Carlton & United Breweries (NSW) Pty Ltd v. Bond Brewing New South Wales Ltd & Ors [1988] FCA 205

2nd respondent ~ the nature of the Court's discretion

SCI Operations Pty Limited v. Trade Practices Commission and Others (1984) 53 a.L.R. 283

CARLTON AND UNITED BREWERIES (N.S.W.) PTY. LIMITED v. BOND BREWING NEW SOUTH WALES LTD, TOOTH & CO. LIMITED and BOND BREWING QUEENSLAND LTD.

BETWEEN: CARLTON AND UNITED BREWERIES (N.S.W.) PTY. LIMITED

AND: BOND BREWING NEW SOUTH WALES LTD, TOOTH & CO. LIMITED and BOND BREWING QUEENSLAND LTD.

This is a motion for leave to discontinue an application brought in this Court seeking relief principally under ss.45,

45D, 46 and 47 of the Trade Practices Act 1974 (Cth).

In August 1983 the Victorian brewer, Carlton and United Breweries Ltd ("CUB"), obtained control of a brewery in New South Wales which had been operated by or for the second respondent, the New South Wales brewer, Tooth & Co. Limited ("Tooth"). The

transaction was effected under agreements pursuant to which Tooth

sold to CUB its shareholding in the applicant company "CUB (NSW)" along with other assets. Tooth retained ownership or management of almost 250 hotels in New South Wales but agreed with CUB not to sell such hotels for a period of 5 years and thereafter not to do so without giving CUB first offer to purchase. The Tooth hotels were significant outlets for bulk and bottled beer in New South Wales. By acquiring the Tooth brewery and bearing in mind its association with the Tooth hotels, CUB no doubt hoped to

improve its penetration of the market in New South Wales.

On or about 5 May 1985, Tooth and Tooheys entered into deeds under which Tooth granted to Tooheys concurrent head leases of 236 of the Tooth hotels and agreed to grant to Tooheys concurrent head leases of the 12 hotels managed by Tooth. CUB and CUB (NSW) immediately instituted proceedings in the Supreme Court of New South Wales alleging, inter alia, that these arrangements between Tooth and Tooheys infringed terms to be implied into the August 1983 agreement between Tooth and CUB. On CUB and CUB (NSW) undertaking to abide by any order as to damages which the Supreme Court might make should it consider that Tooth or Tooheys had suffered any damage by reason of the grant of an interlocutory injunction, the Supreme Court, on 8 May 1985 and 20 June 1985, granted injunctions pending the hearing and determination of the action restraining Tooth and Tooheys from giving effect to the arrangements into which they had entered. Subsequently, after a trial of many days, CUB and CUB (NSW) obtained a final injunction. A further undertaking as to damages was given and an injunction was granted pending appeal. On 3

July 1987, the Court of Appeal allowed the appeal and discharged

the injunction. A further undertaking as to damages was given and an injunction granted pending appeal to the High Court of Australia. Special leave to appeal to that Court was refused on 16 October 1987. Subsequently, an inquiry as to the damages that CUB and CUB (NSW) should pay to Tooth and Tooheys by reason of

the undertakings was initiated in the Supreme Court. That inquiry

On 16 October 1987, CUB (NSW) commenced proceedings in

this Court seeking relief under the Trade Practices Act. The

statement of claim directs its attention principally to conduct alleged to be likely to occur should the May 1985 agreements and what are described as "the threatened agreements", being arrangements into which Tooth and Tooheys may enter on or after 16 October 1987 to enable the agreements of May 1985 arrangements to become operative, be implemented. The principal ground upon which relief is sought is that, if the May 1985 or the threatened agreements be implemented, Tooheys will have a substantial degree of power in the market in New South Wales and may or will improperly take advantage of that power for the purpose of substantially damaging its competitor, CUB (NSW). It appears that, notwithstanding the lapse of the injunctions granted in the

Supreme Court of New South Wales, neither the May 1985 agreements

nor the threatened agreements have yet been given effect.

When the trial of these proceedings commenced on Monday, 18 April 1988, Mr R. Merkel Q.C. with whom Mr D. Shavin and Mr P.W.J. Gray appeared for CUB, and Mr D.E. Horton Q.C. with whom

Mr P.M. Jacobson appeared for Tooheys, sought time to discuss a

possible resolution of the proceedings. The grant of time was opposed by Mr T.E.F. Hughes Q.C., with whom Mr J.D. Heydon Q.C. and Mr S. Wheelhouse appeared for Tooth. However, time was allowed. On the afternoon of Tuesday, 19 April, Mr Merkel and Mr Horton announced that, subject to the Court's grant of leave to discontinue the application on certain terms, there had been a resolution as between CUB, CUB (NSW) and Tooheys of all issues arising both in the outstanding claim for damages in the Supreme Court and in the proceedings in this Court. I was informed, however, that there had been no resolution as between CUB (NSW) and Tooth and that Mr Hughes opposed the grant of leave to discontinue save on the imposition of a condition, which I shall

