Burger King Corp v Hungry Jack's Pty Ltd
[1998] FCA 950
•4 AUGUST 1998
FEDERAL COURT OF AUSTRALIA
PRACTICE AND PROCEDURE – Cross vesting – proceeding between same parties in Commercial Division of the Supreme Court of New South Wales – Supreme Court proceeding complex, involving wide range of facts and issues, set down for hearing for at least three months commencing on 26 April 1998 – preparation of Supreme Court proceeding well advanced, voluminous discovery having taken place – present respondent’s draft defence raising matters raised by it as plaintiff in Supreme Court proceeding – applicant’s submission that overlap suggested by respondent is specious – difficulty of this Court’s determining with confidence that draft defence does not raise arguable defence – practical considerations favouring order for transfer.
Jurisdiction of Courts (Cross Vesting) Act 1987 (Cth) s 5(4)
Pegasus Leasing Ltd v Cadoroll Pty Ltd (1996) 59 FCR 152 (FC) referred to.
BURGER KING CORPORATION v HUNGRY JACK’S PTY LIMITED
NG 518 OF 1998
LINDGREN J
SYDNEY
4 AUGUST 1998
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 518 of 1998
BETWEEN:
BURGER KING CORPORATION
APPLICANTAND:
HUNGRY JACK’S PTY LIMITED
RESPONDENTJUDGE:
LINDGREN J
DATE OF ORDER:
4 AUGUST 1998
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
This proceeding be transferred to the Supreme Court of New South Wales.
The parties’ costs of the motion brought by the respondent by notice of motion filed on 5 June 1998 be treated as part of their respective costs of this proceeding.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NG 518 of 1998
BETWEEN:
BURGER KING CORPORATION
APPLICANTAND:
HUNGRY JACK’S PTY LIMITED
RESPONDENT
JUDGE(S):
LINDGREN J
DATE:
4 AUGUST 1998
PLACE:
SYDNEY
REASONS FOR JUDGMENT
The respondent (“HJPL”) moves by notice of motion filed on 5 June 1998 for an order that the proceeding be transferred to the Commercial Division of the Supreme Court of New South Wales (“the Supreme Court”) pursuant to the Jurisdiction of Courts (Cross Vesting) Act 1987 (Cth) and an order that the applicant (“BKC”) pay its costs of the motion on an indemnity basis.
Subsection 5(4) of the Jurisdiction of Courts (Cross Vesting) Act 1987 (Cth) requires this Court to transfer this proceeding to the Supreme Court if one of the several matters identified in that subsection appears to this Court to be the case. The motion has been argued on the basis that the relevant ground is that it is “in the interests of justice” that the proceeding be transferred to the Supreme Court. It is inappropriate that an order be made in the terms sought in HJPL’s notice of motion, insofar as they include a reference to the Commercial Division. That reference has been included because another proceeding to which I will refer, and to which HJPL and BKC are parties, is pending in that Division. However, an order for transfer should be limited in the terms provided for in the subsection, that is, to an order for transfer to the Supreme Court itself, leaving it to that Court as to how the proceeding is to be dealt with administratively within the structure of that Court.
THIS PROCEEDING
This proceeding was commenced by the filing of an application on 29 May 1998. It relates to a restaurant at the corner of Benningfield Road and South Street, Bull Creek in the State of Western Australia (“the Bull Creek Restaurant”). That restaurant business is carried on by HJPL.
By its application, BKC seeks an injunction restraining HJPL from operating the restaurant and using BKC’s trademarks, “Hungry Jack’s” and “Burger King”, or otherwise purporting to be carrying on a Hungry Jack’s restaurant or a Burger King restaurant. HJPL operated the Bull Creek Restaurant as franchisee of BKC. The term of the franchise agreement expired on 26 December last. BKC claims that since that time HJPL has not been entitled to carry on the business as a franchisee of BKC.
