Magic Menu Systems Pty Ltd v AFA Facilitation Pty Ltd

In the Federal Court of Australia, Magic Menu Systems Pty Ltd and MMS Franchising Pty Ltd (the cross-claimants) initiated proceedings against AFA Facilitation Pty Ltd and Walter Corneille Clement Marie Janus (the first and second cross-respondents) amongst others. The cross-claimants sought, among other things, an injunction against the first and second cross-respondents for their alleged unlawful maintenance of proceedings against the cross-claimants. Drummond J determined that while the cross-claimants had not demonstrated a sufficient risk of future injury to warrant injunctive relief, they had successfully established all other elements of their cause of action for maintenance and champerty. Consequently, the court reserved the costs of the separate issues to the judge who would ultimately decide on the damages claim, reserving the decision to ensure fairness given the cross-claimants' partial success and their potential pursuit of damages.

The primary legal issue before the court was whether the cross-claimants were entitled to an injunction against the first and second cross-respondents, and subsequently, what the appropriate allocation of costs should be given the partial success of the cross-claimants. Drummond J considered the cross-claimants' success in establishing all elements of their cause of action except for the requirement of proving actual damage to obtain injunctive relief. The court also contemplated the fairness of the costs allocation in light of the cross-claimants' partial success and their potential to pursue a damages claim against the first and second cross-respondents.

Drummond J concluded that it was inappropriate to apply the ordinary rule that costs follow the event, particularly because the cross-claimants had achieved significant success in establishing their claims. The judge reasoned that the cross-claimants' success in proving all elements of their causes of action, except for the need to prove actual damage for injunctive relief, warranted a reserved costs order. Drummond J opted to defer the costs decision to the judge who would handle the damages claim, ensuring a just allocation based on the full context of the cross-claimants' success. The court further noted that if the cross-claimants did not promptly pursue their damages claim, all parties retained the right to apply for a costs order.

The court ordered that the costs of and incidental to the determination of the separate issues be reserved to the judge who would deal with the cross-claim for damages against the first and second cross-respondents. Additionally, liberty was granted to all parties to apply for a costs order if the cross-claimants failed to promptly pursue their damages claim against the first and second cross-respondents.