Elevate Brandpartners Ltd v Hammond (No 4)

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FEDERAL COURT OF AUSTRALIA

Elevate Brandpartners Ltd v Hammond (No 4) [2020] FCA 421

File number: NSD 488 of 2019
Judge: STEWART J
Date of judgment: 1 April 2020
Catchwords: COSTS – proper exercise of discretion to award costs in circumstances where claim discontinued with leave – whether the respondents in effect capitulated – whether the applicants in effect abandoned the proceeding – general policy of the law that the applicants should be permitted to discontinue proceedings but should usually pay the costs of the respondents – no reason to depart from general rule – continuation of the proceeding not futile
Legislation: Federal Court Rules 2011 (Cth) rr 26.12, 26.14
Cases cited:

Clark v ING Life Ltd [2007] FCA 1960

Elevate Brandpartners Ltd v Hammond [2019] FCA 1103

Elevate Brandpartners Ltd v Hammond (No 2) [2019] FCA 1598

Elevate Brandpartners Ltd v Hammond (No 3) [2019] FCA 1788

FAIRA Aboriginal Corporation v Minister for Aboriginal and Torres Strait Islander Affairs [2002] FCA 9

Motor Trades Association of Australia Superannuation Fund Pty Ltd v Rickus (No 3) [2008] FCA 1986; 69 ACSR 264

Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; 186 CLR 622

Rickus v Motor Trades Assn of Australia Superannuation Fund Pty Ltd [2010] FCAFC 16; 265 ALR 112
Date of hearing: 26 March 2020
Registry: New South Wales
Division General Division
National Practice Area: Commercial and Corporations
Sub-area: Corporations and Corporate Insolvency
Category: Catchwords
Number of paragraphs: 31
Counsel for the Plaintiffs: S Dawson SC and M Cairns
Solicitor for the Plaintiffs: HWL Ebsworth
Counsel for the Defendants: R Newlinds SC
Solicitor for the Defendants: Gadens

ORDERS

NSD 488 of 2019
BETWEEN:

ELEVATE BRANDPARTNERS LTD (UK COMPANY NUMBER 10159717)

First Applicant

QUAYEYEWARE PTY LTD (ACN 118 078 274)

Second Applicant
AND:

LINDA HAMMOND

First Respondent

ALLEN JACKSON RICHARD HAMMOND

Second Respondent

DREAM BANDITS AUSTRALIA PTY LTD (ACN 630 671 206)
Fourth Respondent

JUDGE:

STEWART J

DATE OF ORDER:

1 APRIL 2020

THE COURT ORDERS THAT:

1.Pursuant to r 26.12(2)(c) of the Federal Court Rules 2011 (Cth), the applicants have leave to discontinue the proceeding by filing a notice of discontinuance in accordance with Form 48 within seven days;

2.The applicants are to pay the respondents’ costs of the proceeding as agreed or assessed.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

STEWART J:

Introduction

  1. The earlier history of this proceeding appears from what I have previously said in Elevate Brandpartners Ltd v Hammond [2019] FCA 1103 (Judgment 1), ElevateBrandpartners Ltd v Hammond (No 2) [2019] FCA 1598 (Judgment 2) and Elevate Brandpartners Ltd v Hammond(No 3) [2019] FCA 1788 (Judgment 3).  See in particular paragraphs [7]-[14] in Judgment 1 for an overview of the background to this proceeding.  I adopt the same shorthand references to the parties as I have previously adopted.

  2. What is before me now is…

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Details
Case
[2020] FCA 421
Decision Date

CaseChat Overview and Summary

The case of Elevate Brandpartners Ltd v Hammond (No 4) involved the applicants seeking leave to discontinue the proceeding, which had previously included claims of breaches of a shareholders deed, tortious interference, infringement of trademarks and copyright, and misleading conduct under the Australian Consumer Law. The respondents did not oppose the discontinuance on the condition that it be on terms favourable to them regarding costs. The applicants, in contrast, sought an order that the respondents pay the applicants' costs up to a certain date, after which the applicants would pay the respondents' costs. The court was required to determine the appropriate costs order given the discontinuance of the proceeding.

The court considered the general policy of the law that the applicants should be permitted to discontinue proceedings but should usually pay the costs of the respondents. The court noted that the continuation of the proceeding was not futile, as the declaratory relief sought remained unaffected by the undertakings given by the Hammonds. The court held that there was no reason to depart from the general rule, and that the applicants should pay the respondents' costs of the proceeding as agreed or assessed.

