Indoor Holdings Pty Ltd v Bennett (No 2) - [2010] WASC 307

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: INDOOR HOLDINGS PTY LTD -v- BENNETT [No 2] [2010] WASC 307

CORAM: LE MIERE J

HEARD: 18 OCTOBER 2010

DELIVERED : 2 NOVEMBER 2010

FILE NO/S: CIV 1664 of 2006

BETWEEN: INDOOR HOLDINGS PTY LTD
Plaintiff
AND
PETA JANE BENNETT
Defendant

Catchwords:

Costs - Action discontinued - No hearing on the merits - Interlocutory relief - Whether parties acted reasonably in commencing and defending the proceedings - Turns on own facts

Costs - Application for leave to discontinue the action - Costs to follow the event

Costs - Application to dismiss for want of prosecution - Costs to follow the event

Interlocutory relief - Interlocutory injunction - Usual undertaking as to damages - Action discontinued - No determination on the merits - Application for an inquiry as to damages - Turns on own facts

Legislation:

Nil

Result:

No order as to costs of the action
Defendant to pay plaintiff's costs of the plaintiff's application for leave to discontinue
Defendant to pay plaintiff's costs of the defendant's application to dismiss for want of prosecution
Defendant's application for inquiry as to damages dismissed

Category: B

Representation:

Counsel:

Plaintiff: Ms P E Cahill SC
Defendant: Mr T Galic

Solicitors:

Plaintiff: Cooper Legal Pty Ltd
Defendant: Galic & Co

Case(s) referred to in judgment(s):

Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd [1981] HCA 75; (1981) 146 CLR 249
Australian Securities Commission v Aust‑Home Investments Ltd (1993) 44 FCR 194; (1993) 11 ACSR 136
Bennett v Indoor Holdings Pty Ltd [2006] WASCA 265
Graham v Campbell (1878) 7 Ch D 490
J T Stratford & Son Ltd v Lindley (No 2) (1969) 1 WLR 1547; (1969) 3 All ER 1122
Metropolitan Properties Pty Limited v Caltex Petroleum Pty Limited [1999] WASC 153
Newcomen v Coulson (1878) 7 Ch D 764
One.tel Ltd v Deputy Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548
Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622
Ushers Brewery Ltd v P S King & Co (Finance) Ltd (1972) 1 Ch 148

LE MIERE J: The plaintiff carried on business providing services to retail pharmacies under or by reference to the name 'Pharmacy 777'. Ian Charles Hamilton and Donna Lorraine Pearson licensed the defendant to use the name 'Pharmacy 777 Mandurah'. In 2006 the defendant started to operate a pharmacy in Dower Street, Mandurah under the name 'Pharmacy 777 Mandurah Car Park Chemist'. The plaintiff commenced this action to restrain the defendant from using the name 'Pharmacy 777' or any similar name and for damages for loss and damage it claims to have suffered by reason of the defendant's conduct.
On 6 July 2006, upon the plaintiff giving the usual undertaking as to damages, the court made an order for an interlocutory injunction restraining the defendant from using the name 'Pharmacy 777' or any similar name. The defendant's appeal to the Court of Appeal was dismissed: Bennett v Indoor Holdings Pty Ltd [2006] WASCA 265.
The injunction was discharged on 26 October 2009. On 19 April 2010 the plaintiff applied for leave to discontinue the action. Also on 19 April 2010 the defendant applied for the action to be dismissed for want of prosecution. On 24 May 2010 I ordered that the action be discontinued and reserved the costs of the action and of the plaintiff's application to discontinue. Also on 24 May 2010 I dismissed the defendant's application to dismiss the action for want of prosecution and reserved the costs of the application.
The defendant now applies for orders that she be entitled to enforce the interlocutory undertaking as to damages given by the plaintiff at the time the interlocutory injunction was granted on 6 July 2006 and for an order that there be an inquiry as to damages suffered by the defendant. The plaintiff has also applied for the court to determine the costs issues previously reserved.

