Agha Juice Sydney Road Pty Ltd v Musawi
[2023] FedCFamC2G 270
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Agha Juice Sydney Road Pty Ltd v Musawi [2023] FedCFamC2G 270
File number(s): ADG 299 of 2022 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 14 April 2023 Catchwords: INTELLECTUAL PROPERTY – Costs – applicant discontinued proceedings – whether applicant should pay respondents’ costs – costs order made. Legislation: Trade Marks Act 1995 (Cth) ss 55, 56, 68(1), 191A
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) rr 1.06(3), 13.01(1), 13.02
Federal Court Rules 2011 (Cth) rr 36.03, 36.05, Part 34.3
Trade Marks Regulations 1995 (Cth) reg 7.1(3)
Cases cited: Re Minister for Immigration & Ethnic Affairs; Ex Parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622
Stunning Enterprises Pty Ltd v QIE Pty Ltd [2004] FCA 786
Division: General Number of paragraphs: 21 Date of last submission/s: 19 December 2022 Date of hearing: Decided on the papers Place: Sydney Solicitor for the Applicant: Beena Rezaee Legal & Migration Solicitor for the Respondents: Parkston Lawyers ORDERS
ADG 299 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: AGHA JUICE SYDNEY ROAD PTY LTD
Applicant
AND: SAYED JAFFAR MUSAWI
First Respondent
SAYED MOHAMMAD AGHA MUSAWI
Second Respondent
order made by:
JUDGE MANOUSARIDIS
DATE OF ORDER:
14 apRIL 2023
THE COURT ORDERS THAT:
1.Pursuant to r 13.02(1) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) the applicant pay the respondents’ costs set in the amount of $6,500.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
INTRODUCTION
In these reasons for judgment I consider the question of costs which arises from the applicant’s having filed a notice of discontinuance on 12 December 2022. The parties have agreed that I determine the question of costs on the papers. I take this agreement to have authorised me to read any affidavit that has been filed that is or may be relevant to the determination of the question of costs.
BACKGROUND
On 22 November 2022 the applicant filed an application in this Court purportedly pursuant to r 36.05 of the Federal Court Rules 2011 (Cth) (FC Rules) for an order extending the time provided for by r 36.03 of the FC Rules to appeal, pursuant to s 56 of the Trade Marks Act 1995 (Cth) (TM Act) against the decision a delegate of the Registrar of Trade Marks (Registrar) made on 16 September 2022 pursuant to s 55 of the TM Act.[1]
[1] The reference to r 36.05 of the FC Rules is an error. Section 191A of the TM Act confers jurisdiction on the Federal Circuit and Family Court of Australia (Division 2) “with respect to matters arising under” the TM Act. That includes jurisdiction to hear “appeals” under s 56 of the TM Act. Part 34.3 of FC Rules (which is incorporated into the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) by r 1.06(3), schedule 1, item 21) governs the procedure in this Court in relation to matters arising under the TM Act. Rule 34.24 of the FC Rules governs appeals under s 56 of the TM Act; it requires that an appeal be made within 21 days of the decision.
By his decision the delegate directed that two trade marks (Trade Marks) the respondents had lodged for registration, and which had been the subject of opposition proceedings brought by the applicant, “may proceed to registration one month from the date of” the delegate’s decision. The delegate further directed that, should the Registrar be served with a notice of appeal before the registration of the Trade Marks, the registration of the Trade Marks not occur until the appeal has been decided or discontinued, and that any disposition of the application in relation to the Trade Marks be in accordance with the orders of the Court on which an appeal is brought.
The delegate made the directions about the time by which the Trade Marks were to be registered pursuant to reg 7.1(3) of the Trade Marks Regulations 1995 (Cth). That regulation, in turn, was made for the purposes of s 68(1) of the TM Act, which requires the Registrar to register a trade mark that has been accepted for registration within the period provided under the regulations. Given the delegate’s directions, the Registrar was required under s 68(1)(b)(i) of the TM Act to register the Trade Marks one month from 16 September 2022, being the day on which the delegate made his decision, unless, before the passing of the month, the Registrar were to be served with a notice of appeal in relation to the delegate’s decision. The Trade Marks were registered on 27 October 2022, but the applicant had not before that time filed an appeal against the delegate’s decision.
