Federal Court of Australia Key Logic Pty Ltd v Sun-Wizard Holding Pty Ltd (No 2) [2022] FCA 81 File number(s): QUD 607 of 2017 Judgment of: GREENWOOD J Date of judgment: 8 February 2022 Catchwords: INTELLECTUAL PROPERTY – consideration of the disposition of the costs reserved for determination by the orders made in Key Logic Pty Ltd v Sun-Wizard Holding Pty Ltd [2021] FCA 208 Legislation: Designs Act 2003 (Cth), ss 68(6), 88 Federal Court of Australia Act 1976 (Cth), s 43 Cases cited: Key Logic Pty Ltd v Sun-Wizard Holding Pty Ltd [2021] FCA 208 UCP Gen Pharma AG v Mesoblast, Inc (No 2) [2012] FCA 500 UCP Gen Pharma AG v Mesoblast, Inc [2012] FCA 210 Division: General Division Registry: Queensland National Practice Area: Intellectual Property Sub-area: Copyright and Industrial Designs Number of paragraphs: 18 Date of last submission/s: 26 March 2021 Date of hearing: Heard on the papers Solicitor for the Appellant: Bennett & Philp Lawyers Solicitor for the Respondent: Synkronos Legal ORDERS QUD 607 of 2017 BETWEEN: KEY LOGIC PTY LTD (ACN 099 244 078) Appellant AND: SUN-WIZARD HOLDING PTY LTD (ACN 600 193 413) Respondent order made by: GREENWOOD J DATE OF ORDER: 8 FEBRUARY 2022 THE COURT ORDERS THAT: 1. The respondent pay the appellant's costs of the proceeding before the delegate of the Registrar of Designs fixed in an amount of $4,949.54. 2. The respondent pay the appellant's costs of and incidental to the proceeding to be awarded as a lump sum, in a sum to be determined by officers of the Court (either a National Judicial Registrar and District Registrar or a Deputy District Registrar), rather than undertaking a taxation of costs, as the appointed Court officer determines. 3. The parties submit, within seven days, a proposed timetable by which the appellant is to file and serve an affidavit in the form of a costs summary (as contemplated by paragraphs 4.10, 4.11 and 4.12 of the Costs Practice Note); by which the respondent is to file and serve an affidavit in the form of a costs response for the purposes of 4.13 and 4.14 of the Costs Practice Note; and by which the parties are to file and serve submissions in accordance with paragraph 4.15 of the Costs Practice Note. 4. Pursuant to s 23 and s 37P of the Federal Court of Australia Act 1976 (Cth), rule 1.32 and rule 1.36 of the Federal Court Rules 2011, these orders and the reasons for judgment in support of these orders are made and published from Chambers. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT 1 These proceedings are concerned with the disposition of the costs reserved by Order 3 of the orders made in the principal proceeding: Key Logic Pty Ltd v Sun-Wizard Holding Pty Ltd [2021] FCA 208. 2 The principal proceeding was concerned with an appeal by the applicant, Key Logic Pty Ltd ("Key Logic") under s 68(6) of the Designs Act 2003 (Cth) (the "Act") from a decision of the delegate of the Registrar of Designs made on 17 October 2017 revoking the registration of a design for application to a product called a "solar bollard". In the result, the applicant appellant was successful and the Court ordered that the appeal from the decision of the Registrar's delegate be allowed. The decision of the Registrar's delegate was set aside. 3 The disposition of the costs reserved for determination on the papers involves two classes of costs. 4 The first is the costs of the principal proceeding in the Federal Court of Australia. As to those costs, the applicant seeks an order that the respondent, Sun-Wizard Holdings Pty Ltd ("Sun-Wizard") pay the applicant's costs of and incidental to the proceeding. The applicant also seeks procedural orders for the determination of those costs by way of a lump sum order rather than a taxation of the costs. The respondent makes no submissions as to the costs of the appeal proceeding (which, of course, was an exercise of original jurisdiction). Accordingly, orders will be made for the payment by the respondent of the applicant appellant's costs of and incidental to the proceedings to be awarded on a lump sum basis in accordance with the proposed procedural orders of the applicant. 5 The second category of costs concerns the costs of the proceeding before the Registrar's delegate leading to the decision the subject of the appeal to this Court. The applicant seeks an order that the respondent pay its costs of that proceeding fixed in an amount of $4,949.54. 6 The power to award costs in all proceedings before the Court is conferred by s 43 of the Federal Court of Australia Act 1976 (Cth) (the "Court Act"). There is no need in these reasons to set out the principles governing the exercise of that power. There is no controversy between the parties as to the disposition of the costs of the Federal Court proceedings. Section 43 of the Court Act, however, does not confer power on the Court to make an order as to the costs of a proceeding before the Registrar's delegate. 