FEDERAL COURT OF AUSTRALIA

Elevate Brandpartners Ltd v Hammond (No 3) [2019] FCA 1788

ORDERS

THE COURT ORDERS THAT:

1.    With regard to the costs thrown away by the applicants’ Further Amended Originating Application and Amended Statement of Claim filed on 27 September 2019 pursuant to leave granted by orders on 25 September 2019:

(a)    the applicants are to pay the costs of the proceeding of the third respondent, Zak Hammond, excluding the costs that he was ordered to bear himself by orders on 25 September 2019;

(b)    the costs of the first, second and fourth of respondents are costs in the cause.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

STEWART J:

1    On 25 September 2019, I granted the applicants leave to file and serve an amended statement of claim and a further amended originating application and I reserved all questions of costs arising from those amendments. The costs questions were argued before me today.

2    The amendments are significant. First, they have the effect of removing the third respondent, Zak Hammond, from the proceeding altogether; that is to say, he is no longer a respondent. Second, they delete originally asserted causes of action against (1) the fourth respondent, Dream Bandits, of tortious interference with contractual relations, (2) all the respondents for trademark infringement, (3) the first respondent, Ms Hammond, for copyright infringement, and (4) the first, second and fourth respondents for misrepresentation. Third, they place greater reliance on breaches of a shareholders’ deed, in particular by seeking additional declarations with regard to the nature of any breach of the deed constituting an event of default under the deed.

3    It is convenient to deal first with the costs of the third respondent, Zak Hammond. In the ordinary course, a party discontinuing against another party should pay the latter’s costs. It was submitted on behalf of the applicants that the usual order should not be made in this case because I previously ordered that Zak Hammond should pay his own costs in relation to the interlocutory application that was heard on 25 June 2019 (Elevate Brandpartners Ltd v Hammond (No 2) [2019] FCA 1598). The result, so it was submitted, is that Zak Hammond’s costs in the proceeding other than in respect of the interlocutory application will be insignificant and in particular will be limited to the periods prior to service of the interlocutory application on 10 May 2019 and after 27 June 2019 when judgment was delivered on the interlocutory application (Elevate Brandpartners Ltd v Hammond [2019] FCA 1103). In the latter regard, it was submitted that it was clear from then that the applicants would no longer proceed against Zak Hammond.

4    In the result, the applicants submitted that the appropriate order in respect of Zak Hammond’s costs is that he have his costs of the proceeding in the period 1 April 2019 (i.e. when the proceeding was commenced) and 10 May 2019 (when the interlocutory application was filed).

5    Against that, on behalf of Zak Hammond it was submitted that he is entitled to his costs, which naturally would exclude the costs that I have already ordered he must bear himself, on account of the proceeding in effect being discontinued against him.

6    It may be that Zak Hammond’s costs of the proceeding excluding the costs of the interlocutory application are insignificant. I am, however, not in a position to determine that. That is a matter for assessment. The simple point is that a proceeding was brought against Zak Hammond and it has now been, in effect, discontinued against him by him being removed as a respondent by the amendments that have been filed. The dropping of him from the case does not arise because of any undertakings given at the stage of the interlocutory application, so the considerations arising from that that are relevant to the positions of the other respondents do not arise in the case of Zak Hammond’s costs.

7    In my view, there is no reason why Zak Hammond should not be entitled to his costs. Obviously, that will exclude the costs that I have already ordered that he should bear himself. I am not in a position to say what costs he has had to bear, or what liability he has for costs, in the proceeding other than in respect of the interlocutory application in the period which the applicants seek to excise from any costs order that I now make.

8    In the circumstances, the applicants should pay Zak Hammond’s costs of the proceeding excluding his costs in relation to the interlocutory application that by orders on 25 September 2019 he was ordered to bear himself.

9    Next, it is convenient to say something about the position of Dream Bandits. It was submitted on its behalf that the effect of the amendments is to keep Dream Bandits in the proceeding as a respondent but to not seek any relief against it. I was told that it is intended that Dream Bandits will file a strikeout application at least one purpose of which will be to remove it from the proceeding. I propose to deal with any separate costs issues that might arise in relation to Dream Bandits when I deal with the strikeout application.

10    Now, dealing with the costs of Linda Hammond, Allen Hammond and Dream Bandits thrown away by the amendments, I start by acknowledging that the usual order is that the applicants should pay those costs. The respondents contend for that order, whereas the applicants say that the appropriate order is that any costs thrown away by the amendments should be costs in the cause.

11    The applicants submit, first, that if not all the amendments then certainly the bulk of them including the deletion of all the causes of action except the tortious interference cause of action against Dream Bandits arose because of the permanent undertakings given by these three respondents on the occasion of the interlocutory application. The applicants submit that they have been successful to the extent of those undertakings and in that sense are not abandoning them.

12    Second, the applicants point to the fact that no defence has yet been filed by the respondents so they have not incurred any wasted costs in that respect.

13    It is reasonably plain that most of the amendments arise because of the undertakings that were given on the occasion of the interlocutory application. It is plainly because of the undertakings that the applicants are not persisting with most of the causes of action. That does not mean that the respondents who gave the undertakings should bear the costs thrown away by the amendments – indeed, the applicants do not seek such an order.

14    It is, however, a material consideration with regard to whether I should make the usual order for costs in relation to the amendments. That is because the amendments, for the most part, have not resulted from the applicants having elected to change course part way through a case that was based on the respondents’ conduct that predated the proceeding. The change in course has arisen because of the respondents’ conduct, being the undertakings, part way through the proceeding. That consideration puts the present set of circumstances outside of the usual circumstances in which amendments are sought. It suggests that the best way of dealing with the costs thrown away is to make them costs in the cause so that whoever wins in the end will get their costs. That would obviate the need to otherwise decide whether the applicants would have been entitled to injunctive relief along the lines of the undertakings that the respondents have given.

15    It is true that there has been something of a “pivot”, to use the respondents’ characterisation, of the applicants’ case in the amendments inasmuch as the focus of the case is now alleged breaches of the shareholders’ deed and the characterisation of those breaches. Nevertheless, the breaches relied on, being of clauses 20.4 and 20.5, were part of the original case. Thus, other than the deletion of the tortious interference case against Dream Bandits and the deletions arising specifically from the undertakings that were given by the respondents, the scope of the case is essentially the same. The question of Dream Bandits’ costs can, if necessary, be further dealt with on the strikeout application that it has indicated it intends filing.

16    In all the circumstances, in my view justice is best served by ordering that the costs thrown away by the amendments, other than Zak Hammond’s costs which I have already dealt with, should be costs in the cause.

Associate:

Dated:    31 October 2019

SCHEDULE OF PARTIES