Federal Court of Australia

Toyota Jidosha Kabushiki Kaisha v OZI4X4 Pty Ltd [2023] FCA 1361

ORDERS

THE COURT ORDERS BY CONSENT THAT:

1.    The First Respondent (OZI4x4) shall not, whether by itself, its officers, employees or agents or however otherwise:

(a)    advertise, promote, offer for sale, sell or supply the Counterfeit Products or the Impugned Aftermarket Products (as defined in the Applicants' Amended Statement of Claim dated 15 June 2021 (Statement of Claim));

(b)    represent to the public in contravention of sections 18, 29(1)(a), 29(1)(g), 29(1)(h) or 33 of the ACL that:

(i)    the Counterfeit Products or the Impugned Aftermarket Products are products of the First Applicant (Toyota Japan), the Second Applicant (Toyota Customizing & Development) and/or the Third Applicant (Toyota Australia);

(ii)    the Counterfeit Products or the Impugned Aftermarket Products have the sponsorship or approval of Toyota Japan, Toyota Australia and/or Toyota Customizing & Development;

(iii)    OZI4x4 has the sponsorship or approval of, or an affiliation with, Toyota Japan, Toyota Australia and/or Toyota Customizing & Development; or

(iv)    the Counterfeit Products or the Impugned Aftermarket Products have been manufactured to the standards authorised or approved by Toyota Japan, Toyota Australia and/or Toyota Customizing & Development;

(c)    pass off:

(i)    the Counterfeit Products or the Impugned Aftermarket Products as products of Toyota Japan, Toyota Australia and/or Toyota Customizing & Development;

(ii)    the Counterfeit Products or the Impugned Aftermarket Products as products having the sponsorship or approval of Toyota Japan, Toyota Australia and/or Toyota Customizing & Development;

(iii)    OZI4x4 as a business having the sponsorship or approval of, or an affiliation with, Toyota Japan, Toyota Australia and/or Toyota Customizing & Development; or

(iv)    the Counterfeit Products or the Impugned Aftermarket Products as products having been manufactured to the standards authorised or approved by Toyota Japan, Toyota Australia and/or Toyota Customizing & Development.

2.    The Second Respondent shall not aid, abet, counsel or procure, or be directly or indirectly knowingly concerned in, or a party to, any trade mark infringement, contravention of the ACL or passing off which (if engaged in by OZI4x4) would constitute a contravention of the prohibitions in paragraph 1 above.

3.    The proceeding be dismissed.

THE COURT FURTHER ORDERS THAT:

4.    There be no order as to costs.

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

REASONS FOR JUDGMENT

KENNY J

1    The applicants commenced this proceeding on 22 March 2021. By their originating application and statement of claim, they alleged that the first respondent infringed and was infringing their trade marks, had engaged in misleading and deceptive conduct and committed other breaches of the Australian Consumer Law in Schedule 2 to the Competition Consumer Act 2010 (Cth), and passing off. Accessorial liability was pleaded against the second respondent. Amongst other things, the applicants sought declaratory and injunctive relief, as well as damages. The respondents filed a defence to the applicants’ claims on 4 June 2021. The applicants filed an amended statement of claim on 15 June 2021 containing minor amendments, the details of which are of no present concern.

2    At the first case management hearing before Middleton J on 11 June 2021, the proceeding was referred to mediation before a Registrar of the Court. That mediation was commenced on 2 August 2021 and adjourned from time to time. It was ultimately unsuccessful, but prompted subsequent discussions between the parties.

3    By agreement dated 1 October 2021 (settlement agreement), the parties resolved to settle the proceeding. The settlement agreement contained three clauses of present relevance:

6.    Binding effect of this agreement

This agreement binds the parties and any executor, administrator, transferee, assignee, liquidator or trustee in bankruptcy appointed in respect of it.

7.    Disposal of Proceeding

(a)    As soon as reasonably practicable after the execution of this agreement, the Toyota Parties’ solicitors must email the Court stating (in substance) that:

(i)    the parties have agreed a conditional settlement of the Proceeding, which the parties expect will result in the disposal of the Proceeding by consent by approximately 1 October 2022; and

(ii)    the parties request that they not be required to take any further substantive steps in the Proceeding in the interim.

