Magic Menu Systems Pty Ltd & Anor v AFA Facilitation Pty Ltd & Ors [1997] FCA 9 (20 January 1997)

CATCHWORDS

MAINTENANCE - franchise agreements - proceedings brought by franchisees maintained pursuant to champertous "litigation management" agreements.

MAINTENANCE - consideration of the position of the torts of maintenance and champerty in Australia - whether special damage necessary to be shown where agreement champertous in nature - continued relevance of public policy issues.

DISCOVERY - implied undertaking to the Court not to disclose documents discovered for purposes not connected with the litigation.

PRACTICE - whether stay may be appropriate where terms of agreement to maintain litigation may give rise to abuse of process.

PLEADING - whether public policy issues raised to found relief.

INJUNCTIONS - no financial loss or damage yet occasioned - whether quia timet relief available - whether damage should be shown to be likely to occur - whether any general level of satisfaction required.

Legal Practitioners Act 1995 (Qld) s 23

Edward Street Properties Pty Ltd v Collins [1977] Qd R 399 - Refd

Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 - Affd

Harman v Home Office [1983] 1 AC 280 - Refd

Hill v Archibald [1968] 1 QB 686 - Refd

In re Trepca Mines Ltd (No 2) [1963] 1 Ch 199 - Refd

Trendtex Trading Corporation v Credit Suisse [1980] QB 629 - Refd

Condliffe v Hislop & Anor [1996] 1 WLR 753 - Cons

Roux v Australian Broadcasting Commission [1992] 2 VR 577 - Refd

Martell v Consett Iron Co Ltd [1955] 1 Ch 363 - Cons

Grovewood Holdings PLC v James Capel & Co Ltd [1995] Ch 80 - Refd

McFarlane v E E Caledonia (No 2) [1995] 1 WLR 366 - Refd

J C Scott Constructions v Mermaid Waters Tavern Pty Ltd [1984] 2 Qd R 413 - Refd

Clyne v New South Wales Bar Association [1960] HCA 40; (1960) 104 CLR 186 - Cons

Halliday v High Performance Personnel Pty Ltd (in liq) [1993] HCA 13; (1993) 113 ALR 637 - Cons

Giles v Thompson [1993] UKHL 2; [1994] 1 AC 142 - Refd

Hodges v New South Wales [1988] HCA 9; (1988) 62 ALJR 190 - Refd

Wild v Simpson [1919] 2 KB 544 - Cons

Neville v London "Express" Newspaper Ltd [1919] AC 368 - Cons

White v Mellin [1895] AC 154 - Cons

Ratcliffe v Evans [1892] 2 QB 524 - Refd

Hooper v Rogers [1975] 1 Ch 43 - Cons

Copyright Agency Ltd v Haines [1982] 1 NSWLR 182 - Refd

Alabaster v Harness & Ors [1895] 1 QB 339

Southern Cross Assurance Company Limited v Shareholders Mutual Protection Association Limited & Ors (No 2) [1935] SASR 480

Magic Menu Systems Pty Ltd and MMS Franchising Pty Ltd v AFA Facilitation Pty Ltd, Walter Corneille Clement Marie Janus, Kobble Creek Pty Ltd, Graham Boyd Simon and Anne Marie Simon

No QG 73 of 1996

Lockhart, Cooper, Kiefel JJ

Brisbane

20 January 1997

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION

No QG73 of 1996

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

MAGIC MENU SYSTEMS PTY LTD

First Appellant

(First Cross-Claimant)

AND:

MMS FRANCHISING PTY LTD

Second Appellant

(Second Cross-Claimant)

AND:

A.F.A. FACILITATION PTY LTD

First Respondent

(First Cross-Respondent)

AND:

WALTER CORNEILLE CLEMENT MARIE JANUS

Second Respondent

(Second Cross-Respondent)

AND:

KOBBLE CREEK PTY LTD

Third Respondent

(Third Cross-Respondent)

AND:

GRAHAM BOYD SIMON and ANNE MARIE SIMON

Fourth Respondents

(Fourth Cross-Respondents)

JUDGE MAKING ORDER: Lockhart, Cooper, Kiefel JJ

DATE OF ORDER: 20 January 1997

WHERE MADE: Brisbane

MINUTES OF ORDERS

THE COURT ORDERS THAT:

1. The appeal be dismissed.

2. The appellants pay the first, third and fourth respondents' costs of the appeal.

Note: Settlement and Entry of Orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

GENERAL DIVISION

No QG73 of 1996

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

MAGIC MENU SYSTEMS PTY LTD

First Appellant

(First Cross-Claimant)

AND:

