Mann Travel Pty Ltd v Skyscanner Ltd
[2021] FedCFamC2G 263
•19 November 2021
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Mann Travel Pty Ltd v Skyscanner Ltd [2021] FedCFamC2G 263
File number(s): MLG 2976 of 2018 Judgment of: JUDGE BAIRD Date of judgment: 19 November 2021 Catchwords: PRACTICE AND PROCEDURE - COSTS – Offer of compromise –where Notice of Offer refers to “costs to be assessed on a party/party basis in accordance with Rule 21.11(2) of the Federal Circuit Court Rules 2011 [sic]”– where Offer accepted – costs term construed – application allowed. Legislation: Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth), rr 15.02, 22.02(2)(c), 22.08(1), 22.09, 22.10,
Federal Circuit and Family Court of Australia Act 2021 (Cth), s 217
Federal Circuit Court of Australia Act 1999 (Cth) s 79
Federal Circuit Court Rules 2001(Cth), rr 15.03, 21.02(1)(c), 21.09(1), 21.10, 21.11(2),
Federal Court Rules 1979 (Cth), Schedule 2
Federal Court Rules 2011 (Cth), rr 25.01, 40.01, 40.12, 40.14, Schedule 3
Cases cited: 45 Degrees North v The Promotions Factory (Aust) Pty Ltd [2004] FMCA 49
Active Skin Pty Ltd v Yey Pty Ltd [2021] FCCA 329
Benyk v Mater Misericordiae Health Services Brisbane Ltd & Anor [2009] FMCA 544; (2009) 228 FLR 478
Calderback v Calderback [1975] 3 All ER 333
Centrestage Management Pty Ltd v Riedle [2007] FMCA 1260
Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337
Henley Arch Pty Ltd v del Monaco (No. 2) [2020] FCCA 1911
Otter Products v Peter Haydon [2021] FedCFamC2G 13
Portland Marketing (International) Pty Ltd Wulff & Ors (No. 3) [2018] FCCA 3103
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; (2004) 211 ALR 342
Washington v Qantas Airways Limited [2014] FCCA 1413;
(2014) 107 IPR 144
Western Export Services Inc & Ors v Jireh International Pty Ltd [2011] HCA 45; (2011) 282 ALR 604
Division: Division 2 General Federal Law Number of paragraphs: 102 Date of last submission/s: 4 September 2020 Date of hearing: Determined on the papers Place: Sydney Counsel for the Applicant: A Sykes Solicitor for the Applicant: Brett Samuel, Rosendorff Lawyers Counsel for the Respondent: M Marcus Solicitor for the Respondent: Rani John, Ashurst ORDERS
MLG 2976 of 2018 BETWEEN: MANN TRAVEL PTY LTD
AND: SKYSCANNER LTD
ORDER MADE BY:
JUDGE BAIRD
DATE OF ORDER:
19 NOVEMBER 2021
THE COURT:
1.GRANTS LEAVE to the applicant pursuant to r 22.02(1)(c) of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules (Cth) 2021 (GFL Rules), to file its application in a case dated 4 June 2020, and EXTENDS the time prescribed by r 22.02(1) accordingly.
2.ORDERS, pursuant to r 22.02(2)(c) of the GFL Rules, that the respondent pay the applicant’s costs of the proceeding as agreed or to be taxed on a party / party basis in accordance with Part 40 of the Federal Court Rules 2011 (Cth).
3.DIRECTS within 7 days if either party wishes to be heard on costs of the application they are to file and serve a short submissions limited to 3 pages.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review 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
JUDGE BAIRD
INTRODUCTION
By application in a case dated and filed 4 June 2020, the applicant, Mann Travel Pty Ltd, seeks an order that the respondent, Skyscanner Ltd, “pay [its] costs of the proceeding as agreed or to be taxed [on] a party / party basis in accordance with Part 40 of the Federal Court Rules” (that is, the Federal Court Rules 2011 (Cth)).
On 24 December 2019, more than 5 months earlier, at the written request of the parties and in the terms sought by them, I made orders in Chambers by consent, dismissing the proceeding referred to in the application in a case, that is, this proceeding. The Court’s consent order was:
The proceedings, including the Respondent’s [that is, Skyscanner’s] cross‑claim filed on 25 September 2019, be dismissed.
Self-evidently, Mann Travel brings its application in a case more than 28 days after a final order was made in the proceeding. Accordingly, leave is required to bring the application. In its application in a case Mann Travel first seeks leave under r 21.02(1)(c) of the Federal Circuit Court Rules 2001 (Cth) (FCCR) to make an application for an order for costs, and secondly, pursuant to r 21.02(2)(c) of the FCCR, and s79 of the Federal Circuit Court of Australia Act 1999 (Cth) (FCCA) it seeks the above order for payment of its costs.
The application in a case is brought because the parties have been unable to resolve their differences on the meaning and effect of numbered paragraph 3, a costs term, in a Notice of Offer to compromise dated 15 November 2019 made by Skyscanner, and accepted by Mann Travel on 29 November 2019. The dispute before me concerns the construction of that paragraph 3, which in these reasons I refer to as the Costs Term. It is set out below at [26].
A preliminary matter - Applicable Act and Rules
On 1 September 2021, this Court was renamed the Federal Circuit and Family Court of Australia (Division 2) further to s 8(1) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (FC&FCoA), which Act then came into effect. Relevantly, the FC&FCoA in large part has imported the provisions of the FCCA. Pursuant to s 217 of the FC&FCoA, the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (GFL Rules) were made, and have operated as Rules of this Court on and from 1 September 2021. In substance, the GFL Rules are restatements of those of the FCCR which were applicable to matters commenced under the General Federal law jurisdiction of this Court. There are no transitional provisions.
Relevantly to the orders sought by the application in a case, r 22.02(2)(c) of the GFL Rules is in the same terms as r 21.02(2)(c) of the FCCR, and r 22.02(1)(c) of the GFL Rules is in the same terms as r 21.02(1)(c) of the FCCR. I set out in the table in Annexure A to these reasons a comparative table of some of the FCCR and GFL Rules referred to in these reasons. A more comprehensive table is to be found at In these reasons I do not invariably refer to both the present and former Rules.
