FEDERAL COURT OF AUSTRALIA

Phone Directories Company Australia Pty Ltd v Telstra Corporation Limited (No 2) [2014] FCA 418

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    The decision of the delegate of the Registrar of Trade Marks on 19 April 2011 in Phone Directories Company Australia Pty Ltd v Telstra Corporation Limited (2011) 93 IPR 513 given in respect of Australian trade mark application number 963492 be set aside.

3.    The Applicant's opposition to Australian trade mark application number 963492 be allowed.

4.    Australian trade mark application number 963492 be refused.

5.    The Respondent pay the Applicant’s costs of:

(a)    this appeal, including all reserved costs; and

(b)    the opposition proceeding concerning Australian trade mark application number 963492 before the Registrar of Trade Marks.

6.    The Applicant serve a copy of these orders on the Registrar of Trade Marks within seven (7) days of the date of making this order.

7.    The Registrar of Trade Marks is directed not to take any action in relation to Australian trade mark application number 963492 until no earlier than twenty-one (21) days after the date of these orders, or the resolution of any appeal, whichever date is later.

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

THE COURT ORDERS THAT:

1.    The Applicants’ appeal of the Delegate of the Registrar of Trade Marks’ decision to refuse registration of Australian trade mark application number 963492 be allowed.

2.    The decision of the delegate of the Registrar of Trade Marks on 21 May 2010 in Khoury v Telstra Corporation Limited [2010] ATMO 36, in respect of Australian trade mark application number 963492, be set aside.

3.    The Applicants’ opposition to Australian trade mark application number 963492 be allowed.

4.    Australian trade mark application number 963492 be refused.

5.    The Respondent pay the Applicants’ costs of the proceeding concerning Australian trade mark application number 963492, save and except for the Applicants’ costs of and relating to the purported assignment by the Second Applicant to the First Applicant of his right and interest in the opposition to Australian trade mark application number 963492, including the Applicants’ appearance on 9 October 2012 and the correspondence, submissions and affidavit prepared by the Applicants in relation to the Second Applicant’s purported assignment.

6.    The Applicants pay the Respondent’s costs of and relating to the Respondent’s appearance on 9 October 2012 and the correspondence, submissions and affidavit material relevant to the purported assignment by the Second Applicant to the First Applicant of his right and interest in the opposition to Australian trade mark application number 963492, including any costs incurred by the Respondent by reason of it being ordered to pay the costs of the Applicant in VID 373 of 2011 in relation to the Second Applicant’s purported assignment.

7.    The First Applicant’s appeal of the Delegate of the Registrar of Trade Marks’ decision to refuse registration of Australian trade mark application number 1138225 be refused.

8.    The Respondent’s opposition to Australian trade mark application number 1138225 be allowed.

9.    Australian trade mark application number 1138225 be refused.

10.    The First Applicant pay the Respondent’s costs of the proceeding concerning Australian trade mark application number 1138225.

11.    The Respondent serve a copy of these orders on the Registrar of Trade Marks within seven (7) days of the date of making this order.

12.    The Registrar of Trade Marks is directed not to take any action in relation to Australian trade mark application numbers 963492 or 1138225 until no earlier than twenty-one (21) days after the date of these orders, or the resolution of any appeal, whichever date is later.

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

REASONS FOR JUDGMENT

1    On 11 April 2014 I published my reasons for judgment in proceedings QUD 220 of 2010 and VID 373 of 2011. The parties were directed to confer and prepare draft orders to give effect to those reasons, and if unable to agree on the appropriate costs orders, they were to prepare and file submissions on costs within 14 days.

2    The parties in VID 373 of 2011 have agreed on the form of orders, including in relation to costs. I have made those orders.

3    The parties in QUD 220 of 2010 have agreed on the form of orders except in relation to two questions of costs. I have made the agreed orders.

4    In QUD 220 of 2010 the starting point is that no party contends that there is any reason to deviate from the usual rule that costs follow the event. That is:

(a)    Telstra accepts that it should pay the party-party costs of Yellowbook and Mr Khoury (“the Yellowbook Parties”) in the YELLOW Appeal (as previously defined) relating to trade mark application 963492, except for some costs which it argues were unnecessarily incurred; and

(b)    the Yellowbook Parties accept that they should pay Telstra’s party-party costs of the YELLOWBOOK Appeal (as previously defined), relating to trade mark application 1138225.

The costs relating to the Assignment

5    Telstra accepts that it should pay costs in the YELLOW Appeal, except for the costs of and relating to the purported assignment by Mr Khoury to Yellowbook of his rights and interest in the opposition to the YELLOW Trade Mark, which Telstra argues were unnecessarily incurred: see r 40.06 of the Federal Court Rules 2011. The Yellowbook Parties maintain that they are entitled to these costs. They argue that the assignment of Mr Khoury’s interest was simply “good housekeeping” to deal with the consequences of an innocent administrative error that Mr Khoury had made when he commenced the opposition proceeding.

