Amato v JAS Property Developments (Costs Ruling)

[2020] VSC 215

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE
COMMON LAW DIVISION
PROPERTY LIST

S ECI 2020 01587

CONCETTINA CATERINA AMATO	Plaintiff
v
JAS PROPERTY DEVELOPMENTS PTY LTD (ACN 601 245 363) AS TRUSTEE FOR THE JAS PROPERTY UNIT TRUST	Defendant

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JUDGE:	Forbes J
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers, on return of summons dated 31 March 2020
DATE OF JUDGMENT:	27 April 2020
CASE MAY BE CITED AS:	Amato v JAS Property Developments (Costs Ruling)
MEDIUM NEUTRAL CITATION:	[2020] VSC 215

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COSTS – Whether plaintiff entitled to costs of application for interlocutory relief on indemnity basis – Whether continuing proceeding without apparent defence amounts to special circumstances justifying indemnity costs award – special circumstances found – plaintiff entitled to costs on indemnity basis – Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 63.28 – Australian Electoral Commission v Towney (No 2) (1994) 54 FCR 383 – Ugly Tribe Co Pty Ltd v Sikola & Ors [2001] VSC 189 - Civil Procedure Act2010 (Vic) s 18.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr P Bingham	Falcone & Adams
For the Defendant	A Ritchie	Kennedy Guy

HER HONOUR:

1. On 16 March 2020, JAS Property Developments Pty Ltd (‘JAS Developments’) issued a Notice of Default and Rescission (‘Notice’) of a contract to purchase property between itself as vendor and the plaintiff as purchaser.   At this time Ms Amato was occupying the property prior to settlement by agreement.  The default was said to be a failure to settle under the contract by 11 March 2020.  JAS Developments gave 14 days to remedy the defect. Ms Amato’s position was that she was ready to settle the contract once the builder had remedied various defects, as had been previously discussed between them.  On 31 March 2020 she issued proceedings and sought an interlocutory injunction to prevent the defendant evicting her.   Ultimately, on 14 April 2020 JAS Developments informed the plaintiff that it unconditionally withdrew the Notice and agreed that it was of no effect. 

1. The remaining dispute between the parties is as to the costs of the application for interlocutory relief.  The plaintiff seeks her costs on an indemnity basis.  The defendant submits that they be paid on a standard basis, limited to the cost of her submissions and correspondence with the Court and defendant regarding the listing of the interlocutory matter.  For the reasons that follow, it is appropriate that the plaintiff be paid the costs associated with the application for the interlocutory injunction on an indemnity basis.

1. The recovery of costs by order is at the discretion of the Court.[1]  Costs are usually awarded on a standard basis.[2]  A request for costs on an indemnity basis represents a departure from the usual course.  Special circumstances must be present to justify departure.[3]  In Ugly Tribe Co Pty Ltd v Sikola & Ors[4] (‘Ugly Tribe’) Harper J references seven illustrations where special circumstances existed.  The categories of what conduct might amount to special circumstances justifying an award of indemnity costs are not closed.

   [1]Supreme Court Act 1986 (Vic), s 24(1).

   [2]Supreme Court (General Civil Procedure) Rules 2015 (Vic), r 63.28.

   [3]Australian Electoral Commission v Towney (No 2) (1994) 54 FCR 383 (Foster J).

   [4][2001] VSC 189 (Harper J) (‘Ugly Tribe’).

1. The plaintiff submits that the defendant, properly advised should have known reliance on the Notice of Default had no chance of success.[5]  She further submits that the defendant continued the proceeding in wilful disregard of known facts and clearly established law,[6] in circumstances where all of the relevant facts were known to it from the outset and the merit of the plaintiff’s claim for interlocutory relief should have been apparent.[7]

   [5]Relying on Woodward J in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants  Ltd (1988) 81 ALR 397, 401.

   [6]Ugly Tribe (n 4). 

