Federal Court of Australia

Bed Bath ‘N’ Table Pty Ltd v Global Retail Brands Australia Pty Ltd (No 3) [2024] FCA 226

ORDERS

THE COURT NOTES THAT:

A.    The Respondent undertakes to the Court that, in the event that it files a Notice of Appeal and until the determination of any such appeal, the Respondent:

THE COURT DECLARES THAT:

1.    By using the trade mark “House Bed & Bath” (the HBB mark) including in the form of the device:

as the name of the House B&B stores (including on the external signage over the entrance to those stores, internal store signage, the House Website, store receipts, social media, shopping centre directories and advertising and promotional materials, gift cards and employee name badges), the Respondent has engaged in conduct which is misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the Australian Consumer Law (ACL), as set out in Sch 2 of the Competition and Consumer Act 2010 (Cth).

2.    The Respondent has, by engaging in the conduct in para 1, made false or misleading representations that House B&B Stores are associated or affiliated with the Applicant, contrary to s 29(1)(g) and (h) of the ACL.

3.    The Respondent has, by engaging in the conduct in para 1, committed the tort of passing off.

THE COURT ORDERS THAT:

4.    The allegations of trade mark infringement in paras 25 and 26 of the Statement of Claim dated 11 June 2021 (Statement of Claim) are dismissed.

5.    The allegations of contravention of s 29(1)(a) of the ACL in para 27 of the Statement of Claim are dismissed.

Injunction

6.    Within two months from the date of this order, except with the consent of the Applicant, the Respondent shall, whether by itself, its directors, officers, employees or agents or howsoever otherwise:

(a)    cease and forever refrain from supplying, selling, offering to sell, advertising or promoting soft homewares or the retailing of soft homewares under:

(i)     the HBB mark;

(ii)    any trade mark which is substantially identical to the HBB mark, which includes the words "BED" followed by "BATH" with or without "and", "&" or other conjunction; or

(iii)    any trade mark similar to the HBB mark which is misleading or deceptive or which is likely to mislead or deceive.

(b)    will deliver up to BBNT’s legal representative or destroy, upon oath or affirmation, all signs, cards, advertising material, packaging or other promotional material in the possession, custody or power or control of the Respondent, the continued use or possession of which would offend against any of the injunctions in paragraph (a) above.

Costs

7.    The Respondent pay the Applicant’s costs of the proceeding to date (save as to existing costs orders) with a discount of 10%:

(a)    to 11 am on 8 October 2021 on a party-party basis; and

(b)    thereafter, on an indemnity basis.

8.    Both parties bear their own costs in respect of any affidavits filed by the Applicant and not read.

9.    The costs orders to date in this proceeding, including these orders, be taxable forthwith.

10.    The Applicant be at liberty to apply to the Court for costs to be taxed on a lump sum basis.

Quantum

11.    There be an inquiry into damages (to include exemplary damages) or at the election of the Applicant an account of profits.

12.    For the purposes of enabling the Applicant to make an election between its claim for damages and its claim for an account of profits, the Respondent file and serve within 60 days an affidavit by its proper officer deposing to:

(a)    the location of each store which it operated under the name "House Bed & Bath" in Australia (HBB Stores);

(b)    the dates of operation of each HBB Store;

(c)    the revenue received by each HBB Store broken down on a monthly basis;

(d)    the total number of products sold by it from each HBB Store up to the date of the affidavit;

(e)    the approximate amount of profit it contends it made by the sale of those products;

(f)    the method of allocating overheads, if any, which it regards as reasonably acceptable;

(g)    the steps or reasoning by which the approximate amount of profit has been calculated;

(h)    annex all documents which are relied on for the purposes of making the affidavit, including in original electronic form.

Stay

13.    Upon the Respondent giving the undertakings set out above, orders 6 and 11-12 be stayed until the later of:

(a)    28 days from the date of these orders; or

(b)    if a Notice of Appeal is filed within 28 days from the date of these orders, 28 days after the resolution of that appeal.

Other

14.    The claim otherwise be dismissed.

15.    The parties each be granted leave to appeal from orders 1 to 12 and 14 above and, if a Notice of Appeal is filed, leave to cross-appeal.

16.    The proceeding be listed for further orders in relation to pecuniary relief on a date to be fixed.

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

REASONS FOR JUDGMENT

ROFE J:

Introduction

1    On 14 December 2023, I published my reasons in Bed Bath ‘N’ Table Pty Ltd v Global Retail Brands Australia Pty Ltd [2023] FCA 1587 (December Reasons). The parties were ordered to provide proposed orders and accompanying submissions as to relief and costs. An oral hearing took place on 28 February 2024.

2    These reasons deal with costs and relief and should be read together with the December Reasons. I adopt the abbreviations used in my December Reasons.

3    BBNT alleged that by launching House B&B, a new soft homewares store, GRBA:

(a)    infringed the BBNT marks under s 120 of the Trade Marks Act 1995 (Cth);

(b)    contravened s 18(1) and s 29(1)(a), (g) and (h) of the Australian Consumer Law (ACL) as contained in Sch 2 of the Competition and Consumer Act 2010 (Cth); and

(c)    engaged in the tort of passing off.

4    In my December Reasons, I found that GRBA had contravened s 18(1) and s 29(1)(g) and (h) of the ACL and engaged in passing off. However, I rejected that GRBA had infringed BBNT’s marks.

5    The parties largely agree on the appropriate orders as to costs and reliefs. The parties agree that:

(a)    there be an inquiry into damages;

(b)    GRBA pay BBNT’s costs in relation to the ACL and passing off claims;

(c)    leave be granted to appeal from these orders and my December Reasons; and

(d)    a stay be granted in relation to all orders except as to costs until the determination of the appeal.

