Broad Spectrum Training Pty Ltd & Ors v Bidding Buzz Ltd & Ors
[2010] FMCA 932
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BROAD SPECTRUM TRAINING PTY LTD & ORS v BIDDING BUZZ LIMITED & ORS | [2010] FMCA 932 |
| TRADE PRACTICES – Alleged misleading and deceptive conduct – franchising agreement. PRACTICE AND PROCEDURE – Application for adjournment pending mediation – mediation provisions of Franchising Code – requirement for Court to consider if mediation may help resolve dispute – factors which may help resolve dispute – whether parties must attend mediation in person – whether Court must advise parties to use mediation – whether proceedings to be adjourned pending mediation – relevant factors for consideration. PRACTICE AND PROCEDURE – Venue – application to change – mandatory matters for consideration – other relevant matters for consideration. PRACTICE AND PROCEDURE – Security for costs – factors for consideration. MEDIATION – Whether mediation may help resolve dispute – whether mediation under provisions of Franchising Code or by Registrar of the Court – whether proceedings to be adjourned pending mediation. WORDS AND PHRASES – “mediation” – “may” – “help” – “may help” – “must” – “advise” – “must advise” – “range”. |
| Fair Trading Act 1989 (Queensland), ss. 38, 99, 100 Federal Magistrates Act 1999 (Cth), ss.3(2)(b) and (c), 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 42, 45, 52, 80 Federal Magistrates Court Rules 2001 (Cth), rr.8.01, 14.02, 15.07-15.10, 21.01, 27.01-27.06, Schedule 1 Trade Practices Act 1974 (Cth), ss.51AC, 51AE, 52, 82, 87 Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth), reg.3(a) and (b), Schedule – Franchising Code of Conduct, Part 4, cll.24, 25, 26, 27, 28, 29, 30, 30A, 31 |
| Abrahams v Qantas Airways Limited (No. 2) (2007) 210 FLR 314; [2007] FMCA 639 Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 PEP Community Services Inc. t/as PEP Community Services v Job Futures Ltd [2008] FCA 1264 |
| Explanatory Memorandum, Federal Magistrates Bill 1999 (Cth) M Steele, Federal Magistrates Court Guide Book (Sydney: Thomson Legal and Regulatory Limited) The Shorter Oxford English Dictionary on Historical Principles (Oxford: Clarendon Press, 1973) |
| First Applicant: | BROAD SPECTRUM TRAINING PTY LTD |
| Second Applicant: | LLOYD PATRICK RICE |
| Third Applicant: | JANIS ROWELL |
| First Respondent: | BIDDING BUZZ LIMITED |
| Second Respondent: | MATTHEW DANIEL CLARKSON |
| Third Respondent: | AMANDA CLARKSON |
| Fourth Respondent: | DARREN STEPHENS |
| File Number: | PEG 127 of 2010 |
| Judgment of: | Lucev FM |
| Hearing date: | 16 September 2010 |
| Date of Last Submission: | 16 September 2010 |
| Delivered at: | Perth |
| Delivered on: | 3 December 2010 |
REPRESENTATION
| Counsel for the First, Second and Third Applicants: | Mr J Riley |
| Solicitors for the First, Second and Third Applicants: | Elevation Legal |
| Counsel for the First, Second and Third Respondents: | Ms E Hensler |
| Solicitors for the First, Second and Third Respondents: | Redchip Lawyers |
| Fourth Respondent: | No appearance |
DECLARATION AND ORDERS
DECLARATION
That mediation under the provisions of the Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth), Schedule – Franchising Code of Conduct (“Franchising Code of Conduct”) may help resolve the dispute between the parties, and that the parties must use the mediation provisions in the Franchising Code of Conduct.
ORDERS
The application for an adjournment of the proceedings pending mediation under the provisions of the Franchising Code of Conduct is granted, and the proceedings will be adjourned to 9.00am on 28 February 2011 for mention.
The application for change of venue is dismissed.
The application for security for costs is dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 127 of 2010
| BROAD SPECTRUM TRAINING PTY LTD |
First Applicant
| LLOYD PATRICK RICE |
Second Applicant
| JANIS ROWELL |
Third Applicant
And
| BIDDING BUZZ LIMITED |
First Respondent
| MATTHEW DANIEL CLARKSON |
Second Respondent
| AMANDA CLARKSON |
Third Respondent
| DARREN STEPHENS |
Fourth Respondent
REASONS FOR JUDGMENT
Application in a Case
This is an Application in a Case by the first, second and third respondents, Bidding Buzz Limited,[1] Matthew Daniel Clarkson and Amanda Clarkson respectively,[2] for orders in the following terms:
1.That these proceedings be stayed pending the proper implementation of the mediation procedures as outlined in the Trade Practices (Industry Code – Franchising) Regulations 1998.
2.That the proceedings be transferred to the Brisbane Registry of the Federal Magistrates Court.
3.That the … [Applicants] provide security for the … [Respondents’] costs of the proceedings.
[1] “Bidding Buzz”.
[2] Hereafter “Mr Clarkson” and “Mrs Clarkson” respectively.
In the course of proceedings it was conceded that an adjournment, and not a stay, of the proceedings pending mediation was sought by the respondents.[3]
[3] Transcript, pages 9 and 14.
The Application in a Case is opposed by the applicants, Broad Spectrum Training Pty Ltd,[4] Lloyd Patrick Rice and Janis Rowell.[5]
[4] “Broad Spectrum”.
[5] Hereafter “Mr Rice” and “Ms Rowell” respectively.
Issues
The issues in these proceedings are effectively those in relation to which orders are sought, namely:
a)whether the proceedings ought to be adjourned pending the proper implementation of the mediation procedures outlined in the Trade Practices (Industry Codes – Franchising) Regulations 1998 (Cth),[6] and the Schedule: Franchising Code of Conduct to the TP Franchising Regulations;[7]
b)whether the proceedings ought to be transferred to the Brisbane Registry of the Federal Magistrates Court;[8] and
c)whether the applicants ought to provide security for the respondents’ costs of the proceedings.
Adjournment pending mediation
Legislative provisions
[6] “TP Franchising Regulations”.
[7] “Franchising Code”.
[8] “the Court”.
Federal Magistrates Act
The Federal Magistrates Act 1999 (Cth):[9]
a)has as one of its objects “to encourage the use of a range of appropriate dispute resolution processes”;[10] and
b)provides expressly for matters in relation to dispute resolution processes in ss.21-24 (and also, but not as relevantly for present purposes, in ss.25-30).
[9] “FM Act”.
[10] FM Act, s.3(2)(c).
Sections 21-24 of the FM Act provide as follows:
21. Dispute resolution processes
In this Part:
"dispute resolution processes" means procedures and services for the resolution of disputes otherwise than by way of the exercise of the judicial power of the Commonwealth, and includes:
(a) counselling; and
(b) mediation; and
(c) arbitration; and
(d) neutral evaluation; and
(e) case appraisal; and
(f) conciliation.
22. Federal Magistrates Court to consider whether to advise people to use dispute resolution processes
The Federal Magistrates Court must consider whether or not to advise the parties to proceedings before it about the dispute resolution processes that could be used to resolve any matter in dispute.
23. Federal Magistrates Court to advise people to use dispute resolution processes
(1) If the Federal Magistrates Court considers that a dispute resolution process may help the parties to a dispute before it to resolve that dispute, the Federal Magistrates Court must advise the parties to use that dispute resolution process.
(2) If the Federal Magistrates Court does so advise the parties, it may, if it considers it desirable to do so, adjourn any proceedings before it to enable attendance in connection with the dispute resolution process.
24. Duty of legal practitioners to consider whether to advise people to use dispute resolution processes
A legal practitioner acting in proceedings in the Federal Magistrates Court, or consulted by a person considering instituting such proceedings, must consider whether or not to advise:
(a) the parties to the proceedings; or
(b) the person considering instituting proceedings;
about the dispute resolution processes that could be used to resolve any matter in dispute.
