Fu v Bondi Junction Prime Pty Ltd (No 2)
[2024] FedCFamC2G 979
•2 October 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Fu v Bondi Junction Prime Pty Ltd (No 2) [2024] FedCFamC2G 979
File number(s): SYG 3407 of 2018 Judgment of: JUDGE GOODCHILD Date of judgment: 2 October 2024 Catchwords: CONSUMER LAW – COSTS – indemnity costs sought by respondents – costs awarded in accordance with Part 1 of Schedule 2 of the Rules – cross-claimants entitlement to interest pursuant to Contract of Sale – claim made for agent’s commission on resale – STAY – stay granted. Legislation: Australian Consumer Law.
Civil Dispute Resolution Act 2011 (Cth).
Corporations Act 2001 (Cth), s.601AA.
Federal Circuit and Family Court of Australia Act 2021 (Cth, ss.5, 190, 214.
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth), rr.1.07, 22.02, 22.09, 25.04, Schedule 2.
Conveyancing Act 1919 (NSW), ss.55, 37A.
Cases cited: Bethell v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2021] FCA 756
Fu v Bondi Junction Prime Pty Ltd [2024] FedCFamC2G 513
Galafassi v Kelly (2014) 87 NSWLR 119
McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457
Zografakis v McCarthy (2007) 13 BPR 24,365; (2007) NSW ConvR 56-176; [2007] NSWSC 144
Division: Division 2 General Federal Law Number of paragraphs: 100 Date of last submission/s: 16 August 2024 Date of hearing: 16 August 2024 Place: Brisbane Counsel for the Applicant: Mr Ireland KC Solicitor for the Applicant: D C Balong & Associates Solicitor for the Respondents: StevensVuaran Lawyers ORDERS
SYG 3407 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: CHAO BIN FU
Applicant
AND: BONDI JUNCTION PRIME PTY LTD ACN 161 139 564
First Respondent
PARK COAST REALTY PTY LTD ACN 113 531 098
Second Respondent
ORDER MADE BY:
JUDGE GOODCHILD
DATE OF ORDER:
2 OCTOBER 2024
THE COURT ORDERS:
1.That the first respondent/cross-claimant is entitled to interest on $160,000 at Federal Court of Australia rates calculated from 6 December 2018 until the date of these Orders.
2.That the applicant pay to the cross-claimant the sum of $140,482.22 representing the loss on resale of Apartment 1103, including interest.
3.That the applicant pay to the cross-claimant the sum of $32,252.87 representing the agent’s commission on resale of Apartment 1103, including interest.
4.That the applicant pay to the cross claimant the sum of $2,084.66 representing legal fees of AMW Lawyers, including interest.
5.That the applicant pay to the cross claimant the sum of $304.39 representing legal fees of AMW Lawyers, including interest.
6.That the applicant pay the costs of the first respondent in accordance with Schedule 2 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
7.That the applicant pay the costs of the second respondent in accordance with Schedule 2 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (“the Rules”) up to the time of the Deed of Indemnity.
8.That the declaration made on 6 June 2024 that the first respondent/cross-claimant is entitled to keep and recover the deposit in the sum of $160,000 paid by the applicant be stayed for 28 days from the date of this Order.
9.That Mr St Leon will be released from his Undertaking given on 22 February 2019 not to release the deposit held in this matter.
10.That Orders 1 through to 7 and Order 9 of these Orders be stayed for 28 days from the date of this Order.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE GOODCHILD:
INTRODUCTION
These proceedings concerned the purchase of an apartment “off the plan” by the applicant from the first respondent/cross-claimant. On 6 June 2024 I delivered judgment.
For the reasons set out in Fu v Bondi Junction Prime Pty Ltd [2024] FedCFamC2G 513 (“Fu”), I dismissed the applicant’s claims for relief against the respondents for alleged misleading and deceptive conduct under the Australian Consumer Law and the applicants claim pursuant to s.55 Conveyancing Act 1919 (NSW) seeking recovery of a deposit and declared that the respondent/cross claimant is entitled to keep and recover the deposit in the sum of $160,000 paid by the applicant/cross-respondent.
