Federal Court of Australia

Crescent Capital Partners Management Pty Limited v Salaam Wealth Investments Australasia Pty Ltd [2026] FCA 1375

ORDERS

THE COURT ORDERS THAT:

1. The applicant’s amended application for leave to appeal filed 15 May 2025 is dismissed with costs.

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

REASONS FOR JUDGMENT

BANKS-SMITH J:

1 Rule 26.12 of the Federal Court Rules 2011 (Cth) permits a party claiming relief to discontinue a proceeding, but there are costs consequences.  Under r 26.12(7), unless the terms of a consent order or an order of the Court provide otherwise, a party who files a notice of discontinuance is liable to pay the costs of the other parties to the proceeding.

2 On 5 February 2025 the applicant filed, with the leave of the Court (under r 26.12(2)(c)) and the consent of the respondents, a notice of discontinuance of proceeding.

3 By an interlocutory application filed on the same day the applicant sought an order that the respondents pay the applicant’s costs of the proceeding.

4 The respondents sought an order for their costs, relying on r 26.12(7).

5 Neither the applicant nor the respondents proposed before the Court that the parties bear their own costs.

6 The primary judge appreciated that the respective positions were binary, but that different orders might be made in the exercise of discretion.

7 The primary judge dismissed the applicant’s interlocutory application, and determined that the applicant, having put the respondents to the expense of defending a proceeding which was abandoned, and in the absence of any reason to order otherwise, should pay the respondents’ costs under r 26.12(7).

8 The applicant seeks leave to appeal from this costs order.

Leave required

9 Leave is required to appeal from a costs order:  Harvard Nominees Pty Ltd v Dimension Agriculture Pty Ltd (in liq) [2023] FCAFC 140; (2023) 299 FCR 224 at [13].

10 To obtain leave the applicant must demonstrate (first) that in all the circumstances, the decision is attended with sufficient doubt to warrant its being reconsidered by the Full Court; and (second) that a substantial injustice would result if leave were refused, supposing the decision to be wrong:  Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-99; Harvard at [14].

Award of costs discretionary – House v The King error

11 An award of costs is in the discretion of the Court:  s 43(2) of the Federal Court of Australia Act 1976 (Cth). Therefore, assuming leave is granted, the applicant must point to House v The King (1936) 55 CLR 499 error. The applicant must show that the primary judge acted upon a wrong principle, mistook the facts, failed to take into account a material consideration or was guided by extraneous or irrelevant matters, or that error may be inferred from the overall result:  Harvard at [19].

12 Merely establishing that there were different orders that the primary judge might have made within the scope of discretion is insufficient:  Ridge Estate Pty Ltd v Fairfield Pastoral Holdings Pty Ltd [2024] FCAFC 17; (2024) 302 FCR 375 at [213] (Banks-Smith J, Feutrill and O’Sullivan JJ agreeing).

13 There is a strong presumption in favour of the correctness of the decision appealed from in a discretionary judgment and the decision should be affirmed unless the appeal court is satisfied that it is clearly wrong:  Samsung Electronics Co Limited v Apple Inc [2011] FCAFC 156; (2011) 217 FCR 238 at [39] (Dowsett, Foster and Yates JJ); Rakman International Pty Ltd v Boss Fire & Safety Pty Ltd [2023] FCAFC 202 at [149] (Nicholas, Burley and Rofe JJ).

Summary of events

14 Relevantly, until relatively recently both the applicant and many of the respondents had names that featured the word ‘Crescent’.  This led to a long-standing dispute, dating back to at least 2014, when the applicant commenced proceedings alleging misleading or deceptive conduct.  The applicant succeeded both at first instance and on appeal:  Crescent Capital Partners Management Pty Limited v Crescent Funds Management (Aust) Limited [2016] FCA 229 (Bennett J);  Crescent Funds Management (Aust) Ltd v Crescent Capital Partners Management Pty Limited [2017] FCAFC 2 (Greenwood, Edelman and Markovic JJ) (misleading conduct proceeding). The outcome was in effect that the respondents to the proceeding could continue to trade using ‘Crescent Wealth’ branding provided they used a disclaimer or otherwise clearly distinguished their business from that of the applicant.

15 In 2017 the first respondent filed Australian trade mark applications which featured the words ‘Crescent Wealth’.  This step culminated in a delegate of the Registrar of Trade Marks accepting the applications for registration (trade mark proceeding).  The applicant sought to appeal from the delegate’s decision in this Court by notice of appeal filed 15 November 2023.

16 On 16 November 2023 the applicant commenced separate proceedings in this Court seeking various forms of relief against the corporate respondents and personally against Mr Talal Yassine AM (director of all but one of the respondents), based on allegations of wrongdoing, including deliberate wrongdoing, the alleged infringement of trade marks, representations in breach of provisions of the Australian Consumer Law and breaches of the prior court orders (infringement proceeding).  The impugned conduct allegedly occurred over the course of some 10 years.  The relief sought included declarations, injunctions, an order for corrective advertising and orders for damages or an account of profits.  Mr Yassine and various corporate respondents were alleged to have been knowingly involved in the contraventions.

