Cityrose v Booth (Costs)
[2014] VSC 46
•26 February 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION S CI 2008 5673
| CITYROSE TRADING PTY LTD (ACN 077 934 671) | Appellant |
| v | |
| NOEL BOOTH | First Respondent |
| and | |
| KAY & BURTON PTY LTD (ACN 005 488 175) | Second Respondent |
| S CI 2008 5719 | |
| KAY & BURTON PTY LTD (ACN 005 488 175) | Appellant |
| v | |
| NOEL BOOTH | First Respondent |
and
| CITYROSE TRADING PTY LTD (ACN 077 934 671) | Second Respondent |
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JUDGE: | WHELAN JA | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 18 February 2014 | |
DATE OF JUDGMENT: | 26 February 2014 | |
CASE MAY BE CITED AS: | Cityrose v Booth & Anor (Costs) | |
MEDIUM NEUTRAL CITATION: | [2014] VSC 46 | |
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PRACTICE AND PROCEDURE – Costs – Appeals from VCAT – One appellant (Cityrose) responsible for drafting of clause which led to initial dispute and subsequent litigation – Provision eventually declared void for uncertainty - Findings of misleading conduct by that appellant – That appellant ordered to pay costs of other parties to both appeals.
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APPEARANCES: | Counsel | Solicitors |
| For Cityrose | Mr M Clarke | Madgwicks |
For Mr Booth | Mr M Flynn | Russell Kennedy |
| For Kay & Burton | Ms R Sofroniou | Colin Biggers & Paisley |
HIS HONOUR:
Background
On 26 May 2006, after an auction where the property was ‘passed in’, Noel Booth executed a contract pursuant to which he purchased a property in Sorrento, Victoria from Cityrose Trading Pty Ltd (‘Cityrose’). The contract contained a special condition which had been inserted on the instructions of an employee of Cityrose, one Jason van der Slot, by Cityrose’s then solicitors, B2B Lawyers. The objective of Cityrose’s employee and its lawyers was to impose a liability for GST on the purchaser. The particulars of sale in the contract specified a purchase price without reference to that additional liability. No reference was made to it by Cityrose’s selling agent, Kay & Burton Pty Ltd (‘Kay & Burton’), during the auction or in any dealings with Mr Booth as a prospective purchaser before or after the auction.
Cityrose insisted that Mr Booth pay the GST before settlement. The amount was paid under protest and was held in a trust account by Cityrose’s solicitors.
Litigation has extended over several years about whether Cityrose was bound to repay the sum which Mr Booth had paid under protest. There have been two hearings and determinations before VCAT. Each of those determinations of VCAT was appealed to this Court, and each of those appeals resulted in VCAT’s orders being set aside.[1]
[1][2008] VSC 495 (21 November 2008) (Whelan J) and [2013] VSC 504 (19 September 2013) (Emerton J).
In the first VCAT determination the Tribunal declared that the contract price in the particulars of sale was inclusive of GST, but then went on to find that both Cityrose and Kay & Burton were liable to Mr Booth for misleading and deceptive conduct. I allowed appeals by Cityrose and Kay & Burton on the ground that the VCAT orders were inconsistent with each other, and on the further ground that the declaration that the price was GST inclusive had been made on the basis that VCAT had found that Mr Booth was entitled to rectification without ever making a finding as to what was the proper construction of the contract. I remitted the matter to VCAT, and I reserved the costs of the appeals.
In the second VCAT determination, the Tribunal found that Mr Booth was liable under the special condition to pay the GST but ordered rectification so as to delete that special condition. Because the Tribunal found that the contract should be rectified so as to delete the special condition, it was unnecessary to determine Mr Booth’s alternative claim for misleading and deceptive conduct. But the Tribunal did address that claim and found that Cityrose and Kay & Burton had both engaged in misleading or deceptive conduct. I will return to the findings made and conclusions reached in that regard. Orders were made in Mr Booth’s favour.
Cityrose again appealed to this Court.
