Federal Court of Australia

RB (Hygiene Home) Australia Pty Ltd v Henkel Australia Pty Ltd (No 2) [2021] FCA 1194

ORDERS

THE COURT ORDERS THAT:

1.    Order 1 of the orders made on 1 October 2021 extending the suspension of Order 3 of the orders made on 3 September 2021 (costs of and incidental to the interlocutory hearing on 2 September 2021 be the applicants’ costs in the proceeding) until 5.00 pm on 7 October 2021 be vacated.

THE COURT NOTES THAT:

2.    Pursuant to Order 3 of the orders made on 3 September 2021, the costs of and incidental to the interlocutory hearing on 2 September 2021 are the applicants’ costs in the proceeding.

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

REASONS FOR JUDGMENT

HALLEY J:

1    On 3 September 2021, I made an order that the costs of the applicants’ interlocutory application for the interim injunction that I granted on that date be the applicants’ costs in the cause. I also made orders on that date providing that if a party sought a different costs order, it could do so by filing written submissions.

2    Both the applicants and the respondents filed written submissions seeking alternative costs orders.

3    The applicants seek an order that in lieu of the costs order that I made on 3 September 2021, an order should be made that the respondent pay the applicants’ costs of the interlocutory application.

4    The respondent seeks an order that either each party’s costs should be its costs in the cause or, alternatively, costs be reserved.

5    For the reasons that follow, I have concluded that the existing costs order should stand and no alternative order for costs should be made.

Legal principles

6    The Court has a broad discretionary power to award costs pursuant to s 43(2) of the Federal Court of Australia Act 1976 (Cth) (Act). The discretion must be exercised judicially, not arbitrarily or capriciously, having regard to the relevant principles and the justice of the case in all the circumstances and cannot be exercised on grounds unconnected with the litigation: Summers v Repatriation Commission (No 2) [2015] FCAFC 64 (Summers) at [13]-[14] (Kenny, Murphy and Beach JJ), citing Trade Practices Commission v Nicholas Enterprises Pty Ltd (No 3) [1979] FCA 143; (1979) 28 ALR 201 at 206-207 (Fisher J); InterPharma Pty Ltd v Hospira, Inc (No 4) [2018] FCA 45 (InterPharma) at [8] (Kenny J).

7    In the ordinary course, in the absence of special circumstances justifying some other order, the general rule is that costs will be awarded to the successful party, that is, costs will follow the event: Summers at [14]; Ruddock v Vadarlis (No 2) (2001) 115 FCR 229; [2001] FCA 1865 (Ruddock) at [11] (Black CJ and French J). In at least a public interest context, however, a case that was close or difficult and where there was no obvious fault on the part of the unsuccessful party, the proposition that costs automatically follow the event may result in unfairness. However I note that this would not justify a “global modification” to the usual rule, rather it would indicate the “desirability of avoiding calcification of the discretion with rigid rules governing its exercise”: Ruddock at [13] (Black CJ and French J).

8    Rule 40.04(a) the Federal Court Rules 2011 (Cth) (FCR) provides that:

If no order for costs is made on an interlocutory application or hearing, the costs of the application or hearing:

(a) if an order is made in favour of any party—follow the event; or

(b) if no order is made in favour of any party—are taken to be costs in the cause of the successful party to the proceeding.

9    Costs orders in favour of parties that have succeeded in obtaining orders on an interlocutory basis, consistently with the default positon, are commonly made in circumstances where a party has succeeded on a discrete issue, such as the determination of a separate question in advance of a final hearing, although each case will turn on its particular facts and circumstances: Taylor (liquidator), in the matter of Heading Contractors Pty Ltd (in liq) v Heading (No 2) [2021] FCA 925 at [18] (Charlesworth J).

10    In that context, the making of a costs order following the grant of an interim injunction should be further informed by the following specific principles.