(b)    Following and subject to compliance by the OZI Parties with clauses 2.1 and 8(c) the parties consent to orders being made by the Court in the form of the Consent Orders and will forthwith execute the Consent Orders in that form for the purpose of disposing of the Proceeding.

[]

9.    Consent Orders

(a)    The parties must use their best endeavours to persuade the Court to make the Consent Orders in their current form, in the interests of bringing the Proceeding to an end.

(b)     If, notwithstanding clause 9(a), the Court is not willing to make the Consent Orders in their current form but is willing to make different declarations and orders, each party agrees to consent to those declarations and orders being made by the Court provided those declarations and orders are not materially prejudicial to that party compared to the Consent Orders in their current form.

(c)    The parties acknowledge that, notwithstanding clause 9(b) and the matters contained in the Consent Orders, if the Court decides not to make some or all of the declarations or orders set out in the Consent Orders:

(i)    the OZI Parties must nevertheless comply with the terms of the Consent Orders as if they were terms of this agreement; and

(ii)    that decision will not alter the parties’ obligations and rights under this agreement.

In addition, broadly speaking, clause 8 required the respondents not to sell or offer for sale motor vehicle parts and associated products bearing a “Toyota Trade Mark” (as defined).

4    As it happened, no consent orders were provided to the Court until 12 September 2023, when the applicants’ solicitors emailed Chambers, stating:

Dear Associate

[]

In light of the position now adopted by the Respondents, at the case management on 14 September 2023, the Applicants intend to seek orders providing for the dismissal of the proceeding and other orders in accordance with the settlement agreement (without prejudice to the applicants’ right to commence a new proceeding in relation to the Respondents’ conduct since the date of the settlement agreement).

[]

The Respondents have indicated that they consent to paragraphs 1-3 and 5 of the proposed orders but object to paragraph 4.

A draft minute of order was attached to this email. The applicants foreshadowed that they would file an affidavit in support of an order for indemnity costs as proposed in paragraph 4 of the attached minute.

5    On 13 September 2023, Chambers responded by email, stating that the Court proposed to grant the parties leave to file submissions on the issue of indemnity costs. The email also stated that the Court “would not ... be prepared to make proposed orders 1 and 2 (which appear to be orders in the nature of an injunction) without the benefit of submissions on the Court’s power to make orders of this kind in the absence of evidence or agreed facts”. The Court made consent orders on the same day providing for the filing of such submissions. It also ordered, by consent, that the matters in issue be dealt with on the papers.

6    Two issues arise for resolution: first, the matter of orders 1 and 2 of the parties’ proposed orders and, second, the applicants’ application for indemnity costs.

Proposed Orders 1 and 2

7    The first question is whether the Court should make the following orders in circumstances where the orders are sought by the parties to the proceeding as part of the resolution of their dispute in the absence of agreed facts or evidence:

1.    The First Respondent (OZI4x4) shall not, whether by itself, its officers, employees or agents or however otherwise:

(a)    advertise, promote, offer for sale, sell or supply the Counterfeit Products or the Impugned Aftermarket Products (as defined in the Applicants' Amended Statement of Claim dated 15 June 2021 (Statement of Claim));

(b)    represent to the public in contravention of sections 18, 29(1)(a), 29(1)(g), 29(1)(h) or 33 of the ACL that:

(i)    the Counterfeit Products or the Impugned Aftermarket Products are products of the First Applicant (Toyota Japan), the Second Applicant (Toyota Customizing & Development) and/or the Third Applicant (Toyota Australia);

(ii)    the Counterfeit Products or the Impugned Aftermarket Products have the sponsorship or approval of Toyota Japan, Toyota Australia and/or Toyota Customizing & Development;

(iii)    OZI4x4 has the sponsorship or approval of, or an affiliation with, Toyota Japan, Toyota Australia and/or Toyota Customizing & Development; or

(iv)    the Counterfeit Products or the Impugned Aftermarket Products have been manufactured to the standards authorised or approved by Toyota Japan, Toyota Australia and/or Toyota Customizing & Development;