6    The parties also agree that declarations and injunctions should be made. However, there is a dispute about the scope of the declaration and injunction sought by BBNT.

7    The other area of dispute is in relation to costs. This includes whether:

(a)    BBNT pay GRBA’s costs in respect of its allegations of trade mark infringement;

(b)    GRBA pay costs on an indemnity basis pursuant to r 25.14 of the Federal Court Rules 2011 (Cth); and

(c)    BBNT pay GRBA’s costs in respect of “uncalled confusion witnesses” whose affidavits were not read.

8    I will deal with each of these areas of dispute in turn. For the reasons given below, I will grant the declarations in the form sought by GRBA and the injunctions in the form sought by BBNT. I will order that GRBA pay BBNT’s costs of the whole proceeding. GRBA should be afforded a discount of 10% to account for succeeding on trade mark infringement and both parties should bear their own costs in respect of the unread affidavits of uncalled confusion witnesses. I will also order that GRBA pay BBNT’s costs on an indemnity basis from 11 am on 8 October 2021.

SCOPE OF THE DECLARATIONS AND INJUNCTIONS

Declarations

9    BBNT seeks a declaration that:

(1)    By using the trade mark “House Bed & Bath” including in the form of the device:

as the name of physical and a virtual soft homewares stores, and on or in relation to those stores (including on the external signage over the entrance to those the soft homewares stores, internal store signage, the House website (www.house.com.au), store receipts, social media, shopping centre directories and advertising and promotional materials, gift cards and employee name badges), the Respondent has:

(a)    falsely represented that it is associated or affiliated with the Applicant and its services are associated or affiliated with the Applicant and its services are sponsored or approved by the Applicant and thereby:

(i)    engaged in conduct which is misleading or deceptive, or likely to mislead or deceive, in contravention of s 18 of the ACL;

(ii)    made false representations in contravention of s 29(1)(g) and (h) of the ACL; and

(b)    committed the tort of passing off.

(Emphasis added.)

10    GRBA seeks to strike out the emphasised text “the name of physical and a virtual soft homewares stores, and on or in relation to those stores” and instead simply refer to “House B&B stores”. GRBA says that the reference to “virtual stores” is superfluous given that the declaration explicitly extends to the House website. I agree.

11    GRBA also seeks to strike out the words “sponsored or approved by the Applicant” as it contends that the declaration should not extend beyond my findings (at [522]) that GRBA falsely represented within the meaning of s 29(1)(g) and (h) that House B&B stores were “associated or affiliated” with BBNT.

12    I did not expressly find that GRBA falsely represented that House B&B stores were “sponsored or approved by” BBNT. I held at [533] that:

once it is accepted that GRBA’s conduct has likely misled or deceived consumers into thinking that House B&B stores are operated by, or otherwise associated with, BBNT, there is at least a likelihood of damage to BBNT in the form of diversion of business by reason of the misrepresentation of trade association.

(Emphasis added.)

13    When the December Reasons are read as a whole, particularly [518]-[522] and my finding at [533] set out above, it is clear that GRBA’s false representations only extended to “association or affiliation”, not “sponsorship and approval”.

14    Accordingly, I will make the declarations in the form sought by GRBA.

Injunctions

15    BBNT seeks an injunction which restrains GRBA from using:

(a)    the House B&B mark;

(b)    any trade mark which is substantially identical to the House B&B mark; and

(c)    any trade mark which is similar to the House B&B mark.

16    GRBA accepts that the injunction sought in (a) is appropriate but contends that (b) and (c) should be rejected. GRBA contends that, first, the proceeding only concerned, and the Court did not make any finding regarding the use of any mark other than the House B&B mark. Second, there is no evidence which suggests that GRBA is threatening to adopt any mark which is “substantially identical” or “similar” to the House B&B mark. Third, as the Court rejected BBNT’s allegations of trade mark infringement, it would be inappropriate to grant an injunction in respect of “substantially identical” marks – a concept which is relevant to infringement under s 120 of the Trade Marks Act, not the ACL or passing off. Fourth, the language of “substantially identical” and “similar” outside of the context of the Trade Marks Act is ambiguous. GRBA contends that, for these reasons, the broadly framed injunction puts it at risk of contempt.

17    BBNT contends that the injunction sought in (b) and (c) are necessary to prevent GRBA from seeking to circumvent the injunction in (a) by changing the name of its soft homewares stores to something similar or substantially identical to “House BED & BATH”.

18    In Knott Investments Pty Ltd v Winnebago Industries Inc (No 2) (2013) 103 IPR 395, the Full Court made orders that the appellants be restrained from using the Winnebago name and “any other name or mark substantially identical with, or deceptively similar to, the Winnebago name” (order 3(1)(b)). Allsop CJ noted at [3] that “the respondent Winnebago was not enforcing a trade mark. Its suit was for passing off and in respect of misleading or deceptive conduct”. The causes of action were therefore the same as those which BBNT succeeded in establishing, although the injunction sought by BBNT is somewhat broader than that in Winnebago as it refers only to “similarity” not “deceptive similarity”.

19    As pointed out by GRBA, the Court in Winnebago did not discuss the adequacy or appropriateness of the injunction. However, by granting the order, the Full Court was plainly satisfied that such a form of injunction was appropriate.

20    Order 3(1)(b) in Winnebago is also consistent with the following order made by the Full Court in Taco Co of Australia Inc v Taco Bell Pty Ltd (1982) 42 ALR 177:

(3) Taco Co of Australia Inc by itself, its servants or agents, is restrained from operating any restaurants in the Sydney metropolitan area under the name “Taco Bell” or under any name similar thereto which is deceptive or misleading or which is likely to deceive or mislead.

21    The Full Court in Taco Bell explained at 209 (per Franki, Deane and Fitzgerald JJ) that the “form of injunction [in order 3] is, in our view, appropriate to the circumstances of the case. It precludes no more than what would constitute a contravention of s 52 [of the Trade Practices Act 1974 (Cth)]”.

