Federal Court of Australia

Firstmac Limited v Zip Co Limited (No 2) [2023] FCA 1074

ORDERS

THE COURT ORDERS THAT:

1.    Paragraphs 1 to 3 of the interlocutory application titled “Costs Application” filed by the respondents/cross-claimants on 27 June 2023 (Costs Application) be dismissed.

2.    The respondents’/cross-claimants’ costs are to be paid by the applicant/cross-respondent as between party and party.

3.    The costs that are the subject of Order 4 of the Orders made on 6 June 2023 and Order 2 above are to be assessed as a lump sum.

4.    Within 28 days the respondents/cross-claimants are to file and serve an affidavit constituting a costs summary in accordance with paragraphs 4.10 to 4.12 of the Costs Practice Note (GPN-COSTS).

5.    Within a further 28 days, the applicant/cross-respondent is to file and serve any costs response in accordance with paragraphs 4.13 to 4.14 of the Costs Practice Note (GPN-COSTS).

6.    In the absence of agreement having been reached within a further 14 days, the matter of an appropriate lump sum figure for the respondents’/cross-claimants’ costs be referred to a Registrar for determination.

7.    The respondents/cross-claimants are to pay the applicant’s/cross-respondent’s costs of paragraphs 1 to 3 of the Costs Application.

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

REASONS FOR JUDGMENT

MARKOVIC J:

1    On 29 May 2023 I delivered judgment in this proceeding: see Firstmac Limited v Zip Co Limited [2023] FCA 540 (Firstmac (No 1)). At the time, among other things an order was made for the parties to confer and to provide orders giving effect to the reasons or, if the parties were unable to agree on the terms of proposed orders, competing orders identifying the areas of disagreement. Unless otherwise defined, terms used in this judgment have the same meaning as in Firstmac (No 1).

2    On 6 June 2023 the following orders were made to give effect to Firstmac (No 1):

1.    The application be dismissed.

2.    Subject to Order 8 below, Trade Mark Registration Number 1021128 (128 Mark) be:

(a)    removed, pursuant to s 92(4)(b) of the Trade Marks Act 1995 (Cth);

(b)    cancelled, pursuant to s 88(2)(c) of the Act.

3.    The cross-claim otherwise be dismissed.

4.    The applicant/cross-respondent pay the respondents’/cross-claimants’ costs of the proceeding.

5.    The respondents/cross-claimants are to file and serve any application in relation to the basis upon which their costs are to be assessed together with any affidavits in support and submissions, not exceeding five pages in length, by 27 June 2023.

6.    The applicant/cross-respondent is to file and serve any affidavits and their submissions in response, not exceeding five pages in length, by 18 July 2023.

3    Pursuant to those orders, by interlocutory application filed on 27 June 2023 the respondents, Zip Co Limited and Zipmoney Payments Pty Ltd (together the Zip Companies), seek orders in the alternative as to the basis upon which their costs of the proceeding are to be assessed and an order that their costs be the subject of a lump sum award of costs.

4    More particularly, the Zip Companies seek the following orders:

1    [Alternative 1] The costs of the Respondents / Cross-claimants (together, ZIP) be paid by Applicant / Cross-respondent (Firstmac):

(a)    before 11am on 25 October 2019, on a party and party basis;

(b)    from 11am on 25 October 2019, on an indemnity basis.

2    [Alternative to paragraph 1] The costs of ZIP be paid by Firstmac:

(a)    before 24 February 2022, on a party and party basis;

(b)    from 24 February 2022, on an indemnity basis.

3    [Alternative to paragraphs 1 and 2] The costs of ZIP be paid by Firstmac:

(a)    before 4 March 2022, on a party and party basis;

(b)    from 4 March 2022, on an indemnity basis.

4    The costs that are the subject of order 4 of the orders made on 6 June 2023 and order 1 above be the subject of a lump sum award of costs.

