Cadbury Schweppes Pty Ltd ACN 004 551 473 v Darrell Lea Chocolate Shops Pty Ltd ACN 000 498 386 [2005] FCA 112 (15 February 2005)

Last Updated: 7 April 2005

FEDERAL COURT OF AUSTRALIA

Cadbury Schweppes Pty Ltd ACN 004 551 473
v Darrell Lea Chocolate Shops Pty Ltd ACN 000 498 386
[2005] FCA 112

CADBURY SCHWEPPES PTY LTD ACN 004 551 473 and CADBURY LIMITED v DARRELL LEA CHOCOLATE SHOPS PTY LTD ACN 000 498 386


V 50 of 2003

RYAN J
15 FEBRUARY 2005
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	V 50 of 2003

BETWEEN:	CADBURY SCHWEPPES PTY LTD ACN 004 551 473 First Applicant
and	CADBURY LIMITED Second Applicant
AND:	DARRELL LEA CHOCOLATE SHOPS PTY LTD ACN 000 498 386 Respondent
JUDGE:	RYAN J
DATE OF ORDER:	15 FEBRUARY 2005
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:
1. That until:

(a) the commencement of a fresh proceeding by the applicants seeking relief substantially in the nature sought by them in this proceeding ("the new proceeding"); or

(b) 7 June 2005;
whichever be the first to occur, each of the applicants and the respondent:

(i) continue to have the benefit of the discovery made in this proceeding (subject always to the implied undertaking not to use such documents or the information contained in them other than for the purposes of this proceeding);
(ii) continue to have the benefit of the documents obtained by each of them upon the return of subpoenas issued by each of them (subject always to the said implied undertaking);
(iii) continue to have the benefit of the confidentiality undertakings given in their favour.

2. The applicants be relieved from the implied undertaking and be permitted to utilise in preparing and commencing the new proceeding, those documents received by them as a consequence of discovery having been made and/or subpoenas having been complied with in this proceeding.
3. Upon the new proceeding being commenced each of the applicants and the respondent be relieved from the implied undertaking and be permitted to utilise in the conduct of the new proceeding those documents received by them as a consequence of discovery having been made and/or subpoenas having been complied with in this proceeding.
4. The applicants have leave to discontinue this proceeding without prejudice to the applicants’ right to commence the new proceeding by no later than 7 June 2005.
5. The applicants pay the respondent’s costs (including all reserved costs) of the application up to and including the costs of this day including this order.
6. In the event of the new proceeding being instituted on or before 7 June 2005, the respondent have leave to apply for a stay of the new proceeding until the costs ordered by paragraph 5 of this order have been paid.

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	V 50 of 2003

BETWEEN:	CADBURY SCHWEPPES PTY LTD ACN 004 551 473 First Applicant
	CADBURY LIMITED Second Applicant
AND:	DARRELL LEA CHOCOLATE SHOPS PTY LTD ACN 000 498 386 Respondent

JUDGE:	RYAN J
DATE:	15 FEBRUARY 2005
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

1 The applicants, ("Cadbury"), seek leave to discontinue these proceedings which were commenced on 4 February 2003. The somewhat tortuous history of the proceedings has been outlined in my earlier reasons for judgment published on 23 December last year ([2004] FCA 1718). Those reasons should be read in conjunction with the present reasons.

2 A form of order disposing of the present proceedings has been proposed on each side. The provisions of the competing forms of orders designed to preserve for each party the benefit of discovery, third party production of documents and other interlocutory work in the event that Cadbury should institute fresh proceedings invoking the same causes of action are largely uncontroversial. The real controversy between the parties has centred on whether the Court should order Cadbury to pay the respondent's costs to be taxed as between solicitor and client or, as is sometimes said, on an indemnity basis or whether, on the other hand, the costs, which Cadbury accepts it should pay, ought to be taxed in the ordinary way as between party and party.

3 It has been urged on behalf of the respondent that a solicitor-client order should be made because of Cadbury's misconduct consisting of its repeated, and at times flagrant, non-compliance with procedural or interlocutory directions which have been outlined in my earlier reasons and which in some respects have gone unexplained. In the second place it was submitted that the Court should make a solicitor-client order because of the effect which the issue of subpoenas has had on the respondent's franchisees and distributors. That effect has been described in these terms in [9] of an affidavit sworn 14 February 2005 by the respondent's solicitor, Anthony Brooke Watson;

‘9. Approximately 50 subpoenas have been issued to the respondent's licensees and suppliers at the applicants' request which I am instructed have caused the respondent to have to deal with the queries raised by the subpoenaed parties, many of whom were not aware of the litigation and were alarmed at the suggestion that they had any involvement in this litigation. Further, I am instructed that one of the respondent's suppliers was contacted directly by the applicants' in-house legal team in relation to this proceeding and asked to provide information and documents which were claimed to be relevant to this proceeding.’

