Chamberlain Early Learning Centre Pty Ltd v Chamberlain Group Pty Ltd - [2016] NSWSC 322

Supreme Court

New South Wales

Medium Neutral Citation: Chamberlain Early Learning Centre Pty Ltd v Chamberlain Group Pty Ltd & Ors [2016] NSWSC 322
Hearing dates: 11 March 2016
Decision date: 11 March 2016
Jurisdiction: Equity
Before: White J
Decision:
1. Order that the second defendant pay the plaintiff's costs of the proceedings, including the costs of the submissions concerning costs.
2. As between the plaintiff and the third defendant, make no order as to costs save in respect of the costs of the costs application.
3. In respect of the latter costs, order that the third defendant pay the plaintiff's costs.

Catchwords: COSTS — Application for alternative costs order — Rule 42.20(1) Uniform Civil Procedure Rules 2005 — Plaintiff’s proceedings dismissed against defendants save in relation to costs — Plaintiff achieved substantial success —Plaintiff acted reasonably in joining a company director as the second defendant where director responsible for the first defendant being in apparent contempt — Plaintiff acted reasonably in joining the incorrect corporate entity as the third defendant — Second defendant to pay plaintiff’s costs of proceedings and submissions concerning costs — Third defendant to pay plaintiff’s costs of the costs application
Category: Costs
Parties: Chamberlain Early Learning Centre Pty Ltd (Plaintiff)
Chamberlain Group Pty Ltd (1st Defendant)
Kheiralla Mourched (2nd Defendant)
4 Chamberlain Holdings Pty Ltd (3rd Defendant)
Representation:
Counsel:
V Bedrossian (Plaintiff)
S d’Arville (2nd Defendant)
D C Eardley (3rd Defendant)
Solicitors:
Norris Somers Maait Lawyers (Plaintiff)
Matthews Folbigg (2nd Defendant)
Navado Lawyers (3rd Defendant)