5    There was no dispute about paragraph 4 of the Zip Companies’ application. The applicant, Firstmac Limited, accepts that this is an appropriate case for an award of costs to be assessed as a lump sum consistently with Pt 4 of the Costs Practice Note (GPN-COSTS). The parties are agreed as to the process to be adopted in order to achieve that outcome.

6    However, Firstmac opposes the Zip Companies’ application for assessment of their costs on an indemnity basis from any of the alternative dates sought by them. It says that the Zip Companies’ costs should be assessed on a party-party basis.

7    Before turning to the facts which the Zip Companies say justify an award of costs to be assessed on an indemnity basis from one of the alternate dates specified in their application, it is convenient to set out the applicable principles.

8    Section 43 of the Federal Court of Australia Act 1976 (Cth) confers a broad discretion on the Court to award costs in a proceeding. That includes a discretion to order that costs awarded against a party are to be assessed on an indemnity basis.

9    Part 25 of the Federal Court Rules 2011 (Cth) concerns offers to settle. Rule 25.01 of the Rules permits a party to make an offer of compromise by serving a notice in accordance with Form 45 on another party (the offeree). Where an offer of compromise is made in accordance with the Rules and the offer is not accepted r 25.14 of the Rules provides for the costs consequences. Relevantly, r 25.14(2) of the Rules provides:

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.

10    In Anchorage Capital Partners Pty Limited v ACPA Pty Limited (No 2) [2018] FCAFC 112 at [5]-[8] a Full Court of this Court (Nicholas, Yates and Beach JJ) summarised the approach to be taken in assessing an offer made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333 as follows:

5    Section 43 of the Federal Court of Australia Act 1976 (Cth) confers a broad discretion on the Court to award costs in proceedings. In Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151, Black CJ at 152 stated the principles applicable to a claim for indemnity costs:

…it is well established that the starting point for any consideration of an application for indemnity costs is that in the ordinary case costs will follow the event and the Court will order the unsuccessful party to pay the costs of the successful party, on a party and party basis, a basis which will fall short of complete indemnity. Nevertheless, the Court has an absolute and unfettered jurisdiction in awarding costs, although the discretion must be exercised judicially. So indemnity costs may properly be awarded where there is some special or unusual feature in the case justifying the Court in exercising the discretion in that way.

6    A well-established circumstance justifying an award of indemnity costs is an imprudent refusal of an offer to compromise (Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233 per Sheppard J). In such cases, a key question is whether the offeree’s refusal of the offer was “unreasonable” when viewed in light of the circumstances existing at the time the offer was rejected (Black v Lipovac & Ors (1998) 217 ALR 386 at 432 per Miles, Heerey and Madgwick JJ; CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Ltd [2008] FCAFC 173 at [75] per Moore, Finn and Jessup JJ).

7    The circumstances to be taken into account in determining whether rejection of an offer was “unreasonable” cannot be stated exhaustively but may include, for example:

(a)    the stage of the proceeding at which the offer was received;

(b)    the time allowed to the offeree to consider the offer;

(c)    the extent of the compromise offered;

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

(e)    the clarity with which the terms of the offer were expressed; and

(f)    whether the offer foreshadowed an application for an indemnity costs in the event of the offeree rejecting it.

(Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 at [25] per Warren CJ, Maxwell P and Harper AJA; Beling v Sixty International S.A. (No 2) [2015] FCA 355 at [25] per Mortimer J).

8    An unsuccessful party is not liable to pay indemnity costs merely because it received an offer to settle on terms more favourable than it achieved at trial and rejected that offer (CGU Insurance at [75]; Black at [217]-[218]). As we observed in the Appeal Reasons, albeit in the context of r 25.14(2) of the FCRs, assessment of the “unreasonableness” of an offeree’s refusal of a settlement offer is a broad-ranging inquiry that is not restricted to consideration of the extent or quantum of the compromise offered.

11    A number of those principles are also applicable to the assessment of unreasonableness in failing to accept an offer of compromise made under the Rules.