(c)    pass off:

(i)    the Counterfeit Products or the Impugned Aftermarket Products as products of Toyota Japan, Toyota Australia and/or Toyota Customizing & Development;

(ii)    the Counterfeit Products or the Impugned Aftermarket Products as products having the sponsorship or approval of Toyota Japan, Toyota Australia and/or Toyota Customizing & Development;

(iii)    OZI4x4 as a business having the sponsorship or approval of, or an affiliation with, Toyota Japan, Toyota Australia and/or Toyota Customizing & Development; or

(iv)    the Counterfeit Products or the Impugned Aftermarket Products as products having been manufactured to the standards authorised or approved by Toyota Japan, Toyota Australia and/or Toyota Customizing & Development.

2.    The Second Respondent shall not aid, abet, counsel or procure, or be directly or indirectly knowingly concerned in, or a party to, any trade mark infringement, contravention of the ACL or passing off which (if engaged in by OZI4x4) would constitute an contravention of the prohibitions in paragraph 1 above.

8    I accept that, generally speaking, the Court should exercise restraint in scrutinising a proposed settlement where the parties are legally represented and able to understand and evaluate the desirability of a settlement for themselves. Of course, this is subject to the proviso that the proposed orders and/or proffered undertakings are within the jurisdiction of the Court to make or accept and are otherwise unobjectionable: see, for example, Australian Competition and Consumer Commission v Real Estate Institute of Western Australia Inc [1999] FCA 18; 161 ALR 79 at [20]. Problems may arise where (as in this case) the Court is asked to grant injunctive relief in the absence of evidence or agreed facts, because this may make it difficult to assess whether the proposed order or orders meets this baseline. As French J said in Australian Competition & Consumer Commission v Virgin Mobile Australia Pty Ltd (No 2) [2002] FCA 1548 at [10], in the context of allegations that the respondent had contravened ss 52 and 53 of the then Trade Practices Act 1974 (Cth), “an agreed statement of facts and a joint submission may often be helpful in assisting the Court in determining whether the consent orders are appropriate and within power”. Gray J adopted his Honour’s observation in Australian Competition and Consumer Commission v Francis [2004] FCA 487; 142 FCR 1 at [77] and added that an agreed statement of facts would have assisted the Court in that case.

9    In the present case, the Court has been asked to grant injunctive relief in the absence of agreed facts or evidence. The authorities show, however, that, in the ordinary case, the consent of a party to the orders made to effect settlement constitutes an admission by the consenting party of all elements of each cause of action that would justify the orders sought: see, e.g., Thomson Australian Holdings Pty Ltd v Trade Practices Commission (1981) 148 CLR 150 at 164 Francis at [74]-[75]. The parties accepted and relied on this principle in their joint submission in support of the injunctive relief they sought. In these circumstances, I would make the proposed orders, there being no apparent jurisdictional difficulty in doing so.

Indemnity Costs

10    The applicants also sought an indemnity costs order in the following terms:

The Respondent forthwith pay the Applicants’ costs of and incidental to the proceedings as incurred from 26 April 2023 on an indemnity basis.

This application for indemnity costs was supported by written submissions and the affidavit of Caitlin Emily McCrum sworn on 12 September 2023, which principally served to place the settlement agreement and the parties’ subsequent correspondence before the Court.

11    The respondents opposed the applicants’ indemnity costs application, although they did not contest Ms McCrum’s affidavit. They submitted that there should be no order as to costs. The respondents supported their position by written submissions.

Factual background

12    The circumstances disclosed in Ms McCrum’s affidavit are as follows.

13    About a year after the parties’ entry into the settlement agreement in October 2021, the applicants’ solicitor, Clayton Utz, wrote to the respondents’ then solicitor, Kammoun Sukari Lawyers (KSL) by letter dated 27 October 2022, to advise that the applicants had become aware that, in breach of the settlement agreement, the respondents were engaging in further conduct infringing the applicants’ trade marks and constituting contraventions of the Australian Consumer Law. The letter further advised that the applicants reserved their right to take legal action against the respondents in relation to this conduct.

