FEDERAL COURT OF AUSTRALIA Aircent Pty Ltd v Apple Computer Australia Pty Ltd [2002] FCA 1270 PRACTICE & PROCEDURE – initiation of Federal Court proceeding while proceeding under way in Supreme Court of New South Wales – whether initiation of Federal Court proceeding constitutes an abuse of process – whether proceeding should be stayed or dismissed. COSTS – whether appropriate to order costs against solicitor on an indemnity basis. Trade Practices Act 1974 (Cth) s 52 Federal Court of Australia Act 1976 (Cth) s 43(2) Fair Trading Act 1987 (NSW) Federal Court RulesO20 r 2, O 45 r 7 Walton v Gardiner (1993) 177 CLR 378, applied Software Engineers Australia (NSW) Ltd v Bonket Pty Ltd [2002] FCA 1168, referred to Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, referred to AIRCENT PTY LTD v APPLE COMPUTER AUSTRALIA PTY LTD and MR JIM LIKIDIS V 172 OF 2002 MARSHALL J MELBOURNE 15 OCTOBER 2002 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V 172 OF 2002 BETWEEN: AIRCENT PTY LTD (ACN 064 205 858) APPLICANT AND: APPLE COMPUTER AUSTRALIA PTY LTD (ACN 002 510 054) FIRST RESPONDENT MR JIM LIKIDIS SECOND RESPONDENT JUDGE: MARSHALL J DATE OF ORDER: 15 OCTOBER 2002 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The substantive proceeding be dismissed. 2. Issac Brott & Co. pay the respondents' costs of the proceeding on and from 10 April 2002 until 1 October 2002. 3. Such costs referred to in order 2 be paid on an indemnity basis. 4. The applicant pay the respondents' costs of the application otherwise and the costs of the motion. 5. The motion otherwise be dismissed. In respect of Mr Brott's motion, it is ordered that: 1. The motion be dismissed. 2. Issac Brott pay the respondents' costs of the motion. 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 172 OF 2002 BETWEEN: AIRCENT PTY LTD (ACN 064 205 858) APPLICANT AND: APPLE COMPUTER AUSTRALIA PTY LTD (ACN 002 510 054) FIRST RESPONDENT MR JIM LIKIDIS SECOND RESPONDENT JUDGE: MARSHALL J DATE: 15 OCTOBER 2002 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 On 21 March 2002, the applicant, Aircent Pty Ltd ("Aircent"), commenced a proceeding under the Trade Practices Act 1974 (Cth) ("the TPA"). Aircent sought, inter alia, a declaration that the respondents, Apple Computer Australia ("Apple"), and Mr Likidis, had contravened s 52 of the TPA. 2 On 1 May 2002, Aircent filed an amended statement of claim pursuant to an order of the Court made on 15 April 2002. By motion dated 27 August 2002, the respondents, inter alia, sought the following relief: · pursuant to order 20 rule 2 of the Rules of Court, the amended statement of claim be struck out; · pursuant to s 43(2) of the Federal Court of Australia Act 1976 (Cth), the costs of the proceeding, including the motion, be paid by Aircent's then solicitor (Issac Brott & Co.) on an indemnity basis. 3 The respondents' motion was later amended to seek a costs order against Aircent. An additional Notice of Motion was heard at the same time, in which Mr Brott sought, in the alternative, that Aircent pay the costs of Apple and Mr Likidis. 4 The motion of the respondents was supported by an affidavit sworn by Jennifer Ruth Ball. Ms Ball is a solicitor employed by the solicitors for the respondents. Ms Ball's evidence included the following matters: · Apple commenced a proceeding in the Supreme Court of New South Wales ("the Supreme Court") on 26 April 2001. · There were 13 defendants in the Supreme Court proceeding. The 13th defendant was Wing Nin Liu, the proprietor of Aircent. · In the proceeding in the Supreme Court, Apple sought judgment in respect of a guarantee dated 13 September 2000, provided by the defendants to Apple in support of monies owing to Apple by Buzzle Operations Pty Ltd. · On 22 June 2001, Mr Liu and the sixth defendant to the Supreme Court proceeding, Mr Hartono, filed a defence to Apple's claim. Together, Mr Hartono and Mr Liu filed a cross-claim. The cross-claim, inter alia, sought relief pursuant to the TPA and the Fair Trading Act 1987 (NSW). · Mr Liu also made claims concerning representations made by Mr Likidis on behalf of Apple in respect of a business known as "Mac's Place". · On 25 July 2001, a notice of change of practitioner was filed on behalf of Mr Liu. The notice confirmed that Mr Issac Brott had been appointed to act for Mr Liu in the Supreme Court proceeding. Mr Brott instructed Sydney agent Surry Partners. Mr Brott acted as the principal solicitor