12    The following further principles summarised by Halley J in Energy Beverages LLC v Cantarella Bros Pty Ltd (No 2) [2022] FCA 394 at [52], [54]-[56] are also instructive:

52    It is a necessary precondition to obtain an indemnity costs order that the party to whom a Calderbank v [Calderbank [1975] 3 All ER 333] offer is addressed has not achieved a better result than provided for in the offer, but there is no presumptive entitlement to indemnity costs if that is established: Beling v Sixty International S.A. (No 2) [2015] FCA 355 at [23] (Mortimer J); CGU Insurance Limited v Corrections Corporation of Australia Staff Superannuation Pty Ltd [2008] FCAFC 173 at [75] (Moore, Finn and Jessup JJ).

…

54    An applicant for indemnity costs must demonstrate that the rejection of an offer was unreasonable or imprudent: Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 at [7] (Sundberg and Emmett JJ).

55    Relevant factors to have regard to in exercising the discretion whether to award indemnity costs include the simplicity or complexity of the offer and the relationship of the terms of the offer to the relief sought in the proceedings. The latter consideration has variously been described as “closely related to the relief sought in the case” and “commensurate with a possible outcome in the proceeding”. In Centor Australia Pty Ltd v RMD Industries Pty Ltd (No 2) [2013] FCA 1407 (Centor), Dowsett J stated at [9]:

I find it difficult to assess the offer made on 7 December 2010 or the reasonableness of Centor’s conduct in not accepting it. This difficulty flows from the proposal that RMD have a royalty-free licence, not only in respect of the patent-in-suit but also in respect of all foreign counterparts, and a release from any liability worldwide. I have no idea of the consequences of that proposal, nor do I have any understanding of the consequences of an undertaking by Centor to use reasonable commercial endeavours to enforce the Patent as against other infringers in Australia. There can be no presumption that the offer is reasonable. RMD has not sought to demonstrate that it is so. I do not wish to be taken as encouraging further litigation in order to demonstrate or disprove the reasonableness of a party’s conduct in declining an offer. However it may well be that a Calderbank offer can only operate where the relevant offer is relatively simple in terms, and closely related to the relief sought in the case. The offer of 7 December 2010 seems to me to have gone well beyond the issues joined between the parties. Thus any examination of the offer or the reasonableness of Centor’s conduct would necessarily involve a major enquiry as to the possible legal and commercial effects of acceptance of the offer.

56    In Merial Inc v Intervet International BV (No 4) (2017) 124 IPR 1; [2017] FCA 223, Moshinsky J adopted a “commensurate with a possible outcome of the proceeding approach”, and stated at [54]:

As set out above, Merial’s Calderbank offer involved it receiving a worldwide, non-exclusive, royalty-free licence. The difficulty with such an offer for present purposes is that it is not commensurate with a possible outcome of the proceeding, making it difficult, if not impossible, to assess whether Intervet’s rejection of the offer was unreasonable: see Centor Australia Pty Ltd v RMD Industries Pty Ltd (No 2) [2013] FCA 1407 at [9] per Dowsett J. Thus, it is not established that it was unreasonable for Intervet to reject this offer in all the circumstances.

The settlement offers

13    Firstmac commenced this proceeding on 20 June 2019.

14    The Zip Companies made three settlement offers in the course of the proceeding.

15    The first was an offer of compromise made pursuant to r 25.01 of the Rules. The notice of offer of compromise was dated 23 October 2019 (2019 Offer of Compromise) and was in the following terms:

The offer, on a without admission basis, is:

1.    The Respondents / Cross-claimants pay the Applicant / Cross-respondent the sum of $150,000;

2.    The Originating Application dated 20 June 2019 otherwise be dismissed.

3.    The Notice of Cross-claim dated 15 August 2019 be dismissed.

This offer is inclusive of costs.

