Fairmont Suites and Hotels Pty Ltd v Duck Holes Creek Investments Pty Ltd (No. 2)

[2009] QSC 105

SUPREME COURT OF QUEENSLAND

CITATION:

Fairmont Suites and Hotels Pty Ltd v Duck Holes Creek Investments Pty Ltd & Ors (No. 2) [2009] QSC 105

PARTIES:

FAIRMONT SUITES AND HOTELS PTY LTD
ACN 063 677 065 ATF J F STEWART FAMILY TRUST
(applicant)
v
DUCK HOLES CREEK INVESTMENTS PTY LTD
ACN 106 529 471 ATF DUCK HOLES CREEK

INVESTMENT UNIT TRUST
(first respondent)
and
ADVENTURA PROPERTY HOLDINGS PTY LTD ACN 129 162 465 ATF THE PRUDENT VENTURES NO 1 TRUST
(second respondent)
and
LENTRO INVESTMENTS PTY LTD ACN 081 146 090 ATF PRUDENT VENTURES UNIT TRUST NO 4
(third respondent)
and
PRUDENT VENTURES PTY LTD ACN 108 680 557 ATF PRUDENT VENTURES UNIT TRUST NO 5
(fourth respondent)
and
PRUDENT VENTURES PTY LTD ACN 108 680 557 ATF PRUDENT VENTURES UNIT TRUST NO 6
(fifth respondent)
and
LENTRO INVESTMENTS PTY LTD ACN 081 146 090 ATF MORROW DISCRETIONARY TRUST NO 1
(sixth respondent)
and
LENTRO INVESTMENTS PTY LTD ACN 081 146 090 ATF LENTRO DISCRETIONARY TRUST NO 1
(seventh respondent)
and
SCOTT ATANASOFF AND MIRCA ATANASOFF
(eighth respondent)
and
TERENCE VICTOR LEAKE
(ninth respondent)
and
STEVEN CROFT AND ANNE CROFT ATF CROFT FAMILY SUPER FUND
(tenth respondent)
and
TILE TRENDS (WHOLESALE) PTY LTD
ACN 010 529 852 ATF INGLIS DISCRETIONARY TRUST
(eleventh respondent)
and
MARY TERESE CHATFIELD
(twelfth respondent)
and
FAIRMONT SUITES AND HOTELS PTY LTD

ACN 063 677 065 ATF PRUDENT VENTURES UNIT TRUST NO 3
(thirteenth respondent)
and
PRUDENT VENTURES PTY LTD ACN 108 680 557

ATF PRUDENT VENTURES UNIT TRUST NO 7
(fourteenth respondent)

and
GUESTHOUSE SUITES PTY LTD ACN 118 144 148 ATF GUESTHOUSE SUITES UNIT TRUST
(fifteenth respondent)
and
SWISH CAR CARE PTY LTD ACN 112 375 514  
ATF THE SWISH CAR CARE UNIT TRUST
(sixteenth respondent)

FILE NO:

BS 11419 of 2008

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court of Queensland

DELIVERED ON:

8 May 2009

DELIVERED AT:

Brisbane

HEARING DATE:

Submissions on the papers

JUDGE:

Applegarth J

ORDERS:

1.  Application for costs on an indemnity basis declined.

2.  The applicant, the ninth respondent and the thirteenth respondent pay the sixth and seventh respondents’ costs of and incidental to the application.

CATCHWORDS:

PROCEDURE – COSTS – DEPARTING FROM THE GENERAL RULE – COSTS ON INDEMNITY BASIS – where successful respondents argued that application breached compromise agreement embodied in consent orders – whether costs on an indemnity basis

Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359, cited
Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225, cited
Huntsman Chemical Company Australia Ltd v International
Pools Australia Pty Ltd (1995) 36 NSWLR 242, cited
Malden v Fyson (1847) 116 ER 486; (1847) 11 QB 292, cited
Rosniak v Government Insurance Office (1997) 41 NSWLR 608, cited

Smits v Tabone; Blue Coast Yeppoon Pty Ltd v Tabone [2007] QCA 337, cited

COUNSEL:

J B Loel (solicitor) for the applicant, the ninth respondent and thirteenth respondent
J B Sweeney for the sixth and seventh respondents

SOLICITORS:

Lillias & Loel for the applicant, ninth respondent and thirteenth respondent
Nyst Lawyers for the sixth and seventh respondents

1. The successful respondents seek indemnity costs, rather than the order as to costs I proposed to make at [67] of my reasons for judgment delivered on 5 May 2009.[1]  They submit that:

   [1]Fairmont Suites and Hotels Pty Ltd v Duck Holes Creek Investments Pty Ltd & Ors [2009] QSC 98.

