Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd

Industrial Relations Commission (NSW)|2011-05-06|Before: Boland J

The respondent first of all contends that, as regards the trial, the appellant failed on most of the grounds it had pleaded and argued and, accordingly, the appellant should pay a substantial proportion of the respondent's costs (it suggests 50 to 80 per cent) or alternatively that there should be no order as to costs.

The dispute that has arisen is as to whether the reference in Order (5) to "ordering costs against the second to fourth respondent" correctly represents the intention of the Court. In its terms this order suggests that the exercise of the discretion of the Industrial Court as to costs is constrained, so that only an order against the second to fourth respondents is able to be made as a matter of jurisdiction.

We do not believe there is any need to wait for a change in the Federal Court Rules to adopt an issue by issue approach here. Costs are in the court's discretion. Fairness should dictate how that discretion is to be exercised. So, if an issue by issue approach will produce a result that is fairer than the traditional rule, it should be applied. It is not suggested that such an approach requires a precise arithmetical apportionment of the costs as between the winner and loser of discrete issues. No doubt the assessment will often be rough and ready. But it will have the virtues of both fairness and reasonableness, which are often lacking in the application of the traditional rule . (emphasis added) See also Quest Rose Hill Pty Ltd v White [2010] NSWSC 1190 at [69] and McLaughlin v Dungowan Manly Pty Ltd [2010] NSWSC 306 at [22]. 67There are four other relevant considerations and these were referred to in Cretney at [8]: (j) It may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument: Elite Protective Personnel, citing Sabah Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306 at [24] (see also Bostik and Bonic ). ... (l) Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: Elite Protective Personnel citing James v Surf Road Nominees Pty Ltd (No 2) , which in turn cited Dodds Family Investments Pty Ltd (formerly Solar Tint Pty Ltd) v Lane Industries Pty Ltd [1993] FCA 259; (1993) 26 IPR 261 at 272 (see also Bostik and Bonic ). (m) A successful party may, in appropriate circumstances, be ordered to pay the costs of an unsuccessful party where the Court finds disentitling conduct, or misconduct, on the part of the successful party such as to warrant a costs order against it: Anglo-Cyprian Trade Agencies at 874. (n) In determining whether the successful party is guilty of misconduct (or disentitling conduct), the conduct must relate either or both to the litigation and/or the circumstances leading up to the litigation: Oshlack at 97 per McHugh J. 68The disentitling conduct does not necessarily need to amount to misconduct, and may simply be any conduct "calculated to occasion unnecessary expense": Lollis v Loulatzis (No 2) [2008] VSC 35 at [29]; Keddie v Foxall [1955] VLR 320 at 323-324. McHugh J in Oshlack at [69] stated that: "Misconduct" in this context means misconduct relating to the litigation, or the circumstances leading up to the litigation. Thus, the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation unnecessarily protracts the proceedings; succeeds on a point not argued before a lower court; prosecutes the matter solely for the purpose of increasing the costs recoverable; or obtains relief which the unsuccessful party had already offered in settlement of the dispute. (citations omitted) 69I also refer to what Atkin LJ said in Ritter v Godfrey [1920] 2 KB 47 at 60: In the case of a wholly successful defendant, in my opinion, the judge must give the defendant his costs unless there is evidence that the defendant (1) brought about the litigation, or (2) has done something connected with the institution or conduct or the suit calculated to occasion unnecessary litigation or expense, or (3) has done some wrongful act in the course of the transaction of which the plaintiff complains. 70In that judgment, at 53, Lord Sterndale stated a general proposition, which he said was not necessarily "the only test", that in order to justify refusing costs to a successful defendant "he must be shown to have been guilty of conduct which induced the plaintiff to bring the action, and without which it would probably not have been brought." See also Jones v McKie & Mersey Docks & Harbour Board (1964) 1 WLR 960; Scherer v Counting Instruments Ltd (1986) 1 WLR 615; Forster v Farquhar ; Redden v Chapman (1949) 50 SR (NSW) 24 at 25; Schaftenaar v Samuels (1975) 11 SASR 266 at 274-275; Monier Ltd v Metalwork Tiling Co of Australia Ltd (1987) 43 SASR 588 at 590 and 592 as cited with approval in Bonic at [14]; Re James Bartholomew Cummings v Michael Terence Lewis; Desmond Rundle; John Bradshaw As Representing All Members of the Firm Practising As KPMG Peat Marwick Hungerfords Between 1 February 1989 and 28 March 1989 [1992] FCA 247.

Summary of relevant cost principles 71The principles I draw from the foregoing discussion of the authorities, which are relevant to these proceedings, and which I propose to apply, may be summarised as follows: (1)the Court has a wide discretion under s 181 of the IR Act to award costs and may determine by whom and to what extent costs are to be paid ; (2)rule 42.1 of the UCPR places a limited proscription on the wide discretion to award costs in that the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs; (3)rule 42.1 of the UCPR reflects the general law position that a successful party has a "reasonable expectation" of being awarded costs against the unsuccessful party. Thus, the presumption is that costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. The qualification, however, means there is no absolute or automatic rule that, in the absence of disentitling conduct, a successful party is to be compensated by the unsuccessful party; (4)the purpose of an order for costs is to compensate the person in whose favour it is made and not to punish the person against whom the order is made; (5)the discretion to award costs must be exercised judicially. The discretion cannot be exercised arbitrarily or capriciously and it cannot be exercised on grounds unconnected with the litigation or the circumstances leading to the litigation; (6)although the ordinary rule is that costs follow the event, the "event" extends to any disputed question of fact or law and is not limited to "issues" in the technical sense; (7)it is not necessary to first find in terms or to the effect that it is a most exceptional case, or a strong or exceptional case, before ordering a successful party to pay costs of an unsuccessful party, but there must be a proper basis to do so consistent with r 42.1 of the UCPR ; (8)whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed; (9)unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed; (10)a separable issue can relate to "any disputed question of fact or law" before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter; (11)it may be appropriate, where each party has had substantial success, to order that there be no order as to costs; (12)the exercise of the discretion to award costs is underpinned by notions of fairness; fairness should dictate how that discretion is to be exercised. So, if an issue by issue approach will produce a result that is fairer than the usual rule, it should be applied; (13)it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument; (14)where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation; (15)a successful party may, in appropriate circumstances, be ordered to pay the costs of an unsuccessful party where the Court finds disentitling conduct, or misconduct, on the part of the successful party such as to warrant a costs order against it; (16)the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation; unnecessarily protracts the proceedings; succeeds on a point not argued before a lower court; prosecutes the matter solely for the purpose of increasing the costs recoverable; or obtains relief which the unsuccessful party had already offered in settlement of the dispute; (17)in determining whether the successful party is guilty of misconduct (or disentitling conduct), the conduct must relate either or both to the litigation and/or the circumstances leading up to the litigation; and (18)disentitling conduct does not necessarily need to amount to misconduct.

Consideration 72The applicants' position is that although the respondents were the "ultimate litigious victor", this is not the "usual" case where costs "follow the event" and that the applicants should not be ordered to pay all of the respondents' costs of the proceedings. Indeed, the applicants' position is that the respondents should pay their costs. The applicants rely on claimed disentitling conduct on the part of the respondents, including delay and the fact that the applicants were successful on many issues in the proceedings, most notably the issue of unfairness. That is, there was a finding by the Court that the respondents acted unfairly or unconscionably in acting to cancel the applicants' dealership and a finding that the Overall Arrangement as determined by the Court to have existed between the applicants and the respondents was an unfair contract within the meaning of ss 105 and 106 of the IR Act. 73The respondents' position was that there was no basis to depart from the usual rule that costs follow the event and given that the Court had been ordered to dismiss the proceedings entirely for lack of jurisdiction, the respondents should have all of their costs. The respondents contended there was no substance in the applicants' claims of disentitling conduct, that the applicants lost in respect of the primary claim for relief (to keep the relevant contracts on foot) and that there were no special or extraordinary circumstances warranting a departure from the usual rule. It was submitted that it was not open for the Court to have regard to such matters as its decision finding unfairness because, as the Court of Appeal found, there was no jurisdiction to make such findings in the first place. 74What the Court of Appeal in Caterpillar No 2 has ordered is that I dismiss the proceedings in Matter No IRC 5227 of 2000, but that in doing so I should determine the question of costs. No constraints were imposed on my discretion to determine costs. Indeed, the Court of Appeal identified at least one issue in respect of which I would need to exercise my discretion, namely, the delay by the respondents in challenging the jurisdiction of the Industrial Court. So, it seems to me, as to my standing to determine costs, I am in the same position as I would be if on my own account I had arrived at an ultimate decision to dismiss (on the same basis as that decided by the Court of Appeal) and was left with the task of determining the costs issue. 75In other words, the approach I should take is that if I had decided in Decision No 17 there was no jurisdiction, how would costs of the proceedings, which had extended over seven years, have been determined by me in those circumstances? 76As I earlier indicated, the starting point is the fact that the Court has a wide discretion in relation to the issue of costs. The next consideration, however, is that the respondents were the ultimate litigious victors and considerable weight has to be accorded to that fact: Oshlack per McHugh J. Ordinarily, costs would follow that event. However, I have to ask myself whether some other order should be made as to the whole or any part of the costs, such as whether the applicants should pay only a proportion of the respondents' costs or there should be no order as to costs or that the respondents should pay all or part of the applicants' costs. 77As I have indicated, it is not necessary that I first find that it is a most exceptional case, or a strong or exceptional case in order to arrive at the conclusion the applicants should pay the respondents' costs or part of them. However, any discretion I exercise must be done judicially, having regard to the relevant circumstances of the case and the outcome must represent a fair and just result.

Delay in challenging jurisdiction 78The issue of the alleged delay by the respondents in challenging jurisdiction is a matter I should deal with at this point. The applicants contended that the respondents had not sought to object to the Court's jurisdiction to hear and determine their application until the Court had made its 17 th judgment. That is, the respondents did not press any jurisdictional challenge until the end of the trial, nor did the respondents press any jurisdictional challenge even after the Court had ruled that jurisdiction existed. 79The applicants submitted the "significant and real prejudice" to them associated with the inordinate delay in pressing a jurisdictional challenge stemmed from the fact that had the successful jurisdictional challenge point been raised before, or even during, the trial in this Court it could have been met by pleading amendment and evidence and would have been ruled on by the Court. 80It was further submitted that whilst the applicants accepted that the respondents challenged the jurisdiction of the Court to entertain the proceedings, the respondents did not in this Court, before or during the lengthy trial, challenge the jurisdiction on the basis upon which they ultimately succeeded in the Court of Appeal. 81The applicants referred to a number of authorities to support their contention that because the respondents did not press any jurisdictional challenge until the end of the trial, the applicants were entitled to costs up to the time the jurisdictional point was run: Beoco Ltd v Alfa Laval Co Ltd [1995] QB 137; Australian Prudential Regulation Authority v Holloway [2000] FCA 1245; (2000) 35 ACSR 276; Monier Ltd v Metalwork Tiling Company of Australia Ltd ; Leading Edge Events Australia Pty Ltd v Kiri Te Kanawa (No 2) [2007] NSWSC 568; Zisis v Knighton [2008] NSWCA 42. 82Beoco is probably representative of the authorities regarding the point the applicants seek to rely on. In that case, in the course of the trial, the plaintiff was permitted to make an alternative claim. The plaintiff ultimately succeeded on the alternative claim and the first defendant was ordered to pay the plaintiff's costs. The Court of Appeal overturned the trial judge's order and awarded the first defendant its costs of the action to the date of the amendment at the commencement of the trial. Stuart-Smith LJ, with whom Peter Gibson and Balcombe LJJ agreed, said at 154: In my judgment, the judge erred in principle and his order for costs is so manifestly unfair to the first defendant that he cannot have exercised his discretion judicially. As a general rule, where a plaintiff makes a late amendment as here, which substantially alters the case the defendant has to meet and without which the action will fail, the defendant is entitled to the costs of the action down to the date of the amendment. There may, of course, be special reasons why this general rule should not be applied. An example of this is to be found in Kaines ( UK) Ltd v Osterreichische Warrenhandelsgesellschaft (formerly C.G.L. Handelsgesellschaft m. b. H.) [1993] 2 Lloyd's Rep.1, 9, where the Judge was satisfied that, even if the amendment had been made earlier, the action would have been vigorously resisted. The Judge disbelieved the defendant's witnesses and the plaintiff received substantial damages. 83In Holloway the Australian Prudential Regulation Authority was permitted to amend its claim approximately two months prior to trial. It was only on the basis of the amended claim that the Authority succeeded in establishing contraventions against the respondent. Mansfield J said at [49]:

The reference in the judgment at [163] to the fact that the respondents have 'correctly submitted' that this Court would not make an order for costs with respect to proceedings in the Industrial Court was based on the following passage in the respondent's submissions in this Court dated 16 October 2008:

The implicit adoption of these submissions by this Court was intended to leave it open for the Industrial Court to determine the question of costs before it, not least because of the need to consider the delay by the applicants in challenging the jurisdiction of the Industrial Court. Perhaps there are reasons for that delay occasioned by the development of the jurisprudence in this Court and in the High Court with respect to the Industrial Court's jurisdiction under s 106 of the Industrial Relations Act 1996.

This Court did not have a basis for constraining the discretion of the Industrial Court even if this Court had the power to do so - a matter which it is unnecessary to consider.

The adoption by this Court of the orders sought in the summons, save in the one respect involving the variation of Order (8) by reason of the acceptance of this submission, gives rise to an inconsistency. The result was that the order made did not state the intention of this Court and had consequences that were not intended. (See Newmont Yandal supra at [41], [58], [60], [67], [77], [79], [83], [89]-[90], [116], [152]-[153], [185], [194].) Order (1) sought by the respondent should be made.

The applicants submit that no order as to costs should be made with respect to the Notice of Motion. By written submissions in this Court the applicants supported an interpretation of Order (5) which constrains the discretion of the Industrial Court. They submitted that they were entitled to rely on the terms of Order (5) and "not second guess whether the Court intended to make an order in these terms".

The inconsistency between Order (5) and Order (8) is apparent on its face. The reasons of the Court at [163], adopting as they did the written submissions of the respondents, make it clear that this Court erred in adopting the language of Order (5), as sought in the original summons, in circumstances in which it modified Order (8) in the way that it did.

The applicants should pay the respondents' costs of the Notice of Motion.