The Federal Magistrates Bill 1999 (Cth), Explanatory Memorandum, describes mediation and conciliation as facilitative processes.[11] The Explanatory Memorandum refers to a National Alternative Dispute Resolution Advisory Council paper printed in March 1997 entitled “Alternative Dispute Resolution Definitions” which defines “mediation” as:
a process in which the parties to a dispute, with the assistance of a neutral third party (the mediator), identify the disputed issues, develop options, consider alternatives and endeavour to reach an agreement. The mediator has no advisory or determinative role in regard to the content of the dispute or the outcome of its resolution, but may advise on or determine the process of mediation whereby resolution is attempted.[12]
[11] Explanatory Memorandum, Federal Magistrates Bill 1999 (Cth), Notes on Clauses at para.38 (“Explanatory Memorandum”).
[12] Explanatory Memorandum, Notes on Clauses at para.39.
The purpose of s.23 of the FM Act is described in the Explanatory Memorandum as follows:
This will ensure that parties are referred to appropriate primary dispute resolution processes.[13]
[13] Explanatory Memorandum, Notes on Clauses at para.40.
A further object of the FM Act is to “enable the … Court to use streamlined procedures”,[14] while s.42 of the FM Act provides that the Court “…must endeavour to ensure that proceedings are not protracted.”
[14] FM Act, s.3(2)(b).
The FMC Rules relevantly provide for dispute resolution and mediation in rr.27.01-27.06 which provides as follows:
27.01 Proceeding referred to mediator or arbitrator
(1) If the Court orders a proceeding or any matter arising out of a proceeding to be referred to a mediator or, with the consent of the parties to an arbitrator, the mediation or arbitration must proceed in accordance with this Part.
(2) Nothing in this Part affects an order or direction made under rule 10.01.
27.02 Adjournment of proceeding
(1) Unless the Court otherwise orders, if an order for mediation or arbitration is made in relation to a proceeding, the proceeding is adjourned until the mediator or arbitrator reports to the Court.
(2) A proceeding may be adjourned to a fixed date when the mediator or arbitrator must report to the Court on progress in the mediation or arbitration.
27.03 Court may end mediation or arbitration
(1) The Court may:
(a) end a mediation or arbitration at any time; or
(b) terminate the appointment of a mediator or an arbitrator; or
(c) appoint a new mediator or arbitrator to replace a mediator or an arbitrator.
(2) If the Court appoints a new arbitrator, the Court may order:
(a) that the new arbitrator must treat any evidence given, or any record, document or anything else produced, or anything done, in the course of the arbitration as if it had been given, produced or done before or by the new arbitrator; or
(b) that any interim award made in the course of the arbitration is to be taken to have been made by the new arbitrator; or
(c) that the new arbitrator must adopt and act on any determination made by the previous arbitrator.
(3) If the Court appoints a new mediator, the Court may order that the mediation continue in any way the Court directs.
27.04 Nomination of mediator
(1) If the parties cannot reach agreement on a mediator within 14 days of an order for mediation, a Registrar must:
(a) nominate a person as the mediator; and
(b) give the parties written notice:
(i) of the name and address of the mediator; and
(ii) of the time, date and place of mediation; and
(iii) of any further documents to be given to the mediator by a party.
(2) In fixing a time and date for the mediation, the Registrar must:
(a) consult the parties; and
(b) have regard to any time fixed by the Court for the mediation to be started or completed.
27.05 Mediation conference
(1) A mediation conference must be conducted:
(a) in accordance with any direction of the Court; and
(b) as a structured process in which the mediator assists the parties by encouraging and facilitating discussion between the parties so that:
(i) they may communicate effectively with each other about the dispute; and
(ii) if agreement is reached, with the consent of the parties the agreement can be included in a consent order.
(2) If part only of a proceeding is the subject of an order for mediation, the mediator may at the end of the mediation report to the Court in terms agreed between the parties.
27.06 Mediator may end mediation
If the mediator considers that a mediation should not continue, the mediator must, subject to any order of the Court:
(a) end the mediation; and
(b) advise the Court of the outcome.
Franchising Code
The provisions for mediation under Part 4 of the Franchising Code are as follows:
24 Definitions
In this Part:
"complainant" means the person who starts the procedure under clause 29.
"parties" means the complainant and the respondent in a dispute arising under a franchise agreement or this code.
"respondent" means the person with whom the complainant has a dispute.
25 Mediation adviser
A mediation adviser is to be appointed for this Part by the Minister.
26 Internal complaint handling procedure
A franchise agreement entered into on or after 1 October 1998 must provide for a complaint handling procedure that complies with clauses 29 and 30.
27 Code complaint handling procedure
A party to a franchise agreement who has a dispute with another party to the franchise agreement may start the procedure under clause 29.
28 Choice of procedure
A party to a franchise agreement who has a dispute with another party to the franchise agreement may, at any time, choose to use the procedure under clause 26 or 27.
29 Procedure
(1) The complainant must tell the respondent in writing:
(a) the nature of the dispute; and
(b) what outcome the complainant wants; and
(c) what action the complainant thinks will settle the dispute.
(2) The parties should then try to agree about how to resolve the dispute.
(3) For mediation under a franchise agreement:
(a) if the parties cannot agree under subclause (2) within 3 weeks, either party may refer the matter to a mediator; and
(b) if the parties cannot agree about who should be the mediator, either party may ask the mediation adviser to appoint a mediator.
(4) For mediation under this code, either party may ask the mediation adviser to appoint a mediator.
(5) Subject to subclause (5A), the mediator may decide the time and place for mediation.
(5A) Mediation under this code must be conducted in Australia.
(6) The parties must attend the mediation and try to resolve the dispute.
(7) For subclause (6), a party is taken to attend mediation if the party is represented at the mediation by a person who has the authority to enter an agreement to settle the dispute on behalf of the party.
(8) For subclause (6), a party will be taken to be trying to resolve a dispute if the party approaches the resolution of the dispute in a reconciliatory manner, including doing any of the following:
(a) attending and participating in meetings at reasonable times;
(b) at the beginning of the mediation process, making the party's intention clear as to what the party is trying to achieve through the mediation process;
(c) observing any obligations relating to confidentiality that apply during or after the mediation process;
(d) not taking action during the dispute, including by providing inferior goods, services, or support, which has the effect of damaging the reputation of the franchise system;
(e) not refusing to take action during the dispute, including not providing goods, services or support, if the refusal to act would have the effect of damaging the reputation of the franchise system.
30 Mediation under the code
(1) The mediation adviser must, within 14 days after referral under paragraph 29 (3) (b) or subclause 29 (4), appoint a mediator for the dispute.
(2) After mediation under this code has started, the mediator must tell the mediation adviser, within 28 days, that mediation has started.
30A Termination of mediation
(1) This clause applies if:
(a) at least 30 days have elapsed after the start of mediation of a dispute; and
(b) the dispute has not been resolved.
(2) If either party asks the mediator to terminate the mediation, the mediator must do so.
(3) Subject to subclause (2), the mediator may terminate the mediation at any time unless satisfied that a resolution of the dispute is imminent.
(4) If the mediator terminates the mediation of a dispute under this clause, the mediator must issue a certificate stating:
(a) the names of the parties; and
(b) the nature of the dispute; and
(c) that the mediation has finished; and
(d) that the dispute has not been resolved.
(5) The mediator must give a copy of the certificate to:
(a) the mediation adviser; and
(b) each of the parties to the dispute.
31 Conditions
(1) This Part does not affect the right of a party to a franchise agreement to take legal proceedings under the franchise agreement.
(2) The parties are equally liable for the costs of mediation under this Part unless they agree otherwise.
(3) The parties must pay for their own costs of attending the mediation.
(4) In this clause:
the costs of mediation under this Part includes the following:
(a) the cost of the mediator;
(b) the cost of room hire;
(c) the cost of any additional input (including expert reports) agreed by both parties to be necessary to the conduct of the mediation.
Relevant facts and allegations
Franchise Agreement
The applicants and Bidding Buzz entered into a franchise agreement on or about 4 March 2010.[15]
[15] “Franchise Agreement”.
The Franchise Agreement relates to the provision of learning programs related to e-Bay-based businesses and associated products. The Franchise Agreement provides for the applicants to “obtain the benefit of … [Bidding Buzz’] knowledge skill and experience and the right to operate” the business of providing learning programs under a system used by Bidding Buzz under licence.[16]
[16] Franchise Agreement, Recitals/Background.
