FEDERAL COURT OF AUSTRALIA

Urban Alley Brewery Pty Ltd v La Sirène Pty Ltd (No 2) [2020] FCA 351

ORDERS

THE COURT ORDERS THAT:

1.    The application be dismissed.

2.    Pursuant to section 88(1)(a) of the Trade Marks Act 1995 (Cth), the Register of Trade Marks be rectified by cancelling Australian Registered Trade Mark No. 1775261.

3.    The cross-claim be otherwise dismissed.

4.    Order 2 be stayed:

(a)    initially for a period of 28 days from the date on which these Orders are made; and

(b)    if an appeal is lodged within that period, until the determination of that appeal, or further order.

5.    The applicant/cross-respondent pay the respondent/cross-claimant’s costs of the application and the cross-claim.

6.    The costs referred to in Order 5 be awarded in a lump sum pursuant to rule 40.02(b) of the Federal Court Rules 2011 (Cth).

7.    The quantification of the costs awarded under Orders 5 and 6, and the making of such further orders and directions in connection therewith, be referred to a Registrar of the Court for determination.

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

REASONS FOR JUDGMENT

O’BRYAN J:

Introduction

1    On 7 February 2020 I delivered judgment in this matter, with my reasons published at Urban Alley Brewery Pty Ltd v La Sirène Pty Ltd [2020] FCA 82.

2    In those reasons, I upheld La Sirène’s application (by cross-claim) to have the Register of Trade Marks rectified by cancelling Urban Alley’s trade mark “URBAN ALE” which is registered in class 32 for beer and has Australian Registered Trade Mark No. 1775261 (the Urban Ale mark). I otherwise dismissed the following claims that had been made by the parties in the proceeding:

(a)    Urban Alley’s principal claims against La Sirène for trade mark infringement, breach of ss 18 and 29 of the Australian Consumer Law (ACL) and passing off arising from La Sirène’s marketing and sale of a beer product under a name that incorporated the words “URBAN PALE” (the Urban Pale product);

(b)    Urban Alley’s application to have the Register of Trade Marks rectified by cancelling two registered trade marks owned by La Sirène, being the word mark “FARMHOUSE STYLE URBAN PALE BY LA SIRÈNE” registered in class 32 in relation to beer and a related device mark similarly registered in class 32 in relation to beer; and

(c)    La Sirène’s application for declaratory relief under s 129(2)(a) of the Trade Marks Act 1995 (Cth) (TMA) alleging that Urban Alley had no grounds for bringing an action against it for infringement of the Urban Ale mark.

3    I directed the parties to file an agreed form of orders reflecting my reasons for decision (including as to the costs of the proceeding) or, in the absence of agreement, the orders proposed by each party and accompanying submissions in support. The parties are in agreement that orders to the following effect be made:

(a)    the application be dismissed;

(b)    pursuant to section 88(1)(a) of the TMA, the Register of Trade Marks be rectified by cancelling Australian Registered Trade Mark No. 1775261;

(c)    the cross-claim otherwise be dismissed;

(d)    order (b) be stayed:

(i)    initially for a period of 28 days from the date on which the Orders are made; and

(ii)    if an appeal is lodged within that period, until the determination of that appeal, or further order.

4    The parties disagree about two matters. First, La Sirène seeks a declaration that the Urban Ale mark is, and at all material times has been, invalid. Urban Alley opposes that order on the basis that it is unnecessary. Second, the parties disagree about orders for costs.

5    In support of its contentions, La Sirène relied on an affidavit of its solicitor, Georgina Pay O'Farrell, affirmed 17 February 2020. Ms O’Farrell deposed to two offers of compromise made by La Sirène under rule 25.01 of the Federal Court Rules 2011 (Cth) (FC Rules) and also deposed to the costs incurred by La Sirène in the conduct of the proceeding.

6    In support of its contentions, Urban Alley relied on an affidavit of its solicitor Jonathan Ariel Feder affirmed 5 March 2020. Mr Feder deposed to certain property-related searches he conducted with respect to La Sirène, in support of Urban Alley’s application for a stay of the costs order.

Declaration

7    By its notice of cross-claim, La Sirène sought an order pursuant to section 88(1)(a) of the TMA that the Urban Ale mark be cancelled and removed from the Register of Trade Marks, and also sought a declaration that the Urban Ale mark is, and at all material times has been, invalid.

8    As already indicated, in my earlier judgment, I upheld La Sirène’s cross-claim under s 88(1)(a) that the Register of Trade Marks be rectified by cancelling the Urban Ale mark on two grounds, which were grounds on which registration of the mark could have been opposed under the TMA, namely:

(a)    under s 41 of the TMA on the basis that the Urban Ale mark was not capable of distinguishing Urban Alley’s goods (in respect of which the trade mark is registered) from the goods of other persons; and

(b)    under s 44 of the TMA on the basis that the Urban Ale mark was substantially identical with or deceptively similar to the prior registered mark “URBAN BREWING COMPANY”.