I stood the matter over for hearing of submissions about the nature and content of the orders, the amount payable to the second respondent under an indemnity in the agency agreement between the first and second respondents and submissions on the question of costs (“the outstanding matters”).
Due to the unavailability of legal representatives for the parties, the matter was not listed for hearing of the outstanding matters until 16 August 2024. The outstanding matters have been the subject of further written submissions by the parties. The cross-claimant provided a Schedule to its submissions of what it submits should be the judgment calculations as at 16 August 2024. For convenience, I will follow the sequence set out in that Schedule in these reasons.
At the hearing on 16 August 2024 the applicant sought a stay of the judgment. The applicant did not file an application seeking orders pursuant to r.25.04 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (“the Rules”). In accordance with r.1.07 of the Rules, I dispensed with compliance with the Rules for the filing of an application. The applicant relied upon an affidavit of David Charles Balog, legal representative, deposing to a proposed appeal and annexing a Draft Notice of Appeal.
Further, at the hearing on 16 August 2024, Counsel for the applicant Mr Ireland of King’s Counsel considered that there was some uncertainty as to what was left to deal with in the matter. Mr Ireland read paragraph 150 of Fu as leaving the door open to any matter that I required assistance with on the question of quantum. Mr Ireland was concerned that immutable findings should not be made absent of any argument.
Cross-claimant’s entitlement to interest
The applicant accepts that the cross-claimant is entitled to interest on $160,000 at Federal Court of Australia rates calculated from 6 December 2018, when the contract should have been completed, until date of judgment. The first respondent submits that interest should be calculated and awarded as damages for failure to complete in accordance with Clause 42.4 of the Special Conditions contained in the contract for sale of land. The applicant submits that Clause 42.4 of the contract has no application. The first respondent submits that it is too late to challenge the applicant’s liability to pay this amount in circumstances where in Fu I said [at 143], “… BJP is entitled to $114,805.48 as interest on $1,440,000 at the rate of 10 percent payable between 19 November 2018, the date of completion and 6 September 2019 when the contract was terminated”.
Loss on resale of Apartment 1103
The applicant accepts that the cross-claimant is entitled to recover the $110,000 loss on resale, with credit given for the deposit of $160,000.
Agent’s commission on resale of Apartment 1103
As to the agent’s commission on resale of $25,254.55 plus interest, the applicant submits there is no evidence that the agent (second respondent) was paid commission on the sale to the applicant. The respondents contend that if the incurring of this amount was challenged it ought to have been raised at the hearing and what the applicant is doing is using the leave given in relation to other issues to try and reopen matters in respect of which findings have been made.
Legal fees of AMW lawyers
The applicant accepts that the first respondent/cross-claimant is entitled to the legal fees of AMW lawyers of $1,638.23 and $241.50.
Amount payable under indemnity agency agreement
As to the amount of $16,495 claimed as paid to the second respondent as an “indemnity”, the cross-claimant contends that this amount does not fall within the description of “reasonable costs and expenses arising out of the purchaser’s non-compliance with the contract or the notice and of resale and any attempted resale” set out in the second bullet point in Clause 9.3.1.
The applicant correctly observes that a finding was not made with respect to payment of this amount by the applicant. Paragraph 144 of my judgment observes that Bondi Junction Prime Pty Ltd (“BJP”) seeks the amount payable to Park Coast Realty Pty Ltd (“PCR”) under indemnity in the agency agreement of $16,495.
Costs
The applicant accepts that the first respondent/cross-claimant is entitled to an order for costs, on an ordinary basis but not entitled to indemnity costs.