The statement of claim filed on 29 May 1998 pleads causes of action in breach of contract and for contravention of s 52 of the Trade Practices Act 1974 (Cth) (“the TP Act”). It is pleaded that the contract was a franchise agreement dated 26 December 1982 between BKC and the original franchisee, Selden Pty Limited, whose rights were assigned to HJPL with the consent of BKC by a written agreement dated 6 June 1983.
The statement of claim pleads that the franchise agreement contained express terms that upon its termination by lapse of time, the franchisee would not thereafter use BKC’s trade secrets, signs, symbols, devices, recipes, formulas, food mixes or other materials constituting part of BKC’s franchise system, and that after expiry of the term of the agreement the franchisee would make such removals or changes in signs and colours of buildings and structures as might be reasonably requested by BKC, so as to distinguish the premises from their former appearance and from any other BKC restaurant.
The cause of action under the TP Act is that, by continuing to trade as a BKC franchisee, HJPL has engaged in misleading or deceptive conduct in trade or commerce in contravention of s 52 of that Act. For present purposes, it is not in contest that HJPL has continued to operate the Bull Creek Restaurant using the name “Hungry Jack’s” and BKC’s “bun halves” symbol, but HJPL says that on various bases BKC is disentitled to rely upon the expiry of the franchise agreement.
I will turn a little later to the Supreme Court proceeding but it is convenient to note at this stage that that proceeding is No 50258 of 1996 brought by HJPL as plaintiff against BKC as first defendant, the Shell Company of Australia Limited (“Shell”) as second defendant, and Burger King Australia Pty Limited (“BKA”) as third defendant.
BACKGROUND
BKC, I am told, conducts some 9000 restaurants in 53 countries. It is said that the BKC chain is the largest chain of hamburger restaurants behind McDonald’s. HJPL is an Australian company associated with a Mr Cowin. There are 192 Burger King restaurants in Australia of which 148 are franchised to HJPL. Apparently, in recent times BKA, a subsidiary of BKC, has commenced to operate 4 restaurants in Australia. Until recent events, HJPL has been the instrument through which the Burger King franchise chain has been conducted in this country.
I have been supplied with a helpful chronology of events governing the relationship between BKC and HJPL and I will now refer to the salient background facts in chronological sequence. It is perhaps helpful at the outset, however, to make some general observations about the parties’ dispute. In the most general terms, that dispute could be seen to arise out of a disruption to the previously apparently harmonious relationship between BKC and HJPL by what no doubt appeared to be a promising new point of departure. This was a joint venture, or proposed joint venture, between BKC, HJPL and Shell. The idea was that, pursuant to the joint venture, Burger King restaurants would be conducted at Shell service station sites. But ultimately, according to HJPL, it was excluded from the joint venture or proposed joint venture. As part of its plan to exclude HJPL, BKC began insisting upon strict adherence by HJPL to the terms of its contracts with BKC – a practice which it had not followed previously.
The foregoing is an oversimplification and states the position from HJPL’s viewpoint, but it provides a convenient way of understanding the commercial background. I turn now to the chronological sequence of events.
On 26 December 1982, a franchise agreement was entered into between BKC and Selden Pty Limited in respect of the Bull Creek Restaurant. The period of the agreement was 15 years. Therefore the franchise was to come to an end by effluxion of time on 26 December 1997. But the agreement contained an option of renewal exercisable by the franchisee not later than fifteen months before 26 December 1997, that is, not later than 26 September 1996. On 6 June 1983, with BKC’s consent, the rights of Selden Pty Limited were assigned to HJPL which has remained franchisee of the Bull Creek Restaurant since then.
On 13 November 1990, two important agreements were entered into between BKC and HJPL. One was called a “Development Agreement” and the other a “Service Agreement”. These two agreements and BKC’s insistence that it is no longer bound by them and has terminated them are at the heart of the Supreme Court proceeding, and were originally its sole concern. In short, the Development Agreement established a regime under which HJPL was to develop BKC’s business in Australia in return for particularly advantageous terms. In the Supreme Court proceeding, BKC contends, and HJPL disputes, that it has terminated the Development Agreement.
