Blake v Leondiou (No 2)

Case [2012] SASC 131

SUPREME COURT OF SOUTH AUSTRALIA

(Civil)

BLAKE v LEONDIOU & ANOR (NO 2)

[2012] SASC 131

Judgment of The Honourable Justice Blue

27 July 2012

PROCEDURE - COSTS - GENERAL RULE - COSTS FOLLOW THE EVENT

PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - NATURE OF PROCEEDINGS

PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - PROCEDURE UNDER RULES OF COURT - PAYMENT INTO COURT, AND OFFERS TO SETTLE OR CONSENT TO JUDGMENT

The plaintiff and the first defendant agreed to purchase a house collectively to let out as a rooming house. They each contributed funds towards the purchase price. A dispute arose between the parties and the plaintiff commenced proceedings seeking a declaration that she had an 80% beneficial interest in the property.

The parties reached agreement that a consent judgment be entered in favour of the plaintiff for a principal amount of $98,235 but the parties did not resolve issues of interest and costs. Interest was awarded to the plaintiff in the sum of $21,846. Each party sought an order for costs in their favour on the basis of the alleged misconduct of the other.  

Held:

1. When an action is compromised, the Court will often decline to award costs of the action unless there are particular grounds why one party should bear the costs of the action.

2. The plaintiff was successful in obtaining relief but it was by consent and different relief to that which she had been seeking.

3. Both parties were guilty of unreasonable conduct at various times in the action.

4. In all the circumstances, the parties should bear their own costs of the action and all previous costs orders should be vacated.

Supreme Court Civil Rules 2006 rr 187, 188, 263(1), 264(5)(c), referred to.
Boscaini Investments v Corporation of Kensington and Norwood [1999] SASC 327 ; Gribbles Pathology Pty Ltd v Health Insurance Commission [1997] FCA 1414; (1997) 80 FCR 284; ONE.TEL Ltd v Deputy Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548; Wood v Herd [2001] SASC 217, applied.
Tobin v Tobin and Myers (1977) 75 LSJS 9, discussed.
Advance Resources Services Pty Ltd v Charlton [2008] SASC 118; (2008) 100 SASR 388; Copping v ANZ McCaughan Ltd [1995] SASC 5420; (1995) 63 SASR 523; Forlyle Pty Ltd v Tiver [2007] SASC 464; (2007) 252 LSJS 387; Hansen Yuncken (SA) Pty Ltd v Russell  (1992) 168 LSLJ 99, considered.

BLAKE v LEONDIOU & ANOR (NO 2)
[2012] SASC 131

Civil:

  1. Justice Blue:        In this action, the plaintiff Ms Blake sued the first defendant Mr Leondiou and the second defendant (“the Company”) in connection with the purchase and operation of a house property at Mile End.

  2. On the first day of trial, the parties agreed on the principal relief (judgment for the plaintiff for $98,235), leaving issues of interest and costs to be determined by me as trial Judge. 

  3. I heard evidence and submissions concerning interest, and awarded…

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Blake v Leondiou (No 2) [2012] SASC 131
Case
[2012] SASC 131
Decision Date

CaseChat Overview and Summary

Blake v Leondiou (No 2) involved a dispute between the parties over the costs of the proceeding after a settlement had been reached. The Court had to determine the costs following the settlement of the underlying dispute between Ms Blake and Mr Leondiou concerning the purchase and operation of a property. The central legal issue before the Court was how to determine the costs of the proceeding after a settlement had been reached, and both parties had contributed to the proceedings. Given that the parties had settled all issues except for costs, the Court was required to decide whether to award costs in favour of one party or to order that each party bear its own costs. This decision required consideration of the general rule that costs follow the event, as well as the specific circumstances of the proceedings and the nature of the settlement.