17 The infringement proceeding proceeded through various interlocutory steps, including the exchange of evidence and detailed negotiations relating to discovery categories.  The primary judge was the case management and docket judge from the time of its commencement.

18 The primary judge set out in detail the various interlocutory steps leading to the crystallisation of the discontinuance and the costs issue (PJ [22]-[33]).  It is not necessary to repeat that detail.  However, these are some of the key events:

(a) as noted, the infringement proceeding commenced on 16 November 2023;

(b) on 6 February 2024 the applicant filed an amended originating application and statement of claim;

(c) from 15 February 2024, various respondents undertook steps to rebrand from ‘Crescent’ to ‘Salaam’;

(d) the rebranding steps were pleaded by the applicant in its reply to the defence to the amended statement of claim (27 May 2024), and acknowledged by the respondents in their rejoinder to that reply (6 June 2024);

(e) following a case management hearing on 17 June 2024 orders were made, including that liability be determined ahead of quantum, and that the proceeding be set down for trial in April 2025;

(f) between July 2024 and November 2024 the parties made various offers to resolve the proceedings but none resulted in agreement (including offers of 20 September 2024 and 11 November 2024 referred to below);

(g) relevantly, having regard to a number of formal and informal offers of compromise, it was apparent that although the respondents offered to provide certain undertakings, the applicant required that such or similar undertakings be tethered to an agreement by the respondents to pay the applicant’s costs (or implicitly to an order or application for an order to that effect), and this issue was unresolved;

(h) between November 2024 and February 2025, the applicant filed three separate interlocutory applications, each addressing the manner in which the proceedings might be discontinued; and

(i) although the applicant had sought to condition any discontinuance on a costs order in its favour, in the end an order was made by consent to the effect that the applicant file a notice of discontinuance under r 26.12(2)(c), leaving costs to be determined by the Court.

19 The applicant’s interlocutory application seeking costs was the subject of a hearing before the primary judge.  The applicant contended that by their conduct in rebranding after the commencement of the infringement proceeding the respondents had capitulated or surrendered, and had acted unreasonably in several respects, thereby justifying an order that they pay the applicant’s costs.  The respondents in turn contended that the applicant had acted unreasonably in several respects (and they continue to rely on aspects of the applicant’s conduct by way of a proposed notice of contention if leave to appeal is granted).

The primary judge’s reasons

20 The primary judge correctly identified a number of matters relevant to whether a costs order should be made and its nature:  that the proceeding came to an end with no determination of the merits; whether it could be said that the respondents had capitulated; the overarching purpose and obligations under s 37M and s 37N of the Federal Court of Australia Act; and the role of r 26.12 of the Federal Court Rules.

21 The primary judge commenced by identifying the propositions relevant to assessing where costs should fall in circumstances where there has been no determination of the underlying issues.  His Honour cited (at PJ [35]) a passage from Chapman v Luminis Pty Ltd [2003] FCAFC 162 at [7] (in which McHugh J’s well-known statement in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 is also cited).  It is convenient to repeat the extract from Chapman:

* where a proceeding terminates before there has been a hearing, the Court should not resolve the issue of costs by engaging in something in the nature of a hypothetical trial: Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201;

* this does not mean that a Court can never make an order for costs. Often it will be unable to do so, but in other cases an examination of the reasonableness of the conduct of the parties may provide the basis for an order, or a judge may be confident that one party was almost certain to have succeeded if a matter had been fully tried: Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 625 (McHugh J);

* a distinction is to be drawn between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court’s discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should … bear the costs: ONE.TEL Ltd v Deputy Commissioner of Taxation (2000) 171 ALR 227 at 231-232 (Burchett J).

22 The primary judge dealt with the purported surrender by the respondents in some detail (at PJ [42]), referring in particular to:

(a) the respondents’ conduct in stating they would continue to defend the proceedings despite taking steps to rebrand;

(b) the absence of any undertaking on the part of the respondents that they would not use the ‘Crescent’ name going forward, leaving them open to continue to engage in the impugned conduct, despite the applicant having sought injunctive relief to prevent such use; and

(c) the absence of any conduct on the part of the respondents that suggested a capitulation or surrender insofar as numerous other claims for relief against them were concerned, including claims for declaratory relief as to prior alleged breaches of court orders and damages.

23 The primary judge referred to the applicant’s subjective view that it had achieved its purpose by bringing the proceeding, in that the respondents proceeded to undertake the rebranding.  His Honour observed that it was not sufficient in this context to consider the applicant’s purpose only by reference to an applicant’s subjective assessment of whether its purpose in bringing the proceeding was met.  Rather, the position was to be considered having regard to the relief sought in the originating application (PJ [43]-[44]).  His Honour cited relevantly Halley J in FCA US LLC v Mahindra Automotive Australia Pty Ltd [2021] FCA 1091 at [35(d)], where it was observed that it is not necessary to establish complete success to demonstrate surrender; surrender might be established where it is demonstrated that the outcome secured ‘sufficiently’ achieves the party’s purpose in bringing the proceedings.