Submissions of applicants 23The applicants directed their submissions to an order that the respondents pay the applicants' costs as agreed or assessed in proceedings IRC 5227 of 2000. The submissions commenced with a discussion of the general principles governing the awarding of costs. There it was noted that: (a) the Court has a broad discretion under s 181 of the Industrial Relations Act; (b) the Full Court of the Federal Court in Bowen Investments Pty Limited v Tabcorp Holdings Limited (No 2) [2008] FCAFC 107 emphasised that the broad discretion is governed by fairness, with the principle of fairness having greater weight attached to it than other considerations (such as the notion that costs follow the event); (c) it is plain from Bowen Investments that the governing principle as to the discretion to award costs is fairness. It is clear from Bowen Investments that the notion of costs following the event may be outweighed by the principle of fairness. It is also plain from Oshlack v Richmond River Council (1998) 193 CLR 72 that the notion of costs following the event gives rise to an expectation only and may be rendered inapplicable in circumstances other than the ordinary case. It is further clear from Oshlack , Cretney v Director General NSW Department of Education & Training No. 4 [2010] NSWIR Comm 17 and Toll Transport Pty Ltd v Transport Workers' Union of New South Wales (No 2) [2010] NSWIRComm 97 that "special circumstances" are not confined to "misconduct" leading to or relating to the litigation. Special circumstances may encompass any factor (including any conduct of a party not amounting to "misconduct") undertaken in relation to the litigation (see, for example, Cretney at 8 and 8; Toll Transport at [10], [11]). 24The applicants helpfully summarised their position in the following terms as to why the respondents should pay their costs: In the circumstances of the present case, and given the success of the Applicants on so many of the issues agitated in the course of the trial (as examined in greater detail below in this outline) and given the delay in the Respondents pressing the successful jurisdictional argument, the principle of fairness dictates that this Court makes an order for costs in favour of the Applicants. The Court should conclude that the notion of costs following the event, whilst an expectation in an ordinary case, ought not be applied to the present proceedings given the unprecedented and exceptional nature of the present proceedings. Alternatively, in the circumstances of the present case, and given the success of the Applicants on so many issues at trial as well as the conduct of the Respondents both prior to and during the trial (as examined in greater detail below), this Court should conclude that "special circumstances" (including "misconduct") exist that justify departure from the notion that costs follow the event. Given that the Respondents intend to rely upon regulation 18A of the Civil Procedure Regulation 2005 (NSW) and r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) ( "UCP Rules" ) as allegedly creating a "presumption" in favour of a costs order in their favour and confining the discretion under s 181 of the Act, the Court should make an order dispensing with compliance with regulation 18A (see regulation 18A(3)) on the basis that the proceedings were commenced in 2000 (well in advance of the commencement of regulation 18A on 1 February 2010), the practice of the Court until 1 February 2010 was not to confine the discretion in s 181, and the circumstances of this unprecedented and exceptional case (including the "misconduct" and "special circumstances" outlined below) justify the Court making a costs order in favour of the Applicants in the exercise of a broad discretion. The fact that regulation 18A(3) permits the Court to dispense with compliance with the requirements of the UCP Rules indicates that no "presumption" is created by the combined operation of regulation 18A and r 42.1 of the UCP Rules that costs follow "the event". Additionally, to the extent that the Respondents intend to rely upon r 42.1 of the UCP Rules to claim that costs should follow the event (and that the relevant event is the dismissal of the proceedings), the Court should find that some other order, apart from an order that costs follow the event (see the terms of rule 42.1), should be made in favour of the Applicants as to the whole of the costs of the proceedings (given the success of the Applicants in Decision No 9, Decision No 11 and Decision No 15, and the factors including the "misconduct" of the Respondents and "special circumstances" outlined below). Whilst the Respondents simply say that they were the "litigious victors" because the Court of Appeal found that there was no jurisdiction (and the High Court refused to grant special leave to appeal from that finding), this complex and unprecedented section 106 case demonstrates why courts have always had a broad discretion with respect to costs. Furthermore, given the absence of any "presumption" of a costs order in favour of the Respondents, the Court is not required to approach the matter by asking whether there are "special" reasons why the Respondents should not have such order made. (emphasis in original) 25The applicants submitted that an appropriate starting point for considering the issue of costs was the lengthy trial that resulted in Decision No 9, Decision No 11 and Decision No 15 wherein all the following critical issues were determined in favour of the applicants: (i) Jurisdiction; (ii) Power to grant an interlocutory injunction; (iii) Appropriateness of granting an interlocutory injunction; (iv) Unfairness; (v) Power to grant the primary relief sought; (vi) Power to grant the alternative relief sought; (vii) Appropriateness of granting alternative relief; and (viii) Appropriateness of granting further discretionary relief if a proper foundation existed for such relief. 26The applicants submitted it was then appropriate for the Court to consider "the factors" bearing on an appropriate costs order in 2003 if the applicants had resolved not to pursue compensation and then consider the impact (if any) on that outcome of the respondents' victory on the issue of jurisdiction by reference to all of the circumstances in which that victory was achieved (including the conduct of the respondents in this Court with respect to the issue of jurisdiction). 27It was further submitted that there was little doubt that if, for any reason, the applicants had decided after Decision No 15 not to pursue compensation (such that " Part B " of the proceedings were no longer necessary) and that costs were decided at that time, the applicants would have been entitled to an order for costs in their favour given their "victories" with respect to all of the above issues (and many others) and after taking into account the issues upon which they lost (for example, inappropriateness of granting the primary relief sought), their conduct and the "conduct" of the respondents. 28Accordingly, on this approach, the central question, according to the applicants, was whether the respondents' much later "victory" on the issue of jurisdiction alone was of such significance in all of the circumstances of the litigation to warrant: (a) any alteration of the costs order that the Court (in all likelihood) would have made after Decision No 15 (that is, in 2003) if the Applicants had decided not to pursue compensation; or (b) a reversal of that order so as to make a full or partial order for costs in favour of the Respondents. 29In addition to what the applicants considered to be their success on the issues identified above, it was submitted the respondents' "misconduct" in, and relating to, the litigation provided a proper foundation for the Court to make an order for costs in favour of the applicants. The applicants then proceeded to summarise the "misconduct", which included: (a) a failure to comply with their own "last resort" policy; (b) the respondents' failure to honour the fourth assurance; (c) the respondents' breach of the third assurance; (d) the respondents breached the assurance that the applicants would not receive a notice terminating the Dealership Agreements without warning; (e) the respondents were guilty of unacceptable delay in raising the jurisdictional objection upon which they ultimately succeeded; (f) the respondents, whilst pleading and contending at the close of the trial that the Court lacked jurisdiction, consistently conducted themselves on the basis that they accepted (at least at all material times prior to March 2005 when Hall QC, then senior counsel for the Respondents, was appointed to the Supreme Court) that the ruling of this Court, that the Applicants' claim did fall within the Court's s106 jurisdiction, was correct. There is no other rational inference to be drawn from the respondents permitting (rather than taking all available steps to prevent) an extensive and extremely expensive merit case to be programmed and proceed from November 2000, accepting the Court's decisions as to power in October 2001 and jurisdiction and power in 2002 and abiding by the variation orders made by the Court in 2003; (g) whilst the respondents were ultimately the "successful parties" in Caterpillar No 1 in the Court of Appeal and were successful in their opposition to the applicants' special leave application to the High Court, that "success" was based on arguments never advanced in this Court; (h) at the trial the respondents successfully contended that the relationship between the applicants and the respondents required closeness and a high level of mutual trust and confidence (a "relational contract") and then successfully relied on this proposition in opposing any discretionary order being made for the Applicants to retain the dealership. Yet after dealership retention was rejected by the Court in Decision No 11 (and no appeal was lodged by the Applicants), the Respondents eventually (some years later) saw advantage in adopting a different stance in this regard (that is, by then asserting in the Caterpillar No 1 proceedings that the relationship was an "arm's length commercial" one, as this view was a necessary foundation for their belated and new jurisdictional challenge leveraging off Solution 6 Holdings Ltd & Ors v Industrial Relations Commission (NSW) (2004) 60 NSWLR 558 in the Court of Appeal and Fish v Solution 6 Holdings Limited [2006] HCA 22; (2006) 225 CLR 180, Batterham v QSR Ltd [2006] HCA 23; (2006) 225 CLR 237and Old UGC Inc v Industrial Relations Commission of New South Wales [2006] HCA 24; (2006) 225 CLR 274 in the High Court); (i) during the course of the trial in 2001-2002, it was open for the respondents to plead and to suggest, in submissions, cross-examination or otherwise, that the Dealer Principals (Messrs Gough and Gilmour) were not "required" to perform work in fulfilment or , in consequence, of the Dealership Agreements and that any work they did perform was only done pursuant to, or in accordance with, contracts of employment between themselves (as individuals) and their own company. The respondents did not pursue this course. Had the respondents done so, there is a proper basis to conclude (given the prior history of amendments to the Summons for Relief when faced with changed circumstances) that the applicants would have sought leave to further amend the Summons for Relief to assert that there was an overall arrangement for work in industry constituted by the Dealership Agreements and, inter alia, those "contracts of employment" and they would also have sought leave to call further evidence to show that the work that those dealer principals performed as a matter of fact was in fulfilment of their company's obligations (and their own "contractual" obligations) under the Dealership Agreements, in the manner accepted by the Court of Appeal in Mayne Nickless Ltd v Industrial Relations Commission (NSW) (2004) 141 IR 1. Hence, the respondents' conduct in only advancing the "successful" jurisdictional contentions in the Court of Appeal, and not in this Court (either at first instance or on appeal), denied the applicants an opportunity to address and, in fact, answer those arguments such that there would then have been no foundation for the Court of Appeal to provide the respondents with the relief that they were ultimately granted (resulting in the applicants being ordered to pay the costs of the Court of Appeal hearing); (j) the respondents went even further in their submissions to the High Court in the applicants' Special Leave Application in that they actively asserted in their oral submissions to the High Court that the points considered by the Court of Appeal were not new and had "always" been their "fundamental proposition". Whilst the High Court did not deliver extensive reasons for refusing special leave, it is impossible to rule out the prospect that the respondents' active (but incorrect) submission contributed to the High Court's unfavourable view of the applicants' special leave application; (k) the following factors further support an order for costs in favour of the applicants rather than the respondents: (i) in this Court the respondents were the "unsuccessful parties" as to jurisdiction, power, unfairness and the granting of discretionary relief (with the possibility of even further discretionary relief by way of compensation in prospect prior to Caterpillar No 1); (ii) the respondents unreasonably raised or resisted numerous interlocutory and procedural applications and persisted with untenable arguments that substantially and unreasonably lengthened the trial and added to the already substantial costs of the proceedings in an unwarranted and unjustifiable way. 30The applicants further submitted: The Respondents did not, at any time, seek to prevent the lengthy trial as to the merits from taking place by filing a strike out motion seeking to have the question of jurisdiction determined at the outset as a preliminary issue. Nor did the Respondents ever challenge jurisdiction in the Industrial Court on grounds which ultimately rendered them the "successful parties". They should have done so before the trial judge (either on day one of the proceedings or at least when the Applicants' affidavit evidence in chief was all filed) and, if need be, before the Full Court and then, if still unsuccessful, by seeking "prerogative" type relief in the Court of Appeal, as was done in Mitchforce v Industrial Relations Commission (NSW) (2003) 57 NSWLR 212 and Yim v Industrial Relations Commission (NSW) (2007) 162 IR 62. Alternatively they should have applied immediately for prerogative relief, as was done in Solution 6 Holdings Limited v Industrial Relations Commission (NSW) (2004) 60 NSWLR 558, QSR Limited v Industrial Relations Commission (NSW) (2004) 208 ALR 368; Old UGC Inc v Industrial Relations Commission (NSW) (2004) 60 NSWLR 620; Mayne Nickless Ltd v Industrial Relations Commission (NSW) (2004) 141 IR 1 (all proceedings in which there had been no merit hearings at all). Had such a course been taken by the Respondents at this early stage in the proceedings, one of two possible alternative outcomes would have arisen. If it was decisively determined that this Court lacked jurisdiction, then the extensive and costly merit case in this Court would not have proceeded. If, on the other hand, it was decisively determined at that stage that this Court had jurisdiction, all avenues of appeal with respect to those jurisdictional issues would have been exhausted at that point. In the outcome, the Respondents, who had actively opposed the Applicants' initial (successful) application to split the case with a view to saving Court time and costs, allowed a protracted full merit trial (that is, jurisdiction, power, unfairness and variation) to occur and then only belatedly (that is, years after the hearing and years after fully complying with the Court's substantive variation orders) changed their position as to jurisdiction and formulated new arguments to take advantage of views expressed by the Court of Appeal and High Court in decisions published well after the conclusion of that substantive trial and the publication of the principal judgments, being Decision No 11 and Decision No 15. 31The applicants thereafter expanded on the factual basis to support the foregoing contentions.

Submissions for the respondents 32The respondents also helpfully summarised what was a lengthy submission opposing the applicants' claim for costs, contending instead the applicants should pay the respondents' costs. In summary, the respondents submitted: (a) the applicants' contention that the respondents should pay their costs was advanced in circumstances where the applicants did not concede, despite binding authority to the contrary, that the usual order would result in the applicants being ordered to pay the respondents' costs: see Oshlack; Hansen Yuncken Pty Ltd v Costopoulos (No 2) (2005) 138 IR 118 at 120; Kennett and Anor v Mayrana Pty Ltd and Ors (No 14) [2010] NSWIRComm 64 at [9]. (b) the applicants' application is without merit for reasons which include: (i) the applicants had no standing to make any claim for relief; (ii) the applicants failed in their numerous claims for relief; (c) the applicants' assertions that time was occupied in the proceedings by reason of the respondents contesting interlocutory motions, issues in the proceedings or allegedly failing to take jurisdictional points earlier are misconceived. The submissions ignore the fact that: (i) it was the applicants who prolonged the proceedings by agitating issues which ultimately the Court concluded were of no substance or in fact were false; (ii) the respondents challenged jurisdiction at all relevant times and in a manner that was appropriate in the circumstances of the case and the prevailing jurisprudence of the Court as to the appropriate time to challenge jurisdiction; and (iii) the respondents were entitled to resist the motions filed by the applicants and indeed were successful in a number of respects. (d) there is no sound basis in fact or in law to support the applicants' contention that the respondents should pay their costs in light of the applicants having failed on all claims for relief in the proceedings. The making of an order that a successful party pay his or her opponents costs requires strong justification and exceptional circumstances: see Hooker v Gilling (No. 2) [2007] NSWCA 214 at [21]; (e) the applicants have not and cannot make out a case of exceptional circumstances; (f) it would be unsound for the Court to accept any contentions of the applicants in relation to the issues which it is said the applicants succeeded on during the proceedings. Such contentions are based on a false premise in that the issues relied on are findings which have been quashed by the NSW Court of Appeal. It is nonsensical and misleading to assert there were any findings made in favour of the applicants; and (g) in the alternative, if this argument is not accepted, and the Court determines it is appropriate to consider the "findings" made in the proceedings then, at best this may mean that the respondents should not be entitled to all of their costs of the proceedings, but some substantial portion of them. It would most certainly not lead to an order that the respondents pay the applicants' costs of the proceedings. 33The respondents' written submissions were structured in three parts: Part 1A : Provides a review of these proceedings to show why the respondents have been the successful party in these proceedings; Part 1B : Provides a summary of the relevant legal principles relating to costs including a critique of the applicants' erroneous description of the relevant legal principles in their Outline of Submissions; Part 1C : Applies the relevant legal principles to the facts of these proceedings to show why an order should be made that the applicants pay the respondents' costs in these proceedings. 34The respondents' overview of Part 1A was in the following terms: By any measure, the respondents are the successful parties in these proceedings. This is because: (i) the Court is required to order that the Summons be dismissed in its entirety; (ii) the applicants did not establish any entitlement to relief; (iii) the applicants had none of the rights they contended for, because they did not have a relationship with the respondents of a kind that enlivened the operation of s 106 of the Industrial Relations Act 1996 (NSW) ("Act"); (iv) even if it were permissible and appropriate to take the analysis further by looking at the outcomes at first instance, prior to the dismissal of the Summons, the applicants were substantially unsuccessful at trial. Amongst other things: (a) the claim which dominated the proceedings for most of its existence was the applicants' claim for primary relief, seeking orders the effect of which would have been to continue the parties' relationship. That primary claim was dismissed, the Court finding that the applicants' own conduct had destroyed the necessary confidence that would be required for a continuation of the relationship; (b) the applicants failed on many of the other issues in dispute. 35Part 1B was introduced by a summary of the relevant principles relating to the granting of costs: (a) The guiding principles relevant to the exercise of a discretion under s 181 of the Industrial Relations Act are as follows: (i) the general or ordinary rule is that costs follow the event - or as the Full Court of the Court has expressed it, that prima facie the successful party is entitled to an award of costs; (ii) a successful litigant will not be deprived of an order for costs in its favour unless there are special circumstances warranting it; and (iii) it is only in exceptional circumstances that a successful party would be ordered to pay the costs of the unsuccessful party. 36It was submitted that the applicants' submissions failed to appropriately identify and accept the above principles, and relied instead on an overly simplistic proposition that the "governing principle" as to the costs discretion was "fairness". It was submitted such a proposition flies in the face of High Court and Full Court authority. 37In relation to r 42.1 of the Uniform Civil Procedure Rules 2005 ("UCPR"), it was submitted the common law principles regarding costs are reflected and recognised in the rule, which provides that if the Court makes any order as to costs, the court is to order that costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. 38The respondents also referred to reg 18A(2) of the Civil Procedure Regulation 2005 , which provides that the UCPR apply to civil proceedings commenced in the Court before 1 February 2010 in the same way as they apply to civil proceedings commenced on or after that date. Regulation 18A(3) carries on to provide that in the case of proceedings commenced in the Court before 1 February 2010, the Court may make orders dispensing with the requirements of the UCPR, and such consequential orders, as are appropriate in the circumstances. 39The respondents submitted: It is plain from the terms of the regulations that the starting point is that the UCPRs apply to proceedings in the Court regardless of whether they commenced before or after 1 February 2010, although there is reserved to the Court a power to dispense with a UCPR if to do so is " appropriate in the circumstances ". It follows from this that the mere fact that proceedings were commenced in the Court before 1 February 2010 would not, of itself, be an appropriate circumstance justifying dispensation with a UCPR. There must be something more than the date of commencement of the proceeding which makes it "appropriate" to dispense with a particular rule. Absent a dispensation order of the Court under Regulation 18A(3) of the Civil Procedure Regulations , the effect of Regulation 18A(2) is that UCPR 42.1 applies. Here there is no circumstance which makes it appropriate for a dispensation order to be made. The principle set out in UCPR 42.1 reflects the principles applied by the Court throughout the period from 2000 to date, and is unremarkable. As such, dispensing with UCPR 42.1 would serve no useful purpose, as the matters and principles to be considered by the Court would be the same even if a dispensation order was made. The Applicants have argued first that a dispensation order is appropriate because their claims were commenced in 2000 and prior to the commencement of the Regulation on 1 February 2010. For the reasons set out ... above, that argument cannot be accepted. The Applicants' second argument in support of a dispensation order is that when their proceeding was commenced, the Industrial Relations Commission Rules 1996 did not contain a rule that mentioned costs following the event. That argument should be rejected because, although it is true the Industrial Relations Commission Rules did not contain such a rule, UCPR 42.1 does no more than reflect the general rule that would operate in any event. The Applicants' submissions contain the mistaken suggestion that UCPR 42.1, if permitted to operate, would in some way "confine" the discretion vested in the Court under s 181 of the Act. The submission is remarkable because it assumes, without citing any authority in support, that the general principle found in UCPR 42.1 that costs ordinarily follow the event is one which did not have currency in the Court until 1 February 2010, and then only by virtue of Regulation 18A. ... that is palpably incorrect. The final argument advanced by the Applicants as to why a dispensation order should be made is that this case is "unprecedented" and "exceptional" in that there has been "misconduct" and "special circumstances". Again, this is no reason to make a dispensation order, as the relevant guiding principles are the same, either with or without UCPR 42.1. In either case, if misconduct and special circumstances (as those terms are properly understood) are demonstrated, the court may decide to depart from the general rule. 40In relation to Part 1C of their written submissions, the respondents submitted that on an application of the correct principles to the facts of this case, the following findings should be made: (a) the respondents are the successful parties; (b) that being so on application of the ordinary rule, an order for costs should be made in favour of the respondents; (c) there are no special circumstances which justify depriving the respondents of their usual entitlement to costs; and (d) there are no exceptional circumstances which justify making a costs order against the respondents as the successful party. 41Under each Part of their written submissions the respondents addressed the issues in detail. In their concluding statement the respondents submitted: The application by the Applicants for costs of the proceedings is misconceived and should not have been made on any objective and considered analysis of the legal principles which apply to costs orders as well as the facts of this case. The manner in which the Applicants have chosen to advance their application has required considerable analysis of volumes of material in relation to these proceedings. The Applicants' submissions ignore the reality that the findings upon which they rely to contend success on some issues, were quashed by the NSW Court of Appeal in Caterpillar No 1 . Putting this insurmountable hurdle to one side, the Applicants also fail to accept that they were unsuccessful in the event, which is, the dismissal of all their claims for relief. The Court should decline to open the Pandora's box of issues which the Applicants rely upon to assert that they should not be the subject of a costs order in these proceedings. However, if the Court does proceed down that path, the Applicants' contentions do not make out a case of exceptional circumstances which would warrant the departure from the usual order which is that the Applicants should pay the Respondents' costs. On any considered view of the outcome of the proceedings and the legal principles which guide the exercise of the Court's power to order costs, the Respondents are entitled to their costs of the proceedings. The Respondents have previously foreshadowed that consideration is being given to applying to the Court that such a costs order ought be in the form of a gross sum costs order. Accordingly, the following orders are sought by the respondents : (i) The application by the applicants for costs be dismissed; (ii) The applicants pay the respondents' costs of the proceedings on a party/party basis; (iii) The applicants pay the respondents' costs of the present costs applications on an indemnity basis; and (iv) The respondents be granted leave to file within 21 days, a Notice of Motion and supporting Affidavit, in relation to any application to vary the order sought in paragraph 372(b) in order to seek a gross sum costs order in accordance with s.98(4)(c) of the Civil Procedure Act 2005 (NSW).

