Korolak v Campbell (No 3)
[2024] FedCFamC2G 148
•23 February 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Korolak v Campbell (No 3) [2024] FedCFamC2G 148
File number(s): MLG 1112 of 2021 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 23 February 2024 Catchwords: INTELLECTUAL PROPERTY – form of declaration to make to give effect to a finding of trade mark infringement – costs – whether indemnity costs should be ordered against the successful applicant after the dates by which offers to settle the proceeding were available to be accepted had passed – indemnity costs not ordered because the relief the applicant obtained was not less favourable than the terms of the offers and it was otherwise not unreasonable for the applicant to refuse to accept the offers – whether the respondents should be ordered to pay the applicant’s costs on an indemnity basis – respondents not to pay costs on an indemnity basis – whether lump sum costs order should be made – lump sum costs order made. Legislation: Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 141(1), 214(2)
Federal Court of Australia Act 1976 (Cth) ss 21(1), 43
Trade Marks Act 1995 (Cth) ss 120, 126(2), 129
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) rr 1.06(3), 22.02, 22.09, Sch 2
Federal Court Rules (Cth) O 23, rr 3, 11(5)
Federal Court Rules 2011 (Cth) rr 25.01, 25.06, 25.10, 25.12, 25.14(1), Pt 40
Cases cited: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564
Alborn v Stephens [2010] QCA 58
Anchorage Capital Partners Pty Limited v ACPA Pty Ltd (No 2) [2018] FCAFC 112
Australian Competition & Consumer Commission v Renegade Gas Pty Ltd [2014] FCA 1135
Australian Competition and Consumer Commission v Woolworths Ltd (No 2) [2002] FCA 1046
Australian Competition Consumer Commission v Amcor Printing Papers Group Ltd [2000] FCA 163
GlaxoSmithKline Consumer Healthcare Investments (Ireland) (No 2) Limited v Generic Partners Pty Limited (No 2) [2018] FCAFC 100
Hamod v State of New South Wales [2002] FCAFC 97
Hockey v Fairfax Media Publications Pty Limited (No 2) [2015] FCA 750
Key Logic Pty Ltd v Blue Groper Investments Pty Ltd [2019] FCA 275
Mead v Watson as Liquidator for Hypec Electronics [2005] NSWCA 133
Division: General Number of paragraphs: 65 Date of hearing: 16 February 2024 Counsel for the Applicant: Mr D Stamboulakis (direct access), by video Counsel for the Respondents: Mr B McEniery, by video Solicitor for the Respondents: McCarthy Durie Lawyers ORDERS
MLG 1112 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: RHONDALYNN KOROLAK
Applicant
AND: CANNA CAMPBELL
First Respondent
SASS FINANCIAL AUSTRALIA PTY LTD ATF CANNA CAMPBELL FAMILY TRUST
Second Respondent
ORDER MADE BY:
JUDGE MANOUSARIDIS
DATE OF ORDER:
23 FEBRUARY 2024
THE COURT DECLARES THAT:
1.From around 12 February 2020 to around 15 May 2021 the respondents infringed the applicant’s Australian registered trade mark no 1762611, being the words “Financial Foreplay”, by:
(a)posting the logo reproduced in the schedule to these orders (logo), or logos substantially similar to the logo (logos), on Instagram and Facebook to advertise a forthcoming podcast or podcasts the respondents were to publish, and which the respondents described as “SugarMamma’s Financial Foreplay” (FF Podcast) , or to request listeners to rate and review the FF Podcasts;
(b)using the logo or logos when describing FF Podcasts posted on podcast platforms;
(c)using the words “Financial Foreplay” to advertise or otherwise refer to the FF Podcasts; and
(d)stating the words “Financial Foreplay” in the FF Podcasts themselves.
THE COURT ORDERS THAT:
2.The respondents pay the applicant’s costs set in the amount of $113,791.50.
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).
SCHEDULE
REASONS FOR JUDGMENT
INTRODUCTION
On 21 December 2023 I published reasons for judgment (earlier reasons) in which I concluded the respondents had infringed the registered trade mark “Financial Foreplay” of which the applicant, Ms Korolak, is the owner (Trade Mark); and I listed the matter at 10:15 am on 16 February 2024 to hear submissions on final relief and costs.
In these reasons for judgment, which assume familiarity with the earlier reasons, I consider the questions of relief and costs.
RELIEF
The parties agree that a declaration should be made that the respondents infringed the Trade Mark, although the parties differ as to the form of the declaration that should be made. Although the parties’ agreement is relevant to whether I should grant declaratory relief, I must be satisfied it is appropriate to do so.
Subsection 141(1) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (FCFC Act) provides that this Court “may, in relation to a matter in which it has original jurisdiction, make binding declarations of right, whether or not any consequential relief is or could be claimed”. This is identical to s 21(1) of the Federal Court of Australia Act 1976 (Cth) (FC Act), and reflects similar provisions that confer or confirm jurisdiction in the Supreme Courts of the States and Territories to make declarations of right.
Subsection 141(1) of the FCFC Act confers on the Court “a wide discretionary power to make declarations”.[1] The power, however, is:[2]
confined by the considerations which mark out the boundaries of judicial power. Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions . . . The person seeking relief must have “a real interest” . . . . and relief will not be granted if the question “is purely hypothetical”, if relief is “claimed in relation to circumstances that (have) not occurred and might never happen” . . . or if “the Court’s declaration will produce no foreseeable consequences for the parties” . . .