Under the Franchise Agreement the applicants were granted the non-exclusive rights by Bidding Buzz to operate the business under the system, to sell products and associated services, and to use trade marks on a non-exclusive basis within a non-exclusive territory for a specified term.[17]
[17] Franchise Agreement, cl.2.1.
Broad Spectrum was precluded from commencing trading in its business until Mr Rice and Ms Rowell had undertaken training as required under the Franchise Agreement.[18] The Franchise Agreement provided for Bidding Buzz to provide training for one of Mr Rice or Ms Rowell as set out in the Franchise Agreement.[19]
[18] Franchise Agreement, cll.5 and 6.
[19] Franchise Agreement, cl.6.
Under the Franchise Agreement there was a specific law and jurisdiction clause in the following terms:
“This Agreement is to be governed by the laws of Queensland and the parties submit to the non exclusive jurisdiction of Queensland courts and any courts which have jurisdiction to hear appeals from any of those courts.”[20]
[20] Franchise Agreement. cl.22.5.
Statement of Claim
The Statement of Claim alleges a number of material representations, primarily associated with:
a)the level of income which the applicants might expect to earn;
b)the lifestyle that the applicants might expect to enjoy;
c)the generation of leads by Bidding Buzz for the applicants in order to produce sales and income for the applicants; and
d)the necessity for training provided by Bidding Buzz.
The applicants allege misleading and deceptive conduct and unconscionable conduct by the respondents contrary to ss.52 and 51AC of the Trade Practices Act 1974 (Cth),[21] for which damages are claimed under ss.82 and 87 of the TP Act.
[21] “TP Act”.
The applicants also allege misleading and deceptive conduct and damages under the provisions of ss.38, 99 and 100 of the Fair Trading Act 1989 (Queensland), as well as alleging misrepresentation, undue influence and breach of the Franchise Agreement.
Location of parties and lawyers
In very broad terms the applicants are based in Western Australia. Bidding Buzz and Mr and Mrs Clarkson are Queensland based. Such information as is available on the fourth respondent indicates he was in Victoria, but may now be in Queensland.[22] The lawyers for the applicants are based in Western Australia; the lawyers for the respondents are based in Queensland.
[22] Transcript, p.3.
Mediation provisions and conduct
The Franchise Agreement provides that:
“Where a dispute arises under this Agreement between the parties to this Agreement, the parties must comply with the dispute resolution process stated in the Code.”[23]
[23] Franchise Agreement, cl.21.3(a). The word “Code” does not appear to be defined in the Franchise Agreement, however, there appears to be no dispute that it is a reference to the Franchising Code.
On 22 July 2010 the solicitors for the first, second and third respondents wrote to the applicants’ solicitors concerning the claims the subject of the present litigation and drew attention to the provisions of the Franchising Code in relation to mediation. The applicants were put on notice that Bidding Buzz and Mr and Mrs Clarkson sought that the applicants attend mediation in accordance with the Franchise Agreement, in Queensland.[24]
[24] “22 July 2010 Letter”; affidavit of Angela Mary Laylee, sworn 27 August 2010 (“Ms Laylee’s Affidavit”), para.5 and Annexure AML2.
The applicants’ solicitors did not respond to the 22 July 2010 Letter before commencing the current proceedings. The proceedings were commenced on 3 August 2010.
On 20 August 2010 the solicitors for Bidding Buzz and Mr and Mrs Clarkson wrote to the mediation adviser advising that they wished to appoint a mediator in accordance with the Franchising Code.[25]
[25] Ms Laylee’s Affidavit, para.7 and Annexure AML3.
Bidding Buzz and Mr and Mrs Clarkson have agreed to share the costs of Mr Rice’s and Ms Rowell’s travel to Brisbane for any mediation. However, Mr Rice and Ms Rowell have indicated to the mediation adviser that they do not wish to attend mediation in Brisbane. Bidding Buzz and Mr and Mrs Clarkson still wish to proceed with mediation.[26]
[26] Ms Laylee’s Affidavit, paras.8-11 and Annexures AML4, AML5, AML6 and AML7.
Consideration – adjournment pending mediation
Whether mediation for purposes of FM Act
The process set out at clause 29(1), (2), (6), (7) and (8) of the Franchising Code is a process in which the parties to a dispute, with the assistance of a mediator, identify disputed issues, develop options, consider alternatives and endeavour to reach an agreement. The dispute resolution process set out under Part 4 of the Franchising Code is therefore indisputably “mediation” for the purposes of s.21(b) of the FM Act.
Considering whether to advise of dispute resolution processes
Section 22 of the FM Act requires the Court to consider whether or not to advise the parties to proceedings before it about dispute resolution processes that could be used to resolve any matter in dispute. Section 22 of the FM Act need not be utilised in this case. Both parties are aware of the appropriate dispute resolution processes. The respondents contend that, in accordance with cl.21.3(a) of the Franchise Agreement, the process under the Franchising Code ought to be followed. The applicants express a preference for mediation by a Registrar of this Court.
Whether dispute resolution processes “may help”
Under s.23(1) of the FM Act the question which then arises is whether or not the Court considers that a dispute resolution process “may help the parties to a dispute … to resolve that dispute.” What the Court is required to assess is whether mediation may help the parties to resolve this particular dispute.
The words “may help” appear in the context of the dispute resolution processes being discussed under s.23(1) of the FM Act. In this context:
a)“may” expresses a subjective possibility that the dispute resolution process might help resolve the dispute;[27] and
b)“help” means a thing (in this case, the dispute resolution process) which may make more effectual or aid the resolution of the dispute.[28]
[27] The Shorter Oxford English Dictionary on Historical Principles (Volume II) (Oxford: Clarendon Press, 1973) page 1294.
[28] The Shorter Oxford English Dictionary on Historical Principles (Volume I) (Oxford: Clarendon Press, 1973) page 949 (“The Shorter Oxford English Dictionary (Volume I)”).
In this case, the parties are willing to enter into mediation, albeit that the applicants seek mediation before a Registrar of this Court, whilst Bidding Buzz and Mr and Mrs Clarkson seek mediation before a mediator appointed under the Franchising Code. The fact that six of the seven parties are willing to enter into mediation indicates that there is some preparedness to try to resolve the dispute. That is a factor of some significance in determining whether mediation may help resolve the dispute.
There does not appear to be anything in the subject matter of the proceedings, or the remedies sought in the proceedings, which would prevent resolution of the dispute by mediation.
The evidence discloses that a possible impediment to the resolution of this matter by mediation is that Mr Rice and Ms Rowell might have to travel from Perth to Brisbane to attend any mediation under the Franchising Code, as that mediation process is set to take place in Brisbane. To some degree, any issue associated with the costs of travel, which may be a concern to Mr Rice and Ms Rowell, is offset by reason of the agreement by Bidding Buzz and Mr and Mrs Clarkson to pay half of the costs of the flight to Brisbane from Perth for Mr Rice and Ms Rowell. In any event, travel may not be an impediment to mediation resolving this issue. Mediation does not necessarily require Mr Rice and Ms Rowell to travel to where the mediator is actually sitting, because:
a)clause 29(6) of the Franchising Code does not require attendance at the mediation by a party in person. Even though clause 29(6) of the Franchising Code provides that the “parties must attend the mediation” it is qualified by clause 29(7) of the Franchising Code which provides that a party is taken to attend mediation if it is represented at the mediation by a person with authority to enter into an agreement to settle the dispute on behalf of a party. Thus, with appropriate authority in place, either Mr Rice or Ms Rowell, or a representative (including a lawyer from Perth or from Brisbane), could attend the mediation on their behalf (and on behalf of Broad Spectrum also); and
b)there is no reason why mediation cannot be conducted by video conference, video call or telephone.[29] All are arguably less desirable than mediation attended in person by those concerned, but are nevertheless appropriate means by which to conduct a mediation.[30] In any event, mediation attended by the parties or their representatives, whenever and however it is conducted, and whoever attends, may help in the resolution of the dispute.
[29] Sherwood Overseas Co Pty Ltd v Jaymac International Pty Ltd [2008] FMCA 495 at para.32 per Lucev FM (“Sherwood Overseas”).
