FEDERAL COURT OF AUSTRALIA Peter Bodum A/S v DKSH Australia Pty Ltd [2010] FCA 456 Citation: Peter Bodum A/S v DKSH Australia Pty Ltd [2010] FCA 456 Parties: PETER BODUM A/S, BODUM (AUSTRALIA) PTY LIMITED (ACN 104 809 672) and PI-DESIGN AG v DKSH AUSTRALIA PTY LTD (ACN 005 059 307) File number: NSD 472 of 2008 Judge: MIDDLETON J Date of judgment: 13 May 2010 Catchwords: COSTS – whether indemnity costs or party and party costs are appropriate – whether apportionment of costs is appropriate Cases cited: Australian Competition and Consumer Commission v Universal Music Australia Pty Ltd (No 2) (2002) 201 ALR 618 Black v Tomislav Liqova BHNF Maria Lipovac (1998) 217 ALR 386 CGU Insurance Limited v Corrections Corporation of Australia Staff Superannuation Pty Ltd [2008] FCAFC 173 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 Hansen Beverage Company v Bickfords (Australia) Pty Ltd (No 2) [2008] FCA 601 Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435 J-Corp Pty Ltd v Australian Builders Labourers' Federation Union of Workers [No 2] (1993) 46 IR 301 Maniotis v JH Lever & Co Pty Ltd (No 2) [2006] FCAFC 28 McKerlie v State of New South Wales (No 2) [2000] NSWSC 1159 Nutrientwater Pty Ltd v Baco Pty Ltd (No 2) [2010] FCA 304 Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 Reckitt and Colman Products Ltd v Borden Inc 1990 RPC 341 Re, Wilcox Ex-parte Venture Industries Pty Ltd No 2 (1996) 72 FCR 151 Rosemin Pty Ltd v Gasp Jeans Chadstone Pty Ltd (No 2) [2010] FCA 406 Seven Network Limited v News Limited [2009] FCAFC 166 Sydney Wide Distributors Pty Ltd v Redbull Australia Pty Ltd (2002) 55 IPR 354 Szencorp Pty Ltd v Clean Energy Council Ltd (No 2) [2009] FCA 196 Vasram v AMP Life Limited [2002] FCA 1286 Date of hearing: 13 May 2010 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 32 Counsel for the Applicants: Mr M R Hall Solicitor for the Applicants: Mallesons Stephen Jaques Counsel for the Respondent: Mr G Dalton Solicitor for the Respondent: Arnold Bloch Leibler IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION NSD 472 of 2008 BETWEEN: PETER BODUM A/S First Applicant BODUM (AUSTRALIA) PTY LIMITED (ACN 104 809 672) Second Applicant PI-DESIGN AG Third Applicant AND: DKSH AUSTRALIA PTY LTD (ACN 005 059 307) Respondent JUDGE: MIDDLETON J DATE OF ORDER: 13 May 2010 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The applicants' pay the respondent's costs of the proceeding (other than the costs of the defences relating to estoppel and delay as referred to in paragraphs 186-188 in the liability reasons for judgment, the costs associated with the preparation of the evidence of Ms Sarah Huang and the costs of and in connection with the application for costs) assessed on a party and party basis. 2. The respondent pays the applicants' costs of and in connection with the defences relating to estoppel and delay as referred to in paragraphs 186-188 of the liability reasons for judgment. 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 NSD 472 of 2008 BETWEEN: PETER BODUM A/S First Applicant BODUM (AUSTRALIA) PTY LIMITED (ACN 104 809 672) Second Applicant PI-DESIGN AG Third Applicant AND: DKSH AUSTRALIA PTY LTD (ACN 005 059 307) Respondent JUDGE: MIDDLETON J DATE: 13 May 2010 PLACE: MELBOURNE REASONS FOR JUDGMENT INTRODUCTION 1 On 2 February 2010 Reasons for Judgment were published in this proceeding and the related proceeding VID 423 of 2008. Orders were pronounced on 14 April 2010. The question on costs fell for my determination upon the making of those orders. On 13 May 2010 I pronounced costs orders. The following are the reasons for those costs orders. INDEMNITY COSTS 2 DKSH sought an order that Bodum pay its costs of the proceeding on an indemnity basis. 3 DKSH relied on two grounds as the special circumstances that justify an order for an indemnity of costs: (a) Bodum commenced and maintained a proceeding in circumstances where properly advised it should have known it had no chance of success; (b) Bodum unreasonably rejected a Calderbank offer. First Ground 4 It has been accepted that the general rule is that the costs of a successful party should be paid by the unsuccessful party on a party and party basis. Nevertheless, it is well established that the Court has power to make an order for costs on a different basis in the appropriate case, including an indemnity basis. Indemnity costs may properly be awarded where there is some special or unusual feature in the case justifying a departure from the ordinary rule: see Re Wilcox; Ex parte Venture Industries Pty Ltd (No 2) (1996) 72 FCR 151. 