The applicant supported its application for an extension of time with an affidavit made on 21 November 2022 by Ms Rushton, the applicant’s solicitor. Ms Rushton gives an explanation for the applicant’s not having filed an appeal in time which it is unnecessary to set out in these reasons.
By letter dated 5 December 2022, after the respondents had been served with the application, the respondents’ solicitors made extensive contentions to the applicant’s solicitors that the application for leave to extend time was futile, and was in any event without merit. The respondents’ solicitors demanded that, before 12 noon on 8 December 2022, the applicant confirm in writing that a notice of discontinuance has been filed. The respondents’ solicitors then noted that, unless the applicant were to comply with the demand, the respondents:
(a)intended, at the first court date, which had been fixed for 13 December 2022, to tender a copy of their letter;
(b)apply, on an indemnity basis, for costs associated with the necessary preparation for and appearance on 13 December 2022 and subsequent hearings;
(c)inform the Court that Agha Juice Aust Pty Ltd (Agha Juice) had entered the register as the owner of the Trade Marks, and is, accordingly, the necessary and proper party to the application; and
(d)intended to apply for an order for security for costs.
By a separate letter, also dated 5 December 2022, the respondents’ solicitors demanded security for the respondents’ costs. The letter contended that the applicant was impecunious, having paid up share capital of only $9.00. After setting out the amount of the costs in relation to which the respondents intended to seek security, the letter stated that unless the respondents’ solicitors were to receive a “satisfactory response within 7 days from the date of [the] letter”, the respondents would apply for an order for security for costs.
Ms Di Trocchio, the solicitor for the respondents, deposes that she did not receive a response to the respondents’ solicitors’ letters. Instead, on 7 December 2022 Ms Di Trocchio received an application the applicant had filed to join Agha Juice as a respondent. In an affidavit Ms Di Trocchio made on 8 December 2022, Ms Di Trocchio deposed that at the time she made that affidavit the applicant had made no offer to discontinue the proceeding or provide security for costs.
In an affidavit made on 19 December 2022, Ms Rushton deposes that, at 9:55 am on 12 December 2022, she sent an email to Ms Di Trocchio attaching a notice of discontinuance she had lodged with the Court.
PARTIES’ SUBMISSIONS
The respondents submit that the applicant should be ordered to pay the respondents’ costs, and that they should do so on an indemnity basis by requiring the applicant to pay the respondents $12,994.66. The respondents rely on the following contentions:
(a)the proceeding was wholly misconceived;
(b)the respondents, by their solicitors’ letter dated 5 December 2022, communicated to the applicant the grounds on which the respondents relied for contending the proceeding was misconceived;
(c)the applicant did not withdraw within the time by which the applicant was invited to do so, but instead filed an interlocutory application seeking to join Agha Juice as a respondent;
(d)the applicant, acting through lawyers, did not give notice of any intention to commence the proceeding; and
(e)the applicant did not communicate its intention to discontinue the proceeding in sufficient time to prevent the respondents incurring costs to prepare for the first court date on 13 December 2022.
The applicant, on the other hand, submits that the matters stated in the respondents’ solicitors’ letter dated 5 December 2022 do not demonstrate that the appeal was wholly misconceived because the letter went no further than referring to the factual findings the delegate made; and, on an appeal, being a hearing de novo, the parties are entitled to put material before the Court that was not before the delegate. The applicant also submits there is no basis for the respondents’ contention that the applicant filed the application for an extension of time for an ulterior motive.
DETERMINATION
The applicant filed a notice of discontinuance pursuant to r 13.01(1) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (GFL Rules) in circumstances which did not require the leave of the Court. The Court, however, has power under r 13.02 of the GFL Rules to make an order for costs; and it is pursuant to that rule the respondents now apply for an order for costs.