MMS FRANCHISING PTY LTD

Second Appellant

(Second Cross-Claimant)

AND:

A.F.A. FACILITATION PTY LTD

First Respondent

(First Cross-Respondent)

AND:

WALTER CORNEILLE CLEMENT MARIE JANUS

Second Respondent

(Second Cross-Respondent)

AND:

KOBBLE CREEK PTY LTD

Third Respondent

(Third Cross-Respondent)

AND:

GRAHAM BOYD SIMON and ANNE MARIE SIMON

Fourth Respondents

(Fourth Cross-Respondents)

CORAM: Lockhart, Cooper, Kiefel JJ

DATE: 20 January 1997

PLACE: Brisbane

REASONS FOR JUDGMENT

THE COURT:

Magic Menu Systems Pty Ltd and MMS Franchising Pty Ltd appeal from the decision of Drummond J (reported, 137 ALR 260). His Honour held that proceedings brought by a franchisee of those companies, Kobble Creek Pty Ltd, and its directors Mr and Mrs Simon (we collectively refer to them as "the franchisees" in these reasons) were maintained pursuant to champertous agreements with a company, AFA Facilitation Pty Ltd, but that it had not been shown, as was necessary with respect to the cause of action in tort, that damage had or would likely accrue to the appellants as a result. His Honour therefore declined to grant the injunctions sought, which were to restrain further performance under these and other agreements entered into by AFA Facilitation with other franchisees of the cross-claimants.

The Proceedings

The proceedings brought in this Court in August 1995 by the franchisees concerned conduct, namely representations, said to contravene the Trade Practices Act 1974 (Cth), made prior to entry into the franchise agreement and in respect of which the franchisors were alleged to be responsible. Prior to the commencement of them the franchisees entered into an arrangement with AFA Facilitation for what has been called litigation support or management. Two written agreements were executed as between the franchisees and AFA Facilitation, in the case of the latter by the signature of one of its directors, Mr Janus. The first was dated 2 June 1995 and the second 31 January 1996. The cross-claim filed by the franchisors, the appellants here, in November 1995 named as first and second cross-respondents, AFA Facilitation and Mr Janus, and alleged that the June agreement was champertous and that by carrying out its terms those parties had unlawfully maintained the franchisees in the action. The cross-claim was amended to include the January agreement. The relief sought in the cross-claim included injunctions against AFA Facilitation and Mr Janus and the franchisees, who were also joined as respondents to the cross- claim. The orders proposed would have prevented each of those parties from acting in accordance with the agreements. As against AFA Facilitation and Mr Janus further injunctions were sought to prevent them from maintaining these proceedings and from "entering into or performing any other agreement in substantially the same terms as the facilitation agreement and/or the purported new facilitation agreement in respect of any proceedings or proposed proceedings against the cross-claimants."

The appellants' cross-claim had also sought an order for damages said to have been suffered as a result of the proceedings having been maintained. On 8 February 1996 his Honour the primary Judge ordered that all issues raised by the cross-claim, save that relating to damages, should be heard and determined separately from other issues in the action. It appears from the orders made by his Honour after the hearing, this did not refer only to the quantification of damage which was found to have occurred (see, for example, Edward Street Properties Pty Ltd v Collins [1977] Qd R 399). On 8 May 1996 his Honour having found, as we have earlier observed, that no damage had then been shown as likely to occur so as to warrant an injunction quia timet, dismissed the cross-claim altogether as against Mr and Mrs Simon and their company, with costs, but ordered that the cross-claim for damages might still be pursued against AFA Facilitation and Mr Janus. Further, on 10 May 1996 his Honour ordered that, as between those parties, the question as to the costs incurred with respect to the determination of the separate issues be reserved to the judge who deals with the cross-claim for damages and gave liberty to apply should that claim not be promptly pursued. His Honour had observed (137 ALR 279) that the cross-claimants may yet be able to show that they have suffered more than nominal damages and these orders were made in a background where his Honour had found all other elements of the tort of unlawful maintenance established. That his Honour did not dismiss the cross-claim altogether, was not the subject of appeal by AFA Facilitation or Mr Janus. Their Notice of Contention, which was in any event abandoned on the hearing of the appeal, did not raise any question concerning the finality of the hearing before his Honour and the order leaving open the pursuit of the damages claim.

By their notice of appeal the appellants sought injunctions against only AFA Facilitation and Mr Janus, and not Mr and Mrs Simons. Mr and Mrs Simons and their company were however named as respondents to the appeal and the appellants sought to have set aside the costs order made below in favour of those respondents and to have each of Mr and Mrs Simon, AFA Facilitation and Mr Janus pay the costs of the appeal. On the hearing of the appeal senior counsel for Mr Janus appeared and provided undertakings to the Court. As a result no orders were sought in the appeal against him, whether by way of injunction or with respect to the costs of the appeal or the trial.