A. CROSS-CLAIMANT’S ENTITLEMENT TO INTEREST
At paragraph 143 of my Reasons in Fu, I say this:
143.It was argued on behalf of BJP that there should be interest payable by Mr Fu for the failure to complete in accordance with clause 42.4 of the Contract of Sale. In the circumstances, BJP is entitled to $114,805.48 as interest on $1,440,000 at the rate of 10 percent payable between 19 November 2018, the date of completion and 6 September 2019 when the contract was terminated.
Mr Ireland contends that the determination I made at paragraph 143 needs to be “reconsidered” in circumstances where the parties did not address the Court on this aspect of the claim.
The applicant accepts that the first respondent/cross-claimant is entitled to interest. The dispute is the nature and source of that entitlement. The applicant submits that interest is to be calculated and awarded on $160,000 from 6 December 2018, when the contract should have been completed, until the date of these Orders at Federal Court of Australia rates.
The primary submission of the first respondent/cross-claimant is that it is too late to challenge the applicant’s liability to pay this amount in circumstances where the Court, in the words of the first respondent, “made an express finding that the first respondent was entitled to $114,805.48”.
I am not convinced the statement “is entitled to $114,805.48” is necessarily a finding, especially in circumstances where the parties did not address the Court in respect of the first respondent/cross-claimant’s claim to that amount. In any event, whilst a declaration has been made as to the first respondent/cross-claimant’s entitlement to keep and recover the deposit of $160,000, a final judgment dealing with all outstanding matters has not been made nor have Orders been entered in relation to those outstanding matters, which includes interest.
An Order was made standing the proceedings over for further hearing about the nature and content of the Orders. In the circumstances I am satisfied that it is appropriate to hear and consider submissions with respect to the first respondent/cross-claimant’s entitlement to interest.
The first respondent/cross-claimant claims interest pursuant to Clause 42.4 of the contract as follows:
Interest
42.4If completion does not take place on or before the Completion Date, solely due to the fault of the Purchaser, the Purchaser must pay interest at 10% per annum on the balance of the price calculated from the Completion Date until completion, both dates inclusive, but without prejudice to all and any other rights of the Vendors under this Contract. It is an essential provision of this Contract that the interest be paid on completion. The Purchaser acknowledges that 10% per annum represents a genuine pre-estimate of the liquidated damages likely to be suffered by the Vendors as a result of completion not taking place on or before the Completion Date.
In disputing the first respondent/cross-claimant’s claim, the applicant makes two submissions. The first being that Clause 42.4 of the Contract of Sale has, on its terms, no application.
The second being that Clause 9.3 in the standard conditions governs the position on damages and has application in this case and presents two true alternatives for recovery through Clause 9.3.1 and Clause 9.3.2.
Clause 9 relevantly, reads as follows:
9 Purchaser’s default
If the purchaser does not comply with this contract (or a notice under or relating to it) in an essential respect, the vendor can terminate by serving a notice. After the termination the vendor can –
…
9.3 sue the purchaser either –
9.3.1where the vendor has resold the property under a contract made within 12 months after the termination, to recover –
•the deficiency on resale (with credit for any of the deposit kept or recovered and after allowance for any capital gains tax or goods and services tax payable on anything recovered under this clause); and
•the reasonable costs and expenses arising out of the purchaser’s non-compliance with this contract or the notice and of resale and any attempted resale; or
9.3.2 to recover damages for breach of contract.
Counsel for the applicant submitted that Clause 9.3 is the standard condition that governs the position on damages. He submitted that Clause 9.3.1 is a liquidated damages provision and 9.3.2 is damages for breach of contract, that in respect of damages the cross-claimant “elected” for recovery under Clause 9.3.1, not damages for breach of contract under Clause 9.3.2.
With respect to the first submission, Counsel for the applicant submitted that Clause 42.4 has no application where a contract is never completed, as is the current case. He says this is a case where the contract has been terminated and Clause 42.4 is only concerned with late completion, where there is an eventual completion. He says that Clause 42.4 is not concerned with allowing a high interest rate, in circumstances where there has been no completion of sale, because the clause is clearly worded to direct itself to interest for late completion, not interest for non-completion.
