Adcon v Icon (Costs)
[2020] VSC 194
•21 April 2020
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE COMMERCIAL COURT TECHNOLOGY, CONSTRUCTION AND ENGINEERING LIST | Not Restricted |
S ECI 2020 0577
| ADCON VIC PTY LTD (ACN 606 820 375) | Plaintiff |
| v | |
| ICON CO (VIC) PTY LTD (ACN 604 790 132) | Defendant |
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JUDGE: | Digby J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF RULING: | 21 April 2020 |
CASE MAY BE CITED AS: | Adcon v Icon (Costs) |
MEDIUM NEUTRAL CITATION: | [2020] VSC 194 |
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COSTS – Unsuccessful application for injunctive relief – Usual position that costs follow the event – Whether court should depart from usual positon – Whether costs should be ordered on the usual standard basis or taxed on an indemnity basis – Whether the Court should order indemnity costs in the circumstances including the plaintiff’s chances of success on its application and the effect of offers by the defendant to accept a tender of the sum of the performance bond in issue.
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The papers filed:
Plaintiff’s Submissions dated 15 April 2020 and 17 April 2020.
Defendant’s Submission dated 15 April 2020 and two attached letters.
HIS HONOUR:
Background
In this matter Adcon Vic Pty Ltd (the plaintiff) by Amended Originating Motion and Amended Summons dated 20 February 2020 sought relief, principally by way injunction to restrain Icon Co (Vic) Pty Ltd (the defendant) from calling on, or otherwise requesting payment under the whole or part of the second of two guarantees issued by the Australia and New Zealand Banking Group Limited in favour of the defendant in the sum of AUD$396,250.00, and issued by the plaintiff.
Judgment in this matter was handed down on 9 April 2020.[1] The plaintiff’s application for injunctive relief was unsuccessful. Subsequent to judgment in the above matter on 9 April 2020 the parties have contested what order for costs should be made in the circumstances.
[1]Reasons for Judgment: Adcon v Icon [2020] VSC 165.
Defendant’s submissions as to costs
The successful defendant submits that indemnity costs should be ordered in its favour in relation to the plaintiff’s Amended Originating Motion and application because, properly advised, the plaintiff should have known that it had no chance of success in relation to its application for an injunction. The defendant points to the plaintiff ultimately failing to identify a sufficiently arguable serious issue to be tried and also relies upon statements by the Court as to the likely weight to be ascribed to the plaintiff’s case in support of the balance of convenience, had that issue remained relevant.
Further, the defendant relies upon two occasions on 12 February 2020 and 14 February 2020 when it communicated an offer to the plaintiff that it would accept tender of the amount of the security in issue, in lieu of having recourse to the bank guarantees, and at the same time warned the plaintiff of the cost consequences if the defendant’s offer was not accepted.[2]
[2]Affidavit of David Wood, 12 February 2020, Exhibit ‘DW-23’; letter from defendant to plaintiff, 12 February 2020 and letter from Holding Redlich Lawyers to Maddocks Lawyers, 14 February 2020.
The defendant argues that in light of its offers to the plaintiff in about mid-February 2020 to accept a tender of the sum representing the performance bond in issue and its warning in relation to the cost consequences of the plaintiff not accepting that offer, the plaintiff should also have known that its application had no chance of success, and therefore because it has nevertheless pressed on with its application, the plaintiff should be ordered to pay the defendant’s costs of and associated with the plaintiff’s failed application, on an indemnity basis.[3]
[3]Defendant’s Submissions, 15 April 2020, [4].
Plaintiff’s submissions as to costs
The plaintiff acknowledges that it is liable for the defendant’s costs of and associated with the plaintiff’s application for injunctive relief, on a standard basis.
The plaintiff rejects that it should pay the defendant’s costs on an indemnity basis and contends that the defendant’s offer to accept a tender by the plaintiff of a sum equal to the performance bond, on account of and in substitution for the performance bond and without prejudice to the plaintiff’s underlying rights in respect of that sum, was not truly in the nature of a proposed compromise because the acceptance of that offer by the plaintiff would have amounted to a capitulation by the plaintiff, in particular on the question of the existence of a serious issue(s) argued for by the plaintiff.
The plaintiff also argues that the reasons for judgment in this matter support that, although in the final outcome not made out, the plaintiff’s asserted ‘serious issue’ was ‘not a lay down misère that was doomed to fail’.
