Czechyra v Girardi - [2016] SADC 1

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Appeal Against a Master's Decision)
CZECHYRA AND ANOR v GIRARDI
[2016] SADC 1
Judgment of His Honour Judge Barrett
14 January 2016
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - CONDUCT OF PARTIES
A Master ordered the appellants to pay the respondent's costs on an indemnity basis because of the appellants' unreasonable conduct in purporting to terminate a contract for the sale and purchase of land. The Master made two orders for indemnity costs, one in respect of the respondent's action in seeking to enforce the contract and to resist the removal of a caveat and the other in respect of the contested costs hearing.
Held: Both appeals are dismissed. The appellants' conduct warranted orders for indemnity costs.
Colgate Palmolive v Cussons (1993) 46 FCR 225; Duke Group Ltd (in liq) v Pilmer and Ors [1998] SASC 6699; SGIC v Lane (1997) 68 SASR 257; Hamod & Anor v NSW & Anor (2002) 188 ALR 659; Sandra Investments v Booth (1983) 153 CLR 153; Perri v Coolangatta Investments Pty Ltd (1982) 149 CLR 537; White Industries (Qld) Pty Ltd v Flower & Hart (1998) 156 ALR 169, considered.

CZECHYRA AND ANOR v GIRARDI
[2016] SADC 1

This is an appeal by the defendants against two cost orders made by a Master.
On 17 October 2014 and 14 April 2015 a Master ordered the defendants to pay the plaintiff’s cost on an indemnity basis. The appeal relates only to the indemnity aspect of the costs orders. It does not relate to the decision of the Master to order the plaintiff his costs in each case. In each case the plaintiff succeeded, or substantially succeeded, in his actions and he was entitled to his costs.
In my view the learned Master was correct in both decisions. I explain why.
Background
On 16 August 2013 the plaintiff, as purchaser, and the defendants, as vendors, entered into a written agreement for the sale of a property at 53 Wood Avenue, Brompton. Both defendants were the registered proprietors of the property. The second defendant is a company controlled by the legal practitioner, Mr Peter Scragg and his family. The first defendant is a relative of Mr Scragg. At all relevant times Mr Scragg’s legal firm, Peter Scragg and Associates, represented the defendants. Mr Scragg appeared as counsel for the defendants in these proceedings. The plaintiff was represented at the costs hearings but not on the appeals.
The purchase price for the property was $530,000. The plaintiff paid a deposit of $15,000 on, or shortly after, 16 August. Settlement date was to be 15 November 2013.
The contract was subject to finance. Clause 18 provided that it was a special condition of the contract that the agreement was subject to finance. The terms of the special condition were annexed to the agreement.[1] The minimum amount of the loan to be obtained by the plaintiff was $424,000. The date on or before which the lender was to approve the loan was Monday 16 September 2013.
[1] Appeal Book 24.
Clause 4 of the annexure provided that, unless otherwise agreed in writing between the parties, the plaintiff must deliver to the vendor written notice, signed by the lender, that the loan had been granted.
On the morning of Monday 16 September the plaintiff was told by his mortgage broker that the St George Bank had given in-principle approval for the loan. It appears that there was some incomplete communication between the plaintiff and his broker on that day. The plaintiff understood his broker to be saying that verbal in-principle approval for the loan had been given by the bank, but that no written approval had yet been given. In fact, the St George Bank had sent a letter dated (Sunday) 15 September to the broker giving approval in principle. The letter was unsigned.[2]
[2] Appeal Book 51 and 57.
Sometime later on Monday 16 September, after the plaintiff had spoken to his broker, the defendants’ land agent, Mr Hall, rang the plaintiff asking about the finance approval. The plaintiff told Mr Hall what he understood the mortgage broker had told him. He did not tell Mr Hall about the letter from the bank, because he did not then know about it. However he told Mr Hall that he was willing to rely on what he understood to be verbal approval in principle. Relying on that approval, he was willing to waive the special condition about the contract being subject to finance. He told Mr Hall that he would waive that condition if Mr Hall was happy with that course. Mr Hall said that would be fine. Mr Hall went on to say that it would probably be better for the contract to become unconditional, that is unconditional as to finance, rather than his (Mr Hall) having to seek the vendors’ approval for an extension of the finance clause.
By an exchange of emails between 4 and 5 pm on 16 September Mr Hall sent the plaintiff a notice of waiver of special conditions[3] and the plaintiff returned the form duly executed by him.[4] The plaintiff telephoned Mr Hall to make sure that he had received the executed form. Mr Hall confirmed that he had received it. The telephone discussion between Mr Hall and the plaintiff led the plaintiff to believe that the contract would now proceed to execution on an unconditional basis. He expected to settle on the agreed date. Up to this time the plaintiff had no dealings with the defendants at all. He had dealt only with their agent, Mr Hall.
[3] Appeal Book 34 and 40.
[4] Appeal Book 42 to 43.