Counsel for the applicant submits that Clause 42.4 is not a claim for damages but an interest provision or an adjustment provision, upon which one could sue for money.
The first respondent/cross-claimant submitted that it is entitled to the Special Condition interest as damages for breach of contract arising in circumstances where, under the contract, the applicant was obliged to complete on the completion date and, in the circumstances where he did not complete, then he would pay interest as a result.
The first respondent/cross claimant observed in oral closing addresses that when the contract was on foot the proceedings as filed sought an order for specific performance. If that relief was pursued it would have followed that the first respondent was entitled to interest between the date of when the court ordered the contract to be completed and when it ought to have been completed.
In written submissions, the first respondent/cross-claimant took the Court to the New South Wales Court of Appeal decision of Galafassi v Kelly (2014) 87 NSWLR 119 (Galafassi) where Gleeson JA (with Bathurst CJ and Ward agreeing) considered the difference between Clause 9.3.1 and Clause 9.3.2 in the contract for sale of land. In Galafassi the appellants (purchasers) purchased from the respondent’s (vendors) a property in Paddington (NSW) in September 2011. The contract for sale provided for a purchase price of $6,350,000 and a completion date of 30 December 2011. The purchasers were relying upon the sale of another property to complete the purchase of the Paddington property. Settlement did not take place on the date fixed because the purchasers advised they did not have the funds necessary to enable them to complete. The vendors commenced proceedings for specific performance. Those proceedings were abandoned, and the vendors purported to terminate the contract on the ground of repudiation by the purchasers. The vendor then resold the property and sought, by statement of claim, to recover liquidated damages for the deficiency of resale under Clause 9.3.1 of the contract.
The purchasers argued that the commencement of proceedings by the vendors for specific performance, and the filing of the statement of claim had affirmed the contract. As there was said to be no repudiation by the purchasers, it followed that the vendor was not entitled to terminate the contract. At first instance, Windeyer J rejected those arguments, holding that the purchasers’ conduct remaining unable to complete amounted to a continuing repudiation which the vendor was entitled to accept.
The purchasers argued that the vendor was not entitled to claim special condition interest pursuant to special condition Clause 34.2 or land tax. The purchasers argued that the obligations in special condition Clause 34.2 were contingent on completion, and completion had never occurred. The relevant special condition Clause 34.2 of the contract in Galafassi was to similar effect to special condition Clause 42.4 in the contract in the present case.
Windeyer J rejected the purchasers argument. In relation to special condition interest, his Honour held that the interest payable as at termination could be recovered as part of the deficiency on resale under Clause 9.3.1.
In making his decision, his Honour followed the decision of Hamilton J in Zografakis v McCarthy (2007) 13 BPR 24,365; (2007) NSW ConvR 56-176; [2007] NSWSC 144 (Zografakis). In that case, Hamilton J, dealing with a special condition in very similar terms, had awarded special condition interest as part of the deficiency on resale under a provision in the same terms as Clause 9.3.1 at [21].
In Galafassi on appeal, the Court of Appeal firstly considered whether the purchasers’ conduct amounted to repudiation. The court found that “the Purchasers’ conduct could only be understood as having conveyed to a reasonable person in the position of the Vendor renunciation of the Contract as a whole” at [67].
With regard to special condition interest, the Court of Appeal recorded that the purchasers’ main argument was that special condition interest is only payable upon “noncompletion” by the purchasers but has no application where the vendors elect to terminate the contract because in those circumstances there is no “completion” under the Contract. The vendors sought to uphold the primary judge’s reasoning allowing special condition interest as part of the purchase price under the contract, following the approach of Hamilton J in Zografakis.
Gleeson JA, after analysis of the reasoning in Zografakis, held that the primary judge erred in following that reasoning, as the authorities relied upon by Hamilton J “did not justify his Honour’s conclusion at [21]”: at [187].
