FEDERAL COURT OF AUSTRALIA

Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 9) [2008] FCA 1115

COSTS – applicant’s expert evidence rejected by trial judge – appeal upheld and matter remitted by Full Court for reception of rejected evidence – further hearing – judgment for respondent – whether applicant entitled to costs of argument on admissibility and allegedly duplicated final submissions – entitlement to costs of preparation of expert witness not called

Federal Court of Australia Act 1976 (Cth) s 43(2)

Black and Decker Inc v GMCA Pty Ltd (No 3) [2008] FCA 932 cited

Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 159 FCR 397 cited

Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 3) [2007] FCAFC 119 cited

Clark, Tait & Co v Federal Commissioner of Taxation (1931) 47 CLR 142 cited

Cummings v Lewis (1993) 41 FCR 559 cited

Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602 cited

Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 cited

CADBURY SCHWEPPES PTY LTD v DARRELL LEA CHOCOLATE SHOPS PTY LTD

VID 555 of 2005

HEEREY J

31 JULY 2008

MELBOURNE

THE COURT ORDERS THAT:

1.                  Subject to (2), (3) and (4) hereof, the applicant pay the respondent’s costs of the proceeding, including reserved costs (and for the avoidance of doubt any costs ordered to be in the cause, including the costs the subject of the order of the Full Court on 2 November 2007), on a party and party basis.

2.                  Subject to (3) hereof, the applicant pay on an indemnity basis the respondent’s costs of preparing to meet the evidence excluded by the ruling made on 21 March 2006 as well as the respondent’s costs of preparing to meet the evidence of Messrs Attwood and Blenkisop sworn 16 March 2006.

3.                  The applicant pay on a party and party basis the respondent’s costs of preparing to meet the evidence of Dr Gibbs, Dr Stavros and Mr Riches, including preparing the affidavit of Mr Hall.

4.                  The applicant pay half of the respondent’s costs (on a party and party basis) of the application heard on 16 June 2006.

5.                  Nothing in these orders affects the costs orders made in the applicant’s favour in this proceeding by orders dated 11 March 2008 and 12 March 2008 (specifically, the costs incurred in connection with the applicant’s notice of motion dated 6 March 2008 and the subpoenas issued at the respondent’s request to QBrand Consulting, Dr Stavros, Dr Gibbs and Mr Riches).

6.                  The applicant pay the respondent’s costs of the preparation of the submissions on costs.

7.                  Liberty to apply within seven days of this order is reserved.

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

REASONS FOR JUDGMENT

1                                             The applicant (Cadbury) brought this proceeding against the respondent (Darrell Lea) alleging passing off and also misleading and deceptive conduct in contravention of ss 52 and 53(c) and (d) of the Trade Practices Act 1974 (Cth) by Darrell Lea’s use of the colour purple in connection with the marketing of chocolate products.  In the course of the trial I rejected evidence tendered by Cadbury from three expert witnesses, Dr Brian Gibbs, Dr Constantino Stavros and Mr Timothy Riches (the Cadbury experts). 

2                                             I gave judgment for Darrell Lea: Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 4) (2006) 229 ALR 136.  The Full Court upheld Cadbury’s appeal, holding that I had wrongly excluded the evidence of the Cadbury experts but otherwise rejecting Cadbury’s substantive grounds of appeal: Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (2007) 159 FCR 397.  The orders I made, including costs orders, were set aside and the matter was remitted to me for further hearing so that the evidence of the Cadbury experts could be received. 

3                                             After the further hearing Cadbury’s application was again dismissed: Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 8) (2008) 75 IPR 557.  Questions of costs remain to be resolved.   The parties have filed written submissions, from which it appears that while there is acceptance that, in general, Darrell Lea should get its costs, some issues remain in dispute.

Should Darrell Lea pay Cadbury’s costs for the time taken on 29 and 30 March 2006 in submissions at the first trial on the admissibility of the evidence of the Cadbury experts?

4                                             Argument commenced in the afternoon of 29 March and continued until about 11.45 am on the next day.  After another short witness the trial was adjourned to the following day so that I could prepare a ruling.  So something under a day and a half was taken up.  The whole trial took 13 days.  The further trial in March 2008 after the remitter by the Full Court took another three days.

5                                             The power to award costs is wide; it is “in the discretion of the Court or Judge”: Federal Court of Australia Act 1976 (Cth) s 43(2).  

6                                             The relevant principles were summarised by Toohey J when a judge of the Federal Court in Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 at 48,136:

The discretion must of course be exercised judicially.  There are decisions, both of Australian and English courts, that throw light on the way in which the discretion is to be exercised.  I shall not refer to those decisions in any detail; I shall simply set out in a summary way what I understand to be their effect.

1.                  Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order.  Ritter v Godfrey [1920] 2 KB 47.

2.         Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed.  Forster v Farquhar [1893] 1 QB 564.

3.         A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party’s costs of them.  In this sense, “issue” does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law.  Cretazzo v Lombardi (1975) 13 SASR 4 at 12.

There is no difficulty in stating the principles; their application to the facts of a particular case is not always easy.  Also it is necessary to keep in mind the caveat by Jacobs J in Cretazzo v Lombardi at 16.  His Honour sounded what he described as “a note of cautious disapproval” of applications to apportion costs according to the success or failure of one party or the other on the various issues of fact or law which arise in the course of a trial.  His Honour commented:

But trials occur daily in which the party, who in the end is wholly or substantially successful, nevertheless fails along the way on particular issues of fact or law.  The ultimate ends of justice may not be served if a party is dissuaded by the risk of costs from canvassing all issues, however doubtful, which might be material to the decision of the case.  There are, of course, many factors affecting the exercise of the discretion as to costs in each case, including in particular, the severability of the issues, and no two cases are alike.  I wish merely to lend no encouragement to any suggestion that a party against whom the judgment goes ought nevertheless to anticipate a favourable exercise of the judicial discretion as to costs in respect of issues upon which he may have succeeded, based merely on his success in those particular issues.

