Dymocks Franchise Systems (NSW) Pty Ltd v Todd & Ors (No. 2), Court of Appeal - Privy Council, July 21, 2004, [2004] UKPC 39

Resolution Date:July 21, 2004
Issuing Organization:Privy Council
Actores:Dymocks Franchise Systems (NSW) Pty Ltd v Todd & Ors (No. 2)
 
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[2004] UKPC 39

Dymocks Franchise Systems (NSW) Pty Ltd v Todd & Ors (No. 2) (New Zealand) [2004] UKPC 39 (21 July 2004)

Privy Council Appeal No. 8 of 2001

Dymocks Franchise Systems (NSW) Pty. Ltd. Petitioner

v.

(1) John Todd

(2) Alicia Beatrice Todd

(3) Bilgola Enterprises Ltd and

(4) Lambton Quay Books Ltd. (No.2) Respondents

FROM

THE COURT OF APPEAL OF NEW ZEALAND

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JUDGMENT OF THE LORDS OF THE JUDICIAL

COMMITTEE OF THE PRIVY COUNCIL UPON A PETITION

FOR AN ORDER FOR COSTS AGAINST A NON-PARTY

Delivered the 21st July 2004

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Present at the hearing:-

Lord Nicholls of Birkenhead

Lord Hutton

Lord Rodger of Earlsferry

Lord Brown of Eaton-under-Heywood

Dame Sian Elias

[Delivered by Lord Brown of Eaton-under-Heywood]

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The petition before the Board seeks an order for costs against a non-party. It was lodged following an order of the Board (differently constituted although including two members of the present Board) made on 7 October 2002 allowing an appeal by Dymocks Franchise Systems (NSW) Pty Ltd (``Dymocks'') against the respondents, John Todd and Alicia Beatrice Todd, Bilgola Enterprises Ltd (Bilgola) and Lambton Quay Books Ltd (Lambton) (together called ``the Todds''), restoring the trial judge's order in favour of Dymocks (including his orders as to costs) and ordering the Todds to pay Dymocks' costs in the New Zealand Court of Appeal and in the Privy Council. It now being plain that the Todds are unable to meet the order for costs in the Court of Appeal and the Privy Council, Dymocks ask the Board to order that they be paid by Associated Industrial Finance Pty Ltd (``Associated''), a company whose relationship to the Todds and this litigation will shortly be explained.

The underlying proceedings

It is unnecessary to say much about the underlying proceedings. They are, of course, described in detail in the Board's judgment of 7 October 2002. It is sufficient for present purposes to recount the following matters:

(i) In 1994-1995 Dymocks, long-established Australian booksellers, entered into three franchise agreements with the Todds, allowing them to open three bookstores in New Zealand.

(ii) Upon the agreements being summarily terminated by Dymocks in February 1998, both Dymocks and the Todds issued proceedings: Dymocks for a declaration that their termination of the franchise agreements was lawful (the Todds counterclaiming damages for repudiation) and for an order enforcing their contractual option to take over the assets of the three bookstores; the Todds for damages for mis-representation.

(iii) On 26 February 1999, following a 7-week trial, Hammond J found for Dymocks in both sets of proceedings. Subsequently he ordered the Todds to pay Dymocks costs totalling some NZ $940,000.

(iv) On 11 May 1999, following refusals successively by the judge and the Court of Appeal for a stay of execution, Hammond J ordered that Dymocks' compulsory purchase of the bookstores pursuant to the option take place in the week commencing 24 May 1999. Later that month Dymocks paid into court the purchase price of the acquired assets, some NZ$1,800,000. Some NZ$400,000 of that fund having been paid out to certain retention of title claimants and employees, the remainder was subject to separate legal proceedings in which competing claims were advanced respectively by Dymocks themselves (partly pursuant to Hammond J's costs order, partly in respect of other claims by Dymocks against the Todds), ANZ Bank as first debenture holders in respect of the Todds' assets, Associated as second debenture holders (in circumstances which will shortly be explained), and certain other parties.

(v) The Todds appealed against Hammond J's orders in both actions. On 6 July 2000 the Court of Appeal dismissed their appeal in the misrepresentation proceedings but partially allowed their appeal in the termination proceedings, holding Dymocks' determination of the franchise agreements to have been unlawful but upholding their right to enforce the option to acquire the assets of the three bookstores.

(vi) Both Dymocks and the Todds appealed to the Privy Council, Dymocks against the finding of unlawful termination, the Todds against the finding that Dymocks were entitled to acquire the bookstores. Following a three-day hearing in November 2001, the Privy Council upheld Dymocks appeal, holding that it was the Todds, not Dymocks, who by their conduct had repudiated the franchise agreements. The Privy Council dismissed the Todds' cross appeal, rejecting their contention that the option was void as a penalty.

Associated and their part in the underlying proceedings

Associated is a private company beneficially owned by Mrs Todd's family. Prior to her bankruptcy in December 2002, Mrs Todd was herself a director of Associated together with her father, Frederick Thom, and her two brothers, Ian Thom and Malcolm Thom. Associated is itself a subsidiary of Parkes Holdings Pty Ltd (``Parkes''), the family's holding company. In 1996-1997 Parkes advanced the Todds A$1,200,000 on commercial terms to fund the expansion of their franchise business. In about May 1998, when the Todds asked the family for further financial assistance because of the demands of the litigation with Dymocks upon their normal resources, Associated advanced them a further A$800,000, on 15 June 1998 registering an all monies debenture over Bilgola (a company wholly owned by Mr and Mrs Todd). On 21 May 1999, following Hammond J's judgment, Associated put Bilgola into receivership under that debenture, Michael Stiassny and Grant Graham being appointed receivers. Both the Todds and Associated having been independently advised by leading counsel that the Todds had a good prospect of succeeding on their appeal, Associated then advanced to the receivers further sums to fund the Court of Appeal hearing. Associated instructed a solicitor, Mr Webeck, to negotiate on their behalf with the Todds' solicitors, Russell McVeagh, themselves already owed substantial costs, the terms upon which together they would fund the appeal and, were it to succeed, would distribute any sums recovered by way of damages and costs.

When Dymocks appealed to the Privy Council following the Todds' partial success before the Court of Appeal, Associated advanced yet further sums to the receivers with instructions to pay these over to Russell McVeagh and counsel for their conduct of the appeal, Mr Webeck again having negotiated on their behalf the actual sums to be paid and the distribution of any monies recovered were the Privy Council to find in the Todds' favour.

As already stated, the Todds in the event lost the appeal before the Privy Council. To complete the history of this petition, a month later, on 7 November 2002, Dymocks wrote to Grove Darlow & Partners (solicitors acting for Associated in the priority proceedings regarding the monies in court following Dymocks' purchase of the Todds' business assets), stating for the first time that they were intending to seek an order that their costs in the Court of Appeal and the Privy Council be paid by Associated. On 10 December 2002 Mr and Mrs Todd were both made bankrupt. On 8 May 2003 Bilgola and Lambton (a wholly-owned subsidiary of Bilgola) were put into liquidation by Penguin Books, another creditor. In September 2003 the priority proceedings were settled. No monies will be...

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