FEDERAL COURT OF AUSTRALIA
Lodestar Anstalt v Campari America LLC (No 2) [2016] FCAFC 118
ORDERS
Appellant | ||
AND: | Respondent | |
DATE OF ORDER: |
THE COURT ORDERS THAT:
1. The application by the appellant to vary the orders made by this Court on 28 June 2016 be dismissed.
2. The appellant pay the respondent’s costs of the application referred to in paragraph 1.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
THE COURT:
1 On 9 June 2015, Lodestar Anstalt (“Lodestar”) made an application under s 195(2) of the Trade Marks Act 1995 (Cth) for leave to appeal from orders made by a judge of this Court. An order was subsequently made that the applicant’s amended application for leave to appeal be heard concurrently with the appeal, should leave be granted. On 28 June 2016, this Court made the following orders:
1. The application for leave to appeal be granted.
2. The appeal be allowed.
3. The respondent pay the appellant's costs of the appeal.
4. Paragraph 1 of the orders made by the primary judge on 26 May 2015 and paragraphs 1, 2, 3 and 4 of the orders made by the primary judge on 12 June 2015 be set aside.
5. In lieu of the orders identified in paragraph 4, the appeal to this Court from the decision of the delegate of the Registrar of Trade Marks be dismissed with costs.
(Lodestar Anstalt v Campari America LLC [2016] FCAFC 92).
It will be seen that the orders in paragraph 3 and 5 deal with costs. The reasons which follow deal with an application by Lodestar to vary those orders so as to provide for indemnity costs. The reasons should be read with the principal reasons of the Court. As with the principal reasons it is not necessary for us to detail the different respondents at relevant times. We will refer to the respondent as Campari America.
2 Lodestar has applied for a variation of the orders made by this Court in relation to the application for leave to appeal and appeal to this Court (paragraph 3) and the costs of the appeal to a judge of this Court from the decision of the delegate of the Registrar of Trade Marks (paragraph 5). We will refer to the latter as the primary appeal.
3 In lieu of paragraph 3, Lodestar seeks the following order:
The Respondent pay the Appellant’s costs of the appeal on the following bases:-
(a) before 11.00am on 27 July 2015 – on the party and party basis; and
(b) from 11.00am on 27 July 2015 – on the indemnity basis.
4 In lieu of paragraph 5, Lodestar seeks the following order:
(a) The appeal to this Court in the action NSD 2340/2013 from the decision of the Delegate of the Registrar of Trade Marks be dismissed; and
(b) The Respondent pay the Appellant’s costs of action NSD 2340/2013 assessed on the following bases:-
(i) before 11.00am on 13 June 2014 – on the party and party basis; and
(ii) from 11.00am on 13 June 2014 – on the indemnity basis.
5 Lodestar filed an affidavit of its solicitor (Mr Kenneth Philp) in support of its application. The affidavit and other evidence before this Court establishes the following matters which we set out in chronological order.
6 First, the delegate of the Registrar of Trade Marks made his decision on 25 October 2013. He held that the applications for the removal of the relevant trade marks under s 92(4)(b) of the Trade Marks Act 1995 (Cth) had been successful. On 15 November 2013, the registered owner of the trade marks (then Skyy Spirits LLC) filed an appeal with this Court against the decision.
7 Secondly, on 10 June 2014, Lodestar, then the respondent to the appeal, served on the appellant a Notice of offer to compromise pursuant to Part 25 of the Federal Court Rules 2011 (Cth). The offer was to the effect that the parties consent to orders that the appeal be dismissed and that there be no order as to costs. The offer involved a proposal that each party would bear their costs of and incidental to the appeal. The offer of compromise was expressed to be open to be accepted for 14 days after service of the offer. It is this offer which forms the basis of Lodestar’s application for a variation of the order in paragraph 5.
8 Thirdly, the primary judge heard the appeal by the registered owner of the relevant trade marks on 1 and 2 December 2014 and handed down his judgment on 26 May 2015. His Honour made orders on 26 May 2015 and on 12 June 2015. His Honour allowed the appeal and made the other orders summarised in the principal reasons (at [23]).
9 Fourthly, as we have said, on 9 June 2016 Lodestar applied for leave to appeal from the orders made by the primary judge.
10 Fifthly, on 22 July 2015, Lodestar served a Notice of offer to compromise in the application for leave to appeal proceeding. The offer was to the effect that the respondent consent to orders that the application for leave to appeal to this Court be granted, that the appeal be allowed, and that an order be substituted that the appeal to this Court from the decision of the delegate of the Registrar of Trade Marks be dismissed. The offer in relation to costs was as follows. The respondent would pay the applicant’s costs of the proceedings before the delegate and 80% of the applicant’s party and party costs in the primary appeal. There would be no order as to the costs of the applicant’s application for leave to appeal and, if granted, appeal. As an additional, but non-essential part of the offer, the applicant offered to allow the respondent to use the name “Wild Geese” on certain terms and conditions. It is not necessary for us to set out the details of the terms and conditions. It is this offer which forms the basis of Lodestar’s application for a variation of the order in paragraph 3.
11 Finally, as we have said, this Court handed down its decision and made orders on 28 June 2016.
12 Lodestar, through Mr Philp, has put forward evidence of the costs which would have been saved by Campari America had it accepted the offer made on 10 June 2014 and had it accepted the offer made on 22 July 2015.
The costs of the primary appeal
13 Lodestar was a respondent to the primary appeal and the relevant rule of Court which applies in the case of its offer dated 10 June 2015 is r 25.14(2). That subrule is in the following terms:
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.
14 Lodestar submits that Campari America unreasonably failed to accept its offer dated 10 June 2014 in circumstances where, as a result of this Court’s orders, the primary appeal has been dismissed. It submits that by operation of r 25.14(2) it is entitled to its costs on an indemnity basis after 11:00 am on 13 June 2014.