By the Development Agreement, HJPL undertook to open new Burger King restaurants in Western Australia, South Australia and Queensland in accordance with a “Development Schedule” annexed - four new Burger King restaurants per year, commencing on 12 November 1990.
The period of the Development Agreement was five years but HJPL had options to renew for further five year terms, provided it had opened 20 restaurants during the preceding five years. BKC granted to HJPL a non exclusive right to develop, and to be franchised to operate, Burger King restaurants in Australia. HJPL had to apply for and obtain approval from BKC for each restaurant to be established.
Some indication of the interdependence of the two companies prior to the outbreak of hostilities shortly to be noted, is perhaps indicated by the provision of the Development Agreement that in the three States mentioned, and provided HJPL was in compliance with the Development Schedule, BKC itself had to obtain the prior approval of HJPL for the operating or franchising of a Burger King restaurant. However, the Development Agreement provided that HJPL’s approval might be withheld only if a Burger King restaurant at the location in question would be likely substantially adversely to affect sales at another existing location, or at a location for which an application for approval had been formally lodged by HJPL with BKC.
BKC intended to appoint one of its employees to a position in Australia with responsibility for liaison with HJPL for the purpose of co-ordination and the furthering of the common interests of the two companies in the successful development of Burger King restaurants. Importantly, BKC agreed to waive in favour of HJPL the “initial franchise fees”, which I am informed amounted to $40,000, otherwise payable by HJPL in respect of any restaurant opened by it, provided HJPL adhered to the Development Schedule in each year. If HJPL failed to adhere to the Development Schedule, it was liable to pay the franchise fee for each restaurant required to be opened pursuant to the Development Schedule, but not opened. BKC agreed to pay HJPL three-fifths of the initial franchisee fee payable by any third party franchisee introduced by HJPL. BKC agreed that the monthly “franchise royalties” payable by HJPL for restaurants operated by it during the life of the Development Agreement and any of renewal of it should be at the concessional rate of 3 per cent of gross sales, and that even that concessional rate was to be reduced by a half a per cent if HJPL provided services under the Service Agreement (see below), and by even a further half a per cent for each store in which it complied with BKC’s menu and “brand image” standards.
So long as it continued on foot, the Development Agreement was of considerable benefit to HJPL in relation to the terms on which it was entitled to operate franchised restaurants. However, it provided that the occurrence of certain specified events would constitute good cause for BKC to terminate the Agreement, but where the breach was capable of being cured, BKC was not to do so unless HJPL had failed to cure the breach within a specified period after BKC had served notice of default.
By notice dated 25 March 1996, HJPL renewed the Development Agreement for a further period of five years from 13 November, 1995.
I turn now to the Service Agreement. The period of the Service Agreement was again five years and again HJPL had options to renew for further five year terms. By the Service Agreement, HJPL undertook to provide the services (including educational courses) specified in that Agreement to designated franchisees, being HJPL, franchisees introduced by HJPL, and such other franchisees as BKC might nominate from time to time. Some of the services which HJPL promised to provide were the recruitment of franchisees, inspection of franchise restaurant sites, assistance with franchise development, and training and education. In consideration of HJPL’s providing services to third party franchisees, HJPL and BKC agreed that HJPL should receive a proportion of the initial franchise fee payable by designated third party franchisees, that HJPL should receive half of the monthly franchise royalty payable by designated third party franchisees, and that HJPL should receive and expend the advertising levies payable by designated third party franchisees. The Service Agreement was terminable at any time by BKC upon its giving 90 days’ notice of a specified default and a failure by HJPL to rectify the default within the period specified.
Finally, I should say something about the individual franchise agreements under which the restaurants were operated. As at 18 November 1996 (the significance of this date will appear later), HJPL operated 148 Burger King restaurants in Australia trading under the name “Hungry Jack’s”; third party franchisees owned and operated 18 other Burger King restaurants as to which HJPL provided services pursuant to the Service Agreement; and HJPL had paid franchise royalties of approximately $20.8 million to BKC in the period since 15 November 1990.