[30] See Dorrian v Rushlyn Pty Ltd [2010] FMCA 787 where Lindsay FM ordered that the respondents were at liberty to attend mediation by telephone.
The costs of resolving the dispute by mediation, as opposed to the matter proceeding to hearing, is a further reason why mediation may help the parties resolve the dispute. Costs for Counsel and solicitors for a three to five day hearing in this Court are likely to run to tens of thousands of dollars, with the losing party or parties likely to have to pay the winning party or parties’ costs.[31] In this case, some of the parties are also likely to have to incur significant travel costs depending upon where any final hearing is held. Mediation may therefore assist the resolution of this matter by offering a cheaper, compromise solution, rather than the win-lose outcome of a hearing.
[31] The general rule in this Court is that costs follow the event: Reynolds v The Minister for Health & Anor (No. 2) [2010] FMCA 910 at para.3 per Lucev FM. A good example of the disparity between costs incurred by parties and costs able to be recovered by parties in this Court by reason of a successful party’s costs generally being restricted to those payable under Schedule 1 of the Federal Magistrates Court Rules 2001 (Cth) (“FMC Rules”) is Pierson’s Pro-Health Pty Ltd & Ors v Silvex Nominees Pty Ltd & Anor (No. 3) [2010] FMCA 250 (“Pierson’s Pro-Health (No. 3)”) where, following a five day hearing of a trade marks, torts and trade practices case (see Pierson’s Pro-Health Pty Ltd & Ors v Silvex Nominees Pty Ltd & Anor (No. 2) [2010] FMCA 121) the Court ordered that the successful parties’ costs be paid in the sum of $34,735 in circumstances where it was said that costs and disbursements for Counsel, solicitors and experts totalled $281,922.65: see Pierson’s Pro-Health (No. 3) at paras.1 and 54 per Lucev FM.
Having regard to the above factors, the Court has reached the view that the use of the dispute resolution process, namely mediation, may help the parties to this litigation to resolve their dispute.
Meaning of “must advise”
Section 23(1) of the FM Act then provides that the Court “must advise” the parties to use that dispute resolution process, in this case, mediation.
In Posner v Collector for Interstate Destitute Persons (Vic),[32] one High Court Justice observed that:
“Section 56 of the Justices Act (W.A.) requires, with certain immaterial exceptions, that the summons must be served on the defendant personally. “Must” is a word of absolute obligation and occurs in a section which is concerned with a fundamental principle of justice. It is not merely directory. Compliance is essential to an effective hearing of the summons.”[33]
[32] (1946) 74 CLR 461 (“Posner”).
[33] Posner at 490 per Williams J.
In Kosovich v Mancini,[34] the South Australian Supreme Court was dealing with road transport legislation which provided that the mass of a vehicle “must be determined in accordance with the regulations”.[35] The South Australian Supreme Court observed as follows:
“It seems to me that “must be determined” imposes an obligation which cannot be regarded as directory only. I have looked both in the dictionary and in Maxwell. The appropriate meaning of “must” in the Shorter Oxford English Dictionary is:
“Expressing necessity: Am (is are) obliged or required to; have (has) to; it is necessary that (I, you, he, it, etc) should”. “In ordinary usage, ‘may’ is permissive and ‘must’ is imperative” (Maxwell on Interpretation of Statutes 12th ed. (1969) p.324),”[36]
and
“If the wish of Parliament had been to make the subsection directory it could easily have done so by using the word “may” instead of the word “must””.[37]
[34] (1982) 31 SASR 272 (“Kosovich”).
[35] Kosovich at 275 per Millhouse J.
[36] Kosovich at 275 per Millhouse J.
[37] Kosovich at 276 per Millhouse J.
In Australian Fisheries Management Authority v PW Adams Pty Ltd[38] the Full Court of the Federal Court was dealing with fisheries management legislation, and in particular a provision which provided that certain objectives “must be pursued by the Minister in the administration of this Act and by AFMA in the performance of its functions”. Each of the five objectives were then conjoined by the use of the word “and”. The Full Court of the Federal Court held that the use of the word “must” and the linking of each of the five objectives with the word “and” meant that each objective must be pursued by the Minister and by AFMA.[39]
[38] (1995) 61 FCR 314 (“Adams”).
[39] Adams at 332 per Sheppard J (with whom Tamberlin J at 334 and Lehane J at 336 agreed).
In dealing with migration legislation which required that applications “must” be lodged within a certain time limit, the Federal Court, having cited Posner and Kosovich as authority for the proposition that “must” is a word of absolute obligation, went on to observe that:
“[s]uch an interpretation also accords with the principle that enactments requiring that a specified procedure be followed in courts are usually mandatory and not merely directory”.[40]
[40] Wang v Minister for Immigration and Multicultural Affairs (1997) 71 FCR 386 at 391 per Merkel J.
The above authorities strongly indicate that the use of the word “must” in the phrase “must advise” imposes an obligation on the Court to exercise the required function, namely, to advise the parties to use the dispute resolution process, being mediation in this case.
The question then arises as to what is meant by requiring the Court to “advise” the parties to use mediation. “Advise” has various meanings, including the following:
a)“To consider in company, to hold a consultation”;
b)“To offer counsel, to give advice”;
c)“To give counsel to, to counsel, caution”; and
d)“To give (formal) notice, to inform, apprise.”[41]
[41] The Shorter Oxford English Dictionary (Volume I), page 30.
Some assistance may be derived from Director of Public Prosecutions (Vic) & Anor v Drage.[42] In Drage, the Supreme Court of Victoria was dealing with breath testing provisions in road safety legislation which required that if the person appeared to be over the prescribed concentration of blood alcohol, a person operating a breathalyser “must … advise the person whose breath has been analysed that he or she may request that a second sample … be analysed”.[43] The Supreme Court of Victoria said that:
“The starting point of any analysis of the learned magistrate’s reasons must be the meaning of “advise” in s 55 (4)(b). I was directed by both counsel to the [sic] what was said as to the meaning of “advise” in the Oxford English Dictionary. Page 192 of the 2nd ed includes as item 9: “to give counsel to, to counsel, caution, warn” and as item 10: “to give notice or intimation, to instruct, to inform, to apprise (a person)”. The learned magistrate, who also had the opportunity to consider the dictionary definitions, clearly opted to attribute the first meaning to “advise” in the context of s 55(4)(b).
After hearing the submissions of counsel and after considerable reflection, my position is as it was as a matter of first impression. Put shortly, I am of the view that “advise” in the context of s 55(4)(b) is to be treated as if it was a synonym for “inform”, and not for “counsel”.”[44]
[42] (1993) 17 MVR 390 (“Drage”).
[43] Drage at 391-392 per Teague J.
[44] Drage at 392 per Teague J.
If the purpose of s.23(1) of the FM Act is to “ensure that parties are referred to appropriate primary dispute resolution processes”[45] then “must advise” in s.23(1) of the FM Act must mean more than counselling of the parties by the Court. It must mean that the parties are informed, and in some formal way given notice, to “use that dispute resolution process”. That formal notice, in the context of:
a)litigation in a Court exercising the judicial power of the Commonwealth; and
b)the provisions of s.23(2) of the FM Act which allow the Court, if it considers it desirable to do so, to adjourn the proceedings “to enable attendance in connection with the dispute resolution process”,
can only be by way of an order which has the effect of directing the parties to “use that dispute resolution process”.[46] An order is the proper means to “ensure”[47] that the parties “use”[48] the dispute resolution process, and to “enable” their attendance at the dispute resolution process.[49] An order adjourning the proceedings to enable attendance at mediation would be such an order.
[45] Explanatory Memorandum, para.41.
[46] FM Act, s.23(1).
[47] Explanatory Memorandum, para.41.
[48] FM Act, s.23(1).
[49] FM Act, s.23(2).
In this case, s.23(1) of the FM Act therefore places an obligation on the Court to advise the parties to use a dispute resolution process, in this case mediation, which the Court, as it has concluded above, considers may help the parties resolve their dispute.[50]
[50] FM Act, s.23(1).