Power to award costs 42The Commission's power to award costs in proceedings under Pt 9 of Ch 2 of the IR Act derives from s 181 of that Act, which provides: 181 Costs (1) Subject to the rules of the Commission and any other Act or law: (a) the Commission may award costs, and (b) costs are in the discretion of the Commission, and (c) the Commission may determine by whom and to what extent costs are to be paid, and (d) the Commission may order costs to be assessed on the basis set out in Division 11 of Part 3.2 of the Legal Profession Act 2004 or on any other basis. (2) However, the Commission when it is not in Court Session may award costs only in the following cases: (a) the Commission may award costs against an applicant if it considers that the application to it was frivolous or vexatious, or (b) the Commission may award costs against a party to proceedings who, in the opinion of the Commission, instituted proceedings without reasonable cause, or (c) the Commission may award costs against a party to proceedings under Part 6 of Chapter 2 (Unfair dismissals) who, in the opinion of the Commission, unreasonably failed to agree to a settlement of the claim or whose application was frivolous or vexatious, or (c1) the Commission may award costs against an industrial agent representing an applicant or employer in proceedings under Part 6 of Chapter 2 if: (i) the industrial agent fails to file a certificate as required by section 90A, or (ii) the Commission finds that the industrial agent has filed a certificate under that section certifying that the agent has reasonable grounds for believing, on the basis of provable facts, that the applicant's claim or employer's response to the claim had reasonable prospects of success when the agent did not have reasonable grounds for believing, on the basis of provable facts, that it had reasonable prospects of success, or (d) the Commission may award costs in proceedings for a breach of an industrial instrument or the recovery of money under Chapter 7, as provided by sections 357 and 373. (3) The Commission in Court Session may not award costs in proceedings for a contravention of a dispute order or in proceedings under Division 2 of Part 4 of Chapter 5 (Rules of industrial organisations). (3A) Despite subsection (1), the Commission may not award costs in proceedings under Part 7 of Chapter 2. Note. This subsection does not prevent the award of costs in appeals relating to questions of law in relation to public sector promotional and disciplinary matters under section 197B. (4) In this section, costs includes: (a) costs of or incidental to proceedings in the Commission, and (b) in the case of an appeal to the Commission, the costs of or incidental to the proceedings giving rise to the appeal, as well as the costs of or incidental to the appeal. 43Regulation 18A of the Civil Procedure Regulation 2005 is also relevant: 18A Provisions consequent on enactment of Courts and Crimes Legislation Amendment Act 2009 (1) This clause is taken to have commenced on 1 February 2010. Note. 1 February 2010 was the date on which civil proceedings before the Industrial Relations Commission became subject to the Act and the uniform rules pursuant to the commencement of Schedule 2.6 [3] to the Courts and Crimes Legislation Amendment Act 2009. (2) Subject to subclause (3), the Act and the uniform rules apply to civil proceedings commenced in the Industrial Relations Commission before 1 February 2010 in the same way as they apply to civil proceedings commenced on or after that date. (3) In the case of civil proceedings commenced in the Industrial Relations Commission before 1 February 2010, the Industrial Relations Commission may make such orders dispensing with the requirements of the uniform rules in relation to the proceedings, and such consequential orders (including orders as to costs), as are appropriate in the circumstances. (4) In this clause: Industrial Relations Commission includes the Commission in Court Session (the Industrial Court). uniform rules means the Uniform Civil Procedure Rules 2005. 44The relevant rule in the UCPR is r 42.1, which provides: 42.1 General rule that costs follow the event Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. 45It follows from these provisions that subject to r 42.1 the Commission has a broad discretion to award costs. Section 181 is not materially different to s 69(2) of the Land and Environment Court Act 1979 considered in Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 . The provision (since repealed) stated: 69(2) Subject to the rules and subject to any other Act: (a) costs are in the discretion of the Court; (b) the Court may determine by whom and to what extent costs are to be paid; and (c) the Court may order costs to be taxed or otherwise ascertained on a party and party basis or on any other basis. 46Gaudron and Gummow JJ described the extent of the discretion in the following terms:

Counsel pointed out, correctly, that Ritter v Godfrey [1920] 2 KB 47, to which the Trial Judge referred, related to circumstances in which a successful defendant was refused an order for payment of his costs, and did not relate to or involve consideration of the circumstances in which the successful party may be ordered to pay the costs of an unsuccessful opponent. The Trial Judge referred to Ritter v Godfrey as an example illustrating the breadth to the discretion to award costs conferred by s.98 of the Civil Procedure Act 2005 (NSW). In Ritter v Godfrey consideration by Atkin LJ of the case law to that time was extensive. I respectfully say that the judgments appear to assume a degree of appellate control by ascertainable principles over the exercise of a discretionary power to order costs which may not appropriately recognise the nature of a discretionary power and the limits on appellate intervention. The Trial Judge also referred to Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20 as a further example. That case also was not a case in which a successful party was ordered to pay an unsuccessful party's costs. The decision and reasoning of a Young J. is deeply enmeshed in the facts of that case; and the discretionary nature of the power was appropriately acknowledged.

Discretions as to costs are not correctly seen as confined by rules which have been stated by appellate courts or established by practice. The limitations of appellate intervention in discretionary decisions as to costs, as in other discretionary decisions, were clearly recognised in Oshlack v Richmond River Council (1998) 193 CLR 72 - see Gaudron and Gummow JJ at 81-89 and particularly at 88[40] "There is no absolute rule with respect to the exercise of the power conferred by a provision such as s 69 ... that, in the absence of disentitling conduct, a successful party is to be compensated by the unsuccessful party. Nor is there any rule that there is no jurisdiction to order a successful party to bear the costs of the unsuccessful party. ( Knight v Clifton [1971] Ch 700 at 710, 713-714, 716, 724-725; Tekmat Investments Pty Ltd v Ward (1988) 81 ALR 278 at 280)"

Their Honours' reference to there being no absolute rule can be understood with the assistance of Knight v Clifton , which their Honours noted in a footnote. Knight v Clifton was also referred to in Verna Trading Pty Ltd v New India Assurance Co. Ltd [1991] 1 VR 129, to which the claimants' counsel referred; at 155 Kaye J. made the following citation from Knight v Clifton : Russell LJ in Knight v Clifton , at p. 713, foreshadowed that only in the most exceptional cases could an order be properly made compelling the successful party to pay the costs of the proceeding. Sachs LJ, at p. 718, warning of the impossibility as well as undesirability of attempting to define what constitutes a strong or exceptional case, added: "... but to my mind it can include occasional rare cases in which the conduct of the defendant has brought about the proceeding or in which his conduct causes its continuance or in which he escapes the normal consequences of his blameworthy conduct by reason of some unexpected matter which he knew but which the plaintiff could not know. After giving every weight both to the fact that the defendant has succeeded after being brought to court by a plaintiff who has not secured any relief and to the settled practice of the courts in ordinary cases, it may yet be that in justice the former should bear the costs."

In my view the position was well stated by Evershed MR in Ottway v Jones [1955] 1 WLR 706 at 711: I should like to say (what is indeed obvious) that, where a plaintiff in the end fails, it must be a very unusual thing to order the successful defendant to pay the costs; and it would only be in exceptional cases that a judge would think it right to make such an order. Still, this is a matter of discretion; and, unless it is shown here that the judge erred upon some matter of principle, we should not, according to the well-established rules applicable to such matters, vary the discretion of the judge or seek to substitute a discretion of our own.

It would be an error to think that it has been established, as a matter of law, that an order that a successful party to pay costs of an unsuccessful party cannot be made unless it has first been found in terms or to the effect that it is a most exceptional case, or a strong or exceptional case. Judicial references to general rules for the award of costs should not be understood as endeavours to alter the discretionary character of such decisions. 58Accordingly, I do not consider it necessary to first find in terms or to the effect that it is a most exceptional case, or a strong or exceptional case, before ordering a successful party to pay costs of an unsuccessful party. Obviously there must be a proper basis to do so consistent with r 42.1. 59As to the meaning of "event", it was said in Baker v Towle at [20] that a review of the cases does not reveal any authoritative resolution of the meaning of the "event" within r 42.1. However, it is clear that the "event" for the purposes of the costs discretion is not limited to the determination of either the proceedings as a whole or of particular causes of action: see Ritchie's Uniform Civil Procedure, Vol 1, Butterworths, 2005 and the commentary in respect of r 42.1 where the author cites Reid Hewitt & Company v Joseph [1918] AC 717; Williams v Stanley Jones & Company Ltd [1926] 2 KB 37; Jelbarts Pty Ltd v McDonald [1919] VLR 478; (1919) 25 ALR 252. Ritchie contends that the "event" extends to any disputed question of fact or law and is not limited to "issues" in the technical sense, citing Forster v Farquhar [1893] 1 QB 564 at 569 per Bowen LJ; Hughes v Western Australian Cricket Association Inc (1986) ATPR 40-748 at 48, 136 pe r Toohey J; Cretazzo v Lombardi (1975) 13 SASR 4 at 12. Ritchie comments that the concept is one of some "fluidity". 60A relevant and important consideration in exercising the discretion is the identification of the party who succeeded in the ultimate "event". However, there is no automatic rule that costs follow the event: Oshlack at [47]; Foots at [26]. 61Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: Cretney at [8] and the cases cited therein, namely: Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 , citing State of New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed); Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]; Bonic v Pacific General Securities Ltd [2009] NSWSC 1221 at [12]. In most cases, the costs order will almost invariably depend upon the exercise of the discretion: Baker v Towle at [20]-[22]. 62Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Elite Protective Personnel at [6], citing Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported). A separable issue can relate to "any disputed question of fact or law" before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: Elite Protective Personnel at [9], citing James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 (at [34]). See also Sydney Ferries v Morton (No 2) [2010] NSWCA 238 at [10]-[12]. It may also be appropriate, where each party has had substantial success, to order that there be no order as to costs: Hogan v Trustees of the Roman Catholic Church (No 2) [2006] NSWSC 74 at [40]. 63In Oshlack , McHugh J observed at [67] that the expression the "usual order as to costs": [E]mbodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. (emphasis added) 64In Commonwealth of Australia v Gretton [2008] NSWCA 117 reference was made to the juridical basis of the Court's powers to award costs. At [85] Beazley JA stated:

The provisions of s 69 of the Court Act which confer upon the Court the discretion exercised by the primary judge attract the application of the general proposition that it is inappropriate to read a provision conferring jurisdiction or granting powers to a court by making conditions or imposing limitations which are not found in the words used. The necessity for the exercise of the jurisdiction or power by a court favours a liberal construction. Considerations which might limit the construction of such a grant to some different body do not apply .

The terms of s 69(2) contain no positive indication of the considerations upon which the Court is to determine by whom and to what extent costs are to be paid. The power conferred by the section is to be exercised judicially, that is to say not arbitrarily, capriciously or so as to frustrate the legislative intent. However, subject to such considerations, the discretion conferred is, to adapt the words of Dixon J, unconfined except in so far as 'the subject matter and the scope and purpose' of the legislation may enable an appellate court to pronounce the reasons given by the primary judge to be 'definitely extraneous to any objects the legislature could have had in view'. (emphasis added) 47Their Honours then observed:

Fourthly, however, it seems to me that there must be a limitation on the weight to be put on pre-litigation conduct, lest the exception overwhelm the rule. It is almost always the case that, absent some particular conduct of the defendant, the litigation would not have arisen. That conduct often has an element of reprehensibility, even though it may not give rise to liability at law. If too much emphasis is placed upon the circumstance that the litigation would not have arisen but for an action of the defendant, few successful defendants would recover their costs. I do not say that the conduct of the defendant giving rise to the underlying dispute is irrelevant to the proper decision on costs; but I think that it ought rarely be given much weight. (I distinguish a situation where, the underlying dispute having arisen, the successful defendant has unreasonably provoked the litigation. Different considerations might apply to that type of case: see the reference by Mason C.J. in Latoudis to conduct of the defendant "after the events constituting the commission of the alleged offence".) Accordingly, although I do not disregard the respondents' incitement of Mr Cummings to purchase horses, I do not think that I should give that conduct significant weight. If that conduct was the only relevant matter, I would not be disposed to depart from the usual practice of ordering that the unsuccessful applicant pay the whole of the successful respondents' costs. 183In the present case, I intend to give some weight to the respondents' failure to observe its Last Resort Policy. However, I do not regard the respondents' pre-litigation conduct as a basis to give the applicants the whole of their costs.

Pre-litigation misconduct - Fourth Assurance 184The second basis upon which it was said the respondents invited the litigation was their reneging on the Fourth Assurance. The Court found that the respondents failed to adhere to the Fourth Assurance: Decision No 11 at [734]. At [792] the Court stated:

It also follows that the injunctive orders made by the Court on 24 October 2001 should be extended to the third and fourth respondents. If this were not done it would be open to those respondents, or either one of them, to give notice to terminate the dealership agreements after 1 January 2003 and thereby frustrate the Court's process. The Court notes the applicants' usual undertaking as to damages.

As to the terms of the injunctive orders, circumstances have changed considerably since those orders were made. In particular, the primary relief sought by the applicants has been refused. In light of the changed circumstances the parties are directed to hold discussions with a view to reaching agreement on revising the terms of the orders made on 24 October 2001 so that the respondents are not unreasonably restrained. The Court will hear the parties on this issue at 2.00 pm on 21 January 2003 as well as on the program of further hearing dates in respect of the alternative relief. 99Shortly thereafter, the applicants filed a notice of motion seeking relief in relation to an extension of time to consider and to allow the filing of applications for leave to appeal and appeal from that decision refusing the applicants' primary relief. The motion was successful, in part, with the applicants being given a further 10 days in which to file any appeal: see Gough & Gilmour Holdings Pty Limited v Caterpillar of Australia Limited [2003] NSWIRComm 3. 100In opposing the motion the respondents contended before Kavanagh J that Decision No 11 "finally disposed of the matters in dispute between the parties concerning whether the Applicants ought to be entitled to the Primary Relief." The respondents submitted that an extension of time to appeal would prejudice their position in relation to the injunction, an issue that was due to come back before the Court on 21 January 2003. 101On that day the respondents pressed the Court to lift the injunction, contending that they had a vested right to retain the judgment and orders in Decision No 11 which included the right to terminate the Dealership Agreements and to appoint a new dealer. In Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 14) [2003] NSWIRComm 44 ("Decision No 14") the Court held that the injunction should remain in place until the question of alternative relief was determined. 102Despite being of the view that Decision No 11 was a final decision and not an interlocutory one and in the face of the Court's refusal to lift the injunction, no appeal was filed by the respondents. 103On 4 June 2003, in Decision No 15, the Court published reasons for varying the Overall Arrangement. On 14 July 2003, the Court made orders varying the Overall Arrangement. The effect of the orders was to put in place a timetable and process for disposal by sale of the applicants' business failing which the respondents could terminate the Dealership Agreements. 104On 7 October 2003, the respondents issued new notices terminating the Dealership Agreements (in accordance with the orders made varying the Overall Arrangement). As the applicants submitted, there was no indication that the respondents were "reserving" the right to challenge the validity of the July 2003 orders, either in the notices of termination themselves or in the covering letter serving the notices. 105On 9 April 2004, the Dealership Agreements terminated in accordance with the new notices terminating the Dealership Agreements. 106On 20 June 2005, the respondents commenced proceedings in the Court of Appeal seeking prerogative relief against this Court in respect of its rejection of the jurisdictional challenge in December 2002 in Decision No 11. Those proceedings were stood over for a considerable period by consent because of the view that the issues being considered by the High Court of Australia in appeals from decisions of the Court of Appeal in Solution 6 Holdings Ltd v Industrial Relations Commission of NSW [2004] NSWCA 200; (2004) 60 NSWLR 558; QSR Ltd v Industrial Relations Commission of New South Wales [2004] NSWCA 199; (2004) 208 ALR 368; and Old UGC Inc v Industrial Relations Commission of NSW [2004] NSWCA 197; (2004) 60 NSWLR 620, might be relevant to the determination of the Court of Appeal proceedings. The Court of Appeal handed down those decisions on 21 July 2004. 107On 1 December 2005, the New South Wales Parliament passed the Industrial Relations Amendment Act 2005. The Amendment Act inserted a new privative provision into s 179 of the IR Act . The purpose of the privative clause was stated as follows in the explanatory note accompanying the Amendment Bill:

To reverse so much of the decision of the Court of Appeal ... which held that section 179 did not prevent the exercise of the Supreme Court Supervisory jurisdiction in relation to proceedings or proposed proceedings before the Industrial Court of New South Wales.
If an application is made to the Supreme Court before the Industrial Court of New South Wales makes a decision in the proceedings, and to restrict the operation of section 179 so that the Supreme Court supervisory jurisdiction is available if a purported decision of the Industrial Court of New South Wales is alleged to be outside the jurisdiction of the Industrial Court, but only after the exercise of any right of appeal to the Full Court of the Industrial Court of New South Wales. 108On 20 January 2006, the respondents filed an application for the grant of an extension of time to file an application for leave to appeal and appeal Decisions No 9, 11 and 15. On 18 May 2006, Kavanagh J refused the application for an extension: Caterpillar of Australia Ltd v Gough & Gilmour Holdings Pty Ltd [2006] NSWIRComm 146. Her Honour stated:

The issues to be determined in this stage of the proceedings will be as submitted by the respondents. That is: (a) whether the applicants ought be granted leave to amend the third further amended summons; (b) if the applicants ought be granted leave to amend the third further amended summons, whether the applicants ought be granted the alternative relief sought in the proposed fourth further amended summons; (c) whether the injunction is to be dissolved. 12The Court's determination of the three issues is reflected in the orders that the Court indicated it proposed to make (see [287]-[288] of the decision):

