Federal Court of Australia

The Agency Group Australia Ltd v H.A.S. Real Estate Pty Ltd (No 2) [2024] FCAFC 44

ORDERS

THE COURT ORDERS THAT:

1.    Leave be given to the respondent to rely on the affidavit of Giuseppe Antonio Russo sworn on 5 January 2024 on the question of costs.

2.    Leave be given to the appellants to rely on the affidavit of Joshua Joseph Simons affirmed on 18 January 2024 on the question of costs.

3.    The respondent’s application that its costs of the appeal from 11.00 am on 17 July 2023 be assessed on an indemnity basis be refused.

4.    The costs of the appeal be paid on a lump sum basis, with such sum to be assessed and quantified by a Registrar in the absence of agreement being reached by the parties on that question within 14 days after the making of this order or within such further period as the parties might agree.

5.    The question of the costs of any assessment pursuant to Order 4 hereof be reserved for determination by the Registrar.

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

REASONS FOR JUDGMENT

THE COURT:

Introduction

1    On 19 December 2023, we dismissed the appeal and ordered the appellants to pay the respondent’s costs of the appeal.

2    At the time that judgment was delivered, the respondent sought to be heard further on the question of costs. The respondent had, in fact, flagged that position in its written submissions. A timetable for the provision of submissions was then put in place for that purpose. As events have transpired, the parties also filed additional affidavit evidence directed to the question of costs. We will grant leave, retrospectively, to enable that evidence to be received in respect of the present application.

3    The respondent seeks an order that their costs of the appeal be paid on an indemnity basis from 11.00 am on 17 July 2023 for the reason that the appellants unreasonably failed to accept an offer of compromise made by the respondent on 13 July 2023. The respondent also seeks an order that its costs be paid on a lump sum basis, either for an agreed amount or, failing agreement, for an assessed amount, with the assessment being undertaken by a Registrar.

4    The form of the orders sought by the respondent is:

1.     The appellants pay the respondent’s costs of the appeal on a party and party basis up to 11 am on 17 July 2023 and on an indemnity basis thereafter, including:

(a)     the costs of this costs application; and

(b)     the costs of the Registrar determining the lump sum amount if such amount cannot be agreed.

2.     The appellants pay the respondent’s costs referred to in order 1 on a lump sum basis, in an amount to be agreed, or failing agreement within 14 days of the date of this order, to be determined by a registrar of the Court pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth).

5    The appellants agree that it is practicable and appropriate for the Court to make a lump sum costs order for an agreed or assessed amount. However, the appellants raise four objections to the orders sought by the respondent.

6    First, the appellants oppose the application for indemnity costs principally because they say that their non-acceptance of the respondent’s offer of compromise was not unreasonable.

7    Secondly, the appellants contend that they should not bear the respondent’s costs of its interlocutory application dated 31 October 2023, which was an unsuccessful application to adduce further evidence on appeal. Rather, the appellants contend that the respondent should bear their (the appellants’) costs of that application.

8    Thirdly, the appellants contend that they should not bear the costs of the first ground of the respondent’s notice of contention, which was abandoned by the respondent at the hearing of the appeal.

9    Fourthly, the appellants object to paying the costs of any lump sum assessment. We note, however, that the respondent no longer presses an order for these costs at the present time. It says that it will seek these costs before the Registrar if the parties cannot agree on a lump sum amount.

The offer of compromise

10    The respondent’s offer of comprise was expressed in these terms:

The offer is:

(a)     Subject to (b) and (c) below, as soon as reasonably practicable, but in any event within 60 days of acceptance of this offer, the Respondent will:

(i)     cease using the name ‘The North Agency’ and will instead use the name ‘The North Agents’; and

(ii)     cease using the name ‘The North Agency’ in all marketing and advertising material and activities, including in its domain name, URL, email addresses, social media platforms and on all signage including at the Respondent’s Dee Why office.

(b)     The Respondent will not be under any obligation to recall any marketing or advertising material with the name ‘The North Agency’ already distributed to third parties at the date of acceptance of this offer, such as merchandise and flyers, although the Respondent will take all reasonable steps to instruct third parties such as the operators of the platforms realestate.com.au and domain.com.au to change ‘The North Agency’ to ‘The North Agents’.

(c)     For a period of 6 months from the date of acceptance of this offer, the Respondent will be permitted to divert emails sent to its present addresses (e.g. chris@thenorthagency.com.au) to its new email addresses (e.g. chris@thenorthagents.com.au) although it will take all reasonable steps to notify clients and suppliers of its new email addresses.