Relevantly, at [190] Gleeson JA observed, referring the decision of the Dixon J in McDonald v Dennys Lascelles Ltd (1933) 48 CLR 457 at 477-478, where completion does not occur, a vendor cannot sue the purchaser for special condition interest, at least where the obligation to pay interest is contingent on the conveyance of the property.
The court considered that the “starting point” in assessing the deficiency on resale is the price of the first contract if it had been completed in accordance to its terms. The court said this at [193 and 194]:
… Special condition interest is not part of the purchase price on the first contract but rather a sum contractually payable if settlement is delayed. It is an amount contingent on completion.
In these circumstances it is both arbitrary and artificial to determine the price of the first contract is constituted by the amount shown in the Contract as the purchase price coupled with special condition interest when the latter amount never became payable.
Accordingly, the Court of Appeal determined in Galafassi that special condition interest could not be recovered as part of the deficiency on resale.
I agree with Counsel for the applicant’s construction of Special Condition Cluse 42.4 in the present case.
On its terms, it is apparent that Clause 42.4 deals with interest for late completion of the Contract. I am emboldened in my view having regard to the requirement in that clause that “It is an essential provision of this Contract that the interest be paid on completion”. This clearly contemplates the completion of the contract. Clause 42.4 operates as a framework within the contract for adjustment in favour of the vendors for the late completion by a purchaser. It does not give rise to a separate claim for damages.
Having regard to his Honour Gleeson JA observations in Galafassi, and now having heard from the parties on the issue, I reject the cross-claimant’s claim of interest pursuant to Clause 42.4 of the contract. Upon reflection, and having heard from the parties, it is not correct to say as I did in paragraph [143] in Fu that “… BJP is entitled to $114,805.48 as interest on $1,440,000 at the rate of 10 percent payable between 19 November 2018, the date of completion and 6 September 2019 when the contract was terminated”. In fact, the correct position is that interest is to be awarded on $160,000 from 6 December 2018, when the contract should have been completed, until the date of these Orders at Federal Court of Australia rates. I will leave it to the parties to determine the amount to be calculated.
B. AGENT’S COMMISSION ON RESALE
The first respondent makes a claim for an amount of $27,780 including Goods and Services Tax (“GST”) as additional agent’s commission on the resale.
The applicant submits there is no evidence that the agent (the second respondent) was paid commission on the sale to the applicant in circumstances where that sale was not completed.
Carl St Leon, the solicitor who acted for BJP in relation to all of the sales of the units in the Diamond development, deposed in an affidavit sworn 24 October 2023 that the First Respondent had “incurred additional agent’s costs (that is, in addition to those which had been claimed by the agent in respect of the sale to Mr Fu in accordance with the Contract)” in relation to the resale of an amount of $27,780. A copy of the invoice for the commission was annexed to Mr St Leon’s affidavit. Mr St Leon was not cross-examined with respect to the claim for additional commission.
The first respondent contends that this is one of a number of matters which are now raised by the applicant which are matters that, if they were going to be raised, ought to have been raised at the hearing and what the applicant is doing is using the leave given in relation to other issues that should have been agitated at the hearing.
In my view if there was to be a challenge to the evidence given of the additional commission on resale, the time to make that challenge was during the hearing when the witness who gave that evidence was available for cross-examination.
In any event, I accept that the evidence given by Mr St Leon in his affidavit stating that BJP had incurred additional agent’s costs and providing a copy of the invoice with respect to those extra costs of commission is sufficient proof of the claim for agent’s commission on resale.
The Plaintiff is to pay $27,780 inclusive of GST as additional agent’s commission on the resale, plus interest.
C. AN AMOUNT OF $16,495 PAYABLE BY THE APPLICANT TO THE FIRST RESPONDENT UNDER AN INDEMNITY
Bondi Junction Prime Pty Ltd appointed Park Coast Realty Pty Ltd (Ray White Projects) as its selling agent in relation to the Diamond development pursuant to an Agency Agreement dated 3 December 2014. A copy of the Agency Agreement was before the Court annexed to an affidavit of Lachlan Macinnis sworn 23 October 2023.