Costs of the action ‑ legal principles

McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622, considered the relevant principles for determining costs orders where there has been no hearing on the merits of the case. His Honour stated:
The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigation action which by settlement or extra-curial action they had avoided. …
If it appears that both parties had acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings (624 ‑ 625).
In One.tel Ltd v Deputy Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548, Burchett J said:
In my opinion, it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs [6].

Costs of action - plaintiff's contentions

The plaintiff submits that both parties acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the further prosecution of the litigation became futile and, on the plaintiff's application, the court ordered that the action be discontinued.
The plaintiff says that it sought leave to discontinue the action because in or about June 2009 the defendant commenced trading in partnership with Mr Hamilton at a pharmacy in Mandurah trading as 'Pharmacy 777 Mandurah'. The plaintiff did not, and never had, disputed that Mr Hamilton is licensed to use the business name 'Pharmacy 777 Mandurah' to conduct a pharmacy business within the boundaries of the City of Mandurah. Accordingly, the plaintiff no longer required or desired to restrain the defendant from using the name 'Pharmacy 777 Mandurah'. The plaintiff apprehended that the cost of proving damages incurred in the short period before the interlocutory injunction was obtained could well exceed the likely amount of damages to be awarded.
As I have said, on 24 May 2010 I ordered that the action be discontinued. In stating my reasons for making that order I said:
The basis on which the plaintiff brought its application that the action be discontinued with no order as to costs was as follows. In broad terms, the plaintiff said that since the action had been commenced the defendant had entered into a partnership with Mr Hamilton to operate the relevant pharmacy. The plaintiff accepted that Mr Hamilton was entitled to operate the pharmacy under the name 'Pharmacy 777', whereas it did not accept that the defendant was entitled to operate the pharmacy under that name in her own right.
Accordingly, the plaintiff considered that the circumstances had changed, which made the continuation of the action futile. The plaintiff said that the continuation of the action was futile in that the action sought in effect to prevent the defendant from operating the pharmacy on her own under the name 'Pharmacy 777', whereas the defendant no longer was seeking to do that and had entered into a partnership with Mr Hamilton to operate the pharmacy in partnership with him under the name 'Pharmacy 777'.
A plaintiff should not be required to continue with the action if it does not wish to do so. The defendant does not seek to make the plaintiff continue the action against its wishes and indeed, seeks to have the action brought to an end in any event. In my view, given the history of the matter, the appropriate order is that the plaintiff have leave to discontinue and that the action be discontinued.

