FEDERAL COURT OF AUSTRALIA

Natural Waters of Viti Limited v Dayals (Fiji) Artesian Waters Limited (No 2)

[2007] FCA 555

NATURAL WATERS OF VITI LIMITED AND FIJI WATER (AUSTRALIA) PTY LIMITED (ACN 103 806 668) v DAYALS (FIJI) ARTESIAN WATERS LIMITED, PRANESH DAYAL AND JAY PRAKASH DAYAL

NSD 658 OF 2006

BENNETT J

18 APRIL 2007

SYDNEY

THE COURT ORDERS THAT:

1.                  The applicants are to pay the respondents costs on a party and party basis. 

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

REASONS FOR JUDGMENT

1                     In Natural Waters of Viti Limited v Dayals (Fiji) Artesian Waters Limited [2007] FCA 200 I ordered that the application be dismissed.  The parties have now filed submissions on costs. 

2                     Recognising that, in the ordinary course, they would be required to pay the respondents’ (‘Dayals’) costs, the applicants (‘Natural Waters’) seek an order that they pay only 75% of those costs, on the basis that Dayals unnecessarily prolonged the final hearing.  That prolongation occurred, Natural Waters submits, by Dayals putting the reputation of and goodwill associated with the get-up of the Natural Waters product, Fiji Water, in issue. 

3                     Dayals, on the other hand, seek indemnity costs or, in the alternative, fifty percent of their costs on an indemnity basis or, in the further alternative, costs on an indemnity basis from 11 December 2006.  The further alternative relates to an offer to settle the proceedings made on that date, during the course of the hearing.

The percentage of costs to be paid by the applicants

4                     Natural Waters submits that, by failing to concede Natural Waters’ reputation and goodwill in the “2003 get-up” of Fiji Water in Australia and Natural Waters’ reputation and goodwill in at least those features in common between the 2003 get-up and the “2005 get-up” (see Natural Waters at [6] and [7]), Dayals unnecessarily prolonged the final hearing.  Natural Waters contends that this forced it to incur unnecessary costs in preparing for and appearing at the final hearing.  Natural Waters submits that, in the circumstances, it should only pay 75% of Dayals’ costs on a party and party basis.

5                     The reputation and goodwill claimed by Natural Waters was found to exist in the 2003 get-up and the common features of the 2003 get-up and the 2005 get-up (Natural Waters at [61]).  Dayals, as they were entitled to, put reputation and goodwill in issue in their defence filed on 5 May 2006.  Natural Waters asserted reputation and goodwill in what it described as a “constellation of features” said to be distinctive of Fiji Water.  It submitted that the packaging of Dayals’ “Island Chill” product incorporated a sufficient number of those features, including a tropical motif and a pink or red hibiscus, so as to be likely to mislead or deceive consumers to believe that Island Chill was Fiji Water or associated with Fiji Water or Natural Waters.

6                     While the 2003 and 2005 get-ups of Fiji Water shared a number of features, such as the shape of the bottle and the name “FIJI”, other features were different.  In particular, the tropical garden with a central white orchid of the 2003 get-up was different to the single pink hibiscus of the 2005 get-up and there were different presentations on the inner side of the back label (Natural Waters at [12]–[14]). 

7                     The evidence adduced described the mode of sale of Fiji Water and the marketing strategy of the product itself (Natural Waters at [49] to [54]).  Promotional activities emphasised different aspects of the Fiji Water get-up.  In some cases the promotion emphasised features that were not common to the 2003 and 2005 get-ups, such as the white orchid (Natural Waters at [55]).  The evidence as to reputation was not directed specifically to the common features of the 2003 and 2005 get-ups.  Counsel for Dayals pointed out that there was no survey evidence or other independent evidence to support the assertion of consumer awareness of the Fiji Water get-up. 

8                     It could be said that the evidence of reputation in the 2003 get-up and the common features of the 2003 and 2005 get-ups was not as complete as it may have been.  This may have reflected a lack of appreciation on the part of Natural Waters, prior to the commencement of the hearing, that reputation was really in dispute, despite the defence.   