It is convenient to refer, at this point, to some of the orders now sought. That which seeks to restrain the performance of existing agreements to maintain actions, with persons other than the parties to this litigation, could not be made in the absence of them. And a further order was sought by the notice of appeal, namely a declaration to the effect that AFA Facilitation and Mr Janus had unlawfully maintained the proceedings. Why such an order was now sought was not gone into. It does not, in our view, sufficiently address the problems, which we identify later in these reasons, which arise concerning the relief sought and the basis for it. In any event, it seems to us, without an injunction or other order following it, a declaration would not be appropriate.

The "Facilitation" Agreements

AFA Facilitation is a company, the directors of which are Mr Janus and Mr Cummins. Mr Cummins is a solicitor. Their families were the sole recipients of profits made by the company. Its business was the funding of and assistance in litigation. There were other companies connected with this enterprise and a non-profit organisation, The Australian Franchise Association Ltd, the object of which was said to be the advancement of franchisees. The object and activities of that organisation, in particular, were relied upon in connection with a submission made to his Honour that AFA Facilitation and entities associated with it had an interest in the franchisees' proceedings which justified their maintenance. His Honour did not accept the submission and that issue is not one with which this appeal is concerned.

The two agreements were not, as his Honour found, materially different. They provided, in summary, for an initial fee to be paid by the franchisees to AFA Facilitation ($2000 in the first place, later $3000) and the delivery of all relevant material necessary for the proposed litigation. AFA Facilitation was then to brief counsel and secure an opinion. If it was then warranted and desired, counsel would prepare originating process. The opinion and the pleadings were then to be delivered to "one or more of our Advisor Member Solicitors" with a request that they conduct the litigation on a speculative basis. The appointment of the solicitors was said to be irrevocable.

AFA Facilitation was to provide by way of "Litigation Management" services, which included it acting as the franchisees' agent in giving instructions to the solicitors; advising the solicitors on matters AFA Facilitation considered to be relevant; monitoring and reporting on the progress of the litigation and assisting the solicitors appointed "through trial or negotiated settlement"; taking instructions and advising the appointed solicitors of the franchisees' instructions. The need for this, when solicitors were otherwise appointed, is not readily apparent. His Honour however accepted that the additional explanation of the process of litigation which was offered, together with the associated emotional support, might be of some value to litigants like the franchisees. His Honour was also of the view that AFA Facilitation was handsomely rewarded for this. It was to receive some 20% (the "Contingent Management Fee") of any "Compensation", which referred to any award made by a Court or a negotiated settlement, and included any claim by any other party to the litigation which came to be taken into account in the franchisees' favour. The franchisees were also to be responsible for outlays, expenses and disbursements ("Litigation Expenses") of AFA Facilitation although, as his Honour observed, the provisions of the later agreement were unclear as to when this was to be paid. Each agreement sought to secure AFA Facilitation's interest, in the earlier version by an option to call for an assignment of the compensation, and in the later by a lien over that sum. AFA Facilitation did not accept liability for the conduct of the litigation which, it was said, was not undertaken by it in the capacity of solicitor or advisor. The truth or correctness of that assertion is not presently relevant.

The obligations cast upon the franchisees in the conduct of their litigation is of some importance, if not directly to the relief sought by the cross claimants then with respect to the process of litigation in this Court. We have referred in general terms to provisions which place AFA Facilitation as instructor to the solicitor and as nominated "agent" of the franchisees. Putting to one side what this means as between the appointed solicitors, the facilitation company and the franchisees, it remains the case that an entity, other than parties to the action and their legal representative, and whose interest is confined to the outcome of the litigation, is placed in a position of power and authority with respect to the conduct of it. This would include steps taken towards mediation or a negotiated settlement.

There are other provisions which are troublesome. AFA Facilitation's involvement demands the "full continuing unequivocal and irrevocable authority" of the franchisees to:

"(i) make copies of, pass or share information or material relating to the Cause and the Litigation to The Australian Franchise Association Limited ("A.F.A") for the benefit of its Members and to use the same for its own benefit and/or that of its related companies, trusts, servants or agents.

(ii) make copies of, pass or share information or material relating to the Litigation, to any person being now or at any time hence engaged in or contemplating litigation with or having a cause of action against the Franchisor or any other person where the documentation, facts, information or material relating to the Cause and / or the Litigation may have relevance.