(d)     Within 12 days from the date of acceptance of this offer the Appellants pay a contribution of:

(i)     $10,000 towards the Respondent’s rebranding costs;

(ii)     $20,000 towards the Respondent’s costs after 15 June 2023.

(e)     Within 14 days of acceptance of this offer, the parties submit to the Court the following orders by consent:

(i)     the appeal be dismissed; and

(ii)     there be no order as to costs.

This offer is inclusive of costs.

This offer of compromise is open to be accepted until 5 pm on 2 August 2023.

This offer is made without prejudice.

11    We note that in the primary proceeding, the respondent made a similar offer, which was rejected by the appellants (as applicants):

The offer is:

a)     Within 21 days from the acceptance of this offer, the Respondents will cause the First Respondent to change its name to “The North Agents” and will cease using the name “The North Agency”; and

b)     The parties submit to the Court, within 28 days of acceptance of this offer, consent orders:

a.    The proceeding be dismissed; and

b.    There be no order as to costs.

This offer is inclusive of costs.

This offer of compromise is open to be accepted for 14 days after service of this offer of compromise.

12    The primary judge found that this offer represented a genuine compromise which the appellants had unreasonably rejected: The Agency Group Australia Limited v H.A.S. Real Estate Pty Ltd (No 2) [2023] FCA 652. At [6], the primary judge said:

6    … In my view, it was unreasonable for the applicants to reject the offer. On the basis of the material available to the applicants by 31 March 2023, the applicants ought to have appreciated that their case on trade mark infringement was weak, and their case on passing off and misleading conduct was very weak. The fact that the applicant succeeded on some subsidiary issues did not affect the outcome of the litigation, or relevantly qualify the success of the respondents: The State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174 at [8] (Emmett, Kenny and Middleton JJ). …

13    The primary judge ordered that the appellants pay the respondent’s costs of the primary proceeding on a party and party basis up to 11.00 am on 4 April 2023, and on an indemnity basis thereafter.

14    It will be observed that, unlike the offer in the primary proceeding, the offer in the appeal included a requirement that the appellants contribute $10,000 to the respondent’s re-branding costs, as well as $20,000 in respect of its legal costs.

15    A letter accompanying the offer of compromise did not quantify or seek to substantiate the respondent’s re-branding costs. It did, however, quantify the respondent’s legal costs since 15 June 2023 as $15,000 (Counsel) and $10,000 (Solicitors). The letter advanced the following rationale for both contributions:

The above costs together with the contribution of $10,000 to our client’s costs of rebranding is a small price for your clients to pay in the circumstances of the strong judgment of Jackman J in our client’s favour. We are instructed that rebranding costs will include the costs of changes to internal and external signage of our client’s office, changes to its website, changes to third party websites, updating all marketing and advertising collateral, stickers to conceal the name ‘The North Agency’ on existing ‘for sale’ and ‘for lease’ signboards, re-ordering of stationery such as business cards and merchandise such as pens and changing sponsorship merchandise.

16    Mr Russo, the solicitor having conduct of the appeal on behalf of the respondent, has made an affidavit in which he deposed, on information and belief, that the respondent’s re-branding costs would have been in excess of $45,000. This sum is not, however, particularised or substantiated. It is simply an asserted estimate provided to Mr Russo by the director of the respondent.

The application for indemnity costs

The submissions

17    The respondent submits that the offer made in the appeal was a genuine offer of compromise and that it was unreasonable for the appellants not to accept it. The respondent submits that the appellants had sufficient information and time (until 5.00 pm on 2 August 2023) to give the offer proper consideration. If the appellants had accepted the offer, it would have finally resolved the issue in dispute between the parties and achieved the outcome that the appellants sought in the appeal, namely the respondent’s cessation of the use of THE NORTH AGENCY. The respondent submits that the contribution to costs of $20,000 was reasonable (being a little under 80% of the costs it had incurred up to the time of the offer). Further, it submits that the requested contribution to both its legal costs and its re-branding costs was:

… a modest one for an outcome [the appellants were] unlikely to achieve as a result of the appeal and was reasonable, especially in light of the strength of the primary judgment, the primary judge’s findings about the weakness of the appellants’ case and the respondent’s ultimate costs of the appeal.

18    In his affidavit, Mr Russo deposes that the respondent’s costs in relation to the appeal, up to judgment, were, approximately, $148,377.75 (including GST).

19    The appellants submit their non-acceptance of the offer of compromise was not unreasonable. They submit, firstly, that it was not unreasonable for them to seek to have the primary judgment tested, given the evaluative nature of the question of deceptive similarity: Verrocchi v Direct Chemist Outlet Pty Ltd (No 2) [2016] FCAFC 162 at [11]. Secondly, they submit that, at the time the offer was made, the only justifiable financial contribution they could have paid to the respondent, as a compromise, was a reasonable proportion of the respondent’s costs of the appeal at that time. The total financial contribution sought by the respondent ($30,000) exceeded its actual legal costs of the appeal at that time.

