FEDERAL COURT OF AUSTRALIA

Community First Credit Union Limited v Bendigo and Adelaide Bank Limited (No 2) [2019] FCA 1976

ORDERS

THE COURT ORDERS THAT:

1.    The respondent pay the appellant’s costs of the proceeding.

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

ORDERS

THE COURT ORDERS THAT:

1.    The first respondent pay the applicant’s costs of the proceeding.

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

REASONS FOR JUDGMENT

MARKOVIC J:

1    On 20 September 2019 I made orders and published reasons in these two related proceedings which were heard together: see Community First Credit Union Limited v Bendigo and Adelaide Bank Limited [2019] FCA 1553 (Judgment).

2    Those orders included orders that the parties attempt to agree the form of orders to be made reflecting the conclusions expressed in my reasons or, in the absence of agreement, each notify the Court of the orders for which they contended and provide short written submissions explaining why those orders should be made. That included any orders in relation to the costs of the proceedings.

3    On 24 October 2019 the proceedings were listed before me. By that time the parties had reached agreement on all aspects of the orders to be made in the proceedings save in relation to two matters. The first was the extent of an undertaking to be given by the respondent, Bendigo and Adelaide Bank (Bendigo), in proceeding NSD1389/2017 (Rectification Proceeding) as a condition of a stay of the orders to be made requiring rectification of the register of trade marks (Register). After hearing submissions from the parties, that issue was resolved. The second was the question of costs in both proceedings, a matter on which the parties could not agree. These reasons address that outstanding issue.

4    By way of background I note the following:

(1)    there were two proceedings before the Court. The first was the Rectification Proceeding, which was an application by the applicant/appellant Community First Credit Union (CFCU) pursuant to s 88(1) of the Trademarks Act 1995 (Cth) (TM Act) seeking orders that the Register be rectified by cancelling and removing two trademarks registered in the name of Bendigo (which I will refer to as the Bendigo Community Marks). The second was an appeal brought by CFCU pursuant to s 56 of the TM Act against the decision of a delegate of the Registrar of Trade Marks rejecting CFCU’s application for registration of two trademarks (which I refer to as the CFCU Marks) (Appeal Proceeding): see Judgment at [2]-[7];

(2)    the Rectification Proceeding and the Appeal Proceeding were heard together and, by orders made in each of the proceedings prior to the commencement of the hearing, evidence in each proceeding was to be evidence in the other; and

(3)    CFCU was successful in both proceedings. On 24 October 2019:

(a)    an order was made in the Rectification Proceeding that the register be rectified by cancelling the Bendigo Community Marks; and

(b)    orders were made in the Appeal Proceeding that the appeal be allowed, the decision of the Registrar of Trade Marks be set aside and the CFCU Marks proceed to registration.

5    Insofar as costs of the proceedings are concerned, CFCU seeks orders that Bendigo pay its costs of the Rectification Proceeding and of the Appeal Proceeding while Bendigo seeks orders that it pay 75% of CFCU’s costs in each of the Rectification Proceeding and the Appeal Proceeding.

6    Bendigo also seeks an order that CFCU pay its costs of and incidental to responding to the expert report of Timothy Aman filed by CFCU in the Rectification Proceeding, including in relation to consideration of that report, preparation of the report of Barry Taylor in response and costs incidental to those reports.

Relevant principles

7    Section 43 of the Federal Court of Australia Act 1976 (Cth) confers a wide discretion on the court in awarding costs, which is to be exercised judicially. The usual rule is that costs will follow the event, although a successful party may be awarded less than its costs, or costs may be apportioned, based upon success on the issues: see Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd (No 2) [2018] FCAFC 7 at [3].

8    In Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 327 ALR 192; [2015] HCA 53, in considering whether a costs order should be made having regard to the success on issues, the High Court (French CJ, Kiefel, Nettle and Gordon JJ) said at [6]:

In any event, the preferable approach in this case is the one usually taken, that costs should follow the outcome of the appeal. This is not a case where it may be said that the event of success is contestable, by reference to how separate issues have been determined. There are no special circumstances to warrant a departure from the general rule, and good reasons not to encourage applications regarding costs on an issue-by-issue basis, involving apportionments based on degrees of difficulty of issues, time taken to argue them and the like. The fact that Firebird retains its registration is immaterial to the overall outcome of this appeal.