16    The 2019 Offer of Compromise was open for acceptance for 14 days after its service. Firstmac did not accept it.

17    By letter dated 22 February 2022 the Zip Companies made their next offer. Their letter was expressed to be “without prejudice save as to costs” (First Calderbank Offer). The principal terms of the First Calderbank Offer were:

(a)    The trial listed to commence on 8 March 2022 be vacated;

(b)    Within 28 days of the execution of the Deed of Settlement, the Respondents pay the Applicant the sum of $2.5 million (Settlement Sum) in full and final satisfaction of all of the Applicant’s claims against the Respondents, the Settlement Sum being inclusive of legal costs and GST;

(c)    Within two business days of payment of the Settlement Sum:

(i)    the parties will sign, and provide to the Court, consent orders in the Proceeding on the following terms:

(A)    the Applicant’s originating application be dismissed;

(B)    the Respondents’ cross-claim be dismissed;

(C)    Zipmoney Payments Pty Ltd’s non-use application be withdrawn;

(D)    there be no order as to costs (with the effect that each party will bear its own costs);

(ii)    the Applicant will provide letters of consent to the Australian Trade Marks Office (and, where applicable, any other Trade Marks Office including IPONZ) in relation to all trade mark applications in the name of Zipmoney Payments Pty Ltd against which the Registered Mark (or Firstmac Group mark containing ZIP in any another country) is cited, including Australian trade mark application numbers 1977513, 1977514, 1977515, 1977520, 1977521, 1977523, 2107867, 2108801, 2165839, and 2184229;

(iii)    The Applicant will not challenge the use and/or registration of any trade mark in any country that consists of or contains the name ZIP (Zip Formative Marks) used and/or filed by the Respondents or any related entities in relation to financial services and any goods or services associated with those services;

(d)    Within six months of payment of the Settlement Sum:

(i)    the Applicant will assign all of its right, title and interest (including goodwill) in and to the Registered Mark to Zipmoney Payments Pty Ltd; and

(ii)    all members of the Firstmac Group (as defined in paragraph 6 of the affidavit of David Gration sworn on 6 May 2020 and filed in the Proceeding), and each of their Related Bodies Corporate (as defined in section 50 of the Corporations Act 2001 (Cth)), will permanently cease (whether by themselves or any licensee) any use of the Registered Mark or any name, word, mark or sign which is substantially identical with, deceptively similar to or includes the name ZIP, in Australia and anywhere in the world;

(e)    Mutual releases in relation to the matters the subject of the Proceeding;

(f)    The terms of settlement (including the Settlement Sum) be kept confidential by all parties.

18    The First Calderbank Offer remained open for acceptance until 4 pm on 1 March 2022.

19    On 24 February 2022 Firstmac rejected the First Calderbank Offer and made a counter-offer.

20    By letter dated 1 March 2022 the Zip Companies made a further offer (Second Calderbank Offer). The Second Calderbank Offer was also expressed to be “without prejudice save as to costs”. Its terms were the same as those in the First Calderbank Offer but with a revised settlement sum of $4 million (inclusive of legal costs and GST). The Second Calderbank Offer was open for acceptance until 4 pm on 3 March 2022.

21    Firstmac did not accept the Second Calderbank Offer.

22    The trial commenced on 8 March 2022.

Consideration

23    I address each of the Zip Companies’ offers in turn.

2019 Offer of Compromise

24    The Zip Companies submitted that it was unreasonable for Firstmac not to accept the 2019 Offer of Compromise because:

(1)    at the time the 2019 Offer of Compromise was made Firstmac was well placed to assess its position in the case. The Zip Companies had filed their defence to the amended statement of claim and their cross-claim. The defence set out particulars in support of the Zip Companies’ defences under s 122 of the Trade Marks Act 1995 (Cth), the claim of honest concurrent use and the basis upon which the Zip Companies contended that they had legitimate and substantial common law rights in the trade mark ZIP. Insofar as the particulars to the defence are concerned, the Zip Companies contend that they were uncontroversial, were ultimately unchallenged and accurately foreshadowed the factual findings that would lead to the outcome in this case;