22    GRBA contends that Winnebago and Taco Bell are no longer good law following the comments by the Full Court in Calidad Pty Ltd v Seiko Epson Corp (No 2) (2019) 147 IPR 386 at [46] (per Greenwood, Jagot and Yates JJ) that “passing-off cases may stand in a different camp” to patent and trade mark cases where an injunction in general form is appropriate. It is useful to set out their Honours comments at [46] in full:

In the case of other rights, there can be no real objection to an injunction in general form if the scope of the holder’s rights is made clear by the injunction itself. As our survey of the cases shows, copyright infringement cases are a paradigm. We accept that confidential information cases and passing-off cases may stand in a different camp (as Aldous LJ’s remarks in Coflexip at [18] recognise) although, even in a confidential information case, the prospect exists that, as between the parties, the information in question can be appropriately identified by the form of the injunction so as to warrant it being granted in general form. What cannot be countenanced is an injunction which simply restrains, in blanket terms, the infringer from using another person’s “confidential information” without precise identification of that information.

23    Calidid did not concern allegations of passing off or misleading and deceptive conduct. As such, the remarks at [46] concerning passing off cases were made in obiter and the Full Court did not express any view on whether injunctions in the form sought by BBNT are available for infringement of the ACL. Further, the Full Court in Calidad did not refer to, let alone disavow, the appropriateness of the orders made in Winnebago or Taco Bell. GRBA did not point to any other authority to support its contention that Winnebago and Taco Bell should not be followed.

24    I also do not agree that the concepts of “substantially identical” and “similar” are, in GRBA’s words, “nebulous” and “ambiguous” concepts because they find no expression in the ACL. Courts regularly make orders utilising those concepts in trade mark cases and I consider that GRBA is capable of understanding them for the purposes of complying with the injunction sought by BBNT, as it would have had to have done if BBNT had succeeded on its trade mark case. Accordingly, I will grant BBNT’s proposed injunction.

COSTS

25    I recently set out the principles with respect to costs in MMD Design and Consultancy Limited v Camco Engineering Pty Ltd (No 2) [2023] FCA 1416 at [20]-[23]:

[20]    It is well established that s 43 of the Act confers a wide discretion to award costs in all proceedings before the Court which is unfettered except by the principle that it be exercised judicially.

[21]    The Full Court in Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd (No 2) [2018] FCAFC 7 (per Nicholas, Beach and Burley JJ) made the following observation at [3] about the breadth of the discretion conferred by s 43:

The power of the Court in relation to costs is well established. Section 43 of the Federal Court of Australia Act 1976 (Cth) gives the Court a wide discretion in awarding costs. The exercise of the Court's discretion is not without principles or practices; it must be exercised judicially (Les Laboratoires Servier v Apotex Pty Ltd (2016) 247 FCR 61 at [305] per Bennett, Besanko and Beach JJ). The ordinary rule is that costs follow the event, although a successful party may be awarded less than its costs, or costs may be apportioned, based upon success on the issues (Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 327 ALR 192; [2015] HCA 53 at [6] per French CJ, Kiefel, Nettle and Gordon JJ; Les Laboratoires Servier at [297] to [298] and [303]).

[22]     The Full Court in Sandvik Intellectual Property AB v Quarry Mining & Construction Equipment Pty Ltd (No 2) (2017) FCAFC 158 at [9]–[11] (per Greenwood, Rares and Moshinsky JJ) summarised the principles of costs as follows:

Section 43(3)(e) of the Federal Court of Australia Act 1976 (Cth) provides that an award of costs may be made in favour of, or against, a party whether or not that party is successful in the proceeding. The approach usually taken is that costs follow the outcome of an appeal: see Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 327 ALR 192 at [6] per French CJ, Kiefel, Nettle and Gordon JJ; see also Les Laboratoires Servier v Apotex Pty Ltd (2016) 247 FCR 61 at [303]; Oshlack v Richmond River Council (1998) 193 CLR 72 at [66]-[68].

In Queensland North Australia Pty Ltd v Takeovers Panel (No 2) (2015) 236 FCR 370, Dowsett, Middleton and Gilmour JJ, after referring to Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 and State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174, said at [11] that these decisions treat the success or failure of the relevant party as being the starting point in consideration of the question of costs, but contemplate at least three distinct categories of situation in which a successful party might be deprived of costs, or even ordered to pay the costs of the other side. These were identified as follows:

One such category is where the applicant has been only partially successful in that it has not obtained all of the relief sought. The second category is where a party has succeeded in obtaining the relief sought, but has not succeeded on all bases (factual or legal) upon which it sought such relief. Of course, it is possible that a particular outcome will fall into both categories. A third category involves consideration of the successful party’s conduct of the case.

After referring to the decision of Finkelstein and Gordon JJ in Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107, Dowsett, Middleton and Gilmour JJ in Queensland North Australia then said at [18]:

[Section 43 of the Federal Court of Australia Act] does not mention costs following the event. In Ruddock, Bowen Investments and Sportsbet, the Court proceeded on the basis that ordinarily, the successful party may reasonably expect to receive its costs, whether that outcome be described as costs following the “event” or otherwise. The question of costs is within the Court’s discretion. As we have said, relevant factors include the extent of a party’s success, the extent of its success or failure on individual issues and its conduct of the proceedings.

[23]     The Court should attempt to avoid, so far as possible, creating a situation in which the quantification of costs will be complex, protracted and, by itself, costly; Hockey v Fairfax Media Publications Pty Ltd (No 2) (2015) 237 FCR 127 at [120] (per White J). The taxation process following the award of costs takes place before Registrars of the Court. Convoluted costs orders are likely to detract from the efficiency of taxing and further prolong proceedings remaining within the Court system, thereby also increasing the costs of the process.

