Klatte v Baker's Club Worldwide Pty Ltd
[2013] QDC 209
To print this judgment please return to the case and click on the PDF icon
next to the
case name. For court use, a full PDF copy is required or preferred.
Exit Distraction Free Reading Mode
Please Note: You are about to print a copy of the onscreen
version of
this judgment. For court use, a full PDF copy of the judgment is required or preferred. Please
return to
the case for PDF printing options.
- Unreported Judgment
- Klatte v Baker's Club Worldwide Pty Ltd[2013] QDC 209
- Add to List
Klatte v Baker's Club Worldwide Pty Ltd[2013] QDC 209
Klatte v Baker's Club Worldwide Pty Ltd[2013] QDC 209
DISTRICT COURT OF QUEENSLAND
CITATION: | Klatte & Ors v Baker’s Club Worldwide Pty Ltd & Anor [2013] QDC 209 |
PARTIES: | ULRICH GERHARD KLATTE AND OTHERS (applicants) V BAKER’S CLUB WORLDWIDE PTY LTD AND ANOTHER (respondents) |
FILE NO/S: | 689/2013 |
DIVISION: | |
PROCEEDING: | Originating application |
ORIGINATING COURT: | District Court at Brisbane |
DELIVERED ON: | 12 September 2013 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 2 September 2013 |
JUDGE: | McGill SC DCJ |
ORDER: | The respondents pay the applicants’ costs of and incidental to the application, including costs reserved on 14 March 2013 but not including costs reserved on 29 July 2013, to be assessed. Application otherwise dismissed. |
CATCHWORDS: | COSTS – When ordered – issues in proceeding otherwise resolved – whether reasonable to bring matter to court – whether conduct of respondents unreasonable – costs awarded to applicants. UCPR r 395. Hammercall Pty Ltd v Robertson & Anor [2011] QCA 214 – applied. |
COUNSEL: | A Lonergan for the applicants C Johnstone for the respondents |
SOLICITORS: | Hemming & Hart Lawyers for the applicants Schultz Toomey O'Brien for the respondents |
- [1]This proceeding was commenced by originating application filed on 27 February 2013. It came before the court on 14 March 2013 when it was adjourned by consent to a date to be fixed, with the costs of the adjournment reserved. It was brought back before the court on 29 July 2013, when it came before me. I made an order which included for the application to be adjourned to 2 September 2013, and for the costs of the adjournment to be reserved. The order also contained other provisions. When the matter came back on on 2 September 2013 I was told that, following the working out of the order that was made on the previous occasion, the applicants were no longer pursuing any substantive relief against the respondents, but the issue of the costs of the application had not been resolved. Accordingly it was necessary for me to deal with those costs, under UCPR r 395.
- [2]On that day I ordered:
- The originating application be amended so as to substitute as the introductory words of paragraph 1: “Recovery of possession of so many of the following chattels the value of which does not exceed the monetary limit of jurisdiction of the District Court”.
- The respondents pay the applicants’ costs of and incidental to the application, including the costs reserved on 14 March 2013 but not the costs reserved on 29 July 2013, to be assessed.
- Application otherwise dismissed.
- [3]I said that I would publish reasons for the costs order in due course. These are those reasons.
Background to the proceedings
- [4]By a contract in writing made 12 April 2013 the third, fourth, fifth, sixth, seventh and eighth applicants sold to the first respondent bakery franchise businesses operated at six sites in Queensland or New South Wales.[1] The contract provided expressly that upon completion the seller would deliver to the buyer certain documents and records in addition to any other documents or records expressly agreed in the agreement. The list included financial records relating to accounts of past and current customers of the businesses, and records associated with inquiries and approaches made by prospective customers and relating to concluded or pending negotiations for orders, and certain other categories of documents, but did not include any express provision for the financial records generally of the businesses to be so delivered. The contract also expressly provided that the records received on completion referred to earlier would be retained by the buyer with the seller permitted at reasonable times to inspect and at the seller’s expense to obtain copies of any of those records if required by the seller for taxation purposes.
