ACN 116 149 092 Pty Ltd v Coopers Brewery Ltd

The motion 13 Where leave to discontinue is sought, the Court normally will grant leave provided no injustice will be caused to the respondent/defendant: Covell Matthews & Partners v French Wools Ltd [1977] 1 WLR 876 at 879. As I earlier noted, Coopers does not oppose the grant of leave. It simply contests ACN's claim that no order be made as to costs. 14 The basis of ACN's no costs contention is that, in commencing the proceeding, it has acted reasonably and that its conduct has continued to be reasonable until the further prosecution of the litigation became futile. That futility, it is said, is evidenced by the amendments to Coopers' articles removing Lion Nathan's pre-emptive and exemption rights. In support of this, counsel relies on the observations of McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 143 ALR 1 to the effect that where further prosecution of proceedings becomes futile, the questions for the court are (i) whether one side or the other was almost certain to succeed or (ii) whether there had been some unreasonableness in the behaviour of one of the parties. 15 In contrast, Coopers contends that the facts demonstrate that ACN went into the litigation with knowledge of the real risk that the amendment to the articles would take place should the EGM proceed. As such, the plaintiff cannot now rely on the realisation of that risk (which has had the effect of ending the litigation) to avoid a costs order. 16 Order 22 of the Federal Court Rules, insofar as presently relevant, provides: "2 Discontinuance - Form 29 (1) Subject to subrules 2 and 3 a party making a claim for relief may discontinue a proceeding so far as concerns the whole or any part of any claim for relief, by notice in accordance with Form 29: (a) at any time before the directions hearing appointed in the application - without the leave of the Court or the consent of any other party; (b) where after the directions hearing the proceeding continues on pleadings but the pleadings are not closed - without the leave of the Court or the consent of any other party; (c) where judgment has not been entered - with the consent of all the parties; and (d) at any time - with the leave of the Court. … 3 Costs (1) A party who discontinues pursuant to paragraph 2 (1) (a) or (b) shall be liable to pay the costs of the other party or parties occasioned by the whole or the relevant part of the proceeding. (2) A party who discontinues under paragraph 2 (1) (c) is liable to pay the costs of the other party or parties occasioned by the whole or the relevant part of the proceeding, unless the terms of the consent provide otherwise." 17 Order 62 r 26(1) in turn provides: "(1) Where pursuant to Order 22, rule 2 a party to any proceeding discontinues the proceeding without leave as to the whole or any part of the relief claimed by him against any other party, the discontinuing party shall, unless the Court otherwise orders, pay the costs of the party against whom the discontinued claim is made occasioned by the discontinued claim and incurred before service of notice of the discontinuance."

18 It is unnecessary in this proceeding to canvass in detail the case law on discontinuance and the above rules. This has been done recently and, with respect, helpfully by Stone J in Smith v Airservices Australia (2005) 146 FCR 37; see also Harvey Norman Holdings Ltd v Fels [2002] ATPR 41-852; O'Neill v Mann [2000] FCA 1680. All I need note is the following. 19 (i) Order 22 does not make express provision for the incidence of costs on discontinuance with leave, the Court's power to award costs being that general one conferred by s 43(1) of the Federal Court of Australia Act 1976 (Cth). 20 (ii) While the underlying policy in the Rules is that the discontinuing party should be liable for the other parties' costs unless the Court otherwise orders, this has not hardened into a "usual rule" where leave is granted such as is the case where there has been a determination of a claim on its merits: as to the latter see Re Wilcox; Ex parte Venture Industries Pty Ltd (1996) 72 FCR 151. As Stone J observed in Smith, at [44]: "Where a claim for relief is discontinued the respondent to that claim is thereby deprived of an opportunity to vindicate its position despite, generally, having incurred costs in preparing to do so. Although the reasons for discontinuance may vary considerably, it is likely to be in the interests of justice that in those circumstances the respondent to the claim should have those costs met by the discontinuing party."

21 (iii) The reasons for, and circumstances of, a discontinuance can be so various that there are some number of factors which can be of (varying) utility in informing the Court's discretion. These include the following: (a) While it is not the function of the Court to make a prediction as to the outcome of the litigation concerned, the Court may nonetheless in particular circumstances feel confident that, although both parties have acted reasonably, "one party was almost certain to have succeeded if the matter had been fully tried": Ex parte Lai Qin, at 3; (b) If one party has acted unreasonably in occasioning the need for the litigation or for the incurring of expense in it, that can entitle the other party to costs. (c) As McHugh J observed in Ex parte Lai Qin at 3-4: "If it appears that both parties have 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. This approach has been adopted in a large number of cases."

(d) A common species of futility is where a change in "objective": O'Neill v Mann at [13]; or "extrinsic": Smith at [48] circumstances renders the further prosecution of a proceeding futile. 22 As I foreshadowed, I am satisfied that an order for costs is appropriate. While it cannot be said that the institution of this proceeding was in any way unreasonable - it was one of a complex of legal manoeuvres in a hostile take over bid - it was done in the full knowledge that, consequent upon the decision of Perry ACJ, Coopers would act to alter its constitution to remove Lion Nathan Australia's pre-emptive rights and exemptions unless either that decision was reversed on appeal or the holding of the necessary extraordinary general meeting could be prevented. Neither of these contingencies eventuated. From its inception this matter contained the seeds of its own futility, yet ACN was prepared to proceed and to put Coopers to its defence. In so doing ACN assumed the risk of the proceedings becoming futile. It cannot escape the consequences of that by the assertion that it nonetheless conducted itself reasonably. It gambled and it lost. It is entirely appropriate that it pay Coopers' costs occasioned by the discontinued claim including reserved costs and its costs of this motion. 23 By way of consequential order, having given ACN leave to discontinue, I will also give leave to Coopers to discontinue its cross-claim but I make no order as to costs in relation to that grant of leave. I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Finn.

Associate: Dated: 23 August 2006 Counsel for the Plaintiff/Defendants to the Cross-Claim: Mr R D Strong

Solicitor for the Plaintiff/Defendants to the Cross-Claim: Mallesons Stephen Jaques

Counsel for the Defendant/Cross-Claimant: Mr D J Blight

Solicitor for the Defendant/Cross-Claimant: Piper Alderman

Date of Hearing: 14 July 2006

Date of Judgment: 23 August 2006