(iii) undertake negotiations (be it directly or through the Appointed Solicitors) with the Franchisor and/ or those instructed on their behalf and conclude the same with a binding agreement on your behalf (without further reference to or consent required from you) for settlement or compromise of the Cause and / or the Litigation where the compensation is NO LESS than the figure stated in the endorsement to this letter as the "Minimum Acceptable Compensation" exclusive of solicitors costs / fees AND the signed duplicate of this letter shall be your sufficient and complete authority in that regard."

(These passages are taken from the earlier agreement, but the later in relevant respects is in identical terms).

The problems that these provisions raise are obvious enough. If material, obtained by way of discovery in the proceedings from the franchisors, was made available to others including those who might also be considering bringing action against them, this would amount to a breach of the implied undertaking by each party to the Court, which arises from the nature of the process of discovery, not to use any document disclosed for any purpose other than in respect of the litigation in which it is disclosed: Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10, referring to Harman v Home Office [1983] 1 AC 280, 304. They display, at the least, a lack of understanding on the part of those connected with the maintainor company. They may well expose the franchisees to sanctions by the Court, and in circumstances where they have received no advice as to the propriety of the conduct in question. It is not clear whether the panel solicitors retained by AFA Facilitation, and counsel engaged on behalf of the franchisees, are likely to become aware of these provisions, or of the terms of the agreement generally, although it seems likely that the solicitors must at some point be made aware of the terms which permit AFA Facilitation to conduct settlement negotiations, without reference to them, and for the minimum figure agreed by the franchisees. Whether it occurs to them that the franchisees ought to have advice as to these and other matters, we put to one side as relevant primarily to the question of their professional obligations.

Finally, nowhere in the agreements does it appear that AFA Facilitation, or those profiting from its enterprises, intend to be liable for costs to the intended respondent to the litigation. The risks, such that they are, which AFA Facilitation is to take might be assessed by reference to the advice as to prospects originally obtained for the franchisees. And, it seems clear, the terms of the "facilitation" agreement place it in a position where it may better ensure that monies are forthcoming from the litigation.

In summary, so far as the franchisees are concerned, there is a substantial risk inherent in the terms of such an arrangement that their interests will not be pursued as paramount or with vigour. And there is no certainty that they will be sufficiently advised. Further, franchisees are exposed to severe penalty, in the event that discovered material is disseminated to others under the terms of the facilitation agreement. It is noteworthy, in that connexion, that a later clause in the document prepared by AFA Facilitation renders the terms of the agreement absolutely secret and confidential. So far as those who are made respondents to these proceedings are concerned, the confidentiality of their documents is at risk, and their ability to deal directly with the franchisees or to undertake any meaningful mediation is reduced. And, because of the secrecy provisions neither these provisions, nor the identity of the maintainor who might be made liable for costs, will necessarily be known. The concerns that the Courts will have as to these matters, and as to the conduct of litigation by parties who are not subject to the Court's process, will be obvious (and see Hill v Archibald [1968] 1 QB 686, 695).

The Appeal

The appellants sought, in the first place, to distinguish an action brought for injunctions from one "for damages" arising from unlawful maintenance. By this means it was hoped to demonstrate that little weight need attend the proof of damage. It was not attempted to prove that financial loss or other damage had yet been caused to the appellants, by reason of the maintenance of either these proceedings, or the other proceedings brought by other franchisees under similar arrangements with AFA Facilitation. Rather the appellants' case was that such damage may yet occur and that injunctions quia timet ought be granted to prevent it. It was submitted that, so long as the risk of such damage was not excluded, it should not be necessary to show more to obtain injunctions preventing the agreement being further performed or others like them entered into in the future. This tends to suggest that the likelihood of damage is of little importance where the wrong referred to is maintenance of the proceedings. This approach is confirmed by what we took to be the principal submission for the appellants, namely that once the agreements were found by his Honour to be champertous in nature, injunctions should have issued almost as a matter of course. There are a number of aspects to this contention. First, it might proceed from an assumption that the conduct is prima facie wrongful, that is to say absent damage caused by it. In this respect mention was made of public policy considerations from which it might be concluded that such agreements should be so viewed. And it was combined with a submission that the appellants had a "right" to be able to conduct their defence in the litigation free from all that may flow from such an agreement.

These submissions require some reference to the status of the torts of maintenance and champerty today and to current conceptions as to whether they might be considered as contrary to public policy.

Maintenance and Champerty

Maintenance, which consisted of the assistance or encouragement of a party to an action in which the maintainor had no interest, was regarded by the English law, from an early time, as a crime punishable by fine or imprisonment. It later became recognised as a civil wrong. (See generally Blackstone's Commentaries, 5th ed, Book IV, p 134).

