Aura S Kalra Pty Ltd v Zeine (No 2)
[2022] VCC 1186
•28 July 2022
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-20-03518
| AURA S KALRA PTY LTD | Plaintiff |
| v | |
| GHASSAN ZEINE and NOUHAD ZEINE | Defendants |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers | |
DATE OF JUDGMENT: | 28 July 2022 | |
CASE MAY BE CITED AS: | Aura S Kalra Pty Ltd v Zeine and Anor (No 2) | |
MEDIUM NEUTRAL CITATION: | [2022] VCC 1186 | |
REASONS FOR JUDGMENT
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Subject:COSTS
Catchwords: Plaintiff successful in obtaining order for specific performance – alternative damages claim unsuccessful – costs follow the event – whether costs awarded in favour of plaintiff should be on standard basis or on a full indemnity basis – whether costs awarded in favour of plaintiff should extend to costs of unsuccessful damages claim and expert witnesses in support of that claim – whether rule that costs follow the event should be departed from on the basis that plaintiff could have obtained performance of contract subject to payment of default interest and default costs either to defendants or to be held in suspense pending resolution of the principal dispute – costs awarded in favour of the plaintiff on the standard basis – no costs for unsuccessful damages claim – costs to be offset against interlocutory costs orders in favour of defendants
Cases Cited:Saafin Constructions Pty Ltd (in liq) & Ors v MAG Financial and Investment Ventures Pty Ltd & Ors (Costs and Orders) [2021] VSC 702;
Judgment: Within 14 days the parties must bring in short minutes to give effect to these reasons
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr D. Gibson | Victoria Mercantile Lawyers |
| For the Defendants | Mr L. Wirth | R J Legal |
HIS HONOUR:
Background
1On 23 May 2022 I published reasons for judgment in this proceeding, dismissing the defendants’ counterclaim and determining that the plaintiff was entitled to an order for specific performance of a contract for sale to it of a service station and general store at Toolern Vale ([2022] VCC 680). An alternative claim by the plaintiff for damages (which was not its preferred relief) failed. I reserved the question of costs.
2I now have the following costs submissions:
(a) on behalf of the plaintiff dated 6 June 2022;
(b) on behalf of the defendants dated 27 June 2022;
(c) reply submissions dated 14 July 2022 on behalf of the plaintiff.
The plaintiff’s solicitors foreshadowed or sought leave to make further costs submissions on or before 22 July 2022. No leave was granted to make those further submissions and no submissions were in fact filed.
Plaintiff’s contentions
3Mr Gibson summarised the outcome of the proceeding, and in his primary costs submission (paragraph 9) continued:
“The evidence can be interpreted that the Defendants have intentionally resisted the Plaintiffs intentions to settle.”
4He referred to a series of items of correspondence from 19 December 2019 to 24 March 2020, further correspondence in February, and a failed mediation on 5 March 2020. There then ensued further correspondence. In paragraph 10 of his primary submission he said:
“The Plaintiffs loss of its claims for damages were incidental to the case for performance and because of the nature of the claim had to be pleaded. But it was always the Plaintiffs position that it wanted to settle the contracts and still does.”
5Mr Gibson noted at paragraph 11 of his primary submission that an offer of compromise on behalf of the defendants for $250,000 “plus costs on the County Court Scale” was “not as favourable as establishing the contracts of sale to be both still on foot and enforceable between the parties”. He said at paragraph 12:
“Any order for costs in favour of the Plaintiff should be off set with the order of Judge [Aileen] Ryan for the Plaintiff to pay the Defendants costs for the unsuccessful application for the Defendant to provide the Plaintiff with further and better particulars of the pleaded representations of waiver and estoppel.”
6Consequently (paragraph 8), he said:
“The Plaintiffs [sic] seeks costs from the Defendants on an indemnity basis to be taxed based on the Supreme Court [scale] for the writ, injunction, Defence and Counterclaim, Affidavit of Documents plus mediation proceedings and the County Court scale for the balance of proceedings from the date of transfer to the County Court ...”
