Atlantic Securities Pty Ltd ATF the Atlantic Superannuation Fund v Isalex Pty Ltd ATF the Isalex Superannuation Fund - [2013] WASC 281

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: ATLANTIC SECURITIES PTY LTD ATF THE ATLANTIC SUPERANNUATION FUND -v- ISALEX PTY LTD ATF THE ISALEX SUPERANNUATION FUND [2013] WASC 281

CORAM: ALLANSON J

HEARD: 22 JULY 2013

DELIVERED : 30 JULY 2013

FILE NO/S: CIV 3029 of 2012

BETWEEN: ATLANTIC SECURITIES PTY LTD ATF THE ATLANTIC SUPERANNUATION FUND
Plaintiff
AND
ISALEX PTY LTD ATF THE ISALEX SUPERANNUATION FUND
Defendant

Catchwords:

Practice and procedure - Costs - Principles governing exercise of costs discretion - Turns on own facts

Legislation:

Property Law Act 1969 (WA), s 126, s 128
Rules of the Supreme Court 1971 (WA), O 53 r 2, O 66 r 1
Supreme Court Act 1935 (WA), s 37

Result:

Costs orders made

Category: B

Representation:

Counsel:

Plaintiff: Mr A J N Aristei
Defendant: Mr P C Hassett

Solicitors:

Plaintiff: Irdi Legal
Defendant: Lavan Legal

Case(s) referred to in judgment(s):

Giacci v Giacci Holdings Pty Ltd [2010] WASC 349
Jeruth Pty Ltd v Haybale Pty Ltd [2004] VSC 319
Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622