7 As to the power conferred on the Federal Court on the hearing of an appeal against a decision of the Registrar's delegate, s 88 of the Act is in these terms: On hearing an appeal against a decision or direction of the Registrar, the Federal Court or Federal Circuit Court may do any one or more of the following: (a) admit further evidence orally, or on affidavit or otherwise; (b) permit the examination and cross-examination of witnesses (including witnesses who gave evidence before the Registrar); (c) order an issue of fact to be tried as it directs; (d) affirm, reverse or vary the Registrar's decision or direction; (e) give any judgment, or make any order, that, in all the circumstances, it thinks fit; (f) order a party to pay costs to another party. 8 As mentioned, the Court set aside the decision of the Registrar's delegate. That order had the effect of setting aside the delegate's decision to order Key Logic to pay Sun-Wizard's costs of the proceeding before the delegate. Section 88(d) confers power on the Court to vary the delegate's decision (including in relation to the costs). Section 88(f) confers power on the Court to order a party to pay costs to another party. It may be that the proper construction of s 88(f) (having regard to the role of s 43 of the Court Act in relation to the costs of proceedings in the Court), is that s 88(f) includes the conferral of a power in relation to costs incurred by a party in proceedings before the Registrar's delegate. The scope of s 88(f) might become more relevant in a proceeding where the Registrar's delegate has made no order as to costs. In these proceedings, the power under s 88(d) to vary the Registrar's decision (including, in this case, the delegate's decision to award costs to Sun-Wizard), confers power to make an order as to the costs of the proceeding before the delegate. For my part, I take the view that s 88(d) of the Act is sufficiently broad to confer a general power to make an order as to the costs of the proceeding before the Registrar's delegate. That view of the scope of the power is consistent with the view expressed by Jessup J in relation to s 197(d) of the Trade Marks Act 1995 (Cth), which is in the same terms as s 88(d) of the Act, in UCP Gen Pharma AG v Mesoblast, Inc (No 2) [2012] FCA 500 at [3] ("UCP Gen Pharma AG"). The exercise of the power raises another question. 9 It does not necessarily follow that, because an applicant has successfully appealed a decision of the Registrar's delegate (and obtained an order reversing, by setting aside the decision), that the delegate's decision ought to be varied so as to award the successful applicant in the Court proceedings the costs of the proceeding before the Registrar's delegate. The appeal proceeding is a hearing de novo and the scope of the evidence on the facts is likely to be more extensive (as it was in this case) than the material put on before the delegate. It may be that on the basis of the material before the delegate, the failure to award costs or indeed an award of costs in favour of the party that was unsuccessful in the appeal proceeding, was properly made. 10 It is important to remember that the conduct of the de novo appeal proceeding is not a process by which the Court investigates contended error on the part of the Registrar's delegate. The proceeding is a true de novo proceeding in the Court's original jurisdiction with all issues of fact and law determined afresh. 11 In the present proceeding, I made reference in the principal reasons at [7] to some of the declarations and affidavit material, in these terms: 7 As to the evidence, I have had the benefit of reviewing the transcript of the proceedings in the context of the cross-examination of the principal witnesses, namely, Mr Michael Arieni concerning his declaration dated 5 September 2016 and his affidavits of 8 February 2018 and 3 May 2018; Mr Ian Fry concerning his declarations of 17 June 2016 and 11 May 2017 and his affidavit of 9 April 2018; Mr Earl Palfrey's declaration of 17 June 2016; and the affidavits and cross-examination of Mr Adrian Kedwell and Mr Peter West. I have, of course, considered the remaining evidence. I have also noted the lengthy initial discussions at the outset of the hearing about objections to evidence. 12 The respondent notes that the following material before the Court was not before the delegate: Mr Arieni's affidavit of 8 February 2018; Mr Arieni's affidavit of 3 May 2018; Mr Fry's affidavit of 9 April 2018; Mr Kedwell's affidavit of 1 May 2018; Mr West's affidavit of 2 May 2018; and oral evidence given by Mr Arieni, Mr Palfrey, Mr Fry, Mr Kedwell and Mr West. The respondent contends that the delegate ought to have determined the matter as he did in reliance upon the body of evidence before him and that the additional evidence before the Court "tipped the discretionary balance in favour of the appellant" with the result that the Court ought not vary the delegate's order as to costs so as to award Key Logic the costs of the proceedings before the delegate. 