Discretion to grant adjournment
The Court having:
a)concluded that mediation may help the parties resolve their dispute; and
b)advised the parties to use that dispute resolution process,
has a discretion to adjourn the proceedings to enable attendance in connection with the dispute resolution process, if the Court “considers it desirable to do so”.[51] The very broad discretion given by those words must nevertheless be exercised judicially, consistent with the subject matter, scope and purpose of the relevant legislation.[52] A number of factors might affect whether or not the Court considers it desirable to adjourn the proceedings pending mediation, and in which forum mediation ought to initially take place. Having regard to the circumstances of this case, the factors may include:
[51] FM Act, s.23(2).
[52] Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at 505 per Dixon J; Oshlack v Richmond River Council (1998) 193 CLR 72 at 81 per Gaurdron and Gummow JJ; [1998] HCA 11 at para.22 per Gaurdron and Gummow JJ.
a)whether the parties consent to mediation;
b)the prospect of the matter being resolved through mediation;
c)whether mediation might narrow the issues to be determined in the proceedings, and, therefore, whether the mediation might be of benefit to the proceedings;
d)the length of time that mediation may take;
e)whether or not mediation will unduly delay the proceedings;
f)whether processes and timeframes for mediation have been, or can be, complied with;
g)the expense to the parties of the mediation;
h)the effect on the parties of mediation and attending mediation; and
i)the objects of the relevant legislation, in this case the FM Act and FMC Rules, and the TP Act, TP Franchising Regulations and Franchising Code.
As indicated above, both parties agree that there ought to be mediation, but they differ as to who might conduct the mediation: a mediator appointed under the Franchising Code or a Registrar of this Court.
As further indicated above, the fact that:
a)the parties want to mediate; and
b)the:
i)subject matter of the litigation; and
ii)remedies sought,
pose no obvious impediment to resolution by mediation, is indicative of there being some prospect of the matters being resolved or the issues being narrowed through mediation.
Each of the above matters make it desirable that there be mediation, and that the proceedings be adjourned for that purpose. That leaves open the question of who ought to conduct that mediation.
There is no evidence before the Court as to how long a mediation of this matter may take. However long it takes it is unlikely to unduly delay the litigation. That is because, taking into account necessary pre-hearing interlocutory steps (not including mediation) any hearing of this matter, which looks likely to be a three to five day hearing, would not be likely to be heard, wherever it is heard, before May 2011. That allows ample time for the processes and timeframes for any mediation to be conducted.
The applicants place some reliance on the judgment of the Federal Court in Biman International Pty Ltd v Amalgamated Security Services Pty Ltd.[53] Biman is however distinguishable because it did not deal with the express provisions of the Franchising Code, nor did it deal with the question to which the Court is about to come, namely who ought to conduct any mediation. Further, the delays in Biman were greater than they were in these proceedings, and in these proceedings the issue of mediation had been raised by the respondents well prior to the institution of proceedings by the applicants. If anything Biman supports the notion that “[m]ediation agreements of this kind should generally be the subject of compliance by the parties.”[54]
[53] [2002] FCA 919 (“Biman”).
[54] Biman at para.22 per Allsop J.
The above considerations do not make it undesirable for there to be mediation, and for the proceedings to be adjourned for that reason, but again leave open the question of who ought to conduct that mediation.
For the reasons expressed above, the expense to the parties of mediation is not such, when compared to the expense of any hearing, that it ought to preclude mediation taking place. Even if the mediation is to occur before a mediator appointed under the Franchising Code, the expense of mediation involving travel to, and accommodation in, Brisbane by the applicants does not alter the Court’s view in that regard. In any event, for reasons already expressed above, it may not be necessary for the expense of travel and accommodation to be incurred, either at all, or for more than one person, in relation to any mediation in Brisbane. Likewise, if there were to be mediation in Perth requiring the respondents to travel.
Expense is therefore not a matter which makes it undesirable that there be mediation of this matter, and to the extent that expenses are to be incurred, the expenses are necessary for the resolution of the matter if that is possible in mediation, no matter where the mediation is conducted or by whom the mediation is conducted.
Mr Rice and Ms Rowell argue that mediation ought not occur in Brisbane, which is where it appears that the mediation would take place under the Franchising Code mediation provisions, because they are a commission sales person and a self-employed business owner respectively, and travelling time would result in a loss of income needed to maintain their livelihood, as well as other expenses from having to stay in Brisbane.[55] Even if Mr Rice and Ms Rowell were required to travel to Brisbane for a mediation for, say two to three days, the Court does not consider that there is sufficient evidence, as opposed to assertion[56] to conclude that there would be a significant detrimental effect on Mr Rice’s or Ms Rowell’s income or livelihood. In any event, for reasons otherwise set out above, it may be possible for mediation to be conducted under the Franchising Code mediation provisions without either Mr Rice or Ms Rowell, or at least only one of them, having to go to Brisbane.
[55] Affidavit of Lloyd Patrick Rice, sworn 13 September 2010, paras.11 and 13 (“Mr Rice’s Affidavit”); Affidavit of Janis Rowell, sworn 13 September 2010, paras.13 and 15 (“Ms Rowell’s Affidavit”).
[56] In Groundwater v Territory Insurance Office (2004) 183 FLR 437 at 447 per Brown FM; [2004] FMCA 381 at para.53 per Brown FM this Court observed that it is “…a nonsense to allow somebody to assert he cannot conduct his case without there being any adequate evidence to support such a submission.”.
The Court therefore does not consider that the effect on Mr Rice or Ms Rowell of having to attend a mediation in Brisbane (if indeed they do have to so attend) should preclude mediation in Brisbane, and in particular mediation in Brisbane under the Franchising Code.
Mediation, insofar as it might resolve or narrow the dispute, and therefore dispose of or shorten the proceedings, is a course which is connected with the objects of the FM Act to encourage the use of the range of dispute resolution procedures, and the statutory purpose of ensuring that proceedings are not protracted.[57]
[57] FM Act, ss.3(2)(c) and 42.
It is an object of the FM Act to “encourage the use of a range of appropriate dispute resolution processes.”[58] The use of “range” indicates that the Court is not restricted in either its choice of dispute resolution process or as to who may provide a particular dispute resolution process, such as mediation. What the Court looks to have provided is an “appropriate” dispute resolution procedure.
[58] FM Act, s.3(2)(c).
In this case there is a dispute as to which of two mediation processes the parties are to be advised by the Court to use. In these circumstances the Court ought to advise the parties to use the mediation process that it considers most appropriate at this stage of the proceedings.
The mediation processes under the Franchising Code:
a)apply specifically to disputes under franchise agreements;[59]
[59] Franchising Code, cll.27-28.
b)involve a mediation adviser specifically appointed by the relevant Minister;[60]
[60] Franchising Code, cl.25.
c)prescribe specific pre-mediation processes directed towards resolving the dispute without the necessity for mediation;[61]
[61] Franchising Code, cl.29(1) and (2).
d)provide for a mediator:
i)agreed upon by the parties; or
ii)if no agreement is reached between the parties, appointed by the mediation adviser;[62]
[62] Franchising Code, cl.29(3)(b).
e)provide that the parties, or their authorised representatives, must:
i)attend the mediation; and
ii)try to resolve the dispute;[63]
[63] Franchising Code, cl.29(6) and (7).
f)prescribe matters which are taken to be indicative of a party trying to resolve a dispute;[64]
g)provide for specific timeframes for:
i)the parties to try to resolve the dispute pre-mediation;[65]
ii)the appointment of a mediator;[66]
iii)the mediator to advise the mediation adviser of the start of mediation;[67]
iv)the termination of the mediation;[68]
h)the issuance by the mediator of a termination certificate if the mediation is terminated in prescribed circumstances;[69] and
i)for the conduct of the mediation in Australia with the time and place to be determined by the mediator.[70]
[64] Franchising Code, cl.29(8).
[65] Franchising Code, cl.29(3)(a).
[66] Franchising Code, cl.30(1).
[67] Franchising Code, cl.30(2).
[68] Franchising Code, cl.30A(1) and (2).
[69] Franchising Code, cl.30A(4).
[70] Franchising Code, cl.29(5) and (5A).
Bearing in mind that the purpose of the Franchising Code is to regulate the conduct of franchising agreement participants towards each other,[71] the mediation provisions can be seen as a particular application of that object to specified circumstances, namely when the parties are in dispute in relation to a franchise agreement. The purpose of the mediation provisions is therefore quite specific, and intended to apply to parties in dispute over a franchise agreement, such as the parties in these proceedings.
