FEDERAL COURT OF AUSTRALIA

Future Entertainment Pty Ltd v Cold Rock Management Pty Ltd [2013] FCA 922

THE COURT ORDERS THAT:

1.    The proceeding be dismissed.

2.    The Applicant pay the Respondents’ costs of the proceeding on an indemnity basis.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    I dismissed this proceeding on 30 August 2013 and gave my reasons in Court. The following reasons for judgment are revised from the transcript without substantive alteration.

2    The applicant, Future Entertainment Pty Ltd (“Future Entertainment”), commenced these proceedings against the respondents, Cold Rock Management Pty Ltd (“Cold Rock”) and Stanley Gordon, on 27 May 2013. The Application and Statement of Claim sought declarations that Cold Rock:

(a)    had infringed Future Entertainment’s trademarks in “Future Music Festival”;

(b)    had engaged in conduct which amounted to it passing off its business as and for a business approved by, connected with or associated with Future Entertainment’s business; and

(c)    had breached sections 18(1) and 29(1)(h) of Schedule 2 of the Competition and Consumer Act 2010 (Cth) (“ACL”).

Future Entertainment sought a declaration that Mr Gordon was involved in Cold Rock’s contravention of the Trade Marks Act 1995 (Cth) and the ACL.

3    Future Entertainment sought:

(a)    a permanent injunction restraining the respondents from using the words “Future Music Festival” as a trademark or otherwise;

(b)    an injunction under s 232 of the ACL prohibiting Cold Rock from falsely representing that it is services have sponsorship, approval, affiliation with Future Entertainment;

(c)    an order for delivery up to Future Entertainment of all promotional, advertising or other material with the words “Future Music Festival”;

(d)    an order for the removal of all references to the words “Future Music Festival” used by the respondents on their website, Facebook page and Twitter page; and

(e)    damages or an account of profits.

4    Having commenced the proceedings, Future Entertainment failed to attend the first directions hearing on 5 July 2013. The Order dated 5 July 2013 provided, amongst other things:

The directions hearing be adjourned for further directions on 30 August 2013 at 9:30 am. The Respondents are directed to advise the Applicant that the Applicant is at risk of its claim being struck out in the event that it fails to appear at the directions hearing on 30 August 2013.

I am satisfied that the respondents so advised Future Entertainment.

5    On 7 August 2013 I heard a security for costs application by the respondents. The security application was served on Future Entertainment but it again failed to appear. Future Entertainment also failed to produce the documents required by way of a Notice to Produce served upon it. I ordered security for costs in the sum of $88,500 payable in two tranches. I made orders that day confirming that the directions hearing listed on 30 August 2013 remained fixed and that the parties’ attendance was required. The Order dated 7 August 2013 provided, amongst other things:

The Respondents to serve a copy of this order on the Applicant by ordinary post and also by registered mail, under cover of a letter which advises the Applicant that the Court has noted that the proceeding may be dismissed if the Applicant fails to appear at the directions hearing listed on 30 August 2013.

I am satisfied that the respondents served the order on Future Entertainment under cover of a letter as directed.

6    When the matter was called on 30 August 2013 there was again no appearance for Future Entertainment. This is now the third time that Future Entertainment has failed to attend a court hearing.

7    Rule 5.23 provides as follows:

(1)    If an applicant is in default, a respondent may apply to the Court for an order that:

(a)    a step in the proceeding be taken within a specified time; or

(b)    the proceeding be stayed or dismissed for the whole or any part of the relief claimed by the applicant:

(i)    immediately; or

(ii)    on conditions specified in the order.

8    The respondents applied for an order that the proceeding be dismissed, and I am satisfied that this order should be made.

9    By way of two earlier orders Future Entertainment was advised that should it not attend the scheduled hearings, the proceedings stand to be dismissed. I have now dismissed the proceeding.

10    I am confirmed in my view that dismissal is appropriate by the fact that when Future Entertainment contacted my chambers to provide draft orders it also proposed an order that the proceeding be dismissed.

11    Moving now to the question of costs, having been successful in the proceeding there is no question that the respondents are entitled to party/party costs. The only question is whether I should accede to the respondents’ submission seeking indemnity costs.

12    It is uncontroversial that the Court has power to make an order for costs on an indemnity basis. The question is whether the Court should exercise its discretion in this case. In Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225, Sheppard J set out some relevant principles concerning costs. As his Honour noted at 232-234, costs ordinarily follow the event and are awarded on a party/party basis unless there are particular or special circumstances which warrant the Court departing from this practice and making an order for costs on an indemnity basis. See also: Re Wilcox, Ex Parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151 at 152-153 per Black CJ and 156-158 per Cooper and Merkel JJ; Ruddock v Vadarlis (2001) 188 ALR 143 at 147 per Black CJ and French J.

13    In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, Woodward J said at 401:

…it is appropriate to consider awarding “solicitor and client” or “indemnity” costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success.

14    In my view the question is whether the particular facts and circumstances before the Court warrant the making of an order for the payment of costs other than on the usual basis. See Matland Holdings Pty Ltd v NTZ Pty Ltd [2002] FCA 1590 per Kenny J at [69].

15    In the present case, Future Entertainment commenced these proceedings and I express no view about their prospect ultimately as to whether the use by the respondents of the relevant trademark was in breach as Future Entertainment alleges. However, what is clear is that Future Entertainment had little or no chance of success in its claim for injunctive relief.

16    By letter dated 22 February 2013 from the respondents to the solicitors for the applicant, the respondents advised that from Monday 25 February 2013 the respondents would no longer be using the name “Future Music Festival” in any of its advertising media. Notwithstanding this advice, a claim for injunctive relief was commenced by Future Entertainment on 27 May 2013.

17    Of even greater concern is the fact that at the time the proceedings were commenced, there had already been a contract of sale - entered into upon 22 May 2013 - whereby Future Entertainment transferred the relevant trademarks to another entity.

18    While the transfer was not effective until 14 June 2013, at the time these proceedings were commenced, it was well known to Future Entertainment that the trademarks which were the substance of the proceeding were in the process of being transferred away. On each occasion when this proceeding was before the Court on 5 July, 7 August and 30 August 2013, Future Entertainment was no longer the owner of the trademarks which were at the centre of the proceeding.

19    The respondents submit that the transfers were effected to ensure that Future Entertainment had no assets of value that could be secured to satisfy costs orders. There is insufficient evidence to draw such an inference, and I remain unsure as to why the transfers were effected. Of course, it may be that they were effected because of the obvious financial trouble the company is in but I do not know.

20    In any event, this is not significant in my decision. In relation to the indemnity cost application my concern relates to the positive steps taken by Future Entertainment to divest itself of the trademarks at the same time as seeking injunctive relief based on them. Another important concern is the approach that Future Entertainment has taken to these proceedings from their commencement. Having commenced the proceedings on 27 May 2013 and put the respondents to substantial expense, Future Entertainment has not attended a single Court hearing and also failed to comply with a Notice to Produce. Future Entertainment has treated the respondents shabbily and the Court with contempt.

21    In my view, the respondents ought not be required to bear the burden of any costs in these proceedings. Had Future Entertainment wanted to contest the issue of indemnity costs and provide some reasonable explanation for their conduct they could have appeared and done so. They did not.

22    I order that the proceeding be dismissed and the applicant pay the respondents’ costs on an indemnity basis.

Associate:

Dated:    11 September 2013