(a)         the agitation of the Rule 668 and Mareva proceedings constituted a breach of the compromise agreement;

(b)         they are precluded from recovering the difference between a standard costs order and an indemnity costs order in fresh proceedings for damages for breach of contract;[2] and

(c)         there is thus some “special or unusual feature” that justifies the court departing from the ordinary practice and awarding costs on an indemnity basis. 

[2]Uniform Civil Procedure Rules 1999 (Qld) r 680; Malden v Fyson (1847) 11 QB 292 at 301; Anderson v Bowles (1951) 84 CLR 310 at 322-324.

1. I am not persuaded that the bringing of the application constituted a breach of the compromise.  The consent orders made on 22 January 2009 embodied a compromise and the applicants sought to vary those orders.  They failed to establish grounds to do so.  An application that seeks the favourable exercise of a judicial discretion to order a variation of an agreement[3] or of consent orders that embody a compromise agreement should not necessarily be treated as a breach of the relevant agreement.  By their application in this matter the applicants did not signal that they did not intend to perform the compromise or comply with the consent order.  They sought to vary the order, or, in the alternative, to restrain the sixth and seventh respondents’ solicitors from dealing with the sum of $200,000 that was expected to be paid to those solicitors pursuant to the order.  The application was based on material that the applicants submitted justified the exercise of the discretion under UCPR 668 to vary that consent order or the exercise of the Court’s power to restrain the payment of money that was to be paid pursuant to it.  The foundation of the submission for indemnity costs, namely that the application constituted a breach of the compromise agreement, is not established.

   [3]For instance, an application for relief pursuant to s 87 of the Trade Practices Act 1974 (Cth).

1. In any event, I am not persuaded that the bringing of the application in the face of the compromise and consent order otherwise warrants an order for indemnity costs.  The categories of cases identified by Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd[4] that have been thought to warrant the exercise of the discretion to order indemnity costs are not exhaustive.[5]  As Sheppard J stated:

“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.”[6]

[4](1993) 46 FCR 225 at 233-234.

[5]Smits v Tabone; Blue Coast Yeppoon Pty Ltd v Tabone [2007] QCA 337 at [43].

[6](supra) at 234.

1. In Rosniak v Government Insurance Office[7] the New South Wales Court of Appeal stated that departure from the usual “party and party” basis for costs is not confined to the situation in which a party has established ethical or moral delinquency by its opponent.  Mason P (with whom Meagher JA and Clarke AJA agreed) stated:

“…the court requires some evidence of unreasonable conduct, albeit that it need not rise as high as vexation.  This is because party and party costs remain the norm, although it is common knowledge that they provide an inadequate indemnity.  Any shift to a general or common rule that indemnity costs should be the order of the day is a matter for the legislature or the rule-maker.”

[7](1997) 41 NSWLR 608 at 616 cited with approval in Smits v Tabone (supra) at [44].

1. Indemnity costs have been awarded in cases where a party persists in a “hopeless case”.[8]  This is not such a case, and the applicants do not submit that indemnity costs are warranted because the application had no reasonable prospect of success.[9]  In such a case, indemnity costs are not awarded simply because the party conducted itself unreasonably in some way.  It is the losing party’s irresponsible conduct in persisting in a hopeless case in disregard of known facts or clearly established law that justifies indemnity costs.[10]

   [8]Huntsman Chemical Company Australia Ltd v International Pools Australia Pty Ltd (1995) 36 NSWLR 242 at 273.

   [9]ibid at 272 citing Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359.

   [10]Huntsman Chemical Company Australia Ltd v International Pools Australia Pty Ltd (supra) at 272; Todrell Pty Ltd v Finch [2007] QSC 386 at [4].

1. The application had poor prospects of success, but it was not a hopeless case.  The order for costs will be the order appearing in my reasons for decision of 5 May 2009.