4 Another matter adverted to by Mr Watson in the same affidavit is his estimate of the likely difference between party and party costs and the respondent's costs if taxed as between solicitor and client. Paragraph 5 of his affidavit reads:

‘5. On 31 May 2004, 2 July 2004 and 23 July 2004 the respondent sought that its costs be taxed and paid forthwith. However, these orders were not made. None of the above court orders have been for the respondent's costs to be taxed and paid forthwith. The respondent has incurred approximately $300,000 legal costs and disbursements in this proceeding to date, including counsels' fees. I estimate that if the respondent's costs are ordered to be paid on a party-party basis that the respondent will only recover about $180,000 of these costs.’

5 On a fairly fine balance I have decided not to order that the respondent's costs be taxed as between solicitor and client. I have come to that view primarily because of the contemplation that fresh proceedings will be issued and the benefit will be taken in those fresh proceedings of much of the substantial work which has already been carried out in the present proceedings. That contemplation was expressed as follows at [19] of my earlier reasons;

‘19. If an order dismissing the action under O 35A r 3 were to have the consequence that the very considerable amount of time and costs so far expended by Cadbury would be thrown away entirely, that would be a powerful factor militating against acceding to Darrell Lea’s application. However, it was not suggested on either side that an order dismissing the proceeding as to the whole of the relief claimed by Cadbury would give rise to an issue estoppel or would otherwise preclude Cadbury from reviving the action when it has assembled all, or most, of the evidence on which it intends to rely. I contemplate that, in assembling that evidence, Cadbury would have the benefit of recourse to documents obtained on discovery or produced on subpoena by third parties in the present proceedings. I am prepared to include in the order giving effect to these reasons a stipulation framed to preserve that benefit to Cadbury. It follows, of course, that if the action is reinstated in the future, Darrell Lea should, correspondingly, be able to use any documents produced to it on discovery or obtained by subpoena to third parties.’

6 If what was there contemplated, and is also contemplated by various paragraphs of the order which I shall shortly make, occurs, there will very probably be a real issue eventually as to how the benefit of work undertaken on each side in the present proceedings should be reflected on the taxation of costs in the new proceedings. That issue would, I consider, be unduly complicated if I were to order that the costs to date be taxed as between solicitor and client. In the circumstances, I am not able to reach a conclusion about the propriety of Cadbury's institution and maintenance of the present proceedings except for the procedural or interlocutory derelictions to which I have already referred. Those derelictions, I consider, should not attract a punitive order for costs to be taxed on the higher scale. Nor have I found persuasive the difference between costs taxed on the two bases which has been estimated by Mr Watson.

7 At first I was disposed to accede to a request made on behalf of the respondent for an order that Cadbury not be permitted to file a further proceeding against the respondent in respect of the same or similar claims as those brought in the present proceeding until such time as the respondent's costs have been paid by Cadbury. However, I consider on reflection that sufficient protection can be afforded to the respondent by the provision of O 22 r 8 to which I was referred by Mr Wyles of Counsel for Cadbury. That rule provides:

‘Where:

(a) a party discontinues proceedings so far as concerns the whole or any part of any claim for relief;
(b) he is, by reason of the discontinuance, liable to pay the costs of another party occasioned by the proceedings; and
(c) before payment of the costs, he brings against that other party a further proceeding on the same or substantially the same cause of action as that on which the discontinued proceeding was brought; the court may stay the further proceeding until those costs are paid.’

8 I consider that the order which I should make should contain an express provision making available to the respondent leave to make an application for a stay of the presumptive fresh proceedings until the costs which I propose to order have been paid.

9 In the result, I shall order;

1. That until:

(a) the commencement of a fresh proceeding by the applicants seeking relief substantially in the nature sought by them in this proceeding ("the new proceeding"); or

(b) 7 June 2005;
whichever be the first to occur, each of the applicants and the respondent:

(i) continue to have the benefit of the discovery made in this proceeding (subject always to the implied undertaking not to use such documents or the information contained in them other than for the purposes of this proceeding);

(ii) continue to have the benefit of the documents obtained by each of them upon the return of subpoenas issued by each of them (subject always to the said implied undertaking);

(iii) continue to have the benefit of the confidentiality undertakings given in their favour.

2. The applicants be relieved from the implied undertaking and be permitted to utilise in preparing and commencing the new proceeding, those documents received by them as a consequence of discovery having been made and/or subpoenas having been complied with in this proceeding.
3. Upon the new proceeding being commenced each of the applicants and the respondent be relieved from the implied undertaking and be permitted to utilise in the conduct of the new proceeding those documents received by them as a consequence of discovery having been made and/or subpoenas having been complied with in this proceeding.
4. The applicants have leave to discontinue this proceeding without prejudice to the applicants’ right to commence the new proceeding by no later than 7 June 2005.
5. The applicants pay the respondent’s costs (including all reserved costs) of the application up to and including the costs of this day including this order.
6. In the event of the new proceeding being instituted on or before 7 June 2005, the respondent have leave to apply for a stay of the new proceeding until the costs ordered by paragraph 5 of this order have been paid.

I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Ryan.

Associate:

Dated: 14 February 2005

Counsel for the Applicants:	Mr M Wyles
Solicitor for the Applicants:	Corrs Chamber Westgarth
Counsel for the Respondent:	Mr C Golvan SC
Solicitor for the Respondent:	Middletons Lawyers
Date of Hearing:	15 February 2005
Date of Judgment:	15 February 2005