Chiodo Corporation Pty Ltd v Refresh Finance Pty Ltd

[2020] NSWSC 696

Supreme Court

New South Wales

Case Name:	Chiodo Corporation Pty Ltd v Refresh Finance Pty Ltd
Medium Neutral Citation:	[2020] NSWSC 696
Hearing Date(s):	On the papers
Date of Orders:	09 June 2020
Decision Date:	9 June 2020
Jurisdiction:	Common Law
Before:	Harrison J
Decision:	(1)  Order that Refresh Finance Pty Ltd pay the costs of Chiodo Corporation Pty Ltd of and incidental to the proceedings in this Court and in the Local Court. (2) Direct that Refresh Finance Pty Ltd be given a certificate in respect of the proceedings in this Court pursuant to s 6 of the Suitors’ Fund Act 1951 if so entitled. (3)  Make no order as to the costs incurred by Infin8 Finance Group Pty Ltd in this Court or in the Local Court.
Catchwords:	COSTS – general rule that costs follow the event
Legislation Cited:	Civil Procedure Act 2005 (NSW) Suitors’ Fund Act 1951 (NSW) Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited:	Chiodo Corporation Pty Ltd v Refresh Finance Pty Ltd [2020] NSWSC 453 Rolls Royce Industrial Power (Pacific) Ltd v James Hardie & Co Pty Ltd (2001) 53 NSWLR 626; [2001] NSWCA 461
Category:	Costs
Parties:	Chiodo Corporation Pty Ltd (First Plaintiff) Paul Chiodo (Second Plaintiff) Refresh Finance Pty Ltd (First Defendant) Infin8 Finance Group Pty Ltd (Second Defendant)
Representation:	Counsel: M Maconachie (Plaintiffs) G Gerges (First Defendant) Solicitors: DWF (Australia) (Plaintiffs) Miller & Prince Lawyers (First Defendant) Hone Legal & Conveyancing (Second Defendant)
File Number(s):	2019/365204
Publication Restriction:	Nil

JUDGMENT

1. I published my reasons for judgment in the principal proceedings on 5 May 2020: see Chiodo Corporation Pty Ltd v Refresh Finance Pty Ltd [2020] NSWSC 453. At that time I directed the parties within 14 days to provide my Associate with written submissions not exceeding three pages dealing with the costs orders for which any party wished to contend. All parties complied with that direction. These reasons deal with the question of costs.

2. The applicable principles are not in dispute. Costs are discretionary: Civil Procedure Act 2005, s 98. UCPR 42.1 provides as follows:

   42.1 General rule that costs follow the event

   Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.

Chiodo’s submissions

1. It will be apparent from my earlier decision that the Chiodo parties were successful. The Chiodo parties now contend that costs should follow the events with the result that Refresh should pay the Chiodo parties’ costs. They also contend that Refresh and Infin8 should bear their own costs in the proceedings in the courts below and on the appeal.

2. Refresh argued in the Court below and in this Court that Infin8 was not its agent. It unsuccessfully contended that Infin8 was Chiodo Corporation’s agent. Refresh failed on that position both in this Court and below.

3. The result in this Court confirmed the learned magistrate’s findings, and vindicated Chiodo Corporation’s primary position, that the statement of claim should have been dismissed.

4. Infin8 did not challenge the finding that it was Chiodo Corporation’s agent. Rather, it contended that it had not made the representation that the “presales condition” would be removed from the La Trobe offer. Infin8 failed on that point both in the Court below and in this Court.

5. The result in this Court gives the Chiodo parties a total victory. That the cross-claim was dismissed does not alter that result. The cross-claim was necessary to prove that Infin8 was the agent of Refresh, and that Mr Chiodo had relied upon Infin8’s misleading or deceptive representations in signing the La Trobe offer.

6. The Chiodo parties submitted that there was no basis for Refresh to claim against Mr Chiodo in the Court below. The alleged guarantee upon which Refresh sued Mr Chiodo never existed. The issue of the guarantee caused costs to be incurred exclusively in respect of the claim against Mr Chiodo in the Court below. Refresh should pay those costs on an indemnity basis.

7. The Chiodo parties submitted that Refresh should pay the Chiodo Corporation parties’ common costs below on the ordinary basis up to and including 11 January 2019, and on an indemnity basis thereafter. The latter submission was based upon the following position.

8. On 11 January 2019 the Chiodo parties’ solicitors sent a letter to Refresh’s solicitors headed “without prejudice save as to costs”. That letter offered to settle the proceedings on the basis that the proceedings be dismissed, there be no order as to costs, that the Chiodo parties would pay Refresh $10,000, and that Refresh would release the Chiodo parties from any claim. That offer represented a significant compromise by the Chiodo parties, who were ultimately successful on appeal.