HJPL had entered into a franchise agreement with BKC in respect of each Burger King restaurant which it operated. Each franchise agreement included a provision that the duration of the franchise was 15 or 20 years and that HJPL should pay franchise royalties to BKC for the use of the Burger King trademarks and the Burger King system.
In chronological sequence, the next event to note is the coming on to the scene of Shell. This occurred over a period which involved activity mainly in 1994 and 1995. HJPL had discussions with Shell about establishing Burger King restaurants in Shell service stations. According to HJPL’s fifth further amended summons in the Supreme Court proceeding, various terms were agreed to in 1994 either between BKC and HJPL, or between BKC, HJPL and Shell. According to that pleading, in 1994 a joint venture was either entered into or was proposed to be entered into, pursuant to which apparently there was to be a “trial” of Burger King restaurants at certain Shell service station sites. According to par 25 of that pleading, HJPL invested substantial time in considering suitable test sites, including meeting with Shell and BKC to discuss those sites; HJPL fitted out and opened the Burger King Restaurant at a Shell Service Station at Kingsway, Melbourne at a cost to HJPL of approximately $700,000; and HJPL did various other things pursuant to, and in implementation of, the joint venture or proposed joint venture. According to the same pleading, BKC and Shell owed fiduciary obligations to their co-joint venturer, HJPL, and in breach of those obligations, in 1995 BKC and Shell discussed and developed plans to expand the business of the joint venture to the exclusion of HJPL.
It is pleaded, for example, that BKC and Shell did not inform HJPL until, at the earliest, mid-May 1995, of the possibility that HJPL might be excluded from participation in the joint venture, yet allowed HJPL to continue to pursue the joint venture and to expend moneys in respect of it. BKC acquired or established in Australia the staff and facilities necessary to enable BKC to provide necessary services directly to Shell to the exclusion of HJPL, entered into a test site agreement with Shell to the exclusion of HJPL, and did various other things to the exclusion of HJPL.
I return to the chronological account of events. On 17 July 1995, HJPL’s National Development Manager (Mr Montgomery) advised BKC’s Regional Vice-President, Operations, Western Region and Assistant General Counsel, Mr Miolla, that BKC should adopt a "carrot and stick" approach in its dealings with HJPL, and that the “stick” included “to get tough on sticking to the letter of the law on existing agreements with legal sanctions to follow”. I should note that it is part of HJPL’s case that Mr Montgomery breached fiduciary obligations which he owed to HJPL and that BKC was a knowing participant in that breach.
In August 1995, Mr Cowin of HJPL advised Mr Miolla of BKC that HJPL declined to sell its operations to BKC or to Shell or to both, after which Mr Miolla told Mr Cowin that “the relationship is now going to change”.
On 5 September 1995, Mr Montgomery advised Mr Miolla that BKC’s overall strategy should be to “keep pressure on [and] start to work towards identifying a number and value for the [HJPL] business”.
As I have already noted, the last date on which HJPL was entitled to give notice of exercise of its option to renew the Bull Creek franchise agreement was 25 September 1996. That date came and went without the giving of a notice by HJPL.
It might be said that overt action by BKC against HJPL commenced on 18 November 1996 when BKC served notices of termination of the Development Agreement and a notice of default under the Service Agreement. Eight days later, on 26 November 1996, HJPL commenced the Supreme Court proceeding against BKC, Shell and BKA. I refer to the fifth further amended summons in that proceeding below.
On 15 April 1997, BKC commenced an earlier proceeding in this Court (NG 276 of 1997) in respect of nine restaurants, namely, those at Fulham, Strathpine, Claremont, Ipswich, Springwood, Balga, Barrack Street, Beak House and Bunbury. Franchise agreements in respect of those nine restaurants had expired and BKC was seeking, in general terms, the same kind of relief in respect of them as it is seeking in the present proceeding in respect of the Bull Creek Restaurant. The expressions “successor restaurants” and “successor franchise agreements” have been used in relation to restaurants such as those the subject of the earlier Federal Court proceeding.