9    An order rectifying the Register will accordingly be made.

10    The question that arises is whether the declaratory relief sought by La Sirène, in addition to the order rectifying the Register, should be made.

11    It may be accepted that the Court’s discretionary power to grant declaratory relief is broad and enables the Court to declare its determination of a right, duty or liability that was the subject of controversy between the parties. However, the power is confined by the considerations which mark out the boundaries of judicial power: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 (Ainsworth) at 582. A discretionary consideration is that declaratory relief will ordinarily be refused if it would produce no foreseeable consequences: Ainsworth at 582; Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 200 CLR 591, 613 at [52] per Gaudron J. Matters of form are also important. A declaration must be framed with certainty and precision: AWB Ltd v Cole (No 6) [2006] FCA 1274 at [5]; it must also be informative as to the basis on which the Court has declared the existence of the right, duty or liability: Rural Press Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 53 at [89]-[90].

12    Those considerations weigh against the declaration sought by La Sirène in the present case. The declaration will produce no foreseeable consequences in circumstances where the Court will order rectification of the Register by the cancellation of the Urban Ale mark and dismiss Urban Alley’s infringement claim. A declaration of invalidity affords no practical relief to La Sirène in addition to the orders that will be made by the Court. La Sirène submitted that the declaration would inform the public that the Urban Ale mark should not have been registered. However, this proceeding is not a public law proceeding; it involves private rights which will be vindicated by the orders to be made. Those considerations are accentuated by difficulties with the form of the declaration. While it is common to refer to a mark that is wrongly on the register or that has been cancelled as “invalid”, the expression is not a statutory term with a precise meaning. The TMA enables a person to apply for registration of a trade mark, enables opposition to the registration on numerous grounds, and enables registration to be cancelled on even more numerous grounds including circumstances that have arisen after the date of registration (see s 88(2)(c)). A declaration that a trade mark is invalid is not informative of the legal findings that were made in relation to the Urban Ale mark. I therefore decline to grant the declaratory relief sought by Urban Alley.

Costs

13    The parties filed evidence and submissions on the question of the costs of the proceeding. There is no disagreement that a costs order should be made in favour of La Sirène reflecting its success in the proceeding. However, the following four issues have arisen between the parties in relation to the form of order that should be made:

(a)    first, whether costs should follow the event, or whether the Court should reduce the costs awarded in favour of La Sirène to take account of certain issues on which La Sirène was not successful;

(b)    second, whether costs for any period of the proceeding ought be awarded in favour of La Sirène on an indemnity basis by reason of Urban Alley’s failure to accept either of the offers of compromise made by La Sirène under rule 25.01 of the FC Rules;

(c)    third, whether costs should be awarded on a lump sum basis under rule 40.02 instead of being taxed and, if so, how they should be calculated; and

(d)    fourth, whether the order for costs should be stayed pending any appeal brought by Urban Alley.

Should costs follow the event or be adjusted on an issues basis?

14    La Sirène enjoyed almost complete success in the proceeding. It successfully defended Urban Alley’s principal claims against it for infringement of the TMA, infringement of ss 18 and 29 of the ACL and passing off, and it successfully defended Urban Alley’s secondary claim seeking cancellation of La Sirène’s word and label marks. It also enjoyed substantial success in its cross-claim, obtaining an order that the Urban Ale mark be cancelled. La Sirène submitted that, given those circumstances, it should be awarded its costs of the proceeding without adjustment.

15    Urban Alley submitted that La Sirène did not enjoy total success at the trial. It identified four issues on which La Sirène did not succeed:

(a)    first, it did not establish its claim of unjustified threats under s 129(2)(a) of the TMA;

(b)    second, it did not establish the s 58 ground of opposition to the Urban Ale mark;

(c)    third, it did not establish the s 124(1) defence to trade mark infringement; and

(d)    fourth, during the trial it withdrew reliance on the URBAN FARMHOUSE BREWING COMPANY prior mark as a basis for opposition to the Urban Ale mark under ss 44 and 58.

16    Section 43 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) confers a wide discretion on the court in awarding costs. The applicable principles were summarised by the Full Court in EMI Songs Australia Pty Limited v Larrikin Music Publishing Pty Ltd [2011] FCAFC 92 at [9]:

Costs are in the discretion of the Court (Federal Court of Australia Act 1976 (Cth) s 43). The discretion is broad but is to be exercised judicially. The fundamental purpose of the discretion is to compensate the successful party, not to punish the unsuccessful party. The furtherance of the goal of compensation means that, in general, a successful party will obtain an order for costs in its favour (Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [65]-[68]). However, “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…” (Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 at 48,136). If apportionment of costs is appropriate, the object is not mathematical precision (Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272) but a result that best reflects the interests of justice in the overall circumstances of the case.