Champerty was a species of maintenance, on terms that the maintainor and the plaintiff would share in the outcome of the action. It was especially feared because the champertor's financial stake in the litigation provided a strong temptation to suborn witnesses and pursue worthless claims (see Discussion Paper 36 "Barratry, Maintenance and Champerty" New South Wales Law Reform Commission, May 1994). These concerns have been reiterated in In re Trepca Mines Ltd (No 2) [1963] 1 Ch 199, Trendtex Trading Corporation v Credit Suisse [1980] QB 629, 653 and in more recent cases, to which we shall refer.

It may be said that public policy considerations shaped the attitude of the Courts towards agreements to maintain litigation. The concern early expressed was that the remedial processes of the law might be used as tool of oppression, as indeed they were by powerful nobles and officers (NSWLRC Discussion Paper, para 2.9 and see Blackstone, 134). What maintained actions were thought likely to produce, and which was inimical to the public interest, altered over the course of time and with changing social conditions, as did the recognition of interests which were sufficient to justify interference in another's litigation by supporting it: see Hill v Archibald, 694; Trendtex; Condliffe v Hislop & Anor [1996] 1 WLR 753, 759 and Roux v Australian Broadcasting Commission [1992] 2 VR 577, 607. It may now be observed, for example, that concerns expressed earlier this century, as to the potential for the maintenance of actions to give rise to an increase in litigation, might now be considered of lesser importance than the problems which face the ordinary litigant in funding litigation and gaining access to the courts. In the latter respect, by the time Martell v Consett Iron Co Ltd [1955] 1 Ch 363 came before Danckwerts J, his Honour was able to observe that support of legal proceedings based upon a bona fide common interest, financial or philosophical, must be permitted if the law itself was not to operate as oppressive. The Courts today, in our view, are likely to take an even wider view of what might be acceptable, particularly if procedural safeguards are present or able to be applied.

There does not however seem to have been any detailed discussion or debate as to these matters and, relevant to this appeal, as to whether champerty will now be tolerated, and if so, on what conditions. We do not suggest that practices in the United States of America would necessarily, or even likely, be viewed as desirable. On the other hand, cases in the United Kingdom such as Grovewood Holdings PLC v James Capel & Co Ltd [1995] Ch 80 and McFarlane v EE Caledonia (No 2) [1995] 1 WLR 366 proceed upon the basis that such agreements are prima facie unlawful. In any event, this appeal does not, for reasons to which we later refer, require the resolution of these larger questions.

Both the offence and tort of maintenance, and of champerty, were abolished in the United Kingdom in 1967, shortly after judgment was delivered in Hill v Archibald and following a report to the Parliament by The Law Commission ("Proposals for Reform of the Law Relating to Maintenance and Champerty") in 1966. They were abolished in Victoria in 1969, in South Australia in 1992 and in New South Wales in 1995 by the Maintenance and Champerty Abolition Act 1993 (NSW). The latter legislation was intended to pave the way for the provision of contingency fees in that State. In Queensland solicitors are now permitted to fix their fees by an agreement which may stipulate for a percentage (s 23 Legal Practitioners Act 1995 (Qld)). Maintenance and champerty however remain torts actionable in Queensland (see J C Scott Constructions v Mermaid Waters Tavern Pty Ltd [1984] 2 Qd R 413), although they were never included as offences in the Criminal Code Act 1899 (Qld).

It is plainly unsatisfactory that maintenance of litigation remains a civil wrong in some, but not all, states in Australia. Whether there remain valid reasons for the retention of the tort at common law has not been addressed, although it has long been considered obsolete and in Clyne v New South Wales Bar Association [1960] HCA 40; (1960) 104 CLR 186, the High Court suggested that it may be necessary to consider whether it ought now be so regarded. Mason CJ, in Halliday v High Performance Personnel Pty Ltd (In Liq) [1993] HCA 13; (1993) 113 ALR 637, 640 also appears to have assumed that the status of the tort was questionable.

That is not to say, however, that the policy considerations which gave rise to the offence and tort have lost all significance today. The ability of the Courts to treat agreements for maintenance as contrary to public policy, and therefore illegal, remains unaffected by the statutory provisions: see Trendtex Trading, 653; McFarlane v EE Caledonia (No 2), 370; Roux v ABC, 605; Giles v Thompson [1993] UKHL 2; [1994] 1 AC 142. The giving of financial assistance to a litigant by a non-party will not however conclude the question as to whether it is unlawful on this ground (see Condliffe v Hislop & Anor). Questions of public policy with which the Courts will be concerned, as Byrne J observed in Roux v ABC, 605, are those which have regard to litigation and its funding in the contemporary world.