   [7]Specialist Australian Security Group Pty Ltd (In Liquidation) v Onwatch Pty Ltd [2017] VSC 184 (Elliott J).

1. The defendant submits that it took a ‘robust’ position as to the validity of the Notice prior to the issue of proceedings and that once issued and served with the supporting affidavit and submissions the defendant took time to consider its position before ultimately withdrawing the Notice and acknowledging a licence to occupy the apartment.  It says that there is no act of dishonesty or bad faith that would justify the making of an indemnity costs order.

1. The defendant’s conduct prior to the issue of the proceeding and once served with the proceeding does demonstrate to me an intransigence in the face of what must have been apparent to it that Notice could not be defended.

1. Without rehearsing the complete chronology, Ms Amato had been in occupation of the apartment since January 2019.  Since approximately November 2019 she had been in discussion with the defendant regarding defects in the property and inclusions that had not been installed in accordance with the contract.  Those discussions were ongoing and she wanted them resolved prior to settlement.  Some matters were addressed and an agreed outcome was achieved but other matters remained outstanding.  Settlement was originally scheduled for 17 February 2020.  A builders report outlining defects was submitted and the day prior to settlement Ms Amato met with a representative of the defendant. An agreement was reached as to how the outstanding defects would be addressed and settlement was ultimately agreed to be extended without penalty to 21 February 2020. 

1. Unfortunately then on 19 February the apartment suffered an inundation of water due to defective air-conditioning pipes and both the apartment itself and Ms Amato’s belongings suffered water damage.  On 22 February a representative of the defendant notified the plaintiff[8] that the damaged carpet could not be replaced until the air-conditioning problem was rectified and requested a deferral of settlement until the extent of the damage could be identified.

   [8]Exhibit CCA 8 to Affidavit of Ms Amato dated 31 March 2020.

1. PEXA had been updated for settlement to occur on 27 February 2020. Ms Amato’s conveyancer wrote to the defendant’s solicitors noting that the defendant had instructed deferral of settlement and that no air-conditioning technician had yet attended the premises to assess the extent of the damage.  The technician ultimately attended on 3, 5 and 6 March. Work was completed but the necessary inspection and certification had not occurred. On Friday 6 March the defendant’s solicitor then informed the plaintiff that settlement was required by 11 March.  The plaintiff pointed out the practical difficulties associated with this given the public holiday on the 9 March  as well as re-iterating the instruction that settlement was deferred and the extent of inundation damage had not yet been finalised.  She and her conveyancer sent a number of emails regarding the lack of substantive response to defects raised and the impracticality of the short notice for settlement on 11 March.

1. The next communication on behalf of the defendant was the Notice.  A detailed letter responding to the Notice was sent by Ms Amato’s solicitors on 17 March 2020.[9] It sought revocation of the Notice, confirmation that defects would be rectified and outstanding items be completed within a specified time frame to be agreed, an agreement to credit the plaintiff at settlement an amount of nearly $20,000 she herself had paid for work to correct some of the defects, an extension of settlement to a date no less than seven days after completion of the relevant work.  In the absence of any response, follow up emails were sent on 23 and 24 March.  A without prejudice email response was received.   Ms Amato’s solicitor replied in the following terms:

With respect, the manner in which your client is approaching these negotiations in our view is unreasonable and lacks any genuine good faith, especially given all of the circumstances of this matter.  That is, the Rescission Notice ought to be immediately withdrawn, and the offer below (or any other offer your client wishes to make) then put forward for our client’s consideration…. If negotiations then break down, your client would be at liberty to issue a fresh Rescission Notice (notwithstanding such action may still result in litigation).  At least then  our client will not be having to consider such an offer whist suffering from undue duress. ……[10]

[9]Exhibit CCA 19 to Affidavit of Ms Amato dated 31 March 2020.

[10]Exhibit MCA 2 to Affidavit of Mr Adams dated 20 April 2020.