[1] Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union [2017] FCAFC 113, at [92]
[2] Ainsworth v Criminal Justice Commission (1992) 175 CLR 564, at page 582 (Mason CJ, Dawson, Toohey Gaudron JJ)
Gordon J, in Australian Competition & Consumer Commission v Renegade Gas Pty Ltd, identified some of the circumstances in which it may be appropriate to grant declaratory relief:[3]
The Court has a wide discretionary power, pursuant to s 21 of the FCA, to grant declarations that particular persons have engaged in conduct that contravenes the [Competition and Consumer] Act: . . . The Court does not lack jurisdiction or power to grant declaratory relief merely because the relief is sought with the consent of the parties . . .
Considerations relevant to the exercise of the discretion to make declarations in the present case include whether the declaration will have any utility, whether the proceeding involves a matter of public interest and whether the circumstances call for the marking of the Court’s disapproval of the contravening conduct . . .
Declarations are not made as a matter of course. Where it is appropriate for a declaration to be made, attention must be given to the form of the declaration, so that it is at least informative as to the basis on which the Court declares that a contravention has occurred. The declarations should contain appropriate and adequate particulars of how and why the impugned conduct is a contravention of the [Competition and Consumer] Act:
[3] Australian Competition & Consumer Commission v Renegade Gas Pty Ltd [2014] FCA 1135, at [64]-[66]
What her Honour said about the appropriateness of granting declarations in relation to conduct that contravenes provisions of the Competition and Consumer Act 2010 (Cth) applies to conduct that constitutes an infringement of a trade mark within the meaning of s 120 of the Trade Marks Act 1995 (Cth) (TM Act). Although the TM Act is concerned with the creation and protection of property rights in the form of registered trade marks, the TM Act promotes the public interest by prohibiting conduct in the use of trade marks that misleads or confuses consumers.
I am satisfied it is appropriate to grant declaratory relief in the circumstances of this case. First, there would be utility in doing so. Ms Korolak, through her counsel, read an affidavit she made on 10 February 2024 to which she annexes screen shots of the results of searches she undertook on the Internet. The screenshots record images of the “SugarMamma’s Financial Foreplay” logo the respondents had used, and whose use in the earlier reasons I found constituted the infringement of the Trade Mark, as well as the words “Financial Foreplay” in connection with the respondents previous’ podcasts known as “SugarMamma’s Financial Foreplay”. The granting of a declaration would enable Ms Korolak to represent in a clear and succinct way to persons who maintain websites, or persons who may have read the websites, that the respondents’ use of the “SugarMamma’s Financial Foreplay” logo, and the use of the words “Financial Foreplay” in connection with the podcasts known as “SugarMamma’s Financial Foreplay”, constituted an infringement of the Trade Mark; and this would enhance Ms Korolak’s ability to induce persons who have power to do so to remove such images and words from websites, and also to disabuse persons of any deception or confusion that may have arisen in their minds about the connection between the Trade Mark and “SugarMamma’s Financial Foreplay”.
Second, I am satisfied that the circumstances in which the respondents engaged in their infringing conduct of the Trade Mark warrants the Court’s marking its disapproval of the respondents’ conduct by granting a declaration. The relevant conduct, which is set out in paragraphs 77-113 of the earlier reasons, included the following:
(a)The respondents continued to engage in infringing conduct after Ms Korolak had requested them to cease that activity, and after the respondents had received an “Adverse TM Headstart assessment” from IP Australia.
(b)The respondents, through their lawyers’ letter dated 12 February 2021, asserted Ms Korolak’s claims of trade mark infringement were “unjustified within the meaning of” s 129 of the TM Act; and that the respondents had instructed their lawyer to file proceedings for a declaration that Ms Korolak’s threats are unjustified.[4]
(c)The respondents, through their lawyers, made representations to the administrators of Podbean, Facebook, and Apple that Ms Korolak’s claims of trade mark infringement by the respondents had no merit.
(d)In the “appeal” she made against Facebook’s removal of 60 items of content, Ms Campbell correctly stated that Ms Korolak “tried to lodge the same infringement notice to Podbean and Apple Podcasts”, but incorrectly asserted that “both platforms immediately rejected her claim once they saw that she does not own the podcast class trademark and in fact there were zero trademark infringements”.[5]
(e)Although the respondents had announced on 23 February 2021 they would cease using “Financial Foreplay” to describe the podcasts “SugarMamma’s Financial Foreplay”, the respondents waited until 15 May 2021 before they removed from those podcasts the audio references to “Financial Foreplay”.[6]
[4] Earlier reasons, [101]
[5] Earlier reasons, [104]
[6] Earlier reasons, [114]
I next turn to the form of the declaration. Ms Korolak submits that the declaration should reflect the conclusions stated in paragraph 284 of the earlier reasons. The respondents submit that the declaration should be in the following form:
The Court declares that the first respondent and second respondent have infringed Australian registered trade mark number 1762611, being the words “Financial Foreplay”, by using those words to conduct and promote a podcast named “SugarMamma’s Financial Foreplay”.
I propose to frame the declaration in a manner that reflects my conclusions; and that is because it identifies the infringing conduct with greater precision than the form of declaration the respondents propose.
The parties agree it is not necessary to grant any injunctions.
COSTS
Parties’ submissions
Ms Korolak submits the respondents should be ordered to pay her costs because Ms Korolak succeeded in her claim for trade mark infringement. Ms Korolak further submits the respondents should be ordered to pay her costs on an indemnity basis because of:[7]
(a)the Respondents’ unreasonable failure to remove infringing materials, the failure to disclose adverse examination reports to various platforms who were asked to remove infringing content, and the decision to maintain a hopeless defence in circumstances where the Respondents must have known were infringing, that necessitated the commencement and continuation of the proceedings to vindicate Ms Korolak’s trade mark rights (set out at E.1., below); and
(b)the Respondents’ unreasonable conduct during the proceedings, including raising claims, objections, or requests for extension of time that ought properly not have been made, which led to significant unnecessary and avoidable costs (set out at E.2., below).
