Beagle Management Ltd & Ors v Targridge Ltd & Anor [1997] FCA 31 (4 February 1997)

C A T C H W O R D S

PRACTICE AND PROCEDURE - Costs - first applicant unsuccessful in contract claim against first respondent - first and second applicants successful in claim for declaration in respect of misleading or deceptive conduct by respondents - second applicants recovered $10,000 damages in respect of such conduct - applicants unsuccessful on several issues - applicants' success stemmed from amendment on first day of trial - nature of application very similar to defamation proceedings - whether proceeding should have been brought in the District Court of Western Australia - no matter of general principle.

BEAGLE MANAGEMENT LIMITED & ORS v. TARGRIDGE LTD & ANOR

No. WAG 62 of 1995

CARR J.

PERTH

4 FEBRUARY 1997

IN THE FEDERAL COURT )

OF AUSTRALIA )

WESTERN AUSTRALIA )

DISTRICT REGISTRY ) No. WAG 62 of 1995

GENERAL DIVISION )

BETWEEN : BEAGLE MANAGEMENT LIMITED

First Applicant

and

JOHN CARLTON YOUNG and HELEN MARGARET SEWELL

Second Applicants

AND : TARGRIDGE LIMITED

First Respondent

and

NICHOLAS RUSSO

Second Respondent

CORAM: CARR J.

PLACE: PERTH

DATE: 4 FEBRUARY 1997

MINUTE OF ORDERS

THE COURT ORDERS THAT:

1. The first applicant pay the first respondent's costs in respect of the first applicant's claim for damages for breach of contract. Such costs are to be apportioned out of the total costs by the District Registrar.

2. In relation to the costs of this application, other than those arising out of or in relation to the first applicant's claim against the first respondent for damages for breach of contract, the respondents pay sixty per centum (60%) of the applicants' costs. Those costs are to be subject to reduction in accordance with Order 62 rule 36A(1) of the Federal Court Rules.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT )

OF AUSTRALIA )

WESTERN AUSTRALIA )

DISTRICT REGISTRY ) No. WAG 62 of 1995

GENERAL DIVISION )

BETWEEN : BEAGLE MANAGEMENT LIMITED

First Applicant

and

JOHN CARLTON YOUNG and HELEN MARGARET SEWELL

Second Applicants

AND : TARGRIDGE LIMITED

First Respondent

and

NICHOLAS RUSSO

Second Respondent

CORAM: CARR J.

PLACE: PERTH

DATE: 4 FEBRUARY 1997

COSTS

On 18 December 1996 I published reasons for judgment in this matter and made the following orders:

. an order that judgment be entered in favour of the second applicants against the respondents in the sum of $10,000;

. a declaration that the first respondent, by representing, in its letter dated 6 June 1995 to investors in the Templegate (now Beagle) Forestry Trust, that the applicants had done nothing to create a secondary market for the interests referred to in that letter, engaged in conduct that was misleading or deceptive or was likely to mislead or deceive, contrary to the provisions of s.52(1) of the Trade Practices Act 1974 (Cth) ("the Act"), and the second respondent was a person involved in such contravention; and

. an order that the first applicant's claim against the first respondent for damages for breach of contract be dismissed.

I reserved the matter of costs and gave the parties leave to file and serve written submissions in that matter being both primary submissions and submissions in reply. Each party has now filed such submissions.

On 6 January 1997, by consent, further orders were made in the following terms:

1. The applicants' claims against the first and second respondents for an injunction be dismissed.

2. The applicants' claim for a corrective statement be dismissed.

3. The first applicant's claim against the first and second respondents for damages pursuant to s.82(2) of the Trade Practices Act 1976 be dismissed.

These reasons deal with the matter of how the costs of the proceedings should be borne. They should be read with my reasons for judgment delivered on 18 December 1996 which I hereby incorporate by reference. I will use the same abbreviations here as I used in those reasons to refer to the various parties.

