FEDERAL COURT OF AUSTRALIA Homart Pharmaceuticals Pty Ltd v Careline Australia Pty Ltd (No 2) [2017] FCA 769 File number: NSD 694 of 2016 Judge: BURLEY J Date of judgment: 21 June 2017 Catchwords: COSTS – application for indemnity costs – application dismissed Legislation: Competition and Consumer Act 2010 (Cth) Schedule 2, s 237 Date of hearing: 21 June 2017 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: Regulator and Consumer Protection Category: Catchwords Number of paragraphs: 8 Counsel for the Applicant: Mr T Maltz Solicitor for the Applicant: Coleman Greig Lawyers Counsel for the Respondents: Mr N Furlan Solicitor for the Respondents: Pure Legal ORDERS NSD 694 of 2016 BETWEEN: HOMART PHARMACEUTICALS PTY LTD ACN 057 411 640 Applicant AND: CARELINE AUSTRALIA PTY LTD ACN 089 177 480 First Respondent DRAGON SHOW AUSTRALIA PTY LTD ACN 080 069 843 Second Respondent AND BETWEEN: CARELINE AUSTRALIA PTY LTD ACN 089 177 480 Cross-Claimant AND: HOMART PHARMACEUTICALS PTY LTD ACN 057 411 640 Cross-Respondent JUDGE: BURLEY J DATE OF ORDER: 21 June 2017 THE COURT ORDERS THAT: 1. The Respondents' application for costs payable on an indemnity basis be dismissed. 2. The Respondents pay the applicant's costs of the application for indemnity costs. 3. The proceeding be listed for case management at 9.30 am on 12 July 2017. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT (Revised from transcript) BURLEY J: 1 In this case, the Respondents (Careline) seek indemnity costs based on an offer in a letter dated 8 June 2016 (offer letter) entitled Without Prejudice Except as to Costs. The legal principles concerning the award of indemnity costs arising from such offers are well established and broadly require an evaluative judgment as to whether or not it was unreasonable to accept or refuse the offer. I do not repeat those legal principles here. The offer letter, set out below, includes the following (with numbering added for convenience); … [1] Careline objects to the usage of virtually identical packaging in an attempt to confuse the marketplace into thinking that they are buying the Careline's bio placenta oil or that there is an association between the two products and companies that does not exist and which is adversely affecting Careline's market for this product and reputation. [2] Accordingly, our client wishes to see Homart differentiate its product and packaging so as to prevent such confusion on the part of consumers. In this regard, our client invites Homart to either consent to the proposed orders set out in our client's Notice of Cross Claim or in the alternative to agree to: (a) change the colour of its packaging ie we would not oppose red packaging associated with Cheri or some other colour other than gold or fully patterned packaging such that the respective products can be sufficiently differentiated. This would also entail colour changes to the ropes, ribbon, bag etc; (b) change the size and shape of the box so that it is not of the same size and shape as Careline's Bio Placenta oil. As discussed in the mediation we would not oppose a round box or any different material for packaging such as cloth or plastic, glass etc; (c) change the shape and colour of the ampules and applicator heavily utilised in our client's displays and advertising; to differentiate Homart's currently bottle and applicator being the identical shape, size and design in al1 respects to Careline's bio placenta oil ampules. [3] Our client will require a private letter of apology not for publication in words to be mutually agreed and will also require corrective advertising in terms to be agreed as discussed during the course of the mediation. Our client is open to the wording of any such statement or corrective advertising being in terms mutually acceptable to the parties. [4] Our client is prepared to compromise its claims and agree to: (a) make no further postings or comments in respect to this dispute including in respect to WeChat or other form of social media; (b) agreeing not to bring any further claims including against any third party; (c) release Homart from any claim in damages arising from the subject of this dispute; (d) each party discontinuing the proceedings. [5] To date our client's costs are in the order of $80,000. Our client is also prepared to reach agreement as to its costs which can otherwise be agreed or assessed. … 2 In my view, the circumstances of the offer do not warrant the grant of an order for indemnity costs in the present case. There are several difficulties that I perceive in reaching a conclusion to contrary effect. 