Psyfari Pty Ltd v Rathcown Pty Ltd [2017] NSWSC 776

Supreme Court New South Wales

Medium Neutral Citation: Psyfari Pty Ltd v Rathcown Pty Ltd [2017] NSWSC 776 Hearing dates: 9 June 2017 Date of orders: 16 June 2017 Decision date: 16 June 2017 Jurisdiction: Equity Before: Parker J Decision: Parties to bear their own costs Catchwords: Costs – no hearing on the merits – consent to dismissal of proceedings – proceedings unnecessary due to actions of third party – success in substance in proceedings – unreasonable conduct – costs lie where they fall Cases Cited: Re Minister for Immigration; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 Category: Costs Parties: Psyfari Pty Ltd (Plaintiff) Rathcown Pty Ltd (Defendant) Representation: Counsel: SJ Philips (Plaintiff) AW Smith (Defendant)

Solicitors: G&B Lawyers (Plaintiff) Summer Lawyers (Defendant) File Number(s): 2017/14910 Publication restriction: Nil

Judgment 1. On 9 June I made consent orders discharging the interlocutory injunction which had been granted in these proceedings and dismissing the proceedings. The parties disagreed about the appropriate order for costs and this judgment concerns the costs issue. 2. The plaintiff is a promoter of musical festivals. The defendant owns a property called "Eurella" in Capertee Valley, northwest of Sydney. The proceedings concern an agreement between the plaintiff and the defendant under which the plaintiff was entitled to conduct music festivals on part of the property, to which I will refer as the "site". 3. The agreement contains provisions which restrict the ability of the defendant to allow other music festivals at the property without the plaintiff's consent. The agreement expires in July this year. The agreement relevantly provides: 6.3 The Landholder [the defendant] shall not stage or permit any third party to hold or stage any other music or other festival events of an identical or similar nature on the above property without an agreement, using written communication with The Promoter [the plaintiff]. 1. The most recent Psyfari festival was conducted by the plaintiff at the end of August last year. Following the completion of the festival, various items of equipment belonging to the plaintiff, as well as rubbish and debris from the festival, were left at the site. Sewage was also left in toilet facilities at the site. 2. After the festival finished, there was correspondence between the defendant and the plaintiff concerning the clean-up afterwards. The clean-up had not been completed on 16 October when the defendant wrote to the plaintiff complaining about various matters which were said to involve breach of the plaintiff's obligations under the agreement. 3. It appears that in about October 2016 the defendant entered into an agreement with the promoter of another music festival, known as "Babylon", for use of the site. The first Babylon festival was to take place at the site in March 2017, that is, while the plaintiff's agreement with the defendant relating to the Psyfari festival was still current. 4. It is clear that the plaintiff was well aware that negotiations were underway between the defendant and Babylon. On 7 July 2016, the defendant wrote to the plaintiff concerning these negotiations. The letter made it clear that the defendant did not consider the Babylon festival to be a "replica" of the Psyfari festival, and it invited the plaintiff "to be involved" with the Babylon festival. Meetings took place between representatives of the plaintiff and representatives of Babylon in October 2016. It appears that at this stage the plaintiff hoped to extend its agreement with the defendant and negotiate some sort of arrangement with the promoters of the Babylon festival to allow both festivals to continue on the site. 5. On 18 October the defendant sent to the plaintiff a copy of the agreement which had been sent to the promoter of the Babylon festival for signature. Apparently this was done with a view to negotiating a new agreement with the plaintiff. On 26 October the plaintiff responded indicating that it would go through the new agreement and reply to the defendant soon. 6. There was no further communication between the plaintiff and the defendant until 1 January 2017 when solicitors acting for the plaintiff emailed to the defendant a formal solicitor's letter. The letter referred to the defendant's letter of 16 October 2016 and denied that there had been any breach by the plaintiff. It went on to assert that the use of the site for the Babylon festival in March 2017 would be a breach of the agreement between the plaintiff and the defendant. An undertaking not to permit the festival to take place was demanded. The letter stated that if the undertaking was not complied with by 5 January, the plaintiff reserved its right to commence proceedings in this Court. 