Question
of the week Question of the week

Curious. Interesting. Informative.

09 August 2019

Stuck with the bill?

Business / Franchise Sale & Purchase, Trade Marks
Federal

Asked

Letters of demand – Claiming legal fees

Our client received a cease and desist letter relating to a claim of trade mark infringement.

The complainant demands legal costs in writing the cease and desist letter to be paid in addition to demands specifically relating to the trade mark infringement claims. If demands are not met including payment of legal costs, further action will be taken.

What are your thoughts on the demand for costs?

Answered

Thank you for the question.

Legal fees are commonly claimed in letters of demand, however there is no entitlement to recover costs. Costs can only be recovered pursuant to a court order. Once the other terms of the cease and desist letter are met, it is unlikely that a complainant would commence proceedings merely to seek a costs order. However, depending on the circumstances, such an application might be made and might be successful. In that event, the costs would of course be greatly increased by reason of the application.

The client should be advised of that risk in the context of the facts of the matter when deciding how to respond to the letter.

Such a letter must not misrepresent or overstate the consequences of failure to comply with the specific demand. This could amount to misleading or deceptive conduct and contravene s 18 of the Australian Consumer Law. An ethical duty also exists upon the author of the letter not to make any statement to another person on behalf of a client that is calculated to mislead or intimidate that other person, and which grossly exceeds the legitimate assertion of the rights or entitlement of the practitioner’s client. The suggestion that the complainant has a right to legal costs might be such a statement: see Australian Competition and Consumer Commission v Sampson [2011] FCA 1165.

If the client is inclined to accede to the demand, then there may be scope to negotiate the quantum of the costs. The amount needs to be reasonable and the liability to pay must be actual. It might be appropriate to require evidence of costs due and payable pursuant to a costs agreement and invoice.

Regards

Mentor