17    The Court should not “cast undue analysis upon whether a successful party has been unsuccessful on ‘particular issues’ in the context of its predominant success in the controversy overall”: NV Sumatra Tobacco Trading v British American tobacco Services [2011] FCA 1295, at [17]. Justice may not be served if parties are dissuaded from canvassing all issues which might be material by the risk of an adverse costs order: Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd (1993) 26 IPR 261 at 271. In State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174, the Full Court observed at [8] (in deciding not to adjust costs on an issues basis):

We do not consider that the outcome of the issue [on which the appellants had failed] … justifies departure from the ordinary position. The outcome of this issue did not relevantly qualify the success of either appellant on its appeal. Both appellants were ultimately wholly successful. The mere fact that a court does not accept all of a successful party’s arguments does not make it appropriate to deal with costs on an issue by issue basis. It cannot be supposed that the issue in question was unreasonably raised at trial or on appeal. There is nothing else disclosed in the circumstances of the case that would support the proposition that the court should depart from the usual order as to costs …

18    La Sirène enjoyed almost complete success on its defence of Urban Alley’s claim and on its cross-claim. None of the issues on which La Sirène was unsuccessful constituted a separate claim; the evidence and submissions associated with each of the issues was marginal; and none of the issues was unreasonably raised by La Sirène. Addressing each of the issues on which La Sirène did not succeed:

(a)    The unjustified threats claim primarily depended on La Sirène’s defence of Urban Alley’s infringement claim and involved very limited evidence associated with the threat of proceedings by Urban Alley’s predecessor in business.

(b)    The s 58 ground of opposition to the Urban Ale mark was one of three bases on which La Sirène applied for the cancellation of the mark. La Sirène was successful on the other two bases. The s 58 ground required no additional evidence and involved submissions only.

(c)    The s 124(1) defence to trade mark infringement was one of four bases on which La Sirène defended Urban Alley’s infringement claim. La Sirène was successful on the other three bases. The evidence relied on by La Sirène in respect of its s 124 defence, relating to its use of the word “urban” in relation to craft beer products from before the priority date of the Urban Ale mark, was evidence that was generally relevant to the parties’ competing claims, including Urban Alley’s claims under the ACL and of passing off.

(d)    In its opposition to the Urban Ale mark under ss 44 and 58, La Sirène originally relied on two prior registered marks, being URBAN BREWING COMPANY and URBAN FARMHOUSE BREWING COMPANY. At trial, it relied only on the former. The additional evidence relating to the latter mark was minimal.

19    In those circumstances, La Sirène should be regarded as being wholly successful in the proceedings and there is not a sufficient reason to discount the costs to be awarded to La Sirène.

Should costs be awarded on an indemnity basis?

20    On 28 February 2019, La Sirène made the first of two offers of compromise under rule 25.01. The first offer was in terms that: (a) Urban Alley’s application be dismissed; (b) La Sirène’s cross-claim be dismissed; and (c) Urban Alley pay La Sirène’s costs to be agreed, or as assessed in accordance with Schedule 3 of the Rules. Urban Alley did not respond to the offer. At the time of the first offer, both Urban Alley and La Sirène had filed their evidence on Urban Alley’s claim and La Sirène had filed its evidence on its cross-claim.

21    On 5 April 2019, La Sirène made a second offer of compromise. The second offer was in terms that: (a) La Sirène would provide Urban Alley with a written undertaking that it would cease and desist from importing, manufacturing, marketing, advertising, promoting, supplying, exhibiting in public, offering for sale and selling its Urban Pale products from 31 October 2019; (b) Urban Alley pay 85% of La Sirène's costs on a party-party basis; (c) Urban Alley's application otherwise be dismissed; (d) La Sirène's cross-claim be dismissed; and (e) the parties otherwise provide mutual releases relating to any claims set out in Urban Alley’s claim and La Sirène’s cross-claim. Again, Urban Alley did not respond to the offer.

22    Rule 25.14(2) of the FC Rules relevantly provides:

(2)     If an offer is made by a respondent and an applicant unreasonably fails to accept the offer and the applicant's proceeding is dismissed, the respondent is entitled to an order that the applicant pay the respondent's costs:

    (a)     before 11.00 am 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.