An application for costs under r 13.02 of the GFL Rules is necessarily determined without the merits of the claim or claims that have been discontinued having been determined. In those circumstances, the principles that apply to determining whether an order for costs should be made are the principles McHugh J discussed in Re Minister for Immigration & Ethnic Affairs; Ex Parte Lai Qin.[2]
[2] Re Minister for Immigration & Ethnic Affairs; Ex Parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622
In Qin the applicant applied to set aside a decision of the Refugee Review Tribunal that affirmed a decision not to grant the applicant a protection visa; but she withdrew her application after the Minister for Immigration and Ethnic Affairs decided to grant the applicant a protection visa. The applicant applied for her costs. McHugh J said:[3]
In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.
In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action…
Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried… But such cases are likely to be rare.
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.
[3] Re Minister for Immigration & Ethnic Affairs; Ex Parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622, at pages 624-625
Also relevant is the following passage from the judgment of French J (as his Honour then was) in Stunning Enterprises Pty Ltd v QIE Pty Ltd (bold added):[4]
As a general rule, in the absence of special circumstances justifying some other order costs will follow the event. The general principles were discussed by the Full Court in Ruddock v Vadarlis (No 2) (2001) 115 FCR 229. When proceedings terminate before a hearing there may be no basis upon which to determine what the event would have been if the matter had proceeded. The Court cannot, in such a case, conduct an hypothetical action between the parties. If both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled, the Court will usually make no order as to the costs of the proceedings – Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6;(1997) 186 CLR 622 at 624 (McHugh J). Where, however, the proceedings have been terminated in a way that leads to one side being clearly successful then there is a basis upon which the Court can exercise its discretion in favour of the successful party. As Burchett J said in ONE.TEL Ltd v Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548 at [6]:
‘... it is important to draw a distinction 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.’
[4] Stunning Enterprises Pty Ltd v QIE Pty Ltd [2004] FCA 786, at [31]
From these passages the following principles apply when determining an application for costs where a court has not determined the merits:
(a)The court should not try a hypothetical action between the parties.
(b)In some cases, however, the court may be able to conclude that one of the parties acted so unreasonably that the other party should obtain the costs of the action.
(c)In other cases the court may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried.
(d)Where the proceeding has been terminated in a way that leads to one side being clearly successful, there is then a basis on which the court can exercise its discretion in favour of the successful party.
The proceeding has been terminated by the applicant filing a notice of discontinuance. That has led to the respondents clearly being successful in the proceeding. Further, the applicant’s having decided to file a notice of discontinuance as soon as it did after the respondents’ solicitors conveyed detailed contentions directed at the difficulties with the applicant’s appeal, and after the respondents indicated they intended to apply for security for costs, is a basis for inferring that the applicant recognised that the proceeding did not have sufficient prospects of success to warrant its further prosecution, or that the applicant did not have the financial resources or was unwilling to devote financial resources to prosecute the proceeding. I am not, however, prepared to find, because there is no basis for so finding, that the applicant commenced the proceeding for some ulterior or other improper purpose.
For these reasons, I am satisfied that the proper exercise of the Court’s discretion in relation to costs is to order that the applicant pay the respondents’ costs, and that those costs should be assessed on the ordinary basis.
I have been invited to fix costs. I am satisfied that it was appropriate for the respondents’ solicitors to have taken the trouble to set out in detail, as they did, the contentions on which they relied for submitting to the applicant that the proceeding had difficulties; and also send a letter foreshadowing an application for security for costs, and the grounds on which the respondents proposed to make such application. I am so satisfied because it appears that these letters led the applicant to focus early in the proceeding on whether it was worth its while to continue with it.
In my opinion, $6,500 represents a fair indemnity of the costs the respondents have reasonably incurred in having to engage, in the manner they did, with the proceeding the applicant brought, and then discontinued, against the respondents.
DISPOSITION
I will order that the applicant pay the respondents’ costs set in the amount of $6,500.
I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 14 April 2023
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