Costs of the action - defendant's contentions

The defendant submitted that the plaintiff should pay the defendant's costs of the action. The defendant submitted that the plaintiff did not seek to discontinue the action because of any changed circumstances. The defendant submitted that the real reason the plaintiff sought to discontinue the action was because it came to the realisation that it could not establish that it had suffered any damages. The defendant submits that there has effectively been a complete surrender by the plaintiff and that there was no change in circumstances of any relevance.
A mediation conference was listed for 31 July 2009. On 29 July 2009 the defendant's solicitor wrote to the plaintiff's solicitor stating that the defendant would be operating the Dower Street pharmacy business in partnership with Mr Hamilton under the name 'Pharmacy 777' as Mr Hamilton was entitled to do. The defendant's solicitors said:
On the basis of the latest developments, there is plainly no basis for maintaining the injunction currently in force against Ms Bennett any longer and the same should now be discharged.
The defendant applied to discharge the interlocutory injunction. In an affidavit sworn 13 August 2009 in support of her application to discharge the interlocutory injunction the defendant swore that Mr Hamilton had joined her in partnership to operate the Dower Street pharmacy, that they wished to trade under the name 'Pharmacy 777 Mandurah' and that if the defendant was entitled to trade in partnership with Mr Hamilton under the name 'Pharmacy 777 Mandurah', which the defendant believed they were entitled to do, then the defendant believed that the need for the injunction falls away. The plaintiff initially resisted the discharge of the injunction and argued that it should be varied to permit the defendant to trade in partnership with Mr Hamilton under the name 'Pharmacy 777 Mandurah'. Eventually, the injunction was discharged on 26 October 2009.
The principal relief sought by the plaintiff in the action was a permanent injunction to restrain the defendant from using the name 'Pharmacy 777'. Buss JA observed in his reasons for decision in Bennett v Indoor Holdings Pty Ltd that if the plaintiff succeeded in its claim at trial it would necessarily have established interference with its reputation and good will in the name 'Pharmacy 777'. His Honour further stated that interference with intellectual property, including reputation and good will in a service, is usually apt for protection by injunction [31]. His Honour noted that measuring loss or damage in monetary terms is often difficult. In his affidavit sworn 8 April 2010 Mr Dillon, a director of the plaintiff, referred to the defendant commencing to trade under the name 'Pharmacy 777 Mandurah' in partnership with Mr Hamilton and swore that in light of those developments the plaintiff's board of directors perceived there to be no benefit to the plaintiff in the further prosecution of this action. Mr Dillon swore that in particular:
(a)as the defendant is now working in partnership with the plaintiff's licensee, the plaintiff no longer seeks to restrain the defendant from using the name Pharmacy 777; and
(b)the plaintiff apprehends that the costs in proving damages against the defendant could well exceed the likely amount of damages to be awarded to the plaintiff if successful.
I find that the plaintiff sought and obtained an order discontinuing the proceedings because of the changed circumstances that removed the principal dispute between the parties, that is, the defendant's entitlement to trade under the name 'Pharmacy 777'. The plaintiff did not litigate for some time and then effectively surrender to the defendant.
The defendant's written submissions submit that the plaintiff failed to progress the proceedings with any reasonable degree of expedition and elected to treat interim relief as final relief before conceding later on that the injunction was no longer necessary.
The action was commenced on 26 June 2006. An order for an interlocutory injunction was made on 6 July 2006. An appeal against the interlocutory injunction was heard on 19 September 2006 and the reasons dismissing the appeal were published on 5 December 2006. Little else appears to have been done to progress the action to trial before the defendant commenced to operate the pharmacy business in partnership with Mr Hamilton in July 2009 and subsequently the action was discontinued on 24 May 2010. The defendant says that the plaintiff had the carriage of the matter and the onus of bringing the matter to trial and therefore the fault for failing to progress the action to trial lies with the plaintiff.
In opposing the grant of an interlocutory injunction the defendant contended that there would be tremendous loss of good will to the defendant's business if the name in question could not be used for, say, three years while the action progressed to trial and final determination. The Court of Appeal held that there was no substance in that contention. Buss JA, with whom Pullin JA agreed, said at [33] that an application should have been made promptly for an expedited trial and it was highly likely that expedition would have been ordered, and the action could have been tried within about three months after the issue of the writ. His Honour observed that neither party appeared to have been interested in a prompt trial, presumably for tactical reasons. After those observations were made by Buss JA the defendant took no steps to apply for an expedited trial or otherwise to progress the action to trial and must be taken to have acquiesced in the lack of progress towards trial. Indeed, it appears from the interlocutory steps taken in the proceedings that the defendant contributed to the delay in progressing the action. For example, the defendant did not answer a notice to admit facts of August 2006 until 31 August 2008. In those circumstances the failure of the plaintiff to progress the action to trial is not unreasonable conduct so as to warrant the plaintiff paying the defendant's costs of the action.
In his oral submissions counsel for the defendant, Mr Galic, submitted that the court should infer that at the time of applying for interlocutory injunctive relief the plaintiff had no present intention of pursuing its case to a determination on the merits. The defendant says that that inference should be drawn from the failure of the plaintiff to progress the proceedings with any reasonable degree of expedition and from statements made by the plaintiff's solicitor.
I have already referred to the failure of either party to prosecute the action with any expedition.
The second factual matter relied upon by the defendant so as to give rise to an inference that the plaintiff did not intend to progress the action to trial are statements made by the plaintiff's solicitor. In his affidavit sworn 30 November 2009 the defendant's solicitor, Tihomir Galic, swore:
The plaintiff's solicitor Mr Cooper has in my presence and at directions hearings frequently said words to the effect that his client had obtained interim injunctive relief and was happy with the same.
In his affidavit sworn 11 December 2009, the plaintiff's solicitor, Mr Cooper, in answer to Mr Galic's evidence swore:
I recall that once when I appeared as counsel before Justice Templeman, his Honour was dealing with an unexplained failure by the defendant to comply with court directions. His Honour asked me if the plaintiff was suffering because of that delay and I responded with words to the effect that the plaintiff's position was protected by the interim injunction. I recall saying the words 'the plaintiff is happy with the status quo'. I also recall saying something similar to a Registrar at a status conference, in response to a similar question arising from a similar context, that is, the court dealing with delay by the defendant.
The statements made by Mr Cooper do not, and are not capable of, giving rise to an inference that at the time the plaintiff commenced the action and applied for interlocutory injunction it had no intention of prosecuting the action to a trial.
The evidence concerning the statements made by the plaintiff's solicitor does not establish unreasonable conduct by the plaintiff in the conduct of the litigation so as to warrant an order that the plaintiff pay the defendant's costs of the action.