14    KSL responded by letter dated 11 November 2022. This letter denied some conduct and explained away other conduct as mischance. The letter included the statement that:

We note that, prior to entry into the Settlement Agreement, we conveyed our clients’ request for your clients to immediately bring to their attention any [] conduct which your clients allege amounts or may amount to Infringing Conduct so that our clients could immediately consider and attend to the same without delay and with an intention to ensure that the purpose and intent of the Settlement Agreement was adhered to. We note that this request was made informally and in good faith.

Despite the Settlement Agreement being entered [into] on 20 October 2021, being over 12 months ago, the first time your clients have made any allegations of our clients purportedly continuing to engage in conduct which amounts to Infringing Conduct was on 25 October 2022, being less than 1 month after our client paid the final instalment under clause 2.1 of the Settlement Agreement.

Although our clients do not know when your clients uncovered the matters contained in the Schedule to your letter, our clients find it convenient that the first time these matters were raised was after the full settlement amount was paid.

...

Our clients have complied with clauses 2.1 and 8(c) of the Settlement Agreement. There is no allegation to the contrary. Accordingly, the Proceedings are to be disposed of in accordance with the Consent Orders. Can you please execute the Consent Orders and send them to our office for execution.

(Emphasis original).

15    Some months apparently passed before the applicants’ solicitors responded. By letter dated 26 April 2023, they described the respondents’ response as “highly unsatisfactory”. This letter also affirmed that:

The Toyota Parties are not responsible for and never gave any indication that they would check and alert the OZI Parties to continuing infringements. The Toyota Parties reject the suggestion in Your Response that the Toyota Parties have only now raised such concerns because it is “convenient”. To the contrary, it would have been much more convenient if the OZI Parties had honoured their obligations under the Settlement Agreement and refrained from engaging in the Further Infringing Conduct.

The letter concluded as follows:

Please be aware that following the disposal of the current Proceeding, the Toyota parties intend to commence new proceedings in the Federal Court of Australia against at least the OZI Parties and anyone else found to have engaged in, or been involved in, the Further Infringing Conduct. In those new proceeding, the Toyota parties will be seeking relief in relation to the Further Infringing Conduct and the OZI Parties’ breaches of the Settlement Agreement. We confirm that pursuant to clause 3(b) of the Settlement Agreement, the Toyota Parties will be relying on the conduct the subject of the current Proceeding in order to seek orders for a significant award of additional / exemplary damages, along with special orders as to costs.

The Toyota Parties reserve all of their rights.

16    The respondents’ solicitor, KSL, filed a Notice of Ceasing to Act in the proceeding on 12 May 2023. The respondents advised Clayton Utz by email dated 19 May 2023 that they “will handle all correspondence from our office and will engage Legal representation in due course as and if needed”. The respondents’ senior compliance manager subsequently wrote what would appear to have been a genuinely conciliatory letter dated 8 May 2023 to Toyota, in which he said, amongst other things:

Understand that we are a relatively small operator in the 4x4 marketplace but acknowledge the rights of others and have never intentionally attempted to pervert the rights of others.

17    By letter dated 25 May 2023, Clayton Utz wrote to the respondents, advising that to dispose of the proceedings in accordance with clause 7(b) of the settlement agreement, the parties needed to provide signed consent orders to the Court, and that to do this at least the first respondent “must engage a law firm to act on its behalf”. Shortly thereafter, the respondents engaged Andrew Norrie of counsel to assist them.

18    By email sent on 31 May 2013, the applicants’ solicitors advised the respondents and Mr Norrie that they would not correspond with Mr Norrie until he had filed a Notice of Acting. Subsequently, by email sent on 13 June 2023, the applicants’ solicitors advised Mr Norrie and the respondents that the respondents needed to engage solicitors so that a Notice of Acting could be filed.

19    Also in the same email of 13 June 2023 the applicants stated that they would request the Court to relist the matter if they did not receive a substantive response from the respondents by 4pm on 20 June 2023 confirming the engagement of new solicitors and the filing of a Notice of Acting with the Court to that effect. Since they received no such response by their nominated time, the applicants’ solicitors emailed the Court Registry on 22 June 2023 stating that the respondents were unrepresented, that the parties’ conditionally agreed settlement had not been concluded, that no further steps could be taken until the first respondents engaged new lawyers or have leave to proceed without a lawyer, and requesting a case management before a judge of the Court. A case management hearing was fixed for 11 August 2023.