At 10.38 am on 17 September Ms Carla Scragg sent the plaintiff an email attaching what purported to be a notice of termination of the contract signed by Mr Peter Scragg, as director of the second defendant.[5] The notice asserted that the vendors had not received the lender’s notice on or before 16 September as provided for in the special conditions. Mr Scragg purported to terminate the contract pursuant to clause 14.3.2 of the Contract.[6] No notice of default was sent by Mr Scragg. Such a notice was required by clauses 15.3 and 15.4 of the Contract.
[5] Appeal Book 45.
[6] Appeal Book 46.
Having received the letter from Mr Scragg, the plaintiff contacted his mortgage broker who told him for the first time about the letter from St George Bank dated 15 September approving finance. At 3.34 pm the plaintiff sent Mr Hall an email[7] telling him about the letter from the bank and attaching a letter he was proposing to send directly to the vendor.
[7] Appeal Book 48.
At 4.25 pm the plaintiff sent an email to Mr Scragg[8] attaching a copy of the executed Notice of Waiver that he had sent Mr Hall the day before and a copy of the letter from the St George Bank.
[8] Appeal Book 54.
I set out in full the email Mr Scragg sent to the plaintiff at 10.03 the following day, 18 September.[9] I reproduce it so that it also includes the email exchange beginning with Ms Scragg’s original email at 10.38 am on 17 September:
[9] Appeal Book 60.
Clint Girardi

From:          Peter Scragg [[email protected]]
Sent:           Wednesday, 18 September 2013 10:03AM
To:             Clint Girardi
Subject:       Re: 53 Wood Avenue Brompton

Dear Clint
We doubt the authenticity of the letter from St George as it is dated last Sunday and unsigned.
The information in it contradicts what John hall told me in relation to the progress of your loan application.
I am alarmed that the bank has not even valued the property one month after the contract had been signed, which bring into question whether you have used your best endeavours to obtain the loan in the first place. In any event you were required to deliver a copy of the approval by the 16^th and clearly you did not. The vendors regard the contract as being terminated for the reasons previously given.
Yours faithfully
Peter Scragg

On 17/9/2013 16:24 Cling Gerardi wrote:
Dear Peter,
In relation to your earlier email, please find my response attached.
My finance broker gave me verbal finance approval over the phone yesterday.
Hence why I chose to go unconditional and remove this clause. (I didn’t realise he had it in written document form. Either way I trust this satisfied your concerns.
Kind regards,
Clint Girardi
Dirardi Design
Ph. 0411283861
17 Helmon Aveenu EVERARD PARK 5035
ABN 79 847 062 367
-------Original Message------
From: Peter Scragg
Sent: Tuesday 17 September 2013 10:38AM
To:
Cc: John Hall
Subject: 53 Wood Avenue Brompton
Dear Mr Girardi,
Please find attached notice of termination in relation to the above property.
Yours faithfully
Carla Scragg

The plaintiff replied to this email at 11.46. He responded to each point made by Mr Scragg. He rebutted the suggested fraudulence of the bank’s letter and he said he proposed proceeding to settlement. He drew particular attention to his waiver of the finance condition. If Mr Scragg did not know of the waiver before then, he certainly knew of it on receipt of this email.[10]
[10] Appeal Book 62.
In an email at 12.20 pm the same day, Mr Scragg persisted in his contention that the contract was terminated.[11] He asserted that the plaintiff had no right to “unilaterally waive compliance with performance of the special condition”.
[11] Appeal Book 65.
Curiously he said “you still do not have the funds you require to purchase the property and the vendors are not prepared to wait around until you get your affairs in order”. That was said on the 18 September. The agreed settlement date was not until the 15 November.
At 3.48 pm the plaintiff replied to each point made by Mr Scragg.[12] He said he would seek his solicitor’s advice.
[12] Appeal Book 69.
The plaintiff’s solicitors Bambrick Legal wrote to the defendants care of Mr Scragg on 20 September asserting the correctness of their client’s actions and his wish to proceed to settlement.[13]
[13] Appeal Book 73.
Mr Scragg replied under his legal firm’s letterhead on 25 September.[14] In that letter he claimed that the land agents ostensibly engaged by him had no authority to propose the waiver. He continued to assert the vendor’s rights to terminate the contract.
[14] Appeal Book 76.
On 27 September the plaintiff placed a caveat on the property.
On 4 October the plaintiff’s solicitor sent Mr Scragg a detailed letter[15] explaining why their client’s waiver was valid and why the vendor’s termination was ineffective. They sought a reply by 9 October. They urged the vendors to avoid litigation. They said they would rely on that letter as to any question of costs.
[15] Appeal Book 79.
Ms Carla Scragg replied on 4 October[16] seeking an extension of time in which to reply. Ms Scragg wrote a further letter on 11 October[17] on the letterhead of Peter Scragg & Associates.
[16] Appeal Book 84.
[17] Appeal Book 86.
The defendants sought to remove the caveat. On 23 October the plaintiff issued proceedings to extend the time for removal of the caveat and for a declaration that the contract remained on foot. On 25 October His Honour Judge Tilmouth ordered the extension of time for removal of the caveat.