9. The letter was open for acceptance for one week, and concluded with a warning that, should it not be accepted, “we will rely on this letter in seeking costs of the proceedings on an indemnity basis”. The full terms of the letter are as follows:

   “Dear Mr Gerges,

   LOCAL COURT PROCEEDINGS 2018/00179629

   CHIODO CORPORATION PTY LTD & ANOR ATS REFRESH FINANCE PTY LTD

   We refer to our open letter dated 11 January 2019 and the affidavit of Paul Chiodo sworn 13 December 2018.

   It is clear based on the contents of our letter and proposed cross-claim and the affidavit that our clients will have no liability in this matter. As such, your client’s offer of compromise dated 18 December 2018 is rejected.

   However, to avoid incurring further needless costs of defending the claim and pursuing the cross-claim we are instructed that our clients are willing to settle this matter on the following terms:

   1. The proceedings be dismissed;

   2. There be no order as to costs;

   3. The defendants will pay to the plaintiff the sum of $10,000;

   4. The plaintiff release the defendants from all claims that the plaintiff may have against the defendants.

   This offer is open for acceptance until 4.00pm 18 January 2019. Should it not be accepted, we will rely on this letter in seeking costs of the proceedings on an indemnity basis.

   Yours faithfully,

   Lachlan Wilson

   Director”

10. The Chiodo parties next submitted that it was necessary for them to join Infin8 to the proceedings below. There should be no costs consequences for the Chiodo parties, notwithstanding that the cross-claim was dismissed. It was submitted that Refresh and Infin8 should each bear their own costs in the Court below.

11. The Chiodo parties were successful in these appeal proceedings. Their costs should be paid by Refresh, especially given that Infin8’s case on appeal, which occupied almost the entire hearing, was calculated only to advance the interests of Refresh.

12. Refresh and Infin8 both contested the appeal and failed. They should each bear their own costs on the appeal.

13. The Chiodo parties submitted that the following orders should be made:

    1. In lieu of the costs orders made by Atkinson LCM in Local Court proceedings 2018/00179629 on 21 November 2019, make the following orders:

    (1) Plaintiff to pay the first and second defendant’s common costs on the ordinary basis up to and including 11 January 2019 and on an indemnity basis thereafter.

    (2) Plaintiff to pay the second defendant’s costs referable to the allegations that the second defendant guaranteed any liability of the first defendant on an indemnity basis.

    (3) There be no order as to the plaintiff’s costs, such that the plaintiff is to bear its own costs of the proceedings.

    (4) There be no order as to the cross-defendant’s costs, such that the cross-defendant is to bear its own costs of the proceedings.

    2. Refresh Finance Pty Ltd is to pay the costs of Chiodo Corporation and of Mr Chiodo.

    3. There be no order as to Refresh Finance Pty Ltd’s costs, such that Refresh Finance Pty Ltd is to bear its own costs of the appeal.

    4. There be no order as to Infin8 Finance Group Pty Ltd’s costs, such that Infin8 Finance Group Pty Ltd is to bear its own costs of the appeal.

Refresh’s submissions

1. On 8 June 2018, Refresh brought proceedings in the Local Court of NSW against Chiodo Corporation and Mr Chiodo alleging breach of contract.

2. On 11 January 2019, Chiodo Corporation and Mr Chiodo (jointly) made an offer of settlement which remained open for acceptance for 7 days. The offer of settlement is neither an offer of compromise pursuant to the Uniform Civil Procedure Rules, nor is it expressed to be a Calderbank Offer. It should therefore not give rise to the making of a special costs order, or an indemnity costs order.

3. Nevertheless, when considering whether or not it was unreasonable for Refresh to reject the offer of 11 January 2019, the Court must take into consideration the circumstances as at the date the offer was made. These include the following matters:

   (1)Chiodo Corporation and Mr Chiodo’s defence was simply a series of denials and non-admissions.

   (2)It was not until 8 February 2019 (and long after the offer had expired) that Chiodo Corporation and Mr Chiodo joined Infin8 to the proceedings and amended their defence to include allegations of misleading and deceptive conduct.

   (3)It was not until 14 February 2019 that Chiodo Corporation and Mr Chiodo joined Infin8 to the proceedings, after which they became largely a contest between Chiodo and Infin8 to which Refresh was a bystander.

   (4)Refresh was awarded judgment in the Local Court of NSW for the full value of its claim as against Chiodo Corporation.

4. Despite the Local Court judgment being overturned on appeal, it was not unreasonable for Refresh to reject the offer made by Chiodo Corporation and Mr Chiodo on 11 January 2019, as they ultimately succeeded on a case that significantly changed after the offer was made, by virtue of the amended defence and the joining of Infin8: see, for example, Rolls Royce v James Hardie (2001) 53 NSWLR 626; [2001] NSWCA 461.

