Re Aut 6 Pty Ltd v Wellington Place Pty Ltd; Alfaro Pty Ltd; Anderson Nominees Pty Ltd and Citywide Investments Pty Ltd [1993] FCA 41 (19 February 1993)

FEDERAL COURT OF AUSTRALIA

Re: AUT 6 PTY LTD
And: WELLINGTON PLACE PTY LTD; ALFARO PTY LTD; ANDERSON NOMINEES PTY LTD and
CITYWIDE INVESTMENTS PTY LTD
No. WA G175 of 1992
FED No. 69
Number of pages - 4
Costs

COURT

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
French J.(1)

CATCHWORDS

Costs - apportionment - unsuccessful applicant - issue raised by respondents - respondents unsuccessful on specific issue - minor costs apportionment ordered.

Commissioner of Australian Federal Police v. Razzi [1991] FCA 267; (1991) 101 ALR 425

J-Corp Pty Ltd v. BLF and BTA (unrep Fed Ct 19.2.93)

HEARING

PERTH, 10 February 1993
19:2:1993

Counsel for the Applicant : Mr N. McKerracher

Solicitors for the Applicant : Clayton Utz

Counsel for the Respondent : Mr M. McCusker QC and Mr C. Tolson

Solicitors for the Respondent: Tolson and Co.

ORDER

The Court orders that:
1. The applicant is to pay seven-eighths (7/8ths) of the

respondents' costs of the action.
2. The applicant to have the costs of the submission on the
question of the appropriate costs order.

Note: Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules.
REASONS FOR JUDGMENT ON RULING AS TO COSTS

DECISION

FRENCH J. On 3 December 1992 I dismissed an application by Aut 6 Pty Ltd claiming relief against the respondents for alleged misuse of market power in contravention of s.46 of the Trade Practices Act 1974. An order was made that the applicant should pay the respondents costs of the action unless within seven days it filed a motion for a different order as to costs. On 10 December 1992 the applicant filed a motion seeking orders in the following terms:

1. The costs payable by the applicant exclude the costs
incurred by the respondents in relation to matters raised
in paragraph 16 of the respondents' amended defence and
particularised in answer number 5 to the respondents'
further and better particulars of amended defence.
2. The costs incurred by the applicant in addressing the
matters raised in paragraph 16 of the amended defence be
set off against the costs payable by the applicant
referred to in 1 above.

2. In paragraph 16 of the amended defence the respondents asserted that they gave notice of non-renewal of the applicant's dealership agreement "for the purpose of the legitimate protection of their commercial interests". Particulars of that pleading were sought by the applicant in relation to:

(a) The commercial interests which the respondents sought to
protect by giving the notice to the applicant.
(b) How the giving of the notice would achieve such
protection.
(c) The specific facts which render "legitimate" the
protection of such commercial interests by giving the
notice.

The answers were as follows:

(a) The commercial interests which the respondents sought to
protect by giving the notice to the applicant were the
preservation of its Distributorship Agreement with MBAu
and the ongoing financial viability of the business of
Diesel Motors.
(b) The respondents will receive greater market penetration
in Western Australia for Mercedes Benz passenger vehicles
if there is only one dealer.
(c) The facts that the respondents could lose their
Distributorship Agreement with MBAu if the market
penetration of Mercedes Benz passenger vehicles in
Western Australia reduces and that the applicant has not
achieved satisfactory market penetration and that the
applicant has conflicting interests, because of its
dealerships for competing passenger motor vehicles.

The letters "MBAu" referred to Mercedes Benz (Australia) Pty Ltd, the national distributor of Mercedes Benz vehicles.

3. The applicant contends that it was a "major allegation" raised by para.16 of the amended defence and particulars that the respondents were in danger of losing their distributorship agreement due to low market penetration of Mercedes Benz passenger vehicles in Australia which in turn was due to the applicant's unsatisfactory market penetration. It was contended also that the matters raised in particulars 5(a) and (b) rely upon those raised in 5(c). I should say at once that I do not accept that the first two sub-paragraphs of particular 5 were contingent or dependent upon the allegation made in the third sub-paragraph. The applicant went on to make reference to findings in the judgment bearing upon these aspects of the defence as particularised. At p 39 of the judgment I said:

"Despite concern from the respondent about contraction
in the market and losses on the commercial vehicle
side of its operations, there is nothing to suggest
that either of the existing dealerships is presently
or likely to be commercially unviable. In that
respect I should say at this stage that I do not
accept the suggestion that the applicant was
performing badly or that the respondent so perceived
it. There was a deal of evidence given on behalf of
the respondent on that issue relevantly to the purpose
of the proposed non-renewal of the dealership
agreement. But as I indicated during closing
addresses, I do not accept that as a fact or as the
reason for the proposed non-renewal."

And at p 41 I said that:

"In coming to the conclusion I have I should also say,
although it is strictly unnecessary to do so, that I
did not accept the explanation advanced on behalf of
the respondent, of its purpose in not renewing the
dealership in so far as it reflected upon the
performance of the applicant. I do not accept that
the alleged poor performance by the applicant was a
factor in the decision. In my opinion the probability
is that the respondent's purpose was to increase its
market penetration and profitability by adding to its
existing sales those derived from sales which would
otherwise have been made by the applicant and to
protect its position with MBAu. In so doing it has
taken advantage of contractual powers, but while those
may be an element of market power they do not
constitute or form part of a substantial degree of
market power in the relevant sense."

4. The applicant contends that the issues raised in para.16 of the amended defence were not issues which were reasonably raised and as such they multiplied issues in the proceedings. It contends that a substantial proportion of its costs were incurred in addressing the matters raised by those allegations which were dominant in the proceedings as was apparent from the third affidavit of Gregory Lle Arnold and the lengthy cross-examination of Rayder Sandon. Mr Arnold was a director of the applicant and the cross-examination referred to is of Mr Sandon by counsel for the applicant. The applicant says it was forced to address the matters raised in para.16 of the amended defence and the particulars pertaining to that paragraph. It was not open to it to have merely elected not to address that issue. The applicant submits that the respondent's conduct in raising the issue of purpose was unreasonable and as such it should not be entitled to be compensated by a costs order in relation to its costs in raising that issue. Furthermore the applicant says the respondents should be ordered to pay its costs in that respect. It relies upon the observations of Wilcox J. in Commissioner of Australian Federal Police v. Razzi [1991] FCA 267; (1991) 101 ALR 425 at 430.

5. I have recently reviewed the principles applicable to applications for apportionment of costs as between successful and unsuccessful parties in the judgment in J-Corp Pty Ltd v. BLF and BTA (unrep. Fed Ct. 19.2.93). I do not propose to repeat what I have said in that judgment which was also published today. In my opinion the allegations of unsatisfactory market penetration and conflict of interest which were made against the applicant were red herrings. I do not accept however, that they were issues which required a lot of attention at trial. But they did involve some diversion of time and resources. In the circumstances I think a minor apportionment is appropriate. I propose therefore to reduce the costs recoverable by the respondents by one-eighth to take account of that issue on which they did not succeed and in which, in my opinion, never had any prospect of success.