On that appeal, Emerton J set aside the Tribunal’s orders, and instead declared that the special condition was void for uncertainty. In other words, the outcome remained the same but for a different reason. Instead of rectifying the contract to delete the special condition, Emerton J declared it void for uncertainty and severed it. Emerton J also addressed the alternative misleading and deceptive conduct claim. She ordered that Cityrose pay the costs of that appeal.
As indicated, I reserved the costs of the two earlier appeals before me. I observed that I would reconsider the costs when the ‘eventual outcome’ was known.[2] That outcome is now known and the parties arranged for the two appeals to be re-listed so that the costs could be determined.
[2]Transcript 8 December 2008, 6.
Before turning to the specifics of the two appeals, and the submissions made, it is necessary to address three matters which I consider to be of significance.
First matter of significance – drafting of the special condition
The relevant special condition was drafted by Cityrose’s lawyers. On any view, the drafting was, to adopt the second Tribunal’s expression, ‘thoroughly unsatisfactory’.[3] That Tribunal’s decision reveals that Cityrose has recovered damages in a negligence action against B2B Lawyers commenced after my decision on the appeals.[4]
[3][2011] VCAT 278 (23 February 2011) [49].
[4]Ibid [151]-[153]. The Tribunal records than an offer of compromise of $100,000 was accepted. In the ordinary course that would mean costs were also recovered.
I addressed the problems with the drafting in my decision on the appeals. It had not been contended by any party up to that point that the drafting might be so poor that the special condition could not be given any meaning. In the second VCAT hearing that contention was made, and that is the basis upon which Mr Booth finally succeeded before Emerton J.
Neither Mr Booth nor Kay & Burton have any responsibility for the drafting. That is entirely the responsibility of Cityrose, as it was its lawyers who drafted it. The difficulties which have bedevilled this matter and have led to so much litigation and delay are in large measure due to that factor. Cityrose has recovered compensation from its lawyers.
Second matter of significance – misleading conduct by Cityrose
Because the Tribunal found that the contract should be rectified so as to delete the special condition (which the Tribunal found did impose the GST liability on Mr Booth), it was unnecessary for it to determine Mr Booth’s alternative claim for relief alleging misleading and deceptive conduct. The Tribunal did nevertheless address that claim and made detailed factual findings,[5] before reaching the following conclusions, which, in view of their importance, I will set out in full. The Tribunal found:
[5]Ibid [11], [53]-[78], [119]-[122].
In the relevant circumstances to which I have referred, and viewing the conduct as a whole, I conclude that Cityrose, by itself and by its agent Kay & Burton, engaged in conduct, in trade or commerce, which was misleading or deceptive or likely to mislead or deceive, in contravention of section 9. It was as a consequence of that conduct that Mr Booth entered into the contract in the belief that it obliged him to pay $2,250,000.00 and no more. The conduct was of three kinds. The first was the conduct of Cityrose vis-à-vis its own agent Kay & Burton. The second was the conduct of Cityrose itself vis-à-vis Mr Booth. The third was the conduct of Kay & Burton vis-à-vis Mr Booth. The third was a consequence of the first.
The conduct of Cityrose vis-à-vis Kay & Burton, which contributed to the entirety of the conduct of Cityrose and Kay & Burton towards Mr Booth being misleading and deceptive, was:
(a) Although it had signed an auction authority for Kay & Burton which gave as an example for commission-calculation purposes a sale price which included GST, it did not inform Kay & Burton, and refrained from informing Kay & Burton, that Cityrose was going to require a purchaser to sign a contract which obliged the purchaser to pay a price plus GST.
(b) During the pre-auction meeting, Cityrose authorised Kay & Burton to make a vendor bid of $1,950,000.00 at the auction, but refrained from informing Kay & Burton that if a bid was accepted Cityrose was going to require the purchaser to sign a contract which obliged the successful bidder to pay the amount of the bid plus GST.
(c) During the pre-auction meeting, when Kay & Burton asked whether there was anything else it needed to know, Cityrose said that there was not. But because it had not been made aware of the fact, Kay & Burton needed to know that Cityrose was offering to sell for a price plus GST so that the auctioneer could announce that fact at the commencement of the auction.
