Ultra Tune Australia Pty Ltd v Australian Competition and Consumer Commission

THE COURT: 1 On 20 September 2019 the Court made orders allowing an appeal in part from orders made by a judge of the Court on 18 January 2019. 2 The primary judge had, in extensive reasons, concluded that the appellant (Ultra Tune) had contravened clauses of the Franchising Code of Conduct (Schedule 1 to the Competition and Consumer (Industry Codes - Franchising) Regulation 2014 (Cth) (Franchising Code). The Court through the primary judge imposed significant penalties for those contraventions, being in total $2,604.000. Ultra Tune was ordered by the primary judge to pay the applicant's costs on an indemnity basis. The reasons for that costs order were concisely expressed by the primary judge at [387]-[389] of his Honour's reasons as follows: 387 The ACCC seeks indemnity costs, largely arising out of the way in which Ultra Tune conducted its defence. Although this is an unusual application to make, and necessarily would only succeed in exceptional or unusual circumstances, the reasons above demonstrate that this is such a case. The attempt to cover up the deplorable conduct of Ultra Tune towards Mr Ahmed was not abandoned in this Court, but rather was persevered with, and this took up the lion's share of the evidence, hearing time and submission length and time, as well as preparation by the ACCC. Ultra Tune made many submissions that were simply unsustainable. 388 This was not a case that was prudently defended as to all of the alleged contraventions having taken place. It probably should not have been more than a penalty hearing conducted on an agreed statement of facts. Only a very small proportion of the costs would have been incurred had Ultra Tune approached this litigation in an appropriate fashion. The ACCC should not bear the costs of that forensic decision. 389 In all the circumstances I am satisfied that it is appropriate to order that Ultra Tune pay the ACCC's costs of this proceeding on an indemnity basis. 3 These reasons at the end of his Honour's judgment reflect the comments that he was obliged to make in [2] of the reasons where he said the following: This case is about Ultra Tune's failure to comply with minimum franchisor obligations, including a number of more serious breaches, and the fabrication of business records in a failed attempt to conceal its wrongdoing. Ultra Tune's stance at trial and in closing submissions has required detailed and comprehensive reasons to be given to explain why most of its evidence and submissions cannot be accepted. 4 This Court allowed the appeal in part, but only upon a narrow basis as to the proper construction of cl 15(1) of the Franchising Code and therefore the number of contraventions that had taken place: see Ultra Tune Australia Pty Ltd v Australian Competition and Consumer Commission [2019] FCAFC 164 at [50]-[54]. The consequence of this was a reduction of penalty. There were some further disagreements with the approach of the primary judge in relation to imposition of penalties which can be seen at [55]ff of Ultra Tune Australia Pty Ltd v Australian Competition and Consumer Commission [2019] FCAFC 164. 5 No submissions were put on the appeal as to any error in the matters of the character found in [2] and [387]-[389] of the learned primary judge's reasons. There was an appeal against the making of the indemnity costs order. However, it could be taken from the absence of any submissions as to the trenchant criticism of Ultra Tune in [2] and [387]-[389] that the appeal against the indemnity costs order was to follow the event. 6 The orders made by this Court on 20 September 2019 (the appeal having been argued on 12 August 2019) were as follows: 1. The appeal be allowed in part. 2. Order 1 of the orders made on 18 January 2019 be varied by substituting the amount of $2,014,000 for the amount of $2,604,000. 3. Order 4 of the orders made on 4 March 2019 be varied by substituting for Annexure A to those orders, Annexure A to these orders. 4. Subject to order 5 below the respondent pay 60% of the appellant's costs of the appeal. 5. Either party wishing to be heard on costs may file submissions not exceeding three pages in length identifying the costs order they seek and reasons in support within 7 days of these orders. 6. Any party which is served with a submission under order 5 may file and serve a submission in reply not exceeding three pages in length identifying the costs order they seek and reasons in support within a further 7 days thereafter. 7. Costs will be determined on the papers if necessary. 7 The orders did not set aside or otherwise deal with Order 4 made on 18 January 2019 that the costs below be paid on the indemnity basis. The reasons of the Court did not address this separate issue. As we have said the submissions on the appeal did not directly challenge the matters in [2] and [387]-[389] of the primary judge's reasons. 8 Nevertheless the Court ordered that any party wishing to be heard on costs file submissions within 7 days: see Order 5 of 20 September 2019. No such submissions were filed. 9 The next thing the Full Court heard was in late July 2020 when the solicitors for Ultra Tune commenced email correspondence with the Associate to Justice Jagot, informing the Court about the current stage of taxation with respect to the costs sought by the ACCC. The ACCC were, in accordance with Order 4 made in January 2019 by the primary judge, seeking indemnity costs for the trial. The parties were informed that if some step was sought from the Full Court an application was to be filed. This led to an interlocutory application being filed in the appeal on 18 August 2020 seeking the following orders: 1. Leave be granted to the Appellant to file and serve submissions nunc pro tunc within two weeks of the date of these orders with respect to the costs of the proceedings below pursuant to order 4 of the Notice of Appeal dated 17 June 2019, together with copies of any authorities on which it relies in pdf format. 