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Federal Court of Australia |
Last Updated: 1 March 2005
FEDERAL COURT OF AUSTRALIA
Yum Restaurants Australia Pty Ltd v The Acorn Group Pty Ltd [2005] FCA 146
COSTS – costs ordinarily follow the event
– award of costs a matter of discretion for the court – no special
circumstances
existed that justified a departure from the ordinary rule –
applicants acted reasonably in commencing the proceedings –
no waiver or
estoppel existed
Federal Court of Australia Act 1976 (Cth)
s 43(1)
Federal Court Rules O 62
r 15
Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72
cited
Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 cited
Cretazzo v
Lombardi (1975) 13 SASR 4 cited
Ritter v Godfrey [1920] 2 KB 47
cited
YUM RESTAURANTS
AUSTRALIA PTY LTD (ACN 000 674 993) AND PIZZA HUT INTERNATIONAL LLC v THE ACORN
GROUP PTY LTD (ACN 091 969 390), WISSAM
BALOUT AND SIMON
BALOUT
NSD 1208 OF 2004
TAMBERLIN
J
SYDNEY
28 FEBRUARY 2005
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YUM RESTAURANTS AUSTRALIA PTY LTD
ACN 000 674 993 FIRST APPLICANT PIZZA HUT INTERNATIONAL LLC SECOND APPLICANT |
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AND:
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THE ACORN GROUP PTY LTD
ACN 091 969 390 FIRST RESPONDENT WISSAM BALOUT SECOND RESPONDENT SIMON BALOUT THIRD RESPONDENT |
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DATE OF ORDER:
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WHERE MADE:
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THE COURT ORDERS
THAT:
The costs of the Application
up to and including 11 August 2004 be paid by the second and third
respondents.
Note: Settlement and entry of orders is dealt with
in Order 36 of the Federal Court Rules.
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AND:
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REASONS FOR JUDGMENT
1 The applicants seek an order that the respondents pay the applicants’ costs of this proceeding up to and including 11 August 2004, being the date when the Court, by consent, granted permanent injunctions as sought by the applicants restraining the respondents from infringing their trade marks.
2 The Court’s discretionary power to award costs is conferred by s 43(1) of the Federal Court of Australia Act 1976 (Cth) ("the Act"). Although this power is broad and is not subject to any express limitations, it must be exercised in a judicial manner. This means that the power must be exercised in accordance with established principle and factors directly connected with the litigation and must not be exercised arbitrarily, capriciously or so as to frustrate the legislative intent: cf Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [22], [65]; Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 at 542; Cretazzo v Lombardi (1975) 13 SASR 4 at 11.
3 The applicants, Yum Restaurants Australia Pty Ltd ("Yum") and Pizza Hut International LLC ("Pizza Hut"), claim that costs should follow the outcome in accordance with accepted general principle: see O 62 r 15 of the Federal Court Rules ("the FCR") and the cases referred to. They point out that the purpose of a costs order is to compensate a successful party for costs that it has incurred and not to punish an unsuccessful party. They say that there are no special circumstances in the present case that would justify a departure from the prima facie position: cf Ritter v Godfrey [1920] 2 KB 47.
4 The second and third respondents, Wissam Balout and Simon Balout, submit that the Court should depart from the general rule in this matter because it is said that the applicants acted unreasonably in commencing the proceedings. In order to resolve this issue it is necessary to look at the sequence of events.
5 On 16 July 2004, Yum served notices of termination of three franchise agreements made with the first respondent, The Acorn Group Pty Ltd ("Acorn"), in respect of Pizza Hut stores located at Lake Haven, Bateau Bay and Tuggerah. Officers of Yum took possession of the stores at Lake Haven and Bateau Bay on 16 July 2004, however, they were unable to take possession of the store at Tuggerah.
6 On 21 July 2004, Yum wrote to Mr Drake, the solicitor for Acorn, demanding that Acorn cease trading under the Pizza Hut brand. Acorn retook possession of the Bateau Bay store on 22 July 2004 and continued to trade from the stores at Bateau Bay and Tuggerah. On 28 July 2004, Yum’s solicitors again wrote to Mr Drake demanding that his client cease trading under the Pizza Hut brand.
7 At about 2.40 pm on 6 August 2004, the day on which proceedings commenced, a letter was sent by Mr Drake on behalf of Acorn, to Messrs Deacons, solicitors for Yum, which included the following paragraphs:
‘We are also instructed, that no matter the outcome of the present ‘Without Prejudice’ negotiations between the parties, that it is our clients intention that as of Monday, the 9th August 2004 at midday to hand over the delivery centre at Bateau Bay. We respectfully submit that any legal action for injunctive or other orders for possession are unnecessary, in light of this clear advice by our clients of their intention to vacate the premises.
...
It is our clients instructions that as of Monday the 9th August 2004 the Tuggerah store will cease trading until such time as a transfer of the Lease and other assets are successfully negotiated with your client. In the absence of a successful negotiation of the transfer of this Lease, our clients will arrange to de-badge the premises ..."
