Illawarra Breads Pty Limited and ors v Baker's Delight Holdings Limited

FIFTH APPLICANT Mark Andrew Massie

RESPONDENT Baker's Delight Holdings Limited

CORAM: Walton J Acting President; Boland J; Backman J

CATCHWORDS: Costs - Unfair contract - Motion by respondent to dismiss amended summons on jurisdictional grounds - Motion by applicants to further amend summons for relief to overcome jurisdictional objection - Applicants' motion granted - Whether applicants should pay the costs thrown away by reason of grant of leave to file amended summons - Whether applicants should pay costs thrown away in the motion to dismiss on an indemnity basis by reason of grant of leave to file amended summons - Applicants ordered to pay respondent's costs thrown away by reason of grant of leave to file amended summons - Premature to order costs in respect of respondent's motion to dismiss - Respondent to pay applicant's costs of notice of motion to further amend summons

LEGISLATION CITED: Industrial Relations Act 1996 s 106

Barclays Australia Ltd v Dan (Yeldham J, NSWSC ,16 December, 1981, unreported) Beoco Ltd v Alfa Laval Co Ltd [1995] QB 137 Colgate-Palmolive Company and another v Cussons Pty Limited (1993) 46 FCR 225 Degmam Pty Ltd (in liq) v Wright (No 2) [1983] 2 NSWLR 354 EMI Records Ltd v Ian Cameron Wallace Ltd [1983] Ch 1 59 Frost v The Speaker of Legislative Assembly of New South Wales (No 2) (2001) 103 IR 358 Illawarra Breads Pty Limited and ors v Baker's Delight Holdings Limited [2007] NSWIRComm 223 CASES CITED: Koh v Murchison Metals Ltd [2007] NSWSC 765 Latoudis v Casey (1990) 170 CLR 534 Mayne Nickless Ltd v Industrial Relations Commission Of New South Wales (2004) 141 IR 1 Murrihy v Radio 2UE Sydney Pty Ltd [2000] NSWSC 318 Nagle (T/as W D and J L Nagle & Sons) v Tilburg & Anor (1993) 51 IR 8 Old UGC Inc and Others v Industrial Relations Commission of New South Wales and Another (2004) 60 NSWLR 620 Oshlack v Richmond River Council (1998) 193 CLR 72 Solution 6 Holdings Ltd and Others v Industrial Relations Commission of New South Wales and Others (2004) 60 NSWLR 558 Van Huisstede v Commissioner Of Police (No 2) (2001) 106 IR 56

HEARING DATES: (Written submissions) 3 and 10 October 2007

APPLICANTS Mr S E J Prince of counsel Solicitor: Mr B Belling Home Wilkinson Lowry LEGAL REPRESENTATIVES: RESPONDENT Mr J P Phillips SC Solicitor: Mr M Tooma Deacons

CORAM: WALTON J, Acting President BOLAND J BACKMAN J Friday, 19 October 2007

Illawarra Breads Pty Limited and ors v Baker's Delight Holdings Limited

Application under s 106 of the Industrial Relations Act 1996

1 In Illawarra Breads Pty Limited and ors v Baker's Delight Holdings Limited [2007] NSWIRComm 223, a decision given on 26 September 2007, the Full Bench made the following orders: (1) The applicants' application to further amend the summons in the terms set out in the further amended summons is granted; (2) Within seven days of the date of this judgment the respondent shall file and serve its submissions in relation to costs of the applicants' notice of motion to amend. The applicants have a further seven days in which to file and serve a response. Unless one or both parties make a request to be heard orally, the Full Bench will deal with the question of costs on the papers. This judgment deals with the question of costs; there was no application made for an oral hearing. 2 As it was explained in Illawarra Breads: · The applicants filed a summons in November 2005 under s 106 of the Industrial Relations Act 1996 seeking relief from what was asserted to be unfair contracts or arrangements arising from the franchising arrangements between the applicants and the respondent. · On 5 May 2006 the applicants filed an amended summons. · On 7 May 2007 the respondent filed a notice of motion seeking a declaration that the Court did not have jurisdiction with respect to various franchise and licence agreements and an order that the amended summons be dismissed. · On 11 July 2007 the respondent filed its written outline of submissions in support of its motion to dismiss the amended summons. · On 2 August 2007, in light of the respondent's submissions, the applicants, by notice of motion, sought to further amend the summons. The respondent opposed the motion to amend.

