Background
Crescent Capital Partners Management Pty Limited brought proceedings against Salaam Wealth Investments Australasia Pty Ltd and numerous related parties, alleging trade mark infringement, misleading or deceptive conduct, breaches of earlier court orders and other wrongdoing arising from their use of “Crescent” branding. The relief sought included declarations, injunctions, corrective advertising, damages or an account of profits, and additional damages.
After the respondents began rebranding from “Crescent” to “Salaam,” Crescent Capital discontinued the proceeding by consent and with the Court’s leave, while leaving costs for determination. Crescent Capital argued that the rebranding amounted to capitulation and sought its costs. The primary judge rejected that argument and, applying rule 26.12(7) of the Federal Court Rules 2011 (Cth), ordered Crescent Capital to pay the respondents’ costs. Crescent Capital then sought leave to appeal that costs order.
The Court’s Holding
Justice Banks-Smith dismissed the application for leave to appeal, holding that Crescent Capital had not shown sufficient doubt about the correctness of the primary judge’s discretionary costs decision. The primary judge had applied the correct principles and was entitled to conclude that the respondents’ rebranding was not equivalent to the injunctive relief sought and did not constitute surrender or capitulation. The respondents had given no binding undertaking, remained free to determine their future conduct and continued to dispute liability.
The Court also emphasized that Crescent Capital’s claims extended substantially beyond stopping use of the “Crescent” name. Its discontinuance abandoned claims for declarations, pecuniary relief, corrective advertising and alleged breaches of prior orders. The separation of liability and quantum did not establish that Crescent Capital had achieved a substantial victory, and the primary judge had not applied rule 26.12(7) mechanically. Nor did the costs principles conflict with the overarching purpose provisions in sections 37M and 37N of the Federal Court of Australia Act 1976 (Cth). The leave application was dismissed with costs.
Key Takeaways
- A party discontinuing Federal Court proceedings will ordinarily be liable for the other parties’ costs under rule 26.12(7), unless the Court orders otherwise.
- A defendant’s voluntary commercial change does not necessarily amount to capitulation, particularly where no undertaking or court order binds future conduct and substantial claims remain unresolved.
- Leave to appeal a discretionary costs order requires sufficient doubt about the decision and substantial injustice; showing that another costs outcome was available is not enough.
Why It Matters
The decision underscores the costs risk of discontinuing intellectual-property litigation after a defendant changes the challenged conduct. A claimant’s view that it achieved its practical objective will not by itself establish success or capitulation; the Court will assess the proceeding’s pleaded relief, any binding undertakings or orders, and the parties’ broader conduct.
It also confirms that courts generally will not conduct a hypothetical trial or investigate disputed motives merely to allocate costs after discontinuance. Parties negotiating an exit should address both enforceable future restraints and costs expressly rather than assume that a commercial rebrand will shift costs to the defendant.