FCR 64, the Full Court (French, Weinberg, Greenwood JJ) noted that this question had not been previously considered (at [43]-[44] and [47]): 43 In making any consent order the Court must be satisfied that the order is within power and appropriate. The question is whether, before it can make an order allowing an appeal by consent of the parties, the Court must be satisfied that there was a legal or factual error or an error in the exercise of a discretion by the primary judge. 44 Section 25(2B)(b) of the Act authorises a single judge or a Full Court to "make an order by consent disposing of an appeal to the Court (including an order for costs)". The appeal so "disposed of", whether by allowing it or dismissing it, is an appeal by way of rehearing, that is an appeal of the kind described by the High Court in Jia Legeng 205 CLR 507 and Allesch 203 CLR 172. It seems that the question whether an appeal can be allowed under s 25 without first instance error has not been directly considered previously by this Court. … 47 The above observations do not mean that the Court is relieved of the obligation to ensure that a proposed consent order is both within power and appropriate. There is long established authority that the Court cannot be given power, by consent of the parties, to make an order that it would not have the power to make without their consent: Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 at 163. That limitation and the requirement that the order be "appropriate" do not mandate close scrutiny of the merits of the proposed order by the Court. There is a principle of judicial restraint in the scrutiny of settlements between legally represented parties of full capacity which applies to consent orders: Australian Competition and Consumer Commission v Real Estate Institute (WA) Inc (1999) 161 ALR 79. 9 After consideration of a number of authorities, the Court concluded (at [51]) that 'none of the preceding authorities relieves this Court of the duty to be satisfied, as a condition of the exercise of its power to allow an appeal by consent, that there was an appellable error' (emphasis added.). The Court then proceeded however, to note that after some conferral, the parties in Telstra reached an agreed position to the effect that there was an 'arguable appellable error' (at [52], emphasis added.) On the basis of that agreed position, the Court concluded as follows (at [54]): In our opinion and without descending into the merits of the appeal, there is sufficient basis for the existence of error by his Honour to enliven the power of the Court to allow this appeal. Essentially the error related to the absence of certain findings of fact said to bear upon a determination of the merits of any cause of action by Telstra against the Minister. This is relevant to his Honour's extensive consideration of the legal merits of Telstra's posited cause of action which would, at trial, be considered in a more detailed factual context. The Court acknowledges, in reaching the conclusion that it does, that there was no contradictor before it. (Emphasis added.) 10 The decision in Telstra was subsequently applied in Citigroup Pty Ltd v Mason [2008] FCAFC 151; 171 FCR 96 per Moore, Finn and Dowsett JJ (at [7] and [16]) and Commonwealth Bank of Australia v Walker [2012] FCAFC 68; 289 ALR 674 per Perram JJ ([3]-[6], Rares and Flick JJ agreeing) on the basis that all that need be demonstrated is arguable appellable error. In each of those cases the Court was satisfied that arguable appellable error had been demonstrated and made orders allowing the respective appeals. In Mason, significant doubts were expressed in obiter (at [8]-[15]) about the appropriateness of the requirement that any appellable error be demonstrated in order to enliven the power under s 25(2B(b), however the Court followed Telstra in the result on the basis that it was not invited to reconsider the correctness of that decision and because the respondent had conceded that there was arguable appellable error in the primary judgment. 11 A similar situation arose in Bradken Ltd v Norcast S.ár.L [2013] FCAFC 123; 219 FCR 101 where Allsop CJ, Mansfield and Jacobson JJ said (at [19]-[23]): 19 There is some room for debate about the circumstances in which the Court's power to allow an appeal by consent under s 25(2B) is enlivened. 20 For present purposes, it is not necessary to enter further upon that debate. Senior Counsel for the appellants was content for the Court to proceed upon the basis that the Court must be satisfied that there is appellable error: Telstra Corporation Ltd v Minister for Broadband, Communications and the Digital Economy (2008) 166 FCR 64 (Telstra). The Full Court, after reviewing relevant authorities at [40]-[50] concluded at [51] that it was under a "duty to be satisfied, as a condition of the exercise of its power to allow an appeal by consent, that there was an appealable error". The Court in Telstra accepted that the satisfaction may be derived by a process less than hearing the full appeal. 