FEDERAL COURT OF AUSTRALIA Rosemin Pty Ltd v Gasp Jeans Chadstone Pty Ltd (No 2) [2010] FCA 406 Citation: Rosemin Pty Ltd v Gasp Jeans Chadstone Pty Ltd (No 2) [2010] FCA 406 Parties: ROSEMIN PTY LTD (ACN 120 758 116) v GASP JEANS CHADSTONE PTY LTD (ACN 094 253 522) File number: VID 832 of 2007 Judge: MIDDLETON J Date of judgment: 30 April 2010 Catchwords: COSTS – whether indemnity costs are appropriate – whether Calderbank Offers are genuine offers and whether rejection is unreasonable – party and party costs amended Legislation: Designs Act 2003 (Cth) Cases cited: Aljade and Malaysian Kuwaiti Investment Co SDN BHD (MKIC) v Oversea-Chinese Banking Corp Ltd (OCBC) [2004] VSC 351 Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd (No 2) (2002) 201 ALR 618 Black v Tomislav Lipova BHNF Maria Lipovac (1998) 217 ALR 386 CGU Insurance Limited v Corrections Corporation of Australia Staff Superannuation Pty Ltd [2008] FCAFC 173 Donnelly v Edelsten (1994) 121 ALR 333 Dresna Pty Ltd v Linknarf Management Services Pty Ltd (in liq) (No 2) [2006] FCA 755 Fyna Foods Australia Pty Ltd v Cobannah Holdings Pty Ltd (No 2) [2004] FCA 1212 Maniotis v JH Lever & Co Pty Ltd (No 2) [2006] FCAFC 28 McKerlie v New South Wales (No 2) [2000] NSWSC 1159 Nutrientwater Pty Ltd v Baco Pty Ltd (No 2) [2010] FCA 304 Australian Transport Insurance v Graeme Phillips Road Transport Insurance(Graeme Phillips case) (1986) 10 FCR 177 Rosemin Pty Ltd v Gasp Jeans Chadstone Pty Ltd [2010] FCA 228 Seven Network Limited v News Limited (2009) 262 ALR 160 Szencorp Pty Ltd v Clean Energy Council Ltd (No 2) [2009] FCA 196 Vasram v AMP Life Limited [2002] FCA 1286 Date of final submission: 8 April 2010 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 20 Counsel for the Applicant: Mr M Rivette Solicitor for the Applicant: Middletons Counsel for the Respondent: Ms M Schilling Solicitor for the Respondent: dkp Lawyers IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 832 of 2007 BETWEEN: ROSEMIN PTY LTD (ACN 120 758 116) Applicant AND: GASP JEANS CHADSTONE PTY LTD (ACN 094 253 522) Respondent JUDGE: MIDDLETON J DATE OF ORDER: 30 APRIL 2010 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The application be dismissed. 2. The registration of the following registered design numbers be revoked pursuant to s 93 of the Designs Act 2003 (Cth). (a) No 312362 – Moon Dress design (b) No 312739 – Bo-Peep Dress design (c) No 312740 – Belt-me in Dress design (d) No 312363 – Cross my Heart Dress design (e) No 313660 – Secret Dress design (f) No 313016 – Pink Lips Dress design. 3. Save as to the costs referred to in paragraphs 4 and 5, the applicant pay the respondent's taxed costs of the proceeding on a party and party basis. 4. The respondent pay the applicant's costs of and in connection with the application for video conference and in respect of a half day of the trial on a party and party basis. 5. The respondent pay the applicant's costs of and in connection with the application for indemnity costs on a party and party basis. Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION VID 832 of 2007 BETWEEN: ROSEMIN PTY LTD (ACN 120 758 116) Applicant AND: GASP JEANS CHADSTONE PTY LTD (ACN 094 253 522) Respondent JUDGE: MIDDLETON J DATE: 30 APRIL 2010 PLACE: MELBOURNE REASONS FOR JUDGMENT INTRODUCTION 1 On 16 March 2010, the Court delivered its reasons in support of dismissing the applicant's claims against the respondent (Rosemin Pty Ltd v Gasp Jeans Chadstone Pty Ltd [2010] FCA 228). 