Facton Ltd v Toast Sales Group Pty Ltd [No 2]
[2012] FCA 762
•18 July 2012
FEDERAL COURT OF AUSTRALIA
Facton Ltd v Toast Sales Group Pty Ltd [No 2] [2012] FCA 762
Citation: Facton Ltd v Toast Sales Group Pty Ltd [No 2] [2012] FCA 762 Parties: FACTON LTD, G-STAR RAW CV, G-STAR AUSTRALIA PTY LTD (ACN 084 011 852) and STICHTING LITIGATION G-STAR INTERNATIONAL v TOAST SALES GROUP PTY LTD (ACN 139 709 694) File number: VID 821 of 2011 Judge: MIDDLETON J Determined on the papers: 18 July 2012 Date of last submissions: 6 July 2012 Place: Melbourne Division: GENERAL DIVISION Category: NO CATCHWORDS Number of paragraphs: 20 Counsel for the Applicants: Mr T Cordiner Solicitor for the Applicants: Middletons Counsel for the Respondent: Mr C Smith Solicitor for the Respondent: Scanlan Carroll
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 821 of 2011
BETWEEN: FACTON LTD
First ApplicantG-STAR RAW CV
Second ApplicantG-STAR AUSTRALIA PTY LTD (ACN 084 011 852)
Third ApplicantSTICHTING LITIGATION G-STAR INTERNATIONAL
Fourth ApplicantAND: TOAST SALES GROUP PTY LTD (ACN 139 709 694)
Respondent
JUDGE:
MIDDLETON J
DATE OF ORDER:
18 JULY 2012
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.The applicants’ Further Amended Fast Track Application dated 18 April 2012 be dismissed.
2.The applicants pay the respondent’s costs (including reserved costs) on a party/party basis to be taxed or as agreed.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 821 of 2011
BETWEEN: FACTON LTD
First ApplicantG-STAR RAW CV
Second ApplicantG-STAR AUSTRALIA PTY LTD (ACN 084 011 852)
Third ApplicantSTICHTING LITIGATION G-STAR INTERNATIONAL
Fourth ApplicantAND: TOAST SALES GROUP PTY LTD (ACN 139 709 694)
Respondent
JUDGE:
MIDDLETON J
DATE:
18 JULY 2012
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
On 19 June 2012 I delivered reasons in this proceeding. The applicants are to obtain none of the relief they sought, and it is accepted their application (as amended) should be dismissed. The question of costs remained to be determined, as did the making of final orders. The parties have agreed that the question of costs could be determined on the papers. The parties have provided the Court with written submissions.
The respondent seeks an order that the applicants pay the respondent’s costs, including all reserved costs, on an indemnity basis. Indemnity costs are sought because of two Calderbank letters sent to the applicants by the respondent.
The applicants do not agree with the costs orders sought by the respondent. The applicants submit they should pay only 60% of the respondent’s costs. The applicants seek to only pay 60% of the costs because the respondent was unsuccessful on an issue concerning copyright. As to paying indemnity costs, the applicants argue that no reliance can be placed upon the Calderbank letters because the offers contained therein did not comply with the requirements as set down in the authorities for effective Calderbank offers; and that, in any event, it was not unreasonable to reject the offers made in the two letters relied upon by the respondent.
Section 43 of the Federal Court of Australia Act 1976 (Cth) (“the Act”) confers upon the Court a wide discretion in relation to the awarding of costs. Section 43(2) of the Act provides that, except as provided by any other Act, the award of costs is at “the discretion of the Court or Judge”. This discretion must be exercised judicially.
In the ordinary course, costs follow the event and a successful party is entitled to an order requiring the unsuccessful party to pay its taxed costs, including any reserved costs. In this proceeding, the applicants have been wholly unsuccessful in obtaining any of the relief they sought.
I accept that the preponderance of authority suggests that in order to justify a departure from this usual rule there needs to be some “special or unusual” feature in the case.
As for indemnity costs, the Court’s discretion should be exercised carefully and should not be exercised too readily. Where a party advances an entitlement to an award of costs on a higher than party/party basis, it carries the onus of establishing that the other party’s conduct was imprudent or unreasonable.
A number of offers of settlement were made in this proceeding by the parties. In support of its application for an award of indemnity costs the respondent relies on the offers which were made in letters from the respondent’s solicitors to the applicants’ solicitors dated 24 January 2011 and 13 July 2011.
The applicants did not accept any of the settlement offers made by the respondent. The offers were more favourable to the applicants than the outcome of the proceedings.