In an affidavit sworn on 25 October[18] Mr Scragg asserted the defendants’ right to require proof of the plaintiff’s ability to pay the purchase price. He asserted the plaintiff had no such ability. He asserted the vendor’s rights to terminate the contract. He said he did not accept the genuineness of the St George Bank letter.
[18] Appeal Book 96.
On 29 October the legal proceedings were settled, except as to costs. Settlement of the contract took place on 19 November. Ironically, as the Master observed, the settlement did not take place on the agreed date of 15 November because the defendants were not ready. In correspondence almost up to settlement the defendants were doubting the plaintiff’s ability to pay the purchase price and were challenging the plaintiff to prove that he was going to be able to do.
In the course of the brief proceedings before settlement, the plaintiff sought indemnity costs.
On 12 December, ie after settlement, the plaintiff sought a dismissal of the proceedings that he had commenced. That included the plaintiff’s claim for damages. The plaintiff sought an order for indemnity costs and an order that Mr Scragg be personally liable for those costs.
On 16 December the action was dismissed save as to costs.
The plaintiff’s application for indemnity costs, and for Mr Scragg to pay the costs personally, was contested. On 17 October 2014 Master Rice delivered detailed reasons for ordering the defendants to pay the plaintiff’s costs on an indemnity basis. The learned Master made certain exclusions from the order which are not relevant to the appeal except to demonstrate the care the Master took in framing the orders. He declined to order Mr Scragg to pay the costs personally. The plaintiff was represented by counsel on the costs argument. Mr Scragg represented the defendants and himself.
The Master reserved the questions of costs of that contest. His decision on that costs application is the subject of the second decision which he published on 14 April 2015.
Before dealing with the individual grounds of appeal it is appropriate to consider the breadth of the discretion to award indemnity costs.
Costs Discretion
In Colgate Palmolive v Cussons[19], Sheppard J reviewed authorities on the circumstances in which there might be an appropriate departure from the usual rule that the successful party will be awarded costs on a party/party basis. His Honour then set out principles and guidelines to be drawn from those authorities.[20]
[19] (1993) 46 FCR 225.
[20] See pp 232-234.
I reproduce two paragraphs of His Honour’s judgment. I reproduce the emphases made by the Master in paragraph 5:
4.In consequence of the settled practice which exists, the court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v Barnes (supra) at 141 said the Court had a general and discretionary power to award costs as between solicitor and client “as and when the justice of the case might so require”. Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v Preston (supra) at 637; namely, there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of facts which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at p 9) in Tetijo, “The categories in which the discretion may be exercised are not closed”. Davies J expressed (at p 6) similar views in Ragata (supra).
5.Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp (supra)); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson (1987) 10 NSWLR 525; ; Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 AT 724 (Court of Appeal); Crisp v Keng (unreported, Court of Appeal, NSW, Kirby P, Priestley JA, Cripps JA, No 40744/1992, 27 September 1993) and an award of costs on an indemnity basis against a contemnor (eg Magarry V-C in EMI Records (supra)). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.” (emphasis added.)
This case was approved by Mulligan J in Duke Group Ltd (in liq) v Pilmer and Ors[21] and by the Full Court (per Debelle J, Cox and Millhouse JJ agreeing), in SGIC v Lane[22] Debelle J said:
The ordinary rule is that costs are paid on a party/party basis. Generally speaking some special or unusual feature is required to warrant departure from the usual practice. However, an order to pay costs on a solicitor/client basis will not be found to have miscarried unless it appears that the order involves a manifest error or injustice.
[21] [1998] SASC 6699 (1 June 1998) at 7.
[22] (1997) 68 SASR 257 at 265.
The Master’s reasons for finding that the plaintiff was entitled to an order for indemnity costs are set out in paragraphs 193-198 and 201-203. At paragraph 200 the Master identified the purpose of an indemnity order. It is “to fully compensate a party where there are costs incurred as the court considers it is unreasonable for a party to have subjected the plaintiff to expenditure of those costs”.[23]
[23] See Hamod & Another v NSW & Another (2002) 188 ALR 659 at 665.
Grounds of Appeal
I deal with each defendant’s Grounds of Appeal.
Ground 3.1 Erred in law in holding that the Defendants were not entitled to refuse to complete the contract for the sale of the subject property, as the condition was only for the benefit of the Plaintiff and he could waive it without the consent of the Defendants (paragraph 41 of the First Decision).
The defendants submit that the “subject to finance” special condition (“the finance condition”)[24] was either for the benefit of both parties or was for the benefit of the appellants[25]. That submission is made in the knowledge that if the special condition was solely, or perhaps even primarily, for the benefit of the purchaser, then the purchaser is entitled to waive the condition, at least in the absence of contrary terms in the contract.
[24] Appeal Book 24.
[25] Outline [1].
Mr Scragg cites Sandra Investments v Booth[26]. In that case Gibbs CJ (Mason, Murphy and Brennan JJ agreeing) held that if a condition was solely for the benefit of the purchaser, the purchaser was entitled to waive the condition. Wilson J declined to decide that point, saying it was unnecessary to do so because the terms of the contract under consideration specifically gave the purchaser the option of waiving compliance with the condition and enforcing the contract, or alternatively, cancelling it. All members of the court agreed that the terms of the contract were critical.