13 An example of a proceeding in which Jessup J refused to make an order in favour of a successful appellant for costs of the proceeding before the relevant Registrar's delegate (in that case, the delegate of the Registrar of Trade Marks) is UCP Gen Pharma AG. In that matter, Jessup J expressed this observation at [3]: In the exercise of that power [that is the power arising under s 197(d) of the Trade Marks Act 1995 (Cth) in the same terms as s 88(d) of the Act], the question must be whether, in the light of the judgment which the court gave on 15 March 2012, it can now be said that the applicant ought to have succeeded before the delegate, such that it would have been awarded its costs – and the respondent would not have been awarded its costs – on the conventional basis [that is, costs follow the event]. [emphasis added] 14 His Honour noted that many judgments had been referred to him in which the successful party on appeal also obtained the benefit of an order for the costs of the proceeding before the Registrar as a matter of the "normal course" (on the footing that costs ought to follow the event). His Honour accepted that that very circumstance provided some support for the proposition that the awarding of costs in relation to the proceeding before the Registrar would normally be "adjusted" so as to reflect the outcome of a successful appeal before the Court. His Honour also accepted, however, that a particular feature of the case might "set it apart" from such an approach. His Honour had before him an example of a case where such a feature was present. His Honour put it this way at [5]: That feature is that the proceeding in the court was decided substantially by reference to events which post-dated the evidence led before the delegate, even if they did not all post-date his decision. The delegate heard the parties' cases on 15 April 2010, and the most recent event to which he referred in his reasons was the liquidation of Polartechnics Ltd. None of the facts to which I referred in my reasons of 15 March 2012 after the second sentence in paragraph 21 thereof was mentioned by the delegate; or, I would infer, was relied on by the applicant before the delegate. 15 At [21] (apart from the first sentence) to [25] of the primary judgment in UCP Gen Pharma AG v Mesoblast, Inc [2012] FCA 210, Jessup J notes a significant body of fact which was not before the Registrar's delegate most of which arose after the date of the delegate's decision on 15 April 2010. That being so, Jessup J dismissed an application by the successful appellant for an order that it be awarded the costs of the proceeding before the delegate. 16 In the present case, it is correct to say that the material described at [12] of these reasons was not before the delegate. It needs to be kept in mind that the question for the Court in a de novo appeal as an exercise of original jurisdiction from the Registrar's decision is not an exercise in correcting error on the part of the delegate. The question, so far as it relates to the costs of the proceedings before the delegate, is whether there are features or differentiating circumstances in the proceeding before the delegate which suggest that the successful party before the Court (who is only before the Court by reason of the anterior decision) ought not to have the costs of the anterior proceeding. One example of that is UCP Gen Pharma AG. 17 Although additional material was put on for the purposes of the Court proceeding (as earlier described), the material included the declarations before the delegate supplemented by affidavits including affidavits from persons who had filed declarations central to the anterior decision including Mr Arieni, Mr Fry and Mr Palfrey. In the Court proceeding, the Court accepted the evidence of Mr Arieni. As to Mr Palfrey, the Court said this at [284]: (2) To the extent that Mr Palfrey suggests that any information in emails sent to him by Exlites in the period between formation of the CI Network and a time when all the production difficulties and problems for the GENII had been resolved and the product was complete and ready for supply (and in particular the emails of 21 April 2010 and 3 May 2010), was information that he was free to use and disclose as he determined appropriate in marketing Exlites products, I reject his evidence. (3) I have already expressed the view that Mr Palfrey allowed himself to become an advocate for invalidity of the Registered Design, not just a witness of fact. (4) I choose not to rely upon Mr Palfrey's evidence as to these matters of the extent to which information communicated by the emails of 21 April 2010 and 3 May 2010 could be used by him. 18 At [284], the Court also noted that Mr Fry had a direct commercial interest in seeking to invalidate the registration of the design for the GENII product, but also noted aspects of the evidence that Mr Fry accepted (at [284](6), (7) and (8)). These findings were an important basis upon which the appellant was successful. Although these findings emerged out of the conduct of the proceeding before the Court, the findings engaging the declarations critical to the application before the delegate suggest that the initial application the subject of the delegate's decision was unmeritorious and ought not to have been made, especially to the extent that it rested upon the declaration of Mr Palfrey. I am satisfied that the circumstance that there was additional evidence before the Court is not a differentiating circumstance which ought to deprive the successful appellant of the benefit of an order for costs of the proceeding before the delegate. I am satisfied that the orders as proposed by the applicant ought to be made. I certify that the preceding eighteen (18) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Greenwood. Associate: Dated: 8 February 2022