Even if the offers were truly Calderbank offers, the question arises whether the rejection of each offer was imprudent or unreasonable. In Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (No. 2) (2005) 13 VR 435 at para [25], Warren CJ, Maxwell P and Harper AJA stated that a court considering a submission that the rejection of an offer was unreasonable should ordinarily have regard at least to the following matters:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree’s prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed; and(f)whether the offer foreshadowed an application for an indemnity costs order in the event of the offeree’s rejecting it.
The applicants raised a number of reasons why the offers were not truly Calderbank offers, but argued that even if they were, it was not unreasonable to reject each of the offers.
In my view, even if the offers satisfied the requirements set down in the authorities for effective Calderbank offers, it was not unreasonable in the circumstances for the applicants to have rejected the offers. I say this for the following reasons:
(a)the proceeding raised a number of difficult issues, which required the assessment of evidence from the respondent. The applicants were entitled, having regard to the proposed evidence of the respondent, to test that evidence at trial.
(b)the January 2011 offer (at least the offer to pay $2,000) was only open for acceptance for a period of three business days. This was not a reasonable time for the applicants to consider the offer.
(c)the respondent denied all liability including the applicants’ claim that the respondent had infringed copyright in the G-Star Raw Logo. This allegation was later conceded in the respondent’s opening submissions dated 23 March 2012.
(d)no offer sought to meet the demands made by the applicants including an acknowledgment that the respondent had infringed copyright.
(e)the applicants sought various forms of relief including declarations and injunctions. This relief was not considered in either offer made by the respondent.
(f)the applicants’ case was not such that it could have been characterized as without prospect of success at the time both offers were made.
(g)a principal feature of the offers was to withdraw the claims and pay a sum that would account for only a portion of the applicants’ costs incurred. In my view it is appropriate to consider, in a case such as this, the pre-litigation costs in determining the reasonableness of accepting an offer. Taking these costs into account in this way does not discourage parties from engaging in good faith ‘without prejudice’ negotiations; it does though recognise that in some cases pre-litigation costs can be substantial and the offeree is reasonably entitled to take such into account in accepting or rejecting an offer of settlement.
I, therefore, do not consider it appropriate to award indemnity costs.
As to the issue relating to the costs of the copyright infringement claim and whether the respondent should bear the costs relating to this issue, I apply the approach taken in Hughes v Western Australian Cricket Assn Inc (1986) ATPR ¶40-748. Justice Toohey indicated, at 48,136, that there are three principles that should be considered in the exercise of the discretion:
(a)in the absence of special circumstances costs follow the event: Ritter v Godfrey [1920] 2 KB 47;
(b)the costs order should reflect the degree of success attained: Forster v Farquhar [1893] 1 QB 564; Australian Postal Corporation v Botany Municipal Council (1989) 69 LGRA 86; and
(c)a successful party may be ordered to pay some costs in respect of unsuccessful aspects of the case: Cretazzo v Lombardi (1975) 13 SASR 4; Australian Conservation Foundation Inc v Forestry Commissionof Tasmania (1988) 81 ALR 166; Schindler Lifts Australia Pty Ltd v Debelak (1989) 89 ALR 275; Inn Leisure Industries Pty Ltd (prov liq apptd) v DF McCloy Pty Ltd (No 2) (1991) 28 FCR 172.
There was some disputation as to the ownership of the copyright in the G-Star Raw Logo and the entitlement to bring this proceeding. I consider that the respondent would have been entitled to put the applicants to their proof on this aspect. In any event, the respondent did not put the applicants to their proof in respect of ownership.
That then leaves the question of infringement, and the delay in admitting this aspect of the copyright claim. I do not consider on the evidence before me that there was any substantial expense incurred as a result of the delay in this admission, and certainly not in the range of the 40% reduction sought by the applicants. In essence, the respondent had admitted reproduction of the logos and never contested any of its relevant conduct.
As to the sub-issue concerning the defence of innocent infringement and the claim for an account of profits under the Copyright Act 1968 (Cth), this was itself a matter limited to brief legal submissions relevant to that topic.
I consider that these matters were, in the context of the litigation, and in the context of the issues of fact and law that were canvassed, minor issues.
Accordingly, I do not think the interests of justice require a departure from the ordinary rule that costs follow the event. The respondent has been wholly successful in resisting the claim of the applicants and no relief is to be ordered in favour of the applicants. I consider that the costs order I propose to make reflects the degree of success attained by the respondent in this proceeding.
Therefore, I will order as follows:
(a)the applicants’ Further Amended Fast Track Application dated 18 April 2012 be dismissed.
(b)the applicants pay the respondent’s costs (including reserved costs) on a party/party basis to be taxed or as agreed.
I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton. Associate:
Dated: 18 July 2012
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