2 The question of costs now falls for my determination. The respondent, in its written submissions, now seeks an indemnity costs order: (a) on the basis that the court found that there were no reasonable grounds for the applicant's allegations of fraud in this proceeding and the absence of such reasonable grounds constitutes the unusual circumstances necessary to enliven the court's jurisdiction to order costs on an indemnity basis; or alternatively, (b) if the unusual circumstances do not enliven the court's jurisdiction, that the respondent's costs should be paid on an indemnity basis from the date of two Calderbank letters dated 3 March 2008 ('March Offer') and 20 June 2008 ('June Offer') (the 'Calderbank Offers'). UNUSUAL CIRCUMSTANCES 3 In Australian Transport Insurance Pty Ltd v Graeme Phillips Road Transport Insurance Pty Ltd (Graeme Phillips case) (1986) 10 FCR 177, Woodward J stated: … Courts in both the United Kingdom and Australia have long accepted that solicitor and client costs can properly be awarded in appropriate cases where "there is some special or unusual feature in the case to justify the court exercising its discretion in that way" (Preston v Preston [1982] 1 All ER 41 at 58). It is sometimes said that such costs can be awarded where charges of fraud have been made and not sustained; but, in all the cases I have considered, there has been some further factor which has influenced the exercise of the court's discretion — for example, the allegations of fraud have been made knowing them to be false, or they have been irrelevant to the issues between the parties: see Andrews v Barnes (1888) 39 Ch D 133; Forester v Read (1870) 6 LR Ch App 40 Christie v Christie (1873) 8 LR Ch App 499; Degmam Pty Ltd (in liq) v Wright (No 2) [1983] 2 NSWLR 354. 4 Whilst not pleading fraud, during the trial the applicant made allegations of fraudulent conduct against the respondent, employees of the respondent and independent third parties such as Mr Colosuonno. 5 In respect of the above allegations the Court: (a) specifically rejected the suggestion that Mr Yilmaz was involved in any conduct involving forging or the creation of documents to support the respondent's position in the proceeding (at [2], [50] and [67] of the Reasons dated 16 March 2010); (b) accepted that Ms Qiu was not involved in any conduct forging or creating documentation in an effort to support the respondent's case (at [37] of the Reasons); (c) rejected the allegation that there was a 'concerted course of conduct of deceit' (at [37] of the Reasons); and (d) rejected the allegation that Mr Chidgey and Mr Colosuonno had fabricated, respectively, the run sheet and invoice (at [82], [88] and [95] of the Reasons). 6 However, I think more than a failure on these allegations is needed to found an order for indemnity costs. 7 There were some peculiarities with the documentation supporting the cross-claim brought by the respondent. Evidence was required by the respondent to explain these peculiarities, and to put the documentary evidence in context. In the circumstances of this case, the applicant was entitled to test the respondent's witnesses. Further, the main attack of the applicant was to seek to demonstrate that the respondent did not satisfy the burden of proof upon it to revoke the design registrations. 8 I am not satisfied that the conduct of the applicant is such as to justify the exercise of the Court's discretion to award costs other than on a party and party basis. THE CALDERBANK OFFERS 9 The applicant submits that the Calderbank Offers were not genuine offers of compromises such as to enliven an indemnity costs order. 10 There are authorities to the effect that a respondent's offer to settle on the basis that each party bears it's own costs is not a Calderbank offer and in any event may not be considered a genuine offer of compromise: see Dresna Pty Ltd v Linknarf Management Services Pty Ltd (in liq) (No 2) [2006] FCA 755 at [20]; Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd (No 2) (2002) 201 ALR 618 at [59]-[60]; McKerlie v New South Wales (No 2) [2000] NSWSC 1159; Vasram v AMP Life Limited [2002] FCA 1286 at [12]; and Fyna Foods Australia Pty Ltd v Cobannah Holdings Pty Ltd (No 2) [2004] FCA 1212 at [10]. It seems to me that the correct approach is to look at the extent of the offer of compromise viewed with all the other relevant circumstances to determine whether the rejection of the offer was unreasonable: see Aljade and Malaysian Kuwaiti Investment Co SDN BHD (MKIC) v Oversea-Chinese Banking Corp Ltd (OCBC) [2004] VSC 351 at [78] to [81] per Redlich J; Szencorp Pty Ltd v Clean Energy Council Ltd (No 2) [2009] FCA 196 at [15] per Goldberg J; Fyna Foods at [11]; Vasram at [13] and Nutrientwater Pty Ltd v Baco Pty Ltd (No 2) [2010] FCA 304. This is how I will proceed to consider this application for indemnity costs. 