In these proceedings Beagle and two of its directors, Mr John Carlton Young and Miss Helen Margaret Sewell (who were the second applicants) sought damages, an injunction and other relief against the first and second respondents. Beagle sued Targridge for breach of contract. Beagle claimed that Targridge was in breach of contract when it used a copy of a register of the holders of interests in a trust, the affairs of which were managed by Beagle, for the purposes of ascertaining the names of those interest holders and sending them a letter dated 6 June 1995 ("the Letter"). I dismissed that claim. All three applicants also alleged that Targridge had engaged in misleading or deceptive conduct in contravention of s.52 of the Act and that the second respondent, Mr Nicholas Russo (who is a director of Targridge) was "a person involved in the contravention" within the meaning of that expression in the Act. The conduct complained of comprised the publication of the Letter to the holders of interests in the trust. In relation to that claim I held that Targridge had contravened s.52 of the Act, in a particular way to which I will refer in a moment. It was common ground that in those circumstances Mr Russo was a person involved in that contravention. The misleading or deceptive conduct alleged by the applicants arose out of the making of five representations in the Letter. Central to the applicants' allegations was a complaint that Targridge had wrongly stated that Beagle had not used its best endeavours to create a secondary market and in fact had done nothing to carry out its undertaking, given in a prospectus, to create a secondary market for certain forestry interests. There were other representations relied upon but I do not need to refer to them in detail. I found that Targridge had not contravened s.52 of the Act by stating that Beagle had not used its best endeavours in the manner first mentioned above. However, I found that Targridge had contravened s.52 by the second statement i.e. that Beagle had done nothing in that regard.

It can thus been seen that Beagle was unsuccessful in its claim for breach of contract. It was successful (with the second applicants) in obtaining a declaration that Targridge had contravened s.52 of the Act in the manner outlined above, but not otherwise in respect of that cause of action. The second applicants were successful in their cause of action based on s.52 of the Act but failed on a number of issues. By far the most important issue was whether Beagle had used its best endeavours to ensure that there was a secondary market for the abovementioned interests.

The manner in which a court proceeds to exercise its discretion on the question of costs was conveniently summarised by Toohey J in Hughes v. Western Australian Cricket Association (Inc) (1986) ATPR 40-748 at p.48,136 as follows: (I omit citations)

"(1) Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order.

(2) Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed.

(3) A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party's costs of them. In this sense, "issue" does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law."

In Dodds Family Investments Pty Ltd v. Lane Industries Pty Ltd [1993] FCA 259; (1993) 26 IPR 261 at pp.271-272 the Full Court of this Court observed:

"The propositions enunciated in that case [Toohey J's decision in Hughes] are subject to the further consideration that justice may not be served if parties are dissuaded by the risk of costs from canvassing all issues which might be material to the decision in the case - Cretazzo v. Lombardi (1975) 13 SASR 4 at 12. In Trade Practices Commission v. Nicholas Enterprises Pty Ltd (1979) 42 FLR 213, Fisher J regarded the discretion to apportion costs as one to be exercised only in the most exceptional circumstances. Nevertheless he accepted that where a considerable part of a trial is taken up in determining issues upon which a party fails, it is a proper exercise of the discretion to reduce the costs allowed to that party. Generally speaking, and notwithstanding the considerations referred to by Toohey J and the other authorities mentioned above, the demands of the community for greater economy and efficiency in the conduct of litigation may properly be reflected in a qualification of the presumption that a successful party is entitled to all its costs."

The applicants say that they were substantially successful in that publication of the Letter was held to amount to misleading conduct in contravention of s.52 of the Act. The applicants expressly acknowledge that they did not succeed on every argument. They refer to the fact that a significant amount of time at the trial was devoted to the question whether their "best endeavours obligation" required the issue of a primary prospectus. As matters turned out, it was not necessary to decide that point. The applicants further say that where they were denied relief, this was on a discretionary basis. In respect of the first applicant's unsuccessful claim in contract, the applicants say that this did not involve issues of disputed facts but, depended upon a contested construction of legal documents. The applicants contend that they have been substantially successful and should have an order for the costs of the application.

The respondents, in their written submissions, initially focussed on the extent to which the applicants' claims to various types of relief were unsuccessful. I shall take into account that factor, but to a limited extent. I think it is more important to have regard to the respective degree of success in relation to the two principal causes of action relief upon i.e. breach of contract and contravention of the Act respectively, together with the degree to which the respective parties were successful on the main issues which occupied most of the hearing. In that regard I accept the applicants' submissions (made in response) that relatively little time was spent at the hearing on the questions of what relief would be appropriate if the applicants were successful. On the other hand, I think it is significant (as the respondents contend) that had it not been for the amendment made to the statement of claim on 19 August 1996 (the first day of the trial) by the insertion of the words "done nothing to carry" [out its abovementioned undertaking] the applicants claim would have failed in its entirety. Most of the representations made by Targridge and complained of by the applicants were held to be true. I have regard also to the quantum of damages awarded. On that aspect, the respondents say that this is not merely a matter to which Order 62 rule 36A(1) and (2) of the Federal Court Rules apply, but that the Court should exercise its discretion under s.43(2) of the Federal Court of Australia Act (Cth) to reduce further the costs payable to the applicants. The respondents say that if the application had been remitted to the District Court of Western Australia then, pursuant to the provisions of s.86 of the Local Courts Act 1904 (W.A.), that Court would have ordered that the applicants have their costs taxed on the Local Court scale. The respondents also relied upon the unreported decision of Lee J in The Green Team (W.A.) Pty Ltd v. Brulee Pty Ltd & Ors (unreported, Federal Court Judgment No. 871 of 1995) where his Honour made an order that the successful applicant's costs be taxed on that scale. Targridge claims its costs in relation to Beagle's unsuccessful claim in contract against it. The respondents further say that they were successful in respect of three of the four representations upon which the applicants relied and that the majority of the evidence dealt with those three representations. The respondents contend that there should be an order that the applicants pay 80% of their costs of the application.