7                                             These observations were approved by Cooper J (with whom Sheppard and Neaves JJ agreed) in Cummings v Lewis (1993) 41 FCR 559 at 602-603.  See also Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602 at [54] and Black and Decker Inc v GMCA Pty Ltd (No 3) [2008] FCA 932.

8                                             As has been seen, argument over the Cadbury expert evidence did not take up a disproportionate time, less than ten per cent of the overall length of the trial and the further trial.

9                                             It cannot be suggested that Darrell Lea’s conduct in relation to the rejection of this evidence was unreasonable or inappropriate.  Indeed the critical reason for the wrongful rejection of the evidence was the failure of senior counsel on both sides, and myself, to advert to s 80 of the Evidence Act 1995 (Cth) which, departing from the common law, provides that opinion evidence is not inadmissible only because it is a matter of common knowledge; see the Full Court’s observations 159 FCR 397 at [49], [54].

10                                          I do not think any allowance should be made for Cadbury on this issue.

Should Darrell Lea pay Cadbury’s costs of the making of submissions on 10 April 2006?

11                                          Cadbury submitted that Darrell Lea should receive no costs, and should pay Cadbury’s costs, in respect of the making of final submissions on 10 April 2006 at the end of the first trial.  Cadbury says that these submissions were wasted because they had to be repeated at the second trial.  Had it not been for the wrongful exclusion of the evidence of the Cadbury experts, only one set of final submissions would have been made.

12                                          In the final submissions at the second trial there was necessarily reference by both sides to the whole body of evidence and argument, but this was really by way of background so as to put the evidence of the Cadbury experts in context. 

13                                          Also, the real contest between the parties had been substantially narrowed by the intervening decision of the Full Court.  As already noted, the Full Court had rejected Cadbury’s appeal grounds other than those connected with the Cadbury experts and a costs issue.  Some of those grounds were abandoned and others “pressed only formally at the hearing of the appeal”: Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd (No 3) [2007] FCAFC 119 at [8]. The Full Court ordered that Cadbury pay Darrell Lea’s costs of and associated with grounds 1 to 14 (inclusive), 17 and 18 of the amended notice of appeal.

14                                          Further, while the first trial had been conducted on the mutual assumption that there was no relevant difference between the passing off and Trade Practices Act claims, the Full Court pointed out that this was not necessarily so and that, in particular, in the Trade Practices claims Cadbury did not have to establish an exclusive reputation in relation to the colour purple: 159 FCR 397 at [96]-[99].

15                                          The conclusion is that, broadly speaking, while there was a certain amount of overlapping, the submissions at the first trial were not wasted.  The submissions at the second trial understandably concentrated on the evidence of the Cadbury experts. 

16                                          Moreover, virtually all the final submissions by Darrell Lea at the first trial were directed to arguments in effect upheld by the Full Court and, indeed, to a large extent ultimately not challenged by Cadbury (since the evidence of the Cadbury experts had already been excluded, it was not the subject of any discussion in those submissions).  It would seem unreasonable to deprive the ultimately successful party of the costs of arguments which have been found to be correct. 

17                                          There should be no special order in relation to the final submissions at the first trial.

Darrell Lea’s costs of meeting affidavits late filed by Cadbury

18                                          This matter is discussed by the Full Court: 159 FCR 397 at [115]-[127].  Because there had been substantial default by Cadbury in complying with consent directions for the filing of affidavits I directed that Cadbury pay, on an indemnity basis, Darrell Lea’s costs of preparing to meet such evidence.

19                                          Their Honours held that because there had been no explanation of the failure to apply for an extension of time to vary the timetable, there was no error of principle in my ordering indemnity costs for Darrell Lea’s preparation related to Cadbury affidavits rejected on the grounds of lateness: 159 FCR 397 at [125]-[126].  However, their Honours considered there was an error insofar as that order extended to Darrell Lea’s costs in respect of its expert Mr John Hall.  His evidence, which was in the same field as that of the Cadbury experts, would have been relied on by Darrell Lea had I not rejected the evidence of the Cadbury experts on grounds unrelated to lateness (although their affidavits were a few days late). 

20                                          At the second trial, Darrell Lea decided not call Mr Hall.  Nevertheless, costs in relation to the preparation of his evidence should be allowed to Darrell Lea: Clark, Tait & Co v Federal Commissioner of Taxation (1931) 47 CLR 142 at 146.  But, consistently with the Full Court’s ruling, those costs should not be on an indemnity basis, as Darrell Lea now concedes.

21                                          As to the issue of other costs in relation to the late filed evidence, I remain of the view, having once again considered the matter, that Cadbury’s conduct as discussed in the Full Court’s reasons warrants an order for indemnity costs.

22                                          The net result that is that there should be the same order for indemnity costs as made at the first trial, except in relation to the evidence of Mr Hall.

Submissions on costs

23                                          Since Darrell Lea has succeeded on the costs issues, it should get the costs of those submissions.

Orders

24                                          There will be orders accordingly.  I believe I have dealt with all remaining issues.  In case that is not so, I shall reserve liberty to apply within seven days.

Associate:

Dated:         31 July 2008