... It is in that sense that there is to be understood the earlier statement in this Court as to the existence of 'a general rule that a wholly successful defendant should receive his costs unless good reason is shown to the contrary'. 48Kirby J also referred to the court's discretion in the following terms at [134] (citations omitted): 4. It is because the general purpose of an order for costs in favour of a successful party is to provide compensation in the form of a partial indemnity for the costs incurred that the ordinary principle observed in civil litigation under the "English rule" (as contrasted to the "American rule") is that legal costs will usually be ordered in favour of the successful party. Absent special statutory provisions, Australian law has followed this English rule. But the compensatory principle cannot be treated as an absolute rule. Otherwise, the discretion conferred in unqualified terms would indeed be shackled and confined. To permit this would be incompatible with statutory language expressed in such terms. Therefore, although there are "rules" or ordinary principles which will guide the donee of power in the exercise of the discretion, they cannot extinguish the element of discretion. They must not be allowed to harden into rigid or inflexible requirements. 49In the present case, the starting point in respect of costs is that costs are in the discretion of the court: s 181 of the IR Act. Here, unlike the position in Oshlack , there is a qualification (albeit limited) on the discretion in the form of r 42.1, but it is a qualification consistent with the common law rule that a wholly successful party should receive costs unless good reason is shown to the contrary. 50Pursuant to r 42.1 of the UCPR, costs follow the event, unless it appears to the court that some other order ought to be made: see Dunstan v Rickwood (No 2) [2007] NSWCA 266; (2007) 38 Fam LR 491 at [40] per McColl JA, Beazley and Ipp JJA agreeing; Baker v Towle [2008] NSWCA 73; (2008) 39 Fam LR 323 at [3]-[6]. The rule reflects the general law position that a successful party has a "reasonable expectation" of being awarded costs against the unsuccessful party: Oshlack at [67] and [134]. The purpose of an order for costs is to compensate the person in whose favour it is made and not to punish the person against whom the order is made: Oshlack at [67] per McHugh J; Allplastics Engineering Pty Ltd v Dornoch Ltd [2006] NSWCA 33 at [34], referring to Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ. The discretion to award costs must be exercised judicially: Oshlack at [65]-[66] per McHugh J; Overton Investments Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 [2001] NSWCA 137 at [61]. 51Thus, the presumption is that costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. 52In Oshlack, Gaudron and Gummow JJ at [40] took a broad view of the exceptions to the usual order that costs follow the event: There is no absolute rule with respect to the exercise of the power conferred by a provision such as s 69 of the Court Act that, in the absence of disentitling conduct, a successful party is to be compensated by the unsuccessful party. Nor is there any rule that there is no jurisdiction to order a successful party to bear the costs of the unsuccessful party: Knight v Clifton [1971] Ch 700 at 710, 713-714, 716, 724-725; Tekmat Investments Pty Ltd v Ward (1988) 81 ALR 278 at 280. 53Kirby J, similarly advocated against the imposition of "rigid requirements" in respect of the discretion regarding costs (at [134]): 2. Notwithstanding the width of the statutory language by which the discretion was conferred on the trial court, it came to be said in civil non-jury trials that a successful party, in the absence of special circumstances, had a reasonable expectation of obtaining an order for costs in its favour unless "for some reason connected with the case" a different order was specially warranted. Any departure from this expectation would require that there should be material upon which the adverse discretion could be properly exercised. It could not be exercised by reference to idiosyncratic notions or to facts and circumstances irrelevant to the case. Yet, until the discretion had been exercised and a costs order made in favour of a successful party, that party had no right to the order of costs, notwithstanding its success in the litigation. 3. Against this background, judicial descriptions of a statutory discretion to award costs as "absolute and unfettered", "unqualified", "uncontrolled" or "unconfined" cannot be taken at face value. Because the discretion is typically conferred upon a court or tribunal obliged to act judicially, fetters, confinement and controls of a sort are provided by the law. Although appellate courts should avoid the imposition of rigid requirements which would gloss the statute and narrow the discretion afforded to the donees of the statutory power, they retain a function to guide those who are obliged to exercise cost discretions. Such guidance may be afforded by referring in general terms to the considerations which the decision-maker can take into account. Such considerations may be listed for the avoidance of arbitrariness and inconsistency in such decisions. They are not intended to confine the decision-maker to a rigidly mechanical approach. Arbitrariness and inconsistency would be potentially unjust and therefore undesirable. Mechanical rigidity would amount to an abdication of the discretion afforded to the decision-maker in large terms. (citations omitted) 54In Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52 the High Court adopted the approach of Gaudron and Gummow JJ in Oshlack (at [26]-[27]). 55In Cretney v Director General, New South Wales Department of Education and Training (No 4) [2010] NSWIRComm 17 the Full Bench, in summarising the principles relevant to that case, stated at [8]: (f) A successful litigant is, prima facie , entitled to an award of costs, unless there are special circumstances warranting a departure from the rule: O'Sullivan v Crown in Right of the State of New South Wales (Department of Education and Training) [2003] NSWIRComm 303; (2003) 128 IR 158 at [198] - [199]; Powerlan Ltd v Squires (No 2) [2007] NSWIRComm 68; (2007) 162 IR 389; Kim Hollingsworth v Commissioner of Police [2007] NSWIRComm 137 at [14]. '[T]he making of an order that a successful party pay his or her opponent's costs requires strong justification and exceptional circumstances must exist before a party will ... be ... required to pay part of the opponent's costs': Arian v Nguyen (2001) 33 MVR 37, [2001] NSWCA 5 at [37]; Hooker v Gilling (No 2) [2007] NSWCA 214 at [21]. 56However, there appears to be some tension between statements by appellate courts that the making of an order that a successful party pay his or her opponent's costs requires strong justification and exceptional circumstances and other statements that such a rule cannot "extinguish the element of discretion". 57In GR Vaughan (Holdings) Pty Ltd v Vogt [2006] NSWCA 263 Bryson JA, with whom Hodgson and Santow JJA agreed, considered this tension at [16]-[20]:

After the two agreements were made and the share purchase agreement was completed, Mr Fish performed work in an industry. But when one asks what was the 'contract' whereby he performed that work, the answer does not include the share purchase agreement.

The Applicants, in the Applicants' Further Submissions at paragraph 9.1, contend that this Court has the power to order that the Respondents pay the Applicants' costs 'of the appeal and of the proceedings before the Industrial Court'. Quite apart from the fact that this is not an appeal, the Respondents submit that this Court does not have the power to make such an order, even in the exercise of supervisory jurisdiction, with respect to the Industrial Court proceedings: see Production Spray Painting & Panel Beating Pty Ltd and Others v Newnham and Others (No 2) (1992) 27 NSWLR 659 at 662 per Handley JA; see also Battenberg v Union Club (2005) 215 ALR 696 at 710 per Campbell J (as his Honour then was). Additionally, in any event, the Respondents would wish to be heard on the questions of costs in the Industrial Court, including with respect to the delay by the Applicants in raising the jurisdictional challenges agitated in these proceedings.

It is clear on the facts this is not a case where this was a short delay in filing a leave to appeal and appeal application nor a mistake by lawyers as to the time limit. The delay in the circumstance is significant in respect of each judgment and the orders whether one looks at the date of filing in the Court of Appeal or the date of filing of this application. I am able to infer it was a well informed decision taken by the applicants to not appeal any of the three relevant judgments or orders given they always had the benefit of the advice of senior counsel throughout the hearing. ...

The conduct of the parties in the litigation is also a relevant consideration. The applicants by their own conduct respected the decisions and orders of Boland J. I accept the applicants by their conduct gave no indication of an intention to appeal during any interlocutory stage in the proceedings. They co-operated with the respondents in the attempt to sell the dealership and issued termination orders within the timetable determined by Boland J. The matter went back before Boland J to determine the issue of jurisdiction and unfairness without appeal. After Boland J ruled on jurisdiction and found an unfairness in the contract, issues as to the effect of his determination then went back before him for clarification. The conduct of the applicants indicated compliance with the orders issued until the filing in the Court of Appeal some two years after the orders. It took a further six months before this application was filed. ...

The dealership agreements confirm the first respondent's very close involvement in the applicants' business and the first respondent's right to exercise direction and control over important aspects of the dealership. I note that cl 27 of the Sales and Service Agreement provides that the relationship existing between the parties shall be "that of independent contractors and vendor and vendee." But that is stated in the context of a provision that the Dealer is not to be regarded as an agent for the Company. I do not consider that I should view that bare provision as indicating the true nature of the relationship.

The agreements, if anything, again strengthen Mr Kimber 's contention that the relation between the first respondent and the applicants are akin to that of franchisee and franchisor. The agreements require the applicants to set up a business in a certain way; they require the principals of the dealership to use their qualifications and abilities to achieve the primary purpose of the Agreements, for example, the development and promotion of the sale of products; they directly require the applicants to employ personnel to perform work in the business the business could not operate unless relatively large numbers of personnel were employed to perform work for the business. Whilst the dealership does not operate under the business name of Caterpillar, the dealership is synonymous with that name. The dealership, through its employees, is required to develop and execute promotion and market development programs to support the sale of Caterpillar products and to solicit orders for Caterpillar products.

Given the foregoing, it may be said the agreements lead directly to the performance of work in an industry (indeed, it may be said the agreements lead directly to the performance of work by a person or persons for another ) and Caterpillar has a real interest in the performance of that work. Moreover, the performance of work is not merely a remote consequence of the agreements but a necessary requirement that, in the absence of the performance of such work, would render the agreements meaningless.

It was submitted for the respondents that the dealership agreements "do not require or provide for the licensing or operation of premises for the conduct of a business thereon on behalf of or for the benefit of Caterpillar" and, therefore, it could not be said that the arrangements between the applicants and the first respondent were the same as that which applied in Majik Markets . Similarly, it was submitted that the agreements do not provide for the franchising or licensing of a business and do not require the applicants to conduct a business of Caterpillar or a business of their own under Caterpillar's name.

In determining whether the relevant jurisdictional fact exists, I do not consider it is necessary for there to be licensing or operation of premises for the conduct of the first respondent's business. The dealership agreements do, however, provide that the applicants shall maintain a suitable place or places of business; require the applicants to provide adequate sources of products and mechanical service for the benefit of users and that all places of business will be maintained by the applicants in a neat and attractive manner with adequate quantities of Caterpillar products all to the satisfaction of the first respondent. The agreements also require the applicants to maintain branches in specified locations.

I also do not consider it necessary for the dealership agreements to provide for the franchising or licensing of a business or for the applicants to conduct a business of Caterpillar or a business of their own under Caterpillar's name. Franchising or licensing arrangements are not the only such arrangements that may attract the provisions of s 106 and it would be a most artificial distinction to say that the agreements the subject of these proceedings do not come within the ambit of s 106 because they are not specifically franchise or licence arrangements. The dealership in this case is for all intents and purposes an integral part of the Caterpillar organisation.

The arrangement between the applicants and the first respondent, which includes the agreements is, except for the reference to land, indistinguishable from those that were the subject of proceedings in Majik Markets. Handley JA described it thus at 188: The franchisees are independent contractors conducting retail businesses on the land of the franchisor and selling motor fuel purchased from the franchisor. The franchisees, or in some cases, their employees, work in the businesses both in consequence of the agreements and in fulfilment of them. The form of agreement requires the franchisee to perform work in the retail industry either personally or through employees and therefore it leads directly to the performance of work in that industry. The franchisor has a real interest in the performance of that work. It results in the sale of motor fuel purchased from the franchisor and tends to maintain and improve both the value of its general goodwill, and the value of the local goodwill attached to the premises.

If one were to transpose the observations of Handley JA in Majik Markets to the present proceedings it would read as follows: The applicants are natural persons and a corporate entity conducting a sales and service business on land at a location determined by Caterpillar and required by Caterpillar to be suitable for the purpose, and selling Caterpillar equipment purchased from Caterpillar. The applicants, or their employees, work in the business both in consequence of the agreements and in fulfilment of them. The form of the agreement requires the applicants to perform work in the sales and service industry either personally or through employees and therefore it leads directly to the performance of work in that industry. Caterpillar has a real interest in the performance of that work. It results in the sale of Caterpillar products purchased from Caterpillar and tends to maintain and improve the value of its general goodwill. 98Following Decision No 11, an issue arose regarding the joinder of additional respondents. That issue was determined in Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 12) [2002] NSWIRComm 379 ("Decision No 12") on 27 December 2002. In that Decision the Court also stated in relation to the continuing injunction:

The broad grounds relied upon in the proposed appeal document reveal a comprehensive attack on the decisions and orders of Boland J and raise challenges beyond the jurisdictional issue. The litigation is in preparation for the hearing as to a final decision and appropriate orders. The parties by their conduct have acted upon the relevant decisions and orders. I am of the view the delay in bringing any leave to appeal and appeal application, within time, has not been acceptably explained by the applicants. I accept the respondents have not been dilatory in prosecuting the claim.

The overriding consideration must be to do justice between the parties. In balancing the interest of the parties I give consideration to the vested right to judgment held by the respondents especially in a circumstance where both parties have acted upon the relevant judgments and orders while however acknowledging the applicants are entitled to challenge the relevant determinations of Boland J. I consider, on balance, that the exercise of the discretion should not favour the applicants at this final stage in the proceedings, particularly in circumstances where they retain the right to appeal the relevant decisions and orders. 109Coincidentally, on the same day (18 May), the High Court delivered its judgments in Fish v Solution 6 Holdings Ltd [2006] HCA 22; (2006) 225 CLR 180; Batterham v QSR Ltd [2006] HCA 23; (2006) 225 CLR 237; and Old UGC Inc v Industrial Relations Commission of New South Wales in Court Session [2006] HCA 24; (2006) 225 CLR 274. 110On 6 June 2006, the respondents filed an application in the Industrial Court for leave to appeal and to appeal the judgment of Kavanagh J. At a directions hearing on 16 June 2006 Walton J, Vice President, raised with the parties whether or not it would be appropriate for the jurisdictional issues that the respondents wanted to raise to be dealt with by the trial judge at first instance. The respondents subsequently filed a notice of motion on 24 July 2006, seeking an order dismissing the proceedings or in the alternative, and order permanently staying the proceedings. The motion was dealt with subsequently in Decision No 17 and was dismissed. 111On 27 February 2007, the respondents filed an application for leave to appeal and appeal following the dismissal of the notice of motion. That appeal was unsuccessful: Caterpillar of Australia Limited v Gough & Gilmour Holdings Limited [2008] NSWIRComm 3. 112On 15 May 2008, the respondents filed a summons in the Court of Appeal seeking relief in the nature of prerogative relief against this Court. That culminated in the decision in Caterpillar No 1 in respect of which the respondents were successful.

Summary of position regarding jurisdictional challenge 113The position regarding a jurisdictional challenge by the respondents and the timing of it may, accordingly, be summarised as follows: (a) The applicants' summons for relief was filed in October 2000. There was no strike out motion. However, that is not a basis for criticism given the early stage of the proceedings and the absence of any evidence having been filed. (b) In November 2000, the first respondent gave an undertaking that the effective termination of the commercial agreements would be extended to 25 October 2001 on the basis there would be an expedited hearing. The hearing was split into two stages, the first stage to address the applicants' primary relief claims and the second, if it became necessary, to consider any alternative relief. No challenge was made to the Court's jurisdiction, although at this stage no evidence was on. (c) The trial commenced in May 2001. There was no challenge to jurisdiction, except that it was contended the Commission did not have power to grant the applicants' primary relief. (d) In September 2001, the Court found in Decision No 9 there was power to grant the primary relief. There was no appeal from that Decision. However, the respondents did then challenge the Court's jurisdiction on the basis that the relevant contracts were not contracts whereby work was performed in an industry. (e) In December 2002, the Court found in Decision No 11 that it had jurisdiction to hear and determine the applicants' claims. The Court found the contracts were unfair. However, it determined not to grant the applicants' primary relief. Liberty was granted to the parties to have the proceedings relisted for directions in relation to the scheduling of further hearings on the question of whether the applicants were entitled to any alternative relief and, if so, the form of such relief. There was no appeal by the respondents from Decision No 11, despite the respondents regarding it as final, and there was no application for prerogative relief. (f) In the light of Decision No 11, the respondents pressed the Court to lift the injunction that had been in place since October 2001. In Decision No 14 the Court held that the injunction should remain in place until the question of alternative relief was determined. There was neither an appeal from that Decision nor any application for prerogative relief. (g) In Decision No 15, the Court published reasons for varying the Overall Arrangement. On 14 July 2003, the Court made orders varying the Overall Arrangement. The effect of the orders was to put in place a timetable and process for disposal by sale of the applicants' business failing which the respondents could terminate the dealership agreements. (h) On 9 April 2004, the Dealership Agreements terminated consistent with Decision No 15. (i) On 21 July 2004, the NSW Court of Appeal gave judgment in the trilogy of cases comprising Solution 6 , QSR and Old UGC. (j) The applicants subsequently prepared a document referred to as the Fourth Further Amended Summons to reflect the amendments approved in Decision No 15. In April 2005, the applicants made submissions seeking leave to rely upon a further amended summons, namely, the Fifth Further Amended Summons. In that proposed amended summons the applicants sought significant amounts of compensation for lost opportunity and loss of net profits. (k) On 20 June 2005, the respondents commenced proceedings in the Court of Appeal seeking prerogative relief against this Court in respect of its rejection of the jurisdictional challenges in December 2002 in Decision No 11. (l) For reasons that have been explained, the question of jurisdiction came back before this Court and was the subject of Decision No 17 where the jurisdictional challenge was dismissed. That Decision was unsuccessfully appealed before a Full Bench of the Industrial Court. In May 2008, the respondents filed a summons in the Court of Appeal seeking relief in the nature of prerogative relief against this Court. That culminated in the decision in Caterpillar No 1 in respect of which the respondents were successful.

Analysis of respondents' delay in challenging jurisdiction 114The respondents took no immediate steps to challenge the finding in Decision No 11 regarding jurisdiction. Instead, the respondents chose to accept the Court's decision which, of course, had refused the applicants' primary relief claim. The respondents also did not immediately challenge Decision No 15 and allowed the process determined by that Decision to dispose of the applicants' business, to run its course. Only after that process was completed did the respondents take steps to challenge jurisdiction in order to forestall any further proceedings regarding the applicants' claims for compensation. 115The applicants' submission that the respondents accepted the Court had the necessary jurisdiction, as found in Decision No 11, would seem to be correct to the extent that at the time no attempt was made to challenge the Decision. See also the observations of Kavanagh J in her Honour's decision of 18 May 2006 especially at [62]. It was clearly open to the respondents to appeal Decision No 11 or, alternatively, to seek "prerogative" type relief in the Court of Appeal, as was done in Mitchforce Ptd Ltd v Industrial Relations Commission [2003] NSWCA 151; (2003) 57 NSWLR 212 and Yim v Industrial Relations Commission of NSW [2007] NSWCA 77; (2007) 162 IR 62. The respondents chose not to do so until June 2005, after they had achieved the termination of the Dealership Agreements and when they faced significant claims for compensation arising out of the Court's findings that the Overall Arrangement was unfair. 116It is true that in July 2004, the Court of Appeal handed down judgments in Solution 6 , QSR and Old UGC. However, it was not until after the respondents became aware of the nature of the applicants' compensation claims and 11 months after the Court of Appeal judgments that the respondents commenced their jurisdictional challenge. 117There was, to my mind, a significant element of opportunism in the respondents deciding to mount a jurisdictional challenge to Decisions No 11 and 15. They did so after the Dealership Agreements were terminated, which was always their objective, and before the applicants had the opportunity to mount their case for compensation based on the unfairness of the contracts. I do not think the respondents were entitled to sit on their hands and to challenge Decisions 11 and 15 only when it suited them.