In their submissions in response, the applicants focus on the fact that they were successful in relation to the "misleading conduct controversy". The applicants say that this required the determination of two hotly contested central issues of whether publication of the Letter was misleading conduct in contravention of the Act and if so whether the applicants were entitled to relief. The applicants say that any attempt to analyse the misleading conduct controversy into sub-issues would be apt to lead to a distorted view. I think that there is some merit in that submission. In order to decide the case in the second applicant's favour I had to consider, to varying extents, all of the matters (and where appropriate the evidence) on the issues of trade or commerce, best endeavours, causation, damage and relief.

On the question whether these proceedings should be brought in another Court, the applicants say that the vindication of professional and commercial reputation is not usually regarded as suitable for "the inferior Courts". They rely on the fact that the respondents never sought transfer of the proceedings under the cross-vesting legislation. I readily accept those submissions insofar as they relate to the proposition that these proceedings should have been brought in the Local Court of Western Australia. I think that the issues raised were sufficiently complex for it to be unsuitable for these proceedings to have been brought in the Local Court of Western Australia. However, I do think that the application could more suitably have been brought in the District Court of Western Australia. At the hearing, I asked counsel for the applicants why these proceedings were being conducted in this Court. I was told it was because of this Court's expertise in this particular area. I could accept such a submission in relation to an application under Part IV of the Trade Practices Act (which in any event would be a special federal matter under the cross-vesting legislation) or in a matter involving intellectual property. However, putting to one side Beagle's claim in contract, the applicants' claim under Part V of the Act in this matter is almost indistinguishable from a defamation claim.

I propose to make an order which is intended to reflect broadly the relative degree of success of the parties to these proceedings. The first order will be that the first applicant pay the first respondent's costs in respect of the claim for damages for breach of contract. Unless the parties agree, it will be for the taxing officer to make an appropriate apportionment in that regard.

So far as the balance of the costs is concerned, I consider that the applicants should have an order for portion of their costs. In so ordering I do not propose to order that the respondents pay a particular percentage of the applicants' costs and that the applicants pay a particular portion of the respondents' costs. I propose to make an order which is intended to reflect the degree to which I consider that the parties were successful in relation to the claim under Part V of the Act but making some allowance for the issues upon which they were unsuccessful. I consider that justice will be done if there is an order that the respondents pay 60% of the applicants' costs (other than the costs fairly apportioned to the first applicant's claim against the first respondent for damages for breach of contract). I do not propose to make an order under Order 62 rule 36A(1). That will have the result that those costs will be reduced by one-third of the amount otherwise allowable. I have expressed the opinion that these proceedings could more suitably have been brought in the District Court of Western Australia. However, I will not make a declaration to that effect. I consider that the manner in which Order 62 rule 36A(2) is worded preserves a discretion not to make a declaration even where such an opinion is formed. I think that it would work an injustice upon the applicants if I were to make such a declaration. There will already be a one-third reduction in their costs under Order 62 rule 36A(1). I think that it would be unjust for there to be a further, cumulative, reduction in those costs by the operation of Order 62 rule 36A(2). In Magenta Nominees Pty Ltd v. Richard Ellis (Western Australia) Pty Ltd & Ors (unreported, 12 May 1994, Judgment No. 302/94) I expressed the view that the same policy is reflected in both these sub-rules, namely the suitability or otherwise of bringing the proceedings in this Court. Nicholson J agreed with that view in Opalswan Pty Ltd v. Commercial and General Acceptance Pty Ltd & Anor (unreported, 19 December 1996, Judgment No. 1142/96). It is not necessary to decide whether the two sub-rules may operate cumulatively, but I am inclined to think that they are not so intended. The fact that they reflect the same policy does not compel their cumulative operation.

I certify that this and the preceding eight

(8) pages are a true copy of the Reasons for

Judgment of Justice Carr on the matter of costs

in this application.

Associate:

Date: 4 February 1997

Counsel for the Applicants: Mr D.M.Stone

Solicitors for the Applicants: Messrs Williams & Hughes

Counsel for the Respondents: Mr R.W.Richardson

Solicitors for the Respondents: Messrs Stables Scott

Date of Judgment: 4 February 1997