7. The defendant responded to the plaintiff's solicitors on the same day. The letter stated that it was being written without the benefit of legal advice given the timing of the plaintiff's demand. It told the plaintiff to stay off the land. 8. On 5 January the defendant's solicitors sent a letter. This letter denied that the Babylon festival was "identical or similar" to the Psyfari festival and purported to terminate the agreement due to breaches of the plaintiff's obligations under the agreement. The letter also demanded that the plaintiff not have any access to the site without prior arrangement with the defendant. 9. The proceedings were commenced by the plaintiff by Summons in the Duty List on Monday 16 January. Short service was granted and the Summons was made returnable on Monday 23 January. 10. On Friday 20 January solicitors acting for the promoter of the Babylon festival wrote to the solicitors for the defendant. The letter relevantly stated: On the basis of the Declaration sought by Psyfari, Babylon faces uncertainty surrounding the intended use of the Site for the Festival and risks substantial loss if the Festival planning were to proceed and the Festival not to take place. To avoid any further loss, Babylon therefore proposes that Babylon and Rathcown mutually agree to Babylon postponing the Festival so that the intended 2017 Festival does not take place so as not to encroach on the exclusivity claimed by Psyfari pursuant to the Proceedings. 1. The defendant apparently accepted the postponement of the festival. On the same day Babylon made a public announcement that the festival would be postponed. The plaintiff's solicitors were provided with a copy of a letter. 2. When the matter came before Lindsay J in the Vacation List on 23 January, his Honour was informed of the postponement of the festival. The plaintiff nonetheless pressed for interim injunctive relief concerning the purported termination of the agreement. His Honour granted an interlocutory injunction restraining the defendant from treating the purported termination as valid. The order provided that the defendant could restore the matter to the List for argument, in which event the onus would lie on the plaintiff to justify the injunction. In substance, therefore, the order was granted on an ex parte basis, no doubt because there was no immediate need to debate whether a formal interlocutory order should be made pending the hearing in the case. 3. No application has been made by the defendant to reagitate the interim order, which has remained in force since 23 January. The proceedings were mentioned a number of times before the Registrar. At one stage the plaintiff foreshadowed a claim for damages, but that was not pursued. For its part, the defendant prepared a cross-claim seeking damages for trespass and nuisance on account of the presence of the plaintiff's equipment and the debris and sewage left on the site. However, arrangements were made between the parties for the plaintiff to complete the clean-up of the site and remove its equipment and the cross-claim was not pursued. 4. From April at the latest it has been clear that the plaintiff does not press for the determination of the proceedings and is content for the proceedings to be dismissed. In theory, on the plaintiff's view the agreement is still on foot and runs until July this year, but the plaintiff does not seek to maintain the injunction and I assume that the plaintiff has no further use for the site. The effect of the dismissal of the proceedings will be that the injunction will be discharged and the Court will make no final decision on whether the agreement remains on foot. 5. On 19 April 2017, at a directions hearing, the plaintiff apparently pressed for a costs order. Directions were made for the filing and service of evidence and submissions on the question of costs, and the application has now come before me. 6. Generally speaking, where proceedings are discontinued or compromised before the Court has determined the substantive questions raised in them, the Court will not embark on a trial of the proceedings simply to determine the incidents of costs. Rather, in those circumstances, the Court's general practice is to leave the costs to lie where they fall. 7. This is not an invariable practice. In some cases the Court may be persuaded that the outcome represents a capitulation by one side so that the other side has in substance succeeded in the proceedings even though there was no contest. In other situations, the Court may consider that the conduct of one party was unreasonable, so that it should bear the costs: Re Minister for Immigration; Ex parte Lai Qin (1997) 186 CLR 622 at 624. 8. In the present case, the plaintiff contended that it should receive a costs order in its favour. The plaintiff's argument was that in substance it had succeeded in the proceedings and accordingly should receive an order for its costs. 