[7] Applicant’s Written Submissions Pursuant to Order Dated 12 [sic] December 2023, [20]
Ms Korolak also relies on what she submits is the respondents’ refusing to accept four offers Ms Korolak made to the respondents.
Finally Ms Korolak submits I should in any event make a lump sum costs order.
The respondents, on the other hand, submit that the respondents pay 70% of Ms Korolak’s costs of the proceeding on a party and party basis she incurred before 11 am on 10 February 2022, and that Ms Korolak pay the respondents’ costs of the proceeding after 11 am on 10 February 2022 on an indemnity basis to be agreed or, if there be no agreement, to be taxed under Part 40 of the Federal Court Rules 2011 (Cth) (Federal Court Rules). The basis of that submission is the respondents, on 8 February 2022, having served on Ms Korolak’s lawyer a notice of offer to compromise pursuant to r 25.01(1) of the Federal Court Rules (FCR offer), and Ms Korolak’s not accepting the FCR offer. The respondents alternatively rely on Ms Korolak’s not accepting an offer to compromise, which the respondents’ lawyers communicated to Ms Korolak’s lawyers by letter dated 8 February 2022 (Calderbank offer). The respondents further submit that if, contrary to their principal submissions, the respondents are to be ordered to pay Ms Korolak’s costs, Ms Korolak has not identified any basis on which the respondents should be ordered to pay Ms Korolak’s costs other than on a party and party basis.
Power and some principles
General
Subject to exceptions it is not necessary to mention, s 214(2) of the FCFC Act provides that a Judge of this Court “has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs must not be awarded”. The Full Federal Court in GlaxoSmithKline Consumer Healthcare Investments (Ireland) (No 2) Limited v Generic Partners Pty Limited (No 2), when considering the equivalent provision of the FC Act, identified the principles by reference to which the jurisdiction to award costs is to be exercised:[8]
The discretion of the Court in relation to costs is well established. As the Full Court recently observed in Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd (No 2) [2018] FCAFC 7 (Idenix) at [3]:
…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]).
Every case must be decided on its own facts. There is no doubt that this Court could address the costs of the appeals and the cross appeals compendiously. In Apotex Pty Ltd v Sanofi-Aventis Australia Pty Ltd (No 3) [2014] FCAFC 126 (Sanofi-Aventis) the Full Court addressed the costs of the appeal and cross-appeal together at [26], despite Apotex failing in its challenge to validity on various grounds (see at [8]). In Tramanco Pty Ltd v BPW Transpec Pty Ltd (No 2) [2014] FCAFC 58 (Tramanco) the Full Court similarly dealt with costs compendiously (at [13]), and noted the difficulties with disentangling the costs of different issues (at [12]).
Further, a percentage reduction approach may also be appropriate in some cases. Such an approach was adopted in Idenix and in Sandvik Intellectual Property AB v Quarry Mining & Construction Equipment Pty Ltd (No 2) [2017] FCAFC 158.
[8] GlaxoSmithKline Consumer Healthcare Investments (Ireland) (No 2) Limited v Generic Partners Pty Limited (No 2) [2018] FCAFC 100, at [5]-[7]
Also useful is the following passage from the judgment of White J in Hockey v Fairfax Media Publications Pty Limited (No 2):[9]
Section 43 vests a wide discretion in the Court with respect to costs as the examples in subs (3) indicate. It is, however, a discretion which must be exercised judicially. The principles bearing upon the exercise of the discretion are well developed. The judgment of Toohey J in Hughes v Western Australian Cricket Association (Inc) [1986] ATPR 40‑748 at 48,136 is often cited as a starting point:
1.Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order ...
2.Where a litigant had succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed ...
3.A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party’s costs of them. In this sense, “issue” does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law. ...
To these may be added the principle that costs are compensatory in nature and not punitive.
[9] Hockey v Fairfax Media Publications Pty Limited (No 2) [2015] FCA 750, at [37]
The notion of “event”, as it appears in the expression “costs follow the event”, was explained by Muir JA in Alborn v Stephens:[10]
The “event” is not to be determined merely by reference to the judgment or order obtained by the plaintiff or appellant, but is to be determined by reference to “the events or issues, if more than one, arising in the proceedings”. However, a party which has not been entirely successful is not inevitably or even, perhaps, normally deprived of some of its costs.
[10] Alborn v Stephens [2010] QCA 58, at [8]
Power to order indemnity costs
The power and discretion to order costs given by s 214(2) of the FCFC Act “include a power and discretion to award indemnity costs in appropriate cases”.[11] This power is enlivened in a number of circumstances.
[11] Hamod v State of New South Wales [2002] FCAFC 97. This was said in relation to s 43 of the Federal Court of Australia Act 1976 (Cth).
Offers of compromise under rules of court
One circumstance is where a party has made an offer to another party to settle a proceeding on terms that, if the other party had accepted it, would have been more favourable to the party than the result the other party achieved in the litigation. There are two classes of offers that are relevant. One is an offer under r 25.01(1) of the Federal Court Rules, which provides:[12]
[12] Rules 25.01 to 25.06, 25.10 to 25.12 and r 25.14 of the Federal Court Rules apply with necessary changes to proceedings in the General Federal Law division of this Court: see: Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth), r 1.06(3); Schedule 1 items 17-19.
Offer to compromise
(1) A party (the offeror) may make an offer to compromise by serving a notice, in accordance with Form 45, on another party (the offeree).
(2) The notice must not be filed in the Court.