Trendtex, and the later cases to which we have just referred, were concerned with the question whether the Court ought lend its aid to the enforcement of champertous agreements. Questions will also likely arise for the Courts, where actions are funded by them, as to the integrity of its processes and in particular as to the uses to which they are being put, and as to the conduct of the maintained party and the maintainor with respect to the proceedings. In this connexion it would be necessary to have regard to the provisions of the particular agreement.

The New South Wales Law Reform Commission concluded, in its Discussion Paper, with the observation that further consideration as to the remedies which might be provided to the other party with respect to interference in litigation, was necessary. These will concern costs but may extend to other aspects of compliance with procedures. Where more is involved, and where there may be the real potential for an abuse of the Courts' processes it seems to us that a stay might, in some cases, be justified. Whilst it had been said in Martell v Consett Iron (388-9) (referred to in this respect in Hodges v New South Wales [1988] HCA 9; (1988) 62 ALJR 190, 193) that it would not be right to stay a maintained action, that was with respect to an action brought on the tort and which had not been determined. It could not then have been concluded that there was unlawful conduct and the stay was, for that reason, premature. But that is different from the position where an abuse of process has occurred, or is likely to. The question whether a stay ought then be imposed was left open by Atkin LJ in Wild v Simpson [1919] 2 KB 544, 564. It is noteworthy however that here a stay of the proceedings has never been sought. That approach is consistent with there having been no allegation of an abuse of process pleaded. We shall refer to this again later in these reasons.

With these observations we turn now to the appellants' submissions.

The Appellants' Submissions

It was not submitted, in terms, that special damage was not a requirement of an action on the tort, as Neville v London "Express" Newspaper Ltd [1919] AC 368 had held (applied in Queensland in J C Scott v Mermaid Waters Tavern Pty Ltd, 431). It was however submitted, at one point, that the fact of special damage could not be said to convert the conduct involved in maintaining an action into unlawful conduct. The majority in Neville's case however held that actual damage was essential to the cause of action and this has been consistently followed. This submission, so far as it implies the contrary, cannot be accepted.

As we have earlier mentioned, the appellants submitted that the cross-claim should have been viewed by his Honour not as one simply for damages but, relevantly, for injunctions. A difference in the relief claimed does not, however, alter the cause of action on which it is based and the necessary constituents of it. Damages and injunction are, as Lord Watson observed in White v Mellin [1895] AC 154, 167, simply two different types of remedy with respect to the same wrong. There the action brought was for slander of goods, which required proof of the falsity of the disparaging statements and that damage had resulted or was likely to result, which is to say "special damage" in the sense here under consideration (see Ratcliffe v Evans [1892] 2 QB 524, 528). In White v Mellin, to which Drummond J referred, there was no damage proved. And there too an injunction was sought. Lord Watson expressed the view (167) that where a plaintiff who has not yet suffered any special damage seeks an injunction, it would generally be regarded as incumbent upon them to satisfy the Court that it would necessarily be occasioned in the future.

That the relief, by way of injunction, was based upon the same facts as those said to found an entitlement to an award of damages suffered by reason of tortious conduct is clear from the cross-claim. It specifies that special damage had been suffered by reason that there had been an improper interference in the action, and because the appellants had suffered injury to their business and reputation and lost profits. The right to injunctions preventing further agreements being entered into in the future were also made to depend upon these particulars of damage, there being no others. It may be observed that there was not even an allegation, with respect to damage, that, whilst it had not yet been occasioned, it was believed that it would be. But, in any event his Honour heard submissions and dealt with the matter on the basis that the injunctions were said to be necessary to prevent damage arising. For present purposes what is of relevance is that there was only one cause of action pleaded, that in tort, and all of the relief sought depended upon it being established. There was no separate case pleaded for the injunctions.

Turning to the level of satisfaction, as to the likelihood of damage which it was necessary for the Court to have before injunctions could issue, it is necessary to bear in mind that the relief here sought was final and not interlocutory. It was submitted, for the appellants, that the cases do not disclose any fixed or absolute standard of proof which is to be required before injunctions quia timet, to prevent apprehended damage, might issue. That submission may be accepted: Hooper v Rogers [1975] 1 Ch 43, 50. It would follow that much will depend upon the circumstances of the particular case. And, as is pointed out in Spry (Equitable Remedies 4th ed) 370, whilst the same equitable principles are to be applied generally to the grant of injunctions, whether or not there has already been an infringement of rights, it should not be thought to be irrelevant that this has not occurred by the time the matter comes on for hearing. The author continues:

"...So if no breach has taken place it may be more difficult to establish, as a matter of evidence, that there is a sufficient risk of a future injury to justify the immediate grant of an injunction; and in exercising its discretion the court is found here to be "balancing the magnitude of the evil against the chances of its occurrence". If in all the circumstances the likelihood that an injury will take place is not sufficiently high, quia timet relief will be refused, and the applicant will be left either to avail himself of such other remedies as may be open to him or else to renew his application should subsequently the likelihood of an injury increase sufficiently to render equitable intervention appropriate."