Outcome

20    We are not persuaded that it was unreasonable for the appellants not to accept the offer of compromise.

21    The appeal was confined (it was limited to the issue of trade mark infringement) and was arguable, even though, ultimately, we were not persuaded that error had been demonstrated in the primary judge’s reasoning or conclusion in relation to the question of deceptive similarity. Importantly, at the time the offer of compromise was made, it could not be said that the appeal had no prospects of success or was plainly unmeritorious.

22    It is true that the outcome offered by the respondent would have achieved success for the appellants in that, after a period of transition, the respondent would no longer use THE NORTH AGENCY as a trade mark or as the name of its business. However, acceptance of that offer came at a price.

23    That price included a contribution of $10,000 in respect of re-branding costs. The respondent sought this amount in addition to the contribution it sought in relation to its legal costs (for which the appellants were at risk). Apart from specifying the purpose of the contribution, the respondent provided no substantiation for the amount involved other than that it was part of “a small price for your clients to pay in the circumstances of the strong judgment of Jackman J in our client’s favour”. However, the respondent was never able to recover its costs of re-branding (and, therefore, any contribution to those costs) from the appellants by way of court order in the appeal or in the primary proceeding. If the appellants succeeded, the respondent would have to pay its own re-branding costs. If the appellants failed, there would be no re-branding costs.

24    The appellants did not act unreasonably by not accepting an offer that required them to pay a sum they were not, and never would be, liable to pay. The contribution of $10,000 was, in substance, an extraneous payment unconnected to the fate of the litigation. As the appellants correctly point out, the inclusion of this amount in the total financial contribution sought by the respondent meant that their acceptance of the offer would require them to pay an amount that exceeded the respondent’s then legal costs.

25    Further, although not referred to in the appellants’ submissions, we note that the offer of compromise did not purport to affect the costs orders made by the primary judge. Had the appeal been successful (bearing in mind our conclusion that the appeal was arguable), it is likely that the primary judge’s costs orders, as they affected the appellants and the respondent, would have been set aside. However, acceptance of the offer meant that the adverse costs order made below would have remained in place, even though the award of those costs was in dispute in the appeal.

Other costs

26    As we have noted, the appellants contend that (a) they should not bear the costs of the first ground of the respondent’s notice of contention, and (b) the respondent should pay their costs of the interlocutory application dated 31 October 2023.

27    The notice of contention raised three grounds. The first ground did no more than seek to support the primary judge’s finding on the lack of deceptive similarity by recourse to the High Court’s reasoning in Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd [2023] HCA 8; 408 ALR 195 at [70] – [71]. This ground, which was raised defensively, was abandoned by the respondent in its written submissions filed on 2 November 2023, well before the hearing of the appeal on 22 November 2023, and was not addressed by the appellants in their written submissions in chief or in reply. The respondent’s interlocutory application to adduce further evidence was addressed by the appellants in reply submissions. It was, however, a relatively minor aspect of the appeal.

28    We do not propose to entertain the appellants’ application to “carve out” these costs. The Court has already made a final order that the appellants pay the respondent’s costs of the appeal. There is no justification for re-visiting or varying that order.

29    Importantly in this regard, at the hearing of the appeal the only submission made by the appellants in respect of costs was that costs should follow the event of the appeal. The appellants failed in their appeal, and the Court made its costs order on 19 November 2023 in accordance with that event – a possibility that must have been in the appellants’ contemplation having regard to their own submissions on costs. At no stage during the hearing of the appeal did the appellants contend for any separate order in respect of the notice of contention or in respect of the interlocutory application.

30    The Court did not make its further orders on 19 November 2023 to enable the appellants to argue for a different outcome than the one that the Court had already determined. The further orders were made to facilitate the respondent’s application to have the costs already awarded in its favour assessed on a particular basis.

Disposition

31    Leave will be granted to the parties to rely on the affidavits they have filed on the question of costs.

32    The respondent’s application that its costs from 11.00 am on 17 July 2023 be assessed on an indemnity basis will be refused.

33    An order will be made that the costs of the appeal be paid on a lump sum basis, with such sum to be assessed and quantified by a Registrar in the absence of agreement being reached by the parties on that question within 14 days after the making of the order or within such further period as the parties might agree. The Registrar is to determine the question of the costs of the assessment.

Associate:

Dated:    2 April 2024