CPB Contractors Pty Ltd v Rizzani De Eccher Australia Pty Ltd (No 2)

[2018] NSWSC 74

Supreme Court

New South Wales

Medium Neutral Citation:	CPB Contractors Pty Ltd v Rizzani De Eccher Australia Pty Ltd (No 2) [2018] NSWSC 74
Hearing dates:	On the papers
Date of orders:	09 February 2018
Decision date:	09 February 2018
Before:	Ward CJ in Eq
Decision:	1.   The defendant is to pay the plaintiff’s costs of the proceedings on the ordinary basis.
Catchwords:	COSTS - Party/Party – Urgent proceedings – where plaintiff did not succeed in obtaining the relief sought, but obtained other relief
Legislation Cited:	Civil Procedure Act 2005 (NSW) ss 56, 98 Uniform Civil Procedure Rules 2005 (NSW), r 42.1
Cases Cited:	CPB Contractors Pty Ltd v Rizzani de Eccher Australia Pty Ltd [2017] NSWSC 1798
Category:	Costs
Parties:	CPB Contractors Pty Ltd (Plaintiff) Rizzani de Eccher Australia Pty Ltd (Defendant)
Representation:	Counsel: N Nicholls SC with H Morrison (Plaintiff) F Hicks SC with D Robertson (Defendant)   Solicitors: Corrs Chambers Westgarth (Plaintiff) Clayton Utz (Defendant)
File Number(s):	2017/00332074
Publication restriction:	Nil

Judgment

1. HER HONOUR: On 19 December 2017, I published my reasons (CPB Contractors Pty Ltd v Rizzani de Eccher Australia Pty Ltd [2017] NSWSC 1798) in a dispute between parties to an unincorporated joint venture for the undertaking of design and construction works in connection with the widening of the M4 Motorway in Sydney, namely as to whether the defendant (Rizzani de Eccher Australia Pty Ltd – “RdE”) was bound to pay a Called Sum of $8.5m for the purposes of the joint venture (the Called Sum Dispute).

2. I dismissed RdE’s notice of motion seeking a stay of the proceedings by reference to an arbitration clause in the parties’ joint venture agreement (the Stay Dispute) and, having found that RdE was estopped in all the circumstances from acting inconsistently with its promise to do so, ordered RdE to sign a written resolution of the Joint Venture Board (“JV Board”) for the payment of the Called Sum. However, I declined to grant the further relief sought by the plaintiff, CPB Contractors Pty Ltd (“CPB”) (namely, declaratory relief and a mandatory injunction as to the payment of the Called Sum). I made directions for brief written submissions on costs to be filed with a view to determining the issue of costs on the papers.

3. The parties have now filed, and I have had an opportunity to consider, submissions as to costs. These are my reasons for the costs order that I will now make. I do not propose to repeat the background to the dispute which is set out in my earlier reasons.

4. CPB argues that the appropriate order for costs is that RdE should pay CPB’s costs of the proceedings on the ordinary basis. RdE submits that there should be no order as to costs, such that the parties bear their own costs of the proceeding, or alternatively that RdE should pay 50% (or less) of CPB’s costs of the proceedings.

Submissions

5. CPB maintains that it succeeded in establishing that RdE was bound by its promise to sign the resolution so that the general rule in r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) that costs follow the event should be applied; and argues that although the form of order that was made differed from the relief that had been sought by it, that is not a reason for it to be denied part or all of its costs. It argues that in any case the Court is always able to mould the form of equitable relief to grant the appropriate relief against the relevant unconscionable conduct.

6. CPB further maintains that there is no proper basis in this case for the Court to attempt an apportionment of costs by reference to issues on which CPB succeeded and issues on which it failed, arguing that it substantially succeeded on those issues which were litigated and which occupied most of the hearing time (referring to its success in resisting the stay application) and submitting that those issues on which it did not succeed were so interrelated with the primary claims in the proceedings that there could be no basis to apportion costs associated with those issues.