24 However, the primary judge in this case concluded (PJ [45]):

However, this is not a marginal case. In this proceeding the applicant sought various forms of relief, some of it very significant, against twenty respondents. None of the relief sought has been achieved, in form or in substance. The respondents appear to have ceased use of the ‘Crescent’ name but have given no undertaking nor submitted to any order as to the future. The applicant has, by filing its notice of discontinuance, abandoned all of its claims for relief in this proceeding on the basis of subjective views formed by the applicant. The respondents have not capitulated or surrendered in any relevant sense.

25 The primary judge then turned to the applicant’s contention that the respondents’ conduct was unreasonable when viewed in the context of the statutory obligations imposed on parties to litigation and their lawyers by s 37M and s 37N of the Federal Court of Australia Act.  The primary judge referred to the following conduct identified by the applicant:

(a) first, the respondents’ alleged failure to act with transparency about their rebranding, particularly by failing to change their names on the court record (PJ [47]);

(b) second, the respondents’ ‘unreasonable’ conduct in maintaining by their defence that they proposed to continue the impugned conduct and by continuing their defence after the rebranding (PJ [51]);

(c) third, the respondents’ conduct in failing to seek to resolve the proceeding after the rebranding (PJ [53]); and

(d) fourth, the respondents’ conduct in failing to accept an offer made on 20 September 2024 (PJ [54]).

26 His Honour rejected the contention that the respondents’ behaviour had been unreasonable, taking into account that regardless of the effect of the rebranding on the injunctive relief, the respondents were defending a case which sought a significantly broader range of relief.  It was therefore incorrect to equate the rebranding with the relief sought by the applicant.  Nor was it unreasonable to decline to accept an offer when it did not reflect an agreed position between the parties.  The respondents’ failure to update the names of the parties on the court record was regrettable, but there was no suggestion the conduct caused prejudice to the applicant and the rebranding had been disclosed by the pleadings (at PJ [48]-[50], [52]-[54]).

27 His Honour was not persuaded that the costs position should be otherwise than as provided for by r 26.12(7) and accordingly dismissed the applicant’s interlocutory application and made a costs order reflecting this outcome.

Themes of proposed grounds of appeal

28 Although the proposed notice of appeal contains six grounds of appeal and numerous sub-grounds, having regard to the respective submissions it is convenient to group the alleged errors into four themes:

(1) The primary judge erred in finding that the respondents’ voluntary rebranding could not be equated with injunctive relief and so could not be considered a capitulation or surrender.

(2) The primary judge erred in failing to consider and deal with the authority of E & J Gallo Winery v Lion Nathan Australia Pty Ltd [2010] HCA 15; (2010) 241 CLR 144, to the effect that where liability and quantum are split, the costs of liability can be determined before the quantum stage (an argument apparently based on the orders made in that case, which included a costs order in favour of an appellant who had established breach of trade mark, but where the assessment of any damages or an account of profits was remitted to the trial judge).

(3) Error is to be inferred because the primary judge decided not to misplace the ‘mechanical prima facie effect’ of r 26.12(7), a result which is unreasonable and unjust.

(4) Error is to be inferred because as a matter of principle the applicant should not be required to keep litigating to obtain an undertaking or orders before being entitled to costs, and such a requirement is inconsistent with s 37M of the Federal Court of Australia Act; in play is an important public interest issue that has far-reaching implications for parties in intellectual property disputes and for the operations of the Court as a whole, and such arguments should be entertained and considered by the Full Court.

Theme (1) – Capitulation  or surrender (proposed appeal grounds one, two and four)

Respective submissions

29 The applicant relies on the historic context of the litigation between the parties, including the misleading conduct proceeding, the trade mark proceeding and the appeal from the trade mark proceeding decision to emphasise that the respondents knew they were on risk in relation to their continued use of ‘Crescent’ marks and had ample time (‘13 years’) to voluntarily rebrand and minimise the costs and Court resources deployed by the infringement proceeding.

30 In the end, there was a stepped rebranding but not until 2024.  In this regard reference to some of the evidence is important.  For example, the applicant points to the 2 August 2024 affidavit evidence of Mr Yassine.  Mr Yassine’s evidence included an explanation of the respondents’ decision to rebrand from ‘Crescent Wealth’ to ‘Salaam’.  Relevantly, Mr Yassine referred to Commonwealth government superannuation reforms announced in 2020-2021 encouraging smaller funds (such as Crescent Wealth) to merge into larger groups of funds.  He also said that he knew that although the respondents’ trade marks had been accepted by the delegate, there was a right of appeal to this Court.

31 The primary judge extracted large parts of Mr Yassine’s evidence (PJ [24]). For convenience I also extract part of the evidence (emphasis added):

(d)    Over an extended period from about 2021 to 2023, I and other executives of the Crescent Wealth superannuation funds business had discussions and negotiations with a number of superannuation funds about the possibility of a merger. In the second half of 2023, Crescent Wealth was in detailed merger discussions and negotiations with Russell Investments Master Trust (Russell), the trust of which Salaam super ultimately became a division. In the course of those discussions and negotiations, it became apparent to me that, with the change of trustee name upon a merger of Crescent Wealth with a larger fund, Crescent Wealth would need to undertake a number of administrative steps including preparing fresh templates for member communications and revising and printing PDSs to refer correctly to the merged organisation including the trustee and that this would be costly. I understood in late 2023 that the direct costs involved in these administrative tasks would be in excess of several hundred thousand dollars, and that there would be extensive time and effort involved in carrying out the necessary steps.