There should be no order as to the costs of the action

The significance of interlocutory relief having been granted in an action which does not proceed to trial was discussed by Hill J in Australian Securities Commission v Aust‑Home Investments Ltd (1993) 44 FCR 194; (1993) 11 ACSR 136. Hill J said:
Reference may also be made to the decision of Master White in Austcorp Finance and Leasing Pty Ltd v Thomas (unreported, Supreme Court, Queensland, 23 August 1991) and the decision of the Court of Appeal in J T Stratford & Son Ltd v Lindley (No 2) (1969) 1 WLR 1547.
Stratford was a case where an interlocutory injunction had been granted. The interlocutory proceedings were, however, fought through until the House of Lords. Thereafter the proceedings went to sleep and never came to trial. Ultimately the defendants applied to dismiss the proceedings for want of prosecution. The plaintiff countermanded with an application to discontinue the proceedings. Ultimately it was held that the plaintiff should be given leave to discontinue. As Lord Denning MR put it (at 1553):
'Nobody has lost. Nobody has won … Neither side wanted to go on. But neither side wanted to pay the costs of the other side.'
Speaking rhetorically his Lordship continued (at 1553):
'So what is to be done? Is this case to go on simply about costs? I think not.'
His Lordship declined to consider the merits of the dispute. Rather, he affirmed the exercise of discretion below that each side should pay its own costs. Winn LJ and Cross LJ also were of opinion that the assessment of a theoretical prospect of success was impractical and that the merits should not be gone into. Both were of the view that there should be no order as to costs.
These cases seem to me to support the following propositions being made.
(1)Where neither party desires to proceed with litigation the court should be ready to facilitate the conclusion of the proceedings by making a cost order: Stratford and the SEQEB case.
(2)It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial: Stratford. This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue.
(3)In determining the question of costs it would be appropriate, however, for the court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them (SEQEB).
(4)In a particular case it might be appropriate for the court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation: cf Sunday Times Newspaper Co Ltd v McIntosh (1933) 33 SR (NSW) 371.
(5)Where the proceedings terminate after interlocutory relief has been granted, the Court may take into account the fact that interlocutory relief has been granted: cf Re Asiatic Electric Co Pty Ltd (1973) 1 NSWLR 603 at 606, a case which, however, depended upon the specific wording of the statute under consideration.
Where interlocutory relief has been granted, that fact carries no implication as to the ultimate merits of the case but does ordinarily suggest that the Court granting interlocutory relief has accepted or found that there is an arguable issue to be tried between the parties and that the balance of convenience favours the grant of that relief (200 ‑ 201).