7. CPB argues that at the time these proceedings were commenced, it was entirely appropriate for it to advance all issues relevant to the claims it was prosecuting and submits that RdE’s conduct both prior and subsequent to the commencement of the proceedings is relevant to the issue of costs. In that regard, CPB refers to the fact that, when the dispute first arose, there was no suggestion by RdE that it disputed that any decision had been made or that any agreement had been reached for the payment of the Called Sum because its representative, Mr Aurelio Mortoni, had absented himself for a period of time during the course of the meeting; or that there was no binding decision at the meeting because of the requirement that each party be represented in equal numbers. Accordingly, it is submitted that RdE did not, prior to the commencement of the proceedings, give any reason to CPB for it to consider, reflect further upon or take advice on what it understood to have been a meeting of the JV Board, properly constituted, at which each representative of the parties participated.

8. As to RdE’s conduct subsequent to the commencement of the proceedings, CPB points to the fact that in its Technology and Construction List response (filed on 15 November 2017), RdE asserted that Mr Mortoni “took part” in the meeting on 19 September 2017; did not particularise the basis for the assertion that no valid decision had been made by the JV Board by reference to the above matters; and denied that CPB had any grounds for seeking further particulars as to what form it alleged a “vote” should take, within the meaning of cl 5.4(a) of the Joint Venture Agreement made between the parties on 27 August 2015 (“JV Deed”). CPB complains that the first notification as to Mr Mortoni having absented himself from the meeting was when his affidavit was served on about 22 November 2017 (see affidavit of Aurelio Mortoni affirmed 22 November 2017, at [13]ff). CPB argues that not to have informed CPB of the precise bases on which RdE asserted there was no binding vote is inconsistent with s 56 of the Civil Procedure Act 2005 (NSW) and case management principles which impose on parties the responsibility to facilitate the resolution of the real issues in dispute.

9. CPB does not submit that RdE’s conduct before and after the commencement of the proceedings had the effect of extending the hearing or causing CPB to incur additional costs; rather, it submits that (having regard to that conduct) it was entirely reasonable for it to advance the claim that Mr Mortoni participated in discussions during the 19 September 2017 meeting in a way which resulted in a binding decision at that meeting. It is submitted that this is not a case where a litigant in the position of CPB has maintained and prosecuted claims which had no prospect of success.

10. RdE, on the other hand, argues that there were numerous discrete issues in dispute; that it was successful on a majority of those (factual and legal) issues; and emphasises that CPB did not succeed in obtaining the relief that it had sought.

11. RdE notes that the remedy granted to CPB arose from a form of promissory estoppel that was not pleaded in its Commercial List Statement or amended reply (the estoppel there pleaded being that RdE was estopped from denying that there was a “vote” at the relevant JV Board meeting), but was only raised during the final hearing. Further, RdE submits (at [23] of its written submissions) that the estoppel argument that succeeded was based on RdE’s representations and promises in emails following the JV Board meeting (see [346]-[348] of my earlier reasons); and argues that evidence concerning the events that occurred during the JV Board meeting on 19 September 2017 was irrelevant to that issue.

12. RdE further submits that CPB wasted time and costs by rejecting RdE’s invitation to withdraw what it describes as a new and expansive estoppel by convention claim raised in CPB’s original reply (the chronology as to which is outlined in an affidavit of Stephen O’Reilly sworn on 23 November 2017 at [11] and [12]), only to withdraw the claim almost one week later following two interlocutory hearings before Hammerschlag J (and after instructions had to be sought about the history of earlier meetings and the parties had been ordered to prepare an agreed statement of issues and separate outlines of contentions in relation to that issue).

13. RdE argues that it was successful on: the primary factual question as to whether there was a “vote” in the relevant sense at the JV Board meeting on 19 September 2017 (that being the subject of default notices issued by CPB which RdE maintained were invalid); and on the majority of the factual and legal issues listed in the parties’ Agreed Statement of Issues. It places particular emphasis on the finding as to the lack of a formal “vote”, arguing that this was the central commercial dispute between the parties, the resolution of which it says took up most of the time and costs of the proceeding for both parties (including the cross-examination of five witnesses over two sitting days about the events that took place during the JV Board meeting on 19 September 2017); for which it had arranged for a witness based in Europe to travel to Australia on very short notice on two occasions in order to facilitate the plaintiff’s urgent application.

14. RdE notes that CPB’s postulated construction of cl 13.6 of the JV Deed (Issue 2) was not accepted ([109]; [119] of my reasons); that I was not satisfied that a binding vote occurred at the 19 September 2017 JV Board meeting in accordance with the requirements of the JV Deed (Issues 5 & 6) ([6] of my reasons); that I found it unnecessary to decide the acquiescence claim to the extent that the claim went beyond a claim of equitable estoppel (Issue 7) ([315] of my reasons); and refused to grant the CPB the relief sought by its summons (Issues 4 & 9) ([8], [370] of my reasons). RdE also places weight on the finding that it was CPB’s refusal to participate in JV Board meetings which caused the JV Board to be temporarily “dysfunctional” ([156] of my reasons).