Whether point taken in Court of Appeal was a new point 118The respondents submitted that the point they ultimately succeeded on in the Court of Appeal was not a new point. Rather, it was submitted, their objection to jurisdiction remained substantively the same throughout the proceedings in the Industrial Court, save where over the course of time the respondents addressed any Court of Appeal and High Court authorities that had been decided in the intervening period. 119If that be so, it suggests that following Decision No 11, which rejected the respondents' jurisdictional challenge, the respondents were of the view that their jurisdictional arguments were sound and the Court was wrong to reject them. Yet it took from December 2002 until June 2005 for the respondents to renew their jurisdictional challenge. This tends to reinforce the conclusion that the respondents were being opportunistic. In the two and a half year period it took the respondents to implement a decision to challenge the Court's findings regarding jurisdiction, the Court handed down a further five decisions including Decision No 15 and Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 16) [2005] NSWIRComm 8 ("Decision No 16"). That raises the question of the fairness of the respondents obtaining a costs order in their favour at least in relation to Decision No 12, Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 13) [2003] NSWIRComm 26 ("Decision No 13"), and Decisions No 14 to 16 inclusive. It also raises the fairness of the respondents obtaining costs in relation to Decision No 17 because if they had challenged Decision No 11 either on appeal or by way of an application for prerogative relief, the proceedings relating to Decision No 17 would not have been necessary. 120Furthermore, there is some merit in the applicants' submission that if the respondents' submissions - that the ultimately successful jurisdictional point was not a new point because "it was taken from the outset" and it was based on a "proper characterisation of the relevant contractual arrangements" - were to be accepted as correct then it was also the case that the respondents could and should have sought to have that jurisdictional point determined as a preliminary issue (even prior to the trial) and, if unsuccessful, could have then sought prerogative relief in the Court of Appeal. Senior counsel for the applicants submitted: That is, on the submission as now pressed by the Respondents, a jurisdictional challenge based on documents alone was open to the Respondents (in the same manner as it had been in Euphoric v Ryledar (2002) 117 IR 1 and as demonstrated by the approach successfully adopted in S olution 6 (amongst other Court of Appeal cases)) in 2001. (In this context, see also Justice Kavanagh 2006 Decision wherein the Respondents ( before the trilogy of cases) actively submitted that this case was in the same category as Euphoric and that an " appropriate time " had been reached to challenge Boland J's findings as to jurisdiction ... The Court rejected the Respondents' arguments that it was not possible or appropriate for them to have sought to challenge Decisions No 9, 11 and 15 in accordance with the Rules ... (emphasis in original) 121The applicants submitted, however, that the point taken by the respondents in Caterpillar No 1 that was ultimately successful was a new point not run in any proceedings in the Industrial Court. The applicants submitted (references omitted): [T]he "success" achieved by the Respondents in the Court of Appeal was based on new arguments essentially leveraging off the reference in Fish v Solution 6 Holdings Limited (2006) 225 CLR 180 at 189 [18] to "matters industrial" being contentions that: (i) the Dealership Agreement did not "require" the dealer principals to perform work and that the only contracts whereby work was performed in industry were the "contracts of employment" between Messrs Gough and Gilmour as individuals and their own company, Gough & Gilmour Holdings Pty Limited; and indeed (ii) involved the Respondents actively asserting that the Dealership Agreements "transaction" was an "arm's length commercial" one in circumstances where the Respondents had repeatedly advanced the opposite contention in this Court. At the trial the Respondents successfully contended that the relationship between the Applicants and the Respondents required closeness and a high level of mutual trust and confidence (a "relational contract") and then successfully relied on this proposition in opposing any discretionary order being made for the Applicants to retain the dealership. Yet after dealership retention was rejected by the Court in Decision No 11 (and no appeal was lodged by the Applicants), the Respondents eventually (some years later) saw advantage in adopting a different stance in this regard (that is, by then asserting in the Caterpillar No. 1 proceedings that the relationship was an "arm's length commercial" one, as this view was a necessary foundation for their belated and new jurisdictional challenge leveraging off Solution 6 in the Court of Appeal and Fish, Batterham and Old UGC in the High Court). During the course of the lengthy trial in 2001-2002, it was open for the Respondents to plead and to suggest, in submissions, cross-examination or otherwise, that the Dealer Principals (Messrs Gough and Gilmour) were not "required" to perform work in fulfilment or , in consequence, of the Dealership Agreements and that any work they did perform was only done pursuant to, or in accordance with, contracts of employment between themselves (as individuals) and their own company. The Respondents did not pursue this course . Had the Respondents done so, there is a proper basis to conclude (given the prior history of amendments to the Summons for Relief when faced with changed circumstances) that the Applicants would have sought leave to further amend the Summons for Relief to assert that there was an overall arrangement for work in industry constituted by the Dealership Agreements and, inter alia, those "contracts of employment" and they would also have sought leave to call further evidence to show that the work that those dealer principals performed as a matter of fact was in fulfilment of their company's obligations (and their own "contractual" obligations) under the Dealership Agreements, in the manner accepted by the Court of Appeal in Mayne Nickless Ltd v Industrial Relations Commission (NSW) (2004) 141 IR 1. Hence, the Respondents' conduct in only advancing the "successful" jurisdictional contentions in the Court of Appeal, and not in this Court (either at first instance or on appeal), denied the Applicants an opportunity to address and, in fact, answer those arguments such that there would then have been no foundation for the Court of Appeal to provide the Respondents with the relief that they were ultimately granted (resulting in the Applicants being ordered to pay the costs of the Court of Appeal hearing). (emphasis in original) 122The respondents did submit in the Caterpillar No 1 proceedings that the relationship between them and the applicants was an "arm's length commercial" one. However, they also submitted in their reply to the applicants' further amended summons filed on 14 May 2001 that the "Transactions" associated with the establishment and operation of a substantial commercial enterprise (that is, the dealership) involved "arm's length commercial contracts which have no connection with employment or work contracts ..." 123It is correct, as the applicants submitted, that at the trial, the respondents successfully contended the relationship between the applicants and the respondents required closeness and a high level of mutual trust and confidence: see Decision No 11 at (b), [54], [55], [58], [114]-[117]; Decision No 15 at [247], [258], [261]. 124The respondents successfully relied on this proposition in opposing any discretionary order being made for the applicants to retain the dealership. It was because the Court accepted the respondents' "relational contract" submissions that it concluded the relationship was in fact "akin to an employment relationship": see Decision No 17 at [62]. This view was an important consideration in the Court finding that the Overall Arrangement led directly to the performance of work. 125There is obviously some tension between a proposition that the establishment and operation of the dealership involved "arm's length commercial contracts which have no connection with employment or work contracts" and a submission that the relationship between the applicants and the respondents required closeness and a high level of mutual trust and confidence. 126The respondents submitted, in effect, there was no such tension. It was submitted that in addition to the fact that the respondents had described the Dealership Agreements as "commercial contracts" at all times, the respondents' submissions at trial were that the Dealership Agreements imported the concepts of "trust and confidence" in relation to matters independent of jurisdiction; namely, the right of the first respondent to recommend termination of the Dealership Agreements and the inappropriateness of the "primary relief" that was sought by the applicants. Thus, it was submitted, the references to the Dealership Agreements importing the concept of "trust and confidence" were independent of submissions made by the respondents in relation to jurisdiction, both before this Court and before the Court of Appeal. 127In my opinion, there was clearly an inconsistency in the respondents' position. There is no doubt the Dealership Agreements were commercial contracts. However, they could not be described, on the one hand, as " arm's length commercial contracts", but on the other hand, as representing a relationship involving closeness and a high level of mutual trust and confidence, such as to lead the Court to find the relationship was "akin to an employment relationship". That finding influenced the Court in determining the Agreements led directly to the performance of work and led the Court to refuse the applicants' claim for primary relief. 128Regardless of the inconsistency, the respondents did submit in the Industrial Court that for jurisdictional purposes the relationship was "arm's length commercial". That submission provided the respondents with a foundation upon which to contend, inter alia , in the Caterpillar No 1 proceedings that: To the extent that the Third and Fourth Respondents [Messrs Gough and Gilmour] and other employees performed work in connection with the dealership, that work was performed according to and in fulfilment of contracts and arrangements between them and the Second Respondent [Gough & Gilmour Holdings Pty Limited] ... The Second to Fourth Respondents, and their employees, did not work for the First Applicant [Caterpillar of Australia Limited] and there was no subordination between them. They were not working for the Applicants but for the Second Respondent or for the dealership business that they had established ... This work was not performed in fulfilment of the Dealership Agreements or the "overall arrangement". 129The respondents had argued in the Industrial Court that the Dealership Agreements were commercial contracts. It was submitted the Agreements had no connection with employment or works contracts in terms of the grounds relied on by the applicants in the proceedings and no connection with employment or work conditions. It was further submitted that the purpose of the transactions between the applicants and the respondents was not to bring about the performance of work by the second and third applicants, and that the performance or undertaking of any work associated with the sale of products and parts was ancillary to the purpose or objective of the transactions and was not, in the relevant sense within s 106, work performed for another. 130The respondents also submitted: in order for a contract or arrangement to be within jurisdiction, the work directly arising from the agreement must be work " required as a contractual obligation" by one person to be performed for another; the applicants "were working proprietors in their own business"; the arrangements did "not involve obligations upon the [Applicants] to work for [the Respondents] in its [Caterpillar's] business. There was no contractual obligation on them to work for Caterpillar"; "their business [the business of the second and third applicants], though operating commercially under a commercial contract with Caterpillar, was the business for which they worked - not in Caterpillar's business that Caterpillar of Australia owns and operates as a separate business". 131The applicants' complaint, however, is that the jurisdictional challenges in the trial in this Court identified three contracts relating to the business conducted by the applicants - the Dealership Agreements between the first applicant and the first respondent, the contracts between the first applicant and its employees and the contracts between the first applicant and its customers. Significantly, it was submitted, the respondents did not specify or even mention a contract between the first applicant, on the one hand, and each of the second applicant and the third applicant, on the other hand. 132The applicants submitted that if the issue of "internal contracts" (contracts between the first applicant and the second and third applicants) had been raised in the reply to the applicants' summons, in cross-examination or by a "call" for production, the applicants would have had the opportunity to meet that case at trial by evidence showing the connection between any such internal contracts and the Dealership Agreements and by an appropriate pleading amendment to incorporate those internal contracts as a further feature or element of the "overall arrangement" whereby work was performed in an industry and/or in reliance on s 106(2A) to allege that the Dealership Agreements were collateral arrangements to those internal work contracts. 133Reference by the respondents in the Industrial Court to the performance of work by the second and third applicants in fulfilment of contracts and arrangements between them and the first applicant occurred only in the most oblique way: "Their business ... was the business for which they worked ..."; the second and third applicants were "working proprietors in their own business"; the arrangements did "not involve obligations upon the [Applicants] to work for [the Respondents] in its [Caterpillar's] business. There was no contractual obligation on them to work for Caterpillar". 134However, whilst the respondents did not rely in the Industrial Court on the proposition that the relevant work contracts were the internal contracts, they did contend that the Dealership Agreements or the Overall Arrangement were not contracts that led directly to the performance of work. To this extent, the respondents did not raise a new point in the Court of Appeal. In Caterpillar No 1, Spigelman CJ stated:

One question which arose was whether the determination as to who should pay the costs was dependent upon which party should be seen as being responsible for the ongoing legal costs in the matter. This was part of a consideration of the larger question as to the underlying juridical basis of the Court's powers to award costs. I agree with Hodgson JA that the exercise of the discretion must be based on fairness and that underlying that concept itself involves a consideration of the responsibility of parties in incurring the costs. ... 65In the same case, Hodgson JA said at [121]:

If there is a central character in these proceedings it has to be Harcourt David Gough. It is essentially through his drive, intelligence and business acumen that the first applicant is the multi-million dollar business it is today. It is also the case that Mr Gough is the main reason why the respondents have sought to cancel the Gough & Gilmour dealership. The quintessential reason for seeking to cancel the dealership was not the dealership's performance, investment or profitability but rather Mr Gough's attitude and personality. Both Mr Ramseyer and Mr Nitto made it very clear in their evidence that the termination of the dealership was not based on poor performance or lack of investment and nor could it have been. I will need to return to this issue, but as Mr Ramseyer agreed in his evidence, the termination of the dealership "was all about Mr Gough's personality". 226The essence of the applicants' complaint, however, is that in the absence of any concession from the outset that performance was not the basis for termination, the applicants were required to prove, via their extensive affidavits in reply, detailed cross-examination and by reference to extensive documentation, that their performance did not justify the termination of the Dealership Agreements. 227The conclusion is unavoidable that, despite being of the view that performance was not an issue, the failure by the respondents to make the relevant concession put the applicants to the unnecessary task of proving performance was not the basis for the termination of the Dealership Agreements and thereby increased the time and costs of the proceedings.

Misconduct during litigation - refusal to concede no adherence to Last Resort Policy and Fourth Assurance 228Given the admission of the existence of the Last Resort Policy and given the lack of evidence showing compliance with the Last Resort Policy, the applicants submitted the respondents should have conceded that they had not adhered to the Last Resort Policy and thereby avoided the time and costs associated with the proof of the full extent of the non-compliance with the Last Resort Policy. 229It was further submitted for the applicants that given the admission of the making of the Fourth Assurance and given the clear evidence showing non-compliance with the Fourth Assurance, the respondents should have conceded that they had not adhered to the Fourth Assurance and thereby avoided the time and costs associated with the proof of the full extent of the non-compliance with the Fourth Assurance. 230In relation to the Last Resort Policy, the submission of the applicants is accepted. It was clearly open to the respondents to concede they did not adhere to the Last Resort Policy. Such a concession would have saved time and costs. 231In relation to the Fourth Assurance, the Court found that the respondents did not dispute that they indicated to the applicants that they wanted the applicants to obtain "fair value" and that they would seek to assist the applicants in providing the opportunity to realise such value. The Court also found that the respondents had not adhered to the Fourth Assurance. The applicants, nevertheless, were put to the proof that the respondents had not adhered to their Assurance. 232The Fourth Assurance, as pleaded by the applicants, had two limbs, namely: (i) that the Respondents would assist the Applicants in achieving fair value for the dealership business; and (ii) that if no agreement for a sale at a fair value could be reached, the Applicants would retain the Dealership. 233The respondents were entitled to contest the second limb. Indeed, the Court found it had not been made out. 234A concession by the respondents that they had not adhered to the first limb would have avoided the time and costs associated with the proof of the first limb. Such a concession would have saved time and costs.

Misconduct during litigation - Conscious and deliberate decision not to reveal secret conduct 235In the context of the Fourth Assurance, the Court dealt earlier with the meeting of executives of the respondents and the Stokes' organisation on the boat in Sydney Harbour. The applicants contended, however, that given the respondents consciously and deliberately decided not to reveal their "secret conduct" regarding the boat meeting and it only came to light inadvertently in the cross-examination of Mr Curfman, such conduct should be regarded by the Court as disentitling in the context of costs. 236Given that the boat meeting, once it was disclosed, did not in itself add substantial time or costs to the litigation and given it has been taken into account in the context of the failure by the respondents to adhere to the Fourth Assurance, it would be double counting to have any further regard to the matter in determining costs.

Civil Procedure Act 237On 17 May 2011 my Associate wrote to the parties seeking submissions from the parties on the relevance, if any, of ss 56, 57, 58 and 60 of the Civil Procedure Act 2005 ("CP Act") to the cross applications for costs in these proceedings. 238The respondents initially responded by submitting the provisions of that Act had no relevance given they were not in force at the relevant time. The applicants accepted that the majority of the provisions of the CP Act commenced operation on 15 August 2005 (see Government Gazette No 100, 10 August 2005, 4205). Accordingly, it was submitted, ss 56, 57, 58 and 60 were not in force at the commencement of the proceedings in 2000 or at any time prior to the filing of the motion giving rise to Decision No 17. 239The applicants also accepted that ss 56, 57, 58 and 60 would not have retrospective effect unless a contrary intention could be discerned. However, it was submitted a contrary intention was discernible by virtue of reg 18A(2) of the Civil Procedure Regulation 2005. Regulation 18A(2) and (3) provide: (2) Subject to subclause (3), the Act and the uniform rules apply to civil proceedings commenced in the Industrial Relations Commission before 1 February 2010 in the same way as they apply to civil proceedings commenced on or after that date. (3) In the case of civil proceedings commenced in the Industrial Relations Commission before 1 February 2010, the Industrial Relations Commission may make such orders dispensing with the requirements of the uniform rules in relation to the proceedings, and such consequential orders (including orders as to costs), as are appropriate in the circumstances. 240Consequently, it was submitted, ss 56, 57, 58 and 60 of the CP Act can be considered, as part of the discretion concerning costs and as part of the present cross applications before this Court, unless this Court exercises its discretion dispensing with the requirements of the Uniform Civil Procedure Rules 2005 : see reg 18A(3). The Court has not dispensed with those requirements. 241In a written reply dated 17 June 2011, the respondents contested the applicants' submission regarding the application of the CP Act to the proceedings. Their main point was that cl 1 of Pt 1 of Sch 6 of the CP Act provides that to the extent to which any provision of the CP Act takes effect from a date that is earlier than the date of its publication in the Gazette, the provision does not operate so as: (a) to affect, in a manner prejudicial to any person (other than the State or an authority of the State), the rights of that person existing before the date of its publication, or (b) to impose liabilities on any person (other than the State or an authority of the State) in respect of anything done or omitted to be done before the date of its publication. 242Hence, it was submitted the Court ought not take account of any of the provisions of ss 56, 57, 58 and 60 of the CP Act in a manner prejudicial to the interests of either the applicants or the respondents in the exercise of its discretion in respect of costs in these proceedings. It was contended this was consistent with the position at common law: Rodway v The Queen [1990] HCA 19; (1990) 169 CLR 515 at 518. Reliance was also placed on Thaina Town (On Goulburn) Pty Ltd v City of Sydney Council [2007] NSWCA 300; (2007) 71 NSWLR 230. 243My view is that the respondents are correct, that is, the Court ought not take account of any of the provisions of ss 56, 57, 58 and 60 of the CP Act in a manner prejudicial to the interests of either the applicants or the respondents in the exercise of its discretion in respect of costs in these proceedings. Even if the Court were to take the provisions into account, it would only be s 56 and it would only be because that section "adds emphasis to occasion to depart from costs on the ordinary basis where failure properly to conduct the proceedings had caused costs to be incurred unnecessarily": Liverpool City Council v Estephan [2009] NSWCA 161 at [100] per Giles JA, with whom McColl JA agreed (Basten JA not dissenting on this issue). 244The fact that the provisions of the CP Act are not to be taken into account does not affect the common law position that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument or that a successful party may, in appropriate circumstances, be ordered to pay the costs of an unsuccessful party where the Court finds disentitling conduct, or misconduct, on the part of the successful party such as to warrant a costs order against it. 245Given the findings of the Court in these proceedings, it may be concluded that the respondents: (a) delayed agitating their jurisdictional challenge; (b) breached their pre-litigation undertaking to the applicants that was the Third Assurance and did not concede the lack of relevance of performance until closing submissions; (c) breached the assurance that the applicants would not receive a notice terminating the Dealership Agreements without warning; (d) breached their pre-litigation undertakings to the applicants that were the Last Resort Policy and the Fourth Assurance and did not concede those breaches at any time; and (e) unreasonably failed to concede the appropriateness of joining the second to fourth respondents. 246Consequently, the respondents increased the time taken to conduct the trial and caused costs to be incurred unnecessarily. In such circumstances the Court may depart from the usual order as to costs.

