Australia Country Cinemas Pty Ltd v Bya Pty Ltd

[1998] FCA 1274

FEDERAL COURT OF AUSTRALIA

PRACTICE AND PROCEDURE – vacation of trial date – lack of prospects of success – unexplained delay in compliance with trial directions – prejudice to other parties

Federal Court Rules O 30 r 7
Trade Practices Act 1974 (Cth) s 52, Pt IV

Charlie Carter Pty Ltd v Shop, Distributive and Allied Employees’ Association of Australia (1987) 13 FCR 413

AUSTRALIA COUNTRY CINEMAS PTY LTD v BYA PTY LTD & ORS
TG 7 OF 1998

JUDGE:        HEEREY J
DATE:          26 AUGUST 1998
PLACE:        HOBART

IN THE FEDERAL COURT OF AUSTRALIA
TASMANIA DIST`RICT REGISTRY	TG 7 of  1998

BETWEEN:

AUSTRALIA COUNTRY CINEMAS PTY LTD (ACN 076 276 349)
APPLICANT

AND:

BYA PTY LTD
(ACN 009 514 881)
FIRST RESPONDENT

JBT (TAS) PTY LTD
(ACN 081 289 545)
SECOND RESPONDENT

JOHN BLYTHE
THIRD RESPONDENT

ANDREW TILT
FOURTH RESPONDENT

VILLAGE ROADHSHOW OPERATIONS PTY LTD
(ACN 006 735 002)
FIFTH RESPONDENT

JUDGE:

HEEREY J

DATE OF ORDER:

26 AUGUST 1998

WHERE MADE:

HOBART

THE COURT ORDERS THAT:

1. The application be dismissed.

2. The applicant pay the respondents’ costs, including reserved costs. 

3. The costs of and incidental to today’s hearing be on an indemnity basis.

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

IN THE FEDERAL COURT OF AUSTRALIA
TASMANIA DISTRICT REGISTRY	TG 7 of 1998

BETWEEN:

AUSTRALIA COUNTRY CINEMAS PTY LTD
(ACN 076 276 349)
APPLICANT

AND:

BYA PTY LTD
(ACN 009 514 881)
FIRST RESPONDENT

JBT (TAS) PTY LTD
(ACN 081 289 545)
SECOND RESPONDENT

JOHN BLYTHE
THIRD RESPONDENT

ANDREW TILT
FOURTH RESPONDENT

VILLAGE ROADHSHOW OPERATIONS PTY LTD
(ACN 006 735 002)
FIFTH RESPONDENT

JUDGE:	HEEREY J
DATE:	26 AUGUST 1998
PLACE:	HOBART

REASONS FOR JUDGMENT

The applicant seeks an order under O 30 r 7 of the Federal Court Rules vacating the trial date, that date having been fixed for today.  I have come to the conclusion that the application should be rejected.  In combination the factors which lead me to that conclusion are first, the lack of prospects of success of the claim;  secondly, the procedural course the action has taken to date and in particular the unexplained defaults of the applicant;  and thirdly, the prejudice that would be caused to the respondents if the application for vacating the trial date were accepted.

As to the first ground, there are a number of causes of action pleaded.  Paragraph 15 of the statement of claim pleads:

“In the premises the First and/or Second Respondents engaged in conduct in trade or commerce that was misleading or deceptive or which was likely to mislead or deceive in contravention of Section 52 of the Act by failing to advise the Applicant that they had commenced negotiations with Village in circumstances where, as the First and Second Respondents knew or ought to have known, the Applicant had a reasonable expectation that it would be offered the development at the same price and on the same terms and conditions as the First and/or Second Respondents would be prepared to accept elsewhere.”

As far as the fifth respondent (Village) is concerned par 21 alleges:

“The Fifth Respondent knew or ought to have known that the First Respondent and/or the Second Respondent had agreed to lease to the Applicant and/or had given the Applicant a right of first refusal to lease the cinema complex and, by reason of that knowledge, the Fifth Respondent was implicated and/or participated in the misleading and deceptive conduct of the First, Second, Third and Fourth Respondents.”

