FEDERAL COURT OF AUSTRALIA

Edgetec International Pty Ltd v Zippykerb (NSW) Pty Ltd (No 2)

[2012] FCA 354

THE COURT ORDERS THAT:

1.    The respondents pay the applicant’s costs of these proceedings.

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

REASONS FOR JUDGMENT

INTRODUCTION

1    Following my decision in these proceedings (see [2012] FCA 281), Edgetec International Pty Ltd (Edgetec), the applicant, applied for an order for indemnity costs against the respondents, Zippykerb (NSW) Pty Ltd (Zippykerb) and Mr George May.

2    The parties have since submitted written outlines of submissions on that issue, which I have read and considered.

Principles

3    Under s 43 of the Federal Court of Australia Act 1976 (Cth), the Court has a broad and general discretion to award costs: see, for example, Ruddock v Vardalis (No 2) (2001) 115 FCR 229; [2001] FCA 1865 at [9].

4    The width of the discretion conferred by s 43 extends to a power to award indemnity costs: see Colgate-Palmolive Pty Ltd v Cussons Pty Ltd (1993) 46 FCR 225 at 228. However, in Sony Computer Entertainment Australia Pty Ltd v Dannoun (No 2) [2001] FCA 1530, Lindgren J observed (at [4]) that to make such an award:

… the circumstances must be “special”, must take the case out of the “ordinary” category of case, and must involve behaviour associated with the conduct of the proceeding by the person sought to be made liable which is so unreasonable as to make it unjust that the other party should be limited in its recovery to party and party costs.

Contentions

5    In its submissions, Edgetec relied upon two matters to attract one or more of these criteria. They were that:

(a)    the respondents’ case in defence of these proceedings was hopeless;

(b)    the respondents’ conduct in the proceedings should attract the condemnation of the Court.

6    On the first matter, viz the alleged hopelessness of the respondents’ defence, Edgetec relied upon a letter that its solicitors had forwarded to the respondents on 18 November 2010, about three months before these proceedings were commenced, wherein the solicitors set out the details of the allegations Edgetec intended to pursue against them in relation to the infringement of their trade marks and sought from them a series of undertakings. Edgetec’s counsel pointed out that it had been substantially successful in relation to all of the allegations made in that letter. In addition, Edgetec’s counsel relied upon the fact that Zippykerb is a competitor of Edgetec and, so he submitted, had continued to use the infringing material on its website for about a year after Edgetec’s solicitors’ letter (above) for the ulterior purpose of gaining a competitive advantage.

7    On the second matter, viz the respondents’ conduct in the proceedings, Edgetec’s counsel relied upon (among others) the following items of conduct which he described as “improper and unjustifiable”:

(a)    despite the interlocutory injunction ordered by the Court on 30 March 2011, restraining the respondent from infringing Edgetec’s trade marks, the respondents continued to use the domain names and display the infringing material on Zippykerb’s website;

(b)    the sole director of Zippykerb made an affidavit in these proceedings on 14 April 2011 in which she said that Zippykerb was not associated with the website www.zippykerb.com, yet in the defence filed on 19 August 2011, the respondents admitted that Zippykerb was in partnership with Mr May and that Mr May controlled that website;

(c)    the respondents were 14 days late in providing their materials to Edgetec and most of those materials were provided on the morning of the trial.

8    In response to these submissions, Zippykerb’s solicitor submitted that the Court had made no observations in its decision that characterised Edgetec’s case as overwhelming, or that described the respondents’ case as hopeless. He submitted that the authorities relied upon by Edgetec’s counsel were all cases where an applicant had pursued a hopeless case against a respondent and no authority had been given for the contention that a respondent could be visited with an indemnity costs order for “hopelessly” defending an action brought against it. Finally, he submitted that none of the conduct identified by Edgetec’s counsel was such that it amounted to “delinquency” in the proceedings that should be remedied with an order for indemnity costs.

Consideration

9    While Edgetec has succeeded in these proceedings, I do not consider the position taken by the respondents in their defence of the proceedings was so “groundless”, “fanciful” or “hopeless” (to use some well known descriptors) that they were completely unjustified in pursuing that defence. Two examples will suffice. First, the side by side comparison of a trade mark and a sign to determine whether they are substantially identical is not an empirical process. Very often it is a matter of degree. That was particularly so in this case when it came to the three domain names: see at [2012] FCA 281 at [19]. Similar considerations apply to the comparison between the trade mark use of Edgetec’s marks on Zippykerb’s website and the countervailing non-trade mark use of them elsewhere on that website: see at [2012] FCA 281 at [39]. In other words, I do not consider the respondent’s failure in defending these proceedings fairly leads to the conclusion that their defence was so weak that they were acting unreasonably in pursuing it.

10    On the items of conduct identified by Edgetec’s counsel, three observations are pertinent. First, the terms of the interlocutory injunction sought and obtained by Edgetec in March 2011 were expressed to prevent the respondents from “infringing” Edgetec’s trade marks. With the benefit of hindsight, the difficulties with the terms of that injunction are obvious. It contained within it a premise that was the main point of contention in the whole proceedings, viz whether or not the respondents were, indeed, infringing Edgetec’s trade marks. In other words, it presumed at the interlocutory stage success at the final judgment stage in the proceedings. To be effective, it should have been directed to specific identifiable conduct, for example, restraining the use of particular words or signs on Zippykerb’s website. In this respect, the observations of Callinan J in Members of the Yorta Yorta Aboriginal Community v State of Victoria (2002) 214 CLR 422; [2002] HCA 58 are worth mentioning (at [176]):

Orders of courts, whether made in equity or in common law, to be enforceable need to be framed with clarity. Parties placed under curial obligations to do, or abstain from doing acts need to know with certainty what their obligations are. … Furthermore, a defendant will ordinarily not be in contempt for failure to comply with an ambiguous and imprecise undertaking, and by analogy, order.

(Footnotes and case references omitted)

11    Secondly, while the apparent conflict between the statement made by the sole director of Zippykerb about the Zippykerb website and the position subsequently taken in Zippykerb’s pleadings is troubling, without conducting an inquiry to determine what the true position is, I do not consider it is appropriate for me to rely upon that apparent conflict in assessing whether to make this order for indemnity costs. Any number of satisfactory explanations may be provided for it, including mistake, or forensic choice.

12    Finally, it is significant, in my view, that Edgetec has produced no evidence that it was required to incur any significant additional costs as a result of any of the items of conduct identified by it, over and above those that it would have incurred in the ordinary course of pursuing these proceedings. On this aspect, it is well to recall that the function of any costs order is compensatory, rather than punitive: see Latoudis v Casey (1990) 170 CLR 534 at 543 per Mason CJ, 563 per Toohey J and 567 per McHugh J. This applies equally to an award of indemnity costs: see Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [44] per Gaudron and Gummow JJ.

Conclusion

13    Taking into account all of these matters, I do not consider this is one of those special, out of the ordinary cases where the respondents’ conduct of the proceedings was so unreasonable as to make it just to award Edgetec a higher level of compensation for its costs than the usual party and party costs order.

14    The order I will therefore make is that the respondents pay the applicant’s costs of these proceedings.

Associate:

Dated:    5 April 2012