On 26 September 2007 the Full Bench granted the application to further amend the summons. 3 The respondent seeks the following orders: (1) The Applicants pay the costs thrown away by reason of the grant of leave to file the Further Amended Summons;

(2) The Applicants pay the Respondent's costs thrown away in the Motion to dismiss, on an indemnity basis, by reason of the grant of leave to file the Further Amended Summons; and

(3) The Applicants pay the costs of the Motion. Submissions for the respondent

4 After noting that the Court's power to award costs, including indemnity costs, is to be found in section 181(1) of the Act and that costs are in the discretion of the Court, the respondent referred to the observation by the Full Bench in Illawarra Breads at [10] that the proposed further amended summons represented "a very significant restructuring and alteration" of the amended summons. It was submitted that a party granted leave to make significant amendments is ordinarily ordered to pay the costs thrown away by reason of the amendment and of the motion for leave to amend. Reference was made to the rationale for the general rule that costs follow the event: Latoudis v Casey (1990) 170 CLR 534 at 567 per McHugh J. 5 The respondent submitted that: There is no reason to depart from the ordinary rule in relation to the amendments themselves, which are an indulgence granted to the Applicants. It is just in the circumstances that the Respondent be compensated for the costs it has incurred due to the path taken by the Applicants. 6 In relation to the respondent's motion to dismiss, it was submitted that the amendments proposed were, by the applicants' admission, an attempt to meet the arguments of the respondent in support of its motion to dismiss the amended summons for want of jurisdiction. Reference was made to Beoco Ltd v Alfa Laval Co Ltd [1995] QB 137 where Stuart-Smith LJ said at 154 (adopted by Studdert J in Murrihy v Radio 2UE Sydney Pty Ltd [2000] NSWSC 318): 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. 7 The respondent submitted: Whatever the ultimate outcome of the Respondent's Motion to dismiss may be, the amendments will alter the substance of the arguments going to jurisdiction and the costs thus far expended in the preparation for the hearing of that Motion, including the preparation of written submissions, have been wasted. The Respondent also submits that this is an appropriate case for the Court to order the Applicants to those costs on an indemnity basis indemnity. 8 On the question of indemnity costs, after referring to a number of authorities (Degmam Pty Ltd (in liq) v Wright (No 2) [1983] 2 NSWLR 354; Barclays Australia Ltd v Dan unreported, Yeldham J, NSWSC, 16 December 1981; EMI Records Ltd v Ian Cameron Wallace Ltd [1983] Ch 1 59; Frost v The Speaker of Legislative Assembly of New South Wales (No 2) (2001) 103 IR 358; Van Huisstede v Commissioner Of Police (No 2) (2001) 106 IR 56; Koh v Murchison Metals Ltd [2007] NSWSC 765; and, Colgate-Palmolive Company and another v Cussons Pty Limited (1993) 46 FCR 225), the respondent submitted there were "special or unusual features of an unmeritorious or improper nature surrounding the case…which make it unreasonable and unfair" that the respondent "should be out of pocket as a result of the proceedings". Those features were: (i) The Applicant had consented to the referral to the Full Bench for the hearing of the Respondent's Motion to dismiss on the basis of the affidavit of Mr. Taylor and the Statement of Agreed Facts (from which they have now departed);

(ii) The timing of the Applicants' application for leave to amend and to vacate the hearing date; the application came late and only after the Applicants had been seen and considered the Respondent's submissions on the issues as to jurisdiction;

(iii) The amendment will necessitate reconsideration by the Respondent of its Motion to dismiss and may result in the Notice becoming a nullity, with attendant waste of costs;

(iv) [If] the Applicant had taken the steps it has now taken when the matter was listed before Vice President Walton for directions in June 2007; and

(v) The Applicants took no steps to redress, by amendment, the deficiencies in their pleadings which they now acknowledge. Submissions for the applicants

9 The applicants' position was expressed to be as follows: (i) it is agreed that the costs thrown away by reason of the grant of leave to file a Further Amended Summons ought to be paid by the Applicants;

(ii) it is premature to make any costs order in respect of the Motion filed 7 May 2007…. Those orders should await the determination of that Motion in one way or another;

(iii) the Respondent should pay the Applicants' costs of amending the Motion…. 10 In addressing the submissions of the respondent, that the amendments made by the applicants to the summons for relief had substantially altered the case the respondent had to meet (and without which the action would fail), the applicants submitted: (i) the amendments here are not late in terms of the proceedings as was observed by the Full Bench (see Illawarra Breads at [26]);

(ii) the amendments have not substantially altered the nature of the case which the Respondent has to meet (see Illawarra Breads at [18]) but rather have dealt with a technical point which has been raised by the respondent as to jurisdiction;

(iii) it was entirely appropriate for the Applicants to have dealt with those objections (which were not clearly articulated until the written submissions in support of the Respondent's motion were served) in the way that they have (see Mayne Nickless Limited v Industrial Relations Commission Of New South Wales & 3 Ors (2004) 141 IR 1 at [61] per Mason P referring to Solution 6 Holdings v Industrial Relations Commission of New South Wales (2004) 60 NSWLR 558 at [36] per Spigelman CJ; and Old UGC Inc & Ors v Industrial Relations Commission of NSW & Anor (2004) 60 NSWLR 620 at [51] per Spigelman CJ);

(iv) the decision in Murrihy v Radio 2UE Sydney Pty Limited [2000] NSWSC 318 does not assist the Respondent (nor does Beoco) . Murrihy deals with the situation where an order for costs was made in the substantive proceedings at the end of a hearing in circumstances where the amendment pleaded further factual matters, namely imputations in a Section 7A of the Defamation Act hearing. In the present case, the re-ordering of the application (before any response has been filed) to deal with a purely technical former point is entirely different to the situation considered in Murrihy . 11 Referring to the respondent's submission that whatever the ultimate outcome of its motion to dismiss might be, that the amendments will alter the substance of the arguments going to jurisdiction and the costs thus far expended in the preparation for the hearing of that motion have been wasted, the applicants submitted: (i) such a prediction cannot be made until the determination of the Motion, and