This action was terminated without any determination of the merits. In July 2009 the defendant commenced trading in partnership with Mr Hamilton. Under those changed circumstances the subject matter of the dispute between the plaintiff and the defendant ceased to have any practical consequence. The plaintiff did not want to go on with the action. It applied for leave to discontinue the action. The defendant did not want to go on with the action. She applied for the action to be dismissed for want of prosecution. As Lord Denning put it in J T Stratford & Son Ltd v Lindley (No 2) (1969) 1 WLR 1547; (1969) 3 All ER 1122:
Nobody has lost. Nobody has won … Neither side wanted to go on. But neither side wanted to pay the costs of the other side.
The plaintiff acted reasonably in commencing the proceedings. The plaintiff succeeded in obtaining an interlocutory injunction. The Court of Appeal held that the interlocutory injunction was correctly granted. Buss JA said:
Although the respondent established, on the whole of the evidence before the learned Judge, that there were serious questions to be tried in relation to the issues I have mentioned, those questions could not be determined on the affidavits. There were conflicts in the evidence of Mr Dillon and Mr Hamilton which could only be resolved at trial. I consider that his Honour, with respect, overstated the strength of the respondent's case, on the evidence before him, in describing it as 'extremely strong, if not unanswerable'. I have no doubt that the respondent has a powerful argument (which is summarised in his Honour's reasons) in support of its contentions concerning the proper construction of the licence agreement, but, as I have mentioned, there are important issues of fact which can only be found after a trial. I do not, however, accept the appellant's submission that the respondent's claim has 'little prospect of success' [23].
I find that the plaintiff acted reasonably in commencing the proceedings and that the defendant acted reasonably in defending them. The appropriate order is that there be no order as to costs of the action.

Costs of plaintiff's application for leave to discontinue the action

The plaintiff sought leave to discontinue the action with no order as to costs. The plaintiff has been successful in obtaining that relief. The plaintiff seeks the costs of the application on the grounds that costs should follow the event. There is no good reason to depart from the general rule. The defendant should pay the costs of the plaintiff's application of 19 April 2010 for leave to discontinue the action.

Costs of defendant's application to dismiss action for want of prosecution

The application was dismissed. The plaintiff seeks the costs of the application on the grounds that costs should follow the event. The defendant offered no argument in opposition. The usual rule should apply and costs should follow the event. The defendant should pay the plaintiff's costs of the defendant's application of 19 April 2010 to dismiss the action for want of prosecution.