[26] (1983) 153 CLR 153.
The facts of that case are not helpful to the defendants. In that case the contract was conditional upon the purchaser obtaining Council approval for the subdivision of land on terms satisfactory to the purchaser. The purchaser was not able to obtain the necessary approval but elected nevertheless to enforce the contract. The vendor no longer wished to sell. It challenged the purchaser’s election to proceed with the contract.
The High Court upheld the purchaser’s right to enforce the contract. The majority Judges did so on two bases:
1.that the condition was solely for the benefit of the purchaser, and so he was entitled to waive compliance with the condition; and
2.the contract specifically provided for the purchaser to have the option to either enforce or cancel the contract in the event that he was unable to obtain Council approval.

In this case the defendants submit that the finance condition was not solely for the plaintiff’s benefit. As I have indicated the defendants appear to do so on two bases. The first is that the finance condition was for the benefit of both parties.[27] That is said to be so because the words of the finance condition include the passage “unless otherwise agreed in writing between the parties”.
[27] Outline [1].
That submission is misconceived. That passage appears in Clause 4 of the finance condition. That paragraph reads as follows:
Unless otherwise agreed in writing between the parties, the purchaser must deliver to the vendor written notice signed by the lender that the lender has agreed to grant the loan conditionally or unconditionally to the purchaser at settlement by the dates specified in item 2 below.[28]
[28] Appeal Book 24.
That clause merely gives the parties the opportunity to vary the finance condition, including the date by which the purchaser must deliver to the vendor the notice of the lender’s agreement to grant the loan. That clause says nothing to indicate that the finance condition is for the benefit of the vendor. There is nothing implied in that clause that is for the benefit of the vendor.
The second basis for submitting that the finance condition was not solely for the benefit of the purchaser appears to be that there was a benefit for the vendors. I reproduce paragraph 3 of the defendants’ outline:
The finance clause was for the benefit of the appellants in underwriting the respondent’s capacity to settle, noting that the respondent’s settlement date was three months after the making of the contract. This meant that the appellants could not deal with their asset for that period.
This submission is entirely misconceived. There is no sense in which the vendor underwrites the purchaser’s capacity to settle. The purchaser has the sole responsibility to pay the purchase price at settlement. He may do so by complying with the finance condition. He may also waive the finance condition, but if he does that the contract becomes unconditional as to finance and he must pay the purchase price on settlement.
The finance condition was in my view, solely for the benefit of the purchaser. He was entitled to waive the condition. The Master was correct in so finding.
Ground 3.2 Erred in holding that the defendants had not complied with the termination procedure under the contract, and that they knew they had not complied with that procedure (paragraph 51 of the First Decision).
The contract makes provision for the consequences of a failure by the purchaser to comply with the terms of the contract. Clause 14.3[29] reads as follows:
[29] Appeal Book 31.
14.3 If a party fails to satisfy a Special Condition then:
14.3.1If the party required to satisfy the Special Condition complies with clause 14.2 and such other terms and conditions as specified in the Special Condition, then either party may terminate this Agreement upon written notice to the other party; or
14.3.2If the party required to satisfy the Special Condition fails to comply with clause 14.2, or is otherwise in breach of such other terms and conditions specified in the Special Condition, then such an event will be deemed a default under this Agreement and:
(a)if the Purchaser is in default, clauses 15.3 and 15.4 will apply; or
(b)if the Vendor is in default, clauses 16.1 and 16.2 will apply.
Paragraphs 15.3 and 15.4 deal with default by the purchaser. They read as follows:
15.3Without prejudice to any other rights, if the Purchaser fails to pay the Deposit or any part of the Deposit, or otherwise fails to observe or perform any obligations imposed on the Purchaser under this Agreement prior to the Settlement Date (or such other date as specified), the Vendor may give the Purchaser written notice requiring the Purchaser to remedy the default (“Notice of Default”) within three (3) business days of the date of the Notice of Default. If the Purchaser fails to remedy the default within the time specified in the Notice of Default, the Agreement will automatically terminate at the expiration of that period unless the Vendor withdraws the notice in writing.
15.4A Notice of Default under Clause 15.3:
15.4.1may be given at any time after the occurrence of the default;
15.4.2must state that unless the default identified in the Notice of Default is remedied within the time specified, this Agreement will automatically terminate.
Those clauses contemplate that the purchaser will be given time in which to remedy his default. If he fails to remedy the default the contract is terminated. The defendants gave the plaintiff no notice of default. There is no provision in the contract for the unilateral termination of the contract by either party.
The defendants cite Perri v Coolangatta Investments Pty Ltd (1982)[30] in support of the proposition that they were not required to give the purchaser notice of termination upon the purchaser’s failure to comply with the terms of the finance condition. That case might lend support to the contention were it not for the fact that the contract in this case specifically required notice to be given. In Perri v Coolangatta Investments Pty Ltd (supra) the terms of the contract did not provide for the giving of notice. The defendants cannot rely on that authority. In any event the submission ignores the plaintiff’s waiver of the finance condition and his willingness to proceed with the contract unconditionally.