[71] Franchising Code, cl.2.
Because the Franchising Code does apply to the parties in these proceedings it must be complied with, as it is both a prescribed and mandatory industry code for the purposes of s.51AE of the TP Act.[72]
[72] TP Franchising Regulations, reg.3.
By contrast, the ordering of mediation by this Court is ordinarily done at a first directions hearing as part of the usual programming orders, and generally in pursuance of those provisions of the FM Act which:
a)require streamlined procedures;[73]
b)encourage the use of appropriate dispute resolution procedures;[74] and
c)provide for proceedings not to be protracted.[75]
[73] FM Act, s.3(2)(b).
[74] FM Act, ss.3(2)(c) and 21-24.
[75] FM Act, s.42.
The procedures adopted by the Court with respect to mediation are therefore general, and applied as such, rather than specifically tailored to the circumstances of a dispute concerning a franchise agreement in the context of an alleged contravention of the TP Act.
Where the choice of mediation processes comes down to a choice between:
a)a legislatively prescribed mediation process under a mandatory industry code; and
b)an order for mediation ordinarily made by the Court in the usual course of programming at a first directions hearing, albeit pursuant to the provisions of the FM Act and FMC Rules,
there can be no question that the mediation specifically prescribed by a mandatory industry code for precisely the circumstances presently before the Court must be the appropriate dispute resolution procedure which the Court must advise the parties to use. There will therefore be an order that the proceedings be adjourned to allow mediation to occur under the provisions of the Franchising Code. The Court has specific power to adjourn proceedings pending mediation under r.27.02(1) of the FMC Rules. In any event, it would have the power to do so as an implied incidental power to indirectly enforce a contractual agreement to mediate by adjourning these proceedings.[76] Such an order does not conflict with clause 31(1) of the Franchising Code which provides that the Franchising Code does not affect the right of a party to a franchise agreement to take legal proceedings under the Franchise Agreement. To the extent that the present proceedings are proceedings under the Franchise Agreement the parties right to take those proceedings is not affected by such an order. Rather, the order merely has the effect of adjourning those proceedings until mediation is complete. Further, an adjournment to allow mediation reflects the provisions of the Franchise Agreement entered into between the parties, a fact which reinforces the appropriateness of mediation at this stage of the proceedings.
[76] Skipworth v State of Western Australia & Ors (No. 2) (2008) 218 FLR 16 at 27 per Lucev FM; [2008] FMCA 544 at para.37 per Lucev FM; Hooper Bailie Associated Ltd v Natcon Group Pty Ltd (1992) 28 NSWLR 194 at 210-211 per Giles J.
The adjournment will not be of indefinite duration, but rather to a specific date, that being consistent with the objects of, and procedures under, the FM Act which require streamlined procedures and proceedings which are not protracted. The proceedings will therefore be adjourned to 9.00am on 28 February 2011.
Mediation under the provisions of the Franchising Code at this stage of the proceedings does not preclude mediation before a Registrar of this Court at a later stage of the proceedings.
Transfer to Brisbane Registry
Section 52 of the FM Act provides as follows:
Venue
(1) The Federal Magistrates Court may sit at any place in Australia.
(2) The Federal Magistrates Court or a Federal Magistrate may, at any stage of a proceeding in the Federal Magistrates Court, order that:
(a) the proceeding; or
(b) a part of the proceeding;
be conducted or continued at a place specified in the order, subject to such conditions (if any) as the Federal Magistrates Court or Federal Magistrate imposes.
Rule 8.01 of the FMC Rules provides as follows:
Change of venue
(1) A party who files an application or response in a proceeding may apply to have the proceeding heard in another registry of the Court.
(2) In considering an application, the Court must have regard to:
(a) the convenience of the parties; and
(b) the limiting of expense and the cost of the proceeding; and
(c) whether the matter has been listed for final hearing; and
(d) any other relevant matter.
The relevant law has been set out by this Court in Sherwood Overseas. In that case the Court observed as follows:
“7. The starting point in a discussion of the relevant case law is the judgment in National Mutual Holdings Pty Ltd & Ors v The Sentry Corporation & Anor ….
…
10. In applying the test that it identified as correct the Full Court of the Federal Court in Sentry Corporation identified a number of factors which might be taken into account, including:
a) residence of the parties;
b) residence of the witnesses;
c) expense to the parties;
d) the place where the cause of action arose; and
e) the convenience of the court itself.
11. The balance of convenience was also identified as a relevant consideration in Sentry Corporation, not necessarily determinative of each case, and as indicated above, a matter of varying weight from case to case.
12. Sentry Corporation has been applied or followed in a number of cases in the Federal Court and this Court.
13. The Federal Court has identified other factors which warrant consideration when applying the test identified in Sentry Corporation. They include:
a) that the choice of venue should not be capricious;
b) whether a party might receive a legitimate juridical advantage (such as the ability to claim damages or additional damages, or to be awarded pre-judgment interest, in one venue and not the other);
c) the governing law of any contract;
d) the size and nature of any businesses concerned;
e) the degree of connection with the respective venues, and in particular the subject matter of the litigation (especially where a view or inspection might be required by the court);
f) the location of Counsel, solicitors and other advisers, particularly those with actual knowledge and relevant experience;
g) case and docket management considerations, particularly whether a case can or ought to be managed and heard in one Registry, or managed in one Registry and heard in another, which might include consideration of what steps have been taken in the litigation, and if steps have been taken, the nature of those steps and how many steps;
h) that the Court can sit, take evidence and hear witnesses anywhere in Australia; and
i) whether witness statements or affidavits have already been taken, and whether a change of venue might render them redundant.
…
Consideration of legislation and case law
20. In determining a change of venue application this Court is constrained by the mandatory requirements of rule 8.01(2) of the FMC Rules. The Court must have regard to those matters identified in paragraphs (a), (b) and (c) of rule 8.01(2), and must then consider any other relevant matter by reason of paragraph (d) of rule 8.01(2) of the FMC Rules. In that respect, this Court’s considerations are different to those of the Federal Court, insofar as the Federal Court has unfettered discretion as to which factors it will consider. That said, the Federal Court authorities on change of venue set out above are relevant insofar as they consider the three mandatory factors in rule 8.01(2)(a)-(c), and other factors considered by the Federal Court in those cases might well be other relevant matters for the purpose of rule 8.01(2)(d) of the FMC Rules.”[77]
[77] Sherwood Overseas at paras.7, 10-13 and 20 per Lucev FM (with footnotes from the original text omitted), followed in Neil v Reward Property Group Pty Ltd [2008] FMCA 1583 at para.41 per Lucev FM; see also National Australia Bank Ltd v Neil (2009) 7 ABC(NS) 357 at 360 and 361 per Wilson FM; [2009] FMCA 826 at paras.16 and 19 per Wilson FM.
Bidding Buzz and Mr and Mrs Clarkson claim that the proceedings should be transferred from the Perth Registry to the Brisbane Registry of the Federal Magistrates Court. They argue that:
a)they reside in Queensland;
b)the Franchise Agreement was entered into in Queensland;
c)the Franchise Agreement has a specific law provision, providing for governance by Queensland laws;[78]
d)the applicants’ substantive claim raises an issue with respect to Queensland legislation;
e)any witnesses to be called will be located in Queensland; and
f)they would be put to significant cost if they have to travel with witnesses to Perth; and
g)the matter has not yet been listed for final hearing, is in the early stages of proceeding, and the Court has not yet had to consider any substantive issues other than this interim application.
[78] Franchise Agreement, cl.22.5.
The applicants say that:
a)they executed the Franchise Agreement in Perth;
b)if the matter proceeds to hearing a range of witnesses will be called, those witnesses residing throughout Australia (however, the applicants give no further detail of who those witnesses are and where they reside);
c)they are capable of accommodating the witnesses in and around Perth;
d)they have electronic computer equipment and internet connections that permit browsing internet and the sending and receiving of email and facsimiles at their residences;
e)they are independent business persons whose income depends upon their own efforts and that time off to travel interstate results in income reduction or cessation;
f)if the proceedings are transferred to the Brisbane Registry it will be necessary for them to instruct new solicitors; and
g)additional costs would be incurred in travelling and accommodation for the applicants and their witnesses, and that this would prevent the applicants from pursuing their claims against the respondents, although no detail of the costs and the necessity to discontinue on a financial basis are given.