15. RdE submits that the “event” in the context of the current proceeding should not be limited to whether CPB achieved an outcome that could not have been achieved without proceedings; rather, that the “event” should be understood to comprise all of the discrete issues of fact and law in the proceeding which required the parties to expend time and costs in respect of both evidence and argument.

16. RdE argues that, to the extent that CPB did obtain a final remedy, it was entirely independent of the evidence and arguments that CPB’s original (and unsuccessful) claims necessitated, which consumed a majority of the parties’ and the Court’s time; and that a majority of the time and costs expended on the proceeding related to a separable issue on which CPB did not succeed, being factual evidence as to what occurred at the JV Board meeting on 19 September 2017.

17. RdE’s alternative submission (that it should be ordered to pay no more than 50% of CPB’s costs of the proceedings, as agreed between the parties or as assessed) is based on the proposition that costs should be apportioned having regard to its success on various of the issues that were before me.

Determination

18. It is accepted by the parties that there is a wide discretion as to the award of costs (see s 98 of the Civil Procedure Act). The principles in relation to the exercise of that discretion are well known and need not here be repeated. There are cases in which the question as to what is the “event” has required careful consideration and where there can be seen to have been more than one relevant event. There are cases in which assessment on an issue by issue basis has been found to be appropriate (as producing a fair result) and those in which it has not been considered appropriate to apportion costs according to the issues that were in dispute notwithstanding that there was a mixed outcome in the proceedings. Various of those cases (including ones in which I have previously opined on these issues) were cited in the parties’ respective submissions. It is not necessary here to set them out.

19. I accept that CPB did not succeed on all the issues before me (and that it did not obtain precisely the relief it had sought). I also accept that costs are likely to have been wasted by the abandonment of the conventional estoppel claim that was raised in the original reply filed by CPB (see CPB’s Technology and Construction List Reply filed on 27 November 2017, at [1]). Against those matters is the failure by RdE prior to service of its evidence in the proceedings to inform CPB of what was on any view of things a critical factual contention (namely, that Mr Mortoni claimed to have absented himself from the meeting during the whole of the time that the discussion as to the Called Sum took place). The surprising late disclosure of that contention makes it not unreasonable for CPB to have tested in cross-examination the evidence as to what transpired at the relevant JV Board meeting and undermines the contention by RdE that such evidence was unnecessary for the estoppel claim that ultimately succeeded.

20. Two factors lead me to conclude that the appropriate order is that RdE should pay the ordinary costs of CPB. The first is that, absent the proceedings, CPB would not have achieved (in as expeditious a fashion as was made possible by the running of the matter in the Commercial List) the outcome that it did (albeit that it did not obtain the further injunctive relief that it had sought). Without the proceedings having been conducted in this Court, the order requiring RdE to sign the JV Board resolution for the Called Sum would not have been made at the time that it was. There are important consequences that flow from such a resolution. Whether or not the Board dysfunction was a matter resulting from CPB’s election to invoke its perceived legal rights in relation to the default notices, the fact remains that the parties were at loggerheads as to whether the Called Sum was payable and I am satisfied that there was urgency for the determination of that issue in relation to the ongoing project in which they are engaged. That leads to the second factor – the urgency of the matter (which arose, at least, from the existence of outstanding claims by sub-contractors and other creditors; from the inability on the part of the Project Director to certify that all sub-contractors had been paid; and from the need for a cash injection to the joint venture: see [155] of my reasons). In those circumstances, where the parties on both sides were responding to issues raised in pleadings that were prepared against a tight timeframe, the refusal by CPB immediately to abandon its conventional estoppel claim does not in my opinion have the significance attributed to it by RdE.

21. If one steps back from the fray and asks the question as to who, in substance, was successful in the matter, the answer in my opinion is clear – it was CPB. Thus I consider that the ordinary rule that costs follow the event should be applied.

Order

22. For the above reasons I order as follows:

1. The defendant is to pay the plaintiff’s costs of the proceedings on the ordinary basis.

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Decision last updated: 09 February 2018