FEDERAL COURT OF AUSTRALIA Delta Car Rentals Australia Pty Ltd v Bamco Villa Pty Ltd [2000] FCA 72 PRACTICE AND PROCEDURE – cross-vesting – proceeding based on alleged termination of franchise agreement – uncompleted litigation over the same agreement in the Supreme Court of Victoria Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) s 5(4) Re Wakim (1999) 163 ALR 270 mentioned DELTA CAR RENTALS AUSTRALIA PTY LTD & ORS V BAMCO VILLA PTY LTD NO V 701 OF 1999 HEEREY J 8 FEBRUARY 2000 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 701 OF 1999 BETWEEN: DELTA CAR RENTALS AUSTRALIA PTY LTD (ACN 086 276 404) First Applicant CLA OPERATIONS PTY LTD (ACN 088 245 050) Second Applicant AND: BAMCO VILLA PTY LTD (ACN 056 330 262) Respondent JUDGE: HEEREY J DATE OF ORDER: 8 FEBRUARY 2000 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The proceeding be transferred to the Supreme Court of Victoria. 2. The costs of the parties are reserved for the Supreme Court. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 701 OF 1999 BETWEEN: DELTA CAR RENTALS AUSTRALIA PTY LTD (ACN 086 276 404) First Applicant CLA OPERATIONS PTY LTD (ACN 088 245 050) Second Applicant AND: BAMCO VILLA PTY LTD (ACN 056 330 262) Respondent JUDGE: HEEREY J DATE: 8 FEBRUARY 2000 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The trial of this proceeding has been listed for 10 and 11 February next. The respondent seeks an order vacating those trial dates. It is said that time allotted will not be adequate and that neither side has complied adequately with interlocutory directions. More fundamentally however, the respondent says that this proceeding should be cross-vested to the Supreme Court of Victoria because the present matter is intimately connected with uncompleted litigation in that Court. On 3 February 2000 I made the order requested. The following are my reasons. 2 The applicants are controlled by Mr Mario Salvo and the respondent by brothers Horace and Tony Vernuccio. By a franchise agreement dated 11 June 1993 a company called Montedeen Pty Ltd (also controlled by Mr Salvo) granted a franchise to the respondent to operate a car rental business called Delta Car Rentals in a defined area extending from Richmond to Camberwell. Under the terms of that agreement the respondent carried on business at premises at 26 Swan Street, Richmond and 434 Bourke Road, Camberwell. The applicants allege that the first applicant, via an intermediary assignor, obtained by assignment from Montedeen the rights under the franchise agreement and that the second applicant by similar assignments acquired the Delta Car Rentals registered trade mark. 3 On 13 December 1999 the applicants commenced this proceeding alleging infringement of the trade mark and seeking a declaration that as a result of the respondent's alleged breaches of the franchise agreement it was terminated as from 9 December 1999. By a notice of motion returnable on 17 December the applicants sought an interlocutory injunction restraining the respondent from using the trade mark or any signs or names in connection with the conduct of the Delta Car Rentals business, orders that the respondent transfer to the first applicant all of its telephone numbers used in the franchise business, and delivery up of all standard rental agreement forms, advertising matters, bulletins, manuals, accounts and all other materials received by the respondent from the franchisor of the business and any other materials of any description bearing the Delta Car Rentals trade mark. 4 When the matter came on before me on 17 December it appeared that the main issue in dispute was the physical condition of the Richmond and Camberwell premises and the vehicles operated by the respondent. On that basis, I declined to grant the interlocutory injunction sought because 10 and 11 February were available dates for a trial of the action. Counsel who then appeared for the respondent (not its present counsel) had only recently been briefed and while he did mention the existence of Supreme Court litigation the nature of that litigation and its impact on the issues raised in the present proceeding were not really canvassed. I say that without any criticism of the counsel concerned. 5 On the hearing before me on 2 February 2000 considerably more detail emerged about the Supreme Court litigation. It appears that on 22 March 1996 the respondent issued proceedings in the Supreme Court against Montedeen and Mr Salvo seeking relief against alleged breaches of the franchise agreement. These breaches included (a) the diversion of calls received on the Delta 13 13 90 number (to which the respondent was entitled) to Montedeen's St Kilda Delta branch; (b) the opening by Montedeen of a Delta branch in St Kilda at a location 200 metres from the boundary of the respondent's franchise territory; (c) the ownership of car rental businesses by Montedeen in competition with Delta under the names "Crown Rent-a-Car", "Real Cheap" and "Restoria Rent-a-Car" (hereafter referred to as "the competing businesses"); and (d) the withdrawal by Montedeen of the respondent's right to use the name "Damn Cheap". 6 On 8 August 1996, and before the trial of the Supreme Court proceeding, Montedeen purported to sell the competing businesses to a third party. The respondent alleged that this sale was a sham. 7 The trial in the Supreme Court, on issues of liability only, was heard by Hansen J. On 6 June 1997 his Honour delivered a judgment in which he found that Montedeen was in breach of an implied term in the franchise agreement by its diversion of calls on the 13 13 90 number and that Montedeen's refusal to allow the respondent to use the name "Damn Cheap" was in breach of an express term of the franchise agreement. 