FEDERAL COURT OF AUSTRALIA

JBS Australia Pty Ltd v Australian Meat Group Pty Ltd (No 2) [2017] FCA 1611

ORDERS

THE COURT ORDERS THAT:

1.    The respondent pay the applicant’s costs of and incidental to the proceeding including reserved costs to be taxed or otherwise agreed.

2.    Pursuant to s 23 and s 37P of the Federal Court of Australia Act 1976 (Cth), rule 1.32 and rule 1.36 of the Federal Court Rules 2011, these orders and the reasons for judgment in support of these orders are made and published from Chambers.

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

REASONS FOR JUDGMENT

GREENWOOD J:

1    These proceedings are concerned with the disposition of the question of the costs of the principal proceeding: JBS Australia Pty Ltd v Australian Meat Group Pty Ltd [2017] FCA 1421 (the “principal proceeding”).

2    These reasons are to be read together with the reasons for judgment in the principal proceeding published on 30 November 2017.

3    Put simply, the judgment and orders in the principal proceeding dealt with the question of whether the applicant had made good its claims of trade mark infringement in respect of the two trade marks in suit and whether the respondent, by its contended conduct, was susceptible of an order for additional damages. The question of whether the applicant has suffered loss and damage by reason of any infringement (if made good) was separated out for later determination as was any claim for an account of profits.

4    In the result, the applicant made good its case based on deceptive similarity and failed on the issue of substantial identicality. The applicant failed to make good its claim that the respondent was susceptible of an order for additional damages.

5    The trial of the action was almost entirely dominated by the question of whether the marks used by the respondent involved use as a trade mark of a sign deceptively similar to the applicant’s trade marks in relation to the relevant goods in respect of which the applicant’s trade marks are registered. In the result, the Court made declarations as to infringement; mandatory injunctions restraining the respondent from using the impugned marks; an order that the domain name amg.com.au be transferred to the applicant and an order that the AMG trade mark applications be withdrawn. The declarations, injunctions and orders were made on 11 December 2017.

6    Because the applicant was successful in the proceeding, it ought to have its costs of the proceeding: Foots v Southern Cross Mine Management Pty Ltd (2007) 234 CLR 52 at 62 [25]; Yanner v Eaton (1999) 201 CLR 351 at 411-412 [5] (of the costs judgment of 21 December 1999). There seems to be no serious contest to that proposition.

7    However, there is another dimension to the matter.

8    The applicant seeks an order pursuant to r 40.02 of the Federal Court Rules 2011 (Cth) (the “Rules”) and r 25.14 of the Rules that the costs of the proceedings be awarded on a party and party basis up until 11.00am on Friday, 18 December 2015 and thereafter on an indemnity basis. Rule 25.14(3) provides that if an offer is made by an applicant and not accepted by a respondent, and the applicant obtains a judgment that is more favourable than the terms of the offer, the applicant is entitled to an order that the respondent pay the applicant’s costs:

(a)    before 11.00am on the second business day after the offer was served – on a party and party basis; and

(b)    after the time mentioned in paragraph (a) – on an indemnity basis.

9    Rule 40.02 provides that a party who is entitled to costs may apply to the Court for an order that the costs awarded in their favour be paid other than as between party and party; or those costs be awarded in a lump sum of, or in addition to, any taxed costs; or be determined otherwise than by a taxation of the costs.

10    Rule 1.32 of the Rules provides that the Court may make any order that the Court considers appropriate in the interests of justice. The Court may also make an order subject to any conditions the Court considers appropriate: r 1.33. The Court may also dispense with compliance with the Rules either before or after the occasion for compliance arises: r 1.34. The Court may also make an order that is inconsistent with the Rules and in that event, the order will prevail (over the Rules otherwise). More fundamentally, the Federal Court of Australia Act 1976 (Cth) confers a broad discretion on the Court as to costs. Section 43(2) provides that except as provided by any other Act, the award of costs is in the discretion of the Court or a Judge and s 43(3) sets out a range of things the Court may do in the exercise of the discretion without limiting the discretion.

11    On 16 December 2015, the applicant made a “without prejudice” offer to the respondent sent by email that day to the attention of “Messrs Cabral, G Catalfamo, S Catalfamo, Gu, Xu and Zhang”, in these terms:

1.    We refer to our open letter of today. We are further instructed as follows.

2.    JBS prefers to resolve this matter amicably and without the commencement of infringement Court proceedings against your company or its officers.