11    First, there is a marked distinction between an interlocutory order that disposes of a separate question or a discrete issue in advance of a final hearing and an interim injunction that is obtained for the purpose of preserving the status quo pending a final determination of an applicant’s cause of action. In the latter case, the Court has not conclusively determined any controversy between the parties, it has only made a preliminary assessment of the strength of an applicant’s cause of action and had regard to the balance of convenience pending trial: Australian Securities and Investments Commission, in the matter of Whitebox Trading Pty Ltd v Whitebox Trading Pty Ltd (No 2) [2017] FCA 385 at [6] (Gleeson J).

12    Second, an order that each party’s costs be costs in the cause or that an applicant’s costs be costs in the cause following the determination of an application for an interlocutory injunction, has been described as the “usual order”. It has been said to be “a shorthand form of giving effect to the principles that govern the court’s discretion … where there are no countervailing or different circumstances to warrant the exercise of the discretion in a different manner”: His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand v The Macedonian Orthodox Community Church St Petka Incorporated & Anor (No 2) [2007] NSWCA 142 (Metropolitan Petar) at [27] (Beazley, Giles and Hodgson JJA); Boscolo v TCN Channel Nine Pty Ltd (No 2) (unreported, Supreme Court of New South Wales, Young J, 28 April 1994) at [20].

13    The following rationale for a costs in the cause order was advanced by the New South Wales Court of Appeal in Metropolitan Petar at [21]:

The rationale for making an order that costs be costs in the cause is that, at the stage of granting an interlocutory injunction, the court is not in a position to adjudicate on the ultimate outcome of the proceedings. Rather, provided there is a reasonable case to be tried, the Court’s focus in deciding whether to grant the application for interlocutory relief is on other considerations and, in particular, on determining whether, on the balance of convenience, an injunction ought to be granted. Accordingly, if a plaintiff who applies for an interlocutory injunction is not ultimately successful in the proceedings, that plaintiff should not receive the costs of the application for an injunction which, when the matter is considered in overview cannot be sustained. However, as already explained, each case must depend upon its own facts.

14    Third, the usual but not invariable practice is that, in the absence of any specific disentitling conduct, the appropriate costs order in circumstances in which an applicant has been successful in obtaining an interlocutory injunction is that costs be the applicant’s costs in the cause rather than each party’s costs in the cause: Metropolitan Petar at [32]; Devereaux Holdings Pty Limited v Pelsart Resources NL (No 2) (unreported, Supreme Court of New South Wales, Young J, 24 July 1985) (Devereaux) at 2; Ausino International Pty Ltd v Apex Sports [2006] NSWSC 1119 at [55]-[56] (Campbell J); Novartis AG v Hospira Pty Limited (No 2) [2012] FCA 1113 at [10] (Yates J); Dincel Construction System Pty Limited v AFS Systems Pty Ltd [2017] FCA 262 (Nicholas J) subsequent to the delivery of reasons as noted in Dincel Construction System Pty Limited v AFS Systems Pty Ltd (No 3) [2017] FCA 919 at [3] (Nicholas J); cf InterPharma at [11]-[12] (Kenny J); Sigma Pharmaceuticals (Australia) Pty Ltd (ACN 004 118 594) v Wyeth (2009) 81 IPR 339; [2009] FCA 595 (Sundberg J); James v Commonwealth Bank of Australia (No 2) [2015] FCA 599 at [20] (Katzmann J) (but the order in that case for costs to be each party’s costs in the cause was made because of late amendments by the successful applicant where an earlier order was made that costs follow the event).

15    The prevailing practice with respect to the making of costs orders following the grant of interlocutory injunctions was, with respect, usefully summarised by Young J in Devereaux at 2, at least as at the date of his Honour’s judgment:

My researches as to the local practice as to costs when an interlocutory injunction is granted but then the proceedings are dismissed on final hearing, have not led to any definitive rules being uncovered, but the following seems to be what commonly happens in such cases:

(a) If the material before the Judge on the interlocutory hearing discloses that there is an arguable or prima facie case and it is more or less conceded in argument that such is the case so that an interlocutory injunction is granted, then costs of the interlocutory injunction are costs in the cause, though sometimes they may be made plaintiff’s costs in the cause;

(b) If in the situation set out in (a), the defendant does not concede the inevitability of an interlocutory injunction being granted, then the proper order is that the plaintiff’s costs be his costs in the cause, or even that the defendant pay the plaintiff’s costs in any event;