(2)    the 2019 Offer of Compromise was very favourable to Firstmac and constituted a significant compromise. Had Firstmac accepted it, it would be in a much better financial position as it would not have incurred further costs or the Zip Companies’ costs and would have received a payment of $150,000. In addition Firstmac would have retained the registered trade mark in dispute; and

(3)    as at the date of the 2019 Offer of Compromise Firstmac’s prospects were poor. Firstmac was apprised of the nature and extent of the Zip Companies’ common law rights and Firstmac had elected to sue on a trade mark that was vulnerable to removal for non-use.

25    It was not in dispute that the terms of the 2019 Offer of Compromise were more favourable to Firstmac than the outcome of the proceeding. The question for resolution is whether it was unreasonable for Firstmac not to accept the 2019 Offer of Compromise, given its timing. That assessment is to be made at the time i.e. in October 2019.

26    For the following reasons it was not unreasonable for Firstmac not to accept the 2019 Offer of Compromise at the time.

27    First and notably, the 2019 Offer of Compromise was made only four months after commencement of the proceeding and only two weeks after the Zip Companies had filed their defence. At the time the 2019 Offer of Compromise was made and during its currency no evidence had been filed by either party. That is the 2019 Offer of Compromise was made at a time when Firstmac did not have sufficient information to assess its prospects of success having regard to the defence.

28    Secondly, the Zip Companies had admitted use of the Respondents’ Marks and certain domain names, that the name and trade mark ZIP was substantially identical to the Applicant’s Mark and that the Respondents’ Services were those in respect of which the Applicant’s Mark was registered but disputed substantial identity and deceptive similarity for the Stylised Zip Marks or ZIP Formative Marks and domain names. In these circumstances it was reasonable for Firstmac to reject the 2019 Offer of Compromise and press its claim for infringement particularly given the Zip Companies’ admissions and the fact that part of the assessment of the similarity of marks involves matters of impression upon which minds may differ.

29    Thirdly, insofar as the Zip Companies pleaded positive defences based on honest concurrent use, they were, as Firstmac submits, at the time of the filing of the defence and the 2019 Offer of Compromise for the most part assertions not corroborated by evidence. Even accepting that some of the pleaded particulars were matters of public record, Firstmac was entitled to test the pleaded assertions.

30    Fourthly, the Zip Companies succeeded on their positive defences because I accepted evidence given on their behalf by Messrs Diamond and Gray as to their subjective motivations in adopting the trade mark ZIP when they did: see Firstmac (No 1) at [72]-[76], [242]. Firstmac could not have known at the time the 2019 Offer of Compromise was made whether Messrs Diamond and Gray would give evidence to support the pleaded allegations and, if so, the nature of that evidence and whether it would be accepted by the Court.

First Calderbank Offer

31    The First Calderbank Offer was made 14 days before the commencement of the trial. I accept that by that time the parties were well placed to assess their respective positions in the case, they had exchanged evidence and outlines of opening submissions. I also accept that, given the advanced stage of the proceeding, the seven day period allowed by the Zip Companies to consider the First Calderbank Offer was sufficient. In any event, Firstmac rejected the First Calderbank Offer two days after it was made, which reinforces this conclusion.

32    On the other hand, Firstmac accepts that, if the First Calderbank Offer had not been rejected, it would have received a significant payment and it would have avoided liability for costs. But that, of itself, is not enough to characterise the rejection of the offer as unreasonable.

33    The question that arises is whether Firstmac’s rejection of the First Calderbank Offer was reasonable.

34    In considering whether that is so it is necessary to have regard to the terms of the First Calderbank Offer. In particular, the question that arises is whether the terms of the First Calderbank Offer are “commensurate with a possible outcome in the proceeding”. Firstmac submits that they are not and that by the terms of the First Calderbank Offer the Zip Companies would achieve a better outcome than they could achieve in the proceeding.