The Court examined the principle that costs generally follow the event, meaning the prevailing party is usually awarded costs. However, this principle is not absolute, and the Court has discretion to depart from it based on the nature of the proceedings and the settlement. The Court noted that it is uncommon for the Court to try the whole action to determine the issue of costs, and typically, each party bears its own costs unless there is a clear basis to award costs in favour of one party. The Court also considered the nature of the proceedings and the settlement, which involved significant contributions from both parties and contentious issues that were not fully resolved. The Court held that the discretion to award costs was not fettered by any rules, and it was appropriate to order that each party bear its own costs given the circumstances of the settlement and the contributions made by both parties.

In conclusion, the Court ordered that each party bear its own costs, recognising the contributions made by both Ms Blake and Mr Leondiou to the proceedings. The Court's decision reflected the principle that costs generally follow the event, balanced with its discretion to depart from this rule based on the specific circumstances of the case. This outcome ensured that neither party was unduly burdened with the costs of the proceedings, given the nature of the settlement and the contributions made by both parties.

Orders

Orders of the court

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Background

Background to the litigation

Whenever parties settle an action resolving all issues other than costs, there are difficulties in the Court being asked to award costs. The Court will generally not try the whole action to determine the issue of costs.[4] The most common outcome is that each party bears its own costs, unless there is an obvious basis on which to award costs in favour of one party.[5] However, costs are always in the discretion of the Court and that discretion is not fettered by any rules.[6][4] Tobin v Tobin and Myers (1977) 75 LSJS 9 at 12 per Sangster J.[5] Gribbles Pathology Pty Ltd v Health Insurance Commission [1997] FCA 414; (1997) 80 FCR 284 at 287 per Finkelstein J; Boscaini Investments v Corporation of Kensington and Norwood [1999] SASC 327 at [19]-[22] per Debelle J.[6] Advance Resources Services Pty Ltd v Charlton [2008] SASC 118; (2008) 100 SASR 388 at [8]-[13] per Doyle CJ and [52]-[56] per Bleby J.Background facts There was a substantial degree of common ground on the pleadings as they stood at the commencement of trial. In addition, two volumes of documents prepared for the purposes of trial were tendered on the costs argument. I make findings of fact based on matters of common ground and the tendered documents. I do not make findings concerning matters which were in contention and could only have been resolved if the matter had proceeded to trial. In December 2007, Ms Blake and Mr Leondiou agreed to purchase collectively the property for $470,000 to operate as a rooming house. It was agreed that 80 per cent of the purchase price ($376,000) be borrowed on first mortgage security to be organised by Mr Leondiou in his capacity as a finance broker. It was agreed that the balance of the purchase price ($94,000) together with incidental costs (stamp duty and fees) would be shared between Ms Blake and Mr Leondiou. It was agreed that Ms Blake would contribute approximately $94,000 and Mr Leondiou the balance of approximately $24,000. It was agreed that the beneficial ownership of the property (whether directly or via the share holding in a corporate vehicle) would be shared between Ms Blake and Mr Leondiou, but it was in dispute in the action what those shares were agreed, or transpired, to be. In January 2008, it was agreed that the parties would use a company to be incorporated as their vehicle to purchase and operate the property. Mr Leondiou incorporated the Company for this purpose. Settlement of the purchase took place on 22 February 2008. The total cost of the property together with incidental costs, conveyancing fees and finance fees was $503,596. The mortgage financier lent $383,868. Ms Blake contributed $94,239. Mr Leondiou contributed $25,499. Mr Leondiou was sole director and shareholder of the Company. He gave a personal guarantee to the mortgage financier of the Company’s liability. During the two weeks following settlement, Mr Leondiou and Ms Blake in succession undertook work for the purpose of improving the property and each expended monies on the purchase of furniture and fittings. Over that period, there was a major falling out between the parties, culminating in Mr Leondiou assuming sole control of the property and its operation as a rooming house. In March 2008, Mr Leondiou wrote to Ms Blake characterising her contribution to the property as a loan and foreshadowing an intention to return the loan to her.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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