Clause 17 of that Agency Agreement provided for BJP to indemnify PCR for all claims, demands, costs and expenses which may be taken or made against PCR in the course of the performance of the agent of powers, duties and authorities PCR under the agreement.
On 6 December 2018 these proceedings were initiated by the applicant filing an application in the (then) Federal Circuit Court of Australia naming BJP as the first respondent and Ray White Projects as second respondent.
On 4 March 2019 Moray & Agnew filed a Notice of Address for Service.
On 5 March 2019 a demand was made of BJP by Moray & Agnew, for costs and expenses incurred by PCR in the proceedings. A copy of that correspondence was before the court annexed to the affidavit of Lachlan Macinnis of 23 October 2023.
On 29 March 2019 PCR filed a defence as second respondent.
Mr Macinnis deposed that in circumstances where it has always been BJP’s case that there was no improper “performance or exercise of any of the powers, duties or authorities” of PCR, BJP agreed to indemnify PCR in respect of legal costs incurred by it in these proceedings. That agreement was concluded by means of a document titled “Deed of Indemnity and Release” (“Deed”) between BJP and PCR on 16 August 2019.
The first respondent claims from the applicant $16,495 as paid by the first respondent to the second respondent in accordance with the indemnity.
In denying the first respondent’s claim, the applicant submitted:
·That the amount claimed as paid to the second respondent as an indemnity does not fall within the description of “reasonable costs and expenses arising out of the purchaser’s non-compliance with this contract or the notice and of resale and any attempted resale” set out in the second bullet point in Clause 9.3.1 of the contract.
·That the Agency Agreement was not known or disclosed to the applicant at the time of the sale contract between the parties.
·That the payment of the $16,495 under the Deed was labelled as “for costs” but neither its nature nor the reasonableness of the “costs” was established by the cross-claimant in evidence.
·Counsel for the applicant observed that the invoice itself does not refer to any basis of the calculation and is merely an assertion that there is something that has been incurred.
·Counsel for the applicant, referring to Mr St Leon’s affidavit, considers it deficient, in that it does not say that the monies were paid, nor provide the reasonable basis of those costs.
The first respondent submitted that the issues raised by the applicant with respect to the indemnity ought to have been raised at the hearing and that the applicant is using the leave given in these proceedings to clarify the nature and content of the orders, to try and reopen matters.
The first respondent further submitted:
·That the claim for the amount paid by the first respondent on the indemnity is not a claim flowing from the applicant’s breach-of-contract in failing to complete the contract. It is a claim flowing from the applicant’s breach-of-contract in commencing proceedings to advance a claim which he had expressly promised not to advance. By its cross-claim, BJP claimed damages for breach-of-contract, specifically Clause 10.1.5 and Special Condition Clause 49.1.1.
·That the applicant must have been aware at the time that he commenced proceedings against the second respondent, that if he was unsuccessful against the second respondent, the likelihood would be that he would pay the second respondent’s costs of the proceedings. By the time that the first respondent took over the conduct of the proceedings from the second respondent, the proceedings had been on foot for in excess of nine months. In that time, the second respondent had filed a defence.
·That the consequence of the indemnity is that the applicant’s ultimate liability for the costs of the second respondent is limited to the amount claimed in the indemnity, rather than that liability extending to two complete sets of costs.
·That the applicant should not be permitted to take advantage of any lack of knowledge on his part which arose from his failure to comply with the genuine steps obligations set out in the Civil Dispute Resolution Act 2011 (Cth). The affidavit of Lachlan Macinnis sworn 5 August 2024 produces the applicant’s genuine steps statement dated 6 December 2018. This statement refers to a letter from the applicant’s solicitors to the solicitors for the first respondent. There is no indication that effort was made to ascertain the second respondent’s position prior to the commencement of proceedings against the second respondent.