Conclusion 247The respondents were undoubtedly the ultimately litigious victors: Caterpillar No 1. However, it is clear from Caterpillar No 2 that the Court of Appeal left the question of costs to be determined by this Court without any constraints being placed on the Court's wide discretion. Indeed, the Court of Appeal identified one issue, delay in pursuing a jurisdictional challenge, which would be a matter for the Court to consider in determining the outcome regarding costs. 248An important factor - McHugh J in Oshlack regarded it as by far the most important factor - guiding the exercise of the costs discretion is the result of the litigation. The respondents, therefore, should have their costs unless it appears to the Court that some other order should be made as to the whole or any part of the costs. 249Having considered the very extensive and helpful submissions of the parties the Court finds there are proper grounds to depart from the usual order for costs. 250The applicants were successful in making out their claim that the Dealership Agreements were unfair, although they were not successful in obtaining their primary relief. The applicants' success in having the Agreements declared unfair was critical; it was a significant victory. The applicants were successful in obtaining alternative relief in the form of an extended notice period and protection during the sale process. The applicants were also successful in respect of most of the interlocutory contests. 251The respondents engaged in conduct in respect of which it would not be fair or just to reward them with their costs, namely, that the respondents: (a) delayed agitating their jurisdictional challenge; (b) breached their pre-litigation undertaking to the applicants that was the Third Assurance and did not concede the lack of relevance of performance until closing submissions; (c) breached the assurance that the applicants would not receive a notice terminating the Dealership Agreements without warning; (d) breached their pre-litigation undertakings to the applicants that were the Last Resort Policy and the Fourth Assurance and did not concede those breaches at any time; and (e) unreasonably failed to concede the appropriateness of joining the second to fourth respondents. 252As a consequence, the respondents caused substantial costs to be incurred unnecessarily and consumed more of the Court's time than was necessary. 253If the Court had been required to determine costs following Decision No 17 the applicants would have received a substantial order for costs in their favour. It would not be a fair outcome in those circumstances to give costs to the respondents, particularly given the delay by them in challenging jurisdiction, but also having regard to the pre-litigation conduct of the respondents and their conduct during the litigation. 254In weighing up all of the relevant considerations, the Court considers that each party should pay its own costs of the proceedings. Even if I were required to find as a threshold proposition that this was a most exceptional case, I would have come to the same conclusion. 255Accordingly, the Court determines there should be no order as to costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 07 July 2011

In my opinion, underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs. ... See also Turkmani v Visvalingam (No 2) [2009] NSWCA 279 at [13]. 66Cretney referred to the judgment in Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107. There Finkelstein and Gordon JJ (Rares J agreeing in respect of costs at first instance, but not in respect of costs of the appeal) stated:

In Fish , the joint judgment said that the Share Purchase Agreement and employment agreement were related and concluded:

In my opinion, the same conclusion applies in the present case. Messrs Gough and Gilmour can be said to perform work in an industry "in accordance with", "in fulfilment of" or "in consequence of" their contract or arrangement with Holdings, in the same way as Mr Fish was found to perform work pursuant to the employment contract. Similarly, when one has regard to the range of obligations expressly imposed upon Holdings under the Dealership Agreements, which, on the findings, were to be carried into effect by Messrs Gough and Gilmour, there is an analogy with the role envisaged for Mr Fish as a senior executive "responsible for developing strategy" in Australia. 139It was strictly unnecessary, with respect, for the Chief Justice to find that the second and third applicants performed work under contracts with the first applicant in order to grant the relief sought.

Conclusion regarding delay in challenging jurisdiction 140The applicants contended that the respondents ran a new, winning point in the Court of Appeal, which was not, but could have been, run in the Industrial Court. The applicants' claim they were disadvantaged/prejudiced by such conduct and should receive costs from the time when the point could have been run in the Industrial Court, namely, from the outset. 141For the reasons I have expressed, I do not consider this contention can be sustained. However, again for reasons I have expressed, there was an unjustifiable delay by the respondents in seeking to challenge the Industrial Court's jurisdiction after Decision No 11 was given in December 2002.

Success of the applicants at trial 142The applicants submitted that given their success on so many of the issues agitated in the course of the trial and given the delay in the respondents pressing the successful jurisdictional argument, the principle of fairness dictates that the Court should make an order for costs in favour of the applicants. 143In the alternative it was submitted that given the applicants' success on so many issues at trial, as well as the conduct of the respondents both prior to and during the trial, the Court should conclude that "special circumstances" (including "misconduct") exist that justify departure from the notion that costs follow the event. I found earlier that it was not necessary to find in terms or to the effect that it is a most exceptional case, or a strong or exceptional case, before ordering a successful party to pay costs of an unsuccessful party. 144I have dealt with the issue of delay. In relation to the applicants' successes, they were substantial. The applicants were successful in those matters arising for judgment in the following Decisions: Decision No 1 (published on 23 November 2000) regarding an application to split the hearing into two parts; Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 2) (unreported) ("Decision No 2") (published on 28 November 2000) regarding the setting of the discovery and interlocutory timetable by the Court ; Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 4) [2001] NSWIRComm 92 ("Decision No 4") (published on 1 May 2001) regarding the joinder of the Second Respondent and the amendment of pleadings; Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 5) [2001] NSWIRComm 112 ("Decision No 5") (published on 23 May 2001) regarding leave to proceed against a foreign corporation (two notices of motion, one by the Applicants which was accepted and one by the Respondents which was dismissed); Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 8) [2001] NSWIRComm 208 ("Decision No 8") (published on 6 September 2001) regarding a claim for legal professional privilege with respect to certain documents; Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 10) [2002] NSWIRComm 22 ("Decision No 10") (published on 19 February 2002) regarding discovery of the Second Respondent's documents; Decision No 12 (published on 27 December 2002) regarding the joinder of the Third and Fourth Respondents; The reasons for judgment of Kavanagh J (published on 9 January 2003) regarding leave to extend time to appeal; Decision No 13 (published on 13 February 2003) regarding leave to amend the alternative relief sought as a result of Decision No 11; Decision No 14 (published on 27 February 2003) regarding dissolution of the injunction. 145I am not proposing to apply some sort of mathematical approach to determining costs by totalling up the decisions won and the decisions lost by the parties. The outcome of the various interlocutory proceedings will be included in the mix for the purpose of determining the overall costs outcome. 146In Decision No 9, the Court found for the applicants in that the Court had power, and that it was appropriate in the circumstances, to make orders to keep the Dealership Agreements on foot until further order and in the intervening period to prevent the respondents taking any steps inconsistent with or prejudicial to the ongoing operation of the dealership. 147If I had awarded costs in relation to Decision No 9 at the time of making the Decision, it is likely I would have ordered costs in favour of the applicants. 148In Decision No 11, the Court found it had jurisdiction to hear and determine the applicants' claims including power to grant the primary relief. However, it was ultimately held the Court was wrong in those respects: see Caterpillar No 1. 149In Decision No 11, the Court also found that the Overall Arrangement was unfair. This unfairness finding was not insignificant, as is clear from Decision No 15. It was a most significant finding because of the nature of the respondents' conduct; their "discreditably unfair" conduct in the sale process; their failure to comply with the last resort policy; and their breach of the fourth assurance. As the Court found in Decision No 15, the respondents misled the applicants and acted less than honestly and openly. The breaches of the fourth assurance by the respondents were flagrant. 150The finding of unfairness was also significant because of the amount of time and resources involved in arriving at such a finding, and because it opened the critical statutory gateway to granting relief. As the applicant submitted, the findings regarding unfairness: [G]rounded the highly significant and valuable discretionary relief that the Court had granted, namely by way of variations to the "contract" that had immediate real world operation (a further opportunity to sell and an extra nine months in the dealership) and provided a foundation for pressing claims for monetary compensation. 151The Court, however, did refuse the applicants' primary relief claim, which was also a finding of considerable significance. It is not correct for the respondents to characterise "the event at which the Applicants were aiming" as being confined to dealership retention. In their submissions to the Court in early 2003 in support of alternative relief, the applicants asserted that if the Court found relevant statutory "unfairness", but was not prepared to make variation orders to ensure "dealership retention", an appropriate "exit" regime, including an appropriate period of notice and a further opportunity to sell the business prior to the giving of any such further notices of termination, should be included in the "contract". 152The applicants also succeeded in satisfying the Court that power existed, and a foundation had been laid, for the applicants to press (at a later stage in the proposed Part B hearing) a claim for monetary compensation to supplement the important relief by way of "contractual" variation that had already been achieved. 153In other words, the "events" at which the applicants were "aiming" included a fair exit mechanism and timeframe and opportunity to pursue real compensation if dealership retention was not possible and, in fact, those "events" were achieved. 154Nevertheless, dealer retention was a central part of the applicants' case. In that respect, the Court found the primary relief sought was grossly disproportionate to the unfairness found and was not in any sense remedial. Further, the Court observed that the lion's share of the blame for the breakdown in relationship lay with the applicants. Maintaining the relationship, as the primary relief sought to do, was not an option. 155I do not find it necessary to deal with each individual issue decided in Decision No 11. The fact that the respondents were successful in opposing the applicants' primary relief claim and the applicants' success regarding the unfairness finding will be included in the "mix" of relevant factors in arriving at its decision as to an appropriate costs order. 156My view is that if the Court had been required to determine costs following Decision No 11, it is likely it would have awarded costs to the applicants, albeit significantly discounted. The discounting would have been necessary because of the applicants' failure to make out its case for primary relief, because of their misconduct during the sale process and because of the time spent at trial regarding the dealer rationalisation issue and in respect of which the applicants failed to establish there was a conspiracy involving the first respondent aimed at getting rid of the applicants as dealers in NSW/ACT. Alternatively, the Court may have made no order as to costs. 157In Decision No 15, in the face of opposition by the respondents, the applicants were granted leave to amend the Third Further Amended Summons. The terms of the amendment are set out at [29] in Decision No 15. The terms were summarised at [30]: a notice period of 5 years to terminate the dealership agreements; a sale process requiring the assistance of the respondents during negotiations and in terms which are said to be consistent with the Fourth Assurance; an element of the sale process requiring the respondents to acquire the shares at an independently determined value in certain circumstances, i.e. a buyer of last resort provision; prohibitions on the respondents engaging in certain conduct during the sale negotiation process; a dispute resolution procedure to operate in relation to the sale process; relationship management and improvement plan provisions imposing restraints on the ability to issue notices of termination without first undertaking certain procedures whereby notice is given to the applicants allowing them opportunities to respond and remedy any issues raised; allowing the applicants to negotiate with, and/or sell the dealership to, a party other than the party selected by the respondents as the preferred dealer candidate; allowing the applicants to negotiate with other possible dealer candidates. 158The Court noted at [82] in Decision No 15 that the parties had classified the alternative relief being sought by the applicants as follows: the Notice of Termination Provisions; the Sale Process/ Fourth Assurance Provisions; the Buyer of Last Resort Provisions; the Relationship Management Provisions; the Improvement Plan Provisions; the Last Resort Provisions. 159In relation to the notice of termination provisions, the Court: rejected the applicants' claim for five years; decided that 90 days, insisted upon by the respondents, was inadequate; and determined that nine months (a three month additional sale period to allow further time to sell the dealership business and then a six months' period to leave the dealership if no sale was possible) was appropriate. 160In relation to the sale process/fourth assurance, the Court did not grant the sale process claimed by the applicants, namely, "to put the Applicants back in the position they would have been in had the Respondents honoured the Fourth Assurance in the first place." The Court was also critical of the applicants for the part they played in the process in being uncooperative and causing delay. However, in providing relief in respect of unfairness, and against the opposition of the respondents, the Court did put in place a sale process and, to that extent, the applicants were successful. 161The Court refused the applicants' claims regarding the Buyer of Last Resort Provisions and the Relationship Management Provisions. These were not critical issues and I agree with the applicants' submission that the need to address these matters did not take up a great deal of time. In relation to the Buyer of Last Resort Provisions, it should be noted the Court deferred any determination of the "accumulated goodwill" issue and left open the possibility (if the additional sale process failed) that the respondents (at the end of the Part B Hearing) might be ordered to pay the applicants compensation for accumulated goodwill on a "loss of opportunity" basis: see Decision No 15 at [79]-[81]. 162In respect of the Improvement Plan Provisions, the Court varied the Overall Arrangement to include the Plan, but it reduced the period sought by the applicants from 12 months to 6 months. In respect of the Last Resort Provisions, the Court varied the Overall Arrangement to address this, but in doing so declined to vary the Overall Arrangement in the terms sought by the applicants. 163As the respondents submitted, in Decision No 15, the Court also dissolved the injunction. This, however, was an inevitable consequence of putting in place a process for the sale of the business/termination of the Dealership Agreements. 164As a consequence of Decision No 15 there were wins and losses for both sides. However, the applicants were successful in amending their claim for alternative relief and were successful in gaining alternative relief in the face of strong opposition by the respondents, although the relief granted was not as claimed. If I had been required to determine costs in relation to those proceedings at the time, it is likely I would have awarded costs to the applicants, although with some discounting. 165Applications in which the applicants were not successful were: Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 3) [2001] NSWIRComm 73 ("Decision No 3") (published on 9 April 2001) regarding legal professional privilege arising from the discovery process; and Decision No 16 (published on 4 February 2005) regarding costs of the first part ("Part A") of the proceedings. 166Costs in respect of those two Decisions, if costs had been determined at the time, would have gone to the respondents. 167Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 6) [2001] NSWIRComm 135 ("Decision No 6") (published on 8 June 2001) concerned the respondents' application to challenge legal professional privilege. In those proceedings: all but one document regarding goodwill were found to be privileged; access to legal bills were found not to be privileged; and the respondents' contention that reliance on the Fourth Assurance waived all privilege was rejected - not all privilege was found to be waived. It is likely that had costs been determined at the time there would have been no order as to costs. 168Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 7) [2001] NSWIRComm 147 ("Decision No 7") (published on 9 July 2001) concerned legal professional privilege. It was held that there was a waiver by the applicants, supporting the respondents' contentions, but the orders were more limited than those the respondents had sought. It is likely that had costs been determined at the time there would have been an order in the respondents' favour. 169Decision No 17 regarding jurisdiction was determined in favour of the applicants and if costs had been determined at the time, costs would have gone to the applicants. Of course, Decision No 17 was ultimately found to have been wrong: see Caterpillar No 1.

Respondents' "misconduct" 170The applicants submitted the respondents' "misconduct" in and relating to this litigation provided a proper foundation for the Court to make an order for costs in favour of the applicants. 171The alleged "misconduct" both before and during the proceedings, was as follows: (a) pre-litigation misconduct involving conduct of the respondents which was said to have been "lax" and "invited the litigation" including: (i) departing from the Last Resort Policy ; (ii) failing to honour the Fourth Assurance and engaging in "secret conduct" which was entirely inconsistent with the Fourth Assurance; (iii) not complying with the Third Assurance; (iv) not complying with an assurance that the applicants would not receive a notice of termination without warning; (b) the "misconduct" during the litigation was said to involve the respondents: (i) changing their position on jurisdictional arguments and being guilty of delay in bringing their successful jurisdictional challenge; (ii) succeeding on arguments which were not raised at trial; (iii) raising or resisting interlocutory and procedural applications and making untenable arguments which unreasonably lengthened the trial and added to costs; (iv) engaging in other conduct which unnecessarily protracted proceedings or amounted to "inappropriate" conduct by: (A) refusing to concede "poor performance" was not a legitimate basis for termination; (B) refusing to concede their non-compliance with the Last Resort Policy and the Fourth Assurance; (C) making a conscious and deliberate decision not to reveal "secret conduct". 172It was common ground that one recognised exception to the general rule that costs follow the event is where the successful party has by its "misconduct" invited the litigation.

Pre-litigation misconduct - Last Resort Policy 173In relation to the Last Resort Policy, the Court found the respondents had failed to adhere to that Policy. The following extracts from Decision No 11 explain the significance of the Last Resort Policy and the findings regarding the respondents' failure to apply it:

There are numerous respects in which the expectations and obligations arising from the commercial interdependence and closeness of the relationship between Caterpillar and Holdings, required or envisaged conduct by Messrs Gough and Gilmour which goes beyond that encompassed in a managerial employment contract of the kind considered in Fish . (See the summary at [188] of the Full Bench judgment set out at [61] above.) However, these considerations, in my opinion, make it less, rather than more, likely that the Dealership Agreements answer the statutory description, by reason of the industrial context in which that description must be read and understood.

No doubt in a colloquial sense working as an entrepreneur/ manager/controller of a large corporate enterprise can be said to constitute 'work in an industry' and, accordingly, satisfy a dictionary definition of that term. However, there is no "industrial" element in such "work" by a person who occupies a position such as that which Messrs Gough and Gilmour occupied in Holdings. (I note that there was no suggestion that there was any occasion to differentiate Mr Gough's more dominant position from that of Mr Gilmour.) ...

The "industrial" context of the legislative scheme must be taken into account. The High Court's characterisation of the scheme as such was not a matter to which the Full Bench gave express regard in its reasons for judgment on the jurisdictional question.

There will be cases in which it is correct, or at least open, to conclude that the working proprietor of a franchise or dealership does perform 'work in an industry' in accordance with the dealership or franchise agreement. When exercising its supervisory jurisdiction, this Court would not substitute its own views on such a matter for those of the Industrial Court where the issue turns on matters of fact and degree. ...

Messrs Gough and Gilmour conducted an enterprise in which they were the only investors and occupied the senior managerial positions. They were entrepreneurs who conducted a business of significant scale, involving tens of millions of dollars of capital investment, with 700 employees, over a score of business locations. No doubt they worked. They did not, however, 'perform work in an industry' "according to" the Dealership Agreements or the Overall Arrangement, within the meaning of s 106 of the Act.