(e)    Following the decision on 25 October 2023 to dismiss the [trade mark] oppositions, Crescent Capital appealed the opposition decision to the Federal Court on 15 November 2023 and at the same time commenced proceedings in the Federal Court against various Crescent Wealth and other companies as well as myself alleging registered trade mark infringement, misleading and deceptive conduct, passing off and breaches of the orders of the Federal Court made on 23 March 2016 by reason of conduct involving use of the Crescent Wealth brand. Until that time, at no time since the resolution of the earlier proceedings by the Full Court decision in 2017, had Crescent Capital Partners alleged infringement of the CCP Marks.

(f)    I understood that, if as a result of the litigation, it was necessary to change the Crescent Wealth brand, it would be necessary to repeat the exercise referred to in sub-paragraph (d) above and that the costs incurred would be duplicated.

(g)    When Crescent Wealth completed its plans in late 2023 and early 2024 for the establishment of new products, a re-launch of the business and merger with Russell, we also considered the options for rebranding including undertaking market research into alternative brands, preparation of brand logos and livery. Trade mark applications were filed on 8 March 2024. Extensive actions were taken in about early 2024 in relation to corporate name changes and registering domain names as I discuss below.

(h)    Annexed and marked Annexure TY-19 is the press release announcing the re-launch and re-branding. As stated in the press release, at all times I believed that the new name would have the effect of making the legal action by Crescent Capital irrelevant to the future activities of the business; however, the legal action was unjustified and would continue to defend the legal proceedings.

32 Further, a public statement was made to the market on 7 June 2024 by an employee of the respondent group:

The new name will also have the effect of making the legal action by Crescent Capital Partners irrelevant to our future activities. However, we consider the legal action unjustified and are defending the action and will continue to do so.

33 The applicant contends this evidence revealed that the rebranding was not ‘voluntary’ but rather was a ‘candid recognition’ that the respondents faced a potential liability to an injunction that would compel a change of name. Although filing a defence in April 2024 in which the respondents denied any infringement and said they would continue to use the name ‘Crescent’, they were in fact in the ‘slow’ process of rebranding from around February 2024, and they continued to use the name until November 2024.

34 According to the applicant, by the public statement in June 2024 the respondents were ‘telling the world’ they would not resume any use of the word ‘Crescent’ and so, ‘assuming they were telling the truth’, their conduct contradicted their claimed position that they had not provided any real undertaking not to use the word in their branding and were free to return to use of the word ‘Crescent’.

35 As a further ground for inferring the rebranding was involuntary, the applicant submitted that for the first time by the infringement proceeding the respondents were facing claims for trade mark infringement which could not be ameliorated through the use of disclaimers (citing Gummow J’s observation to this effect in Wingate Marketing Pty Limited v Levi Strauss & Co (1994) 49 FCR 89 at 128).

36 The applicant also points to the respondents’ conduct in withdrawing their trade mark registration after the discontinuance.

37 The applicant also submitted that the primary judge’s approach placed artificial emphasis on the scope of relief otherwise sought in the infringement proceeding.  For example, the applicant submitted that although it sought declarations as to breach of court orders by the respondents, it did not pursue contempt proceedings.  It included this relief but ‘it was only relevant to the exercise of the Court’s discretion as to whether injunctive relief should be granted’. It was an error, it was submitted, to find that a failure to achieve success by way of injunctive relief negated a finding of overall success in the proceeding.  This was an ‘inappropriately high threshold’ for the identification of substantial victory, and ‘it bespeaks error’.

38 The respondents, however, maintain that their rebranding was voluntary, was made for commercial reasons in the face of the litigation, involved no concession and was not provided in conjunction with any undertaking that might have otherwise deprived them of ‘control’ over how they might operate going forward.

Authorities

39 In Mahindra, Halley J usefully compiled the principles as to surrender or capitulation at [35]:

(a)    either an applicant or respondent might be found to have effectively surrendered or capitulated;

(b)    it is necessary to have regard to the conduct of the parties not to determine whether a party has acted in a manner that can objectively be characterised as unreasonable, but rather to determine whether by their respective conduct one party has, in substance, capitulated or surrendered to the other party: see generally Chapman v Luminis Pty Ltd [2003] FCAFC 162 (Chapman) at [5]-[8] (Beaumont, Sundberg and Hely JJ); Zhao v Suzhou Haishun Investment Management Co Ltd [2020] VSCA 34 at [19]-[20] (Tate, McLeish and Hargrave JJA); cf Diamond Ace Super Fund Pty Ltd v Rodapa Development Pty Ltd [2020] FCA 1582 (Diamond Ace) at [65]-[68] (Griffiths J);