23    La Sirène seeks an order under rule 25.14(2) that Urban Alley pay its costs on an indemnity basis from 11.00 am on either 4 March 2019 (being the second business day after the first offer was served) or 9 April 2019 (being the second business day after the second offer was served) on the basis that Urban Alley’s proceeding was dismissed and Urban Alley unreasonably failed to accept the offers. La Sirène submitted that Urban Alley unreasonably failed to accept the First Offer, given that: it had already received the majority of La Sirène’s evidence in the proceeding; it was in a position to properly assess the strengths and weaknesses of its case against La Sirène on both the claim and the cross-claim; the letter accompanying the offer provided a detailed analysis of the case and the evidence, which significantly aligned with the judgment of the Court; and ultimately, La Sirène succeeded in obtaining the cancellation of the Urban Ale mark under two independent grounds for cancellation and succeeded in three independent defences to the trade mark infringement claims.

24    Urban Alley submitted that it did not unreasonably fail to accept the offers. It submitted that it was reasonable for it to have not accepted both the offers for the following reasons: the evidence filed by the parties at the time the offers were made was not at a level that Urban Alley should have known that its case must fail or at the very least was likely to fail; La Sirène introduced a significant body of evidence of use by third parties of the word “urban” in relation to beer and breweries after the offers were made, specifically during the running of the trial; the offers were made well before the parties had filed their submissions for trial; neither offer made by La Sirène would have resulted in La Sirène ceasing to use the Urban Pale mark; the offers did not give Urban Alley any comfort that La Sirène would not attack its Urban Ale mark again in the future; and the offers required it to pay a substantial portion of La Sirène's costs but offered little to Urban Alley in return. Urban Alley submitted that it was entitled to have some confidence in the validity of its Urban Ale mark because the mark had survived the scrutiny of the trade marks office registration process and was presumptively valid, relying on Bohemia Crystal Pty Ltd v Host Corporation Pty Ltd (2018) 134 IPR 350 at [30].

25    I note at the outset that I do not accept two of Urban Alley’s submissions. The second offer contained an undertaking from La Sirène that would have resulted in La Sirène ceasing to use the Urban Pale mark. The undertaking was in the same form as the injunction sought by Urban Alley in its originating application. Further, under both offers, La Sirène undertook to agree to orders dismissing its cross-claim, which should have given Urban Alley comfort that La Sirène would not attack its Urban Ale mark again in the future. In that regard, the dismissal of a proceeding can be contrasted with discontinuance which cannot be pleaded as a defence to a proceeding in relation to the same cause of action: see rule 26.14 of the FC Rules and Anchorage Capital Partners v ACPA Pty Ltd (2018) 259 FCR 514 (Anchorage Capital) at [242].

26    The purpose of the rule governing offers of compromise is to encourage a reasonable approach to settlement. As the Full Court of the Federal Court observed in Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2011] FCAFC 141 (at [19]):

The purpose of the principles governing Calderbank offers and offers of compromise in accordance with court rules is to ensure that, when one party makes another an offer that contains a genuine element of compromise, the recipient of the offer is compelled to give real consideration to the costs and benefits of prosecuting its claim by reason of the prospect of suffering an indemnity costs order should its failure to accept the offer prove unreasonable.

27    However, the question raised by the rules is not whether the offer contained a genuine element of compromise; the question is whether it was unreasonable for Urban Alley not to accept the offer at the time it was made: Anchorage Capital at [238]. The question of reasonableness is necessarily an objective one, and invites a comparison between the terms of the offer and what Urban Alley should have known or reasonably foreseen as the range of likely outcomes of the proceeding at the time of the offer: cf Anchorage Capital at [239].

28    La Sirène relied on the fact that each of the offers would have delivered an outcome to Urban Alley that was better than the outcome achieved in the proceeding. Although most of the terms of the first offer were equivalent to the outcome of the proceeding (Urban Alley would not have prevented La Sirène from selling its Urban Pale product and would have had to pay La Sirène’s costs of the proceeding), the first offer delivered one advantage to Urban Alley compared with the outcome of the proceeding: if Urban Alley had accepted the first offer, it would have retained the registration of its Urban Ale mark and La Sirène’s cross-claim to have the mark cancelled would have been dismissed. The terms of the second offer would have delivered an even better outcome to Urban Alley. Urban Alley would have prevented La Sirène from selling its Urban Pale product from October 2019 and would have had to pay a lesser proportion of La Sirène’s costs of the proceeding (85%). Like the first offer, Urban Alley would have retained the registration of its Urban Ale mark and La Sirène’s cross-claim to have the mark cancelled would have been dismissed.