8 Previously, on 4 August 2004, Messrs Deacons had written to Mr Drake in these terms:
"We refer to your further facsimile dated 3 August 2004. We are instructed to extend the deadline for responding to our offer until 3 pm on Friday, 6 August 2004.
In response to the other matters raised in your letter, we are instructed that our client’s current intention is that it will not be opening the Lake Haven store until this matter is resolved and, in light of the fact your client has no right to trade in either the Bateau Bay and Tuggerah stores as a Pizza Hut outlet, our client will not be facilitating that trade by providing call centre services or otherwise assisting with the operating of the store."
9 At 2:41 pm on 6 August 2004, Messrs Deacons received a response to this letter from Mr Drake in these terms:
"We refer to this matter and are instructed by our clients that the offer is rejected. We are instructed by our client to make a counter offer that our clients will settle all their claims in regards to this matter on the basis that your client pays the book value as previously disclosed of the assets of the business."
10 At 4.15 pm on 6 August 2004, an ex parte Application was made to the Court by the applicants and the Court made orders granting the applicant leave to file the Application and directing that the Application be returnable before the Duty Judge on 11 August 2004. The Court also ordered that the time for service of the Application and any affidavits in support should be abridged to 4.00 pm on 9 August 2004 and directed that the Application and the affidavits of Messrs Armstrong and Alexander sworn on 6 August 2004 be served on Mr Drake as soon as practicable. On 9 August 2004, Mr Drake advised Deacons that he would accept service on behalf of all three respondents and Deacons served the Application and affidavits on Mr Drake. Also on that day, Mr Drake informed Deacons that Acorn had ceased trading at the Bateau Bay and Tuggerah stores. On 10 August 2004, Mr Drake lodged a Notice of Appearance on behalf of the respondents and signed Short Minutes of Order consenting to Orders 1, 2 and 4 in the Application.
11 On 11 August 2004, by consent, the Court made orders in accordance with Orders 1, 2 and 4 of the Application and stood the matter over for directions on 24 September 2004. On the latter date, by consent, the Court ordered that leave be granted to join Francis Balout and Joanne Balout as respondents in the proceedings and that the applicants were to file and serve an Amended Application and Statement of Claim by 29 October 2004. The matter was listed for further directions on 9 December 2004.
12 On 30 November 2004, the Supreme Court of New South Wales made orders winding up Acorn.
13 The applicants contend that they acted reasonably in the proceedings because Acorn and its directors, the second and third respondents, were trading under the Pizza Hut marks, notwithstanding prior demands to desist. The prior demands are not contested by the respondents. The applicants note that Yum had demanded that Acorn immediately cease trade under the Pizza Hut marks on three previous occasions and that Acorn had refused to comply with these demands. They refer to correspondence of 21 July 2004, 28 July 2004 and the letter from Deacons to Drake of 4 August 2004.
14 There is a remaining dispute between the parties relating to a debt claim. This claim is said by the applicants to be unrelated to the infringement of the trade marks and the applicants submit that it ought not to be in the Court, however, this aspect is not relevant for present purposes.
15 The respondents submit that, particularly in view of their offer made on 6 August 2004, it was unreasonable for the applicants to approach the Court on that day. They further submit that it was the implicit intention of the respondents in agreeing to the Consent Orders that they would not be liable for, or agree to pay, the applicants’ costs of the Application. There is no provision in the Consent Orders approved by the Court with respect to costs and the respondents contend that there was, in effect, some form of a waiver or estoppel against the applicants from claiming costs as a consequence of this omission.
16 In my view, the Consent Order left the question of costs open and there has been no waiver or estoppel.
17 Applying well-accepted principles and having regard to the conduct of the parties prior to the making of the Consent Orders on 11 August 2004, I am not satisfied that there is any special reason shown as to why the ordinary rule relating to costs should not apply in the present case. It is reasonably apparent to me having regard to the history of the matter that but for the pressure applied by the applicants in the light of prior refusals by the respondents, it was appropriate and reasonable for the applicants to institute these proceedings.
18 This is not a case where there should be any apportionment of costs as between the parties. Accordingly, the applicants should be awarded costs. I therefore order that the costs of the Application up to and including 11 August 2004 be paid by the second and third respondents.
19 I note that the first respondent, Acorn, is the subject of a winding up order and I therefore make no order as to costs against it.
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I certify that the preceding nineteen (19) numbered paragraphs are a true
copy of the Reasons for Judgment herein of the Honourable
Justice
Tamberlin.
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Associate:
Dated: 28 February 2005
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Counsel for the Applicant:
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W G Muddle
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Solicitor for the Applicant:
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Deacons
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Solicitor for the Respondent:
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T H Drake and Associates
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Date of Hearing:
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9 December 2004
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Date of Judgment:
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28 February 2005
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URL: http://www.austlii.edu.au/au/cases/cth/FCA/2005/146.html