ALLANSON J: Atlantic Securities Pty Ltd and Isalex Pty Ltd jointly owned a commercial property in Palmyra as tenants in common in equal shares. Anthony Terribile is a director of Atlantic Securities and conducted the business of Anthony Terribile & Co from that property.
On 17 December 2012, Atlantic Securities and Mr Terribile commenced an action by writ of summons against Isalex, claiming an order that Isalex sell its interest in the property to Atlantic Securities pursuant to s 126(2) or (3) of the Property Law Act 1969 (WA), alternatively O 53 r 2 of the Rules of the Supreme Court 1971 (WA) (RSC), alternatively the inherent jurisdiction of the court. In the alternative, the plaintiffs sought an order that the property be sold pursuant to s 126(1) of the Property Law Act, with Atlantic Securities having leave to purchase the interest of Isalex and to bid for that interest at a sale.
At the same time, the plaintiffs filed a summons seeking interlocutory relief. They sought orders that Isalex be restrained from entering onto the property or in any way interfering with Mr Terribile's possession of it. The application for an injunction was refused. The main action has now been completed. The parties agreed to orders under which the property was sold at auction. This left questions of costs to be resolved, and these are my reasons for the orders I make with regard to costs.
Atlantic Securities' claim against Isalex was related to an earlier dispute between the parties to this action, and also Ms Sharlene de Bari. On 31 March 2012, the parties executed a deed of settlement finalising the business partnership between Ms de Bari and Mr Terribile. Part of that agreement was that Mr Terribile's firm was entitled to sole and exclusive occupancy of the property, and to enjoy rights of quiet enjoyment, until 31 December 2012 on agreed terms regarding rent and outgoings.
On 19 October 2012, Isalex, through its solicitors, wrote to Atlantic Securities and gave notice of its intention to apply for 'partition' of the premises pursuant to s 126 of the Property Law Act. Although the letter used the term partition, reading the letter as a whole it referred to the need for orders for a sale, either after or subject to Mr Terribile's present right of occupancy and quiet enjoyment. Isalex further gave notice of its intention to itself occupy the premises from 1 January 2013 pursuant to its rights as co‑owner to the property and until it was sold. Isalex invited Atlantic Securities to offer to purchase its share, otherwise it would seek orders for sale.
At the same time, Isalex gave notice to Mr Terribile of its intention so as to permit him to make arrangements for giving up possession.
On 16 November 2012, the solicitors for Atlantic Securities wrote to Isalex (who were then no longer represented) and said that Atlantic Securities was ready to purchase the half share held by Isalex. The letter included conditions relating to the sale of the property and, in particular, its valuation. The offer was to remain open for seven days. The letter was expressed to be a Calderbank offer.
On 27 November, Atlantic Securities put a further offer to Isalex to purchase its share, alternatively for it to have exclusive occupancy rights (presumably a lease) for two years on the same terms and conditions as were then in force. The offer was open until 4 December 2012 and again was expressed to be a Calderbank offer.
On 4 December, Isalex responded in a letter from its director, Dr Armand Zurhaar. Isalex now said it had elected to reconsider its intention to apply for partition and was reconsidering whether it wished to dispose of the property. Dr Zurhaar further advised that Isalex would not provide the current occupier with any right of occupation after 31 December 2012 and expected to receive vacant possession on 1 January 2013. Dr Zurhaar requested keys to the property, or Isalex would engage a locksmith and electrician to effect access.
Atlantic Securities responded through its solicitors on 7 December, and asserted that Isalex had no right to demand vacant possession and no right to lock out 'my client'. As Dr Zurhaar later complained, the letter did not make clear whether 'my client' was Mr Terribile or Atlantic Securities or both.
On 14 December 2012, Dr Zurhaar again wrote. He said that neither of the offers made by Atlantic Securities was reasonable. He agreed that Atlantic Securities had the same right of entry and possession as Isalex, but stated that Anthony Terribile & Co was a different legal entity and could not operate on the property without the permission of Isalex.
On 17 December 2012, Atlantic Securities and Mr Terribile commenced their action and brought the application for interlocutory relief. I heard the application as an urgent application on 19 December. In an ex tempore judgment, I refused the application for an injunction. I held, in effect:
1.the parties' relationship was governed by their position as co‑owners and also by the terms of the settlement deed under which Mr Terribile had a right to occupy until 31 December 2012, but only until then;
2.neither co‑owner had a right of exclusive occupancy which would permit it to exclude the other after the right of occupancy in the settlement deed had expired;
3.the ultimate solution would be the sale of the property under s 126 of the Property Law Act, and until that was done I had no legal basis to restrain Isalex from exercising its rights as a co‑owner;
4,in refusing the injunction, I emphasised that I was not deciding anything about Mr Terribile's continued occupancy after 1 January 2013 or whether Isalex had any right to exclude him.
The only way to resolve the matter, as I then saw it, was to expedite the proceedings under s 126 with a view to early mediation or, failing resolution by that method, early trial. I expressed the preliminary view that as there appeared to be no factual dispute between the parties, if it was necessary to proceed to trial that could be done without pleadings or any further interlocutory steps and the trial could be heard shortly.
The relationship between the parties did not improve. On 31 December 2012, the plaintiffs made a set of keys available to Dr Zurhaar. He was, however, impeded in access in the premises by an alarm system to which he did not have the codes.
On 18 January 2013, I held a short directions hearing at which I gave leave to amend the writ. Mr Terribile was removed as a party. The relief sought was amended to an order for sale, with net proceeds to be distributed equally between the parties, with Atlantic Securities to have leave to bid to purchase the interest of Isalex.
A strategic conference was held on 4 February 2013, at which I ordered the matter be referred to mediation to be conducted on 7 February. At the strategic conference the parties confirmed that there were no factual issues between them, although there were still issues regarding:
1.how the sale was to be conducted, whether by auction or private treaty;
2.who was to have carriage of the sale if it was to be by private treaty.
Isalex maintained that it was concerned that if Atlantic Securities had the conduct of the sale, Mr Terribile still was in occupation and would benefit from any delay. Isalex wished to have the conduct of the sale, if by private treaty, or to have the sale by an auction and supervised by the court.
Despite this level of accord, the action could not be resolved at mediation. The matter was listed for a directions hearing at which directions would be made programming it for trial. Only then did commercial prudence prevail. The parties agreed directions for a sale by auction which was conducted on 24 April 2013. Atlantic Securities and Isalex were the only bidders. Atlantic Securities was the successful bidder and has now purchased the property.
This did not end the matter. There were disputes between the parties about the costs of the injunction application, which I had reserved until I could see how the matter resolved, and the costs of the application generally.
Atlantic Securities argued that it was the successful party and should have the costs of the action, and that each party should bear its own costs of the injunction application. Isalex argued that it had been wholly successful on the injunction application and it should have the reserved costs of that application and the costs of the action.
Atlantic Securities based its claim for costs on the conduct of Isalex and Dr Zurhaar, which it says substantially contributed to the commencement of the injunction application and the claim. The threats made against Mr Terribile's occupation of the property required the plaintiff to seek interlocutory relief. Although it was unsuccessful in obtaining that relief, Atlantic Securities submitted that each party should bear its own costs on that application because of the conduct of Isalex. Atlantic Securities also said that it had attempted to resolve this matter by offering to purchase the property from Isalex before 31 December 2012. It had no reasonable alternative but to commence the litigation because of the unreasonable conduct of Isalex. Once it had commenced the action, it was successful in its claim in having the property sold.
Isalex submitted that it should have the reserved costs of the injunction application on the basis that the application was not dismissed by reference to discretionary factors, but because the plaintiffs had no right to an injunction. Isalex submitted that in those circumstances, the costs of the injunction application should follow the event.
Isalex also claimed the costs of the main application. It referred to s 128 of the Property Law Act under which, in an action for partition, the court may make such order as it thinks just respecting costs up to the time of the hearing. It submitted that the plaintiffs' application for an injunction, and its initial assertion that it was entitled to force Isalex to sell its interest to Atlantic Securities under s 126(2) and s 126(3), were unreasonable and both contributed materially to the cost of the action. Once those matters fell away following the amendment of the writ, only minor issues remained. Isalex did not at any stage resist an order that the property be sold under s 126, but were concerned only with the mechanics of sale and in particular that Atlantic Securities should not have the carriage of the sale if it was to be by private treaty. Isalex said that the action has put the defendant to the unnecessary expense of the costs in the action, and the plaintiffs should pay those costs.