Material before me on the application in a case
Further to directions I made by consent on 3 July 2020, the parties filed and rely on affidavits made by their respective solicitors, and have filed and served written submissions, respectively, in support of the application in a case, in response and in reply. Mann Travel relies on the affidavits Mr Brett Anthony Samuel dated 4 June 2021 (Samuel #1), and Mr Samuel’s affidavit in reply dated 17 August 2021 (Samuel #2). Skyscanner relies on the affidavit of Ms Rani Sara John dated 6 August 2020.
By consent, pursuant to r 15.03 of the FCCR (now r 15.02 GFL Rules), the question of costs is to be determined on the papers.
Anterior issue – leave
Skyscanner’s solicitor, Ms John, in her affidavit, states that she is instructed to oppose each of the orders sought. However, Ms John also says that her understanding was that if the parties did not reach agreement as to costs it would be necessary for Mann Travel to apply to the Court for an order to the effect it seeks.
In her affidavit Ms John notes that Mann Travel requires leave to bring the application in a case, and that “the application was brought over 5 months after the proceedings were dismissed by consent”. There is no evidence before me to found any implication that the delay was unilaterally caused by Mann Travel. Samuel #2 annexes correspondence to the effect that any assertion that delay was unilaterally the fault of Mann Travel is not maintainable, and puts Skyscanner on notice that if any submission regarding delay is made, it will rely on correspondence to be tendered. In the event, no submission is made by Skyscanner regarding any delay, or that leave should not be granted because of any delay.
Although expressed obliquely, as will be apparent from my reasons below, the import of Skyscanner’s submissions is that it now does not oppose the grant of leave, whilst opposing the costs order sought. Skyscanner does submit that once the application for the costs order was made by Mann Travel, “it is entitled to be heard about whether that [costs] order ought be granted”, and if the Court is minded to do so, the percentage reduction that ought to apply to the Federal Court scale”.
Given the circumstances in which the application in a case was brought, I do not consider any delay material, or disentitling, and given those circumstances, I am satisfied it is appropriate to grant Mann Travel leave as sought, and I will so order.
BACKGOUND - THE SETTLED PROCEEDING
Mann Travel commenced the proceeding in this Court on 4 October 2018 by filing an originating application, statement of claim, and applicant’s genuine steps statement. Mann Travel alleged that Skyscanner infringed its Australian registered Trade Mark No. 1685617 for the word mark ‘MANN TRAVEL’, and that Skyscanner had engaged in misleading and deceptive conduct under ss 18(1) and 29(1)(g) and (h) of the Australian Consumer Law, Schedule 2 to the Competition and Consumer Act 2010 (Cth). Mann Travel sought declarations, damages or an account of profits, and sought additional damages.
The statement of claim discloses that the Trade Mark is registered with effect since 6 April 2015 in respect of “air travel services” in class 39 of the Register of Trade Marks. Mann Travel’s claim concerned a Google advertisement caused to be published by Skyscanner via Google Inc’s Google Adwords program. Mann Travel alleged that Skyscanner infringed its Trade Mark from at least 21 July 2018 to in or about 30 July 2018 by causing to be published a Google advertisement on that included the words “Mann Travel” and which contained a hyperlink to the Skyscanner website. It alleged the advertisement appeared in Google’s search results in response to the search query term “Mann Travel” when entered through web browsers in Australia.
Ms John attests, on information and belief, that prior to commencement of the proceeding, Mann Travel through its solicitor issued a letter of demand dated 27 July 2018 to Skyscanner, in which Mann Travel alleged that Skyscanner infringed the Trade Mark, requested it cease bidding on the Mann Travel name (by which I infer Ms John is referring to Skyscanner bidding on the name in Google’s Adwords program for its own use of the name as an Adword or search term in its internet search engine marketing activities), and sought its legal costs to date. Ms John attests that, without admission of liability, on or about 28 July 2018, Skyscanner ‘negatively matched’ the name Mann Travel in its search engine marketing activities, that is, it ceased bidding on Mann Travel’s name.
Skyscanner submits that it thereby “immediately address[ed] the activity complained of” by Mann Travel. Whether or not this is so, however, as disclosed by the fact of the initiation of the proceeding, and the steps then taken, it is objectively apparent that the dispute was not resolved. Ms John attests that correspondence between the parties was exchanged in the period 1 August 2018 and 4 October 2021, when the proceeding was commenced.
The proceeding was allocated to my docket. Before the first case management hearing, the parties proposed consent orders for production by Skyscanner of certain information and documents, and that the matter be referred to mediation before a Registrar of the Court. I made the orders sought without requiring any appearance before the Court. The parties participated in a mediation before a Registrar of the Court which commenced on 24 April 2019, and extended over various dates and adjournments until 28 August 2019, when the mediation was terminated, without resolving the dispute.
On 3 September 2019, I made orders by consent in Chambers providing a timetable for finalisation of pleadings, including any cross‑claim, and for the filing and service of any application for security for costs and affidavits in relation to security, and listing the proceeding for further directions on 4 December 2019.
24 September 2019, Skyscanner filed its response, defence, a genuine steps statement, and additionally, a notice of cross‑claim and statement of cross‑claim (together, the cross‑claim) seeking orders for the cancellation or removal of the Trade Mark pursuant to s 88(1), and ss 97 or 101 of the Trade Marks Act 1995 (Cth), on grounds under ss 59 and 92(4)(a) asserting no intention to use, and non‑use. In its cross‑claim Skyscanner claimed that Mann Travel had not used the Trade Mark for the specified services. Mann Travel filed a defence to the cross‑claim, and Skyscanner filed a reply to that defence. From a perusal of those pleadings it is apparent the parties envisaged a dispute encompassing contentions (at least) as to the meaning and ambit of the services within the Trade Mark’s specification, the ambit of the registration, and the characterisation of both the claimed use, and the claimed infringement.
