FEDERAL COURT OF AUSTRALIA

Pacific Brands Sport & Leisure Pty Ltd v Underworks Pty Ltd (No 2)

[2005] FCA 401

COSTS – solicitor and client costs – hopeless case

PACIFIC BRANDS SPORT & LEISURE PTY LTD and PACIFIC BRANDS CLOTHING PTY LTD v UNDERWORKS PTY LTD; UNDERWORKS PTY LTD v SARA LEE APPAREL (AUSTRALASIA) PTY LTD and PACIFIC BRANDS SPORT & LEISURE PTY LTD

V1025 of 2003

FINKELSTEIN J

MELBOURNE

15 APRIL 2005

ON THE CLAIM THE COURT ORDERS THAT:

1.      The application be dismissed.

2.      The applicants pay the respondent’s costs.

ON THE CROSS CLAIM THE COURT DECLARES THAT the Sub-Licence agreement dated 15 November 2000 between the first Cross-Respondent, Sara Lee Apparel (Australasia) Pty Ltd, and the Cross-Claimant, Underworks Pty Ltd continues in force.

Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

RULING

1                     Not without a good deal of hesitation have I come to the conclusion that Pacific Brands should pay Underworks’ costs on the usual basis.  On one view there is good reason for awarding a proportion of those costs on a solicitor and client basis.  For example, the novation and implied contract arguments were hopeless even on Pacific Brands’ own evidence.  Moreover, Pacific Brands failed to establish the alleged breaches of the sub-licence.  It failed on this aspect not because it lost contested issues of fact but because the evidence it adduced did not make out (and in some instances could never make out) a case for breach.

2                     Nowadays one sees far too often parties who run unmeritorious points.  The cost of litigation is so high that courts must take steps to stop this from happening.  It will be stopped if special cost orders are made when hopeless points are argued.  It is incorrect to suggest, as some might, that the imposition of a special costs order will deter parties from advancing bona fide claims or defences.  As everyone knows, marginal claims can succeed and borderline defences are often made out.  What I say is not intended to cover marginal cases, that is cases where parties or their advisers honestly believe that there is some prospect of making good the point in issue.  My comments concern the hopeless case where, when properly analysed as it should be before trial, there is simply no merit in the point.  It is not only litigants that need to be protected from hopeless cases.  The courts’ lists should not be clogged up by parties who wish to pursue such claims.

3                     What saved the day for Pacific Brands is first the novelty of its assertion that the assignment of the sub-licence carried with it the right to terminate the sub-licence for breach and, second, that to exercise that right (which Pacific Brands asserted it could do) it had to prove a breach.  The evidence on breach occupied the majority of the time at trial and, more importantly as it turned out, Underworks had breached the sub-licence in some respects.  Accordingly, if the claims that I have described as hopeless had not been pursued the duration of the trial would not have been sufficiently shortened to warrant punishing Pacific Brands by a solicitor and client or indemnity costs order.  

Associate:

Dated:              15 April 2005