FEDERAL COURT OF AUSTRALIA

Veda Advantage Limited v Malouf Group Enterprises Pty Limited (No 2) [2016] FCA 470

ORDERS

THE COURT DECLARES THAT:

1.    By using the phrases “THE VEDA REPORT CENTRE” and “THE VEDA-REPORT CENTRE” in its sponsored link advertising, the respondent infringed, within the meaning of s 120 of the Trade Marks Act 1995 (Cth), the Australian Registered Trade Marks appearing in Annexure A to these orders.

2.    By using the phrases “THE VEDA REPORT CENTRE” and “THE VEDA-REPORT CENTRE” in its sponsored link advertising, the respondent engaged in misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law as found in Sch 2 of the Competition and Consumer Act 2010 (Cth).

3.    By using the phrases “THE VEDA REPORT CENTRE” and “THE VEDA-REPORT CENTRE” in its sponsored link advertising, the respondent made false or misleading representations that it had the sponsorship or approval of, or affiliation with, the applicant in contravention of s 29(1)(h) of the Australian Consumer Law.

THE COURT NOTES:

4.    The undertaking given to the Court on 10 September 2015 by Jordan Francis Malouf, a director of the respondent, that he would not use the phrase “The Veda Report Centre” in any sponsored link.

THE COURT ORDERS THAT:

5.    The respondent, whether by itself, its directors, employees or agents or otherwise, be permanently restrained from using in its sponsored link advertising the Australian Registered Trade Marks appearing in Annexure A to these orders or any deceptively similar sign as part of the phrase “THE VEDA REPORT CENTRE” or “THE VEDA-REPORT CENTRE”.

6.    The respondent, whether by itself, its directors, employees or agents or otherwise, be restrained from:

(a)    advertising, promoting, offering financial and related services under or by reference to the phrase “THE VEDA REPORT CENTRE” or “THE VEDA-REPORT CENTRE” in its sponsored link advertisements;

(b)    representing by its use of the phrase “THE VEDA REPORT CENTRE” or “THE VEDA-REPORT CENTRE” that the respondent’s businesses have the sponsorship or approval of, or affiliation with the applicant.

7.    The respondent pay the applicant 20% of its costs.

8.    The proceedings be otherwise dismissed.

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

ANNEXURE A

Australian Registered Trade Mark numbers:

(a)    1426238 “VEDA”;

(b)    1133204 “VEDA ADVANTAGE”;

(c)     1153164 “VEDACHECK”; and

(d)     1320811 “VEDASCORE”.

REASONS FOR JUDGMENT

1    This was a dispute about the use in the Google AdWords program of the word “veda” both as keywords and in sponsored link advertising. Veda Advantage Limited (Veda) is the owner of certain registered trade marks which consist of or incorporate “veda” (the Veda Trade Marks). It claimed that Malouf Group Enterprises Pty Limited (Malouf) infringed its registered trade marks, engaged in misleading or deceptive conduct and made false or misleading representations in contravention of the Australian Consumer Law (ACL).

2    On 21 March 2016 I held that both claims were made out, but only to a limited extent, and I ordered that Veda file short minutes of order within 14 days giving effect to my reasons: Veda Advantage Limited v Malouf Group Enterprises Pty Limited [2016] FCA 255. On 5 April 2016 I extended that time to 27 April 2016 and on 26 April 2016 proposed orders were forwarded to my chambers, together with submissions in support of them. Regrettably, however, there is some disagreement.

3    The original claims for damages or an account of profits are not maintained. The parties agreed that declarations should be made reflecting my findings. They also agreed on the form of the declarations. But Malouf did not agree on the proposal for injunctive relief and it vigorously disagreed with Veda’s proposal that it pay 30% of Veda’s costs. Indeed, it applied for an order that Veda pay its costs of the entire proceeding on an indemnity basis.

The scope of the claim

4    The proceeding was commenced by the filing of an originating application and statement of claim on 27 October 2014. Between that date and the delivery of judgment, the pleadings underwent a number of changes.

5    The first was inconsequential; it merely involved the correction of a minor typographical error in the originating application.