(footnote omitted.)

9    In Les Laboratoires Servier v Apotex Pty Ltd (2016) 247 FCR 61 at [300]-[301] a Full Court of this Court (Bennett, Besanko and Beach JJ) said the following about apportionment of costs:

300    The practice has developed that where a party relies on grounds that are not established and where time has been expended and costs incurred as a consequence, that party, although it may ultimately be successful, might not recover all of its costs. This, in turn, may depend on whether evidence and argument can be separated. For example, evidence from the skilled worker in the art may be relevant to different grounds of revocation and to an understanding of the patent for the purposes of construction and disclosure. Further, the question of apportionment is a matter of discretion and generally does not lend itself to mathematical precision, by reference to time or to importance. In any event, as the primary judge recognised, it has not hitherto been the case that such a successful party which obtains an order for revocation of the patent is ordered to pay the patentee’s costs.

301    On the other hand, Courts have been increasingly concerned, generally, to use all proper means to encourage parties to consider carefully what matters they will put in issue in their litigation. This has led to decisions whereby the successful party does not recover all of its costs where it has been unsuccessful on a discrete issue or in what is decided to be an unmeritorious objection. While it is acknowledged that, ordinarily, costs follow the event, the wide discretion in awarding costs has led to circumstances where a successful party who has failed on certain issues may be ordered to pay the other party’s costs of them (as discussed in Hughes v Western Australian Cricket Association (Inc) [1986] ATPR 40-748 per Toohey J), although warnings have been stated that care should be taken in such a course and consideration be given to whether the issues on which the successful party failed are clearly dominant or separable (Waters v PC Henderson (Australia) Pty Ltd (1994) 254 ALR 328 at 330–331 per Mahoney JA) and to whether the issues involved different factual enquiries in the one proceeding or multiple causes of action, even if based on a common substratum of fact.

10    At [303] their Honours continued:

Without amounting to an absolute rule, the principle remains that, subject to certain limited exceptions generally linked to the disentitling conduct of the successful party, a successful party in litigation is entitled to an award of costs (Oshlack per McHugh J at [67]–[68], in dissent but not in this aspect of the principle and with whom Brennan CJ agreed). That is not to punish the unsuccessful party but to compensate the successful party. There is no absolute rule that, in the absence of disentitling conduct, a successful party is to be compensated by the unsuccessful party, nor is there a rule that there is no jurisdiction to order a successful party to bear the costs of the unsuccessful party (Oshlack at [40] per Gaudron and Gummow JJ). However, the Courts have been slow to order a successful party to pay the costs where it has been unsuccessful on some issues. In Mok v Minister for Immigration, Local Government and Ethnic Affairs (No 2) (1993) 47 FCR 81, Keely J was of the view (at 84) that, without attempting to fetter the discretion, this power ought to be exercised only where the Court, on a consideration of all of the circumstances, has concluded that the raising of an issue by the applicant on which it has failed was so unreasonable that it is fair and just to make the order.

11    The Court’s ability to make a compendious costs order was not in issue. In GlaxoSmithKline Consumer Healthcare Investments (Ireland) (No 2) Limited v Generic Partners Pty Limited (No 2) [2018] FCAFC 100 at [6]-[7] a Full Court of this Court (Middleton, Nicholas and Burley JJ) said:

6    Every case must be decided on its own facts. There is no doubt that this Court could address the costs of the appeals and the cross appeals compendiously. In Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd (No 3) [2014] FCAFC 126 (‘Sanofi-Aventis’) the Full Court addressed the costs of the appeal and cross-appeal together at [26], despite Apotex failing in its challenge to validity on various grounds (see at [8]). In Tramanco Pty Ltd v BPW Transpec Pty Ltd (No 2) [2014] FCAFC 58 (‘Tramanco’) the Full Court similarly dealt with costs compendiously (at [13]), and noted the difficulties with disentangling the costs of different issues (at [12]).

7    Further, a percentage reduction approach may also be appropriate in some cases. Such an approach was adopted in Idenix and in Sandvik Intellectual Property AB v Quarry Mining & Construction Equipment Pty Ltd (No 2) [2017] FCAFC 158.

12    However, in that case, which concerned patent infringement and patent validity, the Full Court declined to make a compendious costs order and noted the two were separate events: at [8].

