Telstra Corporation Ltd v Communications Network International Inc.

[1994] FCA 1000

/am, 9y

JUDGMENT No. ........ ........ .. , ..... ..,

IN THE FEDERAL COURT OF AUSTRALIA	)
1
VICTORIA DISTRICT REGISTRY	) No.VG 301 of 1994
GENERAL DIVISION
B E T W E E N :

TELSTRA CORPORATION LIMITED

/ACN 051 775 556)

Applicant

- and -

COMMUNICATIONS NETWORK INTERNATIONAL INCORPORATED

First Respondent

- and -

DATATEL INTERNATIONAL PT!i LTD

/ACN 008 208 688)

Second

JUDGE :	Heerey J
DATE :	2 December 1994

M: Melbourne

EX TEMPORE REASONS FOR JUDGMENT

The applicant seeks leave to withdraw this

22 r 2(l)(d). The question at issue is whether that order

should be made on terms that the second respondent pay the

applicant's costs. It is accepted that I have a general

discretion under s 43 of the Federal Court Act 1976 (Cth) to

award costs.

The proceeding was brought by the applicant, who carries on

business under the name "Telecom", against the first

respondent, an American corporation which manufactures a

telephone credit card under the name "The Telecom Pay Card".

The second respondent is the Australian agent and distributor

of the first respondent. The proceeding was commenced on

13 September 1994. An application for an interlocutory

September his Honour granted the injunction sought. His injunction was heard by Olney J on 27 September. On 30 the respondents' card:

"The general get up of the card and brochure is in my opinion

likely to mislead or dece~ve all but the most astute and

~nquiring minds into believing that The Telecom Pay Card LB a

product of the applicant and particularly the use of the

def~nite artlcle before the word 'Telecom' is strongly

suggestive of the fact that Telecom in that context 1s used to

dist~nguish	the card as one assoc~ated	with the applicant's
busmess."

His Honour gave directions which would have resulted in a fairly early trial of the matter. Negotiations took place between the applicant and the first respondent which resulted in a satisfactory resolution of the matter on the basis that the first respondent would not seek to have the card sold in Australia and that each party would bear its own costs. The President of the first respondent said in a letter to the applicant's solicitors dated 18 October:

"We have ceased market~ng and distr~bution of anything in

Australia with 'Telecom' word on ~ t . Our agents and

distributors were advrsed of the order the same day and

likewlse to the best of our knowledge immed~ately ceased

supplying any such matter to the public. It has never been our

intention to pursue thls matter beyond the ~njunction hear~ng

stage. We consider the judge's 'verdict' to be final in a

practical sense."

In a further letter from the President of the first respondent dated 30 October it is said:

"The old Telecom Pay Cards not distr~buted to the public in

Australia prlor to the mjunction are and will be used

elsewhere in the world. In the end, however, I assure you that

there are no significant stocks of Telecom Pay Cards left in

Australia. We have already begun del~veries of the new re-

named product, the Worldcom Phone Card, w h ~ c h we have had to

produce at great expense just for supply to the Australian

market. All collateral materlals refer to that product name

and auppl~es are being sent to our customers as quickly as

possible. The word 'Telecom' appears nowhere on the product or

materials."

The applicant in seeking an order that the second respondent had brought an action to enforce terms of a lease assigned to the defendant. Shortly before the matter came on for hearing the defendant rectified its non-compliance. The plalntiff sought leave to discontinue. The defendant did not resist that application but argued that the rules only conferred power to award the costs of the application to discontinue as distinct from the costs of the action. His Honour awarded costs of the action to the plaintiff and said (at p 472):

pay its costs relied on a decision of Kaye J of the Supreme

Court of Victoria in Garwolin Nominees Pty Limited v Statewide

"There are sound reasons for grving one party his costs of the act~on on grantrng leave to discontinue. A plarntiff may seek leave to discontinue for any one of a number of reasons. He

may do so because he recognizes the valrdrty of a defence action which cannot succeed. In such circumstances he may seek leave to discontinue and he may be granted leave on terms of payments of the defendant's costs of the act~on. It would seem

pleaded by the defendant, such as the statute of limitations

that that mrght be the only appropr~ate order to do just~ce

between the parties, because the defendant has m effect

succeeded in defeating the pla~ntiff's claim.