Rule 25.14 of the Federal Court Rules deals with the costs consequences if an offer made pursuant to r 25.01 of the Federal Court Rules is not accepted. Relevant to these reasons is r 25.14(1) of the Federal Court Rules, which provides (emphasis added):
Costs where offer not accepted
If an offer is made by a respondent and not accepted by an applicant, and the applicant obtains a judgment that is less favourable than the terms of the offer:
(a)the applicant is not entitled to any costs after 11.00 am on the second business day after the offer was served; and
(b)the respondent is entitled to an order that the applicant pay the respondent’s costs after that time on an indemnity basis.
The expression “judgment that is less favourable than the terms of the offer” is not defined; but the application of this expression has been considered in a number of judgments. It will be sufficient if I refer to two judgments that address facts that are to some extent analogous to the facts in the case before me.
The first judgment is that of Lindgren J in Australian Competition and Consumer Commission v Woolworths Ltd (No 2).[13] In that case the applicant (ACCC) commenced a proceeding in which it sought declarations, injunctions, orders for corrective advertising, and costs in relation to two articles the respondent (Woolworths) authorised be published. Two days after the ACCC commenced the proceeding Woolworths offered to settle the matter by publishing a suitable corrective advertisement, and, on a without admissions basis, giving an undertaking not to repeat or otherwise make representations to the effect alleged in the proceeding. Later, after it filed its defence, Woolworths made an offer of compromise pursuant to the order 23 r 3 of the Federal Court Rules (being the rules of court before they were replaced by the Federal Court Rules) (Old Federal Court Rules). Lindgren J described the offer of compromise as follows:[14]
The notice of offer of compromise was to the effect that Woolworths would cause to be published in the four newspapers, on the right hand facing page within the first five pages, a corrective statement in accordance with annexure A to the notice of offer. As well, the offer included a term that Woolworths would undertake not to make representations, publish or broadcast in North West New South Wales or New England that the cattle used in all of its beef products came from local suppliers when cattle from outside those areas were used in some beef products, that the cattle used for its beef products came from a stated number of local suppliers when the number was less than the stated number, or that its beef products were from cattle fed with grain supplied by the local grain industry when some cattle were fed with grain supplied from elsewhere. Finally, by its offer, Woolworths offered to pay the Commission’s cost of the proceeding taxed on a party and party basis up to and including the date of the offer. . . .
[13] Australian Competition and Consumer Commission v Woolworths Ltd (No 2) [2002] FCA 1046
[14] Australian Competition and Consumer Commission v Woolworths Ltd (No 2) [2002] FCA 1046, [9]
The ACCC did not accept the offer, and the matter proceeded to trial. The ACCC succeeded at trial, but Lindgren J granted no relief other than declarations. The question arose whether the “judgment on the claim” the ACCC made to which the Woolworth’s offer related was “not more favourable than the terms of the offer”, within the meaning of order 23 r 11(5) of the Old Federal Court Rules. Lindgren J held as follows:[15]
Order 23 r 11 of the Rules requires the Court to determine which is more favourable to the offeree: the terms of the offer, or the judgment obtained. Making that determination presents no difficulty when all that have to be compared are two amounts of money. But the position is otherwise where, as here, an offer of a range of terms is to be compared with a declaration of contravention. The difficulty is all the greater by reason of the public interest role of the Commission.
I am not prepared to conclude that a judicial declaration of contravention and its consequences in terms of the publicity the Commission was able to give to it, represent a less favourable result from the Commission’s viewpoint than the terms of either of the two offers which Woolworths made.
If Woolworths had gone further by offering to consent, albeit without admissions, to an injunction and an order for corrective advertising, both in appropriate terms, I may have departed from the usual costs order, but in the circumstances I think the Commission should have its costs.
[15] Australian Competition and Consumer Commission v Woolworths Ltd (No 2) [2002] FCA 1046, [30]-32]
The second judgment is that of Derrington J in Key Logic Pty Ltd v Blue Groper Investments Pty Ltd,[16] a judgment on which Ms Korolak relies. In that case the applicants (Key Logic) claimed remedies for infringement of copyright and misleading or deceptive conduct. These included a claim for damages and an account of profits. In the course of the proceeding the respondents (BGI) made three offers pursuant to r 25.01 of the Federal Court Rules, none of which was accepted by Key Logic. Each of the offers included an offer to pay money, and to give undertakings to perform certain acts. Key Logic abandoned its claims for monetary relief, but, after a hearing, succeeded in obtaining declarations that BGI infringed its copyright and had engaged in misleading or deceptive conduct, and injunctions. Derrington J nevertheless ordered BGI pay Key Logic’s costs, because a significant part of the proceeding was the vindication of Key Logic’s rights:[17]
Overall, the applicants have been substantially successful in the action. A significant part of the proceeding was the vindication of their rights in relation to its copyright and the misleading or deceptive conduct of the respondents or some of them. The infringements and the misleading conduct were engaged in the course of trade or commerce with the intent to injure and damage the reputation of the applicants. It is undoubted that the respondents were successful in doing that and, as was identified in the initial reasons, it will take some significant time for the applicants to restore their market status. The relief obtained in terms of both injunctions and declarations will assist in that endeavour. The obtaining of such relief was a significant and important victory for the applicants.
Whilst it can be said that the applicants were unsuccessful in pursuing some of the relief sought, or abandoned it at or around trial, that cannot significantly diminish their success in vindicating their rights. It should be mentioned that the applicants’ success has occurred in the face of vigorous opposition. The respondents defended on whatever basis they could, even those which were of slender foundation.
