FEDERAL COURT OF AUSTRALIA Eveready Australia Pty Ltd v Gillette Australia Pty Ltd (No 5) [2000] FCA 167 COSTS – indemnity costs – respondent succeeded in opposing applicant's application for interlocutory injunction – certain remarks of judge capable of being regarded as generally favourable to respondent as to ultimate outcome of proceeding – offer by applicant to settle for injunction in its favour less extensive than those it obtained when it succeeded on final hearing – whether applicant should have its costs of the proceeding generally on indemnity basis – whether there should be special costs order in relation to interlocutory hearing in favour of respondent – survey evidence – applicant notified respondent under Practice Note 11 of its intention to conduct market survey and supplied to respondent copy of proposed questionnaire – respondent's non-compliance with Practice Note 11 – implications for costs – generally costs order in favour of applicant not qualified to exclude costs associated with survey, even if respondent's criticisms of survey had substance because respondent had not attempted to overcome disagreement with applicant as required by Practice Note 11. EVEREADY AUSTRALIA PTY LIMITED v GILLETTE AUSTRALIA PTY LIMITED NG 1205 of 1998 LINDGREN J 17 FEBRUARY 2000 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 1205 OF 1998 BETWEEN: EVEREADY AUSTRALIA PTY LIMITED (ACN 003 539 026) Applicant AND: GILLETTE AUSTRALIA PTY LIMITED (ACN 000 011 914) Respondent JUDGE: LINDGREN J DATE: 17 FEBRUARY 2000 PLACE: SYDNEY THE COURT DECLARES: 1. That in causing the three advertisements being annexures A1, A2 and A3 to this document ("the Advertisements") to be broadcast, the respondent in trade or commerce engaged in conduct that was misleading and deceptive in contravention of s 52 of the Trade Practices Act 1974 and made false representations in contravention of s 53(a) and (c) of that Act. 2. That in causing the billboard advertisement in the form of annexure "B" to this document ("the Billboard Advertisement"), to be exhibited, the respondent in trade or commerce engaged in conduct that was misleading and deceptive in contravention of s 52 of the Trade Practices Act 1974 and made false representations in contravention of s 53(a) and (c) of that Act. 3. That in causing each of the three stickers in the form of annexures C1, C2 and C3 to this document ("the Stickers") to be exhibited, the respondent, in trade or commerce, engaged in conduct that was misleading and deceptive in contravention of s 52 of the Trade Practices Act 1974 and made false representations in contravention of s 53(a) and (c) of that Act. THE COURT ORDERS: 1. That the respondent, whether by its servants or agents or otherwise be permanently restrained from, in trade or commerce, broadcasting, or causing to be broadcast, each of the Advertisements or any material which is substantially identical to, or only colourably different from, any of the Advertisements. 2. That the respondent, whether by its servants or agents or otherwise be permanently restrained from, in trade or commerce, exhibiting or causing to be exhibited, offering for sale or causing to be offered for sale, any product to which is affixed (as the case may be): any of the Billboard Advertisement or the Stickers or any material which is substantially identical to, or only colourably different from, any of the Billboard Advertisement or the Stickers. 3. An order restraining the respondent, whether by its servants or agents or otherwise, in trade or commerce, from making, or causing to be made representations: (a) that Duracell batteries last four times longer than all batteries manufactured and/or supplied by persons other than the respondent; (b) that Duracell batteries last up to four times longer than all batteries manufactured and/or supplied by persons other than the respondent; (c) that Duracell batteries last four times longer than all other zinc carbon batteries; (d) that Duracell batteries last up to four times longer than all other zinc carbon batteries; (e) that Duracell batteries last four times longer than Eveready Super Heavy Duty zinc carbon batteries; (f) that Duracell batteries last up to four times longer than Eveready Super Heavy Duty zinc carbon batteries; (g) that Duracell batteries last four times longer than Panasonic zinc carbon batteries; (h) that Duracell batteries last up to four times longer than Panasonic zinc carbon batteries; (i) that Duracell batteries last four times longer than: (i) "AAA" size Acme zinc carbon batteries; (ii) "C" size Eveready Red zinc carbon batteries; (iii) "C" size No Frills zinc carbon batteries; (iv) 6 volt Acme zinc carbon batteries; (v) 6 volt Mallory Plus zinc carbon batteries; (vi) 9 volt Eveready Red zinc carbon batteries; (vii) 9 volt Acme zinc carbon batteries (j) that Duracell batteries last up to four times longer than: (i) "AAA" size Acme zinc carbon batteries; (ii) "C" size Eveready Red zinc carbon batteries; (iii) "C" size No Frills zinc carbon batteries; (iv) 6 volt Acme zinc carbon batteries; (v) 6 volt Mallory Plus zinc carbon batteries; (vi) 9 volt Eveready Red zinc carbon batteries; (vii) 9 volt Acme zinc carbon batteries PROVIDED THAT this order shall not apply in respect of the "Duracell Ultra" battery or any Duracell lithium battery or any other kind or version of Duracell battery introduced after, and not manufactured by, the date of this order. 