29    However, comparing the terms of the offer with the outcome of the proceeding can distract from the relevant question. It is necessary to compare the terms of the offer with the outcomes that should have been known or reasonably foreseen by Urban Alley as at the time of the offer. Addressing that question, it is apparent that a significant component of each offer was that La Sirène sought payment of its costs - the whole of its party/party costs under the first offer and 85% of those costs under the second offer. Ordinarily, Urban Alley would only face a costs order of that kind at the conclusion of the proceeding if it was unsuccessful on both its primary claim and on the cross-claim. Therefore, it is necessary to consider whether, at the time each offer was made, Urban Alley should have known or reasonably foreseen that it would be unsuccessful on both its claim and the cross-claim.

30    Although I found in favour of La Sirène on the claim and cross-claim, and I found in favour of La Sirène on most of the issues, I do not consider that, before the trial, Urban Alley should have known or reasonably foreseen that it would be unsuccessful. Like many cases before the Court, Urban Alley should have known that it faced risks, perhaps significant risks, that it would be unsuccessful. Nevertheless, I accept Urban Alley’s argument that it was entitled to have a degree of confidence with respect to the validity of its Urban Ale mark from the fact that it had been assessed by the trade mark office and had been registered. There were also reasonable arguments in favour of the contention that La Sirène’s Urban Pale product infringed the Urban Ale mark.

31    In my view, it follows that it was not unreasonable for Urban Alley to refuse the first offer. That offer required Urban Alley to pay La Sirène’s costs, which generally would only have followed from failure on its claim and on the cross-claim. The only benefit to Urban Alley from the first offer was the assurance that its registration would not be challenged by La Sirène. However, that was a limited benefit, particularly when Urban Alley would be required to capitulate on its infringement action against La Sirène.

32    The question of whether it was unreasonable to refuse the second offer is more difficult. While that offer required Urban Alley to pay 85% of La Sirène’s costs, La Sirène offered an undertaking to cease supplying the allegedly infringing Urban Pale product from October 2019. As noted above, the undertaking was in the same form as the injunctive relief sought by Urban Alley. Thus, under the second offer, Urban Alley would have achieved success in preventing La Sirène from using a product name that Urban Alley considered infringed its mark, and would have the challenge to the registration of its Urban Ale mark dismissed. It would therefore have achieved most of what it could have expected from the proceeding. However, the complicating factor was the price to be paid for those benefits. Urban Alley would have had to pay most of La Sirène’s costs. Although the relevant comparison in respect of the second offer is more finely balanced than in respect of the first offer, in my view it was not unreasonable for Urban Alley to refuse the second offer. It was reasonable for Urban Alley to believe, as at the date of the second offer, that it had reasonable prospects of success in the proceeding. It follows that it was reasonable for Urban Alley to reject an offer that would have required it to pay 85% of La Sirène’s costs of the proceeding. The objective risks of the proceeding were not sufficiently high to make the rejection of that offer unreasonable.

33    For those reasons, I will not make an order under rule 25.14(2) that Urban Alley pay any part of La Sirène’s costs on an indemnity basis.

Should costs be awarded on a lump sum basis and, if so, how should they be calculated?

34    Rule 40.02(b) of the FC Rules provides that a party entitled to costs may apply to the Court for an order that costs be awarded in a lump sum instead of, or in addition to, any taxed costs. The purpose of such a rule is “to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation”: Beach Petroleum NL v Johnson (No 2) (1995) 57 FCR 119 (Beach Petroleum) at 120. The assessment of costs under a lump sum order does not require a process similar to taxation: Ginos Engineers Pty Ltd v Autodesk Australia Pty Ltd (2008) 249 ALR 371 (Ginos Engineers) at [23]. While the assessment involves the “application of a much broader brush than that applied on taxation” and “is one of estimation or assessment and not of arithmetic calculation or precision”, the approach is one which must be “logical, fair and reasonable”: Nine Films and Television Pty Ltd v Ninox Television Ltd [2006] FCA 1046 at [8]. It is common for the court to take as its starting point the evidence of the charges for professional costs incurred and disbursements made by the lawyers of the party awarded costs, and to discount that figure to take account of the acceptability of the charges made, the conduct of the proceeding and the measure of success on issues, to arrive at a figure which as a matter of judgment is neither over-compensatory nor prejudicial to the successful party: Ginos Engineers at [24]; Telstra Corporation Ltd v Phone Directories Co Pty Ltd [2011] FCA 1463 (Telstra Corporation) at [5].

35    The Costs Practice Note issued by the Court on 25 October 2016 provides guidance to litigants about the approach to the assessment of costs that will be undertaken by the Court in accordance with the FCA Act and the FC Rules. Relevantly, paragraphs 3.3 and 4.1 advise litigants that:

3.3 For those costs issues that are unable to be resolved by negotiation and require the involvement of the Court, the Court's preference is to avoid, where possible, the making of costs orders that lead to potentially expensive and lengthy taxation of costs hearings. Rather, the Court will seek to adopt, and will encourage parties to utilise, the appropriate use of sophisticated costs orders and procedures, including lump-sum costs orders, consolidated costs orders, estimate of costs processes and Alternative Dispute Resolution ("ADR"). Taxation of costs hearings should be the exception and be confined to those matters that have genuinely been unable to be otherwise resolved or determined.