1. The solicitor communicated that this email would be relied on for questions of costs.

1. The response was an email noting instructions to accept service of proceedings and the information about changing the locks after 31 March.  A further email was sent to the defendant’s solicitor on 30 March the contents of which were without prejudice save as to costs.  It expressed frustration at the difficulty in engaging in meaningful discussion given the ‘bargaining strategies’ adopted by the defendant.  It noted a dispute as to who initiated contact that led to discussions between a Mr Richards on behalf of the defendant and Ms Amato.  It outlined a provisional agreement as to substantive matters subject to the withdrawal of the Notice.  It further proposed deferring commencement of any proceeding pending attendance by the parties of informal (or formal) mediation with a genuine attempt to achieve settlement by 6 April, again with an immediate withdrawal of the Notice.  That proposal was not accepted. Proceedings were then issued and served.

1. With the filing of an appearance the defendant’s solicitor noted that he was in the process of taking instructions and would be in a position to advise whether there would be consent to the interlocutory injunction by 4pm on 6 April, and if opposed would file material by 8 April.  It provided an undertaking not to evict the plaintiff or interfere or prevent occupation of the premises by her pending determination of the application for interlocutory relief.  On the basis of this undertaking a consent order was made granting the defendant until 14 April to file material.

1. On 9 April the solicitors confirmed instructions to oppose the application for interlocutory relief.  This information was conveyed with a notable absence of any basis for the opposition and indicated material would be filed in accordance with the orders.

1. On 14 April the solicitor wrote to Ms Amato’s solicitor advising that the defendant unconditionally withdraws the Notice and agrees it is of no effect.  On the basis of this withdrawal it filed submissions of the same date opposing the application for interlocutory relief on the basis that there was now no threat and such relief was therefore unnecessary. 

1. There has been no explanation provided as to the change in the defendant’s position on 14 April.  No additional facts were said to have emerged nor could the change be said to respond to the provision of legal advice.  The absence of any explanation in the face of some four weeks of trenchant reliance on the Notice is significant.  At no stage did the defendant place before the plaintiff or the Court a reasoned argument for its issue and continued reliance on the Notice.  In those circumstances, coupled with a capitulation withdrawing the Notice and agreeing it was of no effect, it is difficult to fathom an appreciation of anything other than that the Notice was not valid and was bound to fail.

1. It is not necessary in my view to show bad faith, dishonesty or some act of misconduct in order to demonstrate special circumstances.  Since the seven non exhaustive illustrations of Ugly Tribe in 2001, the Civil Procedure Act2010 (Vic) (‘Civil Procedure Act’) has been introduced. It imposes overarching obligations on parties and practitioners in their conduct of any aspect of a civil proceeding from the time of the first substantive document being filed. The obligation includes an obligation not to make a response to a claim in a civil proceeding that, amongst other things, does not have a proper basis (s 18). These obligations reflect the sort of conduct breach of which might amount also to special circumstances as contemplated in Ugly Tribe.

1. Whether or not the obligations of the Civil Procedure Act are operative prior to the filing of affidavit material and submissions on 14 April is not the question. The obligations imposed express the expectation that parties will not prolong genuine disputes or advance unmeritorious disputes. A defence, no matter how robust must be based on arguable fact and law. The defendant chose to maintain a Notice without setting out any argument as to why its reliance was well founded, without engaging meaningfully in attempts to resolve the impasse either prior to the issue of the proceeding, or expeditiously once served with the summons, until stating its only ground for opposing the application was that it had now done what had been asked of it since 17 March.

1. Given this conduct in the face of having issued a Notice based upon a settlement date that had been unilaterally set at short notice, in my view special circumstances are demonstrated.  The plaintiff is entitled to the costs incurred in seeking the interlocutory relief on an indemnity basis.  This includes the affidavits and submissions and the necessary correspondence with the Court and the defendant until the order made this day.  The costs of the proceeding otherwise are reserved and the proceeding will be listed for directions before an Associate Justice.