On 20 November 2019, I made orders by consent in Chambers granting leave to Mann Travel to file and serve an amended statement of claim as served, a timetable for the provision of amended responsive pleadings, and standing over argument as to costs to 11 February 2020. Although foreshadowed, no application for security for costs was filed.
On 15 November 2019, Skyscanner served Mann Travel the Offer in respect of the proceeding (referred to above at [4], and see [26]). On 29 November 2019, Mann Travel accepted the Offer.
On 2 December 2019, Skyscanner’s legal representatives informed my Chambers through email communication that the parties had reached an in principle settlement of the proceeding, subject to documentation of that settlement. On 20 December 2019, the parties provided signed consent orders. As I have said above at [2], on 24 December 2019, I made orders by consent in Chambers in the terms provided by the parties.
At the time of dismissal, I had made orders by consent in Chambers on at least 7 occasions, obviating the need for any appearances before the Court. The proceeding had not progressed beyond pleadings. The proceeding had not been set down for hearing.
Ms John states that Mann Travel did not obtain any certificate that it was reasonable to employ an advocate, or more than one advocate, to appear for it in the proceeding. Whilst this is correct, I note, however, that the pleadings filed by both parties have counsel’s names affixed, and in the case of Skyscanner, an express statement that the pleadings were prepared, or settled by its counsel.
THE OFFER OF COMPROMISE AND ACCEPTANCE
It is not in dispute that the Offer was made in the form required pursuant to rule 25.01(1) of the Federal Court Rules, and stated on its face “Form 45, Rule 25.01(1) Federal Court of Australia Rules”. Whilst one of the terms of the Offer stipulated that terms 1, 2, and 3 be confidential, the Offer is annexed to Samuel #1, and no claim to confidentiality is maintained by either party.
The Offer included 5 operative terms. Excluding formal parts, it was as follows:
To the applicant / cross‑respondent (Applicant)
The respondent / cross‑claimant (Respondent) offers to compromise this proceeding, including in its cross‑claim.
The offer is:
1.the Respondent pay to the Applicant the sum of $15,000.
2.no interest be payable by the Respondent to the Applicant.
3.the Respondent pay the Applicant’s costs of the proceeding, as agreed or to be assessed on a party/party basis in accordance with Rule 21.11(2) of the Federal Circuit Court Rules 2011 [sic].
4.terms 1, 2 and 3 are confidential.
5.the proceedings, including the Respondent’s cross‑claim, be otherwise dismissed.
The amount of offer in respect of the claim is $15,000.
This offer is in addition to the costs referred to in proposed order 3 above.
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 on an open basis.
Date: 15 November 2019
[signed]
As I have said above (reasons at [4]), numbered paragraph 3 of the Offer is the Costs Term, the construction of which is in dispute.
Mann Travel’s acceptance of the Offer was made by its solicitors by email dated 29 November 2019 as follows:
Dear Colleagues
Our client accepts your client’s offer as contained in their offer of compromise dated 15 November 2019.
We shall write to you shortly with our client’s position on costs.
In the interim we are content for you to:
1.Prepare a draft terms of settlement;
2.Prepare draft terms of consent in relation to both proceedings;
3.Inform the court that the parties have settles both proceedings and minutes of consent orders will be provided to the court in the near future.
Can you kindly confirm receipt of this email.
In her affidavit at [17] Ms John states that “[t]he parties entered into a Deed of Settlement and Release on 20 December 2019. The Deed reflected the terms of the Offer of Compromise including the payment of $15,000 and the terms on costs”.
As I have said above at [2], thereafter the parties informed the Court that the proceeding had settled, and subsequently provided signed form of orders, and orders were made in the form provided.
The Costs Term and Rule it specifies
The Costs Term names r 21.11(2) of the FCCR. As is apparent from [26] above, there is a typographical error as to the year of the FCCR in the Costs Term. The year 2011 is the applicable year of the introduction of the Federal Court Rules 2011. Neither party makes anything of this error.
Rule 21.11(2) FCCR
Rule 21.11(2) FCCR was as follows:
21.11 Taxation of costs
(2) When taxing a statement of costs, a taxing officer must apply:
(a)for a family law or child support proceeding – the scale of costs set out in Schedule 3 of the Family Law Rules; and
(b)for a general federal law proceeding – the scale of costs set out in Schedule 2 to the Federal Court Rules.
Rule 21.11(2) FCCR is located in Part 21 of those Rules headed “Costs”, in Division 21.3, headed “Costs and disbursements”. See Annexure A.
When the Offer was made and accepted the reference to “Schedule 2” of the Federal Court Rules in r 21.11(2)(b) FCCR was outdated. The reference should have been to “Schedule 3” of the Federal Court Rules. It appears this is because after the FCCR were introduced, and some time prior to, or when, the current Federal Court Rules came into operation on 1 August 2011, the numbers of the schedules changed, and the scale of costs previously appearing in Schedule 2 of the former Federal Court Rules was renumbered and henceforth appeared in Schedule 3, where it is presently found. The FCCR was not subsequently updated to reflect that the scale of costs was henceforth “Schedule 3”. For convenience, I refer to that schedule as FCR Schedule 3.
Mann Travel submits that it is immaterial that r 21.11(2)(b) refers to the incorrect schedule number, and relies, inter alia, on the dictionary in the FCCR (relevantly, replicated in the GFL Rules) which defines Federal Court Rules as the “Federal Court Rules 2011” made under the Federal Court of Australia Act 1976, as amended from time to time”. Skyscanner expressly seeks to make nothing of the obvious error in the number of the schedule. I accept that the reference to the incorrect schedule is an obvious error, and that it is immaterial.
Rule 22.10(1) GFL Rules
Rule 22.10(1) of the GFL Rules restates and updates r 21.11(2) FCCR. It is located in Part 22 headed “Costs”, in Division 22.3, headed “Costs and disbursements”. Rule 22.10(1) GFL Rules is as follows:
22.10 Taxation of costs
(1)In taxing a statement of costs, a taxing officer must apply the scale of costs set out in Schedule 3 to the Federal Court Rules.