4.1 The Court's preference, wherever it is practicable and appropriate to do so, is for the making of a lump-sum costs order.

36    In Paciocco v Australia and New Zealand Banking Group Limited (No 2) (2017) 253 FCR 403 (Paciocco), the Full Court noted (at [19]) that, while the Costs Practice Note suggests that most cases should have a lump sum costs order approach (unless there is some characteristic that would make it unsuitable), that approach is not mandated in all instances and the Court must exercise the discretion given to it under the FCA Act and the FC Rules. The Court further observed that (at [20]):

There is no particular characteristic that a case must possess for it to be suitable for the making of a lump sum costs order. Particular circumstances that may make a lump sum order especially appropriate include where in a large and complex commercial matter it would save the time, trouble, expense and aggravation of a taxation; where a taxation would require the parties to consume additional time and incur additional expenditure prolonging already protracted litigation; and generally to avoid an ongoing, counter-productive dispute as to costs, in the interests of achieving finality.

37    It is well established that a lump sum order may be suitable in simple as well as complex cases: Playcorp Group of Companies Pty Ltd v Bodum A/S (No 2) [2010] FCA 455 (Playcorp) at [3]; Byrnes v Brisconnections Management Co Ltd (No 2) [2009] FCA 1432 at [51]. In Soden v Croker (No 3) [2016] FCA 249, Perry J gave the following examples of circumstances in which a lump sum order may be appropriate (at [10]):

(a)    where a taxation process was expected to be particularly complex (Beach Petroleum);

(b)    where a party has shown a tendency not to comply with costs orders (Salfinger v Niugini Minister (Aust) Pty Ltd (No 5) [2008] FCA 1119);

(c)    where a taxation process would be disproportionately expensive to the award of costs (Cameron v Secretary, Department of Human Services (No 2) [2015] FCA 1201); and

(d)    where the financial circumstances of the parties would lead one to conclude that the costs were unlikely to be recovered (Julien v Secretary, Department of Employment and Workplace Relations (No 2) [2009] FCA 1259; Hadid v Lenfest Communication Inc [2000] FCA 481).

38    La Sirène submitted that a lump sum order would be appropriate in this case because the case was complex, involving 15 separate claims, defences and cross-claims; there is nothing to suggest that any costs incurred by La Sirène were unreasonable; and the parties have already incurred significant costs in the litigation and such an order would save the parties from the time, trouble, delay and expense of formal taxation.

39    Urban Alley submitted that an assessment of costs by a traditional taxation process can be properly and expediently dealt with. In effect, Urban Alley submitted that the proceeding did not fit into the usual category of case for a lump sum award as it was not unduly complex and the level of costs was not unduly high, and it was not a simple proceeding with a small amount of costs (relying on Playcorp at [17]). Urban Alley further submitted that, if the Court formed the view that La Sirène's costs should be assessed on a lump sum basis, the assessment should be undertaken by a Registrar of the Court.

40    In my view, the present case is suitable for the award of costs on a lump sum basis. Like many intellectual property proceedings in this Court, the case has involved complex issues and each issue has been contested. Now that the claims have been resolved, it is desirable that the expense, delay and aggravation involved in a taxation of costs be avoided. Further, because I will order that Urban Alley pay La Sirène’s costs of the proceeding (both claim and cross-claim) on a party/party basis, there is no difficulty arising from the identification of costs expended on the different claims or issues.

41    Having determined that costs should be awarded in a lump sum, a further question arises how to assess the lump sum. In Paciocco, the Full Court referred to a number of options for the assessment of a lump sum award (at [39]):

Whilst a judge of the Court can hear and determine a lump sum costs award, the determination of the lump sum quantum can be referred to a registrar pursuant to s 35A(1)(h) of the Federal Court Act, and r 3.01(1)(b) of the Rules, read with item 221 of Schedule 2. Alternatively, a registrar may provide assistance with the lump sum hearing: Costs Practice Note at [4.9]. If necessary a separate issue could be referred to a referee by a judge pursuant to s 54A of the Federal Court Act and r 8.6 of the Rules. These will be matters that can be considered by the parties and the judge in determining the appropriate approach to the hearing of the costs dispute.