6    But on 7 September 2015 (two days before the start of the trial) Veda filed an application for leave to amend its statement of claim in several respects. Some were substantive, some not. The substantive amendments included adding allegations of infringement of three additional trade marks and of false or misleading representations that Malouf provided or intended to provide services at its websites including a free Veda credit report. Appended to the amended statement of claim were two schedules. The first listed the particular keywords the subject of Veda’s complaint, the second the sponsored links. Included in the schedules were the sponsored links headed “The Veda Report Centre” and “The Veda-Report Centre”, which I ultimately found infringed the Veda Trade Marks and contravened the ACL. Leave was granted to make these amendments, despite Malouf’s opposition to some of them.

7    The final amendment to Veda’s pleadings was made on 14 October 2015 (the fourth day of the hearing). The statement of claim had originally pleaded trade mark infringements occurring from July 2014, but the evidence Veda had presented at the hearing showed infringement stretching back as far as August 2012. As Malouf raised no objection, I granted leave to Veda to amend its pleading to reflect the earlier date.

The findings

8    I found that Malouf infringed the Veda Trade Marks by using the sign “Veda” as a trade mark in its sponsored link advertisements featuring the text “The Veda Report Centre” and “The Veda-Report Centre” for its Clean Your Credit business in October 2014 when that sign was substantially identical with, or deceptively similar, to the Veda Trade Marks in relation to services in respect of which those marks are registered. In all other respects, however, I found against Veda on its trade mark infringement claim.

9    I also found that Malouf contravened ss 18 and 29(1)(h) of the ACL by its use of the terms “The Veda Report Centre” and “The Veda-Report Centre” in its sponsored link advertisements, but not otherwise.

The agreed declarations

10    The declarations sought by Veda and which Malouf agreed are appropriate in the light of the findings are these:

1    By using the phrase “THE VEDA REPORT CENTRE” and the phrase “THE VEDA-REPORT CENTRE” in its sponsored link advertising, the respondent has infringed, within the meaning of section 120 of the Trade Marks Act 1995 (Cth), the Australian Registered Trade Marks appearing in Annexure A to these orders.

2.    By using the phrase “THE VEDA REPORT CENTRE” and the phrase “THE VEDA-REPORT CENTRE” in its sponsored link advertising, the respondent has engaged in misleading and deceptive conduct in contravention of ss 18 and 29(1)(h) of the Australian Consumer Law as found in Schedule 2 of the Competition and Consumer Act 2010 (Cth).

11    I am satisfied that declarations to this effect should be made. The only substantive change I have made is to use the disjunctive “or” instead of the conjunctive “and” between “misleading” and “deceptive” so as to strictly conform to the findings.

Should injunctive relief be granted?

12    Veda sought permanent injunctions to restrain the use of the two phrases “THE VEDA REPORT CENTRE” and “THE VEDA-REPORT CENTRE”. The orders it sought were in the following terms:

4.    The Respondent, whether by itself, its directors, servants or agents or otherwise, be permanently restrained from using in its sponsored link advertising the Australian Registered Trade Marks appearing in Annexure A to these orders or any deceptively similar sign as part of the phrase “THE VEDA REPORT CENTRE” or “THE VEDA-REPORT CENTRE” in its sponsored link advertising.

5.    The Respondent, whether by itself, its directors, servants or agents or otherwise, be restrained in trade or commerce from:

(a)    advertising, promoting, offering financial services and related services under or by reference to the phrase “THE VEDA REPORT CENTRE” and the phrase “THE VEDA-REPORT CENTRE” in its sponsored link advertisements;

(b)    representing by its use of the phrase “THE VEDA REPORT CENTRE” or “THE VEDA-REPORT CENTRE” that the Respondent’s businesses have the sponsorship, approval, or affiliation with the applicant.