(c)    it is necessary to distinguish between cases in which a party seeking to discontinue proceedings can be said to have effectively surrendered or capitulated and cases in which a supervening event renders the proceedings futile or moot: Diamond Ace at [59] (Griffiths J) citing Travaglini v Raccuia [2012] FCA 620 at [13] (McKerracher J); and Chapman at [7], citing ONE.TEL Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548; [2000] FCA 270 (ONE.TEL) at [6] (Burchett J);

(d)    an assessment of the degree to which the outcome achieves the relief sought is a threshold issue of significant weight in determining whether a party has effectively surrendered or capitulated. A party does not have to achieve complete success in order to establish that the other party effectively surrendered or capitulated. It is enough to demonstrate that the outcome secured sufficiently achieves the party’s purpose in bringing the proceedings: Diamond Ace at [67]; Balanggarra Aboriginal Corporation v State of Western Australia [2018] FCA 1538 (Balanggarra) at [50] (Barker J); Stephens v Sena, in the matter of Vtara Solar Pty Ltd [2020] FCA 1179 at [30] (Stewart J);

(e)    generally it is not the function of the Court to make a prediction as to the outcome of a hypothetical case in assessing the degree of success or failure achieved by a party in proceedings in which there has been no determination of the merits: Elevate Brandpartners Ltd v Hammond (No 4) [2020] FCA 421 (Elevate Brandpartners (No 4)) at [20] (Stewart J); Clark v ING Life Limited [2007] FCA 1960 at [16] (Rares J); Rickus v Motor Trades Association of Australia Superannuation Fund Pty Limited (2010) 265 ALR 112; [2010] FCAFC 16 at [118]-[119] (Jacobson, Siopis and Foster JJ); Mineralogy Pty Ltd v National Native Title Tribunal [1998] FCA 1700 at 6 (Lee, Tamberlin and R D Nicholson JJ); and

(f)    in some cases it is relevant to have regard to the likelihood of success, but only insofar as it is possible to identify a likely “clear winner”: ONE.TEL at [7]; and Balanggarra at [71]-[73].

40 In Mahindra, the applicants brought proceedings concerning alleged misleading or deceptive conduct contrary to the Australian Consumer Law relating to the potential importation and sale of a particular motor vehicle, said to be similar to the Jeep Wrangler. The applicants sought wide-ranging injunctive relief, as well as a range of declaratory relief including as to the tort of passing off and infringement of registered designs.  After an exchange of proposed undertakings, the respondents proffered an undertaking to the Court.  The applicants were prepared to accept the undertaking offered subject to costs being determined by the Court.  The applicants then sought to discontinue and contended that the respondents should pay their costs because, by giving the undertaking, the respondents had in substance surrendered or capitulated.  The respondents denied any capitulation, and contended there should be no order as to costs; in the alternative they contended that the conduct of the applicants had been unreasonable and the Court should order the applicants pay their costs in accordance with r 26.12(7).

41 Justice Halley took into account that the substantive relief claimed extended well beyond the proffered injunction, and said at [46]:

Any surrender or capitulation finding with respect to the entitlement of the applicants to the Declarations and the Final Orders would require an inappropriate inquiry into the merits of those cases and a prediction as to the hypothetical resolution of those matters. Given the extent of the specific allegations made in the Letter of Demand and pleaded in the statement of claim, this was not a case in which the other relief sought was merely incidental to the injunctive relief sought by the applicants: see Elevate Brandpartners (No 4) at [21]; Nowra Radiology Pty Ltd v Macintosh (No 2) [2020] FCA 1743 at [49]-[50] (Stewart J).

42 His Honour also observed there had been negotiation on the terms of the undertaking and an element of compromise.  Having regard to all the circumstances, his Honour was not satisfied that there had been capitulation or any conduct sufficiently unreasonable to justify making a costs order against either party.

43 In Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84; (2018) 97 NSWLR 681 (Basten, Meagher and Payne JJA) an employer sued a former employee alleging misuse of confidential information and obtained interlocutory relief.  The proceeding was later resolved by consent orders, including permanent restraints on the use of information, but without admissions and in circumstances where controversy remained as to whether confidential information had been possessed.  The primary judge awarded the employer its costs, having embarked on a relatively detailed consideration of the likelihood of the outcome.  The Court of Appeal overturned the order, observing that the task of assessing the potential outcome should not have been undertaken and acknowledging that the consent orders did not establish that the employer had succeeded on the substantive controversy.  The substantive issues remained genuinely disputed and unresolved.  The employee’s agreement to the consent orders was not characterised as a capitulation warranting a costs order against him.  The Court of Appeal determined the appropriate order was that there be no order for costs of the proceedings.

44 In both of these examples, undertakings were in fact given by the respondents, and regardless, their conduct was held not to constitute surrender or capitulation.  And as is apparent from Mahindra, it is appropriate to look at all the relief sought by an applicant in ascertaining the degree to which the outcome has achieved the relief sought and might reflect that a respondent has effectively surrendered.