[16] Key Logic Pty Ltd v Blue Groper Investments Pty Ltd [2019] FCA 275
[17] Key Logic Pty Ltd v Blue Groper Investments Pty Ltd [2019] FCA 275, at [48], [49]
“Calderbank” offers to settle
A “Calderbank” offer is an offer to compromise a claim that is not made pursuant to rules of court that provide for the making of offers of compromise. In certain circumstances, a party’s failure to accept such an offer may be a reason for a court ordering that costs be paid on an indemnity basis. The circumstances in which this may occur were stated by the Full Federal Court in Anchorage Capital Partners Pty Limited v ACPA Pty Ltd (No 2):[18]
[18] Anchorage Capital Partners Pty Limited v ACPA Pty Ltd(No 2) [2018] FCAFC 112, at [6]-[8]
A well-established circumstance justifying an award of indemnity costs is an imprudent refusal of an offer to compromise (Colgate-Palmolive Company v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 at 233 per Sheppard J). In such cases, a key question is whether the offeree’s refusal of the offer was “unreasonable” when viewed in light of the circumstances existing at the time the offer was rejected (Black v Lipovac & Ors [1998] FCA 699; (1998) 217 ALR 386 at 432 per Miles, Heerey and Madgwick JJ; CGU Insurance Ltd v Corrections Corporation of Australia Staff Superannuation Ltd [2008] FCAFC 173 at [75] per Moore, Finn and Jessup JJ).
The circumstances to be taken into account in determining whether rejection of an offer was “unreasonable” cannot be stated exhaustively but may include, for example:
(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 in the event of the offeree rejecting it.
(Hazeldene’s Chicken Farm Pty Ltd v VictorianWorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435 at [25] per Warren CJ, Maxwell P and Harper AJA; Beling v Sixty International S.A. (No 2) [2015] FCA 355 at [25] per Mortimer J).
An unsuccessful party is not liable to pay indemnity costs merely because it received an offer to settle on terms more favourable than it achieved at trial and rejected that offer (CGU Insurance at [75]; Black at [217]-[218]). As we observed in the Appeal Reasons, albeit in the context of r 25.14(2) of the FCRs, assessment of the “unreasonableness” of an offeree’s refusal of a settlement offer is a broad-ranging inquiry that is not restricted to consideration of the extent or quantum of the compromise offered.
Power to order indemnity costs in other cases
The power to order indemnity costs extends beyond a party’s not accepting an offer which, if accepted, would have been more favourable to the offeree than the result the offeree achieved in the proceeding. Sackville J usefully set out some of the principles in Australian Competition Consumer Commission v Amcor Printing Papers Group Ltd:[19]
[19] Australian Competition Consumer Commission v Amcor Printing Papers Group Ltd [2000] FCA 163, at [7], [8]
In Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) [1996] FCA 1942; (1996) 72 FCR 151, at 152-153, Black CJ stated the principles applicable to a claim for indemnity costs:
“…it is well established that the starting point for any consideration of an application for indemnity costs is that in the ordinary case costs will follow the event and the court will order the unsuccessful party to pay the costs of the successful party, on a party and party basis, a basis which will fall short of complete indemnity. Nevertheless, the court has an absolute and unfettered jurisdiction in awarding costs, although the discretion must be exercised judicially. So, indemnity costs may properly be awarded where there is some special or unusual feature in the case justifying the court exercising its discretion in that way: see John S Hayes & Associates Pty Ltd v Kimberly-Clark Australia Pty Ltd (1994) 52 FCR 201 at 203 per Hill J… But as Hill J pointed out in John S Hayes (at 203):
‘…care must be taken not to circumscribe the discretion by reference to closed categories. It is not a necessary condition of the power to award costs that a collateral purpose be shown. The categories warranting the exercise of the discretion are not closed…. In each case it will be necessary to look at the particular facts and circumstances to see whether an exercise of discretion to order costs on an indemnity basis is warranted.’”
See also at 156-157, per Cooper and Merkel JJ.
In Colgate-Palmolive Company v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225, at 232-234, Sheppard J set out circumstances in which costs may be appropriately awarded on a basis other than a party and party basis. The circumstances identified by his Honour include the making of allegations that ought never to have been made, the undue prolongation of a case by groundless contentions and an imprudent refusal of an offer to compromise. Other decisions have recognised that it is sufficient to enliven the discretion to award costs on an indemnity basis that a party, for whatever reason, persists in what should have been seen to be a hopeless case: J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers, Western Australian Branch (No 2) [1993] FCA 42; (1993) 46 IR 301, at 303, per French J. In Davids Holdings Pty Ltd v Coles Myer Ltd (1995) ATPR 41-383, at 40,303, Drummond J said that if a respondent, at an appropriate stage, puts an applicant on notice that it regards the action as misconceived and sets out detailed reasons for so thinking, and if the applicant nevertheless proceeds and fails, there may be good reason to consider an order for indemnity costs.
It is relevant to note that the conduct in relation to which indemnity costs may be ordered “must be connected with the litigation itself”:[20]
In particular, it must be related to the way the litigation is conducted. It is thus insufficient that the party against whom the award is sought has engaged in unconscionable conduct or breaches of fiduciary duty in a particularly deplorable way. The latter conduct comprises the subject matter of the litigation rather than a delinquency in its conduct. Thus, as Lindgren J observed in NMFM Property Pty Limited v Citibank Limited (No 11) [2001] FCA 480; (2001) 109 FCR 77 at 92,
"In my opinion, there is no counterpart ordinary rule that in the absence of special circumstances indemnity costs will be ordered where the losing party was guilty of ethical or moral delinquency in the antecedent facts which have given rise to the litigation. ... The conduct of the party that is relevant to the issue of indemnity costs is the party's conduct as litigant."
[20] Mead v Watson as Liquidator for Hypec Electronics [2005] NSWCA 133, at [9]
Respondents’ offers
There are two offers to consider. The first is the Calderbank offer which the respondents’ lawyers sent to Mr Benson, Ms Korolak’s then lawyer, by email at 8:43 am on 8 February 2022. The Calderbank offer is as follows:
We are instructed to make an offer to resolve the dispute between our respective clients in order to avoid further costs being incurred in this matter. That offer is as follows.