21 In Commonwealth Bank of Australia v Walker (2012) 289 ALR 674 (Walker), Perram J (with whom Rares and Flick JJ agreed) said of that conclusion at [4]-[5]: That statement, however, needs to be understood in the context of their later statement at [52]-[54], which appears to proceed on the basis that demonstration of an arguable appealable error is all that is required. This test was applied by a later Full Court in Citigroup Pty Ltd v Mason (2008) 171 FCR 96; 250 ALR 7; [2008] FCAFC 151 at [3]-[7] (Citigroup), and it is upon that basis that it seems to me appropriate to proceed. It was not explicitly argued before this court that it should now depart from the Full Court's reasoning in Telstra, and we have not heard argument as to its correctness. In that circumstance there is no reason to depart from it. 22 In Telstra at [54] the Full Court concluded that "without descending into the merits of the appeal, there is sufficient basis for the existence of error by his Honour to enliven the power of the Court to allow this appeal". Their Honours then explained why they were so satisfied. 23 It is therefore neither necessary nor appropriate to explore the correctness of that approach. The observations in Citigroup Pty Ltd v Mason (2008) 171 FCR 96 at [8]-[15] (Mason) about whether the decision in Telstra should be followed do not need to be considered. In Mason, when applying that test, counsel and the Court also proceeded on that basis. The Court notes that in Mason at [7] the Court as then constituted made the orders only because of the concession made by Senior Counsel (for the respondent) that arguable appellable error of law was established. That observation should be read in the context that nevertheless the responsibility of the Court is to make such an assessment, albeit no doubt assisted by the submissions of counsel. (Emphasis added.) 12 However, the Court in Bradken declined to make consent orders in that case to allow the appeal, finding instead that 'operative error' had not been demonstrated in the reasoning of the primary judge which involved complex and detailed findings on a matter of significant public interest. After noting that the Courts in Telstra and Mason appeared to have applied a test of 'arguable appellable error', the Court in Bradken observed that those decisions involved issues on appeal that were 'relatively straightforward' (at [24]) as opposed to the issues in that case which involved the first significant consideration of the cartel conduct provisions under Pt IV, Div 1 of the Competition and Consumer Act 2010 (Cth) and were 'considerably more complex' (at [25]). It was noted at [2] that while the Court need only be satisfied of arguable appellable error, that standard of satisfaction will 'depend upon the nature and complexity of the proceeding and the nature of the error that is identified. In its conclusion, the Court emphasised that the issues on appeal were numerous, complex and involved important questions of general public interest (at [33]-[34] and [36]-[37]): 33 The proposed orders, if made, would have led to the Court allowing the appeal, and setting aside the declarations and orders made at first instance, without any substantive assessment of any of the many issues raised by the appeal, but necessarily based on a view of the existence of sufficient operative error to justify the making of the orders. 34 The judgment at first instance addressed important issues arising under ss 44ZZRJ and 44ZZRK of the CC Act. It reflected carefully considered views of a judge of the Court on a matter of general public interest, as well as on matters of particular interest to the parties. In the normal course of the appeal, the Full Court would have itself expressed views on those matters (as well as on the contested factual findings). As the appeal was not argued, it is not possible to say whether all or any of those matters would have led to the appeal being successful and the orders at first instance being set aside. But it is possible to say that it is unlikely that each of the critical findings of fact by the primary judge would have been found to have been in error and that each of the critical issues of construction and application of the legislative provisions considered by her Honour would also have been found to have been in error. But, the effect of the orders proposed to be made on this application would have led to the outcome that, in effect, all of the legal and factual conclusions of the primary judge would have had no status. … 36 After a careful examination of the submissions of the appellants, the Court was not satisfied of the existence of operative error. That is not to say that the grounds of appeal were not arguable. Important questions were raised by the submissions, some or all of which on full argument may have been answered in favour of the appellants. There were, however, substantial matters put to the contrary in the submissions of the respondent (in the appeal proper) and in the submissions of the ACCC. Without a concession from responsible counsel for the respondent as to the existence of error, in a case of such complexity, with a long and careful judgment of the primary judge, the Court was not satisfied, to any real degree of satisfaction on the submissions, of the existence of error. 