Insufficient doubt on this issue

45 In the present proceeding, the primary judge cited and applied the correct principles in finding that the respondents’ conduct did not constitute a surrender.  In particular, and in contrast to the position in both Mahindra and Nichols, leave was sought by the applicant to discontinue the proceeding in circumstances where no undertakings were provided by the respondents (although some had been proffered in unsuccessful negotiations).  Whilst the applicant might subjectively hold the view that it attained the relief it sought once the respondents independently took steps to rebrand, that submission must be treated with care for (at least) four reasons.

46 First, absent any contractual undertaking or undertaking to the Court, the respondents retained a degree of control and flexibility as to their conduct and the timing of steps going forward.  It is not appropriate on a costs application for the Court to undertake a detailed analysis of the allegations of prior conduct or speculate as to conduct going forward, nor to conduct a satellite trial as to the motives of each party for conduct undertaken over the course of a number of years or their respective litigation strategies.  That in the end there was a discontinuance in circumstances where the respondents were not subject to Court orders or undertakings is objectively apparent.

47 Second, the submission treats the other relief sought by the applicant against the respondents as being of minimal relevance or overreach, in circumstances where the respondents were obliged to deal with the underlying allegations.  Although not characterised as contempt, serious allegations were pleaded as to allegedly breached orders.  Serious allegations were made about conduct the subject of proposed declarations.  Punitive damages and corrective advertising were sought (and separately, I note that in the applicant’s settlement offer of 11 November 2024 the applicant referred to it forgoing by the offer to the advantage of the respondents ‘numerous categories of relief…including all pecuniary relief and corrective advertising’).  Such relief cannot fairly be characterised as merely subsidiary. Discontinuance meant that none of this relief was pursued.

48 Third, the submission challenges at an interlocutory level Mr Yassine’s evidence as to the purpose of the rebranding, and whether it was undertaken in response to the infringement proceeding.  Such issue could not properly be resolved for the purpose of a costs application. On their face the various statements by the respondents (see [31(f),(h)] and [32] above) do not constitute concessions.

49 Fourth, it accords no weight to the respondents’ stated position, objectively borne out by its pleaded defence, its ongoing defence of the litigation, and statements made in the various offers of compromise, to the effect that they would continue to defend the proceeding if necessary.

50 Having regard to these matters, the applicant does not raise sufficient doubt about the correctness of the primary judgment on the ‘surrender’ issue to warrant leave to appeal.  The primary judge applied the correct principles in concluding that the rebranding exercise was not equivalent to injunctive relief and that in any event such conduct did not establish a surrender. His Honour took into account relevant matters in concluding that none of the relief sought by the applicant was in fact achieved.

Theme (2) – Deferral of assessment of quantum (proposed appeal ground three)

51 This proposed ground has its genesis in an order made by the primary judge on 18 June 2024 that all issues of trade mark validity, registration, liability, declaratory and injunctive relief and flagrancy (for the purpose of additional damages) be heard and determined prior to and separately from all issues of quantum.

52 The applicant calls in aid the deferral (by such order) of any damages assessment in support of its submission that there is a boundary between the injunctive relief it sought and other relief.  It claimed it had ‘a substantial victory’ on the injunction issue with other matters pertaining to relief in effect quarantined or deferred, and accordingly it was entitled to its costs at that point. The applicant submitted that the primary judge was mistaken in principle to say that a failure to achieve any outcome on other matters (specifically pecuniary relief) ‘negated the claim for costs on the basis of a substantial victory’. It was said that the primary judge failed to have regard to the authorities to that effect.

53 The primary judge did not specifically refer to E & J Gallo Winery (or other examples the applicant cited of intellectual property cases). However, his Honour took into account and rejected the applicant’s submission that relied upon the deferral of issues, stating that the order of 18 June 2024 was not relevant to the costs issue, because the orders operated to reduce only the tasks to be undertaken by the respondents for the first hearing relating to quantum.  All liability issues remained for determination:  PJ [42(3)].

54 The primary judge’s approach reflected the respondents’ submission that the fact that an assessment of quantum was hived off was largely irrelevant, because the respondents were still left to defend liability, and the fact that damages were sought affected the way the case was prepared (matters that can be accepted as objectively likely).

55 Consideration of this asserted error overlaps with the matters already addressed.  In short, the applicant again focuses only on the injunctive relief component of its claim, without due regard to the other heads of liability and relief that remained to be determined at the first hearing.  Further, it assumes the voluntary rebranding was a ‘substantial victory’.  For the reasons given, such a finding would require the sort of satellite litigation as to purpose, intention and merits that should not be undertaken on a costs determination and fails to have regard to the absence of any undertaking.  I repeat the matters at [45]-[50] above.  The primary judge took into account the order deferring quantum and had regard to the practical effect that all other matters remained to be determined by the first hearing.  Having regard to those circumstances, there is no sufficient doubt raised about the correctness of the primary judgment on this matter.