9                     I concluded that the volume of sales and extent of consumer exposure to the 2003 get-up was such that Natural Waters had sufficient reputation in that get-up to found these proceedings.  I also concluded that, as at the date of the conduct complained of, the reputation in the newly marketed 2005 get-up would extend to the features in common with the 2003 get-up (Natural Waters at [61]).  However, it cannot be said that the case presented on reputation was overwhelming.

10                  The failure by Dayals to admit reputation was not unreasonable.  The fact that Mr Jay Dayal and his designers in Fiji were aware of the 2003 get-up of Fiji Water was not sufficient reason to admit reputation in Australia.  Natural Waters did not adduce additional material after Dayals confirmed that reputation was in issue at the commencement of the hearing.  The cross-examination of Ms Schmidt, the Director of Marketing at Fiji Water LLC, was not unduly extended.

11                  There is no reason to reduce the costs payable by Natural Waters. 

Whether the costs should be paid in whole or in part on an indemnity basis

12                  Dayals relies upon a number of factors in support of its application for indemnity costs.  They include the relative company size of Natural Waters and Dayals and the decision to conduct the litigation in New South Wales rather than Fiji.  These factors do not support an award of indemnity costs.  Indeed, it is difficult to see how Natural Waters can be criticised for bringing the proceedings in Australia rather than Fiji when its complaint was that Dayals activities in Australia constituted a passing off and contravention of the Trade Practices Act 1974 (Cth)(‘the Act’). 

13                  Dayals makes a number of assertions about the basis of the Natural Waters case which are not well-founded.  Natural Waters’ case was never based upon ‘a single issue – the hibiscus flower’.  The hibiscus was a focus of Natural Waters’ submissions and may have been central to settlement negotiations but the case advanced at the hearing was always based on the totality of the get-up or “constellation of features”.  Natural Waters at all times relied upon goodwill and reputation in a combination of features to support its allegations of passing off and contravention of ss 52 and 53 of the Act and ss 42 and 44 of the Fair Trading Act 1987 (NSW).  Natural Waters conducted the litigation efficiently and did not raise extraneous issues. 

14                  Prior to the commencement of the proceedings, in the context of settlement negotiations, Dayals made an “offer of settlement” that Natural Waters discontinue the proceedings and pay Dayals’ costs.  That offer, described by Dayals as an offer made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333, was rejected.  Even if such an offer were so characterised, as Dayals acknowledges mere refusal of a Calderbank offer does not of itself warrant an order for indemnity costs (Alpine Hardwoods (Aust) Pty Ltd v Hardys Pty Ltd (No 2) (2002) 190 ALR 121 at [28]).  As Weinberg J observed in Alpine Hardwoods, it must be shown that the conduct of the offeree in rejecting the offer was unreasonable.  That has not been established in this case. 

15                  Dayals made an open offer of settlement at about midday on the first day of the hearing, 11 December 2006.  The terms of that offer were based on the removal of the red hibiscus from the Island Chill get-up and its replacement with a different flower of a different colour.  The offer was rejected at about 2 pm the same day.  Natural Waters made a counter offer in terms not only of the red hibiscus but also other aspects of the get-up, including the colour of the bottle cap and the font, size, colour and position of the words ‘Bottled at Source in Fiji Islands’.  This was consistent with Natural Waters’ case.  The finding that the overall effect of the combination of each aspect of the Island Chill design is different and sufficiently so to differentiate Island Chill from the 2003 and 2005 get-ups of Fiji Water was not limited to the hibiscus (Natural Waters at [83]).  Nor was the case advanced by Natural Waters.

16                  Dayals has not established a basis for the award of indemnity costs.  There are no circumstances to warrant departure from the usual order as to costs.  It follows that the applicants are to pay the respondents’ costs.  Those costs are payable on a party and party basis. 

Associate:

Dated:         18 April 2007