In both sets of Rules, a taxing officer means a Registrar. In both the GFL Rules and the FCCR, the Division/Subdivision in which is found the above rule (and its predecessor) applies to costs payable, or to be taxed, under an Act, these Rules or an order of the Court in a proceeding: see r 22.08(1) GFL Rules; r 21.09(1) FCCR.
Division 21.2 and Division 21.3, FCCR (now see Divisions 22.02 and 22.03 GFL Rules) make specific provision for the order, awarding and calculation of costs in a general federal law proceeding in this Court.
RELEVANT PRINCIPLES AND PROVISIONS RE COSTS
Costs provisions in this Court
To place r 21.11 (see above at [31]) in context in the FCCR, see extracts of Part 21 – Costs set out in my decision in Active Skin Pty Ltd v Yey Pty Ltd [2021] FCCA 329 at [29], concerning an application for security for costs in a trade mark proceeding in this Court, which I incorporate by reference.
In Active Skin, at [43], I said, referring to the FCCR (emphasis in the original):
Division 21.3 – and r.21.10 within Div.21.3 - is enlivened if an order is made that costs are payable by a party (relevantly), or costs are to be taxed, that is, as r.21.10 expressly states, when a party is entitled to costs in a proceeding. Rule 21.09 states when and to what circumstance Division 21.3 applies. The rule makes clear that neither r.21.10 nor r.21.11 apply unless there is an order that costs are payable, or are to be taxed, that is, the Court has made an order pursuant to a power contained in Division 21.2 of the Rules, or, not relevant to the present case, another Act. An order for security for costs made pursuant to r.21.01 does not constitute such an order.
(See Annexure A for the corresponding costs provisions in the GFL Rules.)
GFL Rules r 22.02 and r 22.09
Rules 22.02 and 22.09 GFL Rules are relevantly in the same terms as rr 21.02, and 21.10 FCCR respectively, which FCCR are referred to in the submissions made by the parties (save for the costs schedule number in r 22.09(a) which, with the reorganisation of the order of the schedules, is now Schedule 2, rather than Parts 1 and 2 of Schedule 1).
Rules 22.02 and 22.09 GFL Rules provide respectively:
22.02 Order for Costs
(1)An application for an order for costs may be made:
(a) at any stage in a proceeding; or
(b) within 28 days after a final decree or order is made; or
(c) within any further time allowed by the Court.
(2)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.
22.09 Costs and disbursements
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.
Schedule 2 to the GFL Rules is an event-based schedule. The former costs schedule, Part 1, Schedule 1 to the FCCR (referred to in r 21.10 FCCR), in substantially the same terms, was similarly event‑based. In each case, events are identified by item number and description, and corresponding amounts specified per event.
The default position in this Court is that costs, when ordered, are assessed as provided by Schedule 2 GFL Rules (formerly, Part 1, Schedule 1 FCCR). See generally, Otter Products v Peter Haydon [2021] FedCFamC2G 13 (15 September 2021).
In a 2004 decision to which Skyscanner drew my attention, 45 Degrees North v The Promotions Factory (Aust) Pty Ltd [2004] FMCA 49, commenting on Schedule 1, FCCR (then named the Federal Magistrates Court Rules 2001) and comparing it to Order 23 in the former Federal Court Rules (replaced in 2011 by Part 25 by the Federal Court Rules, see below) Phipps FM observed “these are event based costs and not suitable for use in taxation”. Whilst this observation remains generally correct (excepting under r 22.02 GFL Rules/r 21.02 FCCR) I note that in 45 Degrees North Phipps FM was concerned with an offer of compromise in different terms to the Offer (the costs provision there in issue was that “each party bear its own costs of the proceeding”), and in the different circumstance of costs arguments subsequent to delivery of judgment in the proceeding. Phipps FM observed that Order 23 (the precursor to Part 25, Federal Court Rules) “naturally assumes that costs will be taxed on the federal Court scale”.
General principles – costs orders in this Court
I summarised this Court’s approach to the exercise of its discretion in relation to orders for costs in Henley Arch Pty Ltd v del Monaco (No. 2) [2020] FCCA 1911 at [7] – [12] which I incorporate here by reference, and to which Mann Travel refers. Although Henley Arch was a decision made in the intellectual property jurisdiction of the Court, and specifically, following judgment for infringement of copyright, the principles are applicable generally). Henley Arch was concerned with the determination of costs in circumstances where the successful applicant had served an offer of compromise in accordance with the provisions of Part 25 of the Federal Court Rules, which had not been accepted.
As I said in Henley Arch, in sum, the Court’s discretion is broad, but is to be exercised judicially, and in the context of the relevant court rules. The general rule is that costs follow the event, costs may be awarded on a party and party basis or on an indemnity basis, and the Court may set the amount of the costs, or the method of calculation, or refer the costs for taxation. This Court’s ability to orders costs under the Federal Court scale is well known and accepted. At [12], I said:
This Court’s ability to order costs under the Federal Court scale is well known and accepted. Whether it is reasonable in the circumstances to do so, however, is a matter to be resolved having regard to the principles I have adverted to above, and the individual circumstances, including achieving a just outcome given the facts and law at issue in the proceeding. The matter is not to be resolved with some formulaic approach: see generally, Washington v Qantas Airways Limited [2014] FCCA 1413; (2014) 107 IPR 144.
If in a particular case this Court’s Rules are insufficient or inappropriate, the Court may apply, relevantly, the Federal Court Rules: see r 1.06(2) GFL Rules, and the non‑limiting application by r 1.06(3) of the provisions of particular Federal Court Rules set out in Schedule 1.
Certain provisions of the Federal Court Rules and costs schedule
FCR Schedule 3
The Costs Term refers to FCR Schedule 3. FCR Schedule 3 is entitled “Costs allowable for work done and services performed”. It sets out the amounts allowable, and the work and services, and circumstances to which they relate. As r 22.10(1) GFL Rules (and formerly, 21.11(2)(b) FCCR) identifies (see above at [35], [31]), it sets out a scale of costs.