7He said that:
“The case was instigated and commenced by the Plaintiff when it had no choice because the Defendants had made unlawful demands for payments of bank interest claimed as being payable by the Plaintiff because of the delay in settlement with regard to two undisclosed purchases made by the Defendants on two other property’s that the Plaintiff was not legally bound by contract to pay and immediately issuing null and void Notice of Default and Recession [sic] under the sale of land contract and a Notice of Default and Termination for the sale of business contract based on grounds that never could be expected to succeed.” (paragraph 8(a))
8He elaborated on what he said was the weakness of the defendants’ case and the strength of the plaintiff’s case.
Defendants’ contentions
9Mr Wirth in his submissions said that the plaintiff had:
“several options available to it to achieve near-immediate settlement of the Contracts, with or without vacant possession, following service of the Default Notices.” (Paragraph 3)
10He referred to the various twists and turns of events in early 2020 and the suggestion made by Sifris J (as his Honour then was) to seek to resolve the matter by agreement. The twists and turns of the narrative are to be found in my principal reasons. He said in light of the suggestions made by Sifris J, the obvious solution to the dispute “was to pay the disputed money into trust, settle the Contracts and litigate over the funds in trust.” (Paragraph 10)
11Mr Wirth noted that the damages claim on behalf of the plaintiff had failed. Accordingly (paragraph 11):
“The [plaintiff] has had a partial victory, but it was a battle that it could have avoided by recourse [to] the alternatives open to it more than 2 years ago, and it would have come at a fraction of the cost. Accordingly, it would be appropriate in this case for the Court to order that each party bear its own costs (that there be no order as to costs).” (Paragraph 11)
12He said that if a costs order were to be made in favour of the plaintiff, I should be guided by the principles stated by Riordan J in Saafin Constructions Pty Ltd (in liq) & Ors v MAG Financial and Investment Ventures Pty Ltd & Ors (Costs and Orders) [2021] VSC 702 [27]–[31].
13Mr Wirth continued, observing that the plaintiff had “completely failed on the question of damages”. He noted that the expert reports in support of the damages claim were served late, leading to an adjournment of trials. (Paragraph 15)
14He said, as to expert witness Mr Dudakov, he had made assumptions which the witness was not qualified to judge, and no effort had been made to prove any of them “except for a last-ditch, manifestly hopeless attempt to prove the assumed construction costs through the evidence of Dhirend Singh.” (Paragraph 16)
15He said another expert report of Mr Raj Sandhu was “nothing more than some basic arithmetic not requiring any expertise.” (Paragraph 17)
16He said the court book was unnecessarily large:
“At least 2 or 3 volumes were unnecessary. Had the court book been printed double-sided, the volume of paper would have been halved.” (Paragraph 18)
17He said any costs order in favour of the plaintiff should exclude the costs in relation to the evidence of Messrs Dudakov, Dhirend Singh and Raj Sandhu. (Paragraph 19)
18Mr Wirth noted his clients’ offer to settle made on 9 February 2022. He said:
“Instead of taking any of the much cheaper opportunities discussed above, [the plaintiff] now has the benefit of an order for specific performance that, if seen through, will leave the [the plaintiff] with a development project that, on the evidence, remains problematic and highly speculative.” (Paragraph 21)
19He noted that any planning permit application was “likely to be opposed”. (Paragraph 22) He concluded:
“The reduction in costs should be at least 50%. If the costs in relation to the evidence of Messrs Dudakov, Singh and Sandhu are not separately excluded, the reduction should be greater.” (Paragraph 23)
20Mr Wirth said that the request for costs on an indemnity basis was unjustified. He said any order should be postponed because:
“If the [plaintiff] does not in fact settle, the [defendants] will be seeking a discharge of the decree for specific performance and, if that is successful, its costs of the proceeding, including on an indemnity basis from 9 February 2022.” (Paragraph 26)
21Finally, he said, in any event the defendants should have the costs reserved by Muller JR on 16 June 2021 when the Court vacated the trial date because of the late service of the expert reports. He said this result followed because the plaintiff “completely failed on the question of damages, and the costs of that application related only to that question ...” (Paragraph 28)
22He also noted that on the 8th day of trial there was a standdown until lunchtime because the plaintiff did not have an available witness. Had that time not been lost, he said, the trial could have been completed without a sitting on the morning of 6 April, and no costs of that day need have been incurred. (Paragraph 29)
Plaintiff’s contentions in response
23Mr Gibson contended that there was no foundation for the defendants’ argument that the proceeding was unjustified: the responsibility for the failure to settle the contracts lay with the defendants. He said the plaintiff was justified in refusing to “park” the demand by the defendants for certain funds because the notices on which they were based were unjustified, and this finding was made at trial. Mr Gibson denied that his client’s claim had been only partially successful. The issue of specific performance was, he said, always the central issue.