This weighs strongly against what was sought to be derived from cases such as Hooper v Rogers (applied Copyright Agency Ltd v Haines [1982] 1 NSWLR 182, 192). The explanation given in the former, that earlier references to the need to show that damage was "imminent" meant only that an injunction must not be granted prematurely, is not to be taken as conveying that it need not be shown to be likely at all. Indeed in that case the injunction was granted because there was a real probability of actual damage occurring in time. And in Copyright Agency v Harris McLelland J concluded that injury was likely to be suffered.

In the present case his Honour concluded (ALR, 277) that the appellants had not shown that "any significant damage is ... likely to result from the conduct complained of" and gave findings for that conclusion. There had been something of a rash of litigation, five actions having been brought against the appellants by franchisees connected with AFA Facilitation in a two month period in 1995. Nevertheless, his Honour observed, the appellants were unable to show that other potential franchisees had, on hearing of the litigation, been deterred from doing business with the appellants. Other franchise agreements had subsequently been entered into. The appellants did not attempt to show that the franchisees' claims were necessarily unmeritorious, or that the actions would not have been brought but for the assistance given. His Honour did give consideration to the possibility that, if AFA Facilitation maintained a sufficient number of cases, the sheer volume might frighten off other prospective franchisees, but held that such a conclusion was too speculative.

It is clear that his Honour considered that it was of some importance, to the question whether an injunction ought be granted, that the action on the tort required proof of damage. That could hardly, in our view, be said to be an irrelevant consideration. That it may be viewed as being of some considerable importance is supported by the observations in White v Mellin, referred to above and Martell v Consett (388-9). Whilst the latter judgment was dealing with a stay of action, and putting aside whether the injunctions here would have a similar practical result, the reasoning is the same.

In any event it seems to us that his Honour's findings did not require a determination as to the extent to which damage must be shown to be likely. As his Honour explained, it was unnecessary to do so given his conclusion that the evidence did not disclose any significant damage was likely to result. That finding was not challenged by submissions on the appeal.

We turn, then, to the appellants' principal submission. In holding that the facilitation agreement was champertous, his Honour said:

"In my opinion, for the reasons given, AFA Facilitation has no legitimate interest of its own in involving itself in the litigation of others, pursuant to arrangements reflected in the current facilitation agreement it has with the Simons. The arrangements between AFA Facilitation and franchisees who enter into facilitation agreements like that which the Simons have executed involves both unlawful maintenance and champerty. The A-Kebab franchisors will be entitled to relief, if they can satisfy the damage requirement of the cause of action."

It was submitted that, once that conclusion was reached, an injunction ought to have issued to protect the respondents from the abuses to which champerty might give rise (Trepca Mines, 219), which is to say that regard is to be had to the nature of the arrangement. Particular reliance was placed upon Wild v Simpson, 563, where Lord Atkin said:

"The cases of champertous agreements by solicitors are often regarded merely as concerning the immediate client. Advantage may be taken of him, and oppressive terms exacted by a legal adviser who is in a commanding position by reason of his special knowledge. But the offence of maintenance, apart from the interest of the public generally, is directed primarily, not at the client maintained, but at the other party to the litigation. He has the right to be free from litigation conducted by the assistance of persons working for their own interests, and not in order to give lawful professional aid to the opposing litigant. A champertous agreement between solicitor and client is void therefore, not merely because of an abuse of the confidential relationship between solicitor and client, but because the agreement involves a continuing wrong, namely, the maintenance of the litigation against the opposing party."

There are a number of matters which arise from this passage which require clarification. In the first place it may be observed that the "wrong" of which Lord Atkin spoke was that constituted by the offence of champerty, not the tort. Indeed the question there before the Court involved the enforceability of what was there clearly an illegal agreement. It needs also to be added that where Drummond J, in the passage set out above, refers to the agreement being "unlawful", his Honour was not speaking in that sense. Rather his Honour was saying that there would be a wrong recognised at common law, if the element of damage was proved.