Considerations and Conclusions
The plaintiff should pay the defendant’s costs of and associated with the plaintiff’s application brought by way of Amended Originating Motion and Amended Summons dated 20 February 2020, together with any reserve costs, on a standard basis up to and including 14 February 2020 because those costs should follow the event of the plaintiff’s unsuccessful application, and thereafter the plaintiff should pay the defendant’s costs on an indemnity basis because:
(a) On its own application the plaintiff failed to establish the existence of the necessary serious issue(s) to be tried and was denied the relief which it sought for that reason;
(b) Although the plaintiff submits that the serious issue(s) for which it contended was ‘not a lay down misère that was doomed to fail’, after full argument it was determined that the plaintiff failed to establish the existence of a serious issue to be tried. This outcome should also have been identified as highly likely by the plaintiff prior to the issue of its application and even more highly likely after 14 February 2020 when the plaintiff elected not to accept the defendant’s offers to resolve the plaintiff’s application on terms;
(c) At the hearing of the plaintiff’s application for injunctive relief it did not press the existence of a serious issue arising from the defendant’s breaches of the consumer legislation, asserted as the second serious issue in the plaintiff’s written submissions;
(d) Further it was not refuted by the plaintiff that provisions of the Subcontract referred to in argument by both the plaintiff and the defendant, including cl 5 and cl 42 of that Subcontract, constituted a risk allocation regime and that that regime, broadly described, reflected the agreement of the parties, that subject to any identifiable agreed fetters on access to the security provided under the Subcontract, such security was intended to be ‘as good as cash’ in the hands of the beneficiary of the performance bond and its availability unconstrained by performance related disputes which may have arisen under the contract.[4] As a result the plaintiff’s balance of convenience arguments, founded on commercial damage arising as result of recourse to the performance bond, were unlikely to avail the plaintiff;
[4]Adcon v Icon [2020] VSC 165, [125]-[129]; Siemens Gamesa Renewable Energy Pty Ltd v Bulgana Wind Farm Pty Ltd [2019] VSCA 318, [14].
(e) The defendant’s open offers to accept a tender of the amount of the performance bond in issue, so as to provide the plaintiff with the opportunity to obviate any reputational and related damage which it asserted would arise if the Security was accessed, was not accepted and acted upon by the plaintiff;
(f) I consider the defendant’s letter of offer of 12 February 2020 both communicates an offer, which if accepted by the plaintiff would have likely addressed and negated the plaintiff’s concerns related to significant reputational damage which were advanced by the plaintiff as a basis for the balance of convenience in the application falling in its favour. As a result the plaintiff’s balance of convenience arguments, founded on the risk of reputational damage arising as result of recourse to the performance bond, was also unlikely to avail the plaintiff;
(g) As a result of the matters referred to in subparagraphs (d) and (f) above, the plaintiff should have appreciated that it would be most unlikely to establish that the balance of convenience in relation to its application was in its favour;
(h) The defendant’s letter of offer of 12 February 2020 and the further letter from the defendant’s solicitor of 14 February 2020 specifically emphasised to the plaintiff that acceptance of the defendant’s offer to tender the sum in issue would avoid subsequent legal costs in relation to an application to the Court;
(i) Further, the letter of 14 February 2020 from the defendant’s solicitors to the plaintiff specifically warned the plaintiff that if it were to proceed with its application for an injunction in the Supreme Court and the relief it sought was not granted, the defendant would rely upon its letters of 12 and 14 February 2020 on the question of costs;
(j) In my view, in the circumstances, the defendant’s communications in relation to the above cost issues, in particular the letter of 14 February 2020 at (5), was a warning to the plaintiff that in addition to costs on a standard basis, additional costs would be sought by the defendant if the plaintiff refused the defendant’s offer and proceeded with its application for an injunction;
(k) I add in relation to the above factors relating to the defendant’s communications of 12 and 14 February 2020 that the defendant’s mid-February 2020 communications were not the subject of developed submissions by either the plaintiff or the defendant at the hearing of the plaintiff’s application for injunctive relief, nor were the potential cost ramifications of both those letters, and how those matters were put in relation to cost consequences;
(l) I do not accept the plaintiff’s submission that the defendant’s offers to accept a tender of the amount of the security in issue was not in the nature of a true offer to compromise the underlying application or that the defendant’s offer should not have a cost consequence because the plaintiff was entitled to regard its acceptance as amounting to capitulation, particularly on the question of a ‘serious issue’. In my view, the defendant’s offer, considered by the plaintiff in the context outlined in subparagraph (a) and (h) above, should have been assessed by the plaintiff to be a genuine offer in relation to a compromise which was likely to result in a better outcome for the plaintiff than pressing on with its application for an injunction;
(m) Had the plaintiff accepted that proposed compromise it would have been in a materially better position than has in fact transpired, and that would be so whether or not costs on a standard or indemnity basis follow the event of the plaintiff’s failing on its application.
Order
Accordingly, I shall order that:
(a) The plaintiff’s Amended Originating Motion and Amended Summons dated 20 February 2020 are dismissed insofar as that process related to the second of the two guarantees issued by Australia and New Zealand Banking Group Limited, in favour of the defendant in the sum of AUD$396,250.00
(b) The defendant’s undertakings given on 10 February 2020, and varied on 17 February 2020, are discharged.
(c) The plaintiff pay the defendant’s costs of and associated with its application brought by way of Amended Originating Motion and Amended Summons dated 20 February 2020 together with any reserve costs, on a standard basis up to and including 14 February 2020 and thereafter on an indemnity basis.
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