Part 40, Federal Court Rules
Rule 22.02 GFL Rules (see [41] above) directs attention to Part 40, Federal Court Rules, the provisions of which concern costs. Pursuant to r 40.01 of the Federal Court Rules, if an order is made that a party or person pay costs or be paid costs, without any further description of the costs, the costs are to be costs as between party and party. That phrase is then defined in the Dictionary, Schedule 1 to those Rules as meaning only the costs that have been fairly and reasonably incurred by the party in the conduct of the proceeding. If such an order is made, r 40.12 provides that the costs must be taxed in accordance with Part 40, unless the amount of costs is agreed between the parties. Rule 40.14 provides that if the Rules or an order of the Court entitle a party to costs, the party may have those costs taxed, without an order directing taxation. Succeeding Rules of Part 40, Division 40.2 deal with taxation, and reference FCR Schedule 3.
By the terms of r 22.02 GFL Rules, the discretion exercisable by this Court expressly includes applying the taxation provisions in Part 40, Federal Court Rules, and thus FCR Schedule 3.
Offers of compromise
Part 25 of the Federal Court Rules sets out the procedure by which a party may make an offer of compromise, prescribes the contents of the offer, and the costs consequences where such an offer is not accepted. The equivalent provisions under the former Federal Court Rules were to be found in Order 23 of the former Rules, with some differences in wording.
In order to be effective as an offer of compromise under Part 25 of the Federal Court Rules, in the event it is not accepted, the notice has to contain the content prescribed by r 25.03, which requires that it must state whether (a) the offer is inclusive of costs; or (b) costs are in addition to the offer: see r 25.03(1). If the offer is of a sum of money, the notice may separately specify the amount that represents: (a) the offer in respect of the claim; and (b) interest (if any): see r 25.02.
Also relevant to the present application in a case is r 25.10, which relevantly is as follows:
25.10 Failure to comply with offer
If, after acceptance of an offer by an offeree, an offeror fails to comply with the offer's terms, the offeree may apply to the Court for an order:
(a) giving effect to the accepted offer; or …
A party may be entitled to rely upon an offer of compromise, even if it does not comply with the requirements of Pt 25, under the principles in Calderback v Calderback [1975] 3 All ER 333.
The GFL Rules (as was the position under the FCCR) make no provision for exchange of offers of compromise that have costs consequences if not accepted. Rule 13.08 GFL Rules, however, provides for consent orders generally, and so encompasses giving effect to settlement agreements.
THE PRESENT APPLICATION – THE PARTIES’ EVIDENCE AND SUBMISSIONS
The parties evidence
As I have said, Mann Travel relies on Samuel #1 and Samuel #2, and Skyscanner relies on Ms John’s affidavit.
To the extent that the parties’ affidavit evidence provides undisputed evidence of the chronology of the proceeding, the Offer and its acceptance, and the parties’ subsequent disagreements, or make reference to or set out the provisions of various of the Rules in this and the Federal Court, I have summarised that evidence above.
Both parties’ solicitors give evidence of their subjective beliefs and understandings. Their evidence is argumentative, and primarily submission guided by the principles in Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 352, and Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; (2004) 211 ALR 342 (see Consideration below), I have considered it accordingly.
Mann Travel
In Samuel #1, Mr Samuel briefly adverts to the receipt of the Offer, and his client’s acceptance, and annexes copies of those communications. He gives evidence that in the first few months while the parties were attempting to resolve the issue of costs his client was unaware that Skyscanner disputed the Costs Term. He assumed the applicable scale of costs was not in dispute. He gives evidence of his awareness of r 21.11 FCCR, the term party/party as referring to a basis of taxation of costs, and that this Court does not have its own scale for taxation of costs, but an item based scale. If the Court orders taxation, it can only do so by r 21.11(2) FCCR. He attests to his belief that assessment would occur under the Federal Court scale.
Skyscanner objects to Mr Samuel expressing his belief that FCR Schedule 3 was agreed, and “this was the clear intention of the parties”. I accept that by this phrase Mr Samuel is expressing his belief, however, on the application of the true principle in Codelfa, and see Toll at [40], I would accord that subjective belief no weight. I reject the phrase.
Skyscanner objects to Samuel #1, [16], which goes to the parties’ respective beliefs as to the incorrect numbering of FCR Schedule 3 in the FCCR, and to Skyscanner’s intentions by the wording of the Costs Term. As to the first matter, there is now no dispute. As to the second matter, it is argumentative. I reject the paragraph.
Lastly, in Samuel #1 at [17], Mr Samuel gives evidence that in his experienced opinion the proceeding was sufficiently complex as to attract costs under FCR Schedule 3, if it progressed to trial. He says this reinforced his belief as to both parties’ understanding of the Costs Term. Skyscanner objects to [17]. I allow Mr Samuel’s opinion based on his experience (first sentence); I reject his belief as to the understanding of the parties as to the Costs Term (second sentence). It is submission.
In Samuel #2, given in reply, Mr Samuel annexes correspondence that goes to any issue of delay. He states clearly from his recollection that at no point did he or Mann Travel make any statement which would have somehow led Skyscanner to believe that the Offer was not intended to refer to FCR Schedule 3. He says it was unsurprising that Skyscanner made the Offer in the terms it did, because he was not aware of any facts or correspondence prior to acceptance which indicated that the parties in anyway disputed the matter was sufficiently complex to justify the application of FCR Schedule 3. He attests that in his experience in commercial litigation he has observed many clauses in offers to settle proceedings that adopt the same style and format of the Costs Term. He posits that “if there are variables in the basis of assessment (such as discounts to a scale) he would expect in his experience the party making the offer to say so”. Skyscanner objects to Mr Samuel so positing, as opinion, conclusion, and submission. I accept that the opinion is based on Mr Samuel’s specialised experience which is set out, and on that basis it is admissible, however, I consider that it rises no higher than submission, and so I give it little weight.