5 DKSH relied upon the proposition that on proper consideration Bodum should have seen this case to be 'a hopeless case': see in J-Corp Pty Ltd v Australian Builders Labourers' Federation Union of Workers [No 2] (1993) 46 IR 301, 303 per French J. 6 One of the essential issues in this case has whether the sale of Euroline Coffee Plungers constituted an actual representation of association with Bodum. Whilst the Court came to some very clear views in determining this matter, I do not think that it is open to conclude that Bodum had no reasonable prospects of success based upon known facts and well established law. Every case must be looked upon by considering all the relevant circumstances including the matter of branding, marketing, labelling and packaging. 7 Whether or not consumers will be mislead or deceived is a question of fact, one in which involves matters of degree and judgment. In particular, I do not think the statement of Gibbs CJ in Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at p 200 was an insurmountable obstacle to Bodum's success: see for example Sydney Wide Distributors Pty Ltd v Redbull Australia Pty Ltd (2002) 55 IPR 354 and Reckitt and Colman Products Ltd v Borden Inc 1990 RPC 341. 8 I do accept that prior to the institution of the proceedings DKSH's solicitors sent a letter to Bodum's solicitors expressly referring of the decision in Puxu and the fact that Bodum and Euroline plungers were both clearly labelled. Even after the proceedings were commenced, DKSH's solicitors wrote to Bodum's solicitors setting out in detail the legal and factual reasons why its proceedings had no reasonable prospects of success. 9 However, once it is accepted that the question of whether there was a misrepresentation is one of degree and depends upon a number of facts and circumstances, I do not think it can be said that the case should have been seen as 'a hopeless case'. 10 Therefore, I have not accepted DKSH's first ground for seeking indemnity costs. Second Ground 11 On 31 July 2008, DKSH made an offer to settle the proceeding on the basis that Bodum discontinue the proceeding and that each party would withdraw and bear their own costs. The offer was rejected by a letter from Bodum's solicitors dated 15 August 2008. 12 It is well established that an unreasonable rejection of an offer of compromise may, by itself, be a proper ground for exercising the discretion to award indemnity costs: see Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) (2005) 13 VR 435, at [28]. 13 The mere refusal of Calderbank letter does not entitle the offeror to indemnity costs. The refusal must be unreasonable: see Hazeldene's Chicken Farm at [23] and [28] and Seven Network Ltd v News Ltd [2009] FCAFC 166 at [60]. 14 It was submitted that Bodum's rejection of DKSH's Calderbank letter was unreasonable having regard to the following: (a) the outcome of the trial was less favourable to Bodum than acceptance of the offer; (b) the weakness of Bodum's case was manifest at the time of the offer and was set out in detail in the Calderbank letter and previous correspondence; and (c) given the manifest weakness of Bodum's case and the amount of cost involved in the proceeding, the offer involved a reasonable compromise. 15 Bodum essentially failed in its claims and will be liable to pay DKSH's costs on a party and party basis. 16 There is also no doubt that DKSH's solicitors had pointed out to Bodum the deficiencies in Bodum's case; not to the extent of indicating that the case was hopeless, but at least indicating that the case was not strong. 17 A question then arises to whether or not there was an attempt to offer a genuine compromise. 18 There are authorities to the effect that a defendant'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 State of 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 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]; Nutrientwater Pty Ltd v Baco Pty Ltd (No 2) [2010] FCA 304 and Rosemin Pty Ltd v Gasp Jeans Chadstone Pty Ltd (No 2) [2010] FCA 406. This is how I have proceeded to consider this application for indemnity costs. 19 DKSH as the party seeking indemnity of costs bears the onus of demonstrating that Bodum's refusal of its offer of settlement was unreasonable: see Black v Tomislav Liqova BHNF Maria Lipovac (1998) 217 ALR 386 at 432; 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] and Seven Network Limited v News Limited [2009] FCAFC 166 at [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. 