- [5]It appears that at the time of the sale the first and second applicants were on good terms with the individual behind the respondents. After the sale was completed they worked for the first respondent until January 2013, in what I take it were managerial positions. They moved from the premises the businesses had been occupying to a new office owned by the second respondent, and brought with them the records of the businesses, including those records which were not to be handed over to the purchaser under the contract, as well as some personal and personal business documents, such as tax records, and documents of other companies with which they were associated.[2] Given the small size of the organisation, this must have been known to the person behind the respondents,[3] and he must have at least raised no objection to this. I was not referred to any material in the lengthy affidavits which had been filed which suggested that he did.
- [6]In time however it appears that the businesses did not go well, or at least the respondents were not happy with them. The relationship between the parties deteriorated. In December 2012 after two other employees left the first and second applicants were asked to stay away from the business premises while others investigated the financial position of the businesses in more detail.[4] The applicants allege that the premises were locked up so as to exclude them; the respondents said that the applicants could have had a key if they had asked for it, though such a position appears to be inconsistent with contemporaneous communications.[5]
- [7]According to the respondents, the applicants’ reaction in early January 2013 was to turn up one day at the business premises with some muscular assistants while a staff meeting was in progress, and begin to load files of documents into vehicles.[6] They were asked to leave and when they refused the police were called, who made them put back the material that they had taken, and leave. I have not investigated the applicants’ response to the allegations about this behaviour, because I do not think that it has the significance attributed to it by the respondents. Assuming that things occurred as the respondents allege, I do not think that it justified the attitude the respondents subsequently took, and I cannot see how it could have justified retrospectively the attitude that they had previously taken, simply excluding the applicants from the workplace without prior notice in circumstances where they must have known that the applicants had there quantities of personal papers and business records which were the property of the applicants and which the respondents had no right to retain. Assuming in favour of the respondents that the applicants did behave in this way and that it was wrong, that did not justify the respondents’ high-handed and, in my opinion, clearly unreasonable behaviour.
- [8]In response to this the first respondent wrote to the individual applicants summarily terminating their employment.[7] Despite this, no arrangement was made for them to collect their property from the respondents’ premises. The communications from the first respondent at the time of the termination[8] were:
- (a)The respondent claimed to be entitled to keep everything that was in fact on the premises;
- (b)If the applicants claimed that there was any property of theirs they should produce a list identifying that property and evidence proving that it was theirs, and the respondent would then make it available for collection if it agreed.
- [9]This was a manifestly unreasonable approach for the respondent to take. Assuming that the respondent was entitled summarily to terminate the employment of the relevant applicants, the appropriate course was to arrange for them to call at the premises and to go through the documents and anything else that was there so as to identify those items that it was agreed were the property of the applicants, and those items the entitlement to which was disputed; the latter could then have been properly catalogued, and arrangements made for them to be kept in safe keeping, preferably with some third party, until such time as the right to possession of them had been resolved.
- [10]The respondents’ starting point, we are entitled to keep everything, was manifestly incorrect, given that ultimately large quantities of documents and other items have been returned by the respondents to the applicants. The respondents pressed the point that these documents had been returned without any admission that the applicants were entitled to have them. It would not be appropriate for me to go through all of the categories of documents that were in dispute and make a determination as to who was entitled to have what documents,[9] but my impression, bearing in mind the quantity of documents that have been returned and the descriptions of most of the documents in dispute, is that it is not difficult to conclude that at least the bulk of the documents sought by the applicants were documents which the respondents were not entitled to retain.