Skyscanner
Ms John gives some background to the proceeding, and a chronology of procedural events. She gives evidence that while the proceedings were on foot, correspondence between the parties referred to the application to the matter of this Court’s scale of costs [sic]. She does not support this statement by any examples (and I note Mr Samuel disputes the statement), except one letter her firm sent on 25 October 2019 to Mann Travel’s solicitors in which Skyscanner foreshadowed it would seek an order that the Federal Court scale would apply.
Ms John says that she anticipated that any application for such an order would be forward looking, and not for costs incurred. She annexes the letter. There is no statement in it that any application for application of the Federal Court scale would be forward looking. I do not consider that any such implication can be inferred.
The 25 October 2019 letter discloses that Skyscanner proposed to seek an order for security for its costs in the amount of $344,000, and the parties were arguing about the matter of security. In the context of rejecting Mann Travel’s proposition that the Court would exercise its discretion to cap the maximum costs, the letter states “In any case, given the complexity of these proceedings, we intend to seek an order that the Federal Court scale applies. If the Court was minded to agree with us that the Federal Court scale applies, it would dramatically increase the likely amount our client would receive by way of an order for security for its costs.”
Ms John says that although Mann Travel responded inviting Skscanner to propose a minute of order for that purpose, Skyscanner did not respond. Ms John did not have instructions “to actually proceed with any application to seek such an order as to costs”.
Ms John emphasises that whilst the proceeding was on foot neither party made any application to the Court for the Federal Court scale of costs to apply. Ms John then attests to her belief that the scale of costs in FCR Schedule 3 would only apply if there was first an order to that effect made by the Court under FCCR r 21.10. She says she understood that if the parties did not reach agreement as to costs under the Offer, then it would be necessary for Mann Travel to apply to the Court for an order referred to in FCCR r 21.10, which she refers to as an “otherwise order”. She says she understood that the Court has discretion whether to make such an order, including as to what discount ought be applied. She argues that in light of the correspondence exchanged between the parties, Mann Travel’s lawyers were also aware of the need for there to be such an order. I presume Ms John is referring to the letter dated 25 October 2019, as no other correspondence is evidence.
There is no evidence that the beliefs of either party to which both Mr Samuel and Ms John attest were made express and communicated to the other before the proceeding was dismissed.
The parties submissions
Mann Travel
Mann Travel says the discretion of the Court ought to be exercised in favour of the orders sought in the application in a case because the parties had agreed to such a form of assessment. It says it is unreasonable for Skyscanner to maintain that costs ought not to be assessed under the Federal Court scale, and that such unreasonableness would inhibit the ability of the parties to reach any form of agreement in line with the accepted terms of the Offer.
In substance, Mann Travel’s position is that it accepted an offer of compromise that laid out a typical two‑step process to determining costs. The Costs Term is a clear reference to assessment under the Federal Court scale of costs (that is, FCR Schedule 3). The parties expressly agreed this. If the parties did not reach agreement on the quantum of the costs to be paid, the method of taxation was agreed and the taxation process is required. If that taxation process requires an order of the Court directing such a process be undertaken, the order ought to be made by consent, there is nothing left to dispute.
The import of Mann Travel’s submission is that:
(a)the parties reached agreement in terms of the Offer, and relevantly, the Costs Term;
(b)the terms of the agreement are clear: in respect of the costs Skyscanner agreed to pay Mann Travel, FCR Schedule 3 applies to determine by a taxation process the quantum of those costs to be paid;
(c)Skyscanner has failed to comply with the Offer, and so is in breach of the parties’ agreement; and
(d)the Court should make orders to give effect to the Offer, relevantly the Costs Term, by making the orders sought in the application in a case (see r 25.10(a) Federal Court Rules).
In answer to Skyscanner’s submission, Mann Travel says the agreement did not include any possibility of discount, nor give Skyscanner the opportunity to resile from the application of FCR Schedule 3 to determine the costs sum to be paid.
Skyscanner
Skyscanner’s position is that the Offer merely “set out a procedure for assessing costs but did not dictate the outcome. The outcome in terms of what was payable by Skyscanner was always uncertain, as is any agreement that is dependent on parties (a) agreeing on an appropriate figure, and (b) agreeing to proceed to taxation in the event that (a) fails.”
Skyscanner says the Offer as accepted did not bind it to pay costs on the Federal Court scale (that is, FCR Schedule 3). If the parties did not reach agreement “on what [Skyscanner] ought to pay to [Mann Travel] in contribution to its costs, then the matter would proceed to taxation”. But because this Court’s event-based schedule of costs (Schedule 1, Part 1 FCCR, now in Schedule 2 GFL Rules) is not appropriate for taxation, the default position in this Court applies. If Mann Travel seeks costs on any other basis than the application of the Court’s event-based schedule of costs, Skyscanner says Mann Travel must apply for an “otherwise order” under r 21.10 FCCR (now, r 22.09 GFL Rules); referring to Portland Marketing (International) Pty Ltd Wulff & Ors (No. 3) [2018] FCCA 3013 at [18]; Centrestage Management Pty Ltd v Riedle [2007] FMCA 1260 at [13]. Skyscanner says the Offer did not remove the need for an application to the Court for such an order in the event that the parties could not agree on an amount payable.
Once Mann Travel makes such an application to the Court, “it goes without saying that in the course of hearing such an application for costs, [Skyscanner] has a right to be heard”.
Skyscanner says this was not a complex matter, nor difficult, save for voluminous correspondence, which should not be confused with complexity: see Washington v Qantas at [82]‑[84], [94]. It had not progressed beyond pleadings. FCR Schedule 3 (see Costs Term) is inappropriate, and ought not be ordered. If the Court is minded, however, to make an “otherwise order”, a very substantial discount to Schedule 3 ought to be applied. It submits throughout the proceeding the parties had proceeded on the basis that this Court’s schedule of costs applied, relying on its 25 October 2019 letter, and that no application had been made for the Federal Court scale of costs to apply.