37 The process, on the authority of Telstra, is not a formality. If the Court had been prepared to make the orders, the parties would have been entitled to tell the world that on a short application and without any adjudication on the merits, the Full Court was satisfied of error in the primary judge's reasons: cf VTAG v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 141 FCR 291 at [23]. We were not so satisfied. (Emphasis added.) 13 The Full Court in Bradken went on to point out that their refusal to endorse consent orders disposing of an appeal did not limit, in any practical sense, the ability of parties to reach an effective settlement of issues the subject of litigation, by reason of the alternative procedure made available by rr 39.05(f) and 39.11 of the FCRs (at [4], [10] and [38]). 14 The issues considered in the primary judgment are certainly not as numerous or complex as those in Bradken. HAMC (AUS)'s claim in the primary proceeding against Redbubble was commenced in December 2020 and initially alleged infringement of its trademarks by conduct pleaded as seven examples of instances where infringing materials appeared on Redbubble's website (Examples 1-7). In brief, Redbubble's website is an online marketplace which allows artists to upload a design and nominate a class of goods to which that design can be applied and subsequently purchased by consumers (for example t-shirts, caps and mugs). 'Bad actors' are able to take advantage of the open nature of the marketplace and upload items that trespass on the intellectual property of third parties. The trial in the primary proceeding in relation to Examples 1-7 concluded on 13 July 2021 with judgment reserved. Shortly after, HAMC (AUS) became aware of a further four examples of alleged infringing conduct (Examples 8-11) that had not been addressed at trial as they appeared to have been subsequently uploaded to Redbubble's website. Instead of commencing fresh proceedings, HAMC (AUS) applied to re-open the primary proceeding and the primary judge granted that application and made provision for both parties to file amended pleadings 'in relation to the four further examples in suit': Hells Angels Motorcycle Corporation (Australia) Pty Limited v Redbubble [2021] FCA 1090 (re-opening judgment). 15 For reasons that are not necessary to set out here, Redbubble filed its amended defence following the re-opening judgment and subsequently sought leave to further amend that defence so as to plead a complete defence in relation to Examples 1-7. The application to amend to include this complete defence was refused in the primary judgment and, as noted, I granted leave to appeal from that judgment. The detail of the 'complete defence' which Redbubble seeks to plead is the subject of strict confidentiality claims, such that the application for leave to amend and the application for leave to appeal were heard in closed court. The primary judgment is also suppressed. For this reason, I will refer to it only as Redbubble's complete defence amendment. It should be kept in mind however that the complete defence amendment is contended to provide a complete defence only to Examples 1-7, and not Examples 8-11. Although the trial in relation to Examples 1-7 has already occurred, in its amended statement of claim HAMC (AUS) contends for broad injunctions and additional damages by reason of, inter alia, Examples 8-11 demonstrating Redbubble's continued infringing conduct amounting to 'reckless indifference and disregard' to HAMC (AUS)'s trademark rights. Redbubble contends that in the event that the complete defence amendment is allowed and succeeds in relation to Examples 1-7, this would dramatically change the context in which the Court would assess the appropriate remedy in relation to the primary proceeding overall. 16 Thus, despite the somewhat unusual procedural background against which Redbubble brought its application to amend to include the complete defence amendment, the issue before the primary judge involved consideration of a discrete question of whether an amendment to a pleading should be allowed. That issue is far more similar in character to those considered in Telstra and Walker than it is to those considered in Bradken; in Telstra and Walker the issues on both appeals concerned unsuccessful applications for pre-trial discovery. In Mason, the issues were more substantive, involving a challenge to an order for payment of particular unpaid annual leave entitlements having regard to the interaction between State and Commonwealth legislation. 17 Although I do not propose to embark on a full consideration of the construction of s 25(2B)(b) of the FCA in the absence of argument, in my view, the power conferred by that section does not require, as a precondition to its exercise, a finding of anything more than arguable appellable error in the judgment appealed from. So much was confirmed by the Full Courts in Walker (at [4]), which involved issues of comparable complexity and character to that in issue here, and Bradken (at [2]). That approach was also adopted in Mason, albeit on the basis of concession of arguable appellable error by the respondent in that case. To the extent that Bradken suggests a higher standard (at [36]), this should be read in the context of the Court's earlier statement (at [2]) and the issues of significant complexity and general public importance that the Full Court considered in that case, which bear upon the standard of satisfaction that the Court must reach as to arguable error: see recently, Comcare v Stefaniak [2020] FCA 560 per Thawley J (at [4]). 