·That the demand made by Moray & Agnew on 5 March 2019 and the Deed constitute sufficient evidence to establish the quantum of the claim made by the first respondent.
·That Mr St Leon, solicitor for BJP at the relevant time gave evidence in the proceedings and was cross-examined. He was not cross-examined with respect to this issue.
Section 214(2) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (“FCFCOA Act”) refers to the general jurisdiction of this Court to award costs in proceedings that are before it. The award of costs is generally in the discretion of the Court, except as otherwise provided for under legislation or the Court’s rules: s.214(3) of the FCFCOA Act.
Rule 22.02(2)(a) of the Rules permits the Court to set an amount of costs in a proceeding. Rule 22.09 of the Rules relevantly provides that a party entitled to costs is entitled to such costs in accordance with Schedule 2 to the Rules, as well as disbursements properly incurred, “unless the Court orders otherwise”. Part 1 of Schedule 2 makes allowance, in assessing costs for general federal law proceedings other than migration proceedings, for both an amount for costs and separately for daily hearing fees. In respect of disbursements, a specific amount is allowed for photocopying per page, agents’ fees and travelling costs, and “court fees and other fees and payments to the extent that they have been reasonably incurred”.
I agree with the submission of the first respondent that the applicant must have been aware at the time that he commenced proceedings against both respondents that if he was unsuccessful in all likelihood he would be required to pay both respondents costs of the proceedings.
I do not accept that the amount paid by the first respondent on the indemnity flows from the applicant’s breach-of-contract commencing proceedings to advance a claim which he had expressly promised not to advance.
Mr Macinnis, in his 23 October 2023 affidavit, deposed to the first respondent having “incurred” legal costs. I agree that letter from Moray & Agnew making a demand of BJP for costs and expenses incurred by BJP, and the Deed in addition to the confirmation of money’s held by Moray & Agnew is sufficient evidence to establish the quantum of the claim made by the first respondent. However, absent a bill of costs, neither the nature nor the reasonableness of the costs is able to be established by the first respondent/cross-claimant. I agree with Counsel for the applicant that the invoice itself does not refer to any basis of the calculation.
In the circumstances, I consider that the more appropriate Order is that the applicant pay the costs of the second respondent in accordance with Part 1 of Schedule 2 to the Rules up to the date of the Deed of Indemnity.
D. COSTS
Principles
As identified earlier in these reasons, r.22.02(2)(a) of the Rules permits the Court to set an amount of costs in a proceeding and r.22.09 of the Rules relevantly provides that a party entitled to costs is entitled to such costs in accordance with Schedule 2 to the Rules, as well as disbursements properly incurred, “unless the Court orders otherwise”.
The applicant accepted that the first respondent/cross-claimant is entitled to an Order that the applicant pay its cost of the proceedings on the ordinary basis. The applicant submitted that the first respondent/cross-claimant is not entitled to an Order for indemnity costs.
The first respondent read an affidavit of Mr Macinnis, employed solicitor for the respondents, dated 5 August 2024. To that affidavit were annexed the following:
(a)The applicant’s genuine steps statement filed 6 December 2018;
(b)The applicant’s amended genuine steps statement filed 28 February 2019;
(c)30 July 2021 a “without prejudice save as to costs” letter sent to DC Balog & Associates; and
(d)10 August 2021 a “without prejudice save as to costs” letter from DC Balog & Associates.
The first respondent seeks the Court to “otherwise order” in circumstances where the applicant chose to bring proceedings in this Court limiting its costs by Schedule 2 of the Rukes, that the proceedings were complex as evidenced amongst other things by the fact that the applicant engaged King’s Counsel for the hearing and the failure to “otherwise order” would mean that the first respondent obtained no benefit from its willingness to make the reasonable offer of compromise which the first respondent relies upon in order to engage Calderbank principles.
The first respondent submitted that if the court does “otherwise order” the applicant should be ordered to pay the first respondent costs on the ordinary basis up to and including 6 August 2021 