Theme (3) – The general rule on discontinuance (proposed appeal grounds five and six)

56 As to r 26.12(7), as explained by Stewart J in Elevate Brandpartners Ltd v Hammond (No 4) [2020] FCA 421 at [24]:

The price that applicants would usually pay in those circumstances is the costs of the proceeding to be discontinued. That is the general rule which reflects the underlying policy of the rules of court that the discontinuing party should be liable for the other party’s costs unless the Court orders otherwise: FCR, r 26.12(7), FAIRA Aboriginal Corporation v Minister for Aboriginal and Torres Strait Islander Affairs [2002] FCA 9 at [7] per Cooper J; Rickus at [116] overturning Motor Trades Association of Australia Superannuation Fund Pty Ltd v Rickus (No 3) [2008] FCA 1986; 69 ACSR 264 at [98].

57 Whilst the starting point is that the discontinuing party must pay costs, in the exercise of the Court’s discretion to order otherwise, it generally has regard to the conduct of the parties, the reasons for the discontinuance, and (as discussed in Lai Qin) the inappropriateness and difficulty of predicting a result:  see generally Travaglini v Raccuia [2012] FCA 620 at [31] (McKerracher J); Australian Securities and Investments Commission v Diploma Group Limited (No 3) [2017] FCA 891 at [2], [18] (McKerracher J); Borg v de Vries (Trustee), in the matter of the Bankrupt Estate of David Morton Bertram (No 2) [2019] FCA 227 at [27] (White J); VDCL v Purcell [2024] FCA 107 at [17] (Horan J); Australian Securities and Investments Commission v Murphy [2024] FCA 861 at [10] (Kennett J); LGC24 v Minister for Immigration and Multicultural Affairs (No 2) [2025] FCA 1143 at [9]-[11], [27] (Owens J).

58 Examples where, as in this case, despite seeking a different costs order, the discontinuing applicant has been ordered to pay the respondents’ costs include Travaglini and VDCL.

59 Before the primary judge the respondents described the operation of r 26.12(7) as providing the ‘default position’ or ‘presumption’ that they were entitled to their costs.  The applicant maintained its binary position that the respondents should pay its costs.

60 The primary judge was clearly aware that r 26.12(7) is not to be applied ‘mechanically’ and is properly described as stating the general position.

61 So much is apparent from the fact that his Honour addressed various other matters relevant to the exercise of discretion, including the principles referred to in Chapman and Mahindra (which in turn cited Lai Qin) (PJ [35]), before deciding that the applicant should pay the respondents’ costs.

62 The applicant asserts there was error by applying the rule in a manner that was ‘unreasonable, unjust and bespeaks error’.  However, I do not consider the applicant has pointed to any relevant error that indicates sufficient doubt about his Honour’s understanding or application of r 26.12(7).  His Honour properly had regard to r 26.12(7), understood the outcome if the Court did not make an order that ‘provide[d] otherwise’, cited the applicable principles, considered relevant issues such as the rebranding and purported capitulation, addressed these matters in the reasons, and was not persuaded that the circumstances were such as to justify making the order sought by the applicant.  It was open to the primary judge in the proper exercise of his discretion to conclude that the applicant had chosen by its discontinuance to abandon the comprehensive proceedings instituted against the respondents, and that having regard to all of the matters that had been considered, the order sought by the applicant was not justified and the order sought by the respondents was.

Theme (4) – The applicant should not be ‘required’ to keep litigating (overarching ground)

63 This submission (potentially within the scope of proposed grounds one or six) centred on the interaction of s 37M and s 37N of the Federal Court of Australia Act and the assertion that if an applicant is not entitled to its costs on a discontinuance, then it is forced to pursue litigation in order to recoup its costs.

64 The applicant submitted that it reasonably sought to bring the proceeding to an end ‘as soon as it was objectively clear that the respondents had ceased and would not resume their impugned conduct’, and that such approach was consistent with the overarching obligation to facilitate the just resolution of disputes as quickly and efficiently as possible.

65 The applicant submitted that the ‘message’ of the primary judge’s decision in the intellectual property enforcement context is that litigants can continue with impugned conduct well after litigation is commenced, plead a defence indicating they will continue the conduct, fail to provide any undertaking to cease the conduct, then at the last minute cease or change the impugned conduct and avoid any costs liability to the applicant.  The message sent, it was submitted, is that:

… you will still never be compensated for your costs unless you fight to the bitter end for an injunction from the Court. And what does that involve? It means that the Court has to hear the trial and issue a judgment. Now, so this precedent only serves to increase and prolong litigation and use up the resources of the Court.

66 In my view this submission does not assist the applicant.  In the end an order for costs on discontinuance of a proceeding is a matter of discretion to be exercised on the particular facts of each case.  That there is potential for an adverse costs order or for the application of the general rule requiring a discontinuing party to pay costs is readily apparent from r 26.12(7).  Properly resourced parties (such as those in this case) are well-positioned to have regard to such matters, including the alternative costs risk associated with the option of proceeding to trial and potentially undertaking appeals.  Many factors will be relevant to such choices, including, as in this case, whether the impugned conduct is something that can be addressed by an injunction or undertaking or whether the relief sought extends beyond such measures. Under existing authority, the principles as to costs on discontinuance permit regard more generally to the conduct of the parties:  Chapman at [7]. The principles do not conflict with the overarching purpose under s 37M or the obligations under s 37N.