13    In Tramanco Pty Ltd v BPW Transpec Pty Ltd (No 2) [2014] FCAFC 58 a Full Court of this Court (Allsop CJ, Greenwood and Nicholas JJ) made a global or compendious costs order, noting at [12] that it was a case where the evidence relevant to the two issues, infringement and validity, could not be “readily disentangled”.

14    There are numerous examples of the Court making compendious costs orders and/or applying a percentage reduction to reflect relative success of parties on issues raised for determination, each of which turns on its facts. The decision in Dunlop Aircraft Tyres Limited v The Goodyear Tire & Rubber Company (No 2) [2018] FCA 1443 (Dunlop), relied on by Bendigo (see [21] below), is one such example. In that case two related proceedings were before the Court. As Nicholas J explained at [2] those proceedings were as follows:

… the Goodyear Parties brought proceedings for trade mark infringement (“the infringement proceeding”) against the Dunlop Parties, in which the Dunlop Parties filed a cross-claim seeking orders for the rectification of (inter alia) the registered trade marks upon which they were sued. In the other proceeding (“the appeal proceeding”) DATL appealed against the decision of the Registrar in respect of various trade mark applications that DATL had filed for the relevant trade marks.

15    As to the outcome of those proceedings, as explained by his Honour at [3]:

The Dunlop Parties were successful in their application to rectify the relevant trade mark registrations. As a result, the Goodyear Parties’ claim for trade mark infringement failed and the infringement proceeding was dismissed. However, the Dunlop Parties failed in their appeal against the decision of the Registrar and the appeal proceeding was dismissed.

16    In addressing the parties’ submissions on the appropriate costs order to be made his Honour said at [19]-[20]:

19    In the present case the Goodyear Parties emphasised that the ordinary rule is that costs should follow the event, even though in their submissions in reply, they submitted that in the case of the infringement proceeding, the Dunlop Parties should receive only a percentage of their costs. Implicit in this submission is an acceptance that some adjustment should be made in this case to take account of the costs incurred by a party that successfully defended a proceeding on a range of issues, some of which were upheld and some of which were rejected.

20    It seems to me that this is a case in which it is in the interests of justice to make a global costs order that has regard to the overlap in issues in the infringement and the appeal proceedings, and which takes account of the particular issues on which the Dunlop Parties succeeded and those on which the Goodyear Parties succeeded.

17    In arriving at the appropriate figure Nicholas J had regard to the issues on which the respective parties failed despite success on the outcome and made orders that, in his Honour’s view, reflected both the overall results and the time devoted to particular issues to which he had referred on which the relevant party had not succeeded.

costs of the proceedings

18    CFCU submitted that Bendigo should pay its costs of both proceedings which would follow from its success on both the issues of rectification and on the appeal. That is, CFCU contended that it had achieved all that it could in both proceedings.

19    CFCU submitted that, while both parties agreed it was appropriate to make a compendious costs order in relation to both proceedings, rather than require costs to be separately assessed, this was not a case where a discount should be applied by reference to sub-issues on which it did not succeed. It said this was so because there was substantial cross-over of evidence between each of the grounds on which it sought rectification as well as, critically, between the Rectification Proceeding and the Appeal Proceeding, in the latter of which CFCU wholly succeeded.

20    Bendigo submitted that the Rectification Proceeding occupied significantly more time in terms of evidence preparation, trial time and submissions than the Appeal Proceeding. It further submitted that in the Rectification Proceeding CFCU pursued seven grounds in its further amended statement of claim (FASOC) but ultimately only succeeded on one, s 41 of TM Act. Bendigo sought to dissect both the FASOC and the Judgment by reference to the number of paragraphs in each of those documents devoted to each issue. For example, Bendigo said that the s 41 ground for rectification occupied six paragraphs in the FASOC whereas the alternate grounds relied on by CFCU for rectification, on which it was not successful, occupied 35 paragraphs. Bendigo noted that each of the alternate grounds on which CFCU sought rectification needed to be responded to in evidence, at trial and in submissions. Bendigo undertook a similar analysis in relation to the Judgment.

21    Bendigo submitted that an adjustment on the overall costs order to reflect the issues upon which CFCU was not successful would produce a result that is fairer than the traditional rule that costs follow the event. It noted that it was an approach adopted in other cases and referred the Court in particular to Dunlop.