for Mr Liu until 12 April 2002, when Surry Partners became solicitors on the record. (Later, in circumstances not currently material, Mr Brott resumed acting on the record in that matter.) · On 10 April 2002, in the Supreme Court, counsel for Mr Liu acknowledged that the claim in this Court "covers the same ambit as the cross-claims". Counsel requested that this proceeding be cross-vested to the Supreme Court. · On 15 April 2002, the Supreme Court matter was listed for hearing on 24 June 2002 for three weeks. · On 30 May 2002, Mr Liu and Mr Hartono were granted leave to file and serve a third further amended cross-claim. (It should be noted that Aircent was, on that day, made a party to that proceeding with identical rights, in effect, to those of Mr Liu and Mr Hartono.) · By letter dated 30 May 2002, the solicitors for the respondents wrote to the Sydney agents of Mr Liu's solicitors, indicating their consent to "cross-vesting or consolidation of the Aircent proceedings to the commercial list of the New South Wales Supreme Court in Sydney". · Certain conditions were raised as a basis for such consent, including costs issues. · The Supreme Court proceeding commenced before her Honour Justice Bergin on 24 June 2002 and continued until 9 July 2002, when it was adjourned for directions until 26 August 2002. Mr Brott ceased to act in that proceeding on 25 June 2002. · By a letter dated 11 June 2002, Aircent's solicitors said that: "Our clients note that the offer to consolidate the Aircent matter, currently in the Federal Court of Australia in Melbourne Registry has met with your conditional consent." (emphasis supplied) · In a letter by Aircent's solicitors to the respondents' solicitors, it was said that such solicitors wish to have "the issues the subject of the Aircent proceedings agitated as part of the New South Wales proceedings". In the solicitors' view "all costs from the Federal Court proceedings ought to be costs in the cause in the New South Wales proceeding". 5 At all material times, at least from 22 June 2001 (when the original cross-claim was filed in the Supreme Court), the issues raised in the instant proceeding, in my view, could have, and should have, been agitated in the Supreme Court. It is highly artificial to draw a distinction between Mr Liu's role in the Supreme Court and Aircent's role in the Federal Court. Their interests were common at all material times. It was inappropriate in the circumstances to issue the application in this Court. As was said by Mason CJ, Deane and Dawson JJ in Walton v Gardiner (1993) 177 CLR 378 at 393: "… proceedings within the jurisdiction of a court will be unjustifiably oppressive and vexatious of an objecting defendant, and will constitute an abuse of process, if that court is, in all the circumstances of the particular case, a clearly inappropriate forum to entertain them." 6 This Court, given the existence of the proceeding in the Supreme Court and Mr Liu's obvious relationship to Aircent, was a clearly inappropriate forum in which to entertain Aircent's claim. Further, as Goldberg J said in Software Engineers Australia (NSW) Ltd v Bonket Pty Ltd [2002] FCA 1168 at [29]: "… it is undesirable that there be parallel proceedings in relation to the determination of issues of common fact." 7 The Court will order, pursuant to O 20 r 2 of the Rules of Court, that the application be dismissed. It is unnecessary for present purposes to consider whether the application was made for an improper purpose, as distinct from the other categories contemplated by the consideration that a particular action would constitute an abuse of process. It is sufficient in my opinion to rely on the circumstances which were adverted to by the High Court in Walton v Gardiner, at the passage cited above. 8 I see no purpose in staying the proceeding, as distinct from dismissing it, given that it should never have been commenced at all. There was overwhelming duplication between Mr Liu's cross-claim in the Supreme Court and Aircent's claim in this Court. Additionally, counsel for Mr Brott said that the matter, if stayed, would never be agitated in the Supreme Court. I note also that no formal application was made, in Mr Brott's motion, for the matter to be stayed. 