In full and final settlement of the issues in dispute in proceeding MLG1112/2021 filed in the Federal Circuit Court of Australia (the Proceeding), including all claims or future claims arising out of the subject matter of the Proceeding, our client offers to settle on the following basis, namely that:
1. within 14 days after the date of acceptance of this offer, the Respondents pay the Applicant the sum of $60,000.00 in full and final satisfaction of all issues in dispute in proceeding MLG1112/2021, excluding costs;
2.within 14 days after the date of acceptance of this offer, the Respondents will issue an apology on Instagram and Facebook, in the following terms (with a hyperlink to previous name of my podcast, SugarMamma’s Financial Foreplay, was established in July 2020 and rebranded in [sic] 8 months later in March 2021, was in no way ever meant to be mixed up with the book, Financial Foreplay by R. Korolak, or her podcast of the same name. Ms Korolak’s book is about how to run your business successfully and was published in 2009. You can find the details here for this book for any aspiring business owner and see the difference for yourself in managing your personal finances as well as your business health.
3. the terms of this offer are to remain confidential between the parties for a period of 20 years from the date of acceptance of this offer.
This offer of compromise remains open to be accepted until 4pm 22 February 2022 (the Acceptance Date).
This offer is made is made [sic] without prejudice, save as to costs, and without admissions, in accordance with the established principles as to settlement offers and their cost consequences set out in Calderbank v Calderbank [1975] 3 All ER 333.
If the Applicant does not accept this offer and the Respondents obtain an outcome more favourable to it than under this offer, they will seek indemnity costs in relation to the balance of this proceeding from the Acceptance Date, or alternatively, they will seek an order that your client not be awarded costs following the Acceptance Date.
The second offer is the FCR offer which is attached to an email Mr Andrew Taylor, the respondents’ lawyer, addressed to Mr Benson, which appears to have been sent at 3:19 pm on 8 February 2022. The FCR offer is as follows:
The First and Second Respondents offer to compromise this proceeding.
The offer is that the First and Second Respondents pay the Applicant $60,000 in full and final settlement of the issues in dispute in proceeding MLG1112/2021, including all claims or future claims arising out of the subject matter of that proceeding.
This offer is in addition to costs.
This offer of compromise is open to be accepted for 14 days after service of this offer of compromise.
The amount of the offer will be paid within 28 days after acceptance of this offer.
This offer is made without prejudice save as to costs.
Ms Korolak, in the shorter of the two affidavits she made on 10 February 2024, says she did not receive the FCR offer, and that she had not seen it until she read the respondents’ written submissions on relief and costs that were filed on 9 February 2024. Ms Korolak further says that she had attempted to contact Mr Benson to confirm whether he had received the email which attached the FCR offer, but she has not heard back from him. Mr Benson had sent emails to Mr Taylor that may suggest he understood he had received only one of the two emails the respondents’ lawyers had sent to Mr Benson on 8 February 2022.
For reasons that will appear shortly, it is unnecessary to decide whether Mr Benson in fact received the email attaching the FCR offer. If, however, it were necessary to decide that question, I would have given Ms Korolak further time to investigate whether Mr Benson did receive the email and, if necessary, set down for hearing the determination of that question.
It will be convenient if I first consider the FCR offer.
The FCR offer
The respondents do not, in their counsel’s written submissions, address whether the “judgment” Ms Korolak will obtain in this proceeding, namely, a declaration that the respondents had infringed the Trade Mark, is “less favourable than the terms of the offer” contained in the FCR offer. That is not surprising; the FCR offer went no further than offering to pay Ms Korolak $60,000, on a “without prejudice” basis, without offering to acknowledge the central claim Ms Korolak had made in the proceeding, namely, that the respondents had infringed the Trade Mark. There is, therefore, no common measure or criterion by which to compare the relative values of Ms Korolak’s obtaining declaratory relief with her being paid $60,000 (plus costs); and, for that reason, there is no criterion by reference to which an assessment can be made that the declaratory relief Ms Korolak will obtain is less favourable than the $60,000 (plus costs) she would have received, had she accepted the FCR offer.
In oral submissions counsel for the respondents submitted it was open to the Court to make such an assessment. I do not accept that submission. First, to make such an assessment, the Court would need to value the declaration that the respondents had infringed the Trade Mark; but there is no material on the basis of which such valuation can be made. Second, even if it were possible for the Court to value the declaration, the Court would have no jurisdiction to determine whether the value of the declaration was less than $60,000 and, if so, order Ms Korolak to pay the respondents’ costs. That is so because this would amount to the Court’s sanctioning the respondents’ unauthorised use of the Trade Mark. That is, it would amount to the Court determining that the respondents were entitled to use the Trade Mark for $60,000 without Mr Korolak’s licence.
Quite apart from the absence of any common measure to determine whether the declaration I propose to grant to Ms Korolak is “less favourable than the terms of the offer” contained in the FCR offer, I could not in any event be satisfied that the declaration I propose to make that the respondents had infringed the Trade Mark is “less favourable” than Ms Korolak receiving $60,000. The granting of the declaration will have the utility I have already identified; and that is not a utility that would have accrued to Ms Korolak had she accepted the FCR offer.
