Specsavers Pty Limited v Luxottica Retail Australia Pty Limited

Introduction 1 On 3 July 2013, I published my reasons for judgment in this matter (Specsavers Pty Ltd v Luxottica Retail Australia Pty Ltd [2013] FCA 648). Orders were made dismissing the originating application and ordering the applicant to pay the respondent's costs. Upon delivery of the judgment, the respondent sought an opportunity to make submissions in support of a claim that it was entitled to an order for costs in its favour on an indemnity basis from 27 March 2013. The basis of its position was the applicant's rejection of two "Calderbank" offers. I made directions for the filing of affidavits and brief outlines of submissions in respect of the costs issue. Both parties took advantage of that opportunity.

Summary of background facts 2 The respondent relies on the applicant's rejection of two offers made by it in Calderbank letters, both dated 27 March 2013. 3 The first Calderbank offer was made on Wednesday, 27 March 2013 at 1:27 pm in an email sent by the respondent's instructing solicitor to the applicant's instructing solicitor. The offer was made on the day before the first day of the hearing. It was made in response to a without prejudice offer made by the applicant earlier on the same day. The respondent's first Calderbank offer was expressed to be open for acceptance until 5:00 pm on 27 March 2013. The essence of the offer was that: (a) the respondent would agree to cease using certain specified "exact phrase combinations", including the phrase "Better Frames, Better Lenses, Better Fit", in any future advertising and marketing activities, as long as there was no restriction on the use of the phrase "Accufit exclusive to OPSM" either by itself or in combination with the other specified phrases; (b) the respondent would use its best endeavours to ensure that the current materials bearing the specified phrases were removed from OPSM stores and the internet promptly and, in any event, by 12 April 2013; (c) the proceedings be dismissed with each party to pay its own costs; and (d) the terms of settlement be kept confidential. 4 By a letter attached to an email sent at 2:52 pm on 27 March 2013, the applicant rejected the respondent's first offer stating that "our client is confident that the Court will find in its favour in the Proceeding". The letter pointed out that the respondent's proposed undertaking did not address one of the central issues in the case, namely the use of the phrase "Better Frames, Better Lenses, And The Best Fit You've Ever Had". Among other reasons given for the applicant's rejection of the first offer, it was claimed that the expedited final hearing which was scheduled to commence the following day "was entirely the suggestion of your client and was in fact actively opposed by our client". The applicant made a counter-offer (the details of which need not be set out). The counter-offer was expressed to be open for acceptance until 5:00 pm on 27 March 2013. 5 The respondent's second Calderbank offer was made by way of an email sent at 8:44 pm on 27 March 2013. The second offer differed from the first in various respects, including by adding to the list of phrases which the respondent said it would no longer use in its future advertising and marketing activities, the phrase "Better Frames, Better Lenses, And The Best Fit You've Ever Had". The reservation of the right to use the phrase "Accufit exclusive to OPSM" was maintained. Reasons were also given for not accepting certain aspects of the applicant's counter-offer. The second Calderbank offer was said to be open for acceptance until 9:00 am the following day i.e. 28 March 2013, the day on which the hearing was scheduled to commence. 6 The parties' instructing solicitors had several telephone conversations after 9:00 pm on 27 March 2013 in respect of the second Calderbank offer. During the course of those conversations, the applicant's instructing solicitor said that she was instructed to decline the second Calderbank offer and to make a counter-offer, which entailed acceptance of the respondent's second Calderbank offer save that it be made clear that the applicant was not precluded from bringing a future action in relation to the respondent's use of the phrase "Accufit exclusive to OPSM" if it was used in a misleading way. The respondent rejected that counter-offer. A further counter-offer was made by the applicant later that evening and the respondent's solicitor indicated that it was unlikely that she would be able to obtain instructions on that proposal that night. 7 At 9:30 am on 28 March 2013, i.e. shortly before the hearing commenced, the respondent's instructing solicitor forwarded to the applicant's instruction solicitor proposed terms of settlement. The applicant proposed some amendments to that document which were forwarded under cover of an email at 10:02 am on 28 March 2013. At approximately 11:00 am on that day the respondent's instructing solicitor indicated that the revised offer was rejected. There were some further discussions between the parties concerning a possible compromise of the proceedings, but they have no relevance to the present issue. 8 As will emerge below, in resisting the application for indemnity costs, the applicant places particular emphasis on the difficulties it experienced at the relevant time in reviewing and responding to the respondent's evidence. Having ordered that the hearing be expedited, directions had been given for the filing of evidence, which provided the applicant with only 28 hours to review the respondent's evidence in answer. Ms Lynne Peach, who had primary carriage of the proceedings on behalf of the applicant, gave evidence, which I accept, that some logistical difficulties were experienced by her and those assisting her in forwarding to the applicant and to its expert copies of the respondent's evidence in answer, primarily because of the bulk of the documentation. It is evident that those logistical problems distracted Ms Peach and her colleagues for some hours during the afternoon and evening of 26 March 2013. Well into the late evening on 26 March 2013 and throughout the following day, Ms Peach and her colleagues were very much focused on the task of preparing evidence in reply. At approximately 5:00 pm on 27 March 2013, the applicant's solicitors forwarded to the respondent a second affidavit of Mr Simon Hawkins by way of evidence in reply. At approximately 10:00 pm on the same day, Ms Peach also forwarded to the respondent a second affidavit by Dr Stephen Downes, the applicant's expert.