W. Win Engineering Pty Ltd v Wiggins

The application 5 On 15 June 2016 W Win filed an interlocutory application seeking leave to discontinue the proceedings and an order that Mr Wiggins pay its costs in the amount of $22,000. The application was supported by an affidavit sworn by Madison Holdsworth, a solicitor in the employ of Deutsch Partners, W Win's lawyers. Mr Wiggins filed an affidavit on 1 July 2016 but he filed no submissions. Mr Wiggins did not indicate whether he opposed the application for costs but I shall proceed on the assumption that he does.

The relevant principles 6 The Court has a broad discretion when it comes to costs and costs may be awarded in a specified sum: see Federal Court of Australia Act 1976 (Cth), s 43(2) and (3)(d). Usually, however, that discretion is exercised after a hearing and, generally speaking, an order for costs will be made in favour of the successful party. As McHugh J observed in Re The Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 6245, in the absence of a hearing on the merits, "a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order". Thus: If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. 7 The Federal Court Rules 2011 (Cth) permit a party to file a notice of discontinuance at any time with the Court's leave. Unless the parties consent or an order of the Court provides otherwise, a party who files a notice of discontinuance is liable to pay the costs of all other parties to the proceeding. See r 26.12(2) and (7). 8 "Costs" are relevantly defined in Sch 1 to the Rules as "costs as between party and party", "unless the context otherwise provides". There is nothing about the reference to "costs" in r 26.12 which provides a different context. "Costs as between party and party" means "only the costs that have been fairly and reasonably incurred by the party in the conduct of the litigation". 9 In Lo v Australian Community Pharmacy Authority [2013] FCA 639 at [60], I observed of r 26.12: This rule, which in substance is the same as r 42.19 of the Uniform Civil Procedure Rules 2005 (NSW), establishes a default or prima facie position (Armstrong v Australian Community Pharmacy Authority [2012] FCA 577 per Rares J at [9]). It does not create a presumption that costs will be awarded against the discontinuing party, but it puts an onus on it to make an application to the Court where, absent an agreement to the contrary, it does not propose to pay the costs of the other parties (Foukkare v Angreb Pty Ltd [2006] NSWCA 335 at [65]). And the Court will require "some sound positive ground or good reason for departing from the ordinary course": Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 at [54], Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 at [54]. 10 Here, W Win submits that a costs order should be made in its favour because Mr Wiggins behaved unreasonably and, had the matter been fully tried, it is almost certain that it would have succeeded. Either circumstance would justify the making of an order in its favour: Lai Qin at 625. A party entitled to costs may apply to the Court for an order that costs be paid other than as between party and party, including on an indemnity basis: r 40.02(a). Despite threatening to do so, W Win made no such application. 11 Three questions therefore arise for determination in this case. First, was the conduct of W Win reasonable and Mr Wiggins' unreasonable? Second, is it almost certain that W Win would have succeeded? Third, if so, should costs be awarded in the amount sought? The first two questions should be answered in W Win's favour, the third not.

W Win's evidence 12 On Monday 1 February 2016 David Deutsch, the principal of Deutsch Partners, wrote a letter addressed to "Mr Leonard Wiggins trading as Win Engineering". The letter was sent by email to lennie@winengineering.net. The letter began with a description of W Win's position. It asserted that that since 1991 W Win has been "the leader in the manufacture and sale of concrete pumping accessories and equipment, servicing the construction and mining industries throughout Australia and internationally"; that its marks, brand, domain names and products were distinctive and carry substantial goodwill and reputation; that it was the owner and operator of "the well-known website" at www.wwinengineering.com.au and the registered holder of the domain name wwinengineering.com.au; and that it was the registered owner of a composite mark incorporating its name, reproduced in the letter. It then made a number of factual and legal allegations against Mr Wiggins the substance of which found its way into W Win's pleading. In summary, those allegations were that Mr Wiggins' use of the logo, the trading name "Win Engineering" and the domain name of the website he owned and operated was: deceptively similar to W Win's registered trade mark and therefore infringed its trade mark (s 120 of the Trade Marks Act); likely to mislead and deceive consumers into believing that he was distributing W Win's products when he was not and that his customers were using W Win's products when they were not (in contravention of s 18 of the Australian Consumer Law): representing that his products have the performance characteristics of W Win's products and the approval of W Win (in contravention of ss 29(g) and (h) of the Australian Consumer Law); and passing off his product as W Win's, causing damage to W Win's reputation and the goodwill of its brand. 