Costs Apportionment in Appeals - Federal Court of Australia

FEDERAL COURT OF [COMPANY] v [COMPANY] (No 3) [2007] FCAFC 119

COSTS – costs of appeal where successful party abandoned a number of grounds of appeal prior to the hearing – where successful party was unsuccessful on substantive issues of appeal – where circumstances justify apportionment of costs between the parties according to their success or failure on separate issues COSTS – costs of the motion on notice seeking variation of orders – where motion was unsuccessful – no circumstance existed to justify departure from the ordinary principle that costs follow the event Federal Court of Australia Act 1976 (Cth), s 43 [COMPANY] (formerly [COMPANY]) v [COMPANY] (1993) 26 IPR 261 cited [COMPANY] (ACN [PHONE]) v [COMPANY] (ACN [PHONE]) VID 774 OF 2006

[NAME] CJ, [NAME] JJ

28 August 2007

MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VID 774 OF 2006

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN: [COMPANY] (ACN [PHONE])

Appellant

AND: [COMPANY] (ACN [PHONE])

Respondent

JUDGES: [NAME] CJ, [NAME] JJ DATE OF ORDER: 28 August 2007

WHERE MADE: MELBOURNE

THE COURT ORDERS THAT:

1. The respondent pay the appellant's costs of the appeal other than the appellant's costs of and associated with grounds 1 to 14 (inclusive), 17 and 18 of the amended notice of appeal.

2. The appellant pay the respondent's costs of and associated with grounds 1 to 14 (inclusive), 17 and 18 of the amended notice of appeal.

3. The appellant pay the respondent's costs of the motion on notice dated 5 June 2007.

4. Neither party be entitled to have a bill of costs taxed until the principal proceeding is concluded or further order of the trial judge. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY VID 774 OF 2006

BETWEEN: [COMPANY] (ACN [PHONE])

Appellant

AND: [COMPANY] (ACN [PHONE])

Respondent

JUDGES: [NAME] CJ, [NAME] JJ

DATE: 28 August 2007

PLACE: MELBOURNE

REASONS FOR

JUDGMENT 1 [NAME] brought a proceeding in the Court in which it claimed that the use by [NAME] of a shade of purple in connection with its chocolate confectionary business may cause consumers to conclude, mistakenly, that [NAME] products are [NAME] products or that there is some connection between the respective chocolate confectionary businesses of [NAME] and [NAME]. A judge of the Court made orders that [NAME]'s proceeding be dismissed with costs: see [COMPANY] v [COMPANY] (No 4) [2006] FCA 446. On 21 May 2007, the [ADDRESS] upheld an appeal from those orders and set them aside on the ground that certain expert evidence that [NAME] sought to lead had been wrongly excluded: see Cadbury Schweppes Pty Ltd v Darrell Lea Chocolate Shops Pty Ltd [2007] FCAFC 70. [ADDRESS] ordered that the matter be remitted to the primary judge for further hearing. 2 By notice of motion dated 5 June 2007, [NAME] moved the Court for an order that the order made on 21 May 2007, remitting the matter to the trial judge for further hearing, be varied to provide that the matter be remitted to the trial judge for a new trial. [ADDRESS] declined to make the order sought: see [COMPANY] v [COMPANY] (No 2) [2007] FCAFC 102. 3 Orders were made that the parties to the appeal file written submissions as to the costs of the appeal and the costs of [NAME]'s motion on notice dated 5 June 2007.