22    Bendigo submitted that if a similar approach to that applied by Nicholas J in Dunlop is applied here to achieve a balanced global outcome, a costs order that it pay 75% of CFCU’s costs across both proceedings would take account of a fair balance in a way that enables a relatively clear approach to the determination of the costs to be paid.

23    The first question to consider is whether a compendious costs order should be made in both proceedings. The parties were agreed that should occur. I accept in the circumstances of this case that it is the appropriate course to adopt.

24    There was a significant degree of overlap in the evidence relied on by the parties in each proceeding; to that end, the preparation of the matters and hearing proceeded on the basis that evidence in one proceeding would be evidence in the other; and there was a significant degree of commonality between the issues. To require the parties to embark on a process to determine the costs payable by taxation or otherwise in circumstances where different costs orders are made in each proceeding would not be in their interests and would cause them to incur unnecessary additional costs in unravelling what evidence was relied on and how time was spent and thus should be apportioned as between the two proceedings.

25    The next question is whether the costs to be awarded to CFCU should be reduced to take account of the fact that it was not successful on all grounds raised by it in the Rectification Proceeding. Put another way, Bendigo says that it enjoyed some success in the Rectification Proceeding in successfully defending six of the grounds relied on by CFCU and that success should be recognised. It noted that one way that could be done would be for it to claim its costs insofar as it was successful in its defence and the other is the course it proposes, that is, reducing the costs to be awarded to CFCU to recognise its success.

26    There were two outcomes or events which CFCU sought: rectification of the Register and success on its appeal. CFCU was successful in both. It obtained an order for rectification of the Register and the appeal was allowed such that it can proceed to register the CFCU Marks. When the grounds raised in each of those proceedings are considered more closely, as Bendigo urges me to do:

(1)    in the Rectification Proceeding, CFCU was successful in establishing its ground based on s 41 of the TM Act but was unsuccessful in establishing any of the other grounds on which it relied, namely, ss 42(b), 43, 44, 59, 88(2)(c) and 92(4) of the TM Act; and

(2)    in the Appeal Proceeding, Bendigo was entirely unsuccessful in establishing any of its grounds of opposition.

27    The starting point is that CFCU, as the successful party, is entitled to its costs in both proceedings. The purpose of making a costs order, in this case in favour of CFCU, is to compensate it for its costs incurred in the proceeding. While I recognise that in determining the order that should be made justice should be done between the parties, taking into account all of the circumstances of the proceedings, in my opinion, there should be no reduction of the costs to be awarded to CFCU. My reasons follow.

28    First, there are no exceptional circumstances in this case that warrant a departure from the usual rule that costs follow the event.

29    Second, as I have already observed, there were two relevant events, rectification of the Register and the appeal. CFCU was successful in both. That CFCU raised grounds in the Rectification Proceeding on which it was unsuccessful is not a sufficient reason in this case to deviate from the usual course that costs follow the event.

30    Thirdly, CFCU was entirely successful in its appeal or, put another way, Bendigo failed to make out any of its grounds of opposition.

31    Fourthly, there was a commonality of issues and a significant degree of overlap in the substratum of facts both between the two proceedings and the various grounds raised by CFCU in the Rectification Proceeding. To that end, Bendigo did not point to any additional evidence it was required to lead because of the grounds raised by CFCU in the Rectification Proceeding on which it did not succeed. It simply says that the inclusion of additional grounds, even if based on the same substratum of facts, adds to the cost of a proceeding and dissects the Rectification Proceeding by reference to time spent arguing or paragraphs of the Judgment devoted to considering the s 41 issue and the balance of the issues raised by CFCU. One would readily accept that the more issues that are raised by a party or parties to a proceeding, the longer the time will be that is devoted to the preparation and hearing of the proceeding and, it follows, the higher their cost. But it cannot be said, and it has not been established, that the inclusion of the additional grounds by CFCU was not justified in the circumstances of this case. Nor has it been established that those additional issues added substantially to the length of preparation or hearing of the case.

32    As has been recognised, each case must be determined on its own facts. The facts of this case appear to be quite different to those before the Court in Dunlop where there were differing degrees of success in each proceeding. It is not possible or useful to extrapolate from that case to the circumstances that present before me, as Bendigo would have me do, beyond applying the accepted statements of principle set out therein.