13 The letter demanded: (a) That the domain name winengineering.com.au located at the URL www.winengineering.com.au is immediately transferred to W Win Engineering. (b) That you immediately deregister the business names "Win Engineering" and "Win United Engineering". (c) That you (including your agents) immediately cease and desist from using "Win Engineering" and/or "Win United Engineering" as a trade mark or name in advertising, promoting or supplying products relating to the classes of goods and services referred to in paragraph 1.5 [of the letter]. If you fail to do so our client will take such further action as may be advised. (d) That you (including your agents) immediately cease and desist from any logo that is substantially identical with or deceptively similar to W Win Engineering's logo. 14 Mr Wiggins was asked to undertake to attend to each of these matters "by executing" a copy of the letter and returning it to the firm by 5.00pm the following Friday. The "execution" clause was in these terms; I, Mark Leonard Wiggins, give to W Win Engineering Pty Ltd (ACN 054 669 911) the undertakings at paragraph 6(a)-(d) of the letter from W Win Engineering Pty Ltd to me dated 1 February 2016. ……………………. Mark Leonard Wiggins Date: 15 A reply was sent by email at 12.41pm the next day, signed Leonard Wiggins, General Manager, from the email address appearing on the first page of the letter: All actions have been completed these will take a couple of days to finalise. 16 Mr Deutsch replied later that afternoon: Lennie You have not provided a signed undertaking or any evidence confirming the same. This must be provided immediately failing which court action will be commenced. 17 Mr Wiggins responded that evening: I am not Mark Leonard Wiggins so I cannot sign this! I am currently in hospital and undergoing surgery and will not be able to reply until 15th February 2016. 18 When Mr Deutsch responded, asking who Mark Leonard Wiggins was, he received the following blunt and provocative reply: Do your own research! Doesn't sound like you're a very accomplished Lawyer! Talk again on the 15th! 19 Mr Deutsch did not wait until 15 February. Rather, on Wednesday, 3 February 2016 he sent another email: Leonard I have reviewed the documents lodged by you when you registered the business name. The name is as stated on our letter. If you don't sign and return our letter and provide the evidence to demonstrate what is required, we will be approaching the court shortly. 20 On 9 February 2016 Mr Deutsch sent another letter to Leonard Wiggins, which was also emailed to the lennie@winengineering.net email address. After referring to the earlier correspondence, Mr Deutsch wrote: From our conversation with you, we understand that your name is Leonard Mark Wiggins. From a review of the ASIC company extract for Win United Group Pty Ltd, of which you used to be a director, it appears that your name is Leonard Mark Wiggins. From a review of your ABN, registered in December 2015, it appears your name is Leonard Mark Wiggins. As such, the reason for the name discrepancy is a result of documents lodged by you with the Australian Securities and Investment Commission, not any error by our firm. Nevertheless, please find enclosed an amended undertaking for your execution and return by close of business Monday, 15 February 2016. If we do not receive the signed undertaking by that time, we will commence proceedings without further notice. 21 The amended undertaking substituted the name "Leonard Mark Wiggins" for "Mark Leonard Wiggins". Mr Wiggins replied by email the same day enclosing a signed copy of the undertaking. 22 On 19 February 2016 Mr Deutsch wrote again to Mr Wiggins, by email and by express post, accusing him of breaching the undertakings. He pointed out that searches undertaken on 18 and 19 February respectively, copies of which were attached, continued to show that Mr Wiggins was the registered owner of the domain name winengineering.com.au and the registered business names win engineering and win united engineering; that on 18 February 2016 there was also a LinkedIn entry for "Win Engineering"; and that the emails Mr Wiggins sent to Deutsch Partners on 2 and 9 February 2016 contained logos which, Mr Deutsch claimed, were substantially identical or deceptively similar to W Win's logo. Mr Deutsch said that if Mr Wiggins did not provide proof of compliance with each of the undertakings by 5.00pm on Wednesday, 24 February 2016 the firm was instructed to commence proceedings against him seeking injunctions restraining him, amongst other things, from using the names "Win Engineering" and "Win United Engineering" in relation to his business and an order that he pay W Win's costs on an indemnity basis. 