13    Malouf opposed the application on the basis that injunctive relief was unnecessary.

14    The evidence about the advertising campaign featuring the two phrases was given by Mr Malouf in the third of his affidavits, handed up on the second day of the trial. Mr Malouf said that he had forgotten that Malouf had used the phrase “The Veda Report Centre” or “The Veda-Report Centre” in its sponsored link advertising until he was reminded of it the previous day by Veda’s application to amend the statement of claim which included reference to them. Since then he said that he had caused searches to be undertaken of the documents Malouf discovered in the proceeding and of the Google AdWords account for one of his businesses (Clean Your Credit). He said that those searches disclosed that “in or about October 2014” the phrase “The Veda-Report Centre” appeared in the title of the sponsored link advertisements for Malouf Group’s website <www.cleanyourcredit.com.au> for a period of about two weeks and that in that entire period there were only 25 clicks on the link and no converted clicks. He then stated:

Without any admission as to liability, I undertake on behalf of Malouf Group that it will not use the phrase “The Veda Report Centre” in any sponsored link.

15    The undertaking was repeated by senior counsel for Malouf at the hearing after Mr Malouf expressed some uncertainty in cross-examination about whether the undertaking would apply if Veda failed in its action.

16    I had some difficulty accepting Mr Malouf’s claim to have forgotten about his company’s use of the two phrases until the day before his affidavit had been filed. First, these phrases were devised after he had received Veda’s “cease and desist” letter and appear to have been part of a calculated decision on his part: see Veda Advantage Limited v Malouf Group Enterprises Pty Limited at [195]. Secondly, they were included in the schedules to the draft amended statement of claim which had been served a few days earlier. That said, however, the phrases were not in the original form of the pleading and there were only two references to the first and one to the second in a list of some 146 keywords. In these circumstances there is every chance that they were overlooked. Moreover, it was never put to Mr Malouf in cross-examination that his claim was false. For these reasons I am not prepared to disbelieve him. Indeed, I accepted his evidence in this respect: Veda Advantage Limited v Malouf Group Enterprises Pty Limited at [171].

17    Mr Hennessy SC, who appeared for Malouf, accepted that there was no vice in the Court granting the injunctions but argued that there was no need for them having regard to the undertaking. I was initially attracted to the argument. While the discretion is at large, it must, of course, be exercised judicially. And it is for the applicant to show that an injunction will serve some purpose: Australian Competition and Consumer Commission v Dateline.Net.Au Pty Ltd (in liq) (2007) 161 FCR 513 (FC) at [111]. Although the conduct in question was plainly not inadvertent, it took place over a period of only two weeks and there is no evidence to indicate that it was ever repeated, either before or after the undertaking was given. On reflection, however, I have decided to grant the relief sought.

18    Malouf’s argument might have been irresistible if the terms of the undertaking had been wide enough to catch the second phrase, such as by the addition of the words “or any colourable variation thereof”. As expressed, however, the undertaking did not extend to the phrase incorporating the hyphen. The narrow terms in which the undertaking was couched, in the face of Malouf’s use of the Veda trade mark after receiving the “cease and desist” letter, persuades me that there is a risk, albeit a small one, that, without an injunction, Malouf might use the phrase “The Veda-Report Centre” (or some colourable variation of it) in its sponsored link advertising. In these circumstances, prudence favours making orders of the kind sought.

19    In any case, where, as here, a person has engaged in misleading or deceptive conduct or made misleading or deceptive representations in contravention of the ACL, the Court may grant an injunction to restrain the person from engaging in conduct of the same kind regardless of the person’s apparent intention: ACL, s 232(4). Thus, as Nicholas J observed in Samsung Electronics Australia Pty Limited v LG Electronics Australia Pty Limited (No 2) [2015] FCA 477 at [18] (Samsung v LG), echoing Lockhart J’s remarks in ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 (FC) at 256, the lack of evidence that a respondent is likely to engage in a repetition of the contravening conduct is a relevant consideration, but it is not fatal to a claim for injunctive relief. In Australian Competition and Consumer Commission v 4WD Systems Pty Ltd (2003) 200 ALR 491; [2003] FCA 850 at [217], to which Nicholas J referred (at [17]) and which was cited with approval by Black CJ and Finkelstein J in Humane Society International Inc v Kyodo Senpaku Kaisha Ltd (2006) 154 FCR 425 [24], Selway J said:

The purpose of an appropriately drafted injunction may be merely to reinforce to the market place that the restrained behaviour is unacceptable. A declaration may achieve the same result, but so long as it is otherwise appropriate that is no reason why an injunction should not also be made if it is in the public interest (as so understood) to do so. On this basis an injunction could still be made where (as here) there was little likelihood that the respondents might engage in the restrained behaviour.