The court granted the applicants leave to discontinue the proceeding, subject to the terms that they pay the respondents' costs as agreed or assessed. The decision underscores the principle that while parties have the right to discontinue proceedings, they should usually bear the costs of the other party, unless there are exceptional circumstances that warrant a departure from this general rule.

Orders

Orders of the court

1. Pursuant to r 26.12(2)(c) of the Federal Court Rules 2011 (Cth), the applicants have leave to discontinue the proceeding by filing a notice of discontinuance in accordance with Form 48 within seven days;

2. The applicants are to pay the respondents’ costs of the proceeding as agreed or assessed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The parties were in agreement that any costs orders made as conditions of leave being granted to discontinue the proceeding would not affect the costs orders previously made by me. They are:(1)in Judgment 2, I ordered that each party is to pay its own costs on the applicants’ interlocutory application for interim injunctions filed on 3 June 2019; and(2)in Judgment 3, I ordered that with regard to the costs thrown away by the applicants’ further amended originating application and amended statement of claim filed on 27 September 2019, the applicants are to pay the costs of the proceeding of the third respondent, Zak Hammond, and that the costs of the remaining respondents be costs in the cause.Background In order to deal with the competing costs contentions, a little background is required. The claims that were originally asserted were summarised by me in Judgment 1 (at [13]) as:·claims of breaches of the shareholders deed (between the shareholder of Quay) by the Hammonds including by enticing an employee away from Quay to Dream Bandits;·a claim of tortious interference by Dream Bandits in Quay’s contractual relations with that employee;·a claim that Ms Hammond is in breach of her director’s duties to Quay;·a claim that the Hammonds and Dream Bandits have infringed Quay’s trademarks;·a claim that Ms Hammond has infringed Quay’s copyright; and·a claim that the Hammonds and Dream Bandits have in the course of trade and commerce engaged in conduct that is misleading or likely to mislead contrary to s 18 of the Australian Consumer Law and made false and misleading representations contrary to ss 29(1)(g) and (h) of the Australian Consumer Law. The relief that was then sought, paraphrased, was:·a series of injunctions restraining the respondents from poaching employees of Quay, making disparaging comments about the applicants and enticing away any supplier or customer of Quay for a period of two years after Linda and Allen Hammond ceased to be shareholders of Quay;·compensation pursuant to s 1317H or damages under s 1324(1) of the Corporations Act 2001 (Cth); and·damages. Following amendments to the originating application for which leave was granted on 30 May 2019, the following additional relief was sought:·a declaration that each of the Hammonds had breached clauses 20.4 and 20.5 of the shareholders deed;·an order under s 126 of the Trade Marks Act 1955 (Cth) that the respondents be restrained from using specified registered trade marks owned by Quay;·an order under s 115 of the Copyright Act 1968 (Cth) that the respondents be restrained from using any photograph or other material in which Quay owns the copyright;·equitable compensation; and·as an alternative to damages, an account of profits. Following undertakings being given by Linda and Allen Hammond and Dream Bandits on 27 June 2019 in response to the applicants’ application for interim injunctions (which are dealt with in Judgment 1), the applicants filed a further amended originating application and amended statement of claim pursuant to leave granted on 25 September 2019. The costs thrown away by the amendments were dealt with in Judgment 3. The relevant changes to the relief that was then sought are the following:·Zak Hammond was removed as a respondent;·declarations were added to the effect that the breaches of clauses 20.4 and 20.5 of the shareholders deed amount in each case to an “Event of Default” under clause 18 of the shareholders deed;·no relief was sought against Dream Bandits;·the relief under the Corporations Act, Trade Marks Act and Copyright Act was deleted;·the relief for equitable compensation, damages and/or an account of profits was deleted.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