Mr Aman’s report

33    I turn then to consider Bendigo’s claim for the costs of responding to Mr Aman’s report.

34    CFCU served a report prepared by Mr Aman, partner, advisory at BDO East Coast Practice. On 11 September 2018 Bendigo wrote to CFCU’s lawyers in relation to Mr Aman’s report querying its relevance. In its letter Bendigo relevantly said:

Leaving aside the question of admissibility, we fail to see how Mr Aman’s evidence is relevant on your client’s pleaded case. The instructions provided by you to Mr Aman by letter dated 21 August 2018 and annexed to his affidavit request that he provide an opinion as to whether various branches are:

(a)    operating at a profit or loss after tax;

(b)    solvent or insolvent; and

(c)    generating positive cash flow.

However, Community First has not pleaded that the franchise model is failing or that operating branches are insolvent or may become insolvent.

We request that you clarify as soon as possible (and in any event by no later than 4pm on Thursday, 13 September 2018) how Mr Aman’s evidence is relevant to the proceedings, having particular regard to the pleadings. In the event you fail to provide adequate clarification, we put on notice that we will object to the evidence on the basis of relevance (reserving the right to object on additional grounds) and intend to seek a specific costs order in relation to any costs incurred by Bendigo in seeking to respond to Mr Aman’s report, should the Court ultimately determine that the evidence of Mr Aman is irrelevant.

(original emphasis.)

35    By letter dated 29 September 2018 CFCU’s lawyers, Sparke Helmore, responded to Bendigo’s letter addressing, among other things, the issue raised by Bendigo in relation to Mr Aman’s evidence. In doing so those lawyers noted that Mr Aman’s evidence was relevant to “establishing that, at all relevant times [Bendigo] was not (and is not) a ‘community bank’ as those words were (and are) understood by consumers and the general public”. CFCU then referred Bendigo to parts of its FASOC and Bendigo’s evidence in chief filed in the Appeal Proceeding. The letter concluded:

Accordingly, the evidence of Mr Aman is clearly relevant to issues in the proceedings and will be relied on by the Applicant in relation to the issue of whether the “Bendigo Bank Community Bank Branches” operated by the Respondent/First Respondent have actually benefited and served the community, in accordance with the meaning of the term “community bank”.

(original emphasis)

36    Bendigo filed an affidavit sworn by Barry Anthony Taylor on 10 October 2018 which annexed a report prepared by Mr Taylor in response to Mr Aman’s evidence.

37    By the time of the hearing, Messrs Aman and Taylor had prepared a joint report. That report was jointly tendered by CFCU and Bendigo. As a result, CFCU did not read Mr Aman’s evidence and Bendigo did not read Mr Taylor’s evidence. The Court was invited by the parties to have regard to that evidence in the event that anything in the joint report required clarification: Judgment at [9].

38    Bendigo submitted that it should have its costs of considering and responding to Mr Aman’s evidence because of its lack of relevance. Notwithstanding that Bendigo further submitted that to the extent CFCU justified the relevance of that evidence it did so by having regard to paragraphs of the FASOC which concern the grounds raised under ss 42 and 43 of the TM Act, both of which were decided in Bendigo’s favour.

39    In my opinion Bendigo is not entitled to its costs of considering and responding to Mr Aman’s evidence. Despite foreshadowing that it would seek those costs because, in its opinion, the evidence was not relevant, Bendigo responded to Mr Aman’s report and did not take the threatened objection at the hearing. As noted above, CFCU did not seek to read Mr Aman’s affidavit and the parties proceeded in a co-operative fashion by tendering a joint report prepared by their respective experts: Messrs Aman and Taylor. That is, despite Bendigo’s threat that it would object to Mr Aman’s evidence on the basis of its relevance and, as I understand was the case, in fact notifying an objection to the effect that it would make submissions as to the relevance and weight to be given to Mr Aman’s evidence, no objection was taken at the hearing. Rather, the parties jointly invited the Court to have regard to the evidence of each of Messrs Aman and Taylor if so required in order to assist in its understanding of the joint report.

40    In those circumstances I would decline to make the order sought by Bendigo in relation to Mr Aman’s report.

conclusion

41    For those reasons CFCU is entitled to its costs of the Rectification Proceeding and of the Appeal Proceeding. I will make orders accordingly.

Associate:

Dated:    25 November 2019