On 27 May 1997, Mr Montgomery sent to Mr Smith of BKC a memorandum requesting BKC to nominate a date for the undertaking of a “successor store report” on the Bull Creek Restaurant with a view to renewal of the franchise agreement. The memo advised that HJPL wanted to complete the necessary works prior to the due date.
On 16 June, HJPL (Mr Montgomery) sent a memo to BKC (Mr Smith) reiterating HJPL’s request that BKC undertake a “successor store report” for the Bull Creek Restaurant.
On 19 June, Mr Montgomery asked Mr Smith to confirm his availability in the week commencing 14 July to visit the Bull Creek Restaurant for the purpose of inspecting it and identifying any upgrading required for the renewal.
On 20 June, Emmett J ordered by consent a transfer of the earlier Federal Court proceeding to the Supreme Court of New South Wales. HJPL’s case there has been reformulated to refer to the nine restaurants mentioned.
On 28 July, Mr Montgomery faxed Mr Smith setting out an itinerary for a proposed “successor store” visit at the Bull Creek Restaurant on 7 August. However, on 4 August BKC withdrew from the visit.
On 12 September, BKC served a further notice of termination (called in the Supreme Court proceeding, the “September 1997 notice”) in relation to the Development Agreement.
On 1 October, BKC served default notices in respect of Hungry Jack’s restaurants operated by HJPL at Hexham and Maitland. These two restaurants and the default notices in respect of them have also come to be referred to in a further reformulation of HJPL’s case in the Supreme Court.
On 15 October, BKC wrote to HJPL proposing terms for renewal of several franchises including that in respect of the Bull Creek Restaurant. I need not discuss the terms proposed by BKC - it suffices to say that they were not as favourable to HJPL as would have been the terms applicable if HJPL had renewed the franchise agreements strictly in accordance with their terms and with the benefit of the concessions allowed in the Development Agreement. In other words, BKC was proposing terms more onerous than those to which HJPL contended it was entitled.
On 26 December, the period of the franchise agreement for the Bull Creek Restaurant expired.
BKC did not immediately take action to restrain HJPL from continuing to operate that restaurant, but on 8 May 1998 BKC’s solicitors wrote to HJPL’s solicitors demanding that HJPL close the Bull Creek Restaurant. On the same day BKC wrote to HJPL directly, advising that BKC’s offer of 15 October 1997 would be withdrawn if it was not accepted by 15 May.
Importantly, on 15 May, the Supreme Court proceeding was set down for hearing to commence on 26 April 1999 for a period of not less than three months. On 22 May HJPL’s solicitors wrote to BKC’s solicitors denying that BKC was entitled to require closure of the Bull Creek Restaurant, and advising that any dispute concerning it should be raised in the Supreme Court proceeding. On the same day, HJPL wrote to BKC repeating HJPL’s offer to enter successor franchise agreements on the old terms. Also on that day, 22 May, BKC wrote to HJPL withdrawing the offer which it had made in its letter dated 15 October 1997.
On 29 May, BKC launched the present proceeding. On 1 June, HJPL’s solicitors wrote to BKC’s solicitors concerning the appropriateness of this Court as the forum before which the dispute relating to the Bull Creek Restaurant should be litigated. On 5 June, HJPL filed its notice of motion seeking an order for transfer.
THE FIFTH FURTHER AMENDED SUMMONS IN THE SUPREME COURT PROCEEDING
HJPL’s fifth further amended summons in the Supreme court proceeding is 98 pages long and is complex. It seeks relief directed to establishing that the Development Agreement and the Service Agreement remain on foot and restraining BKC from acting on its various notices to HJPL; relief directed to establishing that the Hexham and Maitland franchise agreements remain on foot and restraining BKC from acting on the notices it gave in relation to those agreements; and relief directed to compelling BKC to offer HJPL franchise agreements for the nine sites the subject of the earlier Federal Court proceeding.