[30] 149 CLR 537.
The ground of appeal goes on to challenge the Master’s finding that the defendants knew they had not complied with the Notice of Default procedure. It is not clear upon what basis the Master made that finding, but it does not matter whether or not the defendants were aware that they had not complied with the procedure. The terms of the contract govern the procedure irrespective of the defendants’ knowledge of it. I would only add that it would be surprising if Mr Scragg, as a legal practitioner, was unaware of the relevant conditions of the contract.
Ground 3.3 Erred in holding the Defendants had conceded that the contract was not terminated (paragraph 10 of the Second Decision (sic) referring to paragraph 140 of the First Decision (sic)).[31]
[31] The Masters finding in this regard is at paragraph 171 of the First Decision. (see Appeal Book 123). It is not paragraph 10 of the second decision or paragraph 140 of the first as the ground asserts.
The defendants may be right about never having conceded that the contract was not terminated. I can find no such concession in the materials before me. It is clear however that the defendants took no further action to assert that the contract was terminated after the action settled except of course in the various costs proceedings. Unfortunately the defendants have maintained in the costs proceedings what the Master has found, and what I have found, to be an untenable position. That untenability was pointed out to them by the plaintiff’s solicitors in their letter of 20 September 2013[32] and the even more detailed letter of 4 October 2013.[33]
[32] Appeal Book 73.
[33] Appeal Book 79.
The defendants’ persistence in this untenable position in the costs proceedings is indicative ex post facto of their unreasonableness in the proceedings giving rise to the costs issue. Their unreasonableness is relevant to the exercise of the costs discretion.
Ground 3.4 Erred in holding that the difference between party/party costs and indemnity costs would be minimal in circumstances where there was no evidence to support that finding and in fact the difference between indemnity and party/party costs claimed by the Plaintiff is approximately $75,000 (paragraph 4 of the First Decision).
It may be that when the costs are finally taxed there is more than a minimal difference between party/party costs and indemnity costs.
When submissions were first made in this matter on 21 June 2015 I gave the parties an opportunity to put before me what evidence they could about the likely difference. The defendants filed a supplementary appeal book and further written submissions. I called the matter on again on 26 October 2015 and gave the plaintiff, who was unrepresented, an opportunity to make any written reply he wished by 2 November 2015. He replied on 28 October. In spite of the reasonable attempts by both parties to estimate the difference, the figures cannot be finally determined until taxation of costs or agreement. However I accept that the difference may be more than minimal. It may even be of the order of $75,000 as alleged by the defendants, although I cannot be sure.
The questions then become:
1The extent to which the Master relied upon that surmise in exercising the costs discretion;
2If he did rely on the surmise at all, was it an error to do so, ie, is the difference between the two sets of costs a relevant consideration?
3If it was a relevant consideration, and the Master did rely on it, did he give it undue weight?
I deal first with the question of whether the difference in quantum between the two costs orders is a relevant consideration in the exercise of the costs discretion.
Mr Scragg was unable to provide any authority for the proposition that the likely difference between the quantum of each is a relevant consideration. He submitted that the nature of the discretion is wide. I have been unable to find any authority myself.
The object of ordering costs on an indemnity basis is to compensate the successful party where the circumstances of the case warrant the court departing from the usual course. The usual course is to award costs on a party/party basis. I have already referred to the authorities dealing with the principles governing the criteria for the exercise of the discretion. Nowhere in those authorities is there a suggestion that indemnity costs should only be awarded where the difference between the two is minimal. Nor is there any case which suggests that where the behaviour of the unsuccessful party is such as to warrant an indemnity order, the court should desist from making such an order where the difference between the two is considerable. In other words, if the circumstances of the case warrant an award of indemnity costs the successful party may be fully compensated for his properly assessed costs, irrespective of the quantum. The discretion may be wide enough to make such an order if the justice of the case requires it. With some trepidation, in the absence of authority, I find that the difference in the quantums is an irrelevant consideration.
If I am wrong about that and the quantum is a relevant criterion I turn to consider whether the Master gave undue weight to what I will accept for present purposes is an incorrect assumption that the difference was minimal. I do not think that the Master did give that matter undue weight. He set out in detail the unreasonable behaviour of the defendants which led to the decision to award indemnity costs. If the plaintiff did incur considerable costs it was precisely because of the defendants’ unreasonableness. The defendants maintained a wrongheaded contention that they were entitled to challenge the plaintiff’s ability to settle and they were entitled to terminate the contract. This was in the face of the plaintiff’s solicitors pointing out to them their errors. The plaintiff was forced into initiating his legal proceedings to protect his rights. He did everything he could to avoid the litigation. In my view the plaintiff was entitled to indemnity costs even if they turn out to be considerably greater than party/party costs.
Ground 3.5 Erred in holding on the facts that the Defendants’ agent had ostensible authority to waive the subject to finance clause, a factual finding which the Defendants would have challenged had the matter proceeded to trial (paragraphs 54, 77, 80 and 177 of the First Decision). The Defendants say the Plaintiff was aware that the agent did not have that authority.
