Telstra Corporation Ltd v. Communications Network International Inc. & Anor [1994] FCA 1000

The proceeding was brought by the applicant, who carries on business under the name "Telecom", against the first respondent, an American corporation which manufactures a telephone credit card under the name "The Telecom Pay Card". The second respondent is the Australian agent and distributor of the first respondent. The proceeding was commenced on

13 September 1994. An application for an interlocutory

injunction was heard by Olney J on 27 September. On 30 September his Honour granted the injunction sought. His Honour (at 4) made some observations about the appearance of

"The general get up of the card and brochure is in my opinion likely to mislead or deceive all but the most astute and inquiring minds into believing that The Telecom Pay Card 16 a product of the applicant and particularly the use of the definite article before the word 'Telecom' is strongly suggestive of the fact that Telecom in that context 1s used to distinguish the card as one associated with the applicant's business."

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

"We have ceased marketing and distribution of anything in Australia with 'Telecom' word on 1t. Our agents and distributors were advised of the order the same day and likewise to the best of our knowledge immediately ceased supplying any such matter to the public. It has never been our intention to pursue this matter beyond the injunction hearing stage. We consider the judge's 'verdict' to be final ina practical sense."

In a further letter from the President of the first respondent

"The old Telecom Pay Cards not distributed to the public in Australia prior to the injunction are and will be used elsewhere in the world. In the end, however, I assure you that there are no significant stocks of Telecom Pay Cards left in Australia. We have already begun deliveries of the new re- named product, the Worldcom Phone Card, which we have had to produce at great expense just for supply to the Australian market. All collateral materials refer to that product name and supplies are being sent to our customers as quickly as

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

The applicant in seeking an order that the second respondent pay its costs relied on a decision of Kaye J of the Supreme Court of Victoria in Garwolin Nominees Pty Limited v Statewide Building Society [1984] VR 469. In that case the plaintiff had brought an action to enforce terms of a lease assigned to the defendant. Shortly before the matter came on for hearing the defendant rectified its non-compliance. The plaintiff sought leave to discontinue. The defendant did not resist that application but argued that the rules only conferred power to award the costs of the application to discontinue as distinct from the costs of the action. His Honour awarded

costs of the action to the plaintiff and said (at p 472):

"There are sound reasons for giving one party his costs of the action on granting leave to discontinue. A plaintiff may seek leave to discontinue for any one of a number of reasons. He may do so because he recognizes the validity of a defence pleaded by the defendant, such as the statute of limitations

In that event he may not wish to continue what is obviously an action which cannot succeed. In such circumstances he may seek leave to discontinue and he may be granted leave on terms of payments of the defendant's costs of the action. It would seem that that might be the only appropriate order to do justice between the parties, because the defendant has in effect succeeded in defeating the plaintiff's claim.

Other circumstances in which a plaintiff might seek to discontinue might be after the close of pleadings in an action for possession the defendant has surrendered possession of the subject premises. In that event the plaintiff would have achieved what he set out to obtain by the issue of proceedings. It would be quite unjust and unfair if the plaintiff were denied his costs incurred in achieving the relief he sought by the commencement of his action. Furthermore, it would be quite unnecessary to force him to continue on to trial for the purposes of obtaining orders for possession and for costs. The procedure for obtaining leave to discontinue enables the party to bring to an end his litigation when the relief sought has been obtained."

Recently in this court Ryan J indicated his agreement with

Garwolin; see Trade Practices Commission v Santos Limited,

(unreported 19 February 1993) at 27. I would respectfully take the same course. The present situation is different from that dealt with in J.T. Stratford & Son Limited v Lindley [1969] 1 WOR 1547, where neither party wished to pursue the claim to trial and, equally, as far as one can gather from the report, neither side had really achieved anything out of the

The only complicating matter here is that the order is sought against a respondent other than the one who has conceded the applicant's claim. Counsel for the second respondent argued that his client should receive its costs. He said that the question was still open whether the card did in truth infringe s 52 of the Trade Practices Act 1974 (Cth) and argued that the price of discontinuance always is that the respondent is paid out. I must say, with respect, I think that latter proposition overstates the case. The whole point of Garwolin is that a respondent cannot say that the mere fact of discontinuance, with the consequence that there will not be a trial on the merits, means that the discontinuing applicant must pay the costs of the proceeding. Here the position is that the applicant has achieved what it sought out to achieve in the litigation, namely, the cessation of use of the offending card in Australia. That would remain the position even if the litigation were to continue as suggested by the second respondent because even if the second respondent were to succeed it is only the agent of the first respondent and

the first respondent is bound by its agreement of compromise

with-the applicant not to circulate the card in Australia. It could not do that through the second respondent or any other

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

the second respondent. I do not think it should be rewarded

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

Also I do not think it is practicable to enter into any examination of the quantum of the applicant's costs and in

particular whether it was necessary for it to produce evidence

as to the reputation of the business name "Telecom". It is true that his Honour found that this was a matter of notoriety of which he could take judicial notice, but on the face of it I am not persuaded that it was unreasonable for the applicant to have available evidence in case it could not establish that

element of its claim under the doctrine of judicial notice.

There will be leave to the applicant to discontinue. I will order the second respondent pay the applicant's costs

including reserved costs and the costs of this application.

I certify that this and the preceding (five) 5 pages are a true copy of the reasons for judgment of his Honour Mr Justice Heerey.

Counsel for the applicant: A Archibald QC with A J Maryniak

Solicitor for the applicant: Mallesons Stephen Jaques