8 His Honour otherwise dismissed the respondent's claim. At a further hearing before his Honour on 23 and 23 in June 1997 the respondent sought leave to reopen its case to introduce fresh evidence in support of its allegation that the sale by Montedeen of the competing businesses was a sham. On 3 July 1997 his Honour handed down judgment refusing leave. 9 His Honour then proceeded to assess damages in respect of the claims on which the respondent had succeeded. His Honour gave judgment on damages on 20 October 1997 and on 16 March 1998 he ordered Montedeen to pay the costs of the proceeding. 10 Montedeen appealed and the respondent cross-appealed. After a five day hearing the Court of Appeal gave judgment on 18 May 1999. The Court of Appeal dismissed Montedeen's appeal and allowed the cross-appeal. The Court held that the sale of the competing businesses was a sham. 11 As a result of the Court of Appeal's decision the matter was remitted to Hansen J for the assessment of further damages arising from the respondent's success on the sham issue. That hearing has been fixed for 13 April 2000. 12 Section 5(4) of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) relevantly provides: "(4) Where – (a) a proceeding (in this sub-section referred to as the 'relevant proceeding') is pending in the Federal Court or the Family Court (in this sub-section referred to as the 'first court'); and (b) it appears to the first court that – (i) the relevant proceeding arises out of, or is related to, another proceeding pending in the Supreme Court of a State or Territory and it is more appropriate that the relevant proceeding be determined by that Supreme Court; (ii) having regard to – (A) where, in the opinion of the first court, apart from this Act and any law of a State relating to cross-vesting of jurisdiction, the relevant proceeding or a substantial part of the relevant proceeding would have been incapable of being instituted in the first court and capable of being instituted in the Supreme Court of a State or Territory; (B) the extent to which, in the opinion of the first court, the matters for determination in the relevant proceeding are matters arising under or involving questions as to the application, interpretation or validity of a law of the State or Territory referred to in sub-sub-paragraph (A) and not within the jurisdiction of the first court apart from this Act and any law of a State relating to cross-vesting of jurisdiction; and (C) the interests of justice, it is more appropriate that the relevant proceeding be determined by that Supreme Court; or (iii) it is otherwise in the interests of justice that the relevant proceeding be determined by the Supreme Court of a State or Territory, the first court shall transfer the relevant proceeding to that Supreme Court." 13 It was not suggested that the holding of the High Court in Re Wakim (1999) 163 ALR 270 affected the validity of the Federal to State component of the Commonwealth cross-vesting legislation. Clearly the present proceeding is related to the litigation in the Supreme Court to which I have referred, given that it concerns the same franchise agreement. It seems to me therefore that it is in the interests of justice that this matter be transferred to the Supreme Court. In the forthcoming assessment of the damages in the Supreme Court a central question will be whether or not the franchise agreement has been validly terminated. It seems unthinkable that this issue should be litigated in two different courts with the possibility of inconsistent findings. 14 Moreover, the defence filed by the respondent on 21 January 2000, amongst other things, attacks the validity of the assignment of the franchise agreement and alleges a breach of an express term that the franchisor would use its best endeavours to promote the mutual business interest of the franchisor and the franchisee and of an implied term that the franchisor would act reasonably, in good faith and for a proper purpose. 15 The purported termination is said to have been "the continuation of a concerted campaign by Mr Mario Salvo to force the respondent out of business". Particulars indicate the respondent will rely upon the matters set out in the judgments of Hansen J and the Court of Appeal. The conduct of the applicants is alleged to be unconscionable. 16 Thus in the present proceeding the whole conduct of the applicants and Mr Salvo in relation to the franchise agreement has been brought into issue. That conduct, at least to some extent, has been the subject of findings after contested hearings in the Supreme Court and the Court of Appeal. I think it is plainly in the interests of justice that the proceeding continue in the Supreme Court. 17 I shall therefore order that the matter be transferred to the Supreme Court and the costs of this proceeding to date are reserved for that Court. The order submitted to me on 3 February referred only to the costs of the application before the Court on the previous day. However it seems appropriate that all the costs to date in this proceeding should be reserved. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey. Associate: Dated: 8 February 2000 Counsel for the Applicants: Mr C Golvan Solicitor for the Applicants: Messrs Deacons Graham & James Counsel for the Respondent: Mr S Whelan QC and Ms M Rozner Solicitor for the Respondent: Lander & Rogers Date of Hearing: 2 February 2000 Date of Judgment: 8 February 2000