FEDERAL COURT OF AUSTRALIA

Lift Shop Pty Ltd v Easy Living Home Elevators Pty Ltd (No 2) [2013] FCA 1220

THE COURT ORDERS THAT:

1.    The applicant pay the respondent’s costs on a party and party basis up to the judgment of 10 September 2013.

2.    The respondent pay the applicant’s costs of the respondent’s application for indemnity costs.

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

REASONS FOR JUDGMENT

BUCHANAN J:

1    On 10 September 2013, I dismissed the applicant’s claims that the respondent had infringed its trademark and breached s 18 of the Australian Consumer Law contained in Schedule 2 of the Competition and Consumer Act 2010 (Cth) (Lift Shop Pty Ltd v Easy Living Home Elevators Pty Ltd [2013] FCA 900). In accordance with an opportunity sought by the respondent to deal further with the question of costs, I did not at that time determine that question.

2    The respondent has now sought costs, including costs on an indemnity basis, from one of three alternative dates. The indemnity costs have been sought either pursuant to r 25.14 of the Federal Court Rules 2011 (Cth) (“Federal Court Rules”) or pursuant to the principles in Calderbank v Calderbank [1975] 3 All ER 333.

12 June 2013 offer

3    The evidence filed in support of the respondent’s application for indemnity costs discloses that on 12 June 2013 the respondent served a notice of offer of compromise pursuant to r 25.01 of the Federal Court Rules. The letter by which that notice was served also asserted that the principle in Calderbank v Calderbank applied to the offer. Rule 25.14(2) of the Federal Court Rules provides:

25.14    Costs where offer not accepted

…

(2)    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.

4    The letter of 12 June 2013 set out an argument in opposition to the applicant’s case. Elements of that argument found substantial reflection in the judgment. In particular, it was argued in the letter that the term “lift shop” was not used on the respondent’s website as a “badge of origin” of the goods and services provided by the respondent and that use of the term would not cause any confusion on the part of consumers because “[a]t no point would a consumer believe that he or she was being directed to the Liftshop website or one associated with it”. Accordingly, the respondent now argues that the refusal of the offer was unreasonable within the meaning of r 25.14(2). Similarly, relying on the judgment of McDougall J in Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2005] NSWSC 481 (at [30]), the respondent argues that the rejection of the offer was unreasonable for the purpose of engaging principles in Calderbank v Calderbank.

5    The offer made on 12 June 2013 was made some time before the trial. It offered to remove the phrase “lift shop” from the website of the respondent and re-submit the URL of the respondent for re-indexing to search engine providers. It offered to pay $20,000 on account of legal costs. The offer was open to be accepted for 14 days. It is clear from the terms of the offer that it disclosed a preparedness to compromise the respondent’s position for the future. It contained no acknowledgement of any infringement of the applicant’s rights to that point.

6    The respondent’s position, that it had not infringed the applicant’s rights in any of the ways alleged, was vindicated at the trial. However, notwithstanding that circumstance, I do not think it can be said that the applicant’s decision to maintain its contentions was unreasonable even though it lost at the trial. In one respect at least those contentions were upheld. At [46] in the primary judgment, I said that if I had concluded that the term “Lift Shop” was used as the respondent’s own mark, I would have accepted that the mark thus used was deceptively similar to the applicant’s mark. Furthermore, in important respects so far as the case under the Australian Consumer Law was concerned, the outcome of the proceedings turned upon weighing the evidence of Mr Katz for the applicant and Mr Pizzie for the respondent. Those are not matters which, in my view, it may be said were obviously ones which would be resolved in the way they were before the evidence was given and tested in cross-examination.

7    In those circumstances, I am not satisfied that rejection of the offer of 12 June 2013 was unreasonable. I would therefore not be prepared to order the payment of indemnity costs from that date (or 14 days after it) under r 25.14 of the Federal Court Rules or pursuant to the principles in Calderbank v Calderbank.

2 August 2013 offer

8    The remaining foundation for the application for indemnity costs was a letter sent on 2 August 2013, shortly before the hearing, offering to expunge references to “lift shop” (and certain phrases using that term) from the respondent’s website (as before), re-submitting the URL for re-indexing and making a payment to the applicant of $75,000. As recorded in the earlier judgment, the first two elements of this offer were given as an unconditional undertaking to the Court on the second day of the hearing (see at [51]). No reference, of course, was made to the third element at the hearing.

9    The offer made on 2 August 2013 was not expressed to be made pursuant to the Federal Court Rules. It was open for written acceptance until 10 am on 5 August 2013 (i.e. fifteen minutes before the hearing was to commence). The offer was not expressed to be made pursuant to the principles in Calderbank v Calderbank. The offer was not stated to be one which would be relied upon in any application for indemnity costs. The first two elements of the offer were then given unconditionally at the hearing.

10    Again, it could not be said, in my view, to have been unreasonable not to have anticipated those aspects of the judgment which turned upon the evaluation of the evidence given by Mr Katz or Mr Pizzie. No further specific argument or contentions were advanced in the letter of 2 August 2013 suggesting why the applicant could not succeed in the proceedings which were then about to commence. Rather, the offer was said to have been made “in the sole interest of avoiding further time and expense in this dispute”. On the assumption that the offer should be tested by reference to concepts of reasonableness and the failure to accept it by reference to notions of unreasonableness, I would not be prepared to conclude that it was unreasonable not to have accepted this offer by 10 am on the first day of the hearing. The offer was not open for acceptance at a time when the evidence had concluded.

2 November 2012 offer

11    There is a further matter which deserves to be mentioned. On 2 November 2012, the applicant threatened to commence proceedings against the respondent for infringement of trademark, contravention of ss 18 and 29 of the Australian Consumer Law and for passing off. However, the applicant offered to forego any claim for damages if the respondent removed any reference to “Lift Shop” in the respondent’s website source code and gave specified undertakings. The respondent did not act on this offer although, as the applicant has pointed out in its written submissions, it appears that Mr Pizzie acted on legal advice, but not from any other commercial motive, in not acting responsively at the time.

12    The respondent has argued that no weight should be attached to this offer. I have not found it necessary to place any weight on the offer in considering that the respondent is not entitled to indemnity costs. However, in my view it was regrettable that the issues between the parties were not resolved in that way, at that time, without the need for litigation.

Conclusion

13    The result of the foregoing conclusions is that the respondent is entitled to its costs on a party and party basis up to the time of judgment. The applicant is entitled to its costs of the application for indemnity costs.

Associate:

Dated:    20 November 2013