3.    In an effort to settle this matter JBS makes the following without prejudice offer.

4.    The deadline for compliance with demands 32(b) – 32(d) in our open letter will be extended by 6 months to 2:00PM on 30 June 2015 so as to allow your company to trade out of and then completely cease use of all of the AMG marks as complained of in our open letter. Each and every one of the demands in demands 32(b) – 32(d) of that letter must be complied with by that extended deadline and no later. There will be no more time extensions.

5.    In consideration of your company’s full compliance with demands 32(b) – 32(d) by 30 June 2015 [although the author no doubt meant to say 2016], JBS will waive its entitlement to damages (including additional damages), an account of profits and interest on any damages and profits accounted for.

6.    That represents a considerable compromise by JBS especially given the amounts that your company has earned under the trade mark as so far declared in the opposition proceeding. It also allows your company a very generous amount of time to trade out of the AMG name.

7.    Your company must however pay JBS’ legal costs to date plus its anticipated legal costs of finalising these settlement arrangements with your company over the next six months. Those costs will be fixed at $8,500 plus GST of $850. JBS has had to incur a lot of legal expenses to get this matter to its present stage. Given its very substantial compromise on damages and profit accounting, it says that your company having to pay those amounts for costs is also a fair trade-off. The $9,350 is to be paid [into] our trust account by 2:00PM on 23 December 2005 [although the author was no doubt intending to say 2015]. [the trust account details follow]

8.    This offer is open for acceptance until 2pm (EST) 23 December 2015. [It] is made under the Calderbank principles and is made with the purpose of genuinely compromising to avoid litigation in this matter. The offer to settle in this letter is also given as JBS’ resolution proposal under the Civil Dispute Resolutions Act.

9.    [A reservation of rights and a statement that the letter would be brought before the Court on the question of costs in support of an application for indemnity costs calculated as from 2.00pm on 23 December 2015.]

[emphasis added other than at para 8]

12    One of the difficulties is that the open letter setting out the content of the demands at 32(b) to 32(d) is not in evidence on the application. It is therefore not possible to identify the content of the demands which were required to be met. As things presently stand, due to the split issues in the case, the question of the applicant’s claim for damages has not yet been determined. It is not possible to say, at the moment, what the measure of the damages might be or make any observations about the probative weight of material going to damages. There seems to be no profits derived by the respondent and thus the focus of the monetary remedy is upon damages. The applicant says that it is likely to approach the assessment of damages on a licensing basis. That may well mean examining the construct of the licence fee a theoretical willing licensor would have derived from a theoretical willing licensee of the applicant’s marks. The determination of damages might involve a notion of the diminution in the value of the marks or it may involve a question of seeking to establish some measure of “but for” loss derived from the infringing conduct as found.

13    The applicant says that the notion that it has not suffered damage by reason of the infringement measureable as a remedy in damages is fanciful. The applicant says that it will prove some measure of loss and damage calculated on a “licence” basis.

14    The offer put by the respondent on 16 December 2015 was essentially this: if you, the respondent, meet or comply with “each and every one” of the demands at paras 32(b) to 32(d) of the open letter of 16 December 2015, by 30 June 2016, and pay the applicant’s costs to 16 December 2015 and the future costs associated with giving effect to the settlement, all fixed at $9,350.00, we, the applicant, will abandon any entitlement to damages (including additional damages) arising out of contended infringement.

15    That proposition, put by the “without prejudice” letter of 16 December 2015 was open for acceptance until 23 December 2015. The email was sent, in effect, on the evening of Wednesday, 16 December 2015. Thus, the respondent, in effect, received the offer on Thursday, 17 December 2015. The respondent was called upon to accept the offer by 2.00pm on the following Wednesday, 23 December 2015.