35    As set out above, the First Calderbank Offer included the following terms:

(1)    Firstmac would provide letters of consent to the Australian Trade Marks Office (and, where applicable, any other Trade Marks Office including the Intellectual Property Office of New Zealand (IPONZ)) in relation to all trade mark applications in the name of Zipmoney Payments against which the Applicant’s Mark (or a mark owned by the Firstmac Group containing ZIP in any another country) is cited, including Australian trade mark application nos. 1977513, 1977514, 1977515, 1977520, 1977521, 1977523, 2107867, 2108801, 2165839, and 2184229;

(2)    that Firstmac would not challenge the use and/or registration of any trade mark in any country that consists of or contains the name ZIP used and/or filed by the Zip Companies or any related entities in relation to financial services and any goods or services associated with those services; and

(3)    within six months of payment of the settlement sum, among other things, Firstmac would assign all of its right, title and interest (including goodwill) in and to the Applicant’s Mark to Zipmoney Payments.

(Emphasis added.)

36    The Zip Companies submit that the terms of the First Calderbank Offer are commensurate with a possible outcome in the proceeding and/or closely related to the relief sought in the proceeding. They submit that the proceeding was effectively a dispute between them and Firstmac as to who should own and use the trade mark ZIP and the effect of the terms of the First Calderbank Offer and, in particular, those set out at [35(1) and (2)] above, was to ensure that the dispute between the parties was brought to an end by Firstmac acknowledging that the Zip Companies had the relevant rights. The Zip Companies say that the terms fall within the ambit of the dispute because by their defence and cross-claim they were seeking to ensure their right to use the trade mark ZIP and to remove Firstmac’s right to do so. The Zip Companies contend they achieved both of those objectives.

37    The Zip Companies also rely on Firstmac’s solicitors’ letter dated 24 February 2022 in which Firstmac rejected the First Calderbank Offer and made its counter-offer (Firstmac’s Counter-Offer). That letter included:

Nevertheless, our client remains open to a commercial resolution of this matter, which would allow your clients an expedited resolution and a clear path forward.

Our client agrees, in principle, to the terms of the conditional offer in [the First Calderbank Offer] as set out in clauses: (a), (c), (d), (e) and (f).

However, the terms set out in clause (b), …, is unacceptable. We are instructed in this respect that our client would be agreeable to resolving this matter if the terms set out in clause (b) were amended to reflect a payment amount of $25 million (inclusive of GST, where GST is payable).

38    The Zip Companies submit that by agreeing to the terms in clauses (c) and (d) of the First Calderbank Offer as part of Firstmac’s Counter-Offer, Firstmac indicated that those issues were able to be resolved within the “rubric” of the commercial dispute and did not suggest that it was inappropriate for the parties to engage on the basis of a final resolution of all matters concerning ownership of the trade mark ZIP including the matters covered by clauses (c) and (d) of the First Calderbank Offer.

39    In Energy Beverages (see [12] above) Halley J considered whether there should be an award of costs on an indemnity basis. Commencing at [50] his Honour set out the principles guiding an award of indemnity costs, including by reference to Anchorage Capital. At [55]-[56] his Honour referred to the authorities which considered, among others, the relationship between the terms of the offer and the relief sought in the proceeding as a relevant factor to have regard to in exercising the discretion whether to award indemnity costs. In particular, whether there is a sufficient correlation between the two.

40    In my view there was not a sufficient correlation here. The terms of the First Calderbank Offer were not “commensurate with a possible outcome of the proceeding”: see Energy Beverages at [56] referring to Merial Inc v Intervet International BV (No 4) (2017) 124 IPR 1; [2017] FCA 223 at [54]. That is for two reasons.