I think this ground fails for three reasons. The first is that there was no information before the Master, nor is there any now, that the agent acted contrary to the defendants’ instructions. Mr Scragg asserts in his letter of 25 September 2013 to the plaintiff’s lawyers[34], that the agent told the purchaser on 11 September that if he did not get his finance by close of business on 16 September the vendors would terminate the contract. I note that even if the agent had done that, it would not, on the face of it, be contrary to those instructions if, on the 16 September the vendor facilitated the waiving of the finance condition. On the face of Mr Scragg’s letter there was nothing preventing the agent ensuring that the contract proceeded either by the purchaser obtaining his finance or waiving the finance condition altogether.
[34] Appeal Book 77.
In paragraph 7 of his outline Mr Scragg asserts that if the matter had gone to trial the defendants would have demonstrated that they and the agent were in conflict as to the termination of the contract. In submissions before me[35] Mr Scragg inferred, but did not directly say, that the conflict was, that, as at the 16 September, the defendants wanted to rescind the contract and the agent wanted to proceed with it to earn his commission. It is not clear how the defendants would go about proving that contention.
[35] T16-17.
The second reason is that there was no information before the Master, nor is there any before me, that the plaintiff had any reason to doubt that the agent had authority to do as he did. There was ostensible authority. If the agent did not have authority to receive the plaintiff’s waiver then that was completely unknown to the plaintiff. The Master concluded that if the agent acted without authority then the defendants can pursue their claim against him. Mr Scragg, in argument, submitted that the plaintiff was well aware of the agent’s lack of authority. That submission is unsupported by any evidence. In fact it is contradicted by the evidence. If the plaintiff believed that the agent had no authority to receive the waiver on the defendant’s behalf, it is I think plain that he would have served the defendants personally. He was keen to proceed with the contract. He was so keen to proceed with it that he was willing to waive the finance clause even though at that time he believed he had only verbal approval for finance. He was not aware that he had written approval, albeit that that approval was unsigned. As soon as Mr Scragg, via the email from Ms Scragg, communicated with the plaintiff directly on 17 September, the plaintiff replied both to Mr Scragg and the agent. Before the 17 September he had no direct communication with the defendants at all. All communications had been between the plaintiff and the agent.
The third reason is that it is clear that the defendants had no valid instructions they could have given the agent on 16 September to terminate the contract. As I have already found, the plaintiff had the right to waive the finance condition. If the defendants were determined to terminate the contract on the 16 September they could have withdrawn the agent’s authority to act and notified the plaintiff, but it is plain that the plaintiff would have done all that he could to proceed with the contract. This ground is without foundation.
Ground 3.6 Erred in holding that the Defendants’ claimed “generosity” in agreeing to contract with the Plaintiff (paragraph 60 of the first Decision), presumably a relevant factor in the exercise of discretion to award indemnity costs against them.
I am not entirely sure what this ground means. It appears that in paragraph 60 of his reasons the Master was referring to Mr Scragg’s letter to the plaintiff’s solicitors dated 25 September 2013.[36] See also paragraph 59 of the Reasons.
In the letter of 25 September Mr Scragg said:
Your client was given a generous amount of time to arrange the required finance, being 32 days, but did not do so.
[36] Appeal Book 76.
That sentence is indicative of the defendants’ wrongheadedness. If it was referring to the fact that the contract gave the plaintiff a month to organise finance, (ie, from 16 August to 17 September) then that is unremarkable. It is in no sense “generous”. Insofar as the sentence alleges that the plaintiff had failed in that time to obtain finance, it was wrong. The purchaser had obtained approval, although he believed on 16 September that that approval was only verbal. The submission also, of course, overlooks the waiver.
The whole tenor of the letter was wrongheaded and belligerent. This ground fails.
Ground 3.7 Erred in finding that the Defendants were not entitled, under the terms of the contract, to enquire as to the financial capacity of the Plaintiff to complete the contract (paragraphs 74, 75, 113 and 175 of the First Decision).
The contract makes no provision for the defendants to enquire into the plaintiff’s financial capacity to complete the contract. The plaintiff had exercised his right to unilaterally waive the finance condition. He thereupon committed himself to proceed to settle unconditionally. The defendants’ continuing assertion that they had a right to challenge the plaintiff’s capacity to settle is unreasonable. That unreasonableness weighed in favour of the indemnity costs order.
Ground 3.8 Failed to take sufficient notice of and give sufficient weight to the fact that the Plaintiff’s claim for costs against the director of the Second Defendant, ACN 068 691 092 Pty Ltd in a personal capacity was unsuccessful and had no prospects of success, and the costs incurred by the Second Defendant on account of that argument.
The Master noted at paragraph 33 of the Second Decision[37] that little time was taken preparing for, or arguing, the unsuccessful claim by the plaintiff against Mr Scragg personally or his firm. The Master also noted that the written material relevant to that claim was contained in the affidavit dealing with the successful claim against the defendants. The defendants have pointed to no error in these observations.
[37] Appeal Book 142.