4. The respondent cause all Stickers to be removed from exhibition or sale in metropolitan areas of Australia not later than 8 March 2000 and elsewhere not later than 22 March 2000. 5. The respondent pay the applicant's costs except its costs of its application for interlocutory relief and its costs of the motion heard by Tamberlin J, as to which there is no order for costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NG 1205 OF 1998 BETWEEN: EVEREADY AUSTRALIA PTY LIMITED (ACN 003 539 026) Applicant AND: GILLETTE AUSTRALIA PTY LIMITED (ACN 000 011 914) Respondent JUDGE: LINDGREN J DATE: 17 FEBRUARY 2000 PLACE: SYDNEY REASONS FOR JUDGMENT (No 5) (ex tempore) INTRODUCTION 1 This proceeding is listed this morning for the making of orders, including orders as to costs. These issues have been the subject of detailed written and oral submissions. I published reasons for judgment on 23 December last. Those reasons form part of the reasons for the making of the declarations and orders to which I will shortly refer and I will use the abbreviated forms of reference that were used in those reasons. Form of declarations and orders 2 The first area of dispute relates to the content of the declarations and orders to be made. Eveready submits forms of declaration of contravention of the Trade Practices Act 1974 (Cth)("the TP Act") that relate to parts only of the television advertisements being those parts which, it submits, express the gravamen of the misrepresentations which I found to have been made. Duracell submits that the declarations should be limited by the use of the words "to the extent that" so that it is made clear that it is only "to the extent that" the advertisements contained specific representations identified by me in the earlier reasons that they contravened the TP Act. Eveready submits a form of injunction that relates to the same parts only of the three television advertisements. It also submits that there should in addition be a general injunction restraining Duracell from making misrepresentations to the effect of those which I found to be contained in the advertising material. For its part, Duracell submits that the injunction should be expressed to relate to the entirety of the three advertisements and that an additional injunction of the general kind sought by Eveready should not be made at all. 3 I have decided that the declarations are best formulated to relate to the full forms of the three television advertisements (and billboard and product stickers) as submitted by Duracell but that the "to the extent that" limitation should not be adopted. I also think that there should be a general order referring to representations to the effect of those that I found to have been made, as submitted by Eveready. 4 Duracell submits that there should be a proviso excluding from the scope of the injunctive order the "Duracell Ultra" battery which was not the subject of the proceeding, any Duracell lithium battery, or any other Duracell battery introduced after, and not manufactured by, the date of the order. Eveready agrees. So do I. I give effect to these views in the orders annexed. The word "version" is included in addition to the word "kind" to embrace a battery of an existing kind, a new improved version of which, not yet in production, may indeed "last four times longer". 5 In relation to removal of product stickers, Duracell has read affidavit evidence to the effect that it cannot comply by dates suggested by Eveready. Eveready does not oppose the fixing of later dates. Accordingly, order 4 will incorporate the later dates suggested by Duracell. 6 I turn next to the question of costs. Indemnity costs 7 The first issue is whether indemnity costs should be ordered. Eveready's case for indemnity costs turns substantially on a letter dated 16 December 1998 which its solicitors, Gilbert and Tobin ("G&T") wrote to Duracell's solicitors, Mallesons Stephen Jaques ("MSJ"), and MSJ's reply on 18 December 1998. However those two letters can be properly assessed only if I say something first about the earlier hearing of Eveready's application for interlocutory relief before Dowsett J, who gave reasons for judgment on 3 December 1998. 8 It is not easy for me at this time to assess fully the situation as it was before his Honour when the evidence was different from that which was before me. Indeed, it appears that in those relatively early days of this proceeding, the submissions for the respective parties may also have differed from those put to me. In any event, his Honour recorded that Eveready complained that Duracell was comparing its alkaline batteries with Eveready's own alkaline batteries and Eveready's zinc carbon batteries. His Honour noted that Eveready conceded in argument that its complaint in relation to its zinc carbon batteries alone would not be likely to attract interlocutory relief. 