23 There was no response to this letter. 24 On 8 March 2016 the URL www.winengineering.com.au loaded a page displaying the message: "This website hasn't been published yet". 25 As I mentioned earlier, the proceeding was instituted on 9 March 2016, but the originating application was not served on Mr Wiggins personally until about 2 April 2016. Notwithstanding the breadth of the orders sought in the originating application and the allegations made in the statement of claim, Ms Holdsworth stated in her affidavit that the purpose of the proceedings was to enforce the undertakings. 26 On 5 April 2016 Mr Wiggins sent an email to Mr Deutsch, to which a number of documents were attached, from a Gmail account: I received a letter in the mail from yourself today. I have actually been unwell in hospital for the past month thus the reason for the delayed reply. Just to clarify I have covered all your required points. 1. Registering the domain winengineering.com.au, this website has been removed and is no longer alive. 2. The trading name of Win Engineering was ceased 9/2/16 as seen in the attached. 3. In relation to any phone or online marketing please see the attached in regards to White pages, Yellow Pages, True Local and Whereis. 4. In regards to the LinkedIn page I had my personal page closed and I assumed it also closed the company page, I have lodged a request with LinkedIn to have this removed so I'm assuming it will be completed over the next 48 hours. Please advise what else needs to be completed. 27 Documents attached to the email confirmed 2-4 above. 28 Mr Deutsch did not reply until 28 April 2016. The letter was attached to an email from Ms Holdsworth. It enclosed a copy of a search of WHOIS, undertaken two days earlier, which continued to show Mr Wiggins as the registered owner of the domain name winengineering.com.au. In his letter Mr Deutsch insisted that Mr Wiggins immediately transfer the domain name to W Win in accordance with his undertaking. He then set out his understanding as to how this might be done. He indicated that upon receiving confirmation that the transfer had taken place his firm was instructed to file a notice of discontinuance in the proceedings. He added that in view of Mr Wiggins' failure to comply with the undertakings and to respond to correspondence W Win intended to seek an order for costs, which were in the range of $25,000. In the event that he did not confirm the transfer of the domain name by 5.00pm the following day, Mr Deutsch indicated that the firm would appear in court on 2 May 2016 and seek a timetable for the service of evidence in the proceedings. 29 The next day, Mr Wiggins sent an email to Ms Holdsworth. The email contained a "WHOIS Result", showing technical and registration information relating to the domain name winengineering.com.au, and the message: Good Afternoon, As requested I am trying to transfer the domain name and I require W. Win Engineering details for the following. 30 Mr Deutsch's affidavit does not suggest that there was any response to this email. 31 Early on 30 April 2016 Mr Wiggins sent a further, plaintive email to Ms Holdsworth: Can you please advise urgently as I have done all I can on this side. I require the transfer details before I can take any further action. 32 On 3 May 2016 Ms Holdsworth replied, informing Mr Wiggins that he needed to provide W Win with an authorisation code for the transfer of the domain name, setting out the steps she understood needed to be taken and including a link to a website where further information could be found. She advised that once a domain name had been transferred it could take up to 7 days to appear on the register, urging him to act promptly. Noting that the matter was back in court on 16 May 2016, she foreshadowed that the costs application would be made, adding: "We note that you failed to respond to our letter in that regard". 33 On 4 May 2016 Mr Wiggins emailed Mr Deutsch with the authorisation code. 34 In her affidavit, Ms Holdsworth stated that costs to date total $28,016.56, comprising $16,676 in legal fees and $11,340.50 in filing fees and disbursements (the six cents was unexplained). Exhibited to the affidavit are copies of invoices issued periodically by Deutsch Partners to W Win. Ms Holdsworth explained that the $22,000 sought included a 40% reduction in professional fees.