26    BBNT succeeded in relation to relief and therefore the starting position is that BBNT should be entitled to its costs of the whole proceedings unless there is some good reason to depart from that costs order.

Costs on an issue-by-issue basis

27    GRBA’s position is that BBNT should pay its cost of the trade mark case. GRBA contends that it is “common practice” that where an applicant brings “discrete causes of action”, and only succeeds on some of them, the respondent “should have its costs” in respect of those causes of action it successfully defends. GRBA cites Seiko Epson Corporation v Calidad Pty Ltd [2018] FCA 104 at [15] (per Burley J) and Jusand Nominees Pty Ltd v Rattlejack Innovations Pty Ltd (No 2) [2022] FCA 867 at [50] (per Rofe J) for that proposition.

28    Burley J said at [15] of Seiko:

First, the breach of statutory duty, infringement of trade mark and misleading or deceptive conduct cases that were brought by Seiko (as addressed in the judgment in Sections 7, 8 and 9) were each discrete causes of action. Seiko did not succeed on these issues and Calidad should have its costs of each. Secondly, it is common practice in cases of this type for costs to be awarded on an issues basis where they can sensibly be separated; Servier [300], [301]. The 6 different claims in the present case can in my view be so separated and the clear success of Calidad in respect of 3 of those should be recognised in a costs award.

(Emphasis added.)

29    Similar comments were made by the Full Court of this Court in Les Laboratoires Servier v Apotex Pty Ltd (2016) 117 IPR 415 at [301] (per Bennett, Besanko and Beach JJ):

Courts have been increasingly concerned, generally, to use all proper means to encourage parties to consider carefully what matters they will put in issue in their litigation. This has led to decisions whereby the successful party does not recover all of its costs where it has been unsuccessful on a discrete issue or in what is decided to be an unmeritorious objection. While it is acknowledged that, ordinarily, costs follow the event, the wide discretion in awarding costs has led to circumstances where a successful party who has failed on certain issues may be ordered to pay the other party’s costs of them (as discussed in Hughes v Western Australian Cricket Association (Inc) [1986] ATPR 40-748 per Toohey J), although warnings have been stated that care should be taken in such a course and consideration be given to whether the issues on which the successful party failed are clearly dominant or separable (Waters v PC Henderson (Australia) Pty Ltd (1994) 254 ALR 328 at 330-1 per Mahoney JA) and to whether the issues involved different factual enquiries in the one proceeding or multiple causes of action, even if based on a common substratum of fact.

(Emphasis added.)

30    In Seiko, Seiko was successful on three of the six issues, including patent infringement (albeit only in respect of categories 4, 5, 6 and 7, and not 1-3), and unsuccessful on its trade mark, misleading and deceptive conduct and breach of statutory duty cases. Burley J considered the issues in the patent case could be sensibly separated from the three issues on which Seiko did not succeed. As Calidad was successful on both the trade mark and misleading and deceptive conduct cases, Burley J did not consider whether they were separable from each other.

31    Although BBNT did not succeed on trade mark infringement, the issues in the trade mark case cannot be sensibly separated from those in the ACL and passing off cases and BBNT should not be liable for those costs. That is for three primary reasons.

32    First, BBNT was wholly or substantially successful in the relief it sought. BBNT sought declarations, injunctions and damages, and it will be entitled to all of those forms of relief (in one form or another) as a result of succeeding on the ACL and passing of claims. This includes, as GRBA conceded, that GRBA will have to re-brand its soft homewares stores if unsuccessful on appeal, which was the ultimate result sought by BBNT. The fact that GRBA succeeded in defending the trade mark case therefore made little, if any, practical difference to the relief.

33    Second, BBNT did not unreasonably bring the claims relating to trade mark infringement, particularly where those claims were so closely associated with the allegations of passing off and misleading and deceptive conduct.

34    Third, the claim of trade mark infringement was not a sufficiently discrete issue in light of the way in which the proceeding was advanced. There was almost a complete overlap in evidence between all three causes of action, including all of the expert and lay witnesses. The December Reasons at [15]-[333] deal with the witnesses, the core facts (including, among other issues, reputation, tendency to shorten, use of “bed” and “bath” as navigational descriptors), GRBA’s adoption of the House B&B name, expert evidence and alleged confusion evidence. These paragraphs are equally relevant to the trade mark case and the ACL and passing off cases. Therefore, it would be highly complex, time-consuming and expensive to properly separate and apportion the costs from the trade mark case. Such a situation should be avoided: Hockey v Fairfax Media Publications Pty Ltd (No 2) (2015) 237 FCR 127 at [120] (per White J).

35    Further, there was also some overlap in the legal issues relating to the ACL case and the trade mark case, such as the role of GRBA’s intention, the surrounding circumstances forming the background against which deceptive similarity or misleading and deceptive conduct was assessed and the impression of the House B&B mark on the relevant consumer.

36    There were some discrete legal issues pertaining to the allegation of trade mark infringement, including, of course, the relevant legal principles relating to trade mark infringement, assessment of the use of House B&B as a trade mark and the comparisons to assess substantial identity and deceptive similarity. Those issues did not substantially add to the time and expense of the proceeding as they relied upon the same evidence as the ACL and passing off claims. Nonetheless, GRBA should be entitled to recover some of those costs.

37    GRBA handed up a document during the hearing which allocated the number of paragraphs in each party’s closing submissions dedicated to the trademark case compared with the ACL and passing off cases. BBNT observed that the allocations can be done in different ways based on closing submissions, opening submissions, the transcript or the case book, each with different results. Determining “whether the issues on which the successful party failed are clearly dominant or separable” (Servier at [301]) is not a mathematical exercise. I give little weight to the allocations made by GRBA to support its submission.