20    By email dated 4 August 2023, the applicants’ solicitor wrote to the Court, stating that:

… at the case management hearing fixed for 11 August 2023 the Applicants wish to discuss the status of the proceeding having regard to:

•    the conditional settlement that was entered into following the mediation of this matter before Registrar O’Connor on 2 August 2021;

•    the Respondents’ failure or refusal to take the steps required under the settlement agreement to sign consent orders in the form agreed to dispose of the present proceeding; and

•    the Applicants’ contention that, since the entry into the settlement agreement, the First Respondent has engaged in further conduct which the Applicants allege involves both an infringement of their intellectual property rights and a breach of the settlement agreement.

In light of the matters set out above, at the case management hearing the Applicants intend to seek orders in the form attached.

21    The minute of orders attached to this email proposed a timetable according to which the Court was asked to grant the applicants leave to file and serve an amended statement of claim and amended originating application; the respondents would file and serve a defence to the amended statement of claim; the applicants would file a reply; and the matter be adjourned for further directions following the filing of these pleadings.

22    On 6 August 2023, the respondents’ new solicitor, Sydney Criminal Law Specialists (SCLS), advised the applicants that the respondents consented only to the adjournment of the proposed hearing, and not to the proposed amended statement of claim, which they had not yet seen. The Court subsequently made orders by consent for the applicants to provide a draft amended originating application and amended statement of claim to the respondents, and for the respondents to advise whether they consented to the filing of the amended pleadings. On 22 August 2023, the applicants provided their draft pleadings in conformity with the Court’s orders. On 1 September 2023, Mr Norrie, for the respondents, emailed to advise that the respondents did not consent to the filing of the amended pleadings, and that the proceedings should be brought to an end by the making of consent orders in accordance with the settlement agreement.

Parties’ submissions

23    The applicants submitted that the respondents’ persistent failure to execute the consent orders after being requested to do so on 26 April 2023 “significantly protracted the proceedings and resulted in substantial wasted costs, including (most importantly) the costs of preparing the Further Amended Application and Further Amended Statement of Claim”.

24    The applicants contended that the respondents could have executed consent orders at numerous times, including between 26 April 2023 and 12 May 2023; between 13 June 2023 and 4 August 2023; between 4 August 2023 and 8 August 2023; and between 9 August 2023 and 22 August 2022 “when Clayton Utz (and counsel) were preparing the amended pleadings as a result of the Respondents’ insistence that a draft be provided before they could indicate their position”. The applicants submitted that:

It is completely unacceptable, and wholly contrary to the obligation on parties under sections 37M and 37N of the Federal Court of Australia Act 1976 (Cth), for the Respondents to ignore reasonable requests to comply with their contractual obligations to bring the proceedings to an end, insist on the preparation of court documents that would be entirely unnecessary if they complied with those obligations, and then change their position and insist that no costs consequences should follow.

Referring to Martens v Stokes [2016] FCA 1010 at [10]-[12], they submitted that it was appropriate for the Court to order that such costs be borne by the respondents on an indemnity basis.

25    The respondents disputed the applicants’ characterisation of their conduct. They submitted that the settlement agreement bound the parties (clause 5); disposed of the proceedings (clause 7); and barred further action concerning the proceedings (clause 10). They further submitted that they had complied with clauses 2.1 and 8 of that agreement.

26    The respondents drew attention to the fact that they had no solicitor from at least 12 May 2023 (when KSL filed a Notice of Ceasing to Act) until 7 July 2023 (when SCLS filed a Notice of Address for Service). The respondents referred to the applicants’ letter of 25 May 2023 (see [17] above) and their email to this Court’s Registry dated 22 June 2023 (see [19] above). The respondents noted that there was no mention in that email of a further allegation that the first respondent had infringed their intellectual property rights and thereby also breached the settlement agreement. The respondents submitted that the applicants did not inform the Court of any such alleged conduct prior to an email dated 4 August 2023 sent to my associate.