20 It seems to me that the offer made and the letters of the DKSH's solicitors did not adequately address at least one of the principal concerns raised by Bodum, namely whether in all the circumstances consumers would be likely to be misled, having regard to the fact the Euroline Coffee Plunger did bear a visual resemblance to the Bodum Chambord Coffee Plunger. It is significant to recall that at this time, Bodum's view was that: (a) it had a substantial reputation as a manufacturer of coffee plunger products and household accessories; (b) Bodum had an extensive promotion in sales of the Bodum Chambord Coffee Plunger; and (c) there were some similarities in the design features in the overall visual impression of the Bodum Chambord Coffee Plunger when compared to the Euroline Coffee Plunger. 21 I observe that at the time the offer was made, DKSH did not accept that it had to distinguish the Euroline Coffee Plunger by way of branding. Nevertheless, DKSH added a swing tag later in October 2008. However, it is to be noted that I did not regard the addition of the swing tag as making any material difference, and placed no significance on the swing tag in reaching my conclusion on liability. 22 Bodum's concern and views were not unreasonably held, although for the reasons given in my judgment on liability, Bodum did not succeed in ultimately obtaining the relief sought. 23 It is also relevant to remember that on 31 July 2008 the proceeding had been on foot for only three or so months. Any costs incurred as at that date by DKSH would not have been substantial and there would be little element of giving away anything on behalf of the offeror. 24 In the end, I cannot be satisfied that Bodum's rejection of DKSH's offer in August 2008 was so imprudent or plainly unreasonable so as to enable DKSH to costs in the proceedings different from on a party/party basis. Other Issues 25 Bodum submitted that in relation to two distinct claims of DKSH, discounts should be made: one based on the extensive list of other coffee plungers alleged to so resemble the Bodum Chambord so as to dilute Bodum's reputation, and the other relating to the estoppel and related defences. 26 As to the question of the other coffee plungers in the market and the issue of dilution, no discount should be made, and I refer to the reasons set out in the related proceeding, action VID 428 of 2008. 27 As to the estoppel and related defences, I can appreciate how some preparation by Bodum would have been required to deal with those matters at trial. These issues did not occupy much trial time. In fact, the issue of estoppel and delay occupied a very small proportion of the time at trial. However, this may not be indicative of the costs associated with the preparation by Bodum of dealing with these defences. 28 I accept the courts are sometimes reluctant to undertake an enquiry as to which party has succeeded on particular issues for the purposes of determining whether there should be an apportionment of costs against the successful party. However in this particular case, these defences were independent grounds which in my view were without substance. As discreet grounds, they can be separated from the other matters agitated in the proceedings. 29 Whilst the simpler and cheaper approach would be to allow DKSH to recover only part of its costs to reflect Bodum's right to set off the costs of the failed defences based upon delay and estoppel, I have no proper basis to make such an order: see Hansen Beverage Company v Bickfords (Australia) Pty Ltd (No 2) [2008] FCA 601. 30 A costs order in favour of Bodum in relation to those defences should be made. The parties hopefully will be able to reach an agreement in relation to the actual amounts involved. 31 In relation to the other matter in contention, namely the affidavits prepared by Ms Huang that were not relied upon by DKSH, I refer to the reasons in the related proceeding in action VID 423 of 2008. I do consider there is any significant difference to the circumstances surrounding Ms Huang's evidence between the two proceedings. I proceed in the same way by making similar orders as in the related proceeding. 32 As to the application for costs itself, each party had some success and in my view should each bear their own costs. I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Middleton. Associate: Dated: 18 May 2010