15 The element of compromise in Lodestar’s offer dated 10 June 2014 was the foregoing of its costs of the primary appeal. The question posed by the subrule is whether it was unreasonable for Campari America not to accept the offer.
16 Mr Philp has given evidence which is not contradicted by Campari America that Lodestar’s costs in relation to the primary appeal before 13 June 2014 were $19,054.68 and that he estimates that of that figure an amount of approximately $14,737.21 would be recoverable as party and party costs. As at the date of the offer, that is the extent to which it was more favourable to Campari America than the ultimate result.
17 Lodestar submits that the refusal of Campari America to accept the offer was unreasonable. It submits that a “walk-away” offer on costs can constitute a genuine offer of compromise and in that respect it refers to Barnes v Forty-Two International Pty Ltd (No. 2) [2015] FCAFC 19 and Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53. It points out that at the time of the offer Campari America had all the information it needed to make an informed decision about the prospect of its appeal succeeding. Both sides had filed their evidence and Campari America had the benefit of advice from solicitors and counsel experienced in the field.
18 In response Campari America submits that its refusal of the offer was not unreasonable in all the circumstances. The two particular circumstances upon which it relies are as follows. First, it submits that it reasonably took the view that the decision in Yau’s Entertainment Pty Ltd v Asia Television Ltd [2002] FCAFC 78; (2002) 54 IPR 1 (“Yau”) applied to the circumstances of its appeal and that that would lead to the success of its appeal. It points to the fact that this is in fact what happened before the matter reached this Court. It also points to the fact that (on its argument) Yau did not stand alone and that a similar approach to the interpretation it advanced was taken by Sundberg J in Global Brand Marketing Inc v YD Pty Ltd [2008] FCA 605; (2008) 76 IPR 161. Secondly, it submits that the degree or extent of the compromise offered is a relevant factor in terms of assessing the reasonableness of an applicant’s conduct in refusing to accept an offer and that the offer in this case did not involve a substantial compromise.
19 We will not repeat what we said about Yau in our earlier reasons (at [1] per Allsop CJ; at [3] per Greenwood J; at [85]-[94] per Besanko J; at [112] per Nicholas J; at [165] per Katzmann J). It is sufficient to say that there was a serious issue raised by Yau about an important point of law under the Trade Marks Act 1995 (Cth). We agree with the submission of Campari America that although Lodestar’s offer involved an element of compromise, it was not a substantial compromise. In saying that, we acknowledge that it is difficult to see what else Lodestar could have offered in the circumstances. Nevertheless, we think that both matters, but particularly the first, are such that we do not think that Campari America’s refusal to accept the offer was unreasonable.
20 We would not vary the fifth order made by this Court on 28 June 2016.
The Costs of the application for leave to appeal and the appeal to this Court
21 In the case of Lodestar’s offer dated 22 July 2015, Lodestar made the offer in its capacity as applicant and the relevant subrule is r 25.14(3).
22 That subrule provides as follows:
If an offer is made by an applicant and not accepted by a respondent, and the applicant obtains a judgment that is more favourable than the terms of the offer, the applicant is entitled to an order that the respondent pay the applicant’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.
23 In the case of r 25.13(3) it is not necessary for the Court to conclude that the respondent’s refusal to accept the offer was unreasonable. If the applicant achieves a judgment more favourable than the offer of compromise, then there is a rebuttable presumption in favour of indemnity costs. The Court is able to exercise the power in r 1.35 to make an order which is inconsistent with the rules and the Full Court in Kooee Communications Pty Ltd v Primus Telecommunications (No. 2) [2011] FCAFC 141 at [14] considered that this was equivalent to the “unless the Court otherwise orders” provision in the previous Rules.
24 The principal element of compromise in the offer compared with the judgment obtained again relates to costs. We say that because we do not think that it is possible to compare the offer relating to the use of the name with what Campari America and WGW might or might not now be able to do under the general law.
25 Lodestar offered to accept 80% of its party and party costs of the primary appeal and to forgo any order for costs in its favour on the application for leave to appeal and appeal. Mr Philp’s estimate of the “costs savings” to Campari America in relation to the primary appeal had Lodestar’s offer been accepted by Campari America is approximately $14,500. His estimate of the costs savings in relation to the applications for leave to appeal and appeal is less precise. As we understand it, Lodestar’s costs at the time of the offer in terms of its obligation to its solicitors were in the region of $11,000.
26 Notwithstanding the principles and approach discussed in Bradken Limited v Norcast S.ár.L [2013] FCAFC 123; 219 FCR 101, we do not think that, in the circumstances here, there is anything in Campari America’s submission that in some way its conduct in refusing to accept the offer was justified because this Court would not have made the consent orders without submissions identifying error in the primary judge’s approach. That was not a matter raised at the time and in any event we cannot see how that would have been an insurmountable barrier to the resolution of the matter.
27 We think that in the result Campari America relies on the same two matters it relied on to avoid an order for indemnity costs in relation to the primary appeal. Its position is stronger because at the time of the second offer it had the primary judge’s decision in its favour. We recognise that the power to make an order inconsistent with the Rules should be exercised for proper reasons which will generally only arise in exceptional circumstances (Robinson v Kenny (No 2) [2015] FCA 2 and the cases cited therein). Nevertheless, we think that this is such a case bearing in mind the uncertainty surrounding the decision in Yau, the importance of the point, and the degree or extent of the compromise offered.
28 We would not vary the third order made by this Court on 28 June 2016.
29 Lodestar’s application to vary the orders made by this Court on 28 June 2016 should be dismissed and Lodestar should pay the costs of the application.