38    Accordingly, GRBA should pay BBNT’s costs of the whole proceedings including for trade mark infringement but with a discount of 10% to account for succeeding on the trade mark claim.

Indemnity costs

39    BBNT contends that costs should be ordered on an indemnity basis after 11 am on 8 October 2021 based on the operation of an offer to compromise which was served on 5 October 2021 pursuant to r 25.14(3) of the Rules.

40    The offer was made after the close of pleadings and before the service of any evidence. According to the evidence of Mr Darron Kupshik, Director and Chief Operations Officer of GRBA, GRBA had opened three House B&B stores as at the date of the offer: Doncaster, Knox and Bunbury.

41    Rule 25.14(3) provides:

(3) If an offer is made by an applicant and not accepted by a respondent, and the applicant obtains a judgment that is more favourable than the terms of the offer, the applicant is entitled to an order that the respondent pay the applicant’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.

Note 1: Costs on an indemnity basis is defined in the Dictionary.

Note 2: The Court may make an order inconsistent with these rules—see rule 1.35.

42    As the Full Court observed in Sydney Equine Coaches Pty Ltd v Gorst [2017] FCAFC 34 at [14]-[22] (per Rares, Flick and Bromwich JJ), r 25.14 only establishes a “prima facie position”, and r 1.35 expressly provides the Court with a “discretionary”, “remedial” power” to make an order that is inconsistent with the Rules in order to “relieve against injustice”. The Full Court said at [22]:

Care must nevertheless be exercised to ensure that the use of such phrases as “proper reasons” or “exceptional circumstances” do not operate as a gloss to constrain the otherwise broad discretionary power conferred by r 1.35: Shin Kobe Maru 181 CLR at 421. Rather, expressions such as “exceptional” or “show reason why” that Hely J and other judges have used in explaining occasions on which it is open to a Court to make orders inconsistent (under r 1.35) or relieving compliance (under r 1.34) with the provisions of the Rules, should be understood as simply conveying the notion that a reason or reasons must be shown for departing from the prima facie position set forth in r 25.14. That is because, unless there is a feature of the occasion that calls for an exception to be made, the prima facie position prescribed by r 25.14 will apply.

(Emphasis in original.)

43    The terms of the offer made by BBNT to GRBA on 5 October 2021 were as follows:

1. Within twenty-eight days of acceptance of this Offer, the Respondent shall undertake to the Court that, whether by itself, its officers, employees or agents or howsoever otherwise, it shall cease and forever refrain from, without the consent of the Applicant, using as a trade mark each of the following trade marks:

a. the House BED & BATH Logo (as defined in paragraph 21 of the Statement of Claim); and

b. any trade mark substantially identical with the House BED & BATH Logo which includes the words "BED" followed by "BATH" with or without "and","&" or other conjunction.

2. Each party bear its own costs of the Applicant's claim.

3. Upon the Respondent giving the undertaking in paragraph 1 above, the parties will consent to the Court making an order dismissing the Applicant's Claim with no order as to costs on the claim.

This offer of compromise is open to be accepted for 14 days after service of this offer of compromise.

This offer is made without prejudice.

(the Offer)

44    In addition to the injunction sought by the Offer, BBNT has succeeded in obtaining declarations, delivery up, an inquiry into damages and costs for the whole proceeding (with a small discount). The judgment is therefore substantially more favourable than the Offer and thus r 25.14(3) is enlivened.

45    GRBA contends that the judgment is not more favourable than the terms of the Offer. This is for two reasons. First, as GRBA have argued, the proper scope of the injunction should be confined to the use of the House B&B mark only and therefore the judgment is less favourable than para 1(b) in the Offer which extends to “substantially identical” and “similar” marks. I rejected that argument above and therefore the scope of the injunction I will order is no less favourable as that in the Offer.

46    The second reason advanced by GRBA is that BBNT has conceded that the injunction should be confined to the conduct of GRBA in “supplying, selling, offering to sell, advertising or promoting soft homewares or the retailing of soft homewares”. The Offer is not so confined and would ostensibly restrain GRBA from making any use of the House B&B mark (or any substantially identical mark) in relation to any goods or services, not just soft homewares stores. Counsel for GRBA noted that GRBA “runs a range of businesses, and if it chose, for example, to sell beds or baths, it would be precluded by this injunction from doing so”.

47    Lee J observed in Stead v Fairfax Media Publications Ltd (2021) 386 ALR 237 at [26] that the assessment of whether a judgment is more favourable than an offer must be made “as a matter of substance” and “practical consequence”. There is no realistic suggestion, let alone any evidence, that GRBA was considering opening up stores that sell beds or baths, which would be a significant departure from their existing brands selling hard and soft homewares. Therefore, as a matter of substance, I do not consider that the injunction sought in the Offer is more favourable to BBNT, or more unfavourable to GRBA, in practical terms.

48    In any event, even if the injunction I order is less favourable than the injunction sought in the Offer, that is offset by the other orders as to declarations, delivery up, damages and costs such as to enliven 25.14(3).

49    The Full Court in JMC Pty Ltd v Commissioner of Taxation (Costs) [2023] FCAFC 95 recently set out the principles with respect to indemnity costs under r 25.14 at [6]-[13] (per Bromwich, Thawley and Hespe JJ):

[6] Rule 25.14 does not expressly or implicitly turn on whether a rejection of an offer was “reasonable”. Rather, it turns on the question whether the judgment “is more favourable than the terms of the offer”. Where the judgment “is more favourable than the terms of the offer” the applicant “is entitled” to indemnity costs in accordance with the terms of r 25.14(3). Rule 25.14 has been considered in various decisions including Lodestar Anstalt v Campari America LLC (No 2) [2016] FCAFC 118 and Australian Skills Quality Authority v Western Institute of Technology Pty Ltd [2017] FCAFC 183.