Costs of the appeal 4 It was submitted by [NAME] that it had succeeded in the appeal and that it was therefore entitled to its costs. [NAME] submitted that the costs of the appeal should be reserved for the consideration of the trial judge. In the alternative, it contended that if the [ADDRESS] were to determine this issue, then there should be no order as to the costs of the appeal. It said further that if there were an order for costs, it should be that [NAME] pay [NAME]'s costs thrown away by reason of the late abandonment of certain appeal grounds, and [NAME]'s costs of the appeal grounds where [NAME] was unsuccessful. [NAME] accepted that it should pay [NAME]'s costs in relation to the expert evidence grounds of appeal but it also contended that there should be no order permitting the taxation of costs (and requiring payment) until the conclusion of the trial. 5 In support of its submissions [NAME] sought to tender an affidavit of [NAME] sworn 5 June 2007 deposing to the abandonment of certain grounds of appeal, to amendments to [NAME]'s notice of appeal, and to certain costs incurred in the preparation of the appeal. 6 The primary position of [NAME] was that it objected to the tender of the affidavit of [NAME]. However, an affidavit of [NAME] of 10 July 2007 was filed and served on behalf of [NAME] in response to the affidavit of [NAME]. There was some disagreement between the parties as to the costs incurred as detailed by [NAME]. 7 As we have come to the view that it is not appropriate that we determine what costs may have been thrown away by reason of amendments made to the notice of appeal, or the costs associated with the abandonment or loss of certain grounds of the appeal, we place no reliance on the affidavit material sought to be tendered by either party. 8 Without recourse to the evidence sought to be relied upon, it is apparent that the following relevant events occurred prior to and at the hearing. On or about 3 January 2007, [NAME] sought the leave of the Court to amend its notice of appeal dated 14 July 2006. The amended notice of appeal, dated 3 January 2007, was provided to the Court. [ADDRESS] was informed that [NAME] had confirmed that it had no objection to [NAME] relying on the amended notice of appeal and that [NAME] had agreed to pay [NAME]'s costs thrown away by reason of the amendments made. [ADDRESS] granted leave to [NAME] to amend the notice of appeal. At the hearing of the appeal, some grounds of the amended notice of appeal were abandoned by [NAME], namely, grounds 3, 4, 5, 6, 8, 13, 14, 17 and 18. Grounds 1, 2, 7, 9, 10, 11 and 12, which raised challenges to substantive findings of the trial judge, were pressed only formally at the hearing of the appeal and were rejected by the Court. Grounds 19 to 25 relating to the order for indemnity costs were pressed and [NAME] was ultimately successful in setting aside all the costs orders made by the judge. The remaining grounds 15 and 16 related to the disputed evidence issue. 9 The principal question considered by the [ADDRESS] was whether the trial judge erred in refusing to admit the expert opinion evidence that [NAME] sought to adduce and, on this principal question, [NAME] was successful. Nevertheless, putting aside the issue of the costs thrown away by virtue of the amendment to the notice of appeal (as to which the parties have already reached agreement) and the issue of the indemnity costs, the fact is that [NAME] abandoned some grounds and was unsuccessful on others. 10 It is not doubted that a wide discretion is conferred on the Court to make costs orders under s 43 of the Federal Court of Australia Act 1976 (Cth) ('the Act'). [NAME] contended that we should effectively treat the [ADDRESS] decision as interlocutory and reserve the costs for the trial judge to determine at the further hearing of the trial. We do not accept that the characterisation of the [ADDRESS]'s decision as interlocutory is correct. Undoubtedly, in the overall result of the proceedings, the rights of the parties in litigation have not been finally determined, in that a further hearing before the trial judge has been ordered and a number of different outcomes are possible following that further hearing. However, in relation to the appeal itself, the Court was asked to determine a question as to the inadmissibility of evidence, which was contested and which the [ADDRESS] found in favour of [NAME]. Therefore, we do not think that it is appropriate to reserve costs of the matter for the determination of the trial judge as the [ADDRESS] has made a decision which determined the issue before it. 11 The usual practice is that costs follow the event and that the Court will order the recovery of costs by the successful party on a party-party basis but success or failure on separate issues may lead the court to engage in a process of apportionment: see [COMPANY] (formerly [COMPANY]) v [COMPANY] (1993) 26 IPR 261. Accepting that [NAME] has succeeded in its appeal, even though it did not obtain a new trial and that the ordinary course would be that the costs follow the event, we consider that there is a good reason why there should be an apportionment of the costs in the present case. Putting aside the agreement between the parties about the costs thrown away by the amendment to the notice of appeal (which agreement we assume would be maintained and these orders will not affect), further grounds were abandoned prior to the hearing of the matter before the Court. In relation to the challenges to the substantive findings (which were not pressed other than in a formal way) [NAME] was successful in any event. Treating the amended notice of appeal as the starting point for the purposes of our inquiry, there was a significant narrowing of the appeal prior to the hearing, and [NAME] failed in their challenge to the substantive issues. It is appropriate that, where one party, although successful overall, raised and pursued unsuccessful grounds or abandoned grounds that the other party was expected to meet in preparation of and in the course of the hearing, and as a consequence costs have been thrown away or incurred, such costs should be paid by the successful party. 12 Whilst it is true that the abandoned grounds and the substantive issues did not occupy much hearing time, those issues were raised as questions of substance and needed to be dealt with by [NAME]. [NAME] obviously needed to prepare in anticipation of the arguments being presented to the Court. On this basis, it is appropriate that there be an apportionment between the grounds abandoned or lost and those that were won by [NAME]. 13 It is sometimes preferable in these circumstances to avoid leaving the quantification and fixing of costs to taxation. An allocation of costs in the case of a mixed result can rarely be achieved with mathematical precision and such is not necessary: [NAME] 26 IPR at 272 per Gummow, French and Hill JJ. We do not have all the appropriate material to estimate the amount of costs or time spent on the preparation and consideration of each relevant ground of appeal, and so cannot make any percentage apportionment of the costs. Therefore, we must leave the quantification and fixing of costs to taxation in default of agreement between the relevant parties. 14 For these reasons it will be ordered that: a) [NAME] pay to [NAME] the costs of the appeal other than [NAME]'s costs of and associated with grounds 1 to 14 (inclusive), 17 and 18 of the amended notice of appeal. b) [NAME] pay [NAME]'s costs of and associated with grounds 1 to 14 (inclusive), 17 and 18 of the amended notice of appeal.