Defendant's application for inquiry as to damages

The issues for determination are whether the defendant is entitled to enforce the undertaking as to damages and if so, whether there should be an inquiry as to damages. If an inquiry as to damages is to be held, then the appropriate assessment of compensation is to be determined after the parties have adduced further evidence and after a further hearing.
In Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd [1981] HCA 75; (1981) 146 CLR 249, Aickin J explained the undertaking as to damages and its origins in equity practice of the nineteenth century, if not earlier. Aickin J referred to Graham v Campbell (1878) 7 Ch D 490 where James, Cotton and Thesiger LJJ said:
The undertaking as to damages which ought to be given on every interlocutory injunction is one to which (unless under special circumstances) effect ought to be given. If any damage has been occasioned by an interlocutory injunction, which on the hearing is found to have been wrongly asked for, justice requires that such damage should fall on the voluntary litigant who fails, not on the litigant who has been without just cause made so (494).
Aickin J said that the cases display a substantial variation in the language in which the principle is expressed and the following are examples of expressions used:
… some cases speak of damages being available if it turns out that the injunction was 'wrongly granted'; others of where 'the court is ultimately of opinion that the order ought not to have been made', and others again say that the damage should not fall on the 'litigant who has without just cause been made so'. It seems that the first two expressions mean no more than that the plaintiff ultimately fails and are not concerned with the question whether it was correct in the circumstances prevailing at the time to grant the interlocutory injunction (261 ‑ 262).
In this case the plaintiff has not ultimately failed; there has been no determination on the merits. In those circumstances is the defendant entitled to enforce the undertaking as to damages?
The time when, and the circumstances under which, an inquiry as to damages will be ordered was considered by Plowman J in Ushers Brewery Ltd v P S King & Co (Finance) Ltd (1972) 1 Ch 148. In that case the lessees under a lease charged the leasehold premises to the plaintiff mortgagees by way of legal mortgage to secure the payment of certain advances. They neither paid any instalments nor any rent due under the lease. In July 1969 they vacated the premises and handed the keys to the defendant lessors who were anxious to relet the premises. On 26 August the mortgagees issued a writ claiming injunctions restraining the lessors from entering or remaining on the premises and from disturbing or interfering with the right of the mortgagees to possession by granting any lease or delivery of possession to any person. The court granted an interlocutory injunction on the mortgagees' undertaking to pay damages should the court thereafter be of the opinion that the lessors had sustained any loss by reason of the order. The lessors gave possession to the mortgagees. On 6 May 1970 during the course of pleadings, the lessors served a notice of forfeiture under s 146 of the Law of Property Act 1925 (UK). The mortgagees admitted the lessors' claim and surrendered possession. On the lessors' motion seeking dissolution of the interlocutory injunction, which was accepted by the mortgagees, the injunction was dissolved. The lessors moved for an inquiry as to damages sustained by them by reason of the injunction. The lessors said that since the mortgagees had abandoned their claim to possession it was unnecessary for the court to decide whether the injunction was rightly granted. They said that the position was the same as if there had been a trial on the merits and that the mortgagees had been found not entitled to possession. Alternatively, they said that the position was the same as it would have been if the mortgagees had discontinued the action. Plowman J said that the mortgagees disputed the lessors' right to an inquiry as to damages at that stage and he agreed with their submissions. The mortgagees had never conceded that what they did in 1969 was wrong, or that the injunction was not rightly granted. Those matters had not yet been decided. His Honour added that the action was still alive for the purpose of having them decide it because on those issues the question of costs depended. His Honour added that the trial would also determine the question whether the lessors were entitled to an inquiry as to damages. Plowman J said:
It is in my judgment established by the authorities that an inquiry as to damages will not be ordered in these cases until either the plaintiff has failed on the merits at the trial or it is established before trial that the injunction ought not to have been granted in the first instance. Let me refer to two of the cases. The first is Newby v Harrison (1861) 3 De G F & J 287. I will read the sidenote:
'An undertaking given by a plaintiff upon obtaining an injunction, to abide by any order the court may thereafter make as to any damages that may be occasioned to the defendants by the injunction, remains in force notwithstanding the dismissal of the bill. An inquiry as to damages will in such a case be granted where the plaintiff's case fails by reason of his having no right to interfere with the act which he seeks to restrain, though the defendant was a mere trespasser.'
Turner LJ said, at p 290:
'The true principle appears to me to be this, that a party who gives an undertaking of this nature puts himself under the power of the court, not merely in the suit but absolutely; that the undertaking is an absolute undertaking that he will be liable for any damages which the opposite party may have sustained, in case the court shall ultimately be of opinion that the order ought not to have been made.'
Then in Griffith v Blake (1884) 27 Ch D 474, the headnote reads:
'Per Baggallay, Cotton, and Lindley LJJ, where an interlocutory injunction has been granted on the usual undertaking as to damages, if it afterwards is established at the trial that the plaintiff is not entitled to an injunction, an inquiry as to damages may be directed, though the plaintiff was not guilty of misrepresentation, suppression, or other default in obtaining the injunction.'
Cotton LJ said, at p 477:
'… the rule is, that whenever the undertaking is given, and the plaintiff ultimately fails on the merits, an inquiry as to damages will be granted unless there are special circumstances to the contrary.'
Lindley LJ said, at p 477:
'I think that the evidence of nuisance is strong, and that if the plaintiffs ultimately fail, the defendants can obtain under the undertaking full compensation for the injury done to them by the injunction. I agree with the observations of the other members of the court on Smith v Day (1882) 21 Ch D 421. My opinion is that the undertaking applies in all cases where the court at the hearing determines that the plaintiff is not entitled to an injunction.'
All the cases to which I was referred are, I think, consistent with the opinion I have expressed. In Newby v Harrison 3 De G F & J 287 to which I have already referred, and in Graham v Campbell (1878) 7 Ch D 490, the plaintiff failed at the trial of the action and an inquiry was ordered. In Smith v Day 21 Ch D 421, and Ex parte Hall (1883) 23 Ch D 644, the plaintiff also failed at the trial of the action or on appeal, but the inquiry was refused as a matter of discretion on the ground of delay. In Novello v James (1854) 5 De G M & G 876, the injunction was dissolved and an inquiry ordered before the trial, but this was because a decision of the House of Lords in another case decisively concluded the case against the plaintiff. In Newcomen v Coulson (1878) 7 Ch D 764, the plaintiff discontinued the action before trial and so in effect threw his hand in. In Ross v Buxton [1888] WN 55, the plaintiff obtained an ex parte injunction on the usual undertaking in damages, but an injunction was refused when the motion became effective. The defendant then moved for an inquiry as to damages which was ordered, the judge saying that the ex parte injunction was improperly obtained. No case was cited to me where the inquiry was ordered before the question whether the injunction was rightly granted had been disposed of (154 ‑ 155).
A similar issue was considered by E M Heenan J in Metropolitan Properties Pty Limited v Caltex Petroleum Pty Limited [1999] WASC 153. The matter arose from the plaintiff's disputed right to an access way over part of Caltex's land. The court granted an interim injunction restraining Caltex until further order from impeding or obstructing the access way. The injunction was granted upon the usual undertaking as to damages. Caltex complied with the injunction. Later, the plaintiff purchased the lot over which it claimed the access way. The plaintiff sought discharge of the undertaking which it had given when obtaining the interim injunction. E M Heenan J concluded that the plaintiff was entitled to discontinue the action on terms that its undertaking as to damages be discharged. His Honour said:
When the issue is resolved before trial and the action terminates without fault on the part of the plaintiff, the defendant is not entitled to enforce the undertaking if the plaintiff was right in seeking the injunctive relief granted.
It is unnecessary to decide whether, as a matter of strict law, Metropolitan was entitled to the access across Lot 107 which it claimed. Bearing in mind that the access way had been used without objection for more than 18½ years, that Caltex was able to remove its underground tanks and to restore the site without closing the access way and that its closure at that time without reasonable notice would have caused disruption of deliveries to tenants of the shopping centre and severe loss of patronage, the attempt to close it was reprehensible. The blameworthiness of Caltex's conduct was aggravated by its outrageous demand for payment of $20,000. In those circumstances Metropolitan clearly was right in bringing this action and in seeking the injunctive relief which was granted [13] - [14].
It would not be appropriate to order an inquiry as to damages on the ground only that the plaintiff has discontinued the action. That is because it has not been established that the injunction ought not to have been granted in the first instance. The plaintiff has not, as in Newcomen v Coulson (1878) 7 Ch D 764, effectively thrown in his hand and surrendered to the defendant. The plaintiff has discontinued the action because the supervening event of the defendant commencing to trade in partnership with Mr Hamilton has in effect removed the subject matter of the dispute between the parties.
Counsel for the defendant submitted that the injunction ought not to have been granted in the first instance because at the time of applying for the interlocutory injunction the plaintiff had no intention of proceeding to trial and determining the merits of the action. Counsel for the defendant says that that is to be inferred from the plaintiff's failure to progress the action with any reasonable degree of expedition after it had obtained the interlocutory injunction and from the statements made by the plaintiff's counsel or solicitor to which I have referred earlier.
There is no evidence from which it can be inferred that at the time of applying for the interlocutory injunction the plaintiff did not intend to proceed with the action to trial and I do not draw that inference. Furthermore, it is not clear precisely what inference the defendant wishes the court to draw. It might be that the plaintiff intended that if it obtained an interlocutory injunction it would seek to negotiate a settlement with the defendant rather than proceed to trial. If so, that would not establish that the injunction was wrongly granted.
It has not been established that the injunction was wrongly granted or that it ought not to have been made. In the circumstances of this case those matters could only have been determined at trial. However, neither party wanted to proceed to trial and the action has been discontinued. The plaintiff's undertaking as to damages should not be enforced.
Counsel for the plaintiff, Ms Cahill SC, also submitted that the defendant has failed to establish a prima facie case of having sustained damage by reason of the injunction. In the circumstances I need not pursue that matter. It is not appropriate to order an inquiry as to damages because it has not been established that the injunction ought not to have been granted in the first instance or for any other reason that the undertaking should be enforced. The defendant's application for an inquiry as to damages will be dismissed.