42    La Sirène adduced evidence from Ms O’Farrell concerning the costs incurred by La Sirène in the proceeding. Those costs totalled $260,756 (excl GST) to 9 February 2020 with an estimate of $17,233 (excl GST) from 10 February 2020 to the date of this hearing. Ms O’Farrell’s affidavit included a costs summary in accordance with paragraph 4.10 of the Costs Practice Note. La Sirène invited the Court to make a lump sum assessment of costs based on that material.

43    Urban Alley did not adduce evidence in response. Rather, it submitted that the assessment should be undertaken by a Registrar of the Court, an approach recently adopted by Robertson J in Caesarstone Ltd v Ceramiche Caesar S.p.A. (No 3) [2019] FCA 7.

44    In this matter, I consider that the more appropriate course is to refer the quantification of the lump sum award to a Registrar of the Court for determination. That is for two principal reasons. First, as observed by Gordon J in Telstra Corporation at [5], taxation of costs in the Federal Court is conducted by Registrars who have substantial experience in taxation of costs and, as a general statement, a judge’s experience in taxing costs is limited. Second, while Urban Alley filed submissions in relation to La Sirène’s costs evidence, it had only limited time to prepare responsive material for this hearing. In an assessment before a Registrar, it may wish to adduce further evidence from a costs consultant. That is not to suggest that the Registrar’s assessment will involve a process similar to a taxation - as paragraph 4.11 of the Costs Practice Note states, the intention of the lump sum costs procedure is to streamline and expedite the determination or resolution of the quantum of costs and not to replicate the taxation process. It is only to recognise that Urban Alley’s opportunity to address the assessment of costs has, to date, been limited and I consider it appropriate to afford Urban Alley more time to do so.

45    For those reasons, I will order that the quantification of the lump award of costs be referred to a Registrar of the Court for determination.

Should the costs orders be stayed?

46    As noted earlier, the parties agree that the order rectifying the Register of Trade Marks by cancelling the Urban Ale mark should be stayed for the period in which Urban Alley may file an appeal and, if an appeal is filed, pending the determination of the appeal. Urban Alley also seeks an order that the payment of any costs to La Sirène be stayed pending the outcome of any appeal or that the award of costs be paid into the trust account of K&L Gates, the solicitors for Urban Alley, with an irrevocable direction being given by Urban Alley not to release those funds to anyone other than La Sirène pending the outcome of the appeal.

47    Urban Alley contends that, without a stay, it will be required to pay a large sum of money to La Sirène which may not be recovered if the appeal is successful. In support of that contention, Urban Alley relied on the affidavit of Mr Feder who deposed that he conducted a search on the GlobalX database for a current company extract plus PPSR report for La Sirène and its parent, Beverage & Brewing Group Pty Ltd, and that the searches did not identify any real property owned by La Sirène or Beverage & Brewing Group Pty Ltd.

48    Rule 41.03 of the FC Rules provides that a party bound by a judgment or order may apply to the Court for an order that the judgment or order be stayed. Frequently, a stay is sought pending the determination of an appeal. The principles applicable to the decision whether to grant a stay in that context were summarised by Rangiah J in Flight Centre Limited v Australian Competition & Consumer Commission [2014] FCA 658 as follows (at [9]):

(a)    There is an onus on the applicant to demonstrate a proper basis for a stay that will be fair to all parties.

(b)    There is a prima facie assumption that the judgment appealed from is correct.

(c)    There is a prima facie assumption that the Court should not deprive a litigant of the benefit of a judgment in its favour.

(d)    The Court has a broad discretion as to whether to grant a stay, and it is not necessary for an applicant for a stay to demonstrate special or exceptional circumstances. It is sufficient that the applicant demonstrates a reason or an appropriate case to warrant the exercise of discretion in its favour.

(e)    The mere filing of an appeal will not, of itself, provide a reason or demonstrate an appropriate case.

(f)    A stay will usually be granted if there is a real risk that the applicant will suffer prejudice or damage, if a stay is not granted, which will not be redressed by a successful appeal.

(g)    In the exercise of its discretion, the Court will weigh considerations such as the balance of convenience and the competing rights of the parties before it.

49    A common reason for seeking a stay is the risk that an appeal will be rendered nugatory unless the stay is granted. The risk may arise in connection with an order for the payment of monies by the prospective appellant where the prospective respondent may be unable to repay the monies if the appeal is successful. In a decision frequently cited in this Court, the NSW Court of Appeal said in Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 (at 694-5, citations omitted):

…The onus is upon the applicant to demonstrate a proper basis for a stay that will be fair to all parties. The mere filing of an appeal will not, of itself, provide a reason or demonstrate an appropriate case, nor will it discharge the onus which the applicant bears. The Court has a discretion whether or not to grant the stay and, if so, as to the terms that would be fair. In the exercise of its discretion, the Court will weigh considerations such as the balance of convenience and the competing rights of the parties before it. Where there is a risk that if a stay is granted, the assets of the applicant will be disposed of, the Court may, in the exercise of its discretion, refuse to grant a stay. Sometimes as a condition of the grant of a stay, where funds are available, a court will impose on the applicant the payment of the whole, or part, to the judgment creditor. Even where no order is made for the payment of part of a verdict, it is not at all unusual for the Court, in the exercise of its discretion, to grant a stay on terms that the appellant give to the judgment creditor security in terms defined by the Court as appropriate to the fair adjustment of the rights of the parties.