[7] It was not in dispute that, by reason of the orders made on appeal, the appellant obtained a judgment that “is more favourable than the terms of the offer” which JMC had made. It follows that, unless r 25.14(3) is disengaged, JMC “is entitled” to indemnity costs.

[8] Rule 1.35 provides a discretionary power to make an order that is “inconsistent” with the Rules. It provides:

1.35 Orders inconsistent with Rules

The Court may make an order that is inconsistent with these Rules and in that event the order will prevail.

[9] If the Court were to make an order that the Commissioner pay JMC’s costs of the trial on the ordinary basis rather than the indemnity basis that order would be “inconsistent” with r 25.14. Plainly enough, once the applicant has established that r 25.14 is engaged, the Commissioner bears the onus of establishing that an inconsistent order should be made under r 1.35.

[10] The discretion in r 1.35 is confined by the requirement that it be exercised judicially having regard to the purpose for which it was conferred. It has been said that the discretion to make an order inconsistent with the Rules must “be exercised for proper reasons which will generally only arise in exceptional circumstances”: Lodestar at [27]. This is undoubtedly correct, although care must be taken not to transform or confine the broad statutory discretion by permitting judicial descriptions of the circumstances in which the discretion might be exercised to become constraints not sourced in the statute or glosses on the terms of the statute: Sydney Equine Coaches Pty Ltd v Gorst [2017] FCAFC 34 at [22].

[11] In exercising the discretion under r 1.35 to make an order inconsistent with r 25.14, the reasonableness of the rejection of the offer will be relevant. It is most unlikely that an order inconsistent with r 25.14 would be made where the rejection of an offer was not reasonable. On the other hand, merely establishing that the rejection of an offer was reasonable at the time of rejection is not necessarily sufficient.

…

[13] It should also be observed that there are degrees of reasonableness which, amongst other things, must ordinarily be assessed by reference to the extent of the compromise which was offered. It may be reasonable to reject an offer which amounts to something close to capitulation where the case is reasonably and properly arguable. It may be unreasonable to reject a generous offer where the respondent’s prospects are slim.

50    GRBA contends that I should exercise my discretion pursuant to r 1.35 to refuse to order indemnity costs because it was not unreasonable for GRBA to reject the Offer and therefore it would be unjust for GRBA to pay costs on an indemnity basis. GRBA submits that the Offer would have required GRBA to entirely capitulate on the critical issue in the proceeding (ie, whether it could use the House B&B mark), the Offer was made at an early stage in the proceeding before the filing of evidence, and the case involved allegations of misleading or deceptive conduct requiring “evaluative judgments” on “questions of fact and degree involving matters of judgment and impression” about which “minds may differ”: see Callan v Chawk (Costs) [2023] FCA 1198 at [25] (per Halley J).

51    The discretion in r 1.35 is broad but will generally only be exercised in “exceptional circumstances” (subject to the comments made in Sydney Equine about that phrase): Lodestar Anstalt v Campari America LLC (No 2) [2016] FCAFC 118 at [27] (per Allsop CJ, Greenwood, Besanko, Nicholas and Katzmann JJ); JMC at [10] (per Bromwich, Thawley and Hespe JJ).

52    I accept that it was reasonable for GRBA to reject the Offer. Defences to all three causes of action were plainly arguable (and, of course, GRBA ultimately succeeded on trade mark infringement) and the Offer would ultimately have required GRBA to capitulate.

53    However, that GRBA was reasonable in rejecting the Offer is “not of itself a sufficient reason to deny the ordinary operation of the Rules by departing from them in the circumstances of this case”: JMC at [18]. As the Full Court said at [6], which has already been quoted above:

Rule 25.14 does not expressly or implicitly turn on whether a rejection of an offer was “reasonable”. Rather, it turns on the question whether the judgment “is more favourable than the terms of the offer”. Where the judgment “is more favourable than the terms of the offer” the applicant “is entitled” to indemnity costs in accordance with the terms of r 25.14(3).

54    The Full Court went on to explain at [23] that “[t]he intended effect of r 25.14(3) is substantially negated if inconsistent orders are routinely made under r 1.35 on the basis only that the rejection was entirely reasonable”. In that case, the Court accepted that “the Commissioner’s rejection of the offer of compromise was entirely reasonable” (at [23]) but nonetheless ordered indemnity costs.

55    JMC has subsequently been considered in four decisions and in each of those cases indemnity costs were awarded: see Callan at [10] and [12]-[13] (per Halley J); Russell v Australian Broadcasting Corp (No 4) [2023] FCA 1279 at [7] quoting Callan (per Lee J); Taylor v August and Pemberton Pty Ltd (Costs) [2023] FCA 1575 at [12] (per Katzmann J); Morton as Liquidator of MJ Woodman Electrical Contractors Pty Ltd v Metal Manufactures Pty Ltd (No 3) [2023] FCA 1618 at [48]-[50] and [56]-[57] (per Derrington J).

56    In one of those cases, Morton, Derrington J observed at [57]-[58]:

[57] Arguably, the case for an order to be made under r 1.35 to avert the award of indemnity costs was more compelling in JMC than it is here. That is not to suggest that the power to make an order inconsistent with r 25.14(3) is to be exercised by drawing comparisons between one case and another. It is merely to give an authoritative illustration of the proposition, stated above, that this power should be exercised for proper reasons, which will generally only arise in exceptional circumstances. The fact that an offer might reasonably have been rejected does not invariably, in and of itself, call for an exception to be made to the application of the prima facie position prescribed by r 25.14.

[58] Ultimately, there is no feature of the present case that calls for such an exception to be made.