Mr Wiggins' evidence 35 Win United Pty Ltd was a family business Mr Wiggins started in 2008 after leaving school. It was built it into a well-recognised hose and fitting company that is still in operation. Mr Wiggins started Win Engineering Pty Ltd in December 2015. 36 The first letter from W Win (the February letter seeking the undertakings) was "served to Mark Wiggins and not Leonard Wiggins" and so Mr Wiggins said he "could not act upon" it. At the time he was in hospital, as he informed Deutsch Partners, "and ceased trading". Once he left hospital, however, he "immediately completed all tasks requested", including taking down the website, and Win Engineering "ceased trading on 14 March 2016". In the weeks that followed he emailed Deutsch Partners "several times asking if all their requests had been completed but received no reply". After he provided the domain hosting details on 29 April 2016, he was never told that he had provided incorrect information and heard nothing more about it until 2 May 2016. When he learned that he had sent incorrect transfer information, he located the correct information and emailed through the transfer code on 5 May 2016. There was no response to that email so on 10 May 2015 he emailed Deutsch Partners again asking if they could advise as soon as possible if everything that was required had been completed. Once again, he had no reply until he was advised that the matter would be back in court on 16 May 2016. He concluded: Even though Deutsch and Partners stated during the court hearing on the 16th May 2016 that I had provided the incorrect transfer code, I received a confirmation of domain transfer email late that same afternoon with no further information provided to them. So Deutsch and partners had the correct transfer information from the 5th May 2016 and failed to act upon it.

Was the parties' conduct reasonable or unreasonable? 37 W Win submitted that its conduct was reasonable and Mr Wiggins' unreasonable. 38 It submitted that it was reasonable in the circumstances for it to commence the proceeding because: (a) it had written to Mr Wiggins three times warning him that if he did not cease using the name "Win Engineering", it would do so; (b) only after he failed to reply to Mr Deutsch's letter of 19 February 2016 did it do so and then nearly a month after the letter had been sent; (c) at the time the originating application was filed, despite his written undertakings, Mr Wiggins: (i) still owned the business name "Win Engineering"; (ii) still owned the domain name winengineering.com.au and the message it presented to internet users (that the website had not yet been published) could have misled W Win's customers who mistakenly visited the site that its website or even the company itself had closed down; and (iii) was still advertising his "Win Engineering" business; (d) it had no other way to enforce its rights; and (e) it had reasonable causes of action. 39 On the other hand, W Win submitted that Mr Wiggins' failure to respond to the 19 February 2016 letter was unreasonable. Had he responded to the letter on or before 10 March 2016, it contended, stating that he still intended to comply with his undertakings, W Win would not have needed to bring the proceeding. 40 I accept these submissions. 41 W Win gave Mr Wiggins fair notice of its intention to commence the proceeding if he did not comply with the undertakings. In his affidavit Mr Wiggins offers no explanation as to why he did not respond to the 19 February letter. While his email of 5 April begins with an assertion that he had been unwell and in hospital for the previous month and that assertion is not challenged, his undertakings bound him to act immediately and the evidence indicates that he never informed Mr Deutsch that he had any difficulty doing so until after he was served with the originating process. Nor is there any apparent reason why he could not have sent a message to Mr Deutsch to inform him that he had been readmitted to hospital (on the assumption that he was discharged on 15 February as he suggested in his earlier emails). His evidence is that Win Engineering only ceased trading some five days after the originating application had been filed. While he may have taken down the website, that was not what he was called upon to do. Under the terms of his undertaking, he was obliged to immediately transfer the domain name to W Win. Besides, as W Win submitted, the message to consumers that he left behind was misleading. In these circumstances, W Win's conduct was reasonable and Mr Wiggins' unreasonable.

Is it almost certain that W Win would have succeeded? 42 In determining this question, the Court should not engage in a hypothetical trial: Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201; Lai Qin at 624. Here, however, Mr Wiggins effectively surrendered and W Win only seeks to discontinue because it has achieved the result it sought. In a case such as this, as Burchett J pointed out in One.Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548 at [6] there is no good reason why the successful party should not recover its costs. 43 Mr Wiggins never suggested that he had any answer to W Win's claims. Not only did he not file a defence, neither in correspondence nor in his affidavit did he ever question the truth of any of W Win's allegations. Nor did he contend that he had any defence to the claims. 44 Furthermore, it is difficult to see how W Win would not have established, at the very least, that the use of the name "Win Engineering" and the domain name it incorporated was likely to mislead or deceive members of the relevant class into believing that there was a connection or association between Mr Wiggins' business and W Win. The names "Win Engineering" and "W. Win Engineering" are almost identical. The two businesses operate in the same industry, offering the same or some of the same services. The fact that Mr Wiggins never quarrelled with the allegations made against him tends to indicate that he recognised as much. While cost may have been a contributing factor, it is likely that he did not contest the allegations because he had nothing to say in answer to them. 45 These circumstances are sufficient by themselves to persuade me that W Win would almost certainly prevail if the matter were to proceed to trial - at least in relation to its claim for misleading or deceptive conduct. It is unnecessary to go any further.

