Note on: Nagpal v Global Cars Aus Pty Ltd (No 2) [2021] FCA 1300

The case of Nagpal v Global Cars Au Pty Ltd (No 2) [2021] FCA 1300 (Nagpal) concerned a dispute relating to the domain name cars24.com.au.  Ultimately, an Originating Application brought by the Applicants seeking, amongst other things, declaratory relief was set aside and the proceedings were dismissed.  The Federal Court was then to determine the question of costs in the proceedings.

Facts of this domain name dispute in the Federal Court

The facts of the substantial dispute between the parties is laid out in the judgment of Nagpal v Global Cars Aud Pty Ltd [2021] FCA 1226.  By way of summary, the applicants in that case consisted of a Mr. Nagpal, an accountant, and his company Proven Associated Services Pty Ltd.  The applicants contended that since June 2018 they had operated a website at “www.provenaccountants.com.au”.  The Applicants also registered a domain name “cars24.com.au” (Cars Domain).

Both domain names were allegedly owned by Mr. Nagpal and obtained pursuant to a Domain Name Registration Agreement (Agreement) issued by GoDaddy Operating Company, LLC – an American internet domain registrar and web hosting company.  Pursuant to the Agreement, Mr. Nagpal was bound by the .au Dispute Resolution Policy (.auDRP).

A dispute arose between the parties on the basis that the applicants use of the “cars24.com.au” domain infringed the respondents registered trademarks relating to the phrase “CARS24”.

Pursuant to the .auDRP, the World Intellectual Property Organisation (WIPO) administered a decision in respect of this dispute which was not favourable to the applicants.  The applicants then sought relief from the Federal Court in the form of a declaration, amongst other things, that their Cars Domain:

• did not infringe and would be unlikely to infringe the CARS24 trademark; and
• has not contravened sections 18 and 29(1)(g) of the Australian Consumer Law (being schedule 2 to the Competition and Consumer Act 2010 (Cth)). These statutes relate to misleading or deceptive conduct and false or misleading representations about goods or services respectively.

The Federal Court ultimately held that the matter was outside the scope of the original jurisdiction of the Federal Court of Australia on the basis that the issue was neither justiciable nor within the five (5) sub-paragraphs of section 39B(1A) of the Judiciary Act 1903 (Cth).  As such the Originating Application was set aside and the proceedings were dismissed.

Hearing as to costs

The respondents sought two orders from the Court in relation to costs.  Firstly, that the applicants pay the respondent’s costs on an indemnity basis.  Secondly, an order fixing costs by way of a lump sum.  The Court sought fit to make the orders as sought by the respondent.

Indemnity costs

Section 43(1) of the Federal Court of Australia Act 1976 (Cth) provides as follows:

“the Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which this or any other Act provides that costs must not be awarded.”

 The Federal Court may, in its discretion and on the facts present in the case before it, judicially determine whether costs should be awarded in accordance with the ordinary rule or on an indemnity basis.[1]  The ordinary rule is that an award of costs is on the party-party basis, that is, that each party bares their own costs in the matter.^[2]

An order for indemnity costs may be made where proceedings exhibit ‘some special or unusual feature’ or ‘special circumstance’.^[3]  In the present case, relevant circumstances which may give rise to an award for indemnity costs were identified to include:

• the fact that the proceedings were commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law;
• the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions;^[4] and
• where the applicant, if properly advised, should have known that the proceeding should not be commenced in the Federal Court.^[5]

In this case, the Federal Court considered that the respondents had provided the applicants with early and explicit notice of the deficiencies in their application – particularly that the Federal Court did not have jurisdiction to determine this dispute.  In response, the applicants brought hypothetical claims seeking ‘colourable’ declarations for the purposes of fabricating jurisdiction.  The Federal Court also found that, properly advised, the applicant ought to have known not to commence proceedings.  As such, the applicants were liable for indemnity costs – which are far greater than ordinary costs.

Lump Sum Costs

Rule 40.02(b) of the Federal Court Rules 2011 (Cth) provides:

“A party or person who is entitled to costs may apply to the Court for an order that costs:

• …
• be awarded in a lump sum, instead of, or in addition to, any taxed costs;”

The Federal Court’s Costs Practice Note provides at paragraph 4.1 that “the Court’s preference, wherever it is practicable and appropriate to do so, is for the making of a lump sum costs order”.  This practice direction supports the view of Markovic J in the case of Fewin Pty Ltd v Burke (No 3) [2017] FCA 693 who held at [12]:

“The Court has also recognised that it is appropriate to use the lump sum costs order procedure in cases which are simple and in which ‘there would be utility in the Court cutting the Gordian knot of protracted fights about costs.”

On the basis that the proceedings were simple and terminated at an early-stage costs were fixed by a lump sum.

Links and further references

Legislation

Australian Consumer Law

Competition and Consumer Act 2010 (Cth)

Federal Court of Australia Act 1976 (Cth)

Federal Court Rules 2011 (Cth)

Judiciary Act 1903 (Cth)

Cases

Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225

Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd (No 2) [2018] FCAFC 7

Fewin Pty Ltd v Burke (No 3) [2017] FCA 693

Nagpal v Global Cars Au Pty Ltd (No 2) [2021] FCA 1300

Randjelovic v Threlfall [2012] FCA 1331

Re Wilcox; Ex Parte Venture Industries Pty Ltd (No 2) [1996] FCA 1132

Further information about breaches of contract

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Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

[1] Idenix Pharmaceuticals LLC v Gilead Sciences Pty Ltd (No 2) [2018] FCAFC 7 [3].

[2] Re Wilcox; Ex Parte Venture Industries Pty Ltd (No 2) [1996] FCA 1132 [3], [9].

[3] Nagpal v Global Cars Au Pty Ltd (No 2) [2021] FCA 1300 [14].

[4] Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225.

[5] Randjelovic v Threlfall [2012] FCA 1331.

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