Adopting a telling phrase of Kitto J from Ready Mixed Concrete (Victoria) Pty Ltd v Federal Commissioner of Taxation (1969) 118 CLR 177 at 184, to characterise the role of Messrs Gough and Gilmour as 'the performance of work in an industry' in accordance with the Dealership Agreements or the Overall Arrangement, is to 'understate its nature to the point of misdescription'. (See McDonald's Australia Holdings Ltd v Industrial Relations Commission [2005] NSWCA 286; (2005) 223 ALR 78 at [98].)

In the context of a business of this scale, the range of activities to be undertaken by Messrs Gough and Gilmour, as envisaged by or required by the Dealership Agreements or the Overall Arrangement, was devoid of any "industrial" content. Insofar as their activities could be said to constitute "work" within s 106(1), neither those Agreements nor that Arrangement can be said to be, or to be included in, the contract or arrangement "whereby" that work was done. 135The central finding in the Chief Justice's judgment was that neither the Dealership Agreements nor the Overall Arrangement were contracts whereby work was performed in any industry. It seems to me that the respondents would have won in the Court of Appeal even absent a submission that the Industrial Court failed to direct attention to the contractual arrangement between the first applicant and the second and third applicants. 136The applicants described the internal contracts as being the most "proximate contracts". This infers that the Court of Appeal in Caterpillar No 1 considered there were other contracts (the Dealership Agreements or the Overall Arrangement), although more distant, that would have satisfied the jurisdictional test of being contracts "whereby a person performs work in any industry" in any event. However, this was not what the Court of Appeal in Caterpillar No 1 found. Insofar as they performed work, the Court of Appeal held the second and third applicants did not perform it "in accordance with" or "in consequence of" the Dealership Agreements or the Overall Arrangement. 137That is not to say there may not be more than one contract whereby a person performs work in any industry, within the meaning of s 106(1) of the IR Act: see Australian Co-operative Foods Ltd v SW & JD Reilly & Sons Pty Ltd [2011] NSWCA 148 at [4]. However, neither the Dealership Agreements nor the Overall Arrangement in Caterpillar No 1 was held to be such a contract. 138In my opinion, the proposition by the respondents that to the extent work was performed by the second and third applicants it was work performed in accordance with internal contracts, was not the winning point in Caterpillar No 1; it was not central to the decision in that matter. Spigelman CJ mentioned it only once in the following context:

The respondents correctly submit that it is not appropriate, in the exercise of a supervisory jurisdiction, to make any order for costs with respect to the proceedings in the Industrial Court. ...

There were two substantive episodes of failure by the respondents to observe their last resort policy. The first was in March 1999 when the first respondent decided to recommend to the second respondent that the relationship with the applicants should be brought to an end and did so without taking steps to allow the applicants every reasonable opportunity to retain the dealership. The second was in September 2000 when the respondents decided to terminate the dealership agreements, again without satisfying themselves there were no options open other than cancellation and that proper grounds existed to support cancellation. 175The applicants submitted the respondents could have avoided the litigation if they had adhered to the Last Resort Policy; that the applicants had no choice but to commence these proceedings and seek interlocutory relief on 27 October 2000 given the failure of the respondents to adhere to the Last Resort Policy. It was further submitted that given the admission of the existence of the Last Resort Policy and given the lack of evidence showing compliance with the Last Resort Policy, the respondents should have conceded that they had not adhered to the Last Resort Policy and thereby avoided the time and costs associated with the proof of the full extent of the non-compliance with the Last Resort Policy. 176The respondents relied on several contentions in opposing this aspect of the applicants' submissions. One contention was that the applicants failed to recognise that it was, in fact, their own conduct that brought about the particular litigation that was pursued. In this regard, it was submitted: (a) as the Court found, it was the Applicants whose persistent and wilful conduct utterly destroyed the parties' relationship, and this was a reasonable and proper basis for the Respondents to believe that the essential elements of the relationship were no longer present. The conduct was such as to make it inappropriate for the relationship to continue; (b) far from accepting this fact, the Applicants commenced this particular piece of litigation. The primary focus of the litigation was to secure a continuation of the relationship on radically different terms; (c) as such, it was not the successful Respondents who invited this litigation. Rather, it was the unsuccessful Applicants, whose pre-litigation conduct had destroyed the relationship the subject of the proceedings, then chose in the face of that destructive conduct to claim through litigation a right to have the relationship continue. That incorrect choice to sue for that relief , against the backdrop of that destructive conduct , is what brought the litigation about. (emphasis in original) 177The Court found that the main reason why the relationship between the applicants and the respondents broke down was the conduct of the second applicant. It was primarily that conduct that led the respondents to decide to terminate the Dealership Agreements in accordance with the terms of those Agreements. The terms included 90 days' notice of termination. 178The Court also found, given the destruction of the relationship, that there was no proper basis upon which to grant the applicants' primary relief, namely, continuation of the Dealership Agreements, albeit with substantial variations. 179The fact is, though, given the existence of the Last Resort Policy, a Policy treated seriously by the respondents, it was incumbent upon them to satisfy themselves that there were no options open other than cancellation and that proper grounds existed to support cancellation. This they failed to do. Further, as the respondents had given the applicants assurances that they would help them in the sale process in achieving a fair price for the dealership the respondents, by their Last Resort Policy, were under an obligation not to terminate the dealership unless and until they had provided the necessary help in achieving that fair price. As the Court found in Decision No 11 at [780]:

... (1) Leave is granted to amend the third further amended summons to reflect the joinder of the third and fourth respondents to the proceedings pursuant to interlocutory judgment (No 12) [2002] NSWIRComm 379. (2) Subject to Orders 3, 4 and 5 hereof, leave is granted to amend the third further amended summons to incorporate a new Schedule B to the summons in the terms sought by the applicants in their proposed fourth further amended summons. (3) The proposed amendments to the third further amended summons concerning compensation will be considered in the compensation phase of the hearing. (4) Leave to amend the third further amended summons by seeking an order under s 107 of the Industrial Relations Act 1996 is refused. (5) Leave to amend the third further amended summons to reserve the rights of the applicants to amend the summons to reflect any further findings of the Court is refused. (6) The Court will consider the issue of accumulated goodwill in the compensation phase of the hearing. (7) The Overall Arrangement as determined by the Court in Gough & Gilmour Holdings Pty Limited v Caterpillar of Australia Limited (No 11) [2002] NSWIRComm 354 to have existed between the applicants and the respondents is varied as follows: (i) Harcourt David Gough and Anthony Lansley Gilmour will have a period of 90 days ("the additional sale period") commencing on the day following the date of this judgment to sell their shares in the dealership business to that person nominated by Caterpillar of Australia Limited as the "preferred dealer candidate". Subject to Orders 7(ii), 7(iii) and 7(iv) hereof, after the expiry of the additional sale period Caterpillar of Australia Limited may give 26 weeks' notice of termination of the dealership agreements and the notice of termination period will commence to run from a date seven days after the expiry of the additional sale period. (ii) In the event that Messrs Gough and Gilmour decide that they do not wish to sell their shares, that decision will be conveyed to Caterpillar of Australia Limited within 30 days of the date of this judgment and the additional sale period will terminate on the day after the date that Messrs Gough and Gilmour advise Caterpillar of Australia Limited they do not wish to sell ("termination date of the additional sale period"). Upon being so advised Caterpillar of Australia Limited may give 26 weeks' notice of termination of the dealership agreements and the notice of termination period will commence to run from a date seven days after the termination date of the additional sale period. (iii) In the event that a sale occurs or a binding agreement to sell is made prior to the expiration of the additional sale period, Messrs Gough and Gilmour will advise Caterpillar of Australia Limited to this effect. Upon being so advised Caterpillar of Australia Limited may give 90 days' notice of termination of the dealership agreements and the notice of termination period will commence to run from a date seven days after the date of sale or the date of a binding agreement to sell, whichever is the earlier. (iv) The date upon which the 26 weeks' period expires shall be known as the "final termination date". In the event a sale or a binding agreement to sell (whichever is first) occurs during the 26 weeks' notice period on a date that is more than 97 days prior to the final termination date the respondents shall be entitled to issue new termination notices giving the applicants 90 days' notice which will commence to run from a date seven days after the date of sale or date of the binding agreement to sell whichever first occurs. (8) The Overall Arrangement as determined by the Court in Gough & Gilmour Holdings Pty Limited v Caterpillar of Australia Limited (No 11) [2002] NSWIRComm 354 to have existed between the applicants and the respondents is further varied as follows: During the additional sale period Caterpillar of Australia Limited, Caterpillar Inc, Caterpillar SARL and Caterpillar Overseas Credit Corporation SA ("Caterpillar") will not at any time: (i) approach, solicit or entice employees or contractors of Gough & Gilmour Holdings Pty Limited, Harcourt David Gough and Anthony Lansley Gilmour ("Gough & Gilmour") to terminate any contract or arrangement between such employees or contractors and Gough & Gilmour; (ii) approach, solicit or entice any person to terminate, withdraw from or substitute any contract with Gough & Gilmour for the supply of any machine, part, product or other equipment referred to in the Agreements; (iii) approach, solicit or entice, for the purpose of having the effect of causing loss or damage to Gough & Gilmour, any person to refrain from entering into any contract with Gough & Gilmour for the supply of any machine, part, product or other equipment referred to in the Agreements; (iv) enter into any Sales and Service Agreement; Distribution Agreement; or Product Support Agreement for the supply of any machine, part, product or other equipment referred to in the said Agreements relating to New South Wales and/or the Australian Capital Territory, with any other person or entity; and (v) procure or encourage any person to establish any infrastructure or operations in New South Wales and/or the Australian Capital Territory in preparation for, or for the purpose of, exercising contractual rights of the kind referred to in the Agreements, on any basis other than by acquisition of the business of Gough & Gilmour. (9) The Overall Arrangement as determined by the Court in Gough & Gilmour Holdings Pty Limited v Caterpillar of Australia Limited (No 11) [2002] NSWIRComm 354 to have existed between the applicants and the respondents is further varied ab initio as follows:

For the purposes of this variation the parties are referred to both individually and jointly as follows: (a) Gough & Gilmour Holdings Pty Limited, Harcourt David Gough and Anthony Lansley Gilmour - "Gough & Gilmour"; and (b) Caterpillar of Australia Limited, Caterpillar Inc, Caterpillar SARL and Caterpillar Overseas Credit Corporation SA - "Caterpillar".
If Caterpillar holds a serious concern that relationship difficulties it has with Gough & Gilmour may require consideration be given to terminating the dealership, then: (a) Caterpillar will implement an improvement plan as set out in (b) below; (b) the improvement plan is to include the following components: (i) the relationship problems in which improvement is sought are to be clearly identified and described; (ii) methods of bringing about improvement and evaluation of improvement are to be agreed between the parties; (c) the improvement plan is to be pursued over a period of six months, or for such other period as may be agreed between the parties; and (d) Gough & Gilmour will be given the opportunity to complete the plan before a recommendation is made within Caterpillar for the termination of the dealership or any exercise of its right to terminate the dealership agreements.
In the event that Caterpillar has complied with clause 2 hereof but this has proved to be unsuccessful, Caterpillar will take steps to provide Messrs Gough and Gilmour with a proper opportunity to sell their shares in the dealership business and will assist Messrs Gough and Gilmour receive fair value for those shares in that business by ensuring that the sale process is conducted on a reasonable basis without duress. Such steps are to be taken prior to the issue of any notice of termination. Furthermore, Caterpillar shall not use the act or timing of the issue of a termination notice for the purpose of weakening Gough & Gilmour's bargaining position in any sale process.
To avoid doubt, Caterpillar will comply with its obligations under clauses 2 and 3 hereof by 25 October 2000. (10) The terms of Orders 7 to 9 inclusive are to operate notwithstanding any provision to the contrary in the dealership agreements or any notices of termination already issued. (12) [sic] The injunction granted by orders made on 24 October 2001 and continued by orders made on 13 February 2003 is dissolved. (13) Proceedings are stood over to a date to be fixed. (14) Costs are reserved. The parties were directed to file short minutes of order reflecting the decision. The Court made formal orders on 14 July 2003 giving effect to the decision. 13No sale of the business of the applicants occurred and the respondents gave notices of termination of the Dealership Agreements on 7 October 2003, having an expiry date of 9 April 2004. Termination of the Agreements took effect in accordance with the notices. 14In its 17 th judgment ( Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 17) [2007] NSWIRComm 3) ("Decision No 17") the Court addressed a notice of motion by the respondents to dismiss or permanently stay the proceedings and an application seeking leave to amend the summons for relief. The respondents were contending the Court had no jurisdiction, following recent decisions of the High Court and the NSW Court of Appeal, to take any further steps in the proceedings. 15The Court found at [93] there was no jurisdictional basis for dismissing or permanently staying the proceedings. Consequently, the respondents' application was refused. 16The Court then addressed the applicants' proposed amendments to the pleadings, which fell into four classes: (1) Those amendments to the third further amended summons that the applicants contend reflect the rulings of the Court in Judgment No. 15. Those amendments were initially set out in the proposed fourth further amended summons filed with submissions on 15 April 2005. (2) Those amendments to the proposed fourth further amended summons amending Part D to more clearly reflect the claims for compensation pressed by the applicants in light of the Court's findings in Judgment No. 15. These amendments were initially set out in the proposed fifth further amended summons also filed with submissions on 15 April 2005. (3) Those amendments to the proposed fifth further amended summons that seek to avail the enactment of s 106(2A). These amendments are set out in the proposed sixth further amended summons. (4) Those amendments to the proposed fifth further amended summons that make further changes to Part D - Particulars of the manner in which any amount claimed will be calculated. These amendments are set out in the proposed sixth further amended summons. 17The applicants were granted leave to amend the pleadings (at [135]). 18The 17 th judgment was the subject of an appeal to the Full Court in Matter No IRC 227 of 2007: Caterpillar of Australia Limited v Gough & Gilmour Holdings Limited [2008] NSWIRComm 3; (2008) 170 IR 185. Leave to appeal was granted, but the appeal was dismissed. 19Subsequently, the respondents sought leave to appeal and to appeal to the Court of Appeal from the 17 th judgment. The Court of Appeal found in favour of the respondents ( Caterpillar of Australia Pty Ltd v Industrial Court of New South Wales [2009] NSWCA 83; (2009) 255 ALR 131) ("Caterpillar No 1") and made the following orders: (1) Order that the record of the Full Court of the Industrial Court of New South Wales in matter No IRC 227 of 2007 be brought up to this Court; (2) Order that the orders of the Full Court of the Industrial Court of New South Wales of 21 February 2008 and 13 March 2008 in the said proceedings be quashed; (3) Order that the record of the Industrial Court of New South Wales in matter No IRC 5227 of 2000 be brought up to this Court; (4) Order that any findings of jurisdiction, unfairness or declarations or orders made in or consequent upon the judgments of the Industrial Court of New South Wales (Boland J) in matter No IRC 5227 of 2000 delivered on: (a) 23 October 2001 - Judgment No 9; (b) 19 December 2002 - Judgment No 11; (c) 27 February 2003 - Judgment No 14; (d) 4 June 2003 - Judgment No 15; (e) 2 February 2007 - Judgment No 17 be quashed. (5) Declare that the Industrial Court of New South Wales does not have jurisdiction to make any declarations or orders sought by the second to fourth respondents in matter No IRC 5227 of 2000 other than dismissing the proceedings and ordering costs against the second to fourth respondent; (6) Subject to the Order in par 8, Order that the second to fourth respondents, or any of them are prohibited, from further proceeding in matter No IRC 5227 of 2000 in the Industrial Court of New South Wales or upon the Judgments of the Trial Judge and the Judgment of the Full Court of the Industrial Court of New South Wales on 21 February 2008; (7) Subject to the Order in par 8, an Order prohibiting the first respondent from taking any step to further exercise, or purport to exercise, its power pursuant to any provision of the Industrial Relations Act 1996 in matters No IRC 5227 of 2000 and No IRC 227 of 2007; (8) An Order that the proceedings be remitted to the first respondent to determine the issue of costs in the proceedings before it and to conduct an enquiry into damages sustained by the applicants pursuant to an undertaking given by the second to third respondents as a result of interlocutory orders granted by the first respondent on 24 October 2001 and continued by orders made on 13 February 2003 until the interlocutory orders were dissolved on 14 July 2003; (9) An Order that the second to fourth respondents pay the first to fourth applicants' costs of the proceedings in this Court. 20A special leave application by the applicants to the High Court was dismissed. 21In Caterpillar of Australia Pty Ltd v Industrial Court of New South Wales [2009] NSWCA 203; (2009) 185 IR 355 ("Caterpillar No 2"), the Court of Appeal exercised a power under the slip rule to vary Order (5) above to read: (5) Declare that the Industrial Court of New South Wales does not have jurisdiction to make any declarations or orders sought by the second to fourth respondents in matter No IRC 5227 of 2000 other than dismissing the proceedings and ordering costs in respect of those proceedings. 22In doing so, the Court of Appeal stated:

Mr Owens gave evidence that he read the report and in doing so trusted those who prepared it and believed the contents of the report to be correct. Indeed, Mr Owens accepted that the March 1999 report was substantially true. It beggars belief that Mr Owens would not have been influenced by the report or that he would not have taken it into consideration in deciding to authorise Mr Curfman to approach Mr Gough in June 1999 with a view to getting him to sell the dealership business and, in September 2000, in deciding to cancel the dealership. Given the entirely negative focus of the report, Mr Owens could not fail to have gained the impression that Gough & Gilmour was a poor performing dealer. Moreover, Mr Owens would also have been influenced by the separate negative reports he received from the first respondent regarding the RPI and Cadia disputes. For example, he said the RPI dispute took too long to resolve. But it was the first respondents' flawed policies and procedures that contributed to the RPI dispute. As for the Cadia dispute, it too was attributable in part to the first respondents' conduct. 198It is apparent that the false impression created by the 1999 Report influenced the decision to relieve the first and second applicants of the dealership. The use by the first respondent of the 1999 Report was deliberately misleading. Although the Court held that the relationship difficulties caused mainly by the second applicant constituted a proper basis for ordering the sale/termination of the dealership, the fact that the second respondent took a decision to sell/terminate based, in part, on the false belief the applicants were poor performers, the respondents should not be rewarded for such conduct by receiving all of their costs. 199Accordingly, in relation to the respondents' breach of the Third Assurance, I propose to take the same approach as that taken in relation to the Last Resort Policy and the Fourth Assurance, namely, to give it weight in favour of the applicants, but I do not regard the breach as a basis to give the applicants the whole of their costs.