Proceedings commenced
- [11]The respondents have subsequently released documents in dribs and drabs from time to time, so that there have been no fewer than six occasions on which some documents were returned to the applicants.[10] That strongly suggests that on five of those occasions documents were retained by the respondents which they were not entitled to retain. No documents were returned until after these proceedings were commenced by an originating application filed on 27 February 2013. No meaningful practical response was received from the applicants to several letters of demand prior to the filing of the proceedings, and it seems to me clear that at that stage the applicants had no practical alternative but to resort to the court.
- [12]It was submitted that the second respondent had no involvement in the proceeding, being simply the owner of the premises in which the first respondent was operating, so that relevantly the documents in question were in the possession of the first respondent. But the first respondent held only a license to occupy those premises, so the building where the documents were was in fact in the occupation of both respondents. In the circumstances it was plainly reasonable for the applicants to join both respondents, to avoid any arguments about who was in fact in possession of the documents in the building. Besides, both respondents are controlled by the same individual, both have appeared by the same lawyers, and it seems to me that there have been no additional costs incurred because of the involvement of the second respondent; at least the contrary has not been demonstrated. There is no reason to differentiate between the positions of the respondents.
- [13]Unfortunately the process of resorting to the court went awry because the applicants made the common mistake of failing to have sufficient regard to the limited nature of the equitable jurisdiction of the District Court. They filed an originating application which on its face reads as an application for a mandatory injunction that the respondents hand over various items, and other relief mostly by way of injunction. It seems to me that the jurisdiction of the District Court was not properly invoked. The appropriate course was to bring a claim for return of the documents as chattels or payment of their value, a process which would have properly invoked the jurisdiction of the District Court under s 68(1)(a)(iii), provided there was evidence that the value of the chattels did not exceed the monetary limit of the jurisdiction of the District Court, or the claim limited the relief sought to the extent of the jurisdiction of the District Court.[11] Ultimately one of the orders I made was to amend the originating application to invoke the jurisdiction of the court on that basis. Had there been a continuing dispute, I would have made an order under r 14 for the proceeding to continue as if started by claim, and given directions for the delivery of pleadings. I consider that the proceeding should not have been commenced by originating application. In circumstances where the only matter left in dispute was the question of costs, there was no need for any such order.
First adjournment
- [14]Initially the respondents reacted by offering to hand over some documents, and as a result the application was adjourned to enable that to occur. This led to the first delivery of some documents, which was obviously inadequate. Negotiations between the parties continued, though at that stage it does not appear that the ultimate solution, of allowing the applicants to go onto the premises and sort out what was and what was not theirs, was offered. The respondents have asserted that one of the difficulties caused by the behaviour of the applicants was that the documents that they were entitled to take had been intermingled in the files with more recent documents which were the property of the respondents, so that it was necessary to go through each and every file and remove the documents that belonged to the respondents, before returning the others.
- [15]No doubt this was a reflection of the fact that the parties were initially on good terms, so that the businesses were in practice run in the way they had previously been, building on the previous records, even though strictly speaking the property in those records had not passed to the first respondent. That simply underlines the foolishness of the respondents’ adopting the attitude of excluding the applicants of any participation in this process. But it seems to me frankly that far too much was sought to be made of this objection. The “intermingling” could scarcely have been all that difficult to undo, even if the filing system was not very efficient, since it would simply have been a matter of taking off the documents which had been accumulated by the first respondent after it took over the business. That could only have required current files to be examined, and it does not seem to me that the task of doing this would have been all that demanding given the evidence about the actual quantity of these documents. It sounds like something I could do in one day.
- [16]It appears that the real reason for retaining these documents was to give the respondents the opportunity to rifle[12] through them, and to take copies of anything that they found which they thought might be useful for a potential claim in relation to the sale and purchase of the businesses, or other claims against some applicants. The respondents plainly had no lawful right to do that. There are several references in the respondents’ material to copying,[13] which suggest that the respondents were taking copies of documents which were the property of the applicants, something it seems to me the respondents had obviously no right to do. It looks like what has happened here is that the respondents were deliberately delaying returning these documents so that they could have access to them for the purpose of searching for evidence for a potential claim against some of the applicants.