(c) If the main matter argued on the interlocutory application is a question of law which is fully argued, then very often the appropriate order will be that the winner of the argument gets an order for his costs of the interlocutory application in any event, though the order may be that the costs are those of the successful party in the cause;

(d) If the motion is treated by the parties as merely being a minor step in the final proceedings, then the appropriate order is that each party’s costs being their costs in the cause;

(e) If there is an interlocutory motion which is properly brought, and both parties are partially successful, both parties’ costs should be costs in the cause;

(f) If an interlocutory motion for injunction is properly brought and fails, then either both parties’ costs will be costs in the cause, or alternatively the proper order will be that the defendant's costs be costs in the cause.

16    Fourth, it may be preferable to make a costs order at the conclusion of a hearing of an application for an interlocutory injunction, rather than an order reserving the question of costs, when regard is had to the complexity of the issues and arguments raised and the volume of substantive evidence adduced: see InterPharma at [11] (Kenny J); cf Reckitt Benckiser Healthcare (UK) Ltd v GlaxoSmithKline Australia Pty Ltd (No 2) (2013) 103 IPR 472; [2013] FCA 736 (Rares J) and Eli Lilly and Company v Generic Health Pty Ltd [2013] FCA 1254 at [82] (Nicholas J).

SUBMISSIONS

17    The applicants submit that they had “the clear balance of success on both the claim and the cross-claim”. They contend that they succeeded on almost all of the issues arising in the course of the hearing of the interlocutory application in circumstances where the Court was satisfied that it could not reach any view in respect of the aspects of the respondent’s cross-claim that were raised in the course of the interlocutory hearing.

18    They also submit that the interlocutory application was significant in that it comprised a full day hearing and every issue was “forcefully contested” by the respondent.

19    Further, the applicants submit that determining the issue of costs now would ensure that the parties have an awareness of their accumulating costs liability in the proceedings.

20    The applicants contend that, consistent with the general rule that a successful party is entitled to an award of costs in its favour in the absence of special circumstances justifying some other order, a judicial exercise of the Court’s discretion pursuant to s 43(2) of the Act warrants an order that the respondent pays their costs of the interlocutory application.

21    The respondent submits that if the applicants’ trade mark infringement suit ultimately fails it would mean that the basis upon which the interim injunctive relief was granted would be found to have failed. It submits that in those circumstances it would be unjust if the respondent were not able to recover its costs of the interlocutory application from the applicants.

22    The respondent submits that an order that each party’s costs be costs in the cause would avoid any injustice that might arise from the Court making an order at an interlocutory stage, before the rights of the parties have been finally determined. It contends that it would be appropriate for costs to follow the outcome after trial, given that the applicants’ success on its interlocutory application was the outcome of only a provisional assessment of the relative merits of the parties’ cases. It submits that this would be consistent with the rationale underlying the usual requirement for the provision of an undertaking as to damages to compensate the respondent for any losses that it might have suffered as a result of the granting of an injunction that was ultimately found not to be justified.

23    The respondent submits a further reason why the costs of the interlocutory application should be an order that each party’s costs be costs in the cause is that the substantial evidence relied on by the parties on the interlocutory application will also likely be relied upon by them at the final hearing. In those circumstances it submits that it would be unfair if the respondent, in the event that it is ultimately successful in the proceeding, was not able to recover its costs of preparing that evidence because it had also been used in the interlocutory application.

24    The respondent also submits that other factors supporting the costs orders that it seeks are that the determination of the interlocutory application was not straightforward, the result was “close” and the Court did not find any “fault” on its part.

Consideration

25    I remain of the view, for the following reasons, that the appropriate costs order with respect to the application for the interlocutory injunction in these proceedings is that the applicants’ costs be costs in the cause.