6    I do not accept the Yellowbook Parties’ submissions in this regard. The surrounding circumstances are as follows:

(a)    for about four years prior to 21 September 2012 Mr Khoury opposed Telstra’s application to register the word YELLOW as a trade mark, doing so in an individual capacity;

(b)    the Yellowbook Parties had difficulty in meeting an earlier costs order by Collier J on 6 May 2011;

(c)    just 18 days prior to trial Mr Khoury filed an affidavit attaching correspondence to IP Australia, and advising that he had assigned his rights and interest in the YELLOW Appeal to Yellowbook (“the Assignment”);

(d)    Telstra immediately expressed its concern to both Yellowbook and Mr Khoury that the Assignment was merely a device to allow Mr Khoury to extract himself from the proceeding, leaving Yellowbook as the only applicant when it was a small company with unknown assets. Telstra was in the position that it did not know whether Mr Khoury intended to, or was able to, continue as a party in the YELLOW Appeal. If Mr Khoury no longer intended to remain a party, or had no standing to do so, then the question of costs against him, and security for costs by Yellowbook arose;

(e)    unfortunately Mr Khoury failed or refused to explain to Telstra whether he intended to continue to be a party in the YELLOW Appeal, and what standing he had to do so;

(f)    on 8 October 2012 the parties filed submissions on the question of the standing of the applicants, and the matter was listed for urgent directions on 9 October 2012;

(g)    notwithstanding that just over one week remained until trial, on 9 October 2012 Mr  Khoury did not inform the Court whether he intended to remain as a party. It appeared that Mr Khoury was unsure as to whether, upon the Assignment taking effect, he continued to have some residual interest in the YELLOW Appeal. However it was flagged that it was likely that he would later apply to be removed as a party;

(h)    on 11 October 2012 Mr Khoury filed submissions on the question of his standing in which he did not seek to be removed as a party, but accepted that he could not resist an order to that effect;

(i)    on the first day of trial, 15 October 2012, Mr Khoury conceded that he would remain a party and would be responsible for any adverse costs orders.

7    I am satisfied that the costs of and relating to the Assignment by Mr Khoury to Yellowbook of his rights and interest in the opposition to the YELLOW Trade Mark, including the appearances before the Court, the submissions and affidavits, were unnecessarily incurred. All of this work could have been avoided if Mr Khoury had assigned his interest in the appeal to Yellowbook in a timely way, or responded to Telstra’s enquiries as to whether he intended, or was able, to continue as a party in the proceeding in a timely way. Telstra would then have been a position to decide whether it was appropriate to make an application for security for costs from Yellowbook. Leaving aside any question of whether Mr Khoury’s actions were a litigation tactic, if he had acted in a timely way Telstra’s urgent application would not have been necessary.

8    I have ordered that Telstra is not required to pay the Yellowbook Parties’ costs relating to this issue, and that it is entitled to its party-party costs.

Whether a lump sum costs order is appropriate

9    If costs were not agreed, the parties were directed to file submissions within 14 days of 11 April 2014. Telstra filed an affidavit and submissions in support of its position. Yellowbook did not, but on the last day requested 21 days within which to make an application under rule 40.02 seeking a gross sum costs order in the appeals. The evidence is that Yellowbook requested a payment by Telstra of $200,000 to satisfy its net costs in the two appeals, but provided no breakdown in relation to that figure.

10    I am not prepared to allow a further 21 days for Yellowbook to make its application and file submissions. The Yellowbook Parties have had sufficient time make an application under r 40.02 and to file submissions.

11    I accept that r 40.02 is not limited only to complex and protracted litigation, and may often be useful in smaller cases, but I do not accept that a gross sum costs order is appropriate in all the circumstances. These include that:

(a)    the default position is that costs are ordinarily to be assessed by taxation: see r 40.12. Although indicating a desire to make an application under r 40.02 the Yellowbook Parties did not do so within the time allowed, and put on very limited submissions;

(b)    the trial was distinctly split into separate parts for the YELLOW Appeal and the YELLOWBOOK Appeal, as were the submissions. This points away from any need for a gross sums costs order as it should be relatively straightforward to determine to which appeal the costs for particular items of work should be attributed;

(c)    although the evidence in the case was voluminous, this is not a case which was so complex, or where the preparation of a bill in taxable form or the taxation itself is likely to be so complicated and protracted, that a lump sum bill is preferable: see Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 at 120, 123; Byrnes v Brisconnections Management Company Limited [2009] FCA 1432 at [51];

(d)    it is hard to see how there will be any great cost efficiencies or savings by the Court hearing an application for a gross sum costs order. The application would require the parties to provide a detailed breakdown of the costs incurred and seek to explain and justify them. An appearance before me and representation would be required. It seems likely that a normal taxation will be a more efficient use of resources, including the Court’s resources.

(e)    if each party prepares a taxable bill then the taxing officer will make an estimate of the approximate total: see r 40.20. The parties can then have discussions about offsetting one set of costs against the other, and mediation is available through the Court.

12    I have made the orders as attached.

Associate:

Dated:    30 April 2014