Consideration of the matter must proceed on the basis of the mandatory considerations set out in r.8.01(2) of the FMC Rules.
Convenience of the parties
It is fair to observe, and is effectively conceded by the six parties who appeared, that whether future proceedings are heard in Perth or Brisbane, there will be inconvenience to either the applicants or the respondents. Generally speaking, the level of inconvenience will not be materially different for the non-resident parties, save that Mr Rice and Ms Rowell are essentially self-employed or small business people for whom the longer they are away from Perth the more their income or livelihood is affected, and whilst the Court is of the view that two to three days for a mediation in Brisbane under the Franchising Code is probably not as great an inconvenience as is made out, a hearing of a week in Brisbane is of a different order, and does have the potential to impact upon their income and livelihood.
Limiting expense and cost of proceedings
Whether future proceedings are heard in Perth or Brisbane, additional expense and costs will be incurred by either the applicants or the respondents depending on venue. At this stage it is very difficult to determine with any precision to what extent, if at all, the expense and cost of the proceeding might be limited by a change of venue. However, because it appears to be an “all or nothing” situation, and subject to what has been said above, and below, with respect to the use of technology, it is apparent that the choice of venue will result in additional expense and cost for the non-resident parties.
Absent discovery[79] (which has not been raised as a possibility by any party at this stage), it is not really possible to say anything concerning the nature and quantity of relevant documents, and how they will impact on any hearing, other than it is likely that the applicant’s business records and other relevant documents are in Western Australia, whereas for the respondents they are in Queensland.
[79] FM Act, s.45; FMC Rules, r.14.02; and see generally Abrahams v Qantas Airways Limited (No. 2) (2007) 210 FLR 314 at 316-317 and 321 per Lucev FM; [2007] FMCA 639 at paras.9-11 and 25 per Lucev FM; Hobson v BWL Pty Ltd & Ors [2010] FMCA 722 at paras.6-8 per Lucev FM.
With respect to witnesses, it is clear that there will be two principal witnesses for the applicants at this time, namely Mr Rice and Ms Rowell. They are located in Western Australia. They say that there are a number of other witnesses who will come from around Australia, although the exact number of witnesses and their exact locations are not disclosed. For the respondents, it is likely that Mr and Mrs Clarkson, and the fourth respondent, will be witnesses. Mr and Mrs Clarkson reside in Queensland, and it appears that the fourth respondent may now also do so. If the venue is not changed then the non-corporate individual respondents will be disadvantaged. If the venue is changed the non-corporate individual applicants will be disadvantaged. As for other witnesses, it is simply too early to be able to ascertain how many there are likely to be and where they may come from, other than that they may come from anywhere in Australia. Likewise with expert witnesses, who may come from Western Australia or Queensland, but who may also come from anywhere,[80] unless the parties agree on a joint expert or the Court appoints a single expert or directs a joint report to be filed by the parties’ experts.[81] For those witnesses whose evidence may be short and relatively uncontroversial it may be appropriate to hear their evidence by video, or possibly even by telephone.[82]
[80] Australian Steel Co (Operations) Pty Ltd v Steel Foundations Ltd & Anor (2003) 58 IPR 69 at 91 per Kenny J; [2003] FCA 374 at para.89 per Kenny J.
[81] FMC Rules, rr.15.07-15.10.
[82] Goodall v Nationwide News Pty Ltd [2007] FMCA 218 “…provides detailed guidance for any litigant and legal advisors in relation to the matter of video-link evidence in the court”: M Steele, Federal Magistrates Court Guide Book (Sydney: Thomson Legal and Regulatory Limited) para.ADM.1550, page 4013.
Thus, with witnesses, the most that can be said is that there will be disadvantage for either the applicants or the respondents depending upon where any final hearing is held. With respect to other witnesses, it is not possible to make a properly informed decision about issues relevant to limitation of cost and expense until it becomes apparent who those witnesses are, and where they reside.[83]
[83] WG & B Manufacturing Pty Ltd v Telsa Farad Pty Ltd [1999] FCA 859 at para.12 per Finkelstein J (“WG & B Manufacturing”).
The position with respect to lawyers is no different to the position in relation to other issues: the applicants’ lawyers are in Western Australia, the respondents’ lawyers are in Queensland. Again, it is evident that whether the hearing be in Perth or Brisbane either the applicants or the respondents will have to incur the additional expense of having lawyers travel, or having to deal with them remotely, or having to appoint new lawyers in the appropriate venue. [84]
[84] WG & B Manufacturing at para.13 per Finkelstein J.
The choice of venue is not likely to increase costs or convenience with respect to issues associated with case management as those are manageable by way of video-link or telephone hearings.
Whether listed for final hearing
The proceedings have not yet been listed for final hearing, and choice of venue is unlikely to make any difference to the length of a final hearing. The fact that the matter has not been listed for final hearing may make the logistics of any change of venue, if ordered, slightly easier to manage.
Other relevant matters
There is no evidence of caprice in the applicants’ choice of venue when filing the application. The applicants are located in Western Australia, signed the Franchise Agreement in Western Australia, and were to conduct the franchise business in Western Australia.
The subject matter of the litigation does involve conduct which appears to emanate from, or to have physically occurred both in Queensland and Thailand. Nevertheless, some of the representations complained of were representations made telephonically, which had their effect in Western Australia upon the applicants located in Western Australia.
It is argued by Bidding Buzz and Mr and Mrs Clarkson that the Statement of Claim raises an issue with respect to Queensland law, namely the application of the provisions of ss.38, 99 and 100 of the Queensland FT Act. Although strictly correct, there is, however, little in the point because those provisions equate to similar provisions in the TP Act which form part of an essentially similar set of Federal and State legislative provisions with respect to misleading and deceptive conduct and damages arising in relation to that conduct.
Although the Franchise Agreement has a specific law provision providing that it is governed by the laws of Queensland and that the parties submit to the non-exclusive jurisdiction of the Queensland courts, in this regard (and also in relation to the Queensland FT Act) the Court adopts, with respect, what was said by the Federal Court in PEP Community Services Inc. t/as PEP Community Services v Jobs Futures Ltd[85] where the Federal Court said that:
9. It is to be noted that cl 35 is not an exclusive jurisdiction clause but I accept that it does disclose an intention on the part of the contracting parties to the litigation to prefer any dispute arising under the contract to be conducted in courts within the specified State: Australian Co-operative Foods Ltd & Anor v National Foods Milk Ltd [1998] FCA 376 and Aquila Resources Limited v Pasminco Limited [2004] FCA 39 at [36]-[41].
10. However, I also accept the applicant’s submission that such a clause in a change of venue application does not carry weight where federal legislation is involved: Plantagenet Wines Pty Ltd v Lion Nathan Wine Group Australia Ltd [2006] FCA 247 at [61] per Siopis J. It is true also that little weight is attached to such a clause where State legislation is involved providing that such legislation is reasonably uniform in nature: Westpac Banking Corporation v O’Brien [1997] ACTSC 107; Rothwells Ltd (in liq) v Connell [1995] QSC 30. In this regard, it may be that the Court is required to construe the New South Wales Restraints of Trade Act 1976 (NSW) but no particular difficulty in doing so was advanced in argument…[86]
[85] [2008] FCA 1264 (“PEP Community Services”).
[86] PEP Community Services at paras.9-10 per McKerracher J.
Conclusion – transfer to Brisbane Registry
Having regard to all of the above factors, the Court is of the view that there has not been a sufficiently strong case established to conclude that it is in the interests of the administration of justice, the determination of the relevant issues, or the efficient administration of the Court to allow the application for change of venue.
The application for change of venue will therefore be dismissed.
Security for costs
Section 80 of the FM Act provides as follows:
Security for costs
(1) …
(2) The Federal Magistrates Court or a Federal Magistrate may order an applicant in a proceeding in the Federal Magistrates Court to give security for the payment of costs that may be awarded against him or her.