9 His Honour said: "While the applicant asserts that 'four times' is an overstatement of the relative performance of the respondent's battery as against zinc carbon batteries, alkaline batteries undoubtedly outperform zinc carbon batteries, and the price differential is enough to cause potential purchasers to pause to consider the options. In argument the applicant concentrated upon the allegedly misleading comparison between the respondent's battery and the applicant's alkaline battery. It is common ground that the respondent's alkaline battery does not outperform the applicant's by a factor of four, if at all." 10 Dowsett J appears to be saying that the statement of the price differential, not the subject of Eveready's complaint, might itself suggest that the Duracell (alkaline) battery would or might last several times longer than Eveready's zinc carbon batteries and that it might therefore be difficult to support the grant of interlocutory relief if the correct comparison to be made was with those zinc carbon batteries. 11 His Honour went on to note that survey evidence suggested that members of the public discriminated between "premium" and "reliable" batteries, the premium batteries being perceived to last longer, but to be more expensive, than the reliable ones. The premium batteries included the Duracell batteries (which were alkaline) and "Energiser", which was Eveready's alkaline battery. His Honour thought that there was little public awareness of the term "zinc carbon", which referred to "reliable" batteries and other cheaper batteries. 12 In sum, his Honour thought, for the purpose of the application for interlocutory relief, that the comparison which the advertising material drew was not between the two manufacturers' alkaline batteries. Accordingly, for his Honour, and having regard to Eveready's concession, it would be difficult to support the grant of an interlocutory injunction. Nonetheless he thought that the view propounded by Eveready was arguable and he went on to consider the balance of convenience which he found to favour Duracell. For example, he referred to the disruption which would be caused to Duracell's Christmas advertising if all the stickers had to be withdrawn. It is important to appreciate that although not expressed as such, the interlocutory injunction sought was mandatory in effect. His Honour's concluding paragraph was as follows: "In the end I fall back upon my assessment of the strength of the applicant's case as the decisive factor in the balance of convenience, all other things being materially equal. The balance of convenience lies against an injunction. The motion will be dismissed." 13 Following the hearing before Dowsett J, G&T wrote MSJ a letter offering to settle on the following basis: · Duracell consent to a final injunction that it permanently refrain from broadcasting or otherwise publishing the advertisement which was the second advertisement in Eveready's amended statement of claim (the 10 second advertisement); · Duracell agree to refrain permanently from, either by voice-over or image, stating or implying that Duracell batteries last up to four times longer and/or last four times longer, without stating in such a claim that 'Duracell lasts up to four times longer than ordinary heavy duty batteries' where such words or voice over is shown and/or stated consecutively; and · Each party pay its own costs. 14 As can be seen from the attached orders, this offer was more favourable to Duracell than the result at which I arrived, which was that Duracell lost on the final hearing. In its submissions Duracell points out that in one respect the settlement offer was less favourable than the result which it has achieved by defending the matter: the settlement offer did not exclude the Duracell Ultra battery, any Duracell lithium battery or new kinds or versions of Duracell batteries. However, I do not find this argument persuasive. What must be considered is the total context, and it would have been possible for Duracell to have raised these points and no doubt Eveready would have agreed to a modification, as it has now done now without quibble once the issue has been raised. 15 On 18 December 1998 MSJ wrote to G&T rejecting Eveready's settlement offer. I need not refer to the detail of the letter but it did refer to the reasons for judgment delivered by Dowsett J and to the fact that his Honour had described Eveready's case as "relatively weak". 16 The principles governing the issue of indemnity costs have been much discussed and reference has been made in submissions to my summary of them in MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (No 2) (1996) 70 FCR 236. The cases support a proposition that for indemnity costs to be ordered, it must appear that the party against whom the order is sought behaved "unreasonably" or "imprudently" in rejecting the offer made. 17 In his submissions, senior counsel for Duracell has referred to extracts from the reasons for judgment of Dowsett J delivered on the application for the interlocutory injunction. 