20    In the present case, orders in or to the effect of the terms proposed would doubtless have a salutary effect on Mr Malouf and, unlike his undertaking, will serve to mark the Court’s disapproval of his conduct. Consequently, the orders are likely to have a deterrent effect, not only on him but also on other traders. That is very much in the public interest.

What costs order should be made?

21    In support of its application for indemnity costs, Malouf read an affidavit affirmed by Ms Sonaaz Farhadi-Fard, a solicitor employed by McLaughlins Lawyers, who represent Malouf. Annexed to the affidavit, amongst other things, were two letters dated respectively 14 and 21 November 2014 in which offers of settlement had been made, relying on the principles applied in Calderbank v Calderbank [1975] 3 All ER 333.

22    The offer in the first letter was that Veda withdraw the originating application and each party bear its own costs. Malouf’s contention was that Veda’s application was “likely to fail” and the letter included a reasoned argument in support of that contention. The offer lapsed after one week. While this offer might well have founded an application for an order in the terms proposed (see Sagacious Legal Pty Ltd v Wesfarmers General Insurance Ltd [2011] FCAFC 53 at [125]–[146]; Barnes v Forty Two International Pty Ltd (No 2) [2015] FCAFC 19 at [18]), Malouf did not rely on it, save to the extent that it incorporated Malouf’s view of the weaknesses in Veda’s case.

23    The day the offer expired — 21 November 2014 — Malouf sent another letter to Veda’s solicitors. That letter was in the following terms:

We are instructed to make a without prejudice offer in full and final settlement of this proceeding on the following basis:

1.    The Applicant withdraw the Originating Application with the Applicant to pay the Respondent's costs on a solicitor and own client basis to the date of this letter of and incidental to the Originating Application and otherwise the Applicant to bear its own costs incurred to date, inclusive of general and special damages, account of profits, Court ordered interest and any taxable party/party costs and disbursements.

2.    The Respondent undertakes to do the following:

    (a)    Refrain from using in the text of advertisements appearing in the Google Search Engine as sponsored links for the Respondent’s Websites (as defined in the Statement of Claim) any of the Veda Trade Marks (as defined in the Statement of Claim).

    We note our instructions that our client has already removed visible instances of the Veda Trade Marks from sponsored links;

    (b)    Include in all advertisements in the Google Search Engine appearing as sponsored links for the Respondent's Websites, “Call [insert relevant trading name] to clarify that there is no affiliation between the Respondent and the Applicant and that they are separate and unrelated entities.”

    We note that the URLs of the Respondent’s Websites already state the relevant trading entity used by the Respondent;

    (c)    The Veda Trade Marks will be set as “exact match negative” keywords in our client’s Google AdWords campaign for advertisements appearing as sponsored links in respect of the Respondent’s Websites, such that when a Veda Trade Mark, in the absence of other terms, is entered into the Google search engine, sponsored links for the Respondent’s Websites will not appear;

    (d)    The Veda Trade Marks will only be used by our client as keywords in its Google AdWords campaign for descriptive purposes and in combination with other words or as part of a phrase e.g. “fix my Veda file”, “how to clean my Veda score”, “can you repair your Veda history” in order to define our client’s services.

    Such use clearly does not constitute use of the Veda Trade Marks for the purposes of section 120(1) of the Trade Marks Act 1995 (Cth).

We advise that our client's business is based on repairing credit files such as those held by your client. As your client has a practical monopoly in Australia as a credit reporting body, any inability to describe our client's services without some reference to your client and the Veda Trade Marks is impractical. Use for descriptive purposes is permitted by the Trade Marks Act 1995 (Cth) and would not constitute a contravention of the Australian Consumer Law.

This offer is made on the basis outlined at paragraphs 1 to 16 of … our letter of 14 November 2014.

This offer may only be accepted in writing by the Respondent by 4.00pm on Friday, 28 November 2014.