Submissions were made about whether, in instituting and continuing with this proceeding, Ms Korolak did so for the purpose or for the principal purpose of vindicating her rights in the Trade Mark. It may be accepted that in continuing with this proceeding Ms Korolak hoped she would succeed in obtaining substantial monetary relief; but I have no doubt that Ms Korolak would have instituted and continued with the proceeding even without the hope or expectation of obtaining such relief. The respondents were flagrant in their disregard of Ms Korolak’s rights in the Trade Mark; and most persons whose rights are flagrantly violated desire for the infringement of those rights to be acknowledged by the wrongdoer or, if not acknowledged by the wrongdoer, vindicated by a court.
For these reasons, I am not satisfied that Ms Korolak’s not accepting the FCR offer is relevant to the exercise of my discretion as to costs.
Calderbank offer
The question that arises in relation to the Calderbank offer is whether Ms Korolak acted unreasonably in not accepting it. I am not satisfied Ms Korolak acted unreasonably.
(a)The offer did not incorporate an offer to acknowledge the respondents had infringed the Trade Mark.
(b)The proposed “apology” could not reasonably be characterised as an apology; and to the extent it could be construed as an apology, it did not identify the conduct in relation to which the “apology” related.
(c)The Calderbank offer was subject to its being kept confidential for 20 years. If Ms Korolak had accepted the offer, she may have been constrained by the confidentiality condition from taking action to remove from websites references to SugarMamma’s Financial Foreplay.
(d)The “apology” was potentially misleading because, in representing that “SugarMamma’s Financial Foreplay”, was “established in July 2020 and rebranded in [sic] 8 months later in March 2021”, it failed to state that the respondents had continued using the name “Financial Foreplay” in the SugarMamma’s Financial Foreplay podcasts until the middle of May 2021.
I am therefore also not satisfied that Ms Korolak’s not accepting the Calderbank offer is relevant to the exercise of my discretion as to costs.
Conclusion on costs
In these circumstances, I am satisfied that costs should follow the event. I therefore propose to order that the respondents pay Ms Korolak’s costs. The next question is whether I should accept Ms Korolak’s submissions that the respondents should be ordered to pay Ms Korolak’s costs on an indemnity basis.
Ms Korolak’s claims for indemnity costs
Ms Korolak relies on four grounds for claiming that the respondents should be ordered to pay Ms Korolak’s costs on an indemnity basis.
Failure to cease infringing activity
The first is the respondents’ failure to cease their infringing conduct from at least 17 November 2020 when they received the first letter of demand from Ms Korolak’s lawyer, and their having engaged in the conduct I identified in paragraphs 77-113 of the earlier reasons.
These are matters that would have been relevant in determining whether an order for additional damages should be made under s 126(2) of the TM Act; they are not relevant, however, to determining whether the respondents should be ordered to pay Ms Korolak’s costs on an indemnity basis. As I have already noted, the conduct in relation to which indemnity costs may be ordered “must be connected with the litigation itself”.[21]
[21] Mead v Watson as Liquidator for Hypec Electronics [2005] NSWCA 133, at [9]
“Hopeless” defence
The second matter on which Ms Korolak relies is the submission that the respondents’ defence to Ms Korolak’s claims for trade mark infringement was “hopeless”. Having considered the evidence and prepared detailed reasons for judgment, it may be said that the respondents’ defences were weak. But that is not equivalent to finding that the contentions on which the respondents relied were groundless, or that the respondents advanced and maintained contentions it was not open to them to make. The earlier reasons show that the contentions the respondents raised and maintained merited detailed consideration.
I therefore do not accept that the respondents conducted a case that was bound to fail, or that they relied on contentions it was not open to them to advance and maintain.
Manner of conducting the case
The third matter on which Ms Korolak relies is what she submits is the respondents’ unreasonable conduct of the proceeding. Ms Korolak refers to the respondents “repeatedly” failing to meet court deadlines which led to Ms Korolak applying for default judgment on two occasions, and to the respondents’ failures to provide financial disclosure in a timely manner.
The difficulty with this part of Ms Korolak’s submissions is that, assuming the respondents acted in the manner Ms Korolak submits they did, that does not mean that the respondents had conducted the entire proceeding in a manner that would warrant my ordering the respondents pay all of Ms Korolak’s costs on an indemnity basis.
I am therefore not satisfied that the respondents have conducted the case in a manner that warrants the respondents being ordered to pay Ms Korolak’s costs on an indemnity basis.
Ms Korolak’s Offers
The fourth matter on which Ms Korolak relies are three letters Ms Korolak’s lawyers sent to the respondents, these being letters dated 17 November 2020, 23 March 2021, and 23 December 2021, and an undated letter Ms Korolak sent before 6 August 2021.[22] It is unnecessary to set out the terms of these letters.
[22] These letters are annexed to the longer of the two affidavits Ms Korolak made on 10 February 2024.
The first two letters are not offers of compromise. The letter Ms Korolak sent is an offer, but it is not one that was capable, on acceptance, of being converted into a binding compromise. That is because one of the terms of the offer was that the respondents “enter into bona fide negotiations as to the quantum for settlement based on your client’s ongoing flagrant use”. In her lawyer’s letter dated 23 December 2021, Ms Korolak offered to settle on terms that included the respondents paying $374,859.43 to Ms Korolak. The respondents did not in the proceeding achieve a result that was worse that the position they would have been in had they accepted that offer.
I am therefore not satisfied that any of the four letters are relevant to my exercising my discretion as to costs.
Conclusion
I am not satisfied that it is appropriate to order that the respondents pay Ms Korolak’s costs on an indemnity basis.
Ms Korolak’s application for a lump sum costs order
Subrule 22.02(2) of the Federal Circuit and Family Court of Australia (General Federal Law) Rules 2021 (Cth) (GFL Rules) sets out the different types of costs orders the Court may make:
In making an order for costs in a proceeding, the Court may:
(a) set the amount of the costs; or
(b) set the method by which the costs are to be calculated; or
(c) refer the costs for taxation under Part 40 of the Federal Court Rules; or
(d) set a time for payment of the costs, which may be before the proceeding is concluded.