2. The Respondent to file and serve submissions in response within two weeks of receipt of the Appellant's submissions together with copies of any authorities on which it relies in pdf format. 3. The Appellant's application will thereafter be determined on the papers. 4. Reserve liberty to the parties to apply by email to the Full Court for further directions upon giving reasonable notice to the other party. 10 The application was supported by an affidavit of Mr Truong, the in-house lawyer for Ultra Tune. The order sought was under the slip rule on the basis that the Court had not dealt with the question of indemnity costs by some oversight. The affidavit in support noted that the notice of appeal challenged the order for indemnity costs, noted the Full Court's orders, noted that neither party made submissions to the Full Court concerning costs and sought in effect the reopening of the appeal. 11 The Court dealt with the submissions before it in its judgment of 20 September 2019. The order as to any submissions as to costs was wide enough in terms to encourage the parties to deal with any order either of the Full Court or of the primary judge as to costs. 12 When one examines the reasons that reflect the disagreement of the Full Court with the reasons of the learned primary judge it is manifest that there was no disagreement in substance with anything said by the primary judge in [2] and [387]-[389] of his Honour's reasons. 13 The disagreement was as to the proper construction of the Franchising Code. This led to an important difference in the number of contraventions. It also led to a disagreement as to the legitimacy of an argument that was put forward by Ultra Tune. Hence the disagreements with the learned primary judge as to a certain stubbornness of Ultra Tune reflected in [57]ff of Ultra Tune Australia Pty Ltd v Australian Competition and Consumer Commission [2019] FCAFC 164. 14 There is nothing to lead to the conclusion that the trenchant criticisms of Ultra Tune made in the way it conducted enforcement litigation should be varied or substantially qualified. 15 In our view this is not a slip rule matter. The parties were given leave to deal with costs. They are a year out of time in doing so. The submissions put in support rest on some mechanical conclusion that the costs of the first instance matter should be divided in the same fashion as the costs on appeal. The two processes are entirely different. The way the matter was run below was the subject of clear findings by the primary judge that underpinned his view as to costs. They were not challenged during the appeal which was the appropriate time to challenge them. A year after the Full Court handed down its reasons and made its orders is not the time to begin complaining about an order for costs made by the primary judge which is plainly not impugned by the disagreement of the appeal court with some aspects of the primary judge's conclusions. 16 Further, the matter has proceeded and significant expense has been undertaken in vindicating the ACCC's position as to costs. Ultra Tune was aware of this issue during the course of the year and it has delayed until late July in bringing this matter to the attention of the Full Court. 17 It is important that parties bring forward promptly after orders of the Court are made any problem or disagreement they have with the orders, including any assertion, if it is to be made, that the Court has not dealt with something that it should have dealt with. 18 Here the Court dealt with all matters that were laid before it in the appeal. The appeal took place six months after the primary judge's orders and was delivered within a month. The parties were given seven days to address issues as to costs. They did not. Now, after a year, the losing party wishes in effect to reopen the appeal based on the slip rule. That characterisation of the application is misconceived. The Court did not overlook anything. It dealt with the submissions put before it. It permitted the question of costs to be addressed. It was not addressed. What is effectively sought is an extension of time to deal with this issue over a year after the appeal has been otherwise determined. The proper despatch of this Court's business should not tolerate such a delay. 19 In any event, as a matter of substance, there is no merit in the application. The reasons for the indemnity costs order remain unchallenged. The success on the appeal is not a matter that impugns or undermines the indemnity costs order in any way. 20 The interlocutory application should be dismissed with costs. There should be a lump sum order as to the amount of costs to avoid any further expenditure of time or money on this application. 21 The submissions of the respondent were concise and to the point. Nevertheless, they would have taken considerable time given the passage of time since all these matters were litigated. Bearing in mind the issues raised, the necessity to reach back in time to deal with these questions and to prepare and file the submissions that were filed and to deal with the correspondence and assertions of Ultra Tune's lawyers in connection with the application, we are of the view that the amount of such lump sum costs should be $7,500.00. 22 Neither party has been heard on the lump sum costs. Should either party contest the amount it has liberty to file a one-page submission and a short affidavit as to the sum of $7,500.00. If this leave is taken up the Court may vary upward or downward the sum including by reference to the costs consequent on taking up this leave. 23 The orders of the Court therefore will be:

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