HJPL contends that BKC has breached implied terms of the Development Agreement and of the Service Agreement; has breached its fiduciary obligations owed to HJPL and induced or knowingly participated in breaches of fiduciary obligations by others; and has wrongfully received confidential information.
HJPL’s DRAFT DEFENCE
I turn next to the draft defence in this proceeding. According to pars 13 to 18 of the draft, it will be said that a conventional estoppel operates pursuant to which BKC would enter into new franchise agreements in respect of successor restaurants, including the Bull Creek Restaurant, at the expiry of the existing franchise agreements, provided work reasonably satisfactory to BKC was carried out, without BKC’s requiring written notice of exercise of option to be given by HJPL under clause IX of the original franchise agreements.
As an alternative form of estoppel, it is pleaded that BKC represented to HJPL that it would enter into new franchise agreements in respect of successor restaurants, including the Bull Creek Restaurant, at the expiry of the existing franchise agreements, provided works reasonably satisfactory to BKC were carried out.
“Particulars” of estoppel are given. These are particulars of various events which all precede 25 September 1996, the date by which a notice of exercise of option to renew would have had to be given by HJPL to BKC.
It is next pleaded that in reliance on the representation, HJPL did not give formal written notice of exercise of the option to renew; that not later than May 1997, HJPL commenced discussions with BKC as to renewal of the franchise agreement; and that in August 1997, HJPL made arrangements with BKC for a successor restaurant inspection in respect of the Bull Creek Restaurant, from which BKC subsequently withdrew.
As well, HJPL relies on the fact that at all material times it has paid royalties in respect of the Bull Creek Restaurant to BKC calculated in accordance with the franchise agreement and the Development Agreement.
The next part of the draft defence pleads implied terms of the Development Agreement that BKC would act in good faith towards HJPL in exercising its rights under the franchise agreements; that BKC would do all that was reasonably necessary to enable HJPL to enjoy the benefits of its franchise agreements; and that BKC would exercise its rights as to renewal of the franchise agreements in good faith, or, alternatively, reasonably.
It is then pleaded in the draft that in the period between 28 February 1994 and 10 August 1994, HJPL, BKC and Shell entered into, or alternatively proposed to enter into, the joint venture to which I have referred earlier. It is pleaded that by reason of the joint venture or proposed joint venture, BKC owed fiduciary obligations to HJPL. Breach of those obligations is then pleaded.
The draft defence then pleads BKC’s “strategy of harassment”, a notion with which, as a matter of first impression, I have some difficulty.
It is then pleaded that BKC was knowingly involved in the breach of fiduciary duty by Mr Montgomery, the National Development Manager of HJPL.
Finally, insofar as BKC seeks injunctive relief in this present proceeding, the draft defence pleads that BKC comes with “unclean hands” and that the Court should, in its discretion, refuse any discretionary or injunctive relief.
REASONING
It is convenient to consider HJPL’s case for transfer to the Supreme Court in two parts. The first focuses on practical considerations touching retention of the proceeding in this Court as against its being transferred to and determined in, the Supreme Court. The second deals more directly with the question of overlap of issues. Of course, the two parts are interrelated.
I accept in general terms HJPL’s submission that practical considerations favour a transfer. A considerable amount of time and money has obviously been invested in the Supreme Court proceeding. Some measure of this can be gained from the following. The parties to that proceeding have given discovery by reference to some 50 categories of documents. HJPL’s discovery comprises 70 lever arch files of documents; BKC’s discovery comprises 130 lever arch files; and Shell’s discovery comprises 20 lever arch files. HJPL and Shell have filed their witness statements in chief. BKC has filed a substantial number of witness statements, and, according to directions currently on foot, the remainder are to be provided by 11 September. BCK has served answers to interrogatories which are to be verified by 11 September. Directions have been given for the filing of expert evidence and statements in reply.