67 In this case, the primary judge understood that the overarching purpose under s 37M and the parties’ obligations under s 37N were relevant to the exercise of discretion and took them into account. To the extent the applicant contended the respondents should have resolved the proceedings after the ‘substantial issue’ was addressed by rebranding, his Honour repeated his observation that the rebranding was not equivalent to the relief sought by the applicant.  

68 To the extent the applicant contended the respondents acted unreasonably in rejecting the 20 September 2024 offer, his Honour concluded that there remained unresolved issues between the parties such that the respondents’ conduct was not unreasonable in all the circumstances (PJ [53]-[54]). There is some uncertainty (having regard to the number of ‘without prejudice’ and formal settlement offers made and criticism of respective offers made in correspondence) about whether subsequent offers were in effect on the same terms as that of 20 September 2024, leaving aside the ongoing dispute as to costs.  I accept that his Honour (at PJ [54]) may not have appreciated that, apart from the unresolved question of costs, the terms of a proposed undertaking in the 20 September 2024 letter were similar (if not the same) to the terms of a conditional undertaking offered by the respondents in October 2024.  As to costs, the applicant’s offer included a term that the costs of the infringement proceeding and other proceedings be determined by the Court.

69 However, contrary to the assertion of the applicant, it does not follow that the primary judge should have found that the respondents acted unreasonably in not accepting the offer made by the applicant’s 20 September 2024 letter. It should be noted that the 20 September 2024 covering letter also stated that it would be unreasonable for the applicant to accept an offer that did not compensate it for its costs of the proceeding and cross-claim.  It is apparent on the face of the various exchanges that continued between the solicitors, including an offer made by the applicant in November 2024, that the parties continued to debate the issue and purpose of the rebranding and there remained unresolved issues that inhibited the prospect of any settlement that was inclusive of costs.  In circumstances where the respondents were not obliged to accept the applicant’s offer and provide undertakings when the prospect of the applicant maintaining a claim for a costs order against them remained on foot (a prospect that eventuated), the applicant has not persuaded me that there is any error that raises a sufficient doubt about the primary judge’s consideration of s 37M and s 37N in the overall exercise of his discretion.

70 The public importance of the allocation of Court resources and the importance of the obligations of the parties and their lawyers is well-recognised and not to be understated.  However, there exists a general rule that provides guidance to litigating parties seeking to discontinue.  There is a discretion on the part of a trial judge to take into account the particular facts in any matter relevant to an order for costs.  There is an obligation that such discretion be exercised judicially.  There is an established body of authority (including decisions of the Full Court) as to the manner in which the rule (or its predecessor) operates.  These matters tell against the submission that there is a public interest in the orders of the primary judge, made in the particular circumstances of the proceeding, being considered by a Full Court in circumstances where there is insufficient doubt that any error may be inferred from the overall result.

71 In coming to this view I have taken into account that the usual test for the grant of leave set out in Décor is not exhaustive, and that the authorities recognise that leave may be granted where, for example, a question posed for resolution has general importance beyond the concerns of the parties:  see generally the authorities collected by the Full Court in Commissioner of Taxation v Runcity Pty Ltd [2025] FCAFC 152; (2025) 312 FCR 291 at [7] (O’Bryan, Button and Owens JJ).  The costs issues raised by this application are not in my view novel, nor peculiar to intellectual property disputes, and the matters that guide the exercise of the Court’s discretion on the discontinuance of a proceeding have previously been the subject of consideration by appellate courts.

No sufficient doubt

72 For all these reasons, I am not satisfied that the contentions made by the applicant in its proposed grounds of appeal rise to the level where it could be said that the primary judgment is attended with sufficient doubt to warrant its reconsideration by the Full Court, and no other basis for doubting the correctness of the decision has been made out.  I am not satisfied that the primary judgment is attended with sufficient doubt to warrant leave.

Substantial injustice

73 Accordingly, it is unnecessary to consider any issue of substantial injustice if leave is refused.

74 However, I note that the applicant addressed the question of substantial injustice in its submissions in short form, referring to the financial consequence for it of the primary judge’s order.  It submitted that the costs (its own costs and those of the respondents) were ‘very substantial’, as the bulk of the evidence for trial had been prepared.

75 The respondents did not engage with this submission, but instead submitted that any issue of substantial injustice based on an obligation on the applicant to pay costs would fall away on any appeal, because the respondents would pursue the grounds in their proposed notice of contention that pointed to the alleged unreasonableness of the applicant’s own conduct.

76 In the circumstances it is neither necessary to resolve this contest, nor to seek to resolve factual issues about the applicant’s own conduct. Further, it was for the applicant to establish substantial injustice within the meaning of Décor on this application, and although it is self-evident that the costs order would have a financial impact on the applicant, no submissions were made as to why an obligation to meet an adverse costs order of itself would meet the threshold of ‘substantial injustice’.

77 It is not otherwise appropriate to address the matters referred to by the respondents in the draft notice of contention.

Outcome

78 It follows that the application for leave to appeal will be dismissed with costs.

Associate:

Dated:    17 September 2026

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