Pre-litigation misconduct - notice of termination without warning 200The second respondent (through Mr Ramseyer) gave the applicants an assurance that they would not receive a notice terminating the Dealership Agreements without warning. The respondents breached this assurance by serving the termination notices in October 2000 without warning: see Decision No 11 at 780, 780 and [791]. 201This is a further example, albeit of lesser significance, of conduct by the respondents that was less than principled. When taken together with the breaches of the Last Resort Policy, the Fourth Assurance and the Third Assurance, it confirms a view I have formed that despite being the ultimate litigious victors the respondents should not receive an unqualified costs order in their favour. Their pre-litigation conduct operates against such an outcome. 202In Re Cummings , Wilcox J did not give significant weight to the respondent's incitement of the plaintiff to purchase horses. Here though, when one considers the pre-litigation conduct of the respondents, it was not simply a minor reprehensible episode, but rather quite significant breaches of undertakings given to the applicants. I have noted the caution issued by Wilcox J, that if too much emphasis is placed upon the circumstance that the litigation would not have arisen but for an action of the defendant, few successful defendants would recover their costs. It is not my view that the pre-litigation conduct justifies an order for costs in favour of the applicants. However, it does justify a conclusion that it would not be doing justice between the parties to reward the respondents for their pre-litigation conduct by awarding them their costs or even a significant part of their costs. The applicants were put to considerable unnecessary additional expense because of the respondents' conduct.

Misconduct during litigation - jurisdiction and delay 203The matters raised by the applicants under this heading were dealt with earlier in this judgment under the heading "Delay in challenging jurisdiction". The Court found there was such a delay by the respondents and that is a consideration that counts against the respondents receiving all of their costs, despite being the ultimate litigious victors.

Misconduct during litigation - succeeding in arguments not raised at trial 204This matter concerned the applicants' contention that whilst the respondents were ultimately the "successful parties" in Caterpillar No 1 in the Court of Appeal and were successful in their opposition to the applicants' special leave application to the High Court, that "success" was based on arguments never advanced in this Court. 205I dealt earlier in this judgment with these contentions, finding against the applicants.

Misconduct during litigation - raising or resisting interlocutory and procedural applications and making untenable arguments that unreasonably lengthened the trial and added to costs 206The applicants submitted the respondents unreasonably raised or resisted numerous interlocutory and procedural applications and persisted with untenable arguments that substantially and unreasonably lengthened the trial and added to the already substantial costs of the proceedings in an unwarranted and unjustifiable way. 207The respondents contested this submission. It was submitted an analysis of the interlocutory debates revealed that: (a) the Court made significant affirmative findings in the Respondents' favour; (b) any "success" of the Applicants was generally in a more limited form than the relief they had originally sought; (c) contrary to the Applicants' assertions, Judgments No. 6 and No. 7 did not constitute a "draw" between the parties; (d) in light of the Court of Appeal decision in Caterpillar Number 1 it cannot credibly be suggested the Applicants won the proceedings which were the subject of Judgment No. 17; (e) there is no basis for the Applicants' allegation that the Respondents unreasonably raised or resisted numerous interlocutory and procedural applications and persisted with untenable arguments that substantially and unreasonably lengthened the trial and added to the already substantial costs of the proceedings in an unwarranted and unjustifiable way; (f) there is no basis for the Applicants' allegation that the Respondents took a " dogged but generally unreasonable stance " with regard to the significant number of procedural issues which arose; (g) there is no basis for any costs order being made in the Applicants' favour. The submissions do not support an order for costs being made in favour of the Applicants. 208Except for matters that I have addressed, or will address, separately, the fact that the respondents disputed various motions does not demonstrate misconduct. I do not think that the applicants identified any particular argument dealt with in the interlocutory decisions that may be regarded as untenable. Nor in resisting various interlocutory or procedural applications was the respondents' conduct unreasonable such that it should count against them in assessing costs on the ground that what they did added substantially and unnecessarily to the costs of the trial. 209I earlier addressed each of the 17 decisions and made what I regard as an appropriate assessment as to which party won the interlocutory argument. That assessment will go into the overall mix of considerations in determining the final costs outcome. 210One of the matters to be addressed separately in the context of untenable or unreasonable arguments by the respondents is the applicants' claim that the first respondent actively opposed the joinder of the second respondent (Caterpillar Inc) to the proceedings. Opposition was pressed on the basis that the second respondent, as the parent company in the USA, had no real or sufficient connection with the operation of the applicants' dealership in New South Wales (see Decision No 4 at 24). The applicants submitted the opposition was untenable in circumstances where the second respondent was in fact the controlling force and the ultimate decision maker especially with respect to the proposed termination of this Caterpillar dealership. It was submitted the inappropriateness of the active submissions that the first respondent put to the Court on the joinder application was revealed, in stark terms, in the context of the respondents' (again unsuccessful) opposition to the applicants' application for leave to proceed against a foreign corporation (see Decision No 5 at [22]-[25]). 211In Decision No 11 the Court stated:

It would appear from the evidence that it was on 29 May 1999 that Mr Owens approved an approach by Mr Curfman to Mr Gough to obtain an agreement for the sale of the applicants' assets. In giving Mr Curfman the go-ahead it seems that Mr Owens was concerned about such an approach and that Caterpillar "needed to be very careful with how we handled Harcourt Gough". Apparently, Mr Barton had reminded Mr Owens that only the Chairman could finalise the termination of a dealer and that Mr Barton did not "want any legal issue in Sydney." 212And at 653: Curfman, Ramseyer and Owens spoke with one another and determined that it was appropriate to end the dealership. Owens also discussed the matter with Barton. It would appear that this occurred on or about 29 September. Consequently, without prior notice or warning, on 25 October 2000 termination notices were sent to Gough & Gilmour pursuant to the dealership agreements. Those notices specified that the agreements would terminate 90 days from the date on which the notices were posted. 213The Court was critical of the applicants in Decision No 4 for the late joinder application and critical in other respects, as the respondents pointed out in their submissions. Indeed, at the time of Decision No 4 the applicants were unable to convince the Court that it had a "good arguable case that [the Second Respondent] was a party to an arrangement or collateral arrangement within the relevant territorial connection". 214Ultimately, however, it was shown that the second respondent was in fact a party in the Overall Arrangement (see Decision No 11 at 780, [781], [794] and [805]) and had made the termination decision that resulted in these proceedings being commenced. It was entirely appropriate for the second respondent to have been joined. 215I am satisfied that whilst the applicants did not have all of the information at their disposal initially regarding the second respondent's role, the first respondent knew at all relevant times that the dominant party from the respondents' side was the second respondent, that any decision to terminate the Dealership Agreements lay exclusively with the second respondent and that it was the second respondent that made the decision to terminate. In those circumstances, the first respondent unnecessarily caused the proceedings to be protracted by vigorously contesting joinder and contesting leave to proceed against a foreign corporation, namely, the second respondent. 216The applicants submitted the respondents also resisted the joinder of the third and fourth respondents, even though it was their own conscious (albeit undisclosed) decision to transfer the Dealership Agreements from the first respondent via the third, to the fourth, respondent whilst the case was still proceeding: see Decision No 12. 217In this regard, it was submitted for the applicants that, just as in the case of the respondents' resistance to the joinder of the second respondent, there was no proper basis for the respondents acting other than by consenting to the joinder of the third and fourth respondents. This was especially the case when the proceedings were still substantially part heard and the Court needed to ensure that any substantive discretionary relief to be awarded was capable of being effective. 218The respondents resisted these contentions. They submitted: The question of the joinder of the Third and Fourth Respondents arose for consideration after the Applicants had been refused "primary relief" in Judgment No. 11. Rather than conceding that as "primary relief" had been refused the interlocutory restraining orders should be dissolved, the Applicants sought to extend the restraining orders to the proposed Third and Fourth Respondents (Decision No 12 at [7]). The substantive basis for the joinder of the Second Respondent was that if the Applicants were unsuccessful in obtaining the "primary relief", " there is at least an arguable case that [Caterpillar Inc.] had a sufficient connection with [the Dealership Agreements or any collateral arrangement] to the extent that money orders and an order under section 107 of the Act could be made against Caterpillar Inc " (Decision No 4 at [54]). It followed that the position of the Respondents in relation to the joinder motion of the Applicants and the Respondents' own motion to dissolve the orders made on 24 October 2001 was that " because the Court in its substantive judgment of 19 December 2002 had refused the primary relief claimed by the Applicants of keeping the dealership agreements on foot and the only alternative relief sought by the Applicants was compensation, there was no point in joining the proposed third and fourth Respondents because, given the nature of the findings of unfairness, any money orders under section 106(5) would only be made against the first and/or second Respondents " (Decision No 12 at [8]). (emphasis in original) 219The respondents, however, overlook the critical fact that the Court agreed with the applicants that the interlocutory restraining order should not be dissolved and that it was appropriate to join the third and fourth respondents to ensure that the ongoing restraining order would remain effective. 220Whilst the respondents referred to their position on the joinder application (primary relief had been refused and any money orders would only be made against the first and/or second respondents) their position was rejected by the Court. 221In Decision No 12 the Court stated:

The position at the end of 1999/early 2000 was that the applicants had been told in no uncertain terms that the relationship was over and that Caterpillar wanted the second and third applicants to sell their interests in the dealership. The applicants could have been under no illusion, in my opinion, that if they did not conduct themselves reasonably in the sale process that in all likelihood the respondents would take steps to terminate the dealership agreements. ... 187However, the Court ultimately concluded that such conduct was not sufficiently "culpable" to outweigh, or render neutral, the significant findings of unfairness made against the respondents. 188The applicants next referred to the Court's finding that the respondents had engaged in conduct (in September 2000) that was inconsistent with the Fourth Assurance. This related to the meeting between the first and second respondents' senior executives and the Stokes' organisation's principals on the ocean liner chartered by Channel Seven to house and entertain its guests during the course of the Sydney Olympics. 189It was submitted for the applicants that the respondents conducted the litigation inappropriately because they: [C]onsciously and deliberately decided not to reveal the secret conduct in September 2000 on the Channel Seven boat on Sydney Harbour, being conduct that was entirely inconsistent with the Fourth Assurance and which illustrated clearly the breach of the Fourth Assurance. 190It was further submitted that whilst it was strictly correct that the boat meeting, once it was disclosed, did not, of itself, add substantial time or cost to the litigation, what the misconduct did reveal was that: [T]he Respondents could have, and should have, at the outset conceded that sometime after they gave the Fourth Assurance, they resolved not to honour it and, indeed, effectively resolved that it was in their best interests to support the Stokes organisation's position in the sale process (and certainly resolved not to advise the Applicants about their "change of heart"). It is undoubtedly the case that had such proper concessions been made from the outset, then an inordinate amount of Court time and costs would have been saved. 191In Decision No 11 at [652] and [792] the Court stated:

... I have no doubt that following the meetings on 17 September both the Stokes' organisation and Caterpillar understood that the way forward was cancellation of the applicants' dealership and that the consequence of this would be to seriously weaken the applicants' bargaining position. ...

Given the respondents' evidence that cancellation is a measure of last resort - that is, all other reasonable alternatives are explored before a decision to cancel is taken - and that such a policy is treated seriously by Caterpillar, it seems to me to have been incumbent upon the respondents to satisfy themselves that, indeed, there were no options open other than cancellation and that proper grounds existed to support cancellation. This they failed to do. ...

True it is that from the outset the applicants were well aware of the first respondent's right to terminate the dealership agreements on 90 days' notice "without cause". But it was also part of the overall arrangement between the parties, clearly acknowledged by the respondents, that termination of dealership agreements was an act of last resort. This meant that the respondents would not simply stand by and watch a dealership decline to such a level that there was no option but to terminate. This imposed an obligation on the first respondent to take whatever reasonable steps were available to keep the dealership on foot. Further, in circumstances where the respondents had taken a decision to change dealers and had given the applicants assurances that they would help them in the sale process in achieving a fair price for the dealership the respondents, by their "last resort" policy, were under an obligation not to terminate the dealership unless and until they had provided the necessary help in achieving that fair price. ...

(14). Before putting in train the machinery to end the relationship it was incumbent on the first respondent to at least give notice of its intention to do so. In failing to advise the applicants of its intention to recommend that the relationship be brought to an end and in failing to properly consider an improvement plan to allow the applicants the opportunity to rehabilitate themselves the first respondent acted unfairly and inconsistently with its "last resort" policy, which involves dealers being given every reasonable opportunity of remaining as a Caterpillar dealer. ...

(15). The respondents acted unfairly in acting to cancel the applicants' dealership by failing to adhere to their policy that dealerships would only be cancelled as a last resort. 174In Decision No 15, the Court found:

The Respondents' conduct in the sale process was also inconsistent with their assurances to the Applicants that they would help them in the process of achieving a fair price for the dealership. While some assistance was provided, at crucial stages in the negotiations that assistance was not forthcoming and the Respondents' decision to cancel was made without reasonable consultation with the Applicants. In my opinion, the Respondents' conduct in the sale process and in taking the decision to cancel was biased in favour the Stokes organisation and to a significant degree the Applicants were left out in the cold. 185The applicants submitted the respondents could have avoided the litigation if they had adhered to the Fourth Assurance as they had the power to insist that the Stokes' Organisation pay a fair price "via their obvious power to change their mind about the 'preferred dealer candidate' if the Stokes Organisation refused to pay a fair price." 186The Court was critical of the applicants' participation in the sale process. In this respect, in Decision No 11 at [565], the Court stated:

In the result, and having regard to the terms and operation of the Overall Arrangement and the conduct of all of the parties, I find that the Overall Arrangement referred to in par [780(1)] of this judgment between the applicants and the respondents was unfair within the meaning of ss 105 and 106 of the Industrial Relations Act . 8At [795]-[797] the Court gave its reasons for refusing the primary relief sought by the applicants, namely, continuation of the Dealership Agreements on significantly varied terms. The reasons were as follows:

... 1. The applicants failed to make out the first and second assurances. 2. The decision by the first respondent to recommend an end to the relationship with the applicants was brought about by the conduct of the applicants. Such conduct constituted a reasonable and proper basis for the respondents to believe that essential elements of the relationship, namely, cooperation, respect, trust and confidence were no longer present. 3. To maintain the dealership would involve keeping the parties together in a relationship that requires respect, cooperation, trust and confidence. Those elements did not exist at the time of the respondents' decision to cancel the dealership. These proceedings have involved strong attacks on the credit and character of senior executives of both the applicants and the respondents. It is unrealistic to the extent of being fanciful to expect that a proper working relationship based on cooperation, trust, confidence and respect for one another could be established and maintained between the applicants and the respondents. 4. Hallmarks of the relationship between the applicants and the respondents were the requirements of respect, cooperation, trust and confidence. These hallmarks strongly suggest a relationship closer to a personal or relational contract as opposed to an arm's length commercial contract. The applicants cannot submit, on the one hand, the contract is akin to a franchise agreement with the characteristics of a relational contract in order to attract jurisdiction and, on the other hand, contend that trust and confidence do not assume particular significance in the relationship because the relationship is commercial in nature. 5. To grant the primary relief sought would be unfair against the respondents and would put the applicants in an advantaged position in the relationship. By acquiring a tenure that they never bargained for the applicants' would secure an unfair advantage as the dealership would, for all practical purposes, be terminable only in strictly limited circumstances. 6. It could not be said that in 1989 either the applicants or the respondents would have contemplated the contractual arrangements of the nature now proposed by the applicants; it is neither just nor appropriate to now impose such arrangements on the respondents. 7. The primary relief sought is grossly disproportionate to the unfairness found to exist and is not in any sense remedial: see Beahan v Bush Boake Allen Australia Ltd (1999) 93 IR 1 at 13. The orders sought in these proceedings travel beyond the purpose of the legislation. 8. The orders sought amount to orders for specific performance. Such orders, in the circumstances of this case, are not justifiable. I agree with Macken J's observations in Bennett v B.P. Australia Limited where his Honour stated: ...were I to rewrite the contract I would face all the difficulties which in the past have prompted Courts to refuse orders for specific performance of contracts of personal service. The future conduct of BP would be governed by the terms of a lease rewritten by the Industrial Commission, but the conduct of the applicants in carrying out their obligation under that lease (the area in which personal endeavour and initiative resides) would be altogether outside the control of the Court ...(my emphasis). 9. Except for the failures by the respondents giving rise to findings of unfairness in these proceedings, the contracts and arrangements between the applicants and the respondents have operated fairly for over a decade, with the applicants achieving extraordinarily high returns on their original investments. 9In relation to further proceedings the Court stated at [801]-[804]:

In Gough & Gilmour Holdings Pty Ltd and ors v Caterpillar of Australia Ltd and anor (No. 9) [2001] NSWIRComm 260 orders were made the effect of which was to keep the dealership agreements on foot until further order and in the intervening period to prevent the respondents taking any steps inconsistent with or prejudicial to the ongoing operation of the dealership. The respondents submitted that in the event the Court declines to grant the primary relief sought by them the underlying basis for the grant of the interlocutory relief pursuant to Interlocutory Judgment No. 9 falls away.

The effect of lifting the order that has allowed the dealership agreements to remain on foot would, of course, be to allow the agreements to be terminated by the first respondent.

It is yet to be determined whether, in light of the findings of unfairness, the applicants should be granted any alternative relief and, if so, what should be the form of that relief. It would seem that one of the foremost options available to the Court, if a proper case is made out, is to extend the notice period to terminate the dealership agreements. In those circumstances it would be premature to lift the orders allowing the agreements to remain on foot. However, given that the primary relief has been refused, there is a limit to how long the orders preventing termination can continue to apply.

Both parties have reserved their respective rights to make further submissions regarding alternative forms of relief. For that purpose, liberty is granted to either party to have these proceedings relisted for directions in relation to the scheduling of further hearings. 10The Court made the following orders:

... 1. The Court declares that the Overall Arrangement as determined by the Court to have existed between the applicants and the respondents is an unfair contract within the meaning of ss 105 and 106 of the Industrial Relations Act 1996. 2. The relief sought by the applicants in accordance with orders 2, 2A and 4 of the applicants' Further Third Amended Summons For Relief and Schedule A to that Summons is refused. 3. Liberty is granted to the parties to have these proceedings relisted for directions in relation to the scheduling of further hearings on the question of whether the applicants are entitled to any alternative relief and, if so, the form of such relief. 4. Costs are reserved. 11In Gough & Gilmour Holdings Pty Ltd v Caterpillar of Australia Ltd (No 15) [2003] NSWIRComm 173 ("Decision No 15"), given on 4 June 2003, the Court dealt with the applicants' claims for alternative relief. At [27] the Court noted that:

Civil Procedure Regulation 2005(NSW)

(2008) 39 Fam LR 323

(2007) 38 Fam LR 491

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