Order 22, Rule 2(1)(d) of the Federal Court Rules provides that a party who makes a claim for relief may discontinue the proceedings at any time if leave to do so be granted by the Court. Such a provision is commonly found in Rules of Court. The principles to be applied are set out in the notes to Order 21, Rule 2 in the White Book and I need not repeat them. Those principles were fully considered in the context of a

Trade Practices' claim in SCI Operations Pty Limited v. Trade

Practices Commission and Others (1984) 53 A.L.R. 283. It is

settled that, while the Court will normally allow an applicant to discontinue if he wants to, the Court has a complete discretion in the matter which enables it to take into account all relevant factors brought to its notice and that, in deciding whether or not to grant leave and in formulating any conditions upon which

leave will be granted, the Court should take into account the

interests of the parties and any element of public interest which

Confidential terms of settlement as between CUB, CUB (NSW) and Tooheys were placed upon the Court's file. It is permissible for me to say that these terms resolve as between CUB, CUB (NSW) and Tooheys both the application in this Court and the outstanding claim by Tooheys in the Supreme Court for damages arising from the grant by that Court of the interlocutory injunctions. The terms of settlement contain undertakings on the part of Tooheys as to future conduct which, if complied with, will eliminate the conduct of which CUB (NSW) makes complaint under ss.46 and 47 of the Trade Practices Act. There is nothing in the terms of settlement which is improper and the terms should enhance competition between CUB and Tooheys in New South Wales. When to these matters is added the fact that discontinuance will avoid the necessity of a long trial in this Court, estimated at 5 weeks, and a hearing in the Supreme Court, it is clear that the grant of leave to discontinue would do justice as between CUB

(NSW) and Tooheys and would be in the public interest.

With respect to Tooth, Mr Merkel indicated that CUB and CUB (NSW) were prepared to undertake that they would not hereafter issue in this Court any further proceeding under the

Trade Practices Act seeking to restrain the implementation of the

May 1985 agreements referred to in paragraph 6 of the statement of claim or the threatened agreements referred to in paragraph 8 of the statement of claim, to the extent that such threatened

agreements are substantially the same as the terms contained in

the May 1985 agreements. Mr Merkel submitted that no other condition should be imposed on the grant of leave other than that

CUB (NSW) pay the costs of Tooth including reserved costs.

Mr Hughes submitted, however, that leave to discontinue should not be granted unless the following additional terms be

"(a) Neither the applicant nor Carlton and United Breweries Ltd. may without the leave of this Court or the supreme Court of New South Wales raise in the Supreme Court by way of defence to the and respondent's claim for damages pursuant to the undertakings as to damages given in connection with the grant from the time of interlocutory relief in proceeding 4146 of 1985 any of the facts and matters pleaded or sought by notice of leave to be pleaded as causes of action against the second

(c) any application to the Supreme Court or this Court for such leave be filed within twenty-eight days

Mr Hughes did not press the contention that the leave referred to

in para (a) should be granted or refused by this Court.

The issue arises because Tooth's claim for damages resulting from the grant of the interlocutory injunctions by the Supreme Court is still extant and, indeed, has been stood over pending these proceedings. Having received the undertakings from Tooheys to which I have already referred, CUB (NSW) no longer wishes to pursue its claim for relief with respect to the May 1985 agreements or the threatened agreements or any likely action or conduct implementing the same. But CUB and CUB (NSW) nevertheless wish to take as a point of defence to the claim by Tooth for damages resulting from the grant of the interlocutory injunctions that the May 1985 arrangements were illegal or were designed to promote conduct that would be unlawful under the Trade Practices Act and that the damages that might otherwise have been awarded should be reduced or extinguished accordingly, either as a matter of law or as a matter of discretion. I state the matter in general terms. No such defence has yet been formulated and I make no comment as to whether such a defence would be a good one, even were the facts upon which it were based proved. If the defence be bad in law or an abuse of process, it can be struck out by the Supreme Court. It is inappropriate that

Mr Hughes submitted that his client had already been put to great trouble and expense by the Supreme Court proceedings and by the proceedings in this Court. He submitted that the stand taken by his client had been vindicated by the result of the Supreme Court proceedings. He submitted that the present proceedings had caused further expense and also delay in the

recovery of the damages and had been an interference with his

client's right to carry on its affairs as it saw fit. He submitted that the proceedings in this Court were groundless so far as his client was concerned and, in effect, were vexatious and oppressive. Mr Hughes submitted that there should be a limit to the number of different ways and different courts in which CUB and CUB (NSW) should be permitted to raise allegations of unlawfulness on Tooth's part in respect of the 1985 agreements, that that issue should be litigated in this Court and, if not, should only be raised in the Supreme Court if the Supreme Court