Second adjournment
- [17]Ultimately the applicants brought the application back before the court on 29 July 2013, when it came before me. At that point the issue of the failure properly to invoke the jurisdiction of the court was raised on behalf of the respondents, and it seemed to me that that did have to be attended to before the court made any substantive orders. On the morning of the hearing, counsel for the respondents made an open offer to return some further documents and to allow the individual applicants to inspect the premises essentially to see if they could locate any other documents there which they said belonged to them. In effect, the respondents finally got around to doing what was the reasonable response from the beginning. Presumably by then they had obtained whatever benefit they were hoping to obtain from retaining the documents, or had had sufficient time to remove from the premises any that they did not want to return.
- [18]On the morning of the hearing the respondents also were given leave to file an affidavit which set out an updated list in which they responded to 38 documents or categories of documents which had been identified in an earlier letter from the applicants’ solicitors as the documents the return of which was sought.[14] The applicants, faced with the need for the proceeding to be amended to overcome the jurisdictional problem, and perhaps facing an adjournment anyway, accepted the offer, and the proceedings were adjourned to 2 September 2013 to enable that process to occur, and hopefully to enable the matters in dispute to be further refined.
- [19]In the event when the application came back on the applicants announced that they did not wish to pursue any further relief, but sought costs. Accordingly, I have not been concerned with making any final decision about the rights and wrongs of the applicants’ entitlement to any particular categories of documents. I note that a lot of documents were ultimately returned, and that a lot of the reasons that were at one time or another advanced for not returning them more promptly struck me as obviously spurious. Attempts by counsel for the respondents to present some sort of arguable claim to an entitlement to possession of some of the documents merely served to demonstrate that there was no arguable claim.
Conclusion on costs
- [20]It is true that the applicants have done themselves no favours in the conduct of these proceedings. Assuming that events occurred as the respondents allege on 7 January 2013, or something like that, that was clearly inappropriate as a response to the respondents’ high-handed and unreasonable conduct, but it did not justify the continuation of that conduct, which if anything became more unreasonable, at least initially. Ultimately the situation was resolved when the respondents did what they should have done from the beginning, which was to allow the applicants into the premises and sort out who was entitled to what in a practical way. If the respondents had adopted that approach in the beginning these proceedings would have been entirely unnecessary, and accordingly it seems to me that it was the respondents’ unreasonable position which made these proceedings necessary. In those circumstances, the respondents should pay the costs of the proceedings.
Indemnity costs?
- [21]Two remaining issues are whether those costs should include the two sets of reserved costs, and whether some or all of the costs should be assessed on the indemnity basis. The latter was sought on the basis that shortly before the matter came back on, the applicants offered to have the proceedings dismissed if the respondents agreed to pay standard costs of the proceedings. That is ultimately the position that the applicants have achieved as a result of the argument about costs, and it may well have been unreasonable for the respondents to fail to accept that offer. Had it been accepted the costs of the argument on 2 September 2013 would certainly have been avoided. However, it is not necessary for me to arrive at a final conclusion about whether the failure to accept that offer was unreasonable, in circumstances where at that stage the issue of jurisdiction had still not been properly addressed, and in circumstances where the applicants had not at that stage made available some further material which ultimately was sought to be read on 2 September 2013, including the applicants’ final analysis of what had been returned and when, in terms of the 38 categories of documents by reference to which the dispute had been continuing for some time. That material was provided so late that I would not allow it to be relied upon on 2 September 2013, and the applicants withdrew that part of their material rather than face a further adjournment.
- [22]Where the matter has been unnecessarily complicated by a failure on the part of the applicants to conduct the litigation properly, in all the circumstances I am not prepared to order indemnity costs, either in respect of the final few days of the proceedings, or generally. Although I strongly disapprove of the conduct of the respondents, I do not consider that this is one of those cases where their behaviour has been so bad as to justify in itself an order for indemnity costs.