Should your client fail to accept the offer, our client will seek to rely on the principles applied in Calderbank v Calderbank [1975] 3 All ER 333 to obtain an order for indemnity costs in the proceeding against your client.

We reserve our client’s right to rely upon this letter on the question of costs.

(Original emphasis.)

24    The reference to “the basis outlined at paragraphs 1 to 16” of the letter of 14 November 2014 was presumably designed to capture the arguments in favour of Malouf’s position that Veda’s case was likely to fail.

25    Veda responded by serving on Malouf on the day the offer expired an offer of compromise under r 25.01 of the Federal Court Rules 2011 (Cth), open for 14 days, which proposed that Malouf agree to court orders restraining Malouf from:

(a)    using any of 14 different keywords featuring the word “veda” except in the following phrases:

    “Fix my Veda file”;

    “How to clean my Veda score”;

    “Can you repair your Veda history”; or

    any other phrase in which VEDA is used immediately adjacent to “file”, “history” or “score”, together with “fix”, “clean” or repair”; and

(b)    using the VEDA registered trade mark (1426238), “whether alone or in combination with any other words, in the text of any paid search advertisements in the Google Search Engine advertising any website operated in respect of any [of the Malouf] business[es]”.

26    The offer also proposed that each party pay its own costs.

27    It is convenient to deal first with Malouf’s application that Veda pay all its costs on an indemnity basis. Considering that Veda succeeded in proving that Malouf had infringed its registered trade marks and contravened the ACL, albeit in limited respects, the application was a bold one.

28    The award of costs in a case such as this is entirely discretionary: see Federal Court of Australia Act 1976 (Cth), s 43(2). The breadth of the discretion is illustrated by the examples of the kinds of awards that can be made listed in s 43(3). Nevertheless, a successful party is usually entitled to an award of costs in its favour: Ruddock v Vadarlis (No 2) (2001) 115 FCR 229, at [11] (Black CJ and French J).

29    Ordinarily, costs are awarded on a party and party basis: Federal Court Rules 2011 (Cth), r 40.01. “Costs as between party and party” means only the costs that have been fairly and reasonably incurred by the party in the conduct of the litigation: FCR, Sch 1. The burden of persuading a court that a different order should be made rests with the offeror: Black v Lipovac (1998) 217 ALR 386; [1998] FCA 699 at [217]. See, too, r 40.02.

30    The Federal Court Rules provide that, where an offer to compromise is made by a respondent in conformity with r 25.01 and is rejected by the applicant, if the applicant obtains judgment in terms less favourable than those of the offer, there is a presumption that the applicant must pay the respondent’s costs from a certain point in time following the offer on an indemnity basis (r 25.14(a)).

31    In contrast, however, to an offer of compromise made under r 25.01, refusal to accept an offer not made in compliance with the rules (a Calderbank offer, see Calderbank v Calderbank [1975] 3 All ER 333) does not give rise to any presumption in favour of the offeror. The offeror needs to show that there was a genuine offer of compromise, and that it was unreasonable for the offeree not to accept it: Black v Lipovac at [217]–[218]. In deciding whether it is unreasonable for an offer to be rejected, the following matters should ordinarily be considered:

    the stage of the proceeding when the offer was made;

    the time afforded to the offeree to consider the offer;

    the extent of compromise involved;

    the offeree’s prospects of success, assessed as at the date of the offer;

    the clarity with which the terms of the offer were expressed;

    whether the offer foreshadowed an application for indemnity costs in the event of refusal.

See Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 at [25].

32    The offer made by Malouf on 21 November 2014 certainly foreshadowed an application for indemnity costs. It also involved a genuine element of compromise in that it proposed that Malouf refrain from using any of the Veda Trade Marks in the text of sponsored link advertisements. In this respect the offer was more favourable than the result Veda achieved. What is more, although it required Veda not only to pay its costs but to pay them on a solicitor and client basis to the date of the letter, in view of the time the offer was made, costs were unlikely to be substantial and, as Malouf submitted, if Veda had any concern about the amount, it only had to ask.