18 Section 25(2B)(b) makes plain that the disposition of an appeal by consent may be effected by a single Judge or a Full Court. In my view, not only would it be inappropriate for a single Judge to express any conclusion as to error that extends beyond a finding that such an error is 'arguable' in a judgment of another single Judge - a low bar - it would be a highly perverse result if the section contemplated a different standard of satisfaction of error depending on whether the power was to be exercised by a single Judge or a Full Court. I respectfully agree with the observations of the Full Court in Mason (at [11]) regarding the reliance in Telstra on the reasoning in Allesch v Maunz (2000) 203 CLR 172 for the proposition that the existence of appellable error is a precondition to the exercise of power under s 25(2B)(b): We also have little doubt that those observations were not directed to a power to make a consent order, namely a power of the type exercisable under s 25(2B)(b) by a single judge or a Full Court. Such a consent order is, in the words of the Act, made to dispose of an appeal. It does not involve, other than in the loosest sense, a determination of the appeal and certainly does not involve the determination of the appeal after a contested hearing. The fact that a consent order can be made by a single judge militates, in our opinion, against the conclusion that, as a matter of construction, the power to make the order can only be exercised if the Court, in exercising appellate jurisdiction, is satisfied there is error on the part of the judge whose judgment is the subject of appeal (often, in practice, a single judge of the Federal Court). (Emphasis added.) 19 In granting leave for Redbubble to appeal the primary judgment, I considered Redbubble's proposed grounds of appeal to be sufficiently arguable to warrant a grant of leave, having regard to whether the primary judgment was attended by sufficient doubt to warrant its consideration by a Full Court and whether substantial injustice would be occasioned by Redbubble were it to have been incorrectly precluded from pleading the complete defence amendment. For the same reasons, I consider it to be arguable that the primary judgment is attended by appellable error. Being mindful of the confidential basis on which the parties made submissions on the application for leave to appeal, I consider, with great respect to the primary judge who looked at the ultimate likelihood of success of the proposed amendment very closely, Redbubble demonstrated arguable error only in the primary judgment by reason of: (a) The limited consideration in the primary judgment of a number of the usual factors to be taken into account when considering whether to grant leave to amend, as summarised by Gleeson J in Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm), in the matter of Tamaya Resources Limited (in liq) [2015] FCA 1098 (at [127]) and derived from Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 and Luck v Chief Executive Officer of Centrelink [2015] FCAFC 75. In particular, there appeared to be limited consideration given to the importance of the complete defence amendment to Redbubble and the corresponding prejudice to Redbubble if the amendment was not allowed; (b) The detailed consideration given to the merits of Redbubble's complete defence amendment to the exclusion of consideration of the factors referred to in (a) above. Further, in response to Redbubble's submission that the complete defence amendment could succeed in resisting the claims in relation to Examples 1-7 on three alternative bases, the primary judge concluded (at [40]) that the complete defence amendment was 'not absolutely unarguable' rather than considering whether the amendment would be reasonably arguable, and whether it would be liable to be struck out if it had appeared in the original pleading; (c) The absence in the primary judgment of identification of real prejudice to HAMC (AUS) or HAMC (US) if the amendment was allowed in circumstances where the proceedings had already been re-opened. No such prejudice was balanced against the substantial injustice raised by Redbubble that would flow if the complete defence amendment was disallowed; (d) The conclusion (at [11]) in the primary judgment that the 'case is closed' in relation to Examples 1-7 in circumstances where HAMC (AUS)'s amended statement of claim filed after the re-opening judgment pleaded that Examples 8-11 were relevant to the way in which the Court should approach the question of relief with respect to Examples 1-7. 20 In these circumstances, and solely on the basis of the identification of arguable appellable error on effectively the same grounds as those identified as sufficient to warrant a grant of leave to appeal from the primary judgment, I consider that the consent orders that the parties invite the Court to make to dispose of this appeal proceeding should be made pursuant to s 25(2B)(b) of the FCA.