24Mr Gibson said the criticism of the expert witnesses was unjustified, as were the criticisms of the court book. He said:
“the evidence gathering for the reports were effected [sic scil affected] with covid as the business were included within the ring of iron for lockdowns and the income for the business would have been adversely effected [sic] as well.” (Paragraph 18)
25Mr Gibson was inclined to agree that the costs order should be stayed pending the outcome of the settlement.
Conclusion
26The plaintiff could have taken a number of alternative courses as urged by the defendants. It was not, however, obliged to do so. The defendants now contend that the costly trial was the result of the plaintiff’s intransigence. A more accurate interpretation would be that the trial was necessitated by the unjustified demands of the defendants for penalty interest and costs based on default notices which I have found were not valid. The general rule that costs follow the event should therefore apply.
27As to the quantum of costs, the Supreme Court scale should apply for the period within which the matter was before the Supreme Court, and thereafter the County Court scale. Every commercial dispute commences with one party taking a position which the other party rejects and refuses to fall in with. Merely to show that the contentions of one party ultimately prevailed, and those of the other party ultimately failed, does not justify the award of costs on a full indemnity basis. If it did, every victorious litigant would be entitled to indemnity costs, whereas victors customarily receive their costs only on the standard basis. Awards on an indemnity basis are the exception rather than the rule.
28In circumstances where the primary relief sought by the plaintiff is, and always has been, specific performance, it would be contrary to the principles of equity, which regards each piece of land as unique and therefore each contract for the sale of land as being, other things equal, proper for a decree of specific performance, to enable a defendant in a specific performance suit to buy himself out or to create adverse costs consequences for a successful specific performance claim on the basis of the actual or promised payment of an uncovenanted sum of damages. To look at it another way, I am unable to conclude at this stage that a payment to the plaintiff of $250,000 plus costs as at February this year would have been a better outcome for the plaintiff than specific performance.
29The plaintiff’s case, in so far as it sought as alternative relief an award of damages, suffered a dismal failure. This was not merely an instance in which, in the face of a clash of expert opinion advanced by two groups of experts apparently in good standing in their callings or professions, the Court has chosen one set of opinions over another. Here, the “experts” for the plaintiff were in some cases thoroughly discredited; in others, shown to have made their assessments as at the wrong date (in this case a criticism of those who instructed, rather than the expert himself). It is also significant that it was to enable this expert evidence to be put before the Court that the trial was adjourned. In my view, it is appropriate that the costs order in favour of the plaintiff on a standard basis should not extend to the costs of any of its expert witnesses. For the same reason, the costs reserved by Muller JR should be awarded on the standard basis in favour of the defendants, with a view to their being offset against the defendants’ liability to pay the plaintiff’s costs generally. Disallowance of any costs in favour of the plaintiff relative to its expert witnesses accommodates the point made by Mr Wirth, on behalf of the defendants, that the trial took a day longer than ideally it should have. To make a further disallowance against the plaintiff would constitute a double deduction. As to the court book, the Costs Court may determine what is the appropriate allowance for the court book in the circumstances.
30I agree that the costs ordered in favour of the defendants by Judge Aileen Ryan ought likewise to be offset against the defendants’ liability for the costs of the proceeding generally.
31Finally, I agree that the issue of costs remains susceptible to further variation in light of the outcome of the sale transactions. Accordingly, the costs order should be expressed to be postponed until further order of the Court, and there should be liberty to apply.
32I request the parties to bring in short minutes to give effect to these reasons.
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