33    The offer was made at a very early stage of the proceeding — before Malouf had filed its defence. On the other hand, the offer was accompanied by a detailed argument in favour of its acceptance.

34    Even so, I am not satisfied that it was unreasonable of Veda to reject it.

35    First, like the first offer, this offer was only open for a week. At such an early stage of the litigation, I do not consider a week sufficient, especially when at this point Veda did not know the full extent of Malouf’s use of the Veda Trade Marks. It was only after and as a result of discovery that it became aware of the use of the two phrases upon which it ultimately succeeded. Indeed, the use of the two phrases was not revealed in the list of documents Malouf served on 24 March 2014. It was only disclosed by the provision of a zip file supplied on 7 May 2015. I accept Veda’s submission that when the offer was made it was in no position to know whether it had covered all of Malouf’s uses of its marks and, for this reason, that it was in no position to know whether the terms of the offer were adequate to protect its interests.

36    Second, as Veda submitted, there was a lack of clarity in relation to one of the terms of the offer. Clause 2(d) provided that Malouf would only use the Veda Trade Marks as keywords in its Google AdWords campaign for descriptive purposes and in combination with other words or as part of a phrase. Since Malouf’s argument was that it had only ever used the marks in this way and the parties were at loggerheads on this very issue, it is understandable that Veda derived no comfort from the offer. While Malouf offered some examples, it afforded Veda no certainty.

37    Third, at the time the offer was made there was no Australian authority dealing with the question of whether the use of trade marks in keywords in an internet advertising program could amount to trade mark infringement and some European case law which might have given Veda good reason to think that its prospects were nowhere near as bleak as Malouf painted them.

38    But Malouf did not rest on the Calderbank offer. Malouf also submitted that Veda should pay its costs (whether on an indemnity or ordinary basis) because, as it put it, Veda had run what was, in effect at least, a test case.

39    Malouf cited Baltic Shipping Company v Dillon (1991) 22 NSWLR 1 in support of the argument. But Baltic Shipping is a most imperfect analogy. For a start, the costs in that case were awarded to the victor. Second, costs were awarded on a solicitor and client basis in respect of one issue only and in circumstances where the issue was ultimately conceded.

40    Baltic Shipping was an admiralty case. The respondent, Mrs Dillon, was a passenger on a cruise ship, the “Mikhail Lermontov”, when it hit a shoal and sank. She claimed damages for personal injury and loss of property. As Gleeson CJ put it in his opening remarks, there was “a protracted and hard-fought battle” which culminated in the shipowner admitting liability. The trial judge (Carruthers J) was left to decide what, if any, damages Mrs Dillon should recover. Carruthers J found in Mrs Dillon’s favour but refused her request for a special costs order. The shipowner appealed and Mrs Dillon cross-appealed on the costs issue. By a majority (Mahoney JA dissenting), the appeal was dismissed and the cross-appeal allowed. An appeal to the High Court was successful but the costs order in Mrs Dillon’s favour was not disturbed.

41    The circumstances in which Mrs Dillon came to be a plaintiff were quite unusual. After she had accepted an offer of settlement from the shipowner, she was contacted by solicitors retained by insurance underwriters to recover moneys paid out for lost baggage and personal effects. They invited her to join in a test case in which they intended to prove that the shipowner was negligent and recover damages for the passengers, including for personal injury, nervous shock, emotional distress and disappointment. Mrs Dillon accepted the invitation and agreed to join with 122 other passengers named in a schedule. Yeldham J, the then admiralty judge, considered that each plaintiff had to sue separately but later permitted the proceedings to be combined in a single action for the purpose of determining the question of liability, which was hotly disputed. The matter was then passed to Carruthers J who made orders for the separate trial of that question. The trial proceeded and was at what Kirby P described at 11 as “an advanced stage” before the admission of liability was made.

42    The essence of the majority’s decision in the Court of Appeal on Mrs Dillon’s application for a special costs order appears in the President’s reasons at 35C:

Necessarily, very substantial costs were incurred in the respondent’s proof of negligence which ultimately produced the admission of negligence. Figures placed before the Court show the very substantial sums incurred in proving liability against a dogged resistance by the appellant. I believe that that burden of costs useful to all of the other cases awaiting trial and eventually shown to have been thrown away as unnecessary, should not fall upon [Mrs Dillon]. It should not even fall on the insurers behind her.