18 Taking all things into account I do not think that the case warrants an order for indemnity costs. When called upon to assess Eveready's offer, Duracell had just obtained a generally supportive judgment from Dowsett J in its favour, albeit only an interlocutory one. 19 Moreover, the settlement offer allowed only two days for acceptance. 20 If accepted, the offer would have involved a substantial disruption of Duracell's Christmas advertising. 21 While it was reasonable for Eveready to have sought to settle and Duracell would have behaved more reasonably if it had responded with a counter offer, I do not think that Duracell's conduct can be described as unreasonable or imprudent. Accordingly, the costs which I will order Duracell to pay to Eveready will be on the usual party and party basis. The costs of the motion for the interlocutory injunction. 22 I come now to three special costs orders which are sought by Duracell. These are that Eveready should be ordered to pay Duracell's costs of Eveready's application for the interlocutory injunction and of Eveready's motion relating to Dr Gordon's affidavit heard by Tamberlin J on 7 October 1999, and an order that Eveready's costs not include its costs of obtaining the survey evidence and of the part of the hearing that was related to that evidence. I will deal with these in turn. 23 Duracell submits that the interlocutory injunction issue was a discrete one on which it succeeded and that the usual order should be made, that is, that costs of that supposedly discrete matter should follow the event. 24 Eveready makes a submission, which I accept, that having regard to the final result in its favour it was justified in promptly seeking interlocutory relief. However, it is possible to accept that submission yet not to order that Duracell pay Eveready's costs. 25 One reason for this is that the application for interlocutory relief can be regarded as providing the Court with the means of establishing an interim régime of an administrative nature which is to obtain until the final hearing. That is, one view is that no matter which party brings the matter before the Court it is appropriate, having regard to the impossibility of giving an immediate final hearing, that the matter be brought before the Court so that such a régime can be established. 26 One approach to such administrative arrangements is that there should be no order as to costs. Another is that the parties' costs of them be part of their costs of the proceeding. These approaches do not necessarily cover the field. I merely seek to make the point that it does not follow from my acceptance of Eveready's submission that its success on the final hearing shows that it was entitled, perhaps bound, to apply early for interlocutory relief, that it should have its costs of that application. 27 In this case Duracell succeeded in opposing Eveready's application for interlocutory relief. Its loss on the final hearing does not show that it should have lost on the interlocutory hearing also. The interlocutory application had to be determined in light of the evidence and submissions that were before Dowsett J. 28 Notwithstanding Duracell's success on the application for interlocutory relief, I do not think that it should have its costs of that hearing now that the final hearing is concluded and it is known that Duracell's advertising contravened the Act after all. 29 Another factor which favours Eveready in this respect is that we now know that Duracell has had the benefit of contravening advertising over a substantial period. 30 In the result, on the application for the interlocutory injunction there should be no order as to costs to the intent that each party bear its own costs of that motion. Interlocutory application before Tamberlin J in relation to Dr Gordon's affidavit heard on 7 October 1999 31 Practice Note 11 is as follows: "Practice Note No 11 Survey evidence There are many problems in obtaining acceptable survey evidence including the use of relevant and unambiguous questions and whether the actual conduct of the survey (including methodology) is satisfactory. The admissibility of surveys is always a matter for the trial judge to determine but the risk of the survey being rejected or given little, if any, weight at the trial may be diminished if the following procedure is followed when a party seeks to have a survey conducted. Subject to other directions of the Court in the particular case, the Court expects that this practice will usually be followed: 1. Notice should be given in writing by the party seeking to have the survey conducted to the other parties to the proceeding. 2. The notice should give an outline of: (a) the purpose of the proposed survey; (b) the issue to which it is to be directed; (c) the proposed form and methodology; (d) the particular questions that will be asked; (e) the introductory statements or instructions that will be given to the persons conducting the survey; (f) other controls to be used in the interrogation process. 