11 The respondent as the party seeking indemnity of costs bears the onus of demonstrating that the applicant's refusal of its offer of settlement was unreasonable: see Black v Tomislav Lipova BHNF Maria Lipovac (1998) 217 ALR 386 at p. 432, [217]; Maniotis v JH Lever & Co Pty Ltd (No 2) [2006] FCAFC 28 at [7]; CGU Insurance Limited v Corrections Corporation of Australia Staff Superannuation Pty Ltd [2008] FCAFC 173 at [75]; Seven Network Limited v News Limited (2009) 262 ALR 160 at p. 391, [1089]. The question of unreasonableness depends upon the reasonableness of the offer at the time it was made. This includes the status of the proceedings and the relative strength and weaknesses of the parties at the time the offer was made. 12 In this proceeding the timeline of the filing of court documents and events was as follows: (a) The applicant filed its application and statement of claim on 10 September 2007; (b) The respondent filed its defence and cross-claim on 8 November 2007; (c) The respondent's list of discovered documents was filed on 7 April 2008; and (d) The respondent commenced filing its affidavit evidence after 20 June 2008. 13 The applicant submits that it was not unreasonable to reject the Calderbank Offers as the following factors meant that the applicant was not in a position to assess the strengths and weaknesses of both party's cases and therefore its own prospects at trial: (a) It only received the respondent's list of discovered documents after the receipt of the March Offer. The discovery process had not taken place, and therefore the applicant was unaware of the respondent's history with the Gasp Dresses. The documents discovered by the respondent included relevant information which would have assisted the applicant to better assess its prospects; and (b) No evidence had been filed and served by the respondent in the proceeding prior to receiving the June Offer. 14 The Full Court (Neaves, Ryan and Lee JJ) stated in Donnelly v Edelsten (1994) 121 ALR 333 at 345 that the offeror must show that it: … has made a reasonable attempt to terminate the proceeding by an offer to compromise shown to have been a fair offer in all the circumstances and to have provided appropriate opportunity for the offeree to consider and deal with the offer. 15 The Calderbank Offers were made by the respondent before the discovery process had begun or any affidavit evidence had been filed by the respondent. This meant that the applicant had no reasonable or appropriate opportunity to consider and deal with the Calderbank Offers. The applicant's knowledge of the relevant facts, the contentions against its claim, or its knowledge of its prospects were no further advanced than when it filed the proceeding. At the time the applicant filed the proceeding it had a basis for the claim it made in bringing the proceeding. On the basis of the documentation relied upon by the respondent in support of its cross-claim, as I have said, the applicant was entitled to test its accuracy. 16 I do not think that in these circumstances it is possible to conclude that the applicant was imprudent or unreasonable in rejecting the Calderbank Offers. CONCLUSION 17 For the reasons set out above, the appropriate cost orders in the proceeding should be that the applicant pay the respondent's taxed costs of the proceeding on a party and party basis. 18 The respondent should pay the applicant's costs of and in connection with the application for video conference and in respect of a half day of the trial on a party and party basis. 19 The applicant's taxed costs of the application for indemnity costs should be paid by the respondent on a party and party basis. 20 The Court has also been given by the parties minutes of proposed orders disposing of the claim and cross-claim, which the Court now makes. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton. Associate: Dated: 30 April 2010