Costs of the motion on notice 15 In relation to the costs of the motion on notice dated 5 June 2007 [NAME] submitted that the costs should be costs in the appeal. It was said that [NAME] did not seek to reopen the appeal or have the [ADDRESS] consider its reasons for judgment and it brought the matter before the Court to resolve a controversy about the form of the [ADDRESS]'s orders. It was said that the controversy as to the form of the [ADDRESS]'s orders arose because, in its reasons for judgment, the [ADDRESS] referred to a new trial under s 28(1)(f) of the Act. 16 [NAME] submitted that the appropriate order is that [NAME] pay to [NAME] the costs of and incidental to [NAME]'s motion dated 5 June 2007. It was argued that [NAME] was unsuccessful in its motion and there was no reason to depart from the ordinary principle that the costs follow the event. 17 As we have already indicated, on 21 May 2007, the [ADDRESS] ordered that the matter be remitted to the trial judge for further hearing. The order of the Court was clear that the matter be remitted to the trial judge for further hearing of the proceeding and not a trial ab initio. As was said in the [ADDRESS]'s judgment at [114]: In the circumstances, there is no reason why the proceeding should not be remitted to the primary judge for further hearing. Of course, if the primary judge were prepared to entertain a submission that he would not be able to bring an open mind to the resolution of the proceeding in the light of his Honour's earlier rulings both on the disputed evidence and in the final decision, it would be a matter for his Honour to decide whether he considered it was appropriate for the proceeding to be referred to another judge for a retrial ab initio. 18 There was no doubt that the [ADDRESS] had the power to order a further hearing. The actual order of the [ADDRESS] was clear that there was to be a further hearing as opposed to a new trial. The amplification of the reasons of 21 May 2007 was made in response to [NAME]'s position in support of its motion of 5 June 2007. However, there was no controversy as to the form or content of the Court's orders. If [NAME] seeks to appeal it may do so in the appropriate way. We see no basis for departing from the ordinary principle that the successful party is entitled to its costs. In those circumstances we will order that [NAME] pay to [NAME] its costs of the motion on notice dated 5 June 2007.

Timing of taxation of costs 19 As for the timing of the taxation of the costs, it is desirable to avoid multiple taxations, so it is appropriate to order that neither party be entitled to have a bill of costs taxed until the principal proceeding is concluded or further order of the trial judge. This is not because we treat the appeal as an "interlocutory application", but as an aspect of the exercise of the Court's discretion as to the ordering of costs and to avoid unnecessary taxations. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the [NAME] Chief [NAME], and [NAME] and [NAME].

Associate: Dated: 28 August 2007

Counsel for the Appellant: [redacted]

Solicitor for the Appellant: [redacted]

Counsel for the Respondent: [redacted]

Solicitor for the Respondent: [redacted]

Date of Judgment: 28 August 2007