By referring to taxation under r 21.11 FCCR, Skyscanner says it was accepting assessment upon the item based method set out in FCR Schedule 3. It was not agreeing to Mann Travel having its costs assessed at the full Federal Court scale. Skyscanner submits that this ought to have been obvious to Mann Travel because that would have been an agreement between the parties as to the outcome.
CONSIDERATION
For the reasons I expand upon below, Skyscanner’s position cannot be accepted.
In Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24; (1982) 149 CLR 337 at 352, for the purpose of construing a contract Mason J, with the concurrence of Stephen J and Wilson J, said of the admission of evidence of surrounding circumstances on the one hand and of the parties’ intentions on the other hand:
The true rule is that evidence of surrounding circumstances is admissible to assist in the interpretation of the contract if the language is ambiguous or susceptible of more than one meaning. But it is not admissible to contradict the language of the contract when it has a plain meaning. Generally speaking facts existing when the contract was made will not be receivable as part of the surrounding circumstances as an aid to construction, unless they were known to both parties, although, as we have seen, if the facts are notorious knowledge of them will be presumed.
… prior negotiations will tend to establish objective facts known to both parties and the subject matter of the contract. To the extent to which they have this tendency they are admissible. But in so far as they consist of statements and actions of the parties which are reflective of their actual intentions and expectations they are not receivable. The point is that such statements and actions reveal the terms of the contract which the parties intended or hoped to make. They are superseded by, and merged in, the contract itself.
In Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165; (2004) 211 ALR 342, the High Court said at [40]:
It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations. What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intentions of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement. The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction.
The surrounding circumstances in which the Offer was made are set out above at [13]-[24].
The purpose and object of making the Offer was to settle the proceeding, and, if it was not accepted, to enable Skyscanner to rely on it for the purposes of costs if the matter proceeded to hearing and Skyscanner obtained a better result than the Offer: see Pt 25 Federal Court Rules. That is, if not accepted, the Offer could place Mann Travel at risk of paying indemnity costs. Acceptance of the Offer brought the proceeding to an end. That was what it was intended to do. Thereafter, the parties engaged in the mechanics of giving effect to the Offer, that is, in performance of their agreement.
It is not in dispute that the Offer was accepted, nor that the parties entered into a Deed which included the Costs Term. It is plain from both solicitors’ evidence that there was no agreement reached outside the terms of the Offer as to the applicable scale of costs.
The 25 October 2019 letter does not evidence otherwise. That letter concerns different subject matter: the issue of a foreshadowed application for security for costs, and the amount of such security, and a foreshadowed application for an order that the Federal Court scale of costs apply, thereby supporting the $344,000 amount sought as security.
That the proceeding was commenced in this Court, and no order had been sought prior to the Offer to apply the Federal Court scale of costs highlights the express identification in the Costs Term of r 21.11(2) FCCR, and by that reference, FCR Schedule 3. The timing of the Offer, after the 25 October 2019 with its reference to an order that the Federal Court scale of costs applies gives further support to the construction of the Costs Term for which Mann Travel contends.
Contrary to Skyscanner’s submission, the Costs Term is in plain terms. It is certain. By expressly providing that costs be assessed in accordance with r 21.11(2) FCCR it imports FCR Schedule 3. It specifies both process and outcome, namely that Skyscanner pay Mann Travel its costs the amount of which is to be quantified by applying FCR Schedule 3. It is not to the point that the dollar amount of the costs is not specified, the means by which that amount is to be determined is certain – by application of FCR Schedule 3. There is no warrant to imply into the Costs Term any discount, or subsequent chance to argue that costs should be otherwise than determined in accordance with FCR Schedule 3.
The quantification of the sum Skyscanner agreed to pay to Mann Travel for its costs was a matter of performance of the agreement. If it was necessary in order to give effect to the assessment in accordance with r 21.11(2) FCCR as provided by the Costs Term that there be an order of the Court, then that was simply a matter of applying for a consent order to that effect: see r 13.08 GFL Rules (formerly, r 13.04 FCCR).
The decision in Benyk
In its submissions Skyscanner also relied on Benyk v Mater Misericordiae Health Services Brisbane Ltd & Anor [2009] FMCA 544; (2009) 228 FLR 478, a decision of Wilson FM, to argue that Mann Travel’s position had “an extreme illogicality” and that “the illogicality of this unreasonable position ought to have been evident”. Skyscanner argued that Mann Travel’s position:
…whereby a reference to a taxation in accordance with FCCR 21.11 means absolutely that the Applicant gets its costs at the full Federal Court Scale would, in practical terms, give the Applicant its costs of the proceedings in the Federal Circuit Court on the same basis as if the litigation was conducted in the Federal Court. Obviously, “[s]uch a result is counter‑intuitive”. … In circumstances where the Applicant was agreeing to settle its claim, instituted in the Federal Circuit Court well over 12 months earlier than the Offer of Compromise, for a mere $15,000, the illogicality of this unreasonable position ought to have been evident.
In Benyk Wilson FM rejected an argument that because Order 23 r 11 (precursor to Part 25, Federal Court Rules) conferred an entitlement to tax costs, such taxation could only occur under FCA Order 62 (now Part 40), which conferred an entitlement to the taxation of costs pursuant to [FCR Schedule 3]. In a further passage relied on by Skyscanner, Wilson FM said (Benyk at [18]) :
This would, in practical terms, give the applicant her costs of proceedings in this Court on the same basis as if the litigation was conducted in the Federal Court. Such a result is counter‑intuitive. As Counsel for the respondents submitted it would be disadvantageous to respondents to make offers of compromise in this Court in circumstances where the offeror was exposed to having to pay costs on the Federal Costs scale.
Whilst Wilson FM in Benyk held that Order 23 applied in this Court by virtue of r 1.05(3)(b) FCCR (now see r 1.06(3) GFL Rules), he considered “it would be a quite unintended consequence of the incorporation of FCR Order 23 to also incorporate FCR Order 62” (since 2011, see Pt 40 Federal Court Rules) into the Rules of this Court. At [22], Wilson FM then interpreted reference in Order 23 to taxing costs on a party and party basis, when incorporated into the FCCR, as reading “shall pay costs in accordance with Division 21.3 Federal Magistrates Court Rules”, so as to align with the costs regime in this Court.