The "right" spoken of in Wild v Simpson was not one which the common law recognises as that owed to, or held by, an individual and which might found a cause of action and a right to relief. That there is not a "right" appears to be consistent with what gave rise, historically, to the offence and tort and with the view expressed by Lord Esher M.R. in Alabaster v Harness & Ors [1895] 1 QB 339, 342, that doctrines concerning maintenance of actions were founded less upon general principles of "right and wrong or of natural justice" as on considerations of public policy. And one finds in the dissenting judgment of Angus Parsons ACJ, in Southern Cross Assurance Company Limited v Shareholders Mutual Protection Association Limited & Ors (No 2) [1935] SASR 480, to which the Court was referred in argument, similar views expressed. Whilst public policy considerations were critical to the enforcement of the agreements, the law came to recognise only the ability of a party to seek redress for the wrong constituted by the maintenance of an action and, importantly, where it was combined with damage suffered.

Indeed it was largely upon the question, whether any infringement of a right was involved, that the Court divided in Neville's case. The submission made here for the appellants, that there is a right to be protected from maintained proceedings, was considered by the minority to be the basis for the tort. It was however held by the majority that the civil action did not concern the invasion of a right, but that it was one "in respect of an offence which causes damage to the plaintiff" (Lord Findlay, 379-80).

That is not to say however that the agreements cannot be impugned on public policy grounds. The enforceability of the agreements, and the question whether further performance of them ought be prohibited by order, might be made to depend upon findings of illegality on such grounds. The difficulty for the appellants is that none of the relief here sought relies upon a finding that the agreements are unlawful in this sense and public interest or policy questions are not raised at all.

The cross-claim does not raise any question of public policy, either in connection with the nature of the agreement itself or with respect to particular provisions of it. It does not, save in one respect, contain any reference to the performance of the "facilitation" agreement impacting upon the conduct of the litigation or the processes of the Court and, as we have earlier observed, a stay of the proceedings has never been sought. There is an allegation that the action had been the subject of interference pursuant to the maintenance agreement. The conduct it refers to is not further particularised and, in any event, it is pleaded only as an aspect of damage.

The notice of appeal did not further apprise the other parties of any ground based upon public policy. It referred only in a general, and somewhat elliptical, way to the Court's own considerations as to whether injunctive relief was necessary and at one point (at 6(c)) it was asserted:

"strong grounds would be needed for the discretionary refusal of injunctive relief because the conduct complained of was in respect of the court's own process;"

Even then, the view that these are connected with the argument, sought to be advanced on wider grounds, is obtained only with hindsight. A reference to public policy was mentioned only in passing, in argument before his Honour, and was not dealt with at all by the franchisees and AFA Facilitation. Accordingly the question whether they provided a basis for injunctive relief was not dealt with in his Honour's reasons.

In these circumstances it does not seem to us to be possible to determine the matter by reference to any questions of public policy which, in any event, were not the subject of detailed submission on the appeal. Further, it was submitted by the respondents to the appeal that there may have been some such evidence, which they might have adduced, had they been aware of reliance upon public policy grounds.

We are not prepared to conclude to the contrary. In particular it seems to us possible that some, at least, of the terms of the agreement could have been the subject of further clarification and this may be relevant to the appropriateness of the relief.

There are, as we have earlier outlined, aspects of the facilitation agreements which give considerable cause for concern and they might have raised questions as to the need for procedural and other orders by the Court. Whether they have in fact produced undesirable effects was not gone into in argument. Moreover we were informed by Senior Counsel for the franchisees during argument on the appeal that, upon his instructions, the agreements had been terminated and the litigation was now conducted by the franchisees on their own account. If that is not the case, no doubt the appellants will consider whether further applications, or amendment to the pleadings, are necessary.

In our view the appeal must be dismissed with costs. So far as concerns the costs on the appeal of the franchisees, the third and fourth respondents, there seems to us to be no basis for declining to order the appellants pay them. The orders were sought against them and they appeared and made brief submissions on the appeal as they were entitled to do.

I certify that this and the preceding twenty-three (23) pages are a true copy of the reasons for judgment herein of the Court.

Associate

Date: 20 January 1997

Counsel for the appellants: Mr P D McMurdo QC and Mr A Ryan

Solicitors for the appellants: Hawthorn Cuppaidge & Badgery

Counsel for the first respondents: Mr J C Bell QC

Solicitors for the first respondents: Lees Marshall Warnick

Counsel for the second respondent: Mr R R Douglas QC

Solicitors for the second respondent: Grant White & Associates

Counsel for the third and fourth

respondents: Mr P R Dutney QC and Mr I A Erskine

Solicitors for the third and fourth

respondents: Stockley Furlong

Date of Hearing: 1 August 1996

Place of Hearing: Brisbane

Place of Judgment: Brisbane

Date of Judgment: 20 January 1997