(d) Its solicitors sent the auction contract to Kay & Burton so late that its opportunity to read it and understand it or seek clarification of it was minimised.
(e) The auction contract which its solicitors sent contained particulars of sale which did not specify that the purchase price was GST-exclusive, and contained an obscure Special Condition 7.
(f) When it instructed Kay & Burton to refuse offers from Mr Booth which made no reference to GST, and when it instructed Mr Booth that it was accepting an offer of $2,250,000.00 which made no reference to GST, Cityrose refrained from informing Kay & Burton that once Mr Booth signed the contract he would be obliged to pay $2,250,000.00 plus GST: a fact of which Mr van der Slot was aware, even though Mr Salvo[6] was not.
[6]The reference to Mr Salvo is a reference to Mario Salvo who was described as Cityrose’s ‘decision maker’.
The conduct of Cityrose vis-à-vis Mr Booth, which contributed to the entirety of its conduct being misleading or deceptive, was:
(g) Its solicitors sent to his solicitors a draft of the contract so late that the opportunity for his solicitors to advise him properly as to it, and the opportunity for him to read it and understand it or seek clarification of it, were minimised.
(h) The auction contract sent to his solicitors, and the auction contract presented to him for signature on 20 May 2006, contained particulars of sale which did not specify that the purchase price was GST-exclusive, and contained an obscure Special Condition 7.
The conduct of Kay & Burton vis-à-vis Mr Booth, by which it itself engaged in misleading or deceptive conduct and which contributed to the entirety of its principal Cityrose’s conduct being misleading or deceptive, was:
(i) It advertised the land for sale at a price of ‘$1.9 million plus’ without adding that the price was GST-exclusive.
(j) Although it knew that Mr Booth was a prospective purchaser, it did not inform him that any sale price would be GST-exclusive.
(k)It conducted the auction without informing prospective bidders that the land was being offered for sale at a price that was GST-exclusive and that the auction contract so provided.
(l) During its post-auction negotiations with Mr Booth it did not inform him that if he signed a contract for the price agreed upon the contract would oblige him to pay the price plus GST.
…
In my opinion the responsibility for Mr Booth’s loss or damage rests wholly with Cityrose. The misleading or deceptive conduct in which Kay & Burton engaged vis-à-vis Mr Booth was entirely the consequence of its principal Cityrose’s failure to tell it that Cityrose had instructed its solicitors to prepare a contract of sale that specified a GST-exclusive purchase price, and that prospective purchasers ought to be told that entry into the contract would oblige a payment of the purchase price plus GST. Those matters remained a well-kept secret until a few days before the settlement date.[7]
[7][2011] VCAT 278 (23 February 2011) [123]-[126], [144].
Emerton J heard argument on the findings concerning misleading conduct. She set out what she considered to be the relevant factual findings,[8] and concluded that she could see no error in the Tribunal’s conclusion that Cityrose had engaged in misleading or deceptive conduct.[9] She was also ‘not persuaded’ that the Tribunal erred in failing to apportion any liability against Kay & Burton.[10] She declined to consider whether the Tribunal had erred in finding that Kay & Burton had engaged in misleading or deceptive conduct by silence.[11]
[8][2013] VSC 504 (19 September 2013) [17].
[9]Ibid [91], [95].
[10]Ibid [100]-[101].
[11]Ibid [102]-[104].
The significance of these findings is that if Cityrose had succeeded in imposing contractual liability on Mr Booth, it would have done so by conduct which was found by the Tribunal to have been misleading or deceptive, as to which finding Emerton J could see no legal error.
Third significant matter – why the appeals succeeded
The two appeals which I determined were heard together. Both appeals succeeded but there is an important distinction between them.
In my determination of the appeals I found that the VCAT orders had to be set aside because they gave Mr Booth relief on two incompatible bases, and because the Tribunal had ordered rectification without determining the proper construction of the contract. I raised the possibility that the special condition might be void for uncertainty, which was eventually the decisive matter. Of those three issues, only the issue of incompatible relief had been raised by any of the parties by way of a ground of appeal or contention. That issue had been raised only by Kay & Burton.