The costs of the action

Section 37(1) of the Supreme Court Act 1935 (WA) provides that the costs of and incidental to all proceedings in the court shall be in the discretion of the court. Section 128 of the Property Law Act confers a similarly broad discretion.
Sometimes, when there has been no hearing on the merits, it is still possible to say that one party has succeeded and apply the general principle that the successful party is entitled to its costs. Sometimes it is possible, on the papers, to clearly discern which party would have been successful so that the agreement or compromise that renders the hearing unnecessary does not displace the usual order that the successful party have its costs. And sometimes it is apparent that one party has acted unreasonably. In such cases the court can fairly determine who should pay the costs: see, generally, Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622; Jeruth Pty Ltd v Haybale Pty Ltd [2004] VSC 319.
Before these proceedings began each party had told the other that there must be a sale of the property. Atlantic Securities offered to buy Isalex's interest, but the parties did not agree. Atlantic Securities commenced these proceedings when the stalemate could continue no longer. Earlier in these reasons I have outlined the limited areas of dispute between the parties in the progress of the action. This is not a case where it is appropriate to predict which party would have been successful. Atlantic Securities would not have been successful had it persisted in its claim for an order requiring Isalex to sell its interest. But it retreated from that position in the amended writ. I cannot determine that either party acted more or less unreasonably than the other, so as to affect the exercise of the discretion as to costs.
In my opinion it is just that the parties should bear equally the expense of commencing the action (the fee of $1619.20 paid by the plaintiff on filing the writ) and the mediation fee ($379). An application under s 126 was the only way this was going to be resolved, and it was simply chance that Atlantic Securities became plaintiff and incurred the two fees. Otherwise, subject to my decision below regarding the reserved costs of the injunction application, each party should bear its own costs.
The application for an interlocutory injunction was refused, with costs reserved. It is not possible to state any general rule about how the discretion regarding costs should be exercised in such a case. In this case, I have taken the following matters into account. First, the application was dismissed. Second, the plaintiffs had no colourable right to final relief requiring Isalex to sell its interest to Atlantic Securities and allow Mr Terribile to remain in occupation: see Giacci v Giacci Holdings Pty Ltd[2010] WASC 349 [34] ‑ [38]. That asserted right was the apparent basis of the claim for an injunction to preserve the status quo pending trial. As a co‑owner with a 50% interest, Atlantic Securities was entitled to an order for sale of the property, but not to compel Isalex to sell to it the interest held by Isalex. Atlantic Securities had no basis to restrain a co‑owner from entering the premises. Third, the deed of settlement entitled Mr Terribile to occupy the property, but only until 31 December 2012. Atlantic Securities and Mr Terribile could have had no expectation that Isalex would agree to any extension of that period. Fourth, the urgency of the application was brought about by the inaction of the parties, including the plaintiffs, in letting the period of occupancy run down without resolving what was to happen from 1 January 2013. It was open to Atlantic Securities at any time from March 2012, at the latest, to seek the sale of the property.
The plaintiffs should pay the reserved costs of the injunction application. It would be sensible for those costs to be fixed. It was an argued application, it went for two hours, and an allowance may be made for urgency. On the schedule of standard costs orders for interlocutory applications, set out in the Consolidated Practice Directions, that would result in fixed costs of $2,975.
Neither party has obtained the orders it sought for the costs of the main proceedings, although each has had some limited success on part of the costs dispute. In my opinion, there should be no order as to the costs of this application.
The orders will be:
1.the defendant pay to the plaintiff, one half of the fee for filing the writ and one half of the mediation fee;
2.the plaintiff shall pay the defendant's costs of the application for an injunction fixed at $2,975;
3.the amount payable by the defendant under order 1 be set off against the amount payable by the plaintiff under order 2;
4.otherwise, each party bear its own costs of the proceedings, including the application for costs.