It was also submitted that Tooth will be gravely prejudiced by the settlement because, inter alia, in answering the allegations as to improper purpose, Tooth will have to call executives of Tooheys as its own witnesses in the context that CUB and Tooheys have resolved their differences. Counsel submitted that this Court should not allow this prejudice to occur and that this Court is the appropriate and specialist Court

to determine all issues arising under Part IV of the Trade

I am of the opinion that the conditions which counsel for Tooth seek should not be imposed. In the first place, the material before me does not show the claims made by CUB (NSW) in this Court are entirely without foundation and I am not prepared to draw that inference as to the totality of the claims made. The proceedings in this Court and in the Supreme Court have been settled under terms which impose significant obligations on

Secondly, if the defence sought to be taken in the Supreme Court proceedings is without validity, the Supreme Court will have adequate power to strike it out. No order from this

Thirdly, it would be inappropriate to impose a requirement as to leave unless the basis on which the Supreme Court was to grant or to refuse leave was made clear. The condition as phrased by Mr Hughes is too wide. The Supreme Court would be at large as to the grounds of leave and uncertain as to

Fourthly, it is desirable and appropriate that the proceedings in the Supreme Court, concerning which this Court has made no order, should be allowed to run their normal course

Fifthly, the Supreme Court of New South wales is the proper Court to determine all matters relating to the damages payable by CUB and CUB (NSW) under the undertakings given. It is not appropriate for this Court to decide issues arising under the

Trade Practices Act if the purpose for doing so is to resolve one

part of the dispute as to damages or to avoid any prejudice that Tooth may suffer if Tooheys were to cease to be involved in the litigation in the Supreme Court. Questions as to liability under the undertakings given and questions of prejudice in the

proceedings in the Supreme Court are matters for that Court.

Sixthly, Tooth will gain a benefit from the discontinuance in this Court and from the undertaking which Mr Merkel has offered. The discontinuance and the undertaking will effectively bring to an end any positive claim for relief which CUB and CUB (NSW) have against Tooth in respect of the matters raised in this Court, leaving only the question of the defence in the Supreme Court proceedings. Tooth will suffer the prejudice of additional costs and delay, but there should be little extra delay for the proceedings in the Supreme Court were, in any event, awaiting the result of the proceedings in this Court. Additional costs incurred in the Supreme Court can be dealt with by order of the Supreme Court. The costs of Tooth of the

proceedings in this Court will be paid by CUB (NSW).

Seventhly, it is unfair to Tooheys and to CUB (NSW) to require that matters be litigated at length in this Court which CUB (NSW) and Tooheys no longer wish to have litigated. It is unfair to CUB (NSW) and Tooheys that they should not receive the benefit of their settlement simply because Tooth desires a final resolution of the issues raised in this Court and Tooheys is a necessary party if the proceedings are to continue. Indeed, it is unfair to Tooheys to put the May 1985 agreements at risk of an order of this Court when neither CUB (NSW) nor Tooheys desire

Eighthly, CUB and CUB (NSW) will not be able to initiate further proceedings in this Court on the issues raised in these

proceedings. Section 86 of the Trade Practices Act precludes a

like claim from being initiated in another Court. To that

extent, the conclusion of the proceedings will be final.

Lastly, it is in the public interest to bring to an end unnecessary litigation. The grant of leave to discontinue will avoid the necessity of a five weeks' hearing in this Court as well as settling the dispute between CUB, CUB (NSW) and Tooheys

For those reasons, I am of the opinion that leave should be granted to CUB (NSW) to discontinue the whole of the claim against the respondents on the condition that the undertaking offered by Mr Merkel be given and on the term that there be an order of the Court that CUB (NSW) pay the costs of Tooth of these

I certify that this and the 10 preceding pages are a true copy of the Reasons for Judgment herein of the Honourable Mr Justice Davies.

Counsel for the applicant: Mr R. Merkel Q.C. Mr D. Shavin Mr P.W.d. Gray

Solicitors for the applicant: Corrs Pavey Whiting & Byrne

3rd respondents: Mr D.E. Horton Q.C. Mr P.M. Jacobson

Solicitors for the lst and 3rd respondents: Freehill Hollingdale Page

Counsel for the 2nd respondent: Mr T.E.F. Hughes Q.C. Mr J.D. Heydon Q.C. Mr S. Wheelhouse

Solicitors for the 2nd respondent: Blake Dawson Waldron