If the present proceeding continues in this Court, HJPL will need to obtain leave from the Supreme Court to use documents discovered to it in the Supreme Court proceeding, including documents discovered by Shell, in order to finalise its defence to BKC’s statement of claim, and, no doubt, for other purposes in prosecuting its defence and any cross claim in this proceeding. Further, discovery in this proceeding would, according to the draft defence, involve a substantial degree of overlap with the Supreme Court proceeding. It seems that there will be some duplication in the preparation of witness statements although the extent is in dispute. Again, it would be inconvenient that the same third party sources of documents should have to produce the same documents on subpoena in the Supreme Court proceeding and in this proceeding. Finally, there may be a potential for issue estoppels arising from the decision in whichever proceeding reaches the stage of decision first.
HJPL relies on the following passage from the judgment of Lee and Tamberlin JJ in Pegasus Leasing Ltd v Cadoroll Pty Ltd (1996) 59 FCR 152 at 159C-D:
“There can be no doubt that it is undesirable to have on foot two parallel streams of litigation in superior courts involving substantially the same issues of fact and law. Such a situation does not necessarily mean that either proceeding, considered individually, can be regarded as vexatious or oppressive. However, the overall consequences of such a situation, unless there is some restraint agreed or imposed, can be oppressive in placing unnecessary and onerous burdens on all parties. There is always the possibility of conflicting findings of fact or law, which can readily lead to a perception of inconsistency or confusion in the administration of justice. These problems could arise not only as a result of first instance determinations but also from appellate determinations which might be pursued in each of the jurisdictions. Moreover, there is the foreseeable waste of resources, time and expense by the courts, the parties, and the witnesses arising from inevitable duplication at all levels of the proceedings.”
I am of the view that the practical considerations to which I have referred establish that it is in the interests of justice that this proceeding should be transferred to the Supreme Court.
BKC’s response is to the effect that what I have said depends on a misconception. BKC submits that a comparison of HJPL’s fifth further amended summons in the Supreme Court proceeding with its draft defence in this proceeding demonstrates that HJPL’s suggestion of overlap is specious. It submits that there is no overlap, and that therefore the practical considerations to which I have referred lose all persuasive force. BKC submits that in fact the present proceeding is capable of being heard and determined within one day, since HJPL’s proposed defence cannot possibly succeed in relation to the Bull Creek Restaurant.
But I find it difficult to escape the conclusion that even in order to address adequately the question of overlap, it is necessary to overcome at least some of the practical problems to which I have referred. To take the simplest illustration, HJPL needs to be able to use the documents which have been discovered in the Supreme Court proceeding even in order to finalise its defence in this proceeding. It is fairly put by senior counsel for BKC that he is content to have the question of the relevance of such documents determined as if I were determining a motion by BKC for summary dismissal, that is to say, that I should hold such documents irrelevant only if I concluded that they are not even arguably relevant. Taking that approach, I am not satisfied that such documents are not arguably relevant to the preparation of HJPL’s defence.
Similarly, it may be said that this proceeding should be retained in this Court and the question of the relevance of the defences which HJPL wishes to raise should be determined as a preliminary matter on a summary or strike-out basis. But again, to make this determination would, in my estimation, take much more than one day. I do not have some days available earlier than next April, when, I presume, the present proceeding could be heard contemporaneously with the Supreme Court proceeding.
However one looks at the matter, the approach of BKC in favour of retention of the present proceeding in this Court requires me to decide at this early stage that HJPL will quite clearly not be entitled to raise defences of the kind presently proposed which will have overlap with its case in the Supreme Court. I readily concede that there is some force in what Mr McClintock SC, senior counsel for BKC has submitted in this regard. For example, he referred to para 136 of HJPL’s fifth further amended summons in the Supreme Court proceeding. According to that paragraph, it is said that in breach of clause IX of certain franchise agreements, and in breach of the duty of good faith earlier pleaded as owed by BKC to HJPL, by the terms of various extension agreements proffered by BKC to HJPL between 1 January and 31 July 1996, “BKC purported to require HJPL to acknowledge that BKC was under no obligation to allow the successor restaurants to continue to operate beyond the dates set out in those agreements”. HJPL’s pleading goes on to say “that requirement was made under threat of requiring the closure of those restaurants”.