I do not take the defendants to be submitting that the plaintiff’s failure to obtain costs against Mr Scragg personally would militate against awarding indemnity costs against the defendants. That submission would be untenable. The behaviour of the defendants collectively warranted the order for indemnity costs. The Master’s refusal to award costs against Mr Scragg personally, or his firm, does not bear on that decision.
The defendants assert in this ground that the claim against Mr Scragg personally had no prospects of success. I do not agree. It really does appear that Mr Scragg was the “driver” of the defendants’ actions in this matter. I need not dilate on this topic but I do not accept the submission.
What I take the defendants to be submitting in this ground is that the Master erred in not ordering the plaintiff to pay the defendants’ costs of the unsuccessful aspects of the claim. In my view it was no error to make no such order. The issue took up little time and was subsumed by the work necessary for the prosecution of the case for the defendants.
Ground 3.9 Erred in holding that the Defendants had wrongfully made an allegation of fraud (paragraphs 141 and 153 of the First Decision).
I reject this ground. Mr Scragg submitted, first, that he had not alleged that the St George letter was fraudulent. All he did was to doubt its authenticity because it was unsigned and it was dated on a Sunday. I do not accept that submission. In his email to the plaintiff on 18 September[38] Mr Scragg said, “we doubt the authenticity of the letter …”. It is hard to see how doubting its authenticity could be anything other than an allegation of fraud. Mr Scragg persisted in that view. In his affidavit sworn on 25 October 2013[39], he said “I do not accept that the letter … is genuine”.
[38] Appeal Book 60.
[39] Appeal Book 98.

In the event the Master did not place great weight on the fraud allegation. In paragraph 142 of his reasons[40] he said:
In my view this issue was minor and would not of itself justify an indemnity costs order.
At paragraph 202 he said:
I note the plaintiff’s argument that the allegations of fraud were serious. I do not take that view.
[40] Appeal Book 118-119.
I must say I take a different view. It is a serious matter for a legal practitioner to allege fraud. The Master noted what had been said by Goldberg J in White Industries (Qld) Pty Ltd v Flower & Hart[41] about the seriousness of the allegations by a legal practitioner. However the Master gave little weight adverse to Mr Scragg or the defendants. Neither Mr Scragg nor the defendants have anything to complain about in this regard.
Ground 3.10 Erred in holding that the various purchase offers made by the Plaintiff showed that he was in a position to obtain finance (paragraph 184 of the First Decision).
[41] (1998) 156 ALR 169 at 241-242.
It is not necessary to consider this ground in detail. I have already found that the plaintiff exercised his right to waive the financial condition. The Master made what is really a passing reference to the fact that the pre-contract negotiations would indicate that, contrary to the defendants’ assertion, the plaintiff was not an impecunious purchaser.
In the letter to Mr Scragg of 4 October 2013[42] the plaintiff’s solicitors supported that contention by reminding Mr Scragg that the plaintiff had put four offers to purchase, the first of which was for $500,000 unconditionally with settlement in 30 days. The other three offers were each for $10,000 more (successively), and subject to finance with ascending settlement periods.
[42] Appeal Book 79-82.
This is a matter to which the Master gave little weight. This ground is not made out.
Ground 3.11 Erred in holding that the Defendants’ conduct was unreasonable and contrary to law, and had unnecessarily prolonged the dispute and caused the Plaintiff further costs (paragraph 188 of the First Decision).
I have already made findings which lead me to reject this ground but I will summarise them.
The defendants were unreasonable and wrong in contending they were entitled to challenge the plaintiff’s ability to finance his purchase. The contract did not permit them to behave in that way. Nor did the contract permit them to terminate the contract in the way they did. They chose to ignore the plaintiff’s valid waiver of the finance condition. They chose to ignore their own contractual obligations even if they believed that they were entitled to terminate because of default by the plaintiff. The manner of their conduct was unreasonable and belligerent. I regard the defendants’ allegations of fraud more seriously than the Master did. This conduct as a whole would have called for an order for indemnity costs from a lay person ignorant of the law. It is the more deserving of such an order when the director of the second defendant, and plainly the driver of the defendants’ conduct, is a legal practitioner. The defendants’ conduct forced the plaintiff to take legal action that should not have been necessary. The plaintiff was forced to lodge a caveat and to defend the defendants’ attempts to remove it. Right up to the settlement of the litigation it appeared that the plaintiff would have to prove the plain enforceability of his contract. The defendants’ legal contentions were untenable, unreasonably asserted and unreasonably maintained. The plaintiff was entitled to be fully compensated for the unnecessary costs he was forced to incur, both in the original action and the defended costs hearing.
Ground 3.12 Erred in holding that the affidavits of the Defendants’ (FDN 19, FDN 21 and FDN 22) were inadmissible on account of section 67C of the Evidence Act 1929 (SA), and relevance to the question of the indemnity costs (paragraphs 14, 16, 17 and 18 of the Second Decision). The affidavits of the Defendants’ were relevant and admissible to the exercise of the Court’s discretion.
The three affidavits referred to here appear to be Mr Scragg’s affidavit of 19 November 2014[43], Ms Scragg’s affidavit of 3 December 2014,[44] and Ms Scragg’s affidavit of 8 December 2014.[45] In my view the affidavits were irrelevant to the question of whether an order for indemnity costs, or indeed costs, should be made in the plaintiff’s favour.