Kay & Burton succeeded on its appeal because it made out grounds it relied upon. Cityrose only succeeded because that was a necessary consequence of Kay & Burton’s success. Cityrose’s own grounds of appeal were extensive, but were almost entirely directed at issues of fact. I observed in my judgment that most of their grounds may not have raised any issue of law,[12] and that the few which did could not be said to have significant prospects of success.[13]
[12][2008] VSC 495 (21 November 2008) [6]-[7].
[13]Ibid [36].
Submissions
In its written submissions Cityrose submitted that Mr Booth should pay the costs of Cityrose of and incidental to its appeal or that no order as to costs should be made in either appeal. The factors upon which it relied were the following:
(a) both appeals had been allowed by me;
(b) whilst Mr Booth had conceded the correctness of Kay & Burton’s ground concerning inconsistent relief, he had nevertheless persisted in opposing the appeals and maintained that position after my judgment by applying unsuccessfully to the Court of Appeal for leave to appeal;
(c) Mr Booth took a position before me which was inconsistent with the position he had taken at VCAT;
(d) the issue of the special condition being void for uncertainty had not been raised by anyone until it was raised by me;
(e) the first VCAT decision did contain significant errors; and
(f) both VCAT decisions on rectification were overturned as being in error.
Cityrose placed considerable reliance upon the Appeals Cost Act 1998 and submitted that an order for costs made against Mr Booth would appropriately be the subject of a certificate under s 4 of that Act.
In oral submissions counsel for Cityrose referred to the observation I had made that one reason why I was disinclined to determine the construction issue on the appeals was the possibility that expert conveyancing evidence might be called. Counsel referred to the fact that such evidence was called, although the Tribunal did not find it to be of assistance. Counsel also elaborated upon the submission that Mr Booth had not put his contractual liability for GST in issue in the first VCAT hearing. In that respect he relied upon a section of the transcript from the opening in which counsel for Mr Booth had said that he had two arguments – rectification and misleading or deceptive conduct.
In oral submissions counsel for Cityrose’s final position on costs was as follows:
· Mr Booth should pay Cityrose’s costs of both appeals and should be granted a certificate under the Appeal Costs Act 1998.
· Mr Booth should also pay Kay & Burton’s costs of both appeals and be granted a certificate in relation to those costs as well.
· If any order for costs was to be made against Cityrose then it should have a certificate under the Appeal Costs Act1998.
In his written submission counsel for Mr Booth contended that Cityrose should pay the costs of both other parties on both appeals or that each party should bear their own costs. The matters relied upon were that Cityrose had not succeeded in its appeal on any of the grounds which it had raised, and counsel relied on my observations concerning Cityrose’s grounds. He submitted that Cityrose had succeeded on its appeal only because Kay & Burton succeeded on its appeal. The second matter relied upon was that Mr Booth was ultimately successful before Emerton J. The third matter relied upon was that the findings of fact in both the VCAT proceedings were essentially the same, and that at both hearings Mr Booth had succeeded in establishing misleading or deceptive conduct, as to which no legal error had been identified. It was also submitted that as the ground raised by Kay & Burton concerning inconsistent relief had been conceded by Mr Booth, almost all of the time during the appeal hearing had been concerned with issues of construction of the special condition, issues upon which Cityrose had ultimately failed.
In his oral submissions counsel for Mr Booth disputed the proposition that Mr Booth had not put the question of contractual liability in issue in the first VCAT proceeding. He relied on an exchange during final submissions when counsel for Cityrose had said that there was no issue about construction in the case, counsel for Mr Booth had responded by foreshadowing that that was an argument that Mr Booth would be relying upon, and in response the Tribunal Member had said:
Well, I would have thought, ladies and gentlemen, that in final submissions pretty much everything that arises, factually and legally, will be at large and open to you to make submissions on.
Counsel also relied upon the final submissions made by Mr Booth in the first VCAT hearing which did contain a submission to the effect that Mr Booth was not contractually liable.[14]
[14]The final submission is part of Exhibit ADG2 to the affidavit of Allison Grize sworn on behalf of Kay & Burton and filed in its appeal on 24 April 2008. The relevant submission is in paragraphs 32 and 33.