Mr McClintock makes the point that we have here HJPL itself pleading that prior to the critical date, 26 September 1996, BKC was asserting that it was under no obligation to allow the successor restaurants to continue to operate beyond the dates set out in those agreements. How, it may be asked rhetorically, can HJPL’s pleading of estoppel proposed to be included in its defence in this present proceeding stand with its pleading in this respect in the Supreme Court proceeding?
While I see the force of BKC’s submission, I do not find it possible to say with the confidence which would be required on a summary disposal application that the proposed draft defence does not raise, or could not raise, an arguable defence. I would not wish to dwell too long on the question, but it could be said, for example, that by including the term in question in the extension agreements proffered, BKC was seeking an acknowledgment that was in fact inconsistent with the general course of its conduct and which represented an advantageous aspect of a total arrangement which it was seeking, rather than a mere reflection of the reality which prevailed in the parties’ commercial relationship. In any event, and again, it is preferable that such a question be resolved in the Supreme Court.
The Judge who has been managing the Supreme Court proceeding is, doubtless, far more familiar than I am with the issues in that proceeding. If he should see, as I am presently unable to do, that the dispute the subject of this proceeding is, as BKC submits, quite clearly capable of being resolved in a short hearing, separate from that in the Supreme Court proceeding, he could deal with the present proceeding separately, and, no doubt, well before next April.
CONCLUSION
It follows from what I have said that I propose to make an order for transfer.
HJPL seeks an order for indemnity costs. It points to the fact that BKC brought the earlier proceeding in this Court and that that proceeding was transferred to the Supreme Court. HJPL further points to the fact that through its solicitors, it advised BKC that there would be opposition to a proceeding instituted by it in respect of the Bull Creek Restaurant continuing in this Court.
However, I do not think that the costs issue is so clear. When eventually the mass of factual material is analysed, it may be the case, for all I know, that BKC will succeed in showing that this present dispute is properly to be treated separately from the issues in the Supreme Court proceeding. The very uncertainty in this respect which leads me to order a transfer also dissuades me from making an order for indemnity costs.
It is not suggested that this Court does not have jurisdiction to entertain the present proceeding or that BKC was not entitled otherwise to invoke that jurisdiction. BKC’s case, which may eventually be accepted by the Supreme Court, is that HJPL is seeking to delay it in obtaining a remedy to which it has a straightforward entitlement. I take the view that the present motion raises a question of the more appropriate administrative arrangement according to which the parties’ dispute is to be resolved on which there may be differences of opinion.
The appropriate order as to costs, notwithstanding HJPL’s success, is that the parties’ costs of the motion for transfer abide the result of this proceeding in the Supreme Court. Even still, there is a question whether there should simply be an order that the parties’ costs of the motion form part of their respective costs of this proceeding in the Supreme Court or that it be reserved for the parties to make submissions in relation to the motion, after the reasoning of the Judge who determines the Supreme Court proceeding is known. All things considered, I think that the former is the better course.
Accordingly, the orders of the Court are that:
This proceeding be transferred to the Supreme Court of New South Wales.
The parties’ costs of the motion brought by the respondent by notice of motion filed on 5 June 1998 be treated as part of their respective costs of this proceeding.
I certify that this and the preceding sixteen (16) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren
Associate:
Dated: 10 August 1998
Counsel for the Applicant: Mr BR McClintock SC with Ms L McCallum of counsel Solicitor for the Applicant: Corrs Chambers Westgarth Counsel for the Respondent: Mr TD Castle Solicitor for the Respondent: Mallesons Stephen Jaques Date of Hearing: 30 July 1998 Date of Judgment: 4 August 1998
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