I find it difficult to see how, as alleged in par 15, merely failing to advise the applicant that negotiations had commenced with Village could amount to misleading or deceptive conduct, whether or not it was a breach of some contractual obligation.  Still less is it apparent how Village’s knowledge, actual or imputed, meant that it was “implicated and/or participated in” the alleged misleading and deceptive conduct.

Another cause of action relied on is an alleged agreement for lease between the second respondent and the applicant (par 17 of the statement of claim).  The particulars set out a series of correspondence.  But on examination some of the letters, particularly those towards the end of the series, seem quite inconsistent with the alleged agreement.  For example, the draft lease which was sent on 31 December 1997 by the solicitors for the applicant is an incomplete document and, more to the point, is between parties who are not parties to the present proceeding.

The last document in the series, a letter of 5 January 1998 from a company Andrew Tilt Properties Pty Ltd, not a party to the action, to the solicitors for the applicant, commences:

“I refer to your fax dated 31 December 1997 and note that in order to save time in the existing tight timetable, you have provided a draft without client instructions.  To also assist we have considered the draft and are able to respond so that the main document can be worked up accordingly.  Our comments are as follows.”

Then followed a number of detailed comments which raised alternative propositions and the letter concludes:

“Subject to perusal by our solicitor, all other content is agreed.”

In other words the detailed matters referred to in the letter are, at that date, not agreed. 

Then there is a claim in par 18 under Part IV of the Trade Practices Act 1974 (Cth) in these terms:

“Further and in the alternative, the proposed contract, arrangement or understanding between the Second and Fifth Respondents, pursuant to the Village Agreement outlined in paragraph 13 above, would have or be likely to have the effect of substantially lessening competition in the Tasmanian cinema market, in which the Fifth Respondent is the sole major exhibitor in contravention of Section 45 of the Act.” 

I agree with counsel for Village that this is defective in that it does no more than repeat the words of s 55 of the Trade Practices Act and does not attempt to plead material facts: see Charlie Carter Pty Ltd v Shop, Distributive and Allied Employees’ Association of Australia (1987) 13 FCR 413 at 416-418.

There is also the problem that on its face the impugned agreement is an agreement for lease and therefore the acquisition of an asset within the meaning of s 4(4)(b) of the Trade Practices Act and consequently exempted from the reach of s 45: see s 45(7).  I might add that on 20 July 1988 - that is over a month ago - the solicitors for Village wrote to the applicant’s solicitors pointing out these difficulties.  There has been no response to that letter.

This matter was commenced on 7 May 1998.  It came on for hearing before me on 5 June.  The applicant did not then persist with its claim for an interlocutory injunction, but it was agreed that an early trial date should be fixed and a timetable agreed upon.  In the event the parties, by consent, agreed on a timetable which formed the subject of a consent order made on 15 June 1998.  The timetable and the compliance with it are set out in the following table:

Step	Timetable date	Applicant compliance	1st 4 resps’ compliance	5th resp’s compliance
Amended application and Statement of claim	19 June	23 June
Defence and/or cross-claim	26 June	5 August	4 August
Discovery by verified list	10 July	5 August
Inspection of discovered documents	24 July	10 August
Applicant’s statements	31 July
Respondent’s statements	7 August
App’s statements in reply	14 August
Hearing	26, 27 Aug

It should also be noted that the directions reserved liberty to apply.  Thus should any of the parties have had difficulty meeting the timetable it was open for them to approach the other parties and the Court with a view to making necessary variations.  No such application was made by the applicant.

No explanation has been proffered as to why the applicant is in such grievous default.  It was said from the bar table that the parties had been engaged in negotiation, but it is a truism of legal practice to say that while negotiation is highly desirable the best way to negotiate a settlement is to prepare to fight the case.  In any event, I am not prepared to draw the inference that this was the cause of the lack of preparation of the case.  There is just no evidence.  The inference is equally open that the whole proceeding is not genuine and that the applicant thought it might disrupt the respondents’ projects and simply cause delay and obstruction.  I emphasise I am not saying that that is in fact the case.  I simply point out that there is no explanation on affidavit, as one might expect, to tell the Court why these consent directions have been ignored.