Counsel for Mr Booth’s final position in relation to costs was that Cityrose should be ordered to pay the costs of Mr Booth and Kay & Burton of both appeals. It was submitted that Cityrose could apply for a certificate on the Kay & Burton appeal as it was a respondent to that appeal.
On behalf of Kay & Burton counsel submitted that it was clear, and apparently uncontested, that someone ought to be ordered to pay its costs of both appeals. It has always maintained that Mr Booth was not contractually liable for the GST. It succeeded in its appeal before me on the grounds which it raised. All of the claims made against it have been made as alternatives to the other parties’ respective primary positions on contractual liability. Kay & Burton was eventually successful in the proceedings and all claims against it have been dismissed.
In oral submissions counsel for Kay & Burton addressed the findings of misleading or deceptive conduct, submitting that those findings were made on the basis of ‘hypothetical’ conclusions as to contractual liability; that is, that they were premised on the principal conclusions concerning contractual liability being wrong. She also relied upon the fact that even where misleading or deceptive conduct had been found the responsibility for any loss attributed to Kay & Burton had been low, in the case of the first VCAT determination, or nothing at all, in the case of the second.
Analysis
It seems to me that Cityrose should pay the costs of both the other parties on the two appeals. Its lawyers drafted the provision and that drafting has been a principal cause of the litigation. Cityrose has recovered compensation from them. Cityrose ultimately failed to impose contractual liability for GST on Mr Booth, but if it had succeeded it would have done so by conduct which has been found to have been misleading or deceptive. It did not succeed on its appeal on any ground in its notice of appeal. If costs are to follow the event, ultimately the result was that Cityrose failed against both Mr Booth and Kay & Burton.
None of the factors relied upon by Cityrose displace the significance of these considerations.
Cityrose’s appeal was allowed, but not on any of the grounds it had asserted, and almost all its asserted grounds concerned issues of fact.
Mr Booth did persist in arguing the proper construction of the special condition after conceding that the VCAT orders were inconsistent, but Kay & Burton also did so, and it was necessary to do so because, if the construction issue could have been decided by me on the appeals, that might have avoided a second VCAT hearing. Mr Booth did unsuccessfully seek leave to appeal my orders, but he has been ordered to pay the costs of that application already.
Mr Booth did put contractual liability in issue in the first VCAT hearing, although he did so as something of an afterthought. This was, in my view, merely one of the many unsatisfactory consequences of the confused drafting of the special condition, for which Cityrose is responsible.
It is true that before the appeals no-one had raised the possibility that the special condition might be void, it is true that the first VCAT decision contained significant errors, and it is true that both rectification findings were overturned. But it is, in my view, necessary in this case to step back from the specifics and recognize that the unsatisfactory course of this litigation has been a consequence of a poorly drafted attempt to impose a contractual liability which, if that attempt had succeeded, would have done so by misleading conduct, according to both Tribunals’ factual findings.
On the Cityrose appeal I will order that the costs of the appeal of both Mr Booth and Kay & Burton be paid by Cityrose.
On the Kay & Burton appeal I will also order that the costs of the appeal of both Mr Booth and Kay & Burton be paid by Cityrose. I will grant Cityrose a certificate under s 4 of the Appeal Costs Act1998 in relation to that appeal. The first VCAT decision did contain significant errors, which did necessitate the orders made on that appeal.
Conclusions and orders
Subject to any further submissions on matters of form, I proposed to order as follows:
No 5719 of 2008
The second respondent, Cityrose Trading Pty Ltd, is to pay the costs of the appellant, Kay & Burton Pty Ltd, and the first respondent, Noel Booth.
No 5673 of 2008
The appellant, Cityrose Trading Pty Ltd, is to pay the costs of the respondents, Noel Booth and Kay & Burton Pty Ltd.
I will grant a certificate under s 4 of the Appeal Costs Act 1998 to Cityrose in relation to the appeal in No 5719 of 2008.
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