Rule 22.02 must be read with r 22.09 of the GFL Rules, which provides:
Unless the Court otherwise orders, a party entitled to costs in a general federal law proceeding (other than a proceeding to which the Bankruptcy Act 1966 applies) is entitled to:
(a)costs in accordance with Schedule 2; and
(b)disbursements properly incurred.
The first question is whether I should order that Ms Korolak’s costs not be assessed by reference to Schedule 2 to the GFL Rules. I am satisfied that Ms Korolak’s cost should not be assessed on that basis. The costs provided for in Schedule 2 to the GFL Rules are generally appropriate for straightforward matters, and do not reflect the activities and hence the costs parties must undertake and therefore incur in conducting contested litigation under the TM Act. That means that, if Ms Korolak’s costs are to be assessed, they should be assessed under Part 40 of the Federal Court Rules.
The next question is whether I should refer Ms Korolak’s costs for assessment under Part 40 of the Federal Court Rules or, pursuant to r 22.02(a) of the GFL Rules, “set the amount of the costs”, that is, make what is referred to in r 40.02(b) of the Federal Court Rules as a “lump sum” costs order. Justice Murphy of the Federal Court of Australia, writing extrajudicially, helpfully identified some principles relevant to the exercise of the discretion whether to make lump sum costs orders.[23] The principles his Honour deduced from the cases include the following:
[23] The Problem of Legal Costs: Lump Sum Costs Orders in the Federal Court, accessed from the Federal Court website on 19 February 2024.
•the chief purpose of the jurisdiction to award lump sum costs is to avoid the expense, delay and aggravation involved in protracted litigation arising out of taxation of costs. Exercise of the discretion is particularly apt in a lengthy and complex case where the process of taxation is likely to be unduly protracted or expensive;
•there is, however, no particular characteristic of a case which must exist before a lump sum costs order can be made. It is a power which may be exercised whenever the particular circumstances of the case warrant it. The simplicity of a case may make such orders appropriate to save the parties the difficulties and convenience of a taxation or the complexity of the case, where the costs of taxing a bill might be quite considerable, may do so;
. . . .
•it is inconsistent with the objectives of a lump sum order that the costs be subject to the detailed scrutiny normally reserved for formal taxations. It has been said that the lump sum process gives efficiency at the expense of accuracy. The Court shall adopt a broad brush approach to fixing costs, shall not approach the task as one of arithmetic calculation or precision. Courts usually apply a discount to the amounts claimed, but the award must rest on the particular circumstances and on the evidence adduced;
. . . .
•the Court must be confident that the approach taken to estimate costs is logical, fair and reasonable;
. . . .
•the evidence relating to costs must be sufficiently detailed and must clearly identify the components of the costs incurred and how they have been calculated;
Ms Korolak has identified in the longer of her two affidavits she made on 10 February 2024 the actual costs and disbursements she has incurred, and she has annexed invoices and other documents that evidence the costs and disbursements she has incurred. In paragraph 88 of that affidavit (and at page 134 of the annexures to that affidavit), Ms Korolak says these total $151,059.
I am satisfied it is appropriate to make a lump sum costs order. Ms Korolak has identified sufficient material on the basis of which an assessment can be made of the costs and disbursements she incurred, and of the reasonableness of those costs and disbursements. Further, the items Ms Korolak identifies as the costs she incurred are relatively small in number, and for that reason would not warrant the cost of their being assessed through taxation.
In her counsel’s written submissions, Ms Korolak submits that a 10% discount would fairly reflect the costs that would be disallowed on a taxation of costs. The basis of that submission is that Ms Korolak’s costs are comparatively modest because she undertook much of the work herself.[24] The respondents, on the other hand, contend that Ms Korolak’s costs should be discounted by 30%. The respondents rely on the submission that Ms Korolak had “a limited measure of success” because she did not recover a monetary remedy; and on the submission that the second day of the trial was largely occupied by a wasteful cross-examination of the second respondent, because it was directed to Ms Korolak’s claims for monetary relief which I did not accept.
[24] Applicant’s Written Submissions Pursuant to Order Dated 12 [sic] December 2023, [22]
There is merit in some of the submissions the parties make. The actual costs Ms Korolak in fact incurred, assuming they were properly incurred, are relatively modest and are unlikely to face any material reduction on taxation. On the other hand, there is little justification in allowing Ms Korolak to recover from the respondents the costs she incurred in obtaining the Ferrier reports, given the grounds on which I relied in not accepting those reports. Even so, I do not accept that Ms Korolak had a limited measure of success; her central claim was that the respondents had infringed the Trade Mark and, in the face of the respondents’ resistance of this claim, Ms Korolak succeeded.
Given the evidence that has been provided, this is a case where I can make a lump sum costs order, yet deduct items that are unlikely to be allowed on a taxation, and otherwise allow a 10% discount on the other items. The items that are unlikely to be allowed on a taxation are the costs of obtaining the Ferrier reports ($23,100),[25] and the first three items Ms Korolak identified in paragraph 88 of the longer of the two affidavits she made on 10 February 2024 ($1,524), being costs she incurred before she commenced the proceeding.
[25] There are three items: $13,200, $6,600, and $3,300
I am therefore satisfied that $113,791.50 is an appropriate amount to allow for Ms Korolak’s costs.[26]
[26] ($151,059 - $1,524 - $23,100) x 90% = $113,791.50
DISPOSITION
I propose to make a declaration in the form I have discussed, and order that the respondents pay Ms Korolak’s costs set in the amount of $113,791.50.
I certify that the preceding sixty-five (65) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 23 February 2024
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