5. Refresh submitted that Mr Chiodo, while a named party to the Local Court proceedings, and a late addition to the proceedings in this Court, was also the sole director and only witness for Chiodo Corporation. They relied upon the same defence.

6. Refresh submitted that Mr Chiodo would not have incurred any additional time, cost, or energy in defending the Local Court proceedings, or commencing the proceedings in this Court, over and above anything he would have incurred in any event.

7. Refresh’s failure to succeed in its primary case against Mr Chiodo does not give rise to an automatic right to an indemnity costs order in his favour. This is a matter that was ventilated in the costs argument in the Local Court, and the Local Court found that to the extent Refresh should pay Mr Chiodo’s costs they should be on an ordinary basis.

8. Nevertheless, Refresh maintains that Mr Chiodo should not be awarded a separate costs order, and certainly not on an indemnity basis.

9. Infin8 maintained in its defence to cross-claim, its evidence in the Local Court proceedings and its own cross-appeal that it had not engaged in any misleading or deceptive conduct. Infin8 was unsuccessful in its defence.

10. When considered closely, the costs incurred by Chiodo Corporation, Mr Chiodo, and Refresh after 14 February 2019 are attributable to Infin8 firmly contesting the allegation that it had engaged in misleading or deceptive conduct.

11. It follows that, had Infin8 conceded early what was ultimately found in the Local Court and upheld in this Court, namely that Infin8 had engaged in misleading or deceptive conduct, then the Local Court proceedings would have been determined early, sparing the parties further costs.

12. The learned Magistrate found that the behaviour of Infin8 had ultimately caused the problems in what occurred and that the representation that was made by its director was an important factor in her decision making.

13. Refresh accordingly submitted that any costs orders should reflect the fact that Infin8 by virtue of its defence to cross-claim and its cross-appeal prolonged the proceedings as a whole, whilst maintaining a defence it knew, or ought to have known, had no prospects of success.

14. Refresh submitted that the following orders should be made in respect of costs:

    (1) Refresh to pay Chiodo Corporation’s costs up to and including 14 February 2019 on an ordinary basis as agreed or assessed.

    (2) Infin8 to pay Chiodo Corporation costs from 14 February 2019 to date on an ordinary basis as agreed or assessed.

    (3) Infin8 to pay Refresh’s costs incurred as against Chiodo Corporation on an ordinary basis as agreed or assessed.

Infin8’s submissions

1. Infin8 did not seek to oppose the costs orders sought by Chiodo Corporation in paragraph 3 of the amended summons filed on 9 December 2019.

Consideration

1. It is evident that Chiodo Corporation succeeded and that it is entitled to have its costs paid. Refresh was never entitled to recover the fee for which it sued as the finance it arranged was subject to conditions with which Chiodo Corporation could not comply. That problem was caused by the misleading and deceptive conduct of its agent Infin8, for which Refresh was liable as a principal. Chiodo Corporation having therefore succeeded in this Court, Refresh should be ordered to pay Chiodo Corporation’s costs in the Local Court and in this Court. Refresh should be given a certificate under the Suitors’ Fund Act 1951 if so entitled. However, those costs should be limited to the costs incurred by Chiodo Corporation: Mr Chiodo is the controlling mind of that company and is not in my view to be treated as a separate entity for the purposes of determining the extent of Refresh’s liability for costs. Moreover, Refresh did not seek by cross-claim or other pleading to recover damages, or to establish an indemnity from, Infin8. Refresh remained content throughout to rely upon Infin8’s prosecution of the defence to Chiodo Corporation’s argument that it had been the victim of misleading and deceptive conduct. That reliance means in my view that Refresh is not entitled to be compensated by Infin8 for the costs Refresh must pay Chiodo Corporation, particularly in the absence of a pleading suggesting that Infin8’s conduct was something for which Refresh was not liable. The costs that Refresh is ordered to pay should be on the ordinary basis. Chiodo Corporation’s success was based upon a defence that was not current when its offer to settle was made. Infin8 must bear its own costs in this Court and in the Local Court.

2. Accordingly, I make the following orders

   (1)Order that Refresh Finance Pty Ltd pay the costs of Chiodo Corporation Pty Ltd of and incidental to the proceedings in this Court and in the Local Court.

   (2)Direct that Refresh Finance Pty Ltd be given a certificate in respect of the proceedings in this Court pursuant to s 6 of the Suitors’ Fund Act 1951 if so entitled.

   (3)I make no order as to the costs incurred by Infin8 Finance Group Pty Ltd in this Court or in the Local Court.

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