43    In Baltic Shipping it does not seem to have been in contention that the question of the shipowner’s liability in negligence had been run as a test case. The first suggestion that the present case was conducted as such emerged in Malouf’s oral submissions on costs. The basis for it was tenuous at best.

44    A test case, properly so-called, is a case which is brought in order to establish a decision determinative of other cases in which the same question of law is involved. The argument in the present case rested on the unproven assertion that, notwithstanding that the evidence disclosed that several of its competitors had used the Veda Trade Marks as keywords, none of them had been sued.

45    The evidence in support of the proposition that other businesses had used the Veda Trade Marks as keywords was given by Mr Malouf in response to a question I asked him and was apparently based on his knowledge and experience of the operation of the Google AdWords program:

HER HONOUR: Does it follow that Credit Repair Australia is also using Veda keywords? - - - Definitely. There’s probably about eight other competitors, roughly, whether it’s credit repair companies, debt consolidation companies, lenders – a lot of people use the keyword. It’s very common.

MS BAIRD: Just to – on that, Mr Malouf, are you able to see the keywords that your competitors use? - - - No, but I’ve done multiple searches under Veda and various names and seen their ads pop up.

And you’ve done that as part of your research to identify the best strategy for Malouf Group Enterprises to make sure that you pop up at – if I can use that expression – at a number 1 or number 2 position? - - - No. No, I only recently did that when I was corresponding with my solicitor, just to see – just in general talk – who else bids on Veda, because I can see - - -

So it’s an assumption you’ve got about who else bids on Veda? - - - No. It’s not an assumption. It’s a - - -

Well, you’re drawing a conclusion from what you’ve seen on the results? - - - Sorry. Just – just to clarify, it’s not an assumption. When I actually typed in those terms, those advertisers did come up. So it’s not an assumption; it’s fact.

What you’re not too sure about is how those terms have been – whether they’re exact match or phrase match or? - - - I couldn’t answer that, but if I just type in – and you can do it on your computer now – various keywords from Veda, you will see various other advertisers that do.

But there was no evidence that other credit repair businesses were not also the subject of law suits. Nor was there evidence that, if they had used the Veda Trade Marks in this way, they did so without Veda’s permission or authority.

46    In any event, even if other credit repair businesses were acting in precisely the same way as Malouf, it would not necessarily mean that this action was brought as a test case. Indeed, the evidence given by Mr Malouf seemed to take the cross-examiner by surprise.

47    It is true that the principle in Baltic Shipping is not confined to “test cases” so-called. Davies J pointed out in Ragata Developments Pty Ltd v Westpac Banking Corporation (1993) 217 ALR 175 at 177 that special orders have been made, not only where the case was understood to be a test case, but also where it has an effect beyond the parties “in which circumstance additional and special work and responsibilities would have been undertaken”. There is no reason to conclude here, however, that work was undertaken over and above what would have been required if this case had no broader implications.

48    In Ruddock v Vadarlis Black CJ and French J acknowledged that the usual principle that a successful party should recover its costs is subject to a number of exceptions including:

    Where a litigant has succeeded only upon a portion of the claim, the circumstances may make it reasonable that the litigant bear the expense of litigating that portion upon which he or she has failed.

    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 parties’ 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 law.

49    Malouf relied on Samsung v LG in support of an application that Veda should pay, not merely the costs of issues upon which it had failed, but all its costs, at least on an ordinary basis.

50    The mixed outcome achieved by Samsung in Samsung v LG bears more than a passing resemblance to the position in the present case. Nicholas J made declarations that LG had engaged in misleading and deceptive conduct and made misleading and deceptive representations in breach of ss 18 and 29 of the ACL in two respects: by broadcasting an advertisement referred to in the judgment as “the Flickering TVC” and by distributing certain instructions abbreviated to “the Retailing Instructions”. His Honour also enjoined LG from making five discreet representations. Nevertheless, because there were several other issues where Samsung had failed and which his Honour said had attracted a great deal of attention in written and oral evidence and in opening and closing submissions (and, reading between the lines, far more attention than the issues upon which Samsung had succeeded), his Honour decided that Samsung should pay 50% of LG’s costs.