Other crrcumstances in which a plalntiff might seek to drscontrnue might be after the close of pleadings in an action for possesslon the defendant has surrendered possession of the

subject premrees. In that event the plaintrff would have

achieved what he set out to obtain by the Issue of proceedings. denied his costs incurred rn achreving the relref he sought by

the commencement of h ~ s actron. Furthermore, it would be qurte

unnecessary to force him to contlnue on to trlal for the

purposes of obtaining orders for possesslon and for costs. The

procedure for obtaining leave to discontinue enables the party

to bring to an end h ~ s	litigation when the relref sought has
been obta~ned."

Recently in this court Ryan J indicated his agreement with Garwolin; see Trade Practices Commission v Santos Limited,

(unreported 19 February 1993) at 27. I would respectfully

take the same course. The present situation is different from

that dealt with in J.T. Stratford & Son Limited v Lindley

[l9691 1 WLR 1547, where neither party wished to pursue the

claim to trial and, equally, as far as one can gather from the

report, neither side had really achieved anything out of the

litigation.

The only complicating matter here is that the order is sought

against a respondent other than the one who has conceded the

applicant's claim. Counsel for the second respondent argued

that his client should receive its costs. He said that the

question was still open whether the card did in truth infringe

s 52 of the Trade Practices Act 1974 (Cth) and argued that

the price of discontinuance always is that the respondent is

paid out. I must say, with respect, I think that latter

proposition overstates the case. The whole point of Garwolin

is that a respondent cannot say that the mere fact of

discontinuance, with the consequence that there will not be a

trial on the merits, means that the discontinuing applicant

must pay the costs of the proceeding. Here the position is

that the applicant has achieved what it sought out to achieve

in the litigation, namely, the cessation of use of the

offending card in Australia. That would remain the position

even if the litigation were to continue as suggested by the

second respondent because even if the second respondent were

to succeed it is only the agent of the first respondent and

the first respondent is bound by its agreement of compromise

with-the applicant not to circulate the card in Australia.

It

could not do that through the second respondent or any other

agent.

The inevitable consequence of the course urged by the second respondent would be litigation over a bare right to costs. That seems a sterile exercise which this Court should not countenance. The second respondent has not been prepared to negotiate a settlement on the same terms as the first respondent, namely, that each party bear its own costs, but has held out for payment of its costs by the applicant. That seems to me, particularly in the light of the decision of Olney J which gave a fair indication of the likelihood of success of the claim, an indication with which I must say I respectfully agree, an unreasonable attitude on the part of the second respondent. I do not think it should be rewarded with an order for costs.

There was an alternative argument that if costs were to be awarded they should only be such additional costs as were incurred by joining the second respondent. But that does not seem to me to be a feasible alternative. It was in substance the one claim in respect of the one infringement of the Act brought against principal and agent.

Also I do not think it is practicable to enter into any examination of the quantum of the applicant's costs and in particular whether it was necessary for it to produce evidence

true that his Honour found that this was a matter of notoriety

of which he could take judicial notice, but on the face of it

as to the reputation of the business name "Telecom". It is to have available evidence in case it could not establish that element of its claim under the doctrine of judicial notice.

There will be leave to the applicant to discontinue. I will order the second respondent pay the applicant's costs including reserved costs and the costs of this application.

I certify that this and the

preceding (five) 5 pages

are a true copy of the

reasons for judgment of his

Honour M r Justice Heerey.

Dat

Counsel for the applicant:

A Archibald QC with A J

Maryniak

Solicitor for the applicant:

Mallesons Stephen Jaques

Counsel for the second respondent: B J Hess

Solicitor for the second Stephens

respondent:

Date of hearing: 2 December 1994