(ii) it is entirely a problem for the Respondent that it has embarked on an early Notice of Motion to strike out proceedings on a basis of jurisdiction knowing full well that in answer to such jurisdictional objections amendments may be made to re-cast the legal effect of matters (as here) in order to deal with such objections ( Nagle v Tilburg (1993) 51 IR 8; see also Burgess v Mount Thorley Operations Pty Ltd (2003) 132 IR 400 at [91]-[92], [98]; applied in Holburn v Shig Pty Ltd and ors [2007] NSWIRComm 104 at [66]). 12 Addressing the respondent's submissions regarding indemnity costs, the applicants submitted it could hardly be said to be an extreme circumstance that a predictable and obvious amendment would be made in response to a technical jurisdictional objection in circumstances where that course of action is considered in a multitude of decisions of this Court following Nagle (T/as W D and J L Nagle & Sons) v Tilburg & Anor (1993) 51 IR 8 and the approach of the Court of Appeal in Mayne Nickless Ltd v Industrial Relations Commission Of New South Wales (2004) 141 IR 1, Solution 6 Holdings Ltd and Others v Industrial Relations Commission of New South Wales and Others (2004) 60 NSWLR 558 and Old UGC Inc and Others v Industrial Relations Commission of New South Wales and Another (2004) 60 NSWLR 620. 13 It was submitted for the applicants that there was no basis for the awarding of indemnity costs on the respondent's motion to dismiss (or costs at all) even if that were presently before the Court and able to be dealt with, which it is not. Further, that no order in respect of costs should be made on the respondent's motion until it is heard and determined. 14 With respect to the costs of the applicants' motion to amend the summons for relief (motion filed 2 August 2007), the applicants relied upon an affidavit of Aran Alexander, solicitor. It was deposed in Mr Alexander's affidavit that on 26 July 2007 the solicitors for the applicants wrote to the solicitors for the respondent indicating the applicants' intention to amend the summons for relief. On 30 July 2007, the respondent's solicitors wrote to the applicants' solicitors refusing to consent to any amendment and thereby enjoining the applicants to proceed by way of the notice of motion. 15 The applicants noted that upon the hearing of the motion they were successful in obtaining the orders sought and were entirely successful on the motion. Consequently, it was contended, there was no reason to depart from the normal rule that the costs should follow the event of a motion and, accordingly, the applicants should have the costs of the motion on a party/party basis: Oshlack v Richmond River Council (1998) 193 CLR 72 at 96. Consideration 16 On 7 May 2007, the respondent filed a notice of motion seeking a declaration that the Court did not have jurisdiction with respect to various franchise and licence agreements and an order that the applicants' amended summons be dismissed. On 11 July 2007, the respondent filed its written outline of submissions in support of its motion to dismiss the amended summons. On 2 August 2007, in light of the respondent's submissions, the applicants, by notice of motion, sought to further amend the summons. The respondent - unsuccessfully - sought to oppose the applicants' motion to further amend. 17 The applicants have conceded, correctly in our view, that they ought pay the costs thrown away by reason of the grant of leave to file a further amended summons. Accordingly, we propose to order to that effect. 18 In relation to the respondent's claim that the applicants pay the respondent's costs thrown away in the motion to dismiss on an indemnity basis, we agree with the submissions put by the applicants, namely, that it is premature to conclude whether the amendments will alter the substance of the arguments going to jurisdiction. In Illawarra Breads at [23] the Full Bench observed: [23] We are in no position, on what has been put to us thus far, to determine one way or the other whether the amendments contained in the proposed further amended summons are futile. We have not been taken at all to any evidence about whether or not the contracts or arrangements that are the subject of the pleadings are contracts or arrangements whereby work is performed in an industry nor have we been taken to the proposed further amended summons for the purpose of demonstrating its futility in a jurisdictional sense other than in the context of s 108B. 19 Furthermore, although the applicants sought to amend the summons in order to overcome a jurisdictional objection taken by the respondent, such a motive is not, of itself, a bar to the amendments in circumstances where, as to factual matters, the amendments were not such as to "alter the fundamental character or quality of the claims being made by the applicants against the franchisor" (Illawarra Breads at [19]). Moreover, the amendments were sought at a relatively early stage (see Illawarra Breads at [26]) and there was no real prejudice caused to the respondent by the amendments (see Illawarra Breads at [26]). 20 In these circumstances, there is no basis for an order at this stage that the applicants pay the respondent's costs thrown away in the motion to dismiss, either on an indemnity basis or any other basis. 21 As to the applicants' motion to further amend the summons, the applicants were entirely successful. In those circumstances we see no reasons to depart from the usual rule that costs follow the event.

(1) The respondent should have the costs thrown away by reason of the grant of leave to the applicants to file a further amended summons as agreed or assessed.

(2) The respondent shall pay the applicants' costs of the notice of motion filed on 2 August 2007 as agreed or assessed.

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