Red Bull Australia Pty Ltd v Michael Peter Stacey and Christian Walter Graebner [2011] NSWSC 1350

Supreme Court New South Wales

Medium Neutral Citation: Red Bull Australia Pty Ltd v Michael Peter Stacey and Christian Walter Graebner [2011] NSWSC 1350 Hearing dates: 4 November 2011 Decision date: 04 November 2011 Jurisdiction: Equity Division Before: Pembroke J Decision: See paragraph [12] Catchwords: COSTS - no hearing on merits - application for indemnity costs - whether party acted so unreasonably as to justify costs order - usual order that each party to bear own costs - no justification for departure Cases Cited: Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR Re the Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622 Category: Costs Parties: Red Bull Australia Pty Ltd - plaintiff Michael Peter Stacey - first defendant Christian Walter Graebner - second defendant Representation: M J Steele - for the plaintiff R Glasson - for the second defendant Allens Arthur Robinson - for the plaintiff Moray & Agnew - for the second defendant File Number(s): 2011/00302163

EX TEMPORE JUDGMENT 1These proceedings were listed for hearing before me on 19 October 2011. During the course of the first day of the hearing they resolved and the parties reached a compromise. I did not hear all of the evidence, I did not hear any of the submissions and I did not make any findings of fact. The second defendant now seeks costs orders against the plaintiff, including an order that the plaintiff pay his costs on an indemnity basis on and from 14 October 2011. 2There is an intrinsic difficulty in making costs orders in cases which have been resolved by compromise. The Court is handicapped in its ability to form an assessment as to the competing merits of the case and whether the conduct of the parties was reasonable. That is why it is said to be the general approach in cases such as these that each party should bear its own costs. That was a view expressed in Re the Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622 at 624-625 (McHugh J) and in Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR 284 at 287 (Finklestein J). 3In an extreme case the Court may feel justified in making a costs order against one of the parties notwithstanding that there has been no hearing on the merits. In such a case, as McHugh J explained in Lai Qin , supra at 624-625, the Court does so because it is able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. This is not one of those cases. 4In this case, neither party seeks the costs of the action in full. The second defendant seeks orders that the plaintiff pay its costs on a party and party basis on and from 24 September 2011 until 13 October 2011 and indemnity costs for the period after 14 October 2011. The plaintiff seeks an order that the second defendant pay two thirds of its costs as agreed or assessed. 5It is true that by its amended summons the plaintiff sought to restrain the second defendant until 31 December 2011 from, in effect, engaging in the business of 'Calidris 28' in Australia, New Zealand and the Asia Pacific region in connection with the Australian market for energy drinks. The compromise which the parties reached in relation to that substantive claim was to agree to a restraint against the second defendant until 30 November 2011. The plaintiff therefore achieved success but not for quite as long a period as it set out to. 6The first defendant in the proceedings was Mr Stacey against whom orders were made by consent prior to 19 October 2011. Those orders restrained him from engaging in similar conduct until 30 November 2011. I did not hear the evidence as to the distinction between Mr Stacey and Mr Graebner and the reasons which were said to justify a longer restraint against Mr Graebner. 7On 23 September 2011 in an interlocutory judgment, Rein J acknowledged that Calidris Australia was willing to undertake to exclude both defendants from the 'Calidris 28' business in Australia until 30 November 2011 and that both defendants would give an undertaking in similar terms. The 'Calidris 28' business is the business conducted in the Australian market for energy drinks which was the subject of the plaintiff's claim. However, Rein J went on to say that although he regarded the undertakings proffered as significant, the plaintiff was entitled to reject them as insufficient for the reasons which he explained in paragraph 35 of his judgment. 8Against that background, in the week before the commencement of the hearing before me, the parties engaged in correspondence designed to achieve a resolution. In a letter dated 13 October 2011, the solicitors for the second defendant proposed that the restraint sought by the plaintiff be limited to the period up to 30 November 2011. On the following Monday, 17 October 2011, the solicitors for the plaintiff promptly accepted that proposal. In other words, from Monday 17 October, the parties were prepared to agree that the restraint against the second defendant should be limited to 30 November 2011. 9What remained in dispute between them were costs orders. Not surprisingly, the second defendant sought orders favourable to him and the plaintiff sought orders favourable to it. In particular, the plaintiff sought an order that the second defendant pay its costs on an indemnity basis as agreed or assessed after 23 September 2011. Because of the difference between the parties in relation to the costs orders which each sought, their consensus as to the reasonableness of a restraint until 30 November 2011 did not result in a compromise of the proceedings. Thus, when the proceedings commenced before me, the plaintiff reverted to its original claim for a restraint until 31 December and the second defendant made an open offer to agree to a restraint until 30 November. 10At the hearing, I knew nothing of the correspondence between the parties. However, I expressed the preliminary view at the commencement of the hearing, that as a matter of discretion, bearing in mind certain factors, I might well be reluctant to restrain the second defendant beyond 30 November 2011. Although that observation resulted in a temporary adjournment, it did not result, at that stage, in a resolution. However, following the cross-examination of one of the witnesses, a resolution soon followed that day. 11Against that background, I am unable to conclude that the plaintiff's conduct was so unreasonable as to justify me making a costs order against it, let alone an indemnity costs order. Both parties acted reasonably in arriving at a consensus that the restraint against the second defendant should be limited to 30 November 2011. I do not regard the competing claims on both sides for different costs orders as being unreasonable. That is especially so in circumstances where I do not know ultimately where the merits lie. In my opinion, the plaintiff was not acting unreasonably in the negotiations for compromise in seeking an order that the second defendant pay its costs, including its costs on an indemnity basis. That seems to me to be an understandable negotiating position in circumstances where the plaintiff was justified in commencing the proceedings and where it had become apparent by mid-October that one way or another it was going to obtain relief against the second defendant at least until 30 November 2011. 12For those reasons, I think that a safer course in this case is to adopt the usual approach, namely to order each party to bear its own costs. There is no sufficient basis for departing from the usual order. oOo DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 November 2011