16    I accept that the offer put by the applicant was a genuine attempt to compromise a contended claim for declarations, injunctions and damages in respect of contended infringements by the respondent of its trade marks. However, I accept that, standing in the shoes of the respondent, it was not unreasonable for the respondent to reject the offer. That follows for these reasons. First, there was, objectively speaking, no basis in the period between 16 December 2015 and 23 December 2015 for a claim for “additional damages” and thus, the offer was, in part, predicated upon a claim that had no merit. Second, although the applicant asserted that it had suffered loss and damage by reason of contended infringement, and that abandoning a claim for damages was a significant matter, there was, in the relevant period, no objective basis for identifying, even in outline, the measure of the loss. Third, on the question of infringement, the respondent was not maintaining an intransigent attitude to the contended cause of action. It had been seeking advice and was seeking to maintain a position that its use of the marks did not engage use of a sign that was either substantially identical with, or deceptively similar to, the applicant’s trade marks. As to substantial identicality, the respondent was correct. The respondent was ultimately shown to be wrong about deceptive similarity but, nevertheless, the position it adopted, at the relevant time, was one in respect of which an argument could, at least, be properly made.

17    Accordingly, I am not satisfied that the interests of justice are served by exercising the discretion in such a way that the respondent would be required to pay indemnity costs from 11.00am, Friday, 18 December 2015.

18    The applicant made a further offer to settle the proceedings on 8 July 2016. That offer contained a number of elements.

19    First, the respondent immediately “desist and forever refrain [from] making any false representations which claim any association, sponsorship or affiliation” with the applicant’s device mark or the AMH plain word mark.

20    Second, that by 22 July 2016, the respondent de-register the domain name amg.com.au and the respondent not seek to re-register that domain name or any other domain name deceptively similar to it or deceptively similar to the “Restricted Marks”. The Restricted Marks were defined as four marks ((a) to (d)) consisting of the word mark AMG, the respondent’s device mark (as depicted in the judgment in the principal proceeding at [13]), the images from two of the boxes as depicted at [15], [134] and [135] of the judgment and “any other mark or name which is substantially identical or deceptively similar to any of the marks outlined in (a)–(d) above”.

21    Third, by 22 July 2016, the respondent cancel all advertising material containing or referring to the Restricted Marks.

22    Fourth, by 22 July 2016, the respondent withdraw three particular trade mark applications for its marks and any corresponding applications in other jurisdictions.

23    Fifth, by 22 July 2016, the respondent provide written confirmation and supporting evidence to the solicitors for the applicant that the respondent has complied with the matters described at [20] to [22] of these reasons.

24    Sixth, by 22 July 2016, the respondent “permanently desist and forever refrain from making any further application for a domain name, social media account, company name or trade mark that is substantially identical with, or deceptively similar to any of the Restricted Marks”.

25    Seventh, by 1 September 2016, the respondent permanently desist and forever refrain from marketing for sale or selling meat or meat products under or by reference to the Restricted Marks including taking steps to remove signage and other materials from the respondent’s processing plants and destroying packaging and cartons (containing images of the Restricted Marks). Written confirmation was to be provided of that step to the solicitors for the applicant.

26    Eighth, each party bear its own costs of the proceeding.

27    Ninth, the parties consent to orders dismissing the proceeding with no order as to costs.

28    This offer was expressed to be open for acceptance for 14 days from service.

29    The trial of the action commenced on 26 July 2016 and was heard for three days. The offer was open for acceptance until 22 July 2016.

30    There seem to me to be three difficulties with the further offer.

31    First, the elements of the offer are put more broadly than the relief which was ultimately obtained and addressed issues which were not the subject of the orders.

32    Second, although the applicant was successful on the footing that having regard to the findings of fact made upon a trial of the questions of fact and the application of the relevant legal principles to those facts, the respondent did not act unreasonably in pursuing the controversy of fact.

33    Third, the question of whether the respondent has, in all the circumstances, used as a trade mark a sign that is deceptively similar to the applicant’s trade marks in relation to goods in respect of which those trade marks are registered, is a matter upon which minds might differ. The extent to which minds might differ is a function of weighing in the balance all the relevant circumstances and in part that depends upon reaching findings of fact about the relevant circumstances. That is not to simply say that on the one hand the outcome on such a question might be one thing and then on the other hand it might simply be another. The law in this area of discourse is not that vague, episodic and uncertain. As a result of the trial, findings of fact were made. Once the principles were applied to those findings of fact (the respondent having adduced all of its evidence on the controversy), the Court determined that the sign the respondent chose to use, in all the circumstances, was a deceptively similar sign to the trade marks of the applicant.

34    I accept that the respondent did not act unreasonably in engaging in the controversy and refusing to accept the offer of 8 July 2016.

35    In the end result, the order ought to be that the respondent pay the costs of the applicant of and incidental to the proceeding including reserved costs.

Associate:

Dated:    22 December 2017