Reserved costs
- [23]With regard to the reserved costs, the first adjournment occurred in response to an offer to return some documents. Documents were returned, but at that stage not all the documents that were finally returned were returned, and it looks to me very likely that more documents ought to have been returned at that stage than were then returned. Further, obviously a lot of documents ought to have been returned much earlier than this, and if the respondents had behaved reasonably, there would have been no need for the proceedings at all, and no need for the adjournment at that time. The respondents should therefore pay those reserved costs.
- [24]In relation to the costs reserved on 29 July 2013, it seems to me that, although some costs in connection with that day would have been incurred prior to the offer which was made on 24 July 2013 and rejected, there was not a very significant difference between what was known at that stage and what was known the following Monday, and there is some force in the argument that that offer should have been accepted, and that some of the costs would have been avoided had it been accepted on 24 July 2013. A more significant consideration in my view however is the fact that the applicants at that stage still had problems about properly invoking the jurisdiction of the District Court, which had not been then addressed, and attending to those might have made an adjournment necessary anyway. In all the circumstances, I think there should be no order as to the costs reserved on that occasion.
Comment
- [25]I have therefore been able to deal with the question of costs without going into one issue which otherwise occurs to me, which was not the subject of any discussion during argument, but about which I would like to make some comment. It seems to me that one of the reasons why the file in this matter is so thick is that a lot of the material which has been filed at different times has contained a lot which has not been particularly relevant to the matters in issue in the proceeding. For example, there is a whole lot of material in relation to unfair dismissal claims brought, and ultimately discontinued, by two of the applicants against the first respondent, most of which was of little or no relevance to the matters in issue in this proceeding. The same applies to the respondents’ gratuitous allegations of financial misconduct by some applicants. In view of the costs order that I have made I do not need to say anything about the respondents’ material in this respect, and in relation to the applicants’ material, insofar as any of that was not reasonably necessary for the conduct of the proceedings, that issue can addressed by the costs assessor.
Footnotes
[1] Affidavit of Klatte filed 27 February 2013 Exhibit UGK05.
[2] Ibid para 27-40; affidavit of Schoch filed 14 March 2013 para 21-24.
[3] He claimed that he assumed everything brought to the office was purchased under the contract, a claim clearly inconsistent with the terms of the contract.
[4] Affidavit of Klatte para 41-45; Exhibit UGK 07.
[5] Affidavit of Schoch filed 14 March 2013 (Doc 9) paras 13-15. See also affidavit of Klatte Exhibit UGK07 email of 6.1.13.
[6] Affidavit of Schoch filed 14 March 2013 paras 51-52.
[7] E.g. affidavit of Coenen filed 27 February 2013 Exhibit CJC06.
[8] Affidavit of Meadmore filed 27 February 2013 Exhibit JPM04.
[9] Hammercall Pty Ltd v Robertson [2011] QCA 214 at [27].
[10] 14 March 2013, 23 March 2013, 27 March 2013, 6 June 2013, 5 July 2013, 7 August 2013: affidavit of Schoch filed 30 August 2013, Exhibit DS1.
[11]Startune Pty Ltd v Ultra-tune Systems (Aust) Pty Ltd [1991] 1 Qd R 192. I strongly suspect that the value of all of the documents would have been well under the monetary limit, but the claim must be confined in the relevant way.
[12] Counsel for the respondents objected to the use of this term. On the evidence in the respondents’ affidavits, it clearly applies.
[13] For example, in the affidavit of Schoch filed 14 March 2013, paragraphs 24, 31 referring to copying “all of the documents”, 34, 44, 45 identifying that this was for the purpose of proposed litigation, and 48.
[14] Affidavit of Schoch filed 29 July 2013 Exhibit DS5. This letter should not have been put in evidence at that stage, since it was “without prejudice save as to costs”.