File Number(s): 2015/378457

Judgment

HIS HONOUR: These applications concern how the costs of these proceedings should be dealt with.
The proceedings were commenced by summons filed on 24 December 2015. The plaintiff joined three defendants, the first being Chamberlain Group Pty Ltd, the second being a Mr Kheiralla Mourched and the third being 4 Chamberlain Holdings Pty Ltd.
The proceedings were the third brought in relation to the plaintiff's claim to be entitled to a registered lease of premises in Chamberlain Road Guildford pursuant to an exercise of the option for renewal.
On 8 December 2014, McDougall J made orders against Chamberlain Group Pty Limited and a company called 4 Chamberlain Pty Limited. His Honour ordered that those defendants or either of them give the current plaintiff, "further lease options to renew the lease for the Further Term as defined ...".
Orders were made also in relation to the registration of a transfer of lease from the then first plaintiff, a company called Kids For Life Academy Pty Limited to the current plaintiff.
His Honour ordered the caveats lodged by the current plaintiff claiming an estate or interest as transferee of the lease, and by virtue of the exercise by it of the option to renew the lease, be extended until registration of the further lease.
An appeal by the then defendants from his Honour's orders was dismissed by the Court of Appeal on 20 August 2015. In the course of the Court of Appeal's reasons, the Court noted that McDougall J's orders had not been complied with by the then defendants and that their explanation for failure to comply with those orders was "particularly unsatisfactory” in the circumstances.
Notwithstanding those observations, there was considerable further delay in registration of the lease. Negotiations belatedly occurred to settle the terms of the lease between the solicitors acting for the current plaintiff and Chamberlain Group Pty Limited.
Astonishingly, at least to my mind, on 28 October 2015 Matthews Folbigg, then solicitors for Chamberlain Group Pty Limited, served a lapsing notice in respect of the caveat which McDougall J had ordered to be extended until registration of the further lease to be granted. That was done without seeking a discharge of his Honour’s order.
Proceedings were then brought by Chamberlain Group Pty Limited for the withdrawal of the caveat to enable the proposed sale of the property to proceed.
It appears that in the earlier proceedings before MacDougall J the company called 4 Chamberlain Pty Limited was the proposed purchaser of the property. The then sole director and sole shareholder of Chamberlain Group Pty Limited, Mr Mourched, deposed in his affidavit in support of that company's claim for withdrawal of the caveat that a new contract for sale was entered into on or about 21 September 2015 between Chamberlain Group Pty Limited and 4 Chamberlain Holdings Pty Limited. He annexed a copy of that contract bearing the date 21 September 2015 showing 4 Chamberlain Holdings Pty Limited as the purchaser. He said in substance that the continued lodgment of the caveat was preventing Chamberlain Group Pty Limited from completing the sale of the property. The plaintiff did not seek to prevent that sale.
On 8 December 2015, the plaintiff consented to orders that it provide Chamberlain Group Pty Limited with a signed copy of the lease which had been provided to the defendants' solicitors on 14 October and provide withdrawals of caveats.
Then, according to the director of the plaintiff, she was told on 23 December 2015 by Mr Mourched that the property had been sold and she was introduced to a Mr Peter Sleiman.
According to her, Mr Sleiman said words to the effect that there was no lease. She said in substance that she was concerned that the lease had not been registered as Mr Mourched had indicated that would be done. That was the basis upon which he sought and obtained the withdrawal of the caveat. It was clear that the caveat was withdrawn only on the basis that the plaintiff expected that the new lease would be registered. That, in my view, in any event, was required by the orders made by McDougall J of 8 December 2014.
It appears from the evidence of Mr Sleiman that the settlement of the purchase was completed on 18 December 2015. Two days before that, Mr Mourched, according to the ASIC company search, ceased to be the director and shareholder of Chamberlain Group Pty Limited. Nevertheless, he signed the transfer for Chamberlain Group Pty Limited.
The transfer was made not to the company called 4 Chamberlain Holdings Pty Limited as appeared to be the purchaser under the copy of the contract annexed to Mr Mourched's affidavit, but to a company called 4 Chamberlain Pty Limited, which I am told has the same sole shareholder and sole director as 4 Chamberlain Holdings Pty Limited.
The transfer and the mortgage were registered on 9 January 2016 without the lease having been registered. In the meantime, these proceedings were commenced on 24 December 2015. By its summons the plaintiff sought orders against Chamberlain Group Pty Limited by its director, servants and agents and by Mr Mourched immediately to take all reasonable steps to cause the lease to be registered if legal title to the premises had not been transferred.
The summons sought an order that if legal title to the premises had been transferred from the first defendant, Chamberlain Group Pty Limited, to the third defendant, 4 Chamberlain Holdings Pty Limited, that 4 Chamberlain Holdings Pty Limited be required immediately to take all reasonable steps to cause the new lease to be registered.
On 15 January 2016 the solicitors for the third defendant referred to the suggestion, apparently made at a hearing on 6 January, that the third defendant had been wrongly named as a party. In response the plaintiff's solicitor noted that Chamberlain Group Pty Limited had provided a copy of a contract of sale to 4 Chamberlain Holdings Pty Limited and they noted that 4 Chamberlain Holdings Pty Limited had not suggested that the contract was not a genuine document or that the signature upon it was not genuine.
They noted that 4 Chamberlain Pty Limited and 4 Chamberlain Holdings Pty Limited had the same director and that no explanation of the circumstances had been forthcoming.
The matter came before Lindsay J on 20 January 2016. His Honour noted that the solicitor for 4 Chamberlain Holdings Pty Limited advised that he also acted for 4 Chamberlain Pty Limited. He noted that 4 Chamberlain Pty Limited was currently the registered proprietor of the land. It had become registered on 9 January his Honour noted that:

“4 Chamberlain Pty Ltd accepts that the plaintiff has a leasehold estate or interest in the land of the nature of that claimed by the plaintiff in [its] caveat.

His Honour noted that steps were currently being taken towards registration of the lease.

