Subway Systems Australia v Ireland (No 2) - [2013] VSC 693

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

JUDICIAL REVIEW AND APPEALS LIST

No. S CI 2012 6362

SUBWAY SYSTEMS AUSTRALIA PTY LTD (ACN 009 277 034)

Applicant

AARON IRELAND

LYNETTE IRELAND

Respondents

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JUDGE:	CROFT J
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers (Applicant’s written submissions (22 November 2013); Respondents’ written submissions (18 November 2013)).
DATE OF DETERMINATION:	13 December 2013
CASE MAY BE CITED AS:	Subway Systems Australia v Ireland (No 2)
MEDIUM NEUTRAL CITATION:	[2013] VSC 693

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COSTS – Whether costs of mediation are “costs in the proceeding” – whether mediation by consent relevant – the role of mediation in a proceeding – overarching obligations of parties – Newcastle City Council v Paul Wieland [2009] NSWCA 113, Charlick Trading Pty Ltd v Australian National Railways Commission [2001] FCA 629 – Supreme Court (General Civil Procedure) Rules 2005, Order 63, Civil Procedure Act 2010 (Vic), s 7.

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APPEARANCES:	Counsel	Solicitors
For the Applicant	Mr J. Moore	Minter Ellison
For the Respondents	Mr J. Catlin	George Konidaris & Co

HIS HONOUR:

Introduction

On 18 October 2013, I handed down judgment in an appeal by Subway Systems Australia Pty Ltd (“SSA”) against part of the orders of the Victorian Civil and Administrative Tribunal (“VCAT”) in VCAT Proceeding R43 of 2012, in which SSA and Subway Realty Pty Ltd (“SR”) were respondents and the Respondents, Aaron Ireland and Lynette Ireland (“Irelands”) in this proceeding were the applicants (“the judgment”).[1]
[1]Subway Systems Australia Pty Ltd v Aaron Ireland & Anor [2013] VSC 550.

An outline of the grounds of the appeal and the questions of law upon which the appeal was brought are set out in the judgment. The abbreviations and expressions appearing in these reasons bear the same meanings as they bear in the judgment.

Background

On 16 May 2013, the parties appeared before this Court for the first time seeking leave to appeal against part of the orders made in the proceeding in VCAT. There was discussion at the hearing in relation to the operation of the arbitration clause in the Franchise Agreement, particularly given that the default appointing authority applicable to the arbitration agreement provided by the clause is the Permanent Court of Arbitration in The Hague.[2]
[2] Judgment at [51] and [52].

At the conclusion of the discussion in relation to the arbitration clause attention turned to dispute resolution, more broadly, with respect to the present proceedings.

While it was indicated by the parties that there had already been a mediation under the auspices of the Small Business Commissioner as contemplated by the Retail Leases Act 2003 (“Retail Leases Act”), I expressed my view that a further mediation was highly desirable. I subsequently adjourned the proceeding so that the parties could provide written submissions with respect to the validity and operation of the arbitration clause in the Franchise Agreement and also to arrange and attend a further mediation. There was no suggestion that…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2013] VSC 693
Decision Date: 13 December 2013

CaseChat Overview and Summary

The matter before the court was an application by the respondent to determine whether the costs of mediation, which occurred by consent of both parties, were to be treated as costs of the proceeding under the Supreme Court (General Civil Procedure) Rules 2005. The applicant, Subway Systems Australia, had been ordered by the court to pay the respondent's costs of mediation, and sought to determine the scope of the costs order. The respondent, Ireland, argued that the mediation costs were properly included as part of the costs of the proceeding. The court was required to determine the nature of the mediation and its relevance to the overarching obligations of the parties, as well as the proper interpretation of the relevant rules and legislation.

The court considered the overarching obligations of the parties under the Civil Procedure Act 2010 (Vic), s 7 and the Supreme Court (General Civil Procedure) Rules 2005, Order 63. It noted that the role of mediation in a proceeding is to encourage parties to resolve their disputes without resorting to formal adjudication. However, the court found that the mediation in this case had been conducted by consent of both parties, and was not a court-ordered mediation. The court also considered the cases of Newcastle City Council v Paul Wieland and Charlick Trading Pty Ltd v Australian National Railways Commission, which dealt with the costs of mediation and the obligations of parties to engage in alternative dispute resolution processes. Ultimately, the court found that the mediation costs were not properly included as costs of the proceeding, as they were incurred by consent and not as part of a court-ordered mediation process.

The court ordered that the respondent's application for costs of mediation be dismissed, and that the costs of the application be paid by the respondent. The court emphasised the importance of the parties' obligations to engage in alternative dispute resolution processes, and the need for clear and precise orders to avoid disputes over costs. The court also noted that the mediation in this case had not been a court-ordered process, and therefore the costs of mediation should not be treated as costs of the proceeding. This decision highlights the importance of careful drafting of costs orders, and the need for parties to clearly understand their obligations under the rules and legislation.

Orders