57    In Lodestar, the Court considered that legal uncertainty surrounding an applicable Full Court decision and the fact that the offer did not involve a substantial compromise were sufficient reasons to make an order inconsistent with r 25.14. Legal uncertainty regarding two High Court decisions were also the primary reason why the Court in JMC accepted that rejecting the offer of compromise was not unreasonable (although that was not sufficient to refuse to order indemnity costs).

58    Ms Robynne Lyndsay Sanders, GRBA’s solicitor, filed an affidavit dated 22 February 2024 which notes that the Offer was made before the decision in Self Care IP Holdings Pty Ltd v Allergan Australia Pty Ltd (2023) 408 ALR 195 but does not explain how that affected the decision to reject the offer. GRBA made no written or oral submissions on the relevance of Self Care to indemnity costs and it is not clear to me how Self Care stands in the way of the Offer as, at most, the decision might have changed the way in which GRBA ran the trademark case, which it ultimately succeeded upon. As such, legal uncertainty is not a relevant factor to the exercise of my discretion under r 1.35.

59    Further, unlike in Lodestar, the judgment in this case was substantially more favourable to BBNT than the terms of the Offer.

60    The fact that the Offer was made early in the proceeding, before the filing of evidence, is also not a reason to avert the award of indemnity costs. Rather, as explained by Katzmann J in Taylor at [25]-[26] (in comments that are broadly apposite to this case), the timing of the offer was consistent with s 37M:

[25] The object or purpose of rules of court relating to offers of compromise is “to encourage the proper compromise of litigation, in the private interests of the litigants and in the public interest of the prompt and economical disposal of litigation”: South Eastern Sydney Area Health Service v King [2006] NSWCA 2 at [83] (Hunt AJA, Mason P and McColl JA agreeing). It is also to require parties to give serious thought to the risk involved in not accepting an offer of settlement on the basis that “litigation is inescapably chancy”: IFTC Broking Services Ltd v Cmr of Taxation [2010] FCAFC 31; 268 ALR 1 at [9] (Stone, Edmonds and Jagot JJ), citing Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 725.

[26] Ms Taylor’s offer was made at a relatively early stage of the proceeding — some three months after the defence was filed. It was also a generous one in that the amount she was prepared to take at the time was a small fraction of the true value of her case. In making the offer she acted consistently with the object of the relevant rules and the overarching purpose of the civil procedure provisions. Settling her case at that time would have spared all parties a considerable amount of costs and freed up the Court’s time to hear and dispose of other cases. To deny her 40% of her costs would be antithetical to the overarching purpose.

61    In this case, the Offer was made less than five months after the first House B&B store opened on 14 May 2021.

62    There are no features of the present case other than GRBA’s rejection of the Offer as being reasonable that justify departing from r 25.14(3).

63    Accordingly, I consider that GRBA pay BBNT’s costs after 11 am on 8 October 2021 on an indemnity basis.

Costs of affidavits not read

64    The original trial was set for June 2022 with an estimate of seven days. BBNT originally filed affidavits from 10 witnesses — who were either store managers, assistant store managers or sales staff — deposing to instances of alleged confusion. BBNT then sought and obtained leave to file affidavits from a further 26 confusion witnesses. As a consequence, the trial was adjourned for five months and a whole week in the original trial timetable was allocated to these 36 witnesses’ evidence. BBNT was ordered to pay GRBA’s costs of the application on an indemnity basis.

65    Early on the first day of the trial, I directed that BBNT select its best 10 “confusion” witnesses from the field of 36.

Submissions

66    GRBA now contends that BBNT should pay its costs for the 26 confusion witnesses who were not called and whose affidavits were not read. The affidavits were typically 3-8 pages (excluding annexures) describing instances of alleged customer confusion. GRBA submits that it incurred significant costs in relation to preparing this evidence and it should not be required to pay BBNT’s costs of preparing voluminous and irrelevant evidence which it ultimately did not adduce.

67    Neither party referred me to any authority on who should bear the costs for evidence filed but not read.

68    BBNT contends that it acted upon my direction to confine its case to its 10 best confusion witnesses which was consistent with s 37M of the Federal Court of Australia Act 1976 (Cth) (FCA Act) and in the interests of justice. BBNT says that the necessity to confine the number of witnesses arose from the fact that GRBA, as it was entitled to do, indicated that it would extensively cross-examine each witness thereby substantially increasing the hearing time. As the affidavits of the uncalled witnesses were likely admissible and relevant given the findings made with respect to the 10 affidavits that were read (at [340]), it was reasonable for BBNT to produce and rely upon these witnesses in the first instance.

Consideration

69    I do not take issue with BBNT’s willingness to heed my direction at the start of the trial to confine its case to its 10 best confusion witnesses. That was a sensible and welcome decision consistent with s 37M which reduced the length of the trial and associated costs.

70    Rather, I consider that its initial decision to file affidavits from 36 witnesses was unreasonable and inconsistent with s 37M.

71    Section 37M provides:

37M The overarching purpose of civil practice and procedure provisions

(1)     The overarching purpose of the civil practice and procedure provisions is to facilitate the just resolution of disputes:

(a) according to law; and

(b) as quickly, inexpensively and efficiently as possible.

(2)     Without limiting the generality of subsection (1), the overarching purpose includes the following objectives:

(a) the just determination of all proceedings before the Court;

(b) the efficient use of the judicial and administrative resources available for the purposes of the Court;

(c) the efficient disposal of the Court’s overall caseload;

(d) the disposal of all proceedings in a timely manner;

(e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.