51    Assuming this order was warranted in Samsung v LG, I do not consider it appropriate in the present case.

52    In Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 at 874, Devlin J said:

No doubt, the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct.

53    McHugh J cited this statement with approval in Oshlack v Richmond River Council (1998) 193 CLR 72 at [69] and explained that in this context the reference to “misconduct” refers to misconduct relating, or in the lead-up, to the litigation. His Honour went on to point out that it was therefore proper to depart from the usual rule where the successful party:

(1)    “by its lax conduct effectively invites the litigation”;

(2)    “unnecessarily protracts the proceedings”;

(3)    “succeeds on a point not argued before a lower court”;

(4)    “prosecutes the matter solely for the purpose of increasing the costs recoverable”; or

(5)    “obtains relief which the unsuccessful party had already offered in settlement of the dispute”.

54    The only one of these instances which could apply in the present case is the second. In Oshlack McHugh J cited Forbes v Samuel [1913] 3 KB 706 in support of the proposition. In that case Scrutton J found for the defendant in a hearing that ran for four days but, because “considerable portions” of the four days were taken up with arguing about objections on which the defendant failed, his Honour directed that the taxing master only allow costs appropriate to an action lasting two days.

55    In the present case, the trade mark infringement case turned on three issues:

(1)    whether Malouf’s use of the word “veda” in keywords and/or in the text of its sponsored links involved use of the word as a trade mark within the meaning of that expression in s 120 of the Trade Marks Act;

(2)    if so, whether it was use “in relation to services” in respect of which the Veda Trade Marks were registered; and

(3)    if it was a use of the trade marks in relation to services, whether Malouf had made out its defence that the use was in good faith to indicate the kind or intended purpose of the services.

56    While I found that, if there had been a trade mark use, it was a use in relation to services in which the Veda Trade Marks were registered, Veda failed to prove that Malouf’s use of the word “veda” in keywords was a trade mark use. I accepted that it had proved that Malouf’s use of the word as part of the sponsored link advertisements featuring “the Veda Report Centre” and “the Veda-Report Centre” was a trade mark use and that Malouf had not made out its good faith defence.

57    The ACL claim was put in four different ways. All but one (referred to in the pleadings and the judgment as the first ACL case) was wholly unsuccessful. The first succeeded only in relation to the text of the sponsored links, not the keywords, and even then only in relation to two phrases, which appeared in only three of the 146 advertisements the subject of the proceeding.

58    Veda’s victory was certainly modest. It may be inferred that the effect of the findings was to deny Veda damages or the benefit of any profits Malouf made from the relevant advertising campaigns. It failed to prevent Malouf from using the Veda Trade Marks as keywords and it only succeeded in respect of advertisements that had been run for a total period of two weeks and advertisements of which it was blissfully unaware at the time it launched its action.

59    Nevertheless, I am not persuaded that it would be just in the circumstances to require Veda to pay Malouf’s costs. Veda should recover some costs, taking proper account of the limited extent of its success and the work involved in procuring it.

60    The assessment is not an easy one. It defies mathematical calculation. As both parties appear to have accepted, an issue by issue evaluation would be inappropriate. While Veda failed in all its claims based on the use of the Veda keywords (in contradistinction to the sponsored links), to some degree the evidence on this question was connected to the evidence on the use of those words in the sponsored links. To try to disentangle this evidence now would likely generate extra costs. A good deal of the evidence, at least in chief, would have been required even if Veda’s entire case had been based on the issues upon which it succeeded. Doubtless, however, cross-examination and written and oral argument would have been much shorter had Veda not pursued the issues upon which it lost. Moreover, much of Veda’s expert

evidence would have been unnecessary. In my view Veda’s approach is the right one but the proportion it seeks is excessive, given the limited extent of its win. Doing the best I can, I consider that Malouf should pay 20% of Veda’s costs.

Associate:

Dated:    5 May 2016