On 11 February 2016 the proceedings were dismissed as against the defendants, save in relation to costs.
The plaintiff made an open offer on 11 February 2016 to have its costs position against the third defendant determined on the basis that there be no order as to costs. That is the position it maintains today.
In the meantime, Chamberlain Group Pty Limited has gone into liquidation. It is the first defendant. The proceedings against it is stayed.
The plaintiff seeks its costs of the second defendant, Mr Mourched.
Mr Mourched seeks his costs against the plaintiff on the basis that he was not properly joined as a party. The third defendant, 4 Chamberlain Holdings Pty Limited seeks costs against the plaintiff, but does not seek costs against Mr Mourched.
The starting point under rr 42.1 and 42.20 is that as the plaintiff's proceedings were dismissed, costs would follow the event, being that the plaintiff pay the defendants' costs of the proceedings. However, that is subject to any other order being made by the Court.
In this case, the plaintiff says, and I accept, that it has had substantial success, albeit belated success. The purpose of its proceedings was to obtain registration of the lease and the plaintiff is told that the lease was registered this Monday, 7 March. It was the assurance given about that on 20 January that led to the dismissal of the proceedings. Although the proceedings were dismissed, the plaintiff has had substantial success. The relevant event is not the order for dismissal but its having achieved registration of the lease.
The question then is whether it should have orders for costs against the second defendant. It does not seek costs against the third defendant.
Counsel for the second defendant, Mr Mourched, submitted that he was not properly joined as a party to the proceedings. Counsel submitted that the appropriate order to be sought was only against the first defendant, the registered proprietor, or, I interpolate, against the purchaser from it, but not against the director of the first defendant.
Counsel accepted that joinder of the director could be justified if there were reason to consider that the company itself would not comply with orders requiring it to register the lease.
I was not referred to any authority in support of the proposition that it is not proper to join as a party the director who would be required to act or who would be the person who would have to cause the company to refrain from acting in a way sought by a plaintiff who seeks an injunction either in positive or negative form.
No doubt it would often not be appropriate to join a director where the plaintiff's cause of action is against the company. But in this case I think there was every reason for Mr Mourched to be joined as a party, and the plaintiff did not act unreasonably in doing so. He was the sole director of Chamberlain Group Pty Limited and he was responsible for Chamberlain Group Pty Limited’s being in apparent contempt, as the Court of Appeal said, of the orders made by McDougall J in December 2014.
He was the person who, so far as the plaintiff could be aware, would be required to cause Chamberlain Group Pty Limited to comply with the order the plaintiff sought against it. It is true that there is an ASIC search that asserts Mr Mourched ceased to be a director of Chamberlain Group on 16 December 2015. But that information was not available to the plaintiff when the proceedings were commenced. The relevant documents were not lodged with ASIC until January 2016. Nor was any evidence given by Mr Mourched to explain the reasons for his apparently ceasing to be at least an actual (as distinct from a de facto) director of the company.
Be that as it may, it was perfectly proper, in my view, for the plaintiff to join Mr Mourched as a party. It was he who was responsible for the need for these proceedings. He should not have completed the purchase and sale to 4 Chamberlain Pty Limited without taking steps to ensure that the documents lodged for registration included the registration of a registrable lease. In my view, he is not entitled to the costs of the proceedings, but the plaintiff is entitled to its costs of the proceedings against him.
As to the joinder of the third defendant, the plaintiff acted reasonably in joining 4 Chamberlain Holdings Pty Limited as the third defendant, and in not immediately discontinuing proceedings against it when notified that 4 Chamberlain Pty Limited and not 4 Chamberlain Holdings Pty Limited was the transferee. The proceedings were resolved shortly after those matters were disclosed and after the registration of 4 Chamberlain Pty Limited as the new registered proprietor.
As there appears to be a common shareholding and common directorship between the two companies, I think it the height of opportunism for 4 Chamberlain Holdings Pty Limited to seek costs when, prima facie, had the proper party been joined, 4 Chamberlain Holdings Pty Limited would have been liable as well as Mr Mourched for the plaintiff's costs. If anyone were to be responsible for the costs of 4 Chamberlain Holdings Pty Limited it should be Mr Mourched, but no order is sought against him by 4 Chamberlain Holdings Pty Limited.
For these reasons, I make the following orders.

Order that the second defendant pay the plaintiff's costs of the proceedings, including the costs of the submissions concerning costs.

As between the plaintiff and the third defendant, make no order as to costs save in respect of the costs of the costs application.

In respect of the latter costs, order that the third defendant pay the plaintiff's costs.

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Decision last updated: 29 March 2016

Medium Neutral Citation:	Chamberlain Early Learning Centre Pty Ltd v Chamberlain Group Pty Ltd & Ors [2016] NSWSC 322
Hearing dates:	11 March 2016
Decision date:	11 March 2016
Jurisdiction:	Equity
Before:	White J
Decision:	1. Order that the second defendant pay the plaintiff's costs of the proceedings, including the costs of the submissions concerning costs. 2. As between the plaintiff and the third defendant, make no order as to costs save in respect of the costs of the costs application. 3. In respect of the latter costs, order that the third defendant pay the plaintiff's costs.
Catchwords:	COSTS — Application for alternative costs order — Rule 42.20(1) Uniform Civil Procedure Rules 2005 — Plaintiff’s proceedings dismissed against defendants save in relation to costs — Plaintiff achieved substantial success —Plaintiff acted reasonably in joining a company director as the second defendant where director responsible for the first defendant being in apparent contempt — Plaintiff acted reasonably in joining the incorrect corporate entity as the third defendant — Second defendant to pay plaintiff’s costs of proceedings and submissions concerning costs — Third defendant to pay plaintiff’s costs of the costs application
Category:	Costs
Parties:	Chamberlain Early Learning Centre Pty Ltd (Plaintiff) Chamberlain Group Pty Ltd (1st Defendant) Kheiralla Mourched (2nd Defendant) 4 Chamberlain Holdings Pty Ltd (3rd Defendant)
Representation:	Counsel: V Bedrossian (Plaintiff) S d’Arville (2nd Defendant) D C Eardley (3rd Defendant) Solicitors: Norris Somers Maait Lawyers (Plaintiff) Matthews Folbigg (2nd Defendant) Navado Lawyers (3rd Defendant)
File Number(s):	2015/378457