3. The parties should attempt to resolve any disagreement concerning the manner in which the survey is to be conducted and any of the matters mentioned in 2 above. 4. The matter of the survey should be raised with the Court at a directions hearing as soon as possible after the steps mentioned above have been taken. MEJ BLACK (Chief Justice)" 32 On 11 June 1999 G&T wrote to MSJ enclosing a draft questionnaire to form the basis of a market survey which Eveready proposed to conduct. The letter stated that the questionnaire was provided pursuant to Practice Note 11. The letter asked for comments prior to the then next directions hearing to be held on 18 June 1999. 33 On 17 June MSJ replied advising that they were considering the draft questionnaire and were unlikely to have formed a final view on it in time for the directions hearing the next day, 18 June. They advised that they would let G&T know the position as soon as possible. 34 There was a directions hearing before me on 18 June. In his reasons for judgment, Tamberlin J referred to it and to events following it in the following terms: "At the directions hearing on 18 June, Mr McGuiness for Eveready informed the Court that a survey had been served on Gillette. Mr Price for Gillette informed the Court that it was likely that the survey would be opposed. Lindgren J then directed that the time for additional evidence from Eveready should be fixed for 23 July. His Honour was informed that the survey would be undertaken the week following the directions hearing of 18 June. Subsequently, outside the courtroom, there was evidence of a brief conversation between Mr Price and Mr McGuiness in which it is said that Mr McGuiness stated that he expected and accepted that Gillette would oppose the use of survey evidence, and that it could be objected to at the hearing. Mr Price referred to the cost which might be wasted and Mr McGuiness is said to have stated that Eveready would proceed with the survey evidence because of the remarks of Dowsett J that the survey evidence may assist Eveready. There was a challenge to this evidence but I accept that a conversation to the general effect deposed to took place in the terms set out in Malleson's memorandum of 18 June." 35 On 21 June G&T wrote to MSJ asking that any comments that Duracell might wish to make about the survey should be provided prior to 23 June which was the day on which, according to the letter, Eveready was to commence conducting the survey. The next day, 22 June, MSJ replied stating that Duracell would oppose the use of evidence from the survey. 36 In sum, Duracell's position was that it would oppose the use of the survey but it did not, as required by the Practice Note, attempt to "resolve [the] disagreement". 37 Eveready's survey was conducted between 1 and 3 July. Eveready served draft affidavits relating to it. On 2 August G&T wrote to MSJ referring to the course of correspondence and asserting that Duracell had now "missed the opportunity" to rely upon, or seek to lead, any evidence concerning the form or methodology of the survey. G&T asserted that MSJ should have raised any matters as to the form or methodology of the survey prior to the survey's being conducted. 38 On 13 August 1999 MSJ replied referring to the fact that it had previously made it clear that it would oppose the use of the survey evidence and asserting that it was still open to Duracell to lead evidence regarding the admissibility and weight of the survey evidence. 39 Duracell filed an affidavit of Dr Robert Gordon sworn 10 September 1999 which made extensive criticisms of Eveready's survey methodology. It was the service of this affidavit that led to the motion brought by Eveready that was heard by Tamberlin J. Eveready sought by that motion an order that Duracell not be entitled to rely on Dr Gordon's affidavit to the extent that that it related to the form or methodology (or both) of the survey undertaken by Eveready for the purpose of the proceeding. 40 Tamberlin J thought that Duracell had indeed not complied with Practice Note 11 but that Eveready's motion was premature and that the issues of the admissibility of the survey and of any weight to be given to it should be matters for the trial judge. Similarly, his Honour reserved the costs of Eveready's motion to be determined by the trial judge. 