26    First, in the absence of any disentitling conduct by a respondent, I do not consider that, in circumstances where an applicant successfully obtains an interim injunction, making an order that costs follow the event is consistent with the principles that I have outlined above. I do not consider that the respondent here engaged in any conduct in relation to the hearing of the interlocutory application that would cause me to depart from those principles. Further, not making an order that costs follow the event recognises that ultimately the applicants’ trade mark infringement case may not succeed. That latter consideration is particularly apposite in the present case given that the applicants had not established a strong prima facie case, the result might fairly be described as “close” with respect to the existence of a prima facie case, the injunction was only granted on the basis that the applicants agreed to accept the earliest possible final hearing date and the grant of the interlocutory injunction was principally based on balance of convenience grounds.

27    Second, given the hearing of the interlocutory application occupied a full day and with regard to the volume and complexity of the evidence deployed by the applicants and the respondent, I do not consider that it would be appropriate to reserve the question of costs. In the circumstances, I therefore consider that it is desirable that the question of costs, including any disentitling considerations that might have emerged in the course of the hearing, be identified and considered by me as the judge who determined the interlocutory injunction, rather than following the final hearing and by a different judge.

28    Third, given the extent to which the respondent opposed the grant of an interim injunction on both existence of a prima facie case and balance of convenience grounds, I consider that an order that costs be the applicants’ costs in the cause, rather than an order that each party’s costs be costs in the cause, is appropriate. An order in those terms recognises that the applicants have been wholly successful in obtaining an interlocutory injunction after a hard fought hearing and is consistent with the principles and approach in Metropolitan Petar at [32] and Deveraux at 2.

29    I acknowledge a different approach was taken by Kenny J in InterPharma at [12], but the consideration of an appropriate costs order must have regard to the particular circumstances of a case and the interests of justice. I accept, as the respondent submits and Kenny J observed in InterPharma at [10], that an order that costs be each party’s costs in the cause is consistent with the usual obligation to provide an undertaking as to damages because if the respondent is ultimately successful it may still recover its costs of an unsuccessful opposition to the granting of an interlocutory injunction. I do not accept, however, that this consideration is determinative. An undertaking as to damages is discrete from and does not encompass or otherwise seek to supplant or displace a costs order. As explained above, the general rule is that a successful party recovers its costs, even on an interlocutory application by reason of r 40.04(a) of the FCR. I consider that the interests of justice may require a moderation of that rule in circumstances where an interlocutory injunction is obtained. In my view, an order that a successful applicant’s costs be costs in the cause is a sufficient qualification to the usual order. If an applicant is ultimately unsuccessful it will lose the benefit of its costs’ order. An order that each party’s costs be costs in the cause, particularly in circumstances where an interlocutory injunction is vigorously resisted, does not, in my view, give sufficient weight to the principle that costs follow the event reflected in r 40.04(a).

30    Fourth, I acknowledge that the applicants did not establish a strong prima facie case and the effect of an order that the applicants’ costs be costs in the cause will deprive the respondent of the opportunity to recover the likely substantial costs that it incurred in opposing the grant of an interlocutory injunction, even if the respondent were ultimately successful at the final hearing. At the same time it is necessary to give due weight to the success achieved by the applicants, to take into account that the applicants were at risk of an adverse costs order in the event that they failed to obtain the interlocutory injunction and to be mindful that some of the considerations relevant to the grant of the interlocutory injunction may differ markedly from considerations relevant to the final determination of the applicants’ trade mark infringement case. As noted by the New South Wales Court of Appeal in Metropolitan Petar at [21], the Court is not in a position to adjudicate on the ultimate outcome of the proceedings at the stage of granting an interlocutory injunction. Rather, the Court’s focus is on other considerations, particularly whether an injunction ought to be granted on the balance of convenience, which I note was the determinative factor in this case. Failure to obtain permanent injunctive relief at a final hearing does not necessarily carry with it any necessary implication that the grant of an interlocutory injunction was not “justified”, not least because evidence, including expert evidence, may not have been relied upon at the interlocutory hearing and concerns for preserving the status quo in the absence of a final determination of a dispute are not relevant at a final hearing.

Disposition

31    For the reasons outlined above, the existing costs order that the applicants’ costs be costs in the cause will not be vacated and the order made on 1 October 2021 suspending the operation of the existing costs order to 5.00 pm on 7 October 2021 is to be vacated.

Associate:

Dated:    6 October 2021