27    Notwithstanding this, the respondents submitted:

9.    It appears that the primary reason for the Applicants relisting the Proceedings has been to prosecute its allegations concerning the First Respondent and its infringement of their intellectual property rights and its breach of the Settlement Agreement.

10.     Since the relisting of the Proceedings and prior to 8 September 2023, there had not been any indication by the Applica[nts] to end the Proceedings. Indeed, the Applicants had earlier proposed orders with the Court which would have allowed them to amend the originating application and statement of claim, a proposal which would have been precluded by the terms of the Settlement Agreement [].

11.     Since entry into the Settlement Agreement, the Applicants would have had to initiate new proceedings in order to prosecute any alleged infringement of their intellectual property rights and any alleged breaches of the Settlement Agreement. ...

28    The respondents submitted that they should not be required to bear the costs of the steps taken by the applicants to pursue the alleged further infringements of their intellectual property rights and alleged breaches of the settlement agreement, which were not in any event maintainable in the current proceeding. The respondents submitted that the Court should make an order that there be no order as to costs consistent with the orders attached to the settlement agreement.

Consideration

29    Under s 43(2) of the Federal Court of Australia Act 1976 (Cth) (FCA Act), the disposition of costs is at the discretion of the Court, although it is well-established that this discretion must be exercised judicially: see, for example, Ruddock v Vadarlis (No 2) [2001] FCA 1865; 115 FCR 229 at [9]. The Court may order that costs awarded against a party are to be assessed on an indemnity basis: see the FCA Act, s 43(3)(g).

30    The principles relevant to an award of indemnity costs are well-established. In broad terms, where costs are payable, they will be payable on a party and party basis, unless the circumstances of the case justify a departure from the normal course: see Colgate-Palmolive Company v Cussons Pty Limited (1993) 46 FCR 225 at 233 (Sheppard J). Indemnity costs “serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs”: see Hamod v State of New South Wales [2002] FCAFC 97; 188 ALR 659 at [20] per Gray J, with whom Carr and Goldberg JJ agreed.

31    Although the categories in which indemnity costs may be ordered are not fixed, the authorities accept that indemnity costs may be awarded where there is “evidence of particular misconduct on the part of a party that causes loss of time to the Court and to other parties”: see Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd [1991] FCA 225 at [22]. It does not follow from this, however, that every action, inaction or inadvertent mistake occasioning some delay in the conduct of a proceeding will attract an indemnity costs order. The question is always whether the facts and circumstances of a particular case, including the nature and consequences of any delay or mistake, justify the making of such an order. Also, in exercising the discretion to make an indemnity costs order, the Court takes account of any failure by a party to comply with its obligation to conduct the proceeding in a way that is consistent with the overarching purpose of the civil practice and procedure provisions, to facilitate the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible: see the FCA Act, ss 37N(4) and 37M(1).

32    It is reasonably clear in this case that there is a disparity of resources as between the applicants and the respondents. The applicants are companies with very extensive resources. They have been and remain represented by Clayton Utz. The respondents are significantly less resourced, as indicated by the compliance manager’s letter of 8 May 2023.

33    In any event, the parties were bound by the settlement agreement once made: see clause 6. Under clause 7 of the settlement agreement, the applicants’ solicitors were obliged to write to the Court informing it of the conditional settlement and request that the parties not be required to take any further substantive steps in the proceeding, which they had done. The respondents had apparently made the payments required of them by clause 2.1 by the time the applicants’ solicitors wrote to the respondents’ solicitor on 27 October 2022: see [13] above. The respondents apparently believed that they had complied with clause 8 of the settlement agreement, and there seems little doubt that they had in fact done so, given the applicants’ insistence that the time had arrived to execute the consent orders that would formally dispose of the proceeding.