41 I should note in passing that following the filing of Dr Gordon's affidavit, Eveready did conduct a further smaller survey and that it attempted to tender certain documents on the hearing, on both of which facts Duracell relies as suggesting that Eveready accepted that its original survey evidence was deficient and that there was substance in Dr Gordon's criticisms of it. 42 As it happened, on the final hearing I admitted the survey evidence but decided the case without relying on it. 43 In my view, although Duracell succeeded on the motion before Tamberlin J it should not have its costs of that motion which was brought about by its failure to comply with Practice Note 11. I was inclined at one stage to think that Eveready should have an order for its costs of the motion, since what prompted the motion was that non-compliance. But I think the better view is again that the parties bear their own respective costs of the motion. The costs of the survey evidence and the part of the hearing related to it 44 The third special costs order sought by Duracell is that Eveready should not recover its costs associated with the obtaining and presentation of the survey evidence, or of that part of the hearing which related to the survey evidence. Duracell refers to the well known case, Arnotts Limited v Trade Practices Commission (1990) 24 FCR 313, and to the requirements with which surveys should comply recognised in that case. It submits that the survey evidence led by Eveready fell far short of complying with those requirements, that those requirements were well known, and that if I had had to resolve the matter I would have given no weight to the survey evidence. Duracell submits that if I should be unable to determine the present issue without making a finding in relation to the weight to be given to the survey evidence, I should proceed to make such a finding. 45 I do not find the submission that I should review all of the evidence and submissions made as to the admissibility of the survey evidence and the weight to be given to it, a particularly attractive one at this stage. Rather, I would take quite a simple approach: making the assumption in favour of Duracell that Eveready's survey evidence was fundamentally flawed and would have been given no weight, nonetheless Duracell should have to pay Eveready's costs relating to it which Duracell seeks to have excluded. The reason is simply that Duracell did not comply with Practice Note 11. 46 If it should be open to a party not to comply with the Practice Note, then to succeed on its submissions in relation to the survey evidence, yet not have to pay the costs associated with the survey-evidence, there seems to be no reason why an objecting party should ever comply with Practice Note 11. 47 It is no answer to say that the Practice Note should be enforced by admitting inadmissible survey evidence, or giving weight to survey evidence that it does not deserve. Let it be assumed in the present case that Dr Gordon's evidence demonstrated that Eveready's survey evidence was inadmissible or should be accorded no weight. I do not think that in such circumstances the evidence ought to be admitted or given weight as some kind of sanction against Duracell. Generally, evidence either is or is not admissible, and either is or is not to be given weight in accordance with legal principle. Costs, on the other hand, are of a different order and invoke a wide discretion. 48 That is why I can determine the present issue by making all assumptions in favour of Duracell. Assuming in its favour that Dr Gordon's evidence, which was, as I indicated earlier, detailed and comprehensive in nature, demonstrated that Eveready's survey evidence was fundamentally flawed and should properly carry no weight, nonetheless Duracell should have to pay Eveready's costs because the Practice Note required Duracell to attempt jointly with Eveready to overcome any problems which it, Duracell, saw in the survey methodology. Of course one cannot be sure what would have happened if Duracell had made that attempt. Eveready may have proved intransigent. But the evidence does not satisfy me that it would have and suggests that it would not have. Duracell should not be allowed to benefit from any uncertainty in this respect. 49 For the above reasons, I would not exclude from the costs to be paid by Duracell, Eveready's costs associated with the obtaining and presentation of the survey evidence or the part of the trial relating to it. 50 Mr Sharpley of counsel for Duracell asks for a special order as to costs. The special order is, in effect, that Eveready should not recover its costs of the hearing last Wednesday 9 February. He points out, correctly, that on the hearing of the question of the declarations and orders to be made, both parties have had some success. However, I regard the two days, last Wednesday and today, as being, in effect, one hearing on these issues. Therefore, I treat it as a necessary outcome of the substantive hearing that this two-day hearing has occurred. I do not distinguish between the two days or between parts of them. Accordingly, I decline to except from the order for costs in favour of Eveready the costs of last Wednesday, 9 February. CONCLUSION 51 For the above reasons and those delivered on 23 December 1999 there will be declarations and orders as annexed. I certify that the preceding fifty one (51) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. Associate: Dated: 25 February 2000 Counsel for the Applicant: Mr F Kunc Solicitors for the Applicant: Gilbert & Tobin Counsel for the Respondent: Mr R C Macaw QC and Mr S Sharpley Solicitors for the Respondent: Mallesons Stephen Jaques Date of Hearing: 9, 17 February 2000 Date of Judgment: 17 February 2000