As to prejudice, the solicitor for the first to fourth respondents, Mr Alan Morgan, in an affidavit sworn today, deposes:

“6.The construction of the cinema complex cannot start until its fundamentals are determined  Particularly, these proceedings have raised uncertainty as to the size of the complex to be constructed, and whether the second respondent will have the benefit of a parent company garantee [sic] of the lessee’s obligations.  The only way in which, apart from determination of these proceedings, this delay in the construction could be overcome, is if the applicant agreed that:

(a)if it is successful in these proceedings, to accept any offer which the first four respondents or any of them are obliged to make to the applicant;

(b)any offer which the first four respondents or any of them may be obliged to make to the applicant will be on the same terms and conditions as the agreement for lease (“the Village agreement”) executed by the secondnamed respondent and the fifthnamed respondent on 16 April 1998 and in respect of a cinema complex constructed to seat only 1,140 patrons;

(c)the applicants ultimate parent company will be required to provide a guarantee of the applicant’s obligations under any agreement for lease and that guarantee include the terms and conditions of the guarantee in the Village agreement.

7.Construction of the cinema cannot commence until these matters are resolved because the seating capacity of the cinema substantially determines the design of the complex, and determines the extent of the requirement and the space available for carparking.  The absence of agreement by the applicant that it will accept any offer made to it, and the absence of the acknowledgment by the applicant that its ultimate parent company ought guarantee its obligations under any lease, precluded the conclusion of construction finance.  All of these are causing detriment because:

(a)the secondnamed respondent has borrowed funds to purchase land required for the development of the complex, and is under an obligation to pay interest on those borrowings without any progress towards completion of the project;

(b)the principal monies referred to in para.(a) are now overdue for repayment but the secondnamed respondent cannot presently do so because it has been precluded from obtaining construction finance as a result of these proceedings;

(c)the delay in the commencement of the construction of the complex will cause a delay to the commencement of rental income from the complex.”

I do not accept the contention of counsel for the applicant that there was no evidence that the existence of the proceeding was interfering with the provision of construction finance.  Such  evidence appears in par 7 of Mr Morgan's affidavit, which is not challenged.  In any event, one can understand as a matter of practical reality that a construction financier would be reluctant to advance substantial money in the context of major litigation about who is to be the developer or ultimate lessee of the site.

Counsel for the applicant argued that there is in truth no prejudice because the first to fourth respondents have chosen not to commence physical construction until these proceedings were resolved.  It was implicit in his submissions that they should reasonably have commenced construction and relied on the likelihood that if the action proceeded to judgment and the applicant were successful a court would not, as a matter of discretion, order the building to be physically pulled down or otherwise altered.

However, the fact remains that the further amended application of the applicant seeks, amongst other things, specific performance of the alleged agreement for a lease between the applicant and the second respondent, and an order that the agreement for lease between the second respondent and Village be set aside.  It also seeks, somewhat surprisingly for an applicant which seeks elsewhere to rely on the pro-competition provisions of the Trade Practices Act, that the first and second respondents be:

“...permanently restrained by themselves, their employees or agents from in any way dealing with any person other than the Applicant in respect to a lease of the cinema complex.”

Counsel did not seek to amend the application to withdraw these claims.  I can then only treat them as being seriously made, and their being on the record would be a very understandable inhibition to any financier. 

If this litigation were postponed further, the applicant would be getting the procedural benefit of an interlocutory injunction without having to give an undertaking as to damages. 

The application is therefore refused.  As counsel for the applicant indicated that he did not propose to lead any evidence, there will be judgment for the respondents. 

I will order that the applicant pay the respondents’ costs, including reserved costs, and that the costs of and incidental to today’s hearing be on an indemnity basis.

I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey

Associate:

Dated:            26 August 1998

Counsel for the Applicant:	Mr J Sexton
Solicitors for the Applicant:	Cashman & Partners
Counsel for the first to fourth Respondents:	Mr  P Tree
Solicitors for the first to fourth Respondents:	Hand Ogilvie & Breheny
Counsel for the fifth Respondent:	Mr D Shavin QC with Mr A Panna
Solicitors for the fifth Respondent:	Herbert Geer & Rundle
Date of Hearing:	26 August 1998
Date of Judgment:	26 August 1998