9. In its Summons, the plaintiff sought a declaration that the agreement remained on foot (until expiration in July 2017) and that the purported termination of the agreement was invalid. As has been seen, the plaintiff obtained interlocutory relief along these lines on 23 January. Relief of this nature was logically the first step in the plaintiff obtaining an injunction against the Babylon festival being conducted on the site in March 2017; the plaintiff could not establish that the conduct of the Babylon festival was a breach of the agreement unless it first established that the agreement remained on foot. 10. The plaintiff also claimed damages and orders which would allow it to continue to access the property. However, it is difficult to see what basis the plaintiff had for the damages claim which was foreshadowed. There was nothing to suggest that the plaintiff itself intended to make any further use of the site before the scheduled expiry of the agreement in July 2017. It is therefore hard to see how the plaintiff could have suffered any substantial loss from the defendant's purported repudiation of the agreement. Of course the plaintiff needed access to the site in order to complete the clean-up but there is nothing to suggest that the plaintiff had any immediate plan to undertake the clean-up work in January 2017 when it initiated the proceedings. The fact that since April the plaintiff has been willing to see the proceedings dismissed and the injunction discharged underlines that once the Babylon festival was postponed there was no other issue in the proceedings of any substantial importance from the plaintiff's point of view. 11. In my opinion, the measure of the plaintiff's success must be understood in the context in which the proceedings were brought. I was not referred to any evidence which explained why the plaintiff did not comment on the form of agreement which had been sent to it in October last year, or why the plaintiff chose to make its initial demand on New Year's day, a public holiday in the middle of the Court vacation. Counsel for the defendant suggested it was a dishonourable tactic on the plaintiff's part. It is not necessary to determine whether that is so; but, in my view, the way in which the proceedings were brought during Court vacation means that the plaintiff's success in obtaining an interlocutory injunction is of virtually no significance. In effect, the order was made on an ex parte basis reflecting the fact that the defendant had not had a proper opportunity to contest it on an interlocutory level. The context of the proceedings also makes the defendant's initial reaction of ordering the plaintiff not to come on to the property, a position which the defendant has not sought to sustain in the proceedings, of no significance either. 12. In my opinion, the plaintiff's only substantial objective in bringing the proceedings was to obtain an order preventing the defendant from allowing the site to be used for the Babylon festival in March 2017. 13. As I have recounted, the decision to postpone the festival apparently came from the Babylon promoter itself. There was no evidence before the Court as to how the promoter became aware of the proceedings. Although the letters from the solicitors invited the defendant to agree with the postponement, there is nothing to suggest that the defendant would have had any entitlement to compel the festival to go ahead. 14. Counsel for the plaintiff invited me to infer that the reason why the promoter of the Babylon festival had postponed it was that, having reviewed the agreement, the conduct of the festival was seen to be a clear breach of the defendant's obligations. I am not prepared to draw that inference. The Babylon festival promoter's solicitor's letter speaks only of risk; it certainly does not express the opinion that the conduct of the festival would be a breach of contract. Moreover, the Court does not know the extent of the preparations that had been made for the conduct of the festival; how much irrecoverable expenditure had been incurred by the promoter; or how the ticket sales were going. The Court has no way of knowing what commercial considerations may have contributed to the promoter's decision to postpone the festival once the dispute between the plaintiff and the defendant arose. 15. In my opinion, this is a clear instance of proceedings becoming unnecessary because of the actions of a third party. The defendant's position in correspondence was that the agreement had been terminated, but also that even if it was still on foot the Babylon festival was not sufficiently similar to the Psyfari festival for it to be a breach of the agreement. Counsel for the plaintiff did not suggest that these defences were hopeless, or that the defendant had otherwise conducted itself unreasonably. In my opinion, there is no reason to depart from the usual approach the Court takes in cases of this kind, namely to allow the costs to lie where they fall. 16. The order of the Court is: 1. Order that each party bear its own costs of the proceedings.