[43] Appeal Book Tab 6.
[44] Appeal Book Tab 7.
[45] Appeal Book Tab 8.
Mr Scragg’s affidavit of 19 October 2014[46] alleges that the quantum of the plaintiff’s claim for costs is excessive. That, as the Master found, is a matter for the taxing master. The affidavit was inadmissible on that ground alone.
[46] Appeal Book Tab 6.
Ms Scragg’s affidavit of 3 December 2014[47] attaches two letters from the plaintiff’s solicitors. The first letter advises the quantum of the plaintiff’s party/party costs and solicitor/client costs. The second letter seeks to settle the quantum of costs on a solicitor/client basis. If the purpose of filing that affidavit was to support the contention that the plaintiff’s claim for costs was excessive then the affidavit was irrelevant and inadmissible. If the purpose was to demonstrate that the difference between the two sets of costs was considerable then the affidavit may have been admissible, but as I have already found, that contention is either irrelevant, or, if I am wrong about that, it does not mean an order for indemnity costs should not have been made. I therefore make no finding about the admissibility of the affidavit but dismiss this ground of appeal as it applies to this affidavit.
[47] Appeal Book Tab 7.
I make the same findings in respect of Ms Scragg’s affidavit of 8 December 2014. [48] That affidavit merely attaches enclosures which had not been attached to the affidavit of 3 December.
[48] Appeal Book Tab 8.
Ground 3.13 Erred in awarding the Plaintiff its costs on the action and on the cost argument.
I dismiss this ground. Plainly the plaintiff had substantially succeeded in both the original action and the costs action. He was entitled to his costs.
Ground 3.14 Erred in awarding those costs on an indemnity basis.
I have already made findings about why the plaintiff was entitled to indemnity costs for the original action, (Master’s Decision of 17 October 2014). I deal more specifically with the appeal from the decision of 14 April 2015. In my view the Master was correct in ordering indemnity costs on the costs dispute.
In the first place the defendants maintained on the costs dispute the untenable and unreasonable arguments they put forward on the original action. For that reason it was reasonable to make an order for indemnity costs.
But there are further reasons. The plaintiff had offered to settle the issue of costs on an indemnity basis up to 24 October 2013 and on a party/party basis thereafter. The defendants did not accept that offer. They counter-offered that each party bear its own costs. In the decision of 17 October 2014 the plaintiff obtained a more favourable costs order than the one he had offered to accept.
Further the Master noted other unsatisfactory aspects of the defendants’ conduct, dealing with a late provision of submissions, raising matters not supported by affidavit and failure to attend on one occasion.[49]
[49] Appeal Book Para 31 at page 42.
As I have already noted the Master found that it was not appropriate to allow the defendants a costs set-off for the short time taken to argue the aspects of the orders which were in their favour, (ie the third party claim).
Issue of alleged ulterior motive
The defendants complain that the Master has impermissibly speculated that, as at 16 September 2013, they did not want to proceed with the sale of the Brompton property because they were required to pay the proceeds of sale into court in another case.[50] In fact in paragraph 23 the Outline goes so far as to question the Master’s impartiality. Paragraph 23 reads: “there are grounds for real concern in relation to the Master’s capacity to determine the issue given the apparent reliance he has placed on the knowledge he gained from the other matter. The court heard argument in this matter on 4 March 2014”.
[50] Outline [22]-[24].
Mr Scragg pursued that submission, albeit briefly.[51] I did not know whether Mr Scragg ever asked the Master to excuse himself. The issue is not raised in the Grounds of Appeal.
[51] T24-25.
The Master did refer to the possibility that the defendants may have sought to avoid paying the sale of the proceeds of sale into court.[52] However it is not clear from the Master’s discussion of that topic from [89]-[96] that an order for payment in had been made, or foreshadowed, before 16 September. The order itself does not appear to have been made until the 13 November 2013.[53] There may have been other orders, or intimations of orders, that I am unaware of. Mr Scragg did not draw my attention to them. Nor did the plaintiff.
[52] [90], Appeal Book 113.
[53] [90]
The defendants have never, to my knowledge, disclosed why on 16 September they did not wish to proceed with the contract they had signed only a month earlier. They are not obliged to. I accept Mr Scragg’s submission in that regard. I also accept that the Master speculated that the defendants may have had a motive related to the destination of the proceeds of the sale. The Master may have had more information tending towards that conclusion than is before me. I do not know.
What I do know however, is that from 16 September 2013 the defendants unreasonably sought to terminate the agreement. They persisted in that determination in the face of detailed and reasonable correspondence, first from the plaintiff himself, then from his lawyers. The plaintiff had no choice but to take legal action to protect his contractual rights. The plaintiff was entitled to indemnity costs on both the original action and the costs action. I make no finding about the defendants having an ulterior motive for their actions. I see no indication that the Master was affected by an unwarranted speculation about the defendant’s motives for behaving so unreasonably. The behaviour itself warranted the orders for indemnity costs.
I dismiss both appeals.