…

Two further principles can be mentioned. The first is that where there is a risk that the appeal will prove abortive if the appellant succeeds and a stay is not granted, courts will normally exercise their discretion in favour of granting a stay. Thus, where it is apparent that unless a stay is granted an appeal will be rendered nugatory, this will be a substantial factor in favour of the grant of a stay. Secondly, although courts approaching applications for a stay will not generally speculate about the appellant's prospects of success, given that argument concerning the substance of the appeal is typically and necessarily attenuated, this does not prevent them considering the specific terms of a stay that will be appropriate fairly to adjust the interest of the parties, from making some preliminary assessment about whether the appellant has an arguable case.

50    The principles stated in Alexander have been applied to costs orders: Australian Federation of Consumer Organisations Inc v Tobacco Institute of Australia Ltd (1991) 30 FCR 548 at 552; Henderson v Amadio Pty Ltd (1996) 65 FCR 66 at 68; Fair Work Ombudsman v Priority Matters Ltd [2016] FCA 1415 at [27] – [28].

51    However, as observed by Middleton J in Wooldridge v Australian Securities and Investments Commission [2015] FCA 349 at [11]:

It is to be first appreciated that a first instance decision is not, and should not be treated as, a provisional decision. This is reflected in and acknowledged by r 36.08(1) of the Federal Court Rules 2011 (Cth). As Gleeson CJ observed in Swain v Waverley Municipal Council (2005) 220 CLR 517, at [2], the “system does not regard the trial as merely the first round in a contest destined to work its way through the judicial hierarchy until the litigants have exhausted either their resources or their possibilities of further appeal”. There is a prima facie assumption that the judgment the subject of the appeal is correct. The Court should not deprive a person of the fruits of victory by granting a stay unless the circumstances warrant the Court’s intervention.

52    In my view, Urban Alley has not made out a case for a stay of the costs orders. That is for the following reasons.

53    First, the orders I will make do not require an immediate payment of costs by Urban Alley. The costs are to be assessed by a Registrar on a lump sum basis. It may be that, by the time the assessment has been made, Urban Alley will have decided not to file an appeal and there will be no need for a stay. In that sense, by reason of the orders I will make, the application for a stay is premature.

54    Second, I am not satisfied that there is a sufficient risk that, if an appeal were to be filed and succeed, that La Sirène would be unable to repay the costs paid to it. While the evidence adduced by Urban Alley shows that La Sirène does not own real property, the evidence adduced by La Sirène in the trial established that La Sirène conducts a significant business brewing beer which has gathered many awards for its beer products and enjoys a significant business reputation. That evidence is the subject of my findings in Urban Alley Brewery Pty Ltd v La Sirène Pty Ltd [2020] FCA 82 at [51] to [76]. Taking the evidence as a whole, Urban Alley has not satisfied me that there is a sufficient risk that, if an appeal were to be filed and succeed, La Sirène would be unable to repay the costs paid to it.

55    Third, La Sirène is a successful respondent to the proceeding. It did not initiate this litigation but was required to defend its position in court incurring very substantial costs. Having successfully defended the proceedings, it is entitled to its costs. In my view, there is particular unfairness if the Court were to stay an order awarding costs to a successful respondent: the principle that there is a prima facie assumption that the judgment the subject of the appeal is correct and that the court should not deprive a person of the fruits of victory applies with even greater force in such circumstances.

56    For those reasons, I decline to order the stay sought by Urban Alley, or require the costs to be paid to K & L Gates.

Conclusion

57    In conclusion, I will not make the declaration sought by La Sirène; I will not discount the award of costs in favour of La Sirène on an issues basis as sought by Urban Alley; I will not order indemnity costs as sought by La Sirène; I will award costs on a lump sum basis as sought by La Sirène but refer the assessment to a Registrar as sought by Urban Alley; and I will not stay the orders for costs as sought by Urban Alley. It is apparent that the parties have had mixed success on the determination of the orders for relief. In those circumstances, I will not make any order for the costs of this hearing on relief and each party will bear their own costs.

Associate:

Dated:    17 March 2020