(3) The security is to be of such amount, and given at such time and in such manner and form, as the Federal Magistrates Court or Federal Magistrate directs.
…
(6) This section does not affect the operation of any provision made by or under any other Act or by the Rules of Court for or in relation to the giving of security.
Rule 21.01 of the FMC Rules provides as follows:
Security for costs
(1) On application by a respondent, the Court may order the applicant to give the security that the Court considers appropriate for the respondent's costs of the proceeding.
(2) …
(3) An application must be made in accordance with the approved form and supported by an affidavit setting out the facts relied on.
In Equity Access Ltd v Westpac Banking Corporation[87] the Federal Court set out the factors that should be considered on an application for security for costs as follows:
a)the prospects of success of the application;
b)the quantum of risk that a costs order would not be satisfied;
c)whether an order would be oppressive in that it would stifle a reasonable claim;
d)whether any impecuniosity arises out of the conduct complained of;
e)whether there are any aspects of public interest which weigh in the balance against such an order; and
f)whether there are any particular discretionary matters peculiar to the circumstances of the case.[88]
[87] (1989) ATPR 40-972 (“Equity Access”).
[88] Equity Access at 50,635 per Hill J, applied in Greenwood v World of Maths Pty Ltd [2005] FMCA 1557 at paras.7-8 per Connolly FM.
Bidding Buzz and Mr and Mrs Clarkson argue that:
a)the applicants have no basis for the substantive application and are merely attempting to recover losses caused by their own failings in relation to the franchise, whereas the respondents have a significant well-founded claim against the applicants in relation to breach of contract; and
b)the applicants have, on a number of occasions, indicated to the respondents that the failed franchise put them in a precarious financial position, which is likely to be compounded by the costs of this application, and therefore the applicants are unlikely to be able to meet a costs order made against them, and therefore, security ought to be provided to ensure that the respondents are not at risk of being significantly out of pocket.
In relation to peculiar discretionary circumstances Bidding Buzz and Mr and Mrs Clarkson note that the applicants have refused an offer to pay half of the applicants’ transportation costs to Brisbane for the cheaper option of pursuing Franchising Code mediation, and that that conduct leads to greater costs being expended in the matter generally.
In support of the application for security of costs Ms Laylee’s Affidavit asserts as follows:
“I am instructed that the First, Second and Third … [respondents] have concerns as to the ability of the … [applicants] to meet a Costs Order in this matter should their claim ultimately fail.”[89]
[89] Ms Laylee’s Affidavit, para.19.
The applicants submit that Ms Laylee’s Affidavit evidence is opinion evidence and therefore not admissible.
The applicants also say that:
a)no evidence of their impecuniosity has been adduced;
b)Broad Spectrum paid the initial franchise fee, in the amount of $61,800;[90] and
c)if an order was made for security of costs then the applicants are likely to be impeded from prosecuting their claim, both jointly and severally.[91]
[90] Ms Rowell’s Affidavit, para.17.
[91] Ms Rowell’s Affidavit, para.19; Mr Rice’s Affidavit, para.16.
The applicants therefore submit that the application for security for costs should be dismissed.
It is necessary to assess the various submissions against the factors for consideration which were identified in Equity Access.
Chances of success
The assessment of the chances of success of an application at this early stage is difficult.[92] There is nothing in the application and Statement of Claim or the Response and Defence and Counterclaim which would indicate that there is anything other than a bona fide contest in this matter. In those circumstances, it cannot be concluded that the substantive application is one which lacks reasonable prospects of success.
[92] Equity Access at 50,636 per Hill J.
Quantum of risk
There is no detailed financial evidence sufficient to enable the Court to determine the quantum of risk that any costs order made at the conclusion of these proceedings will not be fulfilled. In any event, the evidence of Bidding Buzz and Mr and Mrs Clarkson does not assert that the applicants would not be able to meet any costs order that is made. Rather, it evinces (assuming its admissibility) an opinion by a solicitor that Bidding Buzz and Mr and Mrs Clarkson “have concerns as to the ability” of the applicants to meet a costs order. The evidence of Mr Rice and Ms Rowell does not advance the matter much further, although they do say that if they are ordered to give security for costs then they would be incapable of pursuing the claims. However, both are employed, albeit seemingly self-employed, but have not provided any detail of income or assets and liabilities. Further, there are no profit and loss statements or statements of assets and liabilities for Broad Spectrum Training.
Whilst the evidence of Bidding Buzz and Mr and Mrs Clarkson does not establish impecuniosity, the evidence of Mr Rice and Ms Rowell does go some way towards suggesting that they might not be able to meet any final costs order, and there is no evidence as to the position of Broad Spectrum Training at all.
In the circumstances, it cannot be conclusively said that there is a significant quantum of risk that the applicants will not be able to meet any final costs order.
Shutting out the applicants from proceeding with the claim
Bearing in mind the comments that the Court has already made concerning the financial evidence, and the evidence of Mr Rice and Ms Rowell that having to pay security for costs would prevent them from proceeding with the claim, there is evidence on which the Court can conclude, on the balance of probabilities, that to order security for costs would shut the applicants out from proceeding with their claim, in circumstances where, as indicated above, there appears to be a bona fide contest between the parties in the proceedings.
Does impecuniosity arise out of the conduct complained of by the applicants
As indicated above, there is no evidence that the applicants are presently impecunious. It may be that they might become so if there is an order for security for costs. There is evidence that Broad Spectrum Training paid an initial franchise fee of $61,800, and evidence that other sums had been expended in relation to training expenses by the applicants. There is, however, no evidence that any present inability to meet any order for security for costs which might be made by the Court arises out of the conduct of the respondents complained of in these proceedings.
The public interest
As the Federal Court observed in Equity Access, proceedings involving ss.52 and 82 of the TP Act are not normal inter partes litigation, but rather litigation which utilises the mechanism provided by the legislature for the promotion of fair competition.[93] In this case, that characterisation of an application in relation to ss.52 and 82 of the TP Act is reinforced by the provisions of the TP Franchising Regulations and the Franchising Code which seek to put in place a prescribed and mandatory code of conduct in relation to the making of franchise agreements. However, as the Federal Court observed in Equity Access care must be taken in attributing weight to this factor, with the weight given to it increasing with the seriousness of the case.[94] One aspect of this case which might be said to warrant it proceeding in the public interest, without security for costs being granted, is that it appears to relate to a franchise to carry on a business involving internet selling. Again, not too much weight ought to be attributed to that matter, but it lends to the proceedings some element of contemporaneous public interest.
[93] Equity Access at 50,637 per Hill J.
[94] Equity Access at 50,637 per Hill J.
Discretionary matters peculiar to the facts of the present case
The assertion that the applicants have refused an offer to have half of their transportation costs from Perth to Brisbane paid by Bidding Buzz and Mr and Mrs Clarkson, and that that conduct has led to greater costs being expended in the matter generally, is, in the Court’s view, both overstated, and now, by reason of the observations and orders made in relation to mediation in this matter, largely irrelevant. Whilst it is true that greater costs have probably been incurred by reason of having to make this application, insofar as it relates to mediation being conducted under the Franchising Code, the costs of a single interlocutory application are relatively modest, and whilst the applicants’ argument for substituted service on the fourth respondent was not upheld, it was not an argument which was completely devoid of merit. In any event, the relevance of that issue is now significantly diminished by the orders that the Court proposes to make with respect to mediation.
Conclusion – security for costs
Weighing all of the above factors together, the Court does not consider that Bidding Buzz and Mr and Mrs Clarkson have sufficiently established a case requiring the Court to order that the applicants provide security for costs.
The application for security of costs will therefore be dismissed.
Conclusions and orders
The Court concludes that:
a)mediation may help the parties resolve their dispute, and, therefore, the application for an adjournment of the proceedings pending mediation under the provisions of the Franchising Code will be granted, and the proceedings will be adjourned to 28 February 2011 for mention;
b)the application for change of venue will be dismissed;
c)the application for security of costs will be dismissed,
and the Court will make a declaration and orders accordingly.
The Court will hear the parties as to costs.
I certify that the preceding one hundred and eight (108) paragraphs are a true copy of the reasons for judgment of Lucev FM
Date: 3 December 2010
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