In contrast to the Offer, the Benyk offer made no express mention of the basis on which the costs were to be assessed. In Benyk the offer provided in respect of costs “(b) the Respondent will pay the Applicant’s party/party costs as agreed or assessed up to and including the date of acceptance of the offer”. Wilson FM found that the notation in the Benyk offer that the offer was made pursuant to FCR Order 23 (which was mandatory to be able to rely on the consequences of non‑acceptance under Order 23), said nothing about the basis upon which costs would be paid.
Skyscanner’s reliance on Benyk is misconceived. It proceeds on a wrong premise. It overlooks the express terms of the Offer, and the agreement of the parties, expressed in writing by the exchange of written Offer and email acceptance, and confirmed by the Deed. This is not a case where the import of the Federal Court Rules by the form of an offer under Pt 25 of the Federal Court Rules is in issue, c.f. Benyk.
The circumstances in Benyk are very different to those with which the dispute before me is concerned. So too, the facts of each of the other authorities on which Skyscanner relies are distinguishable.
In any event, turning to the facts before him in Benyk, Wilson FM said (emphasis added):
[25]In my view, to determine what costs should be paid is a matter of interpreting the words of the offer itself. Those are set out at paragraph 5 of these reasons. In the absence of agreement between the parties, or a representation by one party relied upon the other to its detriment that may give rise to an estoppel, the offer that a party would pay the other party’s costs ordinarily means costs in accordance with the practice and procedure of that Court in which the matter is being litigated.
[26]Both solicitors for the respondent who had the conduct of these proceedings and the solicitor for the applicant who had conduct of the proceedings gave evidence before me. There was some divergence in their evidence as to whether the applicable scale of costs was discussed before the respondents’ offer was accepted. In my view it is not necessary to resolve that difference. It is plain from both solicitors’ evidence no agreement was reached prior to the offer being accepted as to the applicable scale of costs, nor was any unequivocal statement made by the solicitors for the respondent that would have lead the applicant to believe that the offer included an offer to pay costs on the Federal Court scale.
[27]In those circumstances the offer must be construed according to its plain meaning. In my view, the plain meaning of the offer is that the respondent would pay the applicant’s costs determined in accordance with the Rules of this Court.
Importantly in Benyk, counsel for the applicant there conceded that there was no evidence before the Court to make an order in terms of the introductory words of r 21.10 – “Unless the Court otherwise orders”.
Each case turns on its own facts, on the words of the offer in issue, construed as guided by the principles set out in the above mentioned High Court authorities. To adapt what Wilson FM said in Benyk at [25], to determine what costs should be paid is a matter of construing the words of the Offer itself.
Skyscanner’s Offer contained the Costs Term. That term is clear on its face. I find there is no ambiguity or uncertainty.
A reasonable person in the position of the parties would understand that whilst by reason of term 4 (confidentiality), none of terms 1, 2, and 3 would be contained in an order of the Court, Skyscanner’s Offer was an offer made under Pt 25 Federal Court Rules, and that the parties be bound contractually by all the paragraphs of the Offer, and once accepted, that the agreement reached was enforceable. A reasonable person would understand that the extent of the public expression of the Offer, when accepted, would simply be Court orders made reflecting term 5 of the Offer. That public expression, does not, however, excise the Costs Term from the parties’ agreement made by acceptance of the Offer, and confirmed by the Deed.
Conclusion
It follows from the above that I conclude that the Costs Term is effective and enforceable on its terms. It is appropriate that I make orders in the terms sought in paragraph 2 of the application in a case.
The application in a case is allowed. I will so order.
Both parties have sought a further opportunity to be heard on costs. I am mindful that doing so will incur further costs. I consider that it should not have been necessary for Mann Travel to bring this application in a case. Consent orders would have sufficed. In these circumstances I foreshadow that Skyscanner should pay Mann Travel’s costs of the application in a case, on an indemnity basis. If either party contends otherwise, they may file and serve a short submission, of no more than 3 pages, within 7 days. In the absence of submissions I will make the costs order foreshadowed.
I certify that the preceding one hundred and two (102) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Baird. Associate:
Dated: 19 November 2021
ANNEXURE A
Cross reference table – FCCR and GFL Rules
FCCR
Federal Circuit Court Rules 2001GFL Rules
Federal Circuit and Family Court of Australia (Division) (General Federal Law) Rules 2021Part 21 – Costs Part 22 – Costs Division 21.1 – Security for costs Division 22.1 – Security for costs 21.01 Security for costs 22.01 Security for costs Division 21.2 – Orders for costs Division 22.2 – Orders for costs 21.02 Order for costs 22.02 Order for costs 21.03 Determination of maximum costs 22.03 Determination of maximum costs 21.04 Costs reserved 22.04 Costs reserved 21.05 Costs if proceedings transferred 22.05 Costs if proceedings transferred 21.07 Order for costs against lawyer 22.06 Order for costs against lawyer 21.08 Interest on outstanding costs 22.07 Interest on outstanding costs Division 21.3—Costs and disbursements Division 22.3—Costs and disbursements 21.09 Application 22.08 Application of Division 22.3 21.10 Costs and disbursements 22.09 Costs and disbursements 21.11 Taxation of costs 22.10 Taxation of costs 21.12 Expenses for attendance by witness 22.11 Expenses for attendance by witness 21.13 Expenses for preparation of report by expert 22.12 Expenses for preparation of report by expert 21.14 Solicitor as advocate 22.13 Solicitor as advocate 21.15 Advocacy certificate 22.14 Advocacy certificate 21.16 Counsel as advocate 22.15 Counsel as advocate Schedule 1—Costs Schedule 2—Costs Part 1—Family law proceedings and general federal law proceedings Part 1—General federal law proceedings other than migration proceedings
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