34    The result of these provisions and the parties’ actions was that no action was taken in this proceeding following their entry into the settlement agreement, and no significant costs were therefore being incurred in the proceeding at least until the applicants went about drafting the proposed amended statement of claim referred to in their August 2023 email to Chambers. Furthermore, the letters before Court show that the respondents’ solicitor was in fact the first to ask the applicants to execute the consent orders. This was by letter dated 11 November 2022: see [14] above. It would appear that the applicants ignored this request until some five months later, when they provided the respondents’ solicitor with a copy of the consent orders executed by them. In the same letter, however, the applicants foreshadowed the institution of new proceedings against the respondent, alleging fresh breaches of their rights: see [15].

35    Shortly after this, the respondents ceased to be represented by a solicitor, and commenced trying to manage the proceeding without legal representation. In this circumstance, it was understandable that, in his letter of 8 May 2023, their compliance manager focussed on the allegations of ongoing infringement and the prospect of new proceedings. When the applicants’ solicitors drew their attention (by letter dated 25 May 2023) to the need to retain a lawyer to ensure that consent orders ending the proceeding were filed with the Court pursuant to clause 7(b) of the settlement agreement, the respondents acted expeditiously, and retained Mr Norrie five days later.

36    This was not, however, the end of the matter, because it is clear from the subsequent emails that the applicants were concerned that the absence of a solicitor capable of acting for the respondents made it more difficult to bring the proceeding to an end by the foreshadowed consent orders. It would appear that Mr Norrie did not immediately appreciate the problem, presumably because of his very brief acquaintance with the matter. It is entirely understandable that the respondents themselves apparently had no notion of what lay behind the applicants’ emails.

37    When the applicants did not hear from the respondents by their nominated date, they approached the Court Registry to inform the Court that they were unable to take any further steps in the proceeding and to request a case management hearing. A case management hearing was fixed for 11 August 2023.

38    On 4 August 2023, the applicants emailed my Chambers advising that they would seek leave to file an amended statement of claim. In subsequent correspondence with my Chambers, the respondents advised that they could not consent to the grant of leave to amend the pleadings as they had not seen the proposed amendments. This was reasonable in the circumstances. Ultimately, the respondents advised that, having seen the amended pleadings, they did not consent to the grant of leave because, given the settlement agreement, the proper course was to end the present proceedings without amendment of pleadings (which, in any event, raised new causes of action).

39    When examined in this way, it is clear that none of the respondents’ conduct was unreasonable in the circumstances in which they acted. They sought to comply with the legal requirements referable to conducting a proceeding in this Court, although they were hampered by lack of knowledge and resources, including the loss of legal representation for a time. Furthermore, given the terms of clause 10 of the settlement agreement (providing that “this agreement may be pleaded as a full and complete defence ... to any action, suit or proceeding ... continued by the other party ... in relation to the Proceeding”), it was clearly not unreasonable for the respondents to maintain that the present proceeding should be brought to an end, without the applicants’ proposed pleading amendment.

40    It should be borne in mind too that, up until the applicants’ solicitors sent their email to my Chambers, to which the respondents were copied in, the applicants’ solicitors had repeatedly advised the respondents that the fresh allegations of infringement would be made in new proceedings, consistently it seems with the settlement agreement. It is apparently correct to say, as the respondents do, that they first learned of the applicants’ proposal to amend their statement of claim in this proceeding in this email correspondence between the applicants and my Chambers. Further, it may be observed that the applicants’ subsequent insistence that they have leave to amend their original pleading to raise the further issues is inconsistent with their letter of 8 September 2023 at [28] where they suggested that they had consistently sought to end the proceeding by filing consent orders as contemplated by the settlement agreement. The material before the Court establishes that it was the applicants who ultimately pressed (apparently without notice to the respondents) for the opportunity to amend the pleadings to pursue the allegations of fresh breaches within the present proceeding.

41    In the circumstances to which I have referred, there is no basis upon which it can be fairly said that the respondents should bear the costs of the drafting of the applicants’ amended pleading, the costs of which is central to the applicants’ application for indemnity costs. Nor can I discern any other basis that might justify an award of indemnity costs against the respondents from 26 April 2023. In so far as the applicants applied for indemnity costs, their application fails.

42    Both parties ultimately sought an order that the proceedings be dismissed, and this order should be made. I accept that, in the circumstances, including consistency with the settlement agreement, there should be no order as to costs.

Associate:

Dated:    8 November 2023