9 The next question which arises for consideration is the question of costs. Having succeeded on the principal claim in their motion, it is appropriate that the respondents have their costs of the proceeding and of the motion. Where should those costs come from? The respondents seek costs from Mr Brott on an indemnity basis. Mr Brott resists any order of that type. Alternatively he contends that Aircent and Mr Liu should pay the respondents' costs. In the further alternative, Mr Brott seeks to be indemnified by Mr Liu and Aircent in respect of any costs orders made against him. In the additional alternative, he contends that the new solicitors should pay the costs or indemnify him in respect of any adverse costs order. Finally, he also seeks costs against the respondents. Aircent, additionally, resists any cost order being made against it. 10 There is no basis whatsoever for the making of any costs orders against the respondents. They have successfully moved the Court to dismiss the proceeding. I found that it was inappropriate to issue the current application in this Court. Mr Brott gave evidence that he did so on express instructions of Aircent and Mr Liu. I note in particular the role of Mr Liu in those instructions, given the fact that he was, at that time, a cross-claimant in the Supreme Court. 11 Mr Brott denies being at fault. His evidence in that regard has not been contradicted but has been the subject of criticism, given that it was submitted that he should have known better. However, Mr Brott gave no evidence about any instructions to persist in the application after 10 April 2002, notwithstanding what senior counsel told the Supreme Court on that day. I consider it appropriate therefore to make a costs order against Mr Brott in respect of all costs incurred by the respondents from 10 April 2002 until he ceased to act for Aircent on 1 October 2002. 12 It is not to the point that Mr Brott considers that his instructions were generally withdrawn (in both courts) when he ceased to act in the Supreme Court on 25 June 2002. He did not file a notice of ceasing to act pursuant to O 45 r 7 of the Rules of Court, or otherwise comply with that provision. He was the solicitor on the record for Aircent when the respondents' motion was filed and served. 13 I also consider that the costs order against Mr Brott in respect of the period of time referred to at [11] should be made on an indemnity basis. As Woodward J said in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401: "I believe it is appropriate to consider awarding 'solicitor and client' or 'indemnity' costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion." (emphasis added) 14 This case differs from Fountain Selected Meats in that the Court is not in a position to determine that the particular action has no chance of success, but in my view it is sufficient that it should not have been continued in circumstances where senior counsel effectively communicated that to the Supreme Court on 10 April 2002. In my view, the continuation of what was clearly an embarrassing overlap of legal issues between two courts, could and should have been avoided by competent advice from competent practitioners. 15 In respect of the other periods relevant to this application, 21 March to 9 April 2002 and 1 October to 15 October 2002, I propose to make a costs order adverse to Aircent. I see no reason in particular to make that order on an indemnity basis. Further, I see no reason to make an order adverse to Aircent or Mr Liu in respect of Mr Brott's motion. I make the following orders in respect of the respondents' motion: 1. That the substantive proceeding be dismissed. 2. Issac Brott & Co. pay the respondents' costs of the proceeding on and from 10 April 2002 until 1 October 2002. 3. Such costs referred to in order 2 be paid on an indemnity basis. 4. The applicant pay the respondents' costs of the application otherwise and the costs of the motion. 5. The motion otherwise be dismissed. In respect of Mr Brott's motion, I order as follows: 1. The motion be dismissed. 2. Issac Brott pay the respondents' costs of the motion. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Marshall. Associate: Dated: 17 October 2002 Counsel for the Applicant: Mr J Isles (with Mr P Hayes QC in absentia) until 2.30pm Mr J Wright (after 2.30pm) Counsel for Mr Brott: Mr J Isles (with Mr P Hayes QC in absentia) Solicitors for the Applicant: Wright Pavuk Lawyers Solicitors for Mr Brott: Issac Brott & Co. Counsel for the Respondents: Mr C Newlinds Solicitors for the Respondents: Clayton Utz Date of Hearing: 15 October 2002 Date of Judgment: 15 October 2002