Costs of the application for leave to appeal 21 At the time when leave was granted to appeal the primary judgment, I ordered that the costs of the application for leave to appeal be reserved to the Full Court, in circumstances where it was anticipated there would be a contested hearing of the appeal. Redbubble thus seeks its costs of the application, contending that the ordinary rule that costs follow the event should apply in circumstances were it both succeeded on the application for leave to appeal and HAMC (AUS) effectively conceded the appeal. HAMC (AUS) submits instead that those costs should be remitted to the primary judge. 22 A single Judge (exercising appellate jurisdiction) has the power to make a costs order; there is no need for a consent position. This follows from the terms of s 25(2)(a) of the FCA which requires an application for leave to appeal to be heard and determined by a single Judge unless one of the exceptions in subs (e) or (f) applies. Redbubble points to the recent decision in Davaria Pty Limited v 7-Eleven Stores Pty Limited [2021] FCA 450 in which Moshinsky J determined the costs of an application for leave in appeal in circumstances where the application was discontinued shortly after it was filed. In that case, his Honour ordered that the costs of the application be costs in the cause in the underlying proceeding (at [17]). 23 Redbubble says that a costs order in its favour is appropriate because it was successful in its application for leave to appeal, which it says is the relevant 'event' for the purposes of determining the costs of the application for leave to appeal. Secondly, by making an order that HAMC (AUS) pay Redbubble's costs of the application for leave to appeal, that will compensate Redbubble (as the successful party on that application) for at least some of the expense that it had to incur in vindicating its rights. Redbubble observes that HAMC (AUS) contested the application which proceeded to hearing. Thirdly, and relatedly, Redbubble notes that this appeal proceeding remained contested by HAMC (AUS) up until 2 November 2021 (six days after leave to appeal was granted), when the primary proceeding came on for directions before the primary judge. It was only in circumstances where the primary judge determined at that hearing that the appeal ought to be heard and determined in advance of the further hearing in the primary proceeding that HAMC (AUS) made the decision - communicated for the first time on 3 November 2021 in an email sent simultaneously to Redbubble and the primary judge's associate - to no longer contest the appeal. It is submitted that allowing Redbubble its costs of the application for leave to appeal now will achieve some further measure of justice between the parties in those particular circumstances. 24 HAMC (AUS)'s resistance is shortly stated, and to the effect that the 'event' which costs should follow is the ultimate decision of the primary judge, or another judge, on the merits of the complete defence amendment at trial. It says that only at this later stage would it be appropriate to consider the costs of the application for leave to appeal, in the same way that the costs of Redbubble's application to amend in the primary proceeding which brought about this appeal have been remitted to the primary judge. 25 In line with my initial view that costs of the application for leave to appeal should be reserved to a Full Court hearing Redbubble's appeal, in circumstances where that appeal is no longer contested and is to be allowed by consent, it is appropriate for Redbubble to receive its costs as the successful party. If the appeal had been contested and determined by a Full Court, the central issue would have been whether the decision in the primary judgment to refuse Redbubble's application to amend was attended by appellable error. It would not have considered the underlying merits of the complete defence amendment as the primary judge would have done at trial had his Honour allowed the amendment. The relevant 'event' therefore, is success in this appeal proceeding on the question of leave to amend, not the success that the complete defence amendment may or may not have at trial. 26 For this reason, Redbubble is entitled to its costs of the application for leave to appeal from HAMC (AUS). It is to be observed however that HAMC (AUS)'s opposition to the application for leave to appeal was not the basis upon which the application was required to be brought. Redbubble required a grant of leave to proceed with its appeal regardless of the position taken by HAMC (AUS): s 24(1A) of the FCA. In all likelihood, the Court would have required the application to proceed to oral hearing as it did even if it was unopposed, unless specifically (and with good reason) requested otherwise by Redbubble. In those circumstances, although it is not possible to fix a lump sum amount at present, I consider that any assessment of costs must account for these factors such that any costs order against HAMC (AUS) is not disproportionate to the nature of its quite limited opposition.

Redbubble Ltd v Hells Angels Motorcycle Corporation

At a glance

Court

Decision date

Before

Source

Judgment (5 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (19)

Cited By (5)