72    BBNT must be taken to have been aware of the authorities on the relevance and weight of confusion evidence that I discussed at [262]-[272] and [330]-[340] of the December Reasons. This includes that direct evidence of customer confusion will be given far greater weight than indirect evidence of alleged confusion, which generally is given little or no weight, particularly where no explanation has been given for the failure to call direct evidence: Telstra Corp Ltd v Phone Directories Co Pty Ltd (2014) 107 IPR 333 at [188], [199], [210], [225], [231], [236], [241] (per Murphy J); Vivo International Corp Pty Ltd v Tivo Inc (2012) 99 IPR 1 at [151] (per Nicholas J). BBNT did not call any direct evidence and did not explain its failure to do so: see December Reasons at [334]. In any event, even direct evidence of confusion is of “limited utility” and “has no statistical significance”: State Government Insurance Corp v Government Insurance Office of New South Wales (1991) 28 FCR 511 at 529 (per French J).

73    BBNT adduced the confusion evidence to make the point that consumers were confused or caused to wonder whether there is an association between House B&B and BBNT. That point could have been readily made with 10 witnesses (or less). The point was no better made by calling 36 witnesses and would have been no better made by calling 100 witnesses (or so on).

74    BBNT maintains that it was its “right” to put on those additional witnesses because their evidence was admissible. However, a party must exercise its right to call witnesses consistently with its obligations in s 37M(1)(b) of the FCA Act to conduct a proceeding as “quickly, inexpensively and efficiently as possible”, and may be penalised by way of costs if it acts inconsistently with s 37M even if it is ultimately successful on relief.

75    Section 37M(2)(e) provides that one of the objectives of s 37M is “the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute”. In my view, that objective requires that the costs of establishing a certain fact or point of law in a proceeding is proportionate to the importance of that point in ultimately obtaining the relief sought in the proceeding. Although establishing that confusion may arise from GRBA’s use of the House B&B mark was integral to BBNT’s overall case on all three causes of action, the importance of adducing evidence of actual confusion in light of the authorities, particularly where only indirect confusion evidence was available, was very limited. In these circumstances, I do not consider that the costs of calling 36 confusion witnesses was proportionate to the importance of the point that BBNT sought to establish through that evidence.

76    Further, I consider that if BBNT had it insisted on calling all 36 witnesses, it would not be entitled to recover all of the costs in respect of those witnesses. If a party calls 100 witnesses to make a point that could be made with 10 witnesses, it is unfair for the opposing party to bear all of the costs for those 90 witnesses whose evidence was ultimately superfluous. I therefore do not accept that BBNT is in a worse position now than it would have been if it had insisted on calling all confusion witnesses, or that depriving BBNT of its costs for the uncalled confusion witnesses will discourage parties in the future from agreeing to confine the number of witnesses they call. Nonetheless, BBNT’s decision to heed my suggestion to limit the number of confusion witnesses to 10 should be acknowledged in any cost’s determination, as that decision reduced the length of the trial and associated costs.

77    One final point made by BBNT is that the costs apparently incurred by GRBA are not discrete costs separable from costs incurred in relation to the 10 confusion witnesses who were called. Ms Sanders’ affidavit provides estimates of the amounts that GRBA’s solicitors and counsel incurred in respect of the uncalled witnesses. These were eye watering figures. Ms Sanders did not provide any bills or time records to support her estimation, nor did she provide an estimate of the overall costs GRBA incurred with respect to this proceeding. BBNT objects to the estimates provided in Ms Sanders’ affidavit and questions whether the time allegedly spent by counsel and solicitors was spent solely in relation to the uncalled confusion witnesses (rather than other parts of the case, such as the 10 witnesses who were called). I will treat Ms Sanders’ affidavit as a submission and therefore I do not need to rule on BBNT’s objection.

78    Annexure RLS-99 to Ms Sanders’ affidavit is a spreadsheet which GRBA’s solicitors created to allow them to complete the necessary analysis and to prepare notes for counsel to use in respect of cross-examination. BBNT raised a number of examples in that spreadsheet which demonstrated that GRBA relied upon the affidavit evidence of uncalled witnesses to prepare for the cross-examination of called witnesses. Further, BBNT notes that consistent themes raised by GRBA in cross-examination, such as confirmation bias, baseline confusion and failing to record a customer’s details, were developed in respect of all affidavits, including the affidavits not read. Therefore, GRBA’s costs in relation to the uncalled confusion witnesses cannot be readily separated from the costs incurred in relation to the called witnesses.

79    I accept that the costs GRBA incurred in relation to the uncalled confusion witnesses were, to an extent, not separate and discrete. However, BBNT chose to adduce evidence from 36 witnesses and GRBA was therefore entitled to make some use of that material. BBNT provided some evidence from the bar table regarding GRBA’s utilisation of the uncalled witnesses’ affidavits but, on the whole, it does not appear that GRBA referred to that evidence to any significant extent during cross-examination or closing submissions.

80    Costs ordinarily follow the event but a successful party may be deprived of their costs due to their conduct in the case: Sandvik Intellectual Property AB v Quarry Mining & Construction Equipment Pty Ltd (No 2) [2017] FCAFC 158 at [10]-[11] (per Greenwood, Rares and Moshinsky JJ). BBNT’s conduct in adducing evidence from 36 confusion witnesses led to both parties incurring substantial costs that were ultimately not necessary. That conduct must be balanced with BBNT’s success on relief, decision to limit its case to 10 witnesses at the start of the trial and the difficulty in readily separating the costs incurred by GRBA in relation to the uncalled witnesses.

81    Accordingly, in exercising the discretion conferred on me by s 43 of the FCA Act, I will order that both parties bear their own costs in respect of any affidavits filed by BBNT and not read.

CONCLUSION

82    I will make the declarations and injunctions in the form set out above. The injunctions will be stayed until the determination of any appeal.

83    I will also order that GRBA pay BBNT’s costs for the whole proceeding, including on an indemnity basis from 11 am on 8 October 2021, with a discount of 10% to account for GRBA succeeding on trade mark infringement. However, both parties will bear their own costs in respect of the uncalled confusion witnesses.

Associate:

Dated:    13 March 2024