3 The first is that the terms of the offer, set out in [2] above, has two components. First, it invites Homart to either consent to the proposed orders set out in the notice of cross-claim then extant, secondly it invites consent to an alternative agreement involving Homart agreeing to vary aspects of its packaging. The first, amounts to a request for capitulation on the cross-claim. That was not pressed in the present application as the basis upon which the claim for indemnity costs should be awarded, but had it been, some obvious difficulties arise. One of which is that the form of declarations then sought, was not pressed in its entirety at trial. No declaration was sought or given, for instance, in relation to [1], (a)(ii) and (iii) or the second part of (c). Further, in the result in the proceedings, orders in the form of [3] of the notice of cross-claim, namely, that there be corrective advertising published, were refused. 4 The second aspect of [2] of the offer letter is that, in the alternative, Homart and Careline agree to the matters set out in (a), (b) and (c). Those subparagraphs carry with them several difficulties. One is that they propose changes in packaging, the final form of which is not clear from the terms of the offer and would require further discussion and negotiation between the parties. Another is that the form of that offer going to get-up considerations of the Homart packaging is more proscriptive than the final orders that were made in the outcome of the proceedings, which were set out in [2] of the orders of 20 April 2017; 2. Homart by itself, its servants and agents be restrained from selling, offering for sale, distributing, promoting and/or marketing in Australia any bio-placenta oil skin care product in the packaging and get up depicted in Annexure A hereto, or any packaging or get up that is deceptively similar to the packaging or get up of the Careline Australia Pty Ltd (Careline) bio-placenta skincare products depicted in Annexure B hereto. 5 That final form of order as made enables Homart to craft its own packaging in circumstances that did not amount to a deceptively similar form of the packaging which is depicted in images attached to those orders. That is, in my view, a more advantageous form of order than that which was proposed in [2] of the offer letter. 6 A further difficulty is that the apology and corrective advertising sought in [3] of the offer letter were either not sought at trial (in the case of the apology), or ultimately refused in the final relief (in the case of the corrective advertising). The apology was not sought in the cross-claim, and it is not apparent, despite the breadth of section 237 of Schedule 2 to the Competition and Consumer Act 2010 (Cth) (Australian Consumer Law), that would have been available. The fact that it was not sought in the cross-claim is indicative of the reasonableness of refusing the offer. Further indicative, in that respect, is the fact that the corrective advertising was not granted by the Court in the final relief given. I do not accept Careline's submissions that a declaration is of "greater significance" in the scheme of remedies than either an apology or corrective advertising. The fact is that a letter of apology is quite different in character to the declaration, ultimately granted, and it entails a different form of conduct on the part of Careline. Corrective advertising, similarly, is of a different character to the declarations ultimately granted in the proceedings, and I would not equate the two or evaluate one as greater than the other in the circumstance of this case. 7 Furthermore, the offer contained in [3] of the offer letter is uncertain in its terms. In my view, that is a significant factor in weighing the considerations because the gist of at least one policy objective of the offer of compromise and costs regime is that the parties have some certainty as to the outcome of an offer if it is accepted. Refusal of an offer is less likely to be reasonable if the offer is set out in certain terms. Conversely, it is less unreasonable to refuse to accept an offer which is in uncertain terms such as in the present case. I do accept that the terms set out in [4] of the offer letter include aspects of an offer which compromises aspects of the dispute, including aspects of the claim brought by Homart in terms which would be advantageous to Homart. However, in light of the uncertainties and other matters to which I have referred, in my view, it was not unreasonable for Homart to refuse to accept the terms contained in the offer letter. 8 Accordingly, I dismiss Careline's application and order that the Respondents' pay the costs of today's application. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Burley. Associate: Dated: 21 June 2017