The earlier history of this proceeding appears from what I have previously said in Elevate Brandpartners Ltd v Hammond [2019] FCA 1103 (Judgment 1), ElevateBrandpartners Ltd v Hammond (No 2) [2019] FCA 1598 (Judgment 2) and Elevate Brandpartners Ltd v Hammond(No 3) [2019] FCA 1788 (Judgment 3). See in particular paragraphs [7]-[14] in Judgment 1 for an overview of the background to this proceeding. I adopt the same shorthand references to the parties as I have previously adopted. What is before me now is an application by the applicants for leave to discontinue the proceeding. Such leave is required by r 26.12(2)(c) of the Federal Court Rules 2011 (Cth) (FCR) because the respondents do not consent to the discontinuance. The respondents do not oppose leave to discontinue being granted, provided that it is on terms favourable to them with regard to costs. In that regard, the respondents seek the following costs orders:(1)that Elevate (the first applicant) pay the costs of Dream Bandits (the fourth respondent) on a party and party basis until 27 September 2019 and on an indemnity basis thereafter; and(2)that Elevate pay the costs of the remaining respondents, being Linda Hammond and Allen Hammond (the first and second respondents) on a party and party basis until 25 October 2019 and on an indemnity basis thereafter. In written submissions, the respondents had also sought an order that Elevate pay any costs incurred by Quay (the second applicant) or that Elevate indemnify Quay for the payment of those costs. In oral submissions, Mr Newlinds SC (who appeared for the respondents) accepted that it was doubtful that the Court had the power in this proceeding to make such an order and he did not press it. The reason for seeking costs against Elevate and not Quay is that the Hammonds are substantial shareholders of Quay. Thus any of the costs to be borne by Quay would in effect be visited on them in due course in an indirect way by reason of their shareholding. That was also the reason for the respondents having initially sought the order referred to in the preceding paragraph which they no longer press. The applicants, in contrast, seek an order that the respondents pay the applicants’ costs up to 15 November 2019 and that the applicants pay the respondents’ costs thereafter. Mr Dawson SC, who appeared with Ms Cairns for the applicants, explained that an alternative order would be that there be no order as to costs. The attraction of such an order is that the need for, and expense of, competing costs assessments would be obviated. It was suggested that the competing costs assessments would likely come close to cancelling each other out in any event. Mr Dawson explained that the significance of the date of 15 November 2019 is that on that date Linda and Allen Hammond gave final undertakings to the applicants and the Court which obviated the need and justification for the injunctive relief that was sought in the proceeding. It was submitted for the applicants that at that point Linda and Allen Hammond in effect capitulated with the result that the applicants were essentially successful in the proceeding and that the costs should, as in the ordinary course, follow that event.

Ratio Decidendi

Legal Principle Established

The relief that was then sought, paraphrased, was:·a series of injunctions restraining the respondents from poaching employees of Quay, making disparaging comments about the applicants and enticing away any supplier or customer of Quay for a period of two years after Linda and Allen Hammond ceased to be shareholders of Quay;·compensation pursuant to s 1317H or damages under s 1324(1) of the Corporations Act 2001 (Cth); and·damages. Following amendments to the originating application for which leave was granted on 30 May 2019, the following additional relief was sought:·a declaration that each of the Hammonds had breached clauses 20.4 and 20.5 of the shareholders deed;·an order under s 126 of the Trade Marks Act 1955 (Cth) that the respondents be restrained from using specified registered trade marks owned by Quay;·an order under s 115 of the Copyright Act 1968 (Cth) that the respondents be restrained from using any photograph or other material in which Quay owns the copyright;·equitable compensation; and·as an alternative to damages, an account of profits. Following undertakings being given by Linda and Allen Hammond and Dream Bandits on 27 June 2019 in response to the applicants’ application for interim injunctions (which are dealt with in Judgment 1), the applicants filed a further amended originating application and amended statement of claim pursuant to leave granted on 25 September 2019. The costs thrown away by the amendments were dealt with in Judgment 3. The relevant changes to the relief that was then sought are the following:·Zak Hammond was removed as a respondent;·declarations were added to the effect that the breaches of clauses 20.4 and 20.5 of the shareholders deed amount in each case to an “Event of Default” under clause 18 of the shareholders deed;·no relief was sought against Dream Bandits;·the relief under the Corporations Act, Trade Marks Act and Copyright Act was deleted;·the relief for equitable compensation, damages and/or an account of profits was deleted. In summary, the principal relief retained in the proceeding from that time was with regard to alleged breaches of the shareholders agreement and their consequences, and the injunctions. On 15 November 2019, Linda and Allen Hammond filed permanent undertakings on a “no admissions” basis which can be characterised as follows:(1)Linda Hammond undertook not to make disparaging comments about the applicants, their officers or employees and not to poach employees of Quay; and(2)Allen Hammond undertook not to make disparaging comments about the applicants, their officers or employees. As indicated above, those undertakings obviated the need for, and possibly removed any justification for, the injunctive relief. But significantly, in giving the undertakings the Hammonds did not concede any liability for injunctive relief, or any other wrongdoing. It is also significant that the declaratory relief was unaffected by the undertakings – the declaratory relief looks backwards at past conduct whereas the injunctive relief looks forward at future conduct. The undertakings, naturally, deal only with future conduct.