Should costs be awarded in the amount sought? 46 Costs may be awarded in a lump sum instead or in addition to taxed costs: r 40.02(b). Mr Wiggins did not challenge W Win's estimate of its costs or argue against a lump sum order. While he appeared to suggest that no costs should be payable after 5 May 2016, the costs referable to that period are relatively inconsequential. In the light of the discounted figure claimed they are immaterial. 47 A question arises, however, as to whether W Win should recover its pre-action costs, more particularly those incurred on or before 24 February 2016, which were included in the amount claimed. Were they costs incurred in the conduct of the litigation? 48 W Win asks for its costs on and from 1 February 2016 when it sent its letter of demand, including the letter of 19 February in which the ultimatum was given to Mr Ramsey to provide proof by 24 February that he had complied with his undertakings. I accept that some pre-action costs may be costs fairly and reasonably incurred by a party in the conduct of the litigation. The reference in the Rules to "the conduct of the litigation" includes costs incurred in preparation for the litigation: State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174 at [15]. But the costs incurred by W Win on and before 24 February 2016 do not answer this description. 49 In response to a request for further submissions on this point, W Win contended that the letter of demand and the correspondence that followed would have been "of use and service in the action", referring in this regard to paras 30 and 32 of its statement of claim. Paragraph 30 was presumably intended as a foundation for injunctive relief. It pleads that Mr Wiggins "threatens to, and unless restrained will, continue to engage in the wrongful conduct pleaded in this Statement of Claim" and refers, by way of particulars, to the correspondence dated 1, 9 and 19 February. Paragraph 32 forms part of a claim for breach of a contract said to be made when Mr Wiggins gave the undertakings. W Win relied on two authorities. One was Société Anonyme Pêcheries Ostendaises v Merchants' Marine Insurance Co [1928] 1 KB 750 and specifically the remark by Lord Hanworth MR at 757 that under the applicable rule there was a discretion to allow pre-action costs in respect of "materials ultimately proving of use and service in the action". The other was Frankenburg v Famous Lasky Film Service, Ltd [1931] 1 Ch 428. 50 I reject W Win's submissions. 51 Neither of the authorities upon which W Win relied supports the proposition that its costs before 24 February are recoverable. 52 First, both cases were concerned with the operation of RSC Order lxv r 27 sub-r 29. Rule 27 sub-r 29 provided that "on every taxation the taxing master shall allow all such costs, charges and expenses, as shall appear to [the taxing master] to have been necessary or proper for the attainment of justice or for defending the rights of any party". Here, on the other hand, W Win's costs are limited to party and party costs, defined as I mentioned earlier, as "only the costs that have been fairly and reasonably incurred by the party in the conduct of the litigation". 53 Second, even assuming there is no relevant distinction between the respective tests, the cases are distinguishable. The costs in issue in these cases related to gathering evidence or material that might ultimately have proved useful in the litigation. It is not controversial that the costs of gathering evidence may be costs of a proceeding. By contrast, the costs incurred by W Win before 24 February were not costs incurred in gathering evidence of matters in issue in the proceeding. They were costs incurred in attempting to avoid litigation or, in the case of the correspondence concerning the undertakings, costs incurred in the events giving rise to, or establishing, a cause of action. They were not costs fairly and reasonably incurred in the conduct of the litigation because they were necessarily anterior to it. Furthermore, on W Win's own case, the proceeding was only started because of Mr Wiggins' failure to respond to its letter of 19 February, which demanded a response by 24 February. 54 The costs incurred after 24 February total $20,048. Of that amount, rounded to the nearest dollar, the disbursements total $9,400 and professional fees $10,648. W Win should be able to recover all its disbursements but, since the full amount of its professional fees would not be recoverable on taxation, as W Win ultimately accepted, the amount of professional fees should be reduced by 30% to $7,392. 55 Accordingly, there should be a fixed costs order in W Win's favour, not in the sum proposed, but in the amount of $16,854.

Conclusion 56 W Win should have leave to discontinue the proceeding and an order should be made that Mr Wiggins pay its costs in the amount of $16,854. I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Katzmann.