41    First, the First Calderbank Offer included terms that required Firstmac to assist the Zip Companies in obtaining and maintaining registration of any trade mark that consists of or contains the name ZIP beyond this jurisdiction. It did so by seeking as terms of the offer: the provision of letters of consent to any other Trade Marks Office, including IPONZ, nominated by the Zip Companies; and an undertaking by Firstmac that it would not challenge the use and/or registration of any trade mark in any country that consists of or contains the name ZIP. That relief was not sought, and could not be granted, in the proceeding.

42    Secondly, the Zip Companies sought an assignment of Firstmac’s right, title and interest in the Applicant’s Mark. The effect of such a term would be to give the assignee, one of the Zip Companies, an earlier priority date because it would have the benefit of the priority date for the Applicant’s Mark. That relief was again not sought, nor could it be granted, in the proceeding.

43    As was the case in Merial Inc the inclusion of these terms “mak[e] it difficult, if not impossible, to assess whether” Firstmac’s rejection of the First Calderbank Offer was unreasonable. In the circumstances the Zip Companies have not established that it was unreasonable for Firstmac to reject the First Calderbank Offer.

44    I am not persuaded that because Firstmac’s Counter-Offer incorporated the terms at cl (c) and cl (d) of the First Calderbank Offer, Firstmac effectively accepted that they were within the “rubric” of the commercial dispute and it would follow that the terms were “commensurate with a possible outcome of the proceeding”.

45    Unsurprisingly in making an offer to settle a proceeding a party will often incorporate terms that are not achievable in the proceeding. A negotiation will often ensue by which those terms are accepted or rejected and new proposed terms are introduced. Whether the proceeding is resolved is a matter for the parties and whether they can reach a mutually agreeable and tolerable outcome.

46    But where an offer to settle is made, the rejection of which will ground an application for indemnity costs, the Court is bound to consider the offer and its rejection in light of the developed principles. The Zip Companies submit that an unduly rigid approach by the Court to its analysis of a comparison of the terms of an offer to the relief that could be obtained in the proceeding would impede the ability to use offers made pursuant to the principles in Calderbank v Calderbank in a constructive way in commercial disputes. I do not agree. The principles as they have developed to date and their application simply impose on an offeror the need to take a considered and careful approach to the terms of an offer.

47    As a final matter I also note that, as submitted by Firstmac, a central issue that remained in the proceeding was the honesty or otherwise of the Zip Companies’ adoption of the trade mark ZIP and all the associated impugned marks. How the resolution of that issue would be affected by the evidence to be given by Messrs Diamond and Gray in cross-examination, and the Court’s assessment of their evidence, were not matters which could have been known by the parties in advance and at the time of the First Calderbank Offer. It was reasonable for Firstmac to test their evidence in cross-examination. That provides a further reason as to why Firstmac’s rejection of the First Calderbank Offer was not unreasonable.

The Second Calderbank Offer

48    As set out above, the Second Calderbank Offer was made on 1 March 2022. Its terms were the same as the First Calderbank Offer save for its quantum which was increased to $4 million (inclusive of legal costs and GST).

49    In support of their respective arguments as to the unreasonableness or otherwise of the rejection of the Second Calderbank Offer, the parties relied on their submissions in relation to the First Calderbank Offer. Accordingly for the same reasons as set out above in relation to the First Calderbank Offer I am not satisfied that the Zip Companies have established that it was unreasonable for Firstmac to reject the Second Calderbank Offer.

conclusion

50    For those reasons the Zip Companies have not established an entitlement to their costs of the proceeding to be assessed on an indemnity basis on any of the alternatives for which they contended. It follows that paragraphs 1 to 3 of the Zip Companies’ application filed on 27 June 2023 (Costs Application) should be dismissed and that the Zip Companies should pay Firstmac’s costs of those paragraphs of the Costs Application.

51    As set out above the parties are agreed that the Zip Companies’ costs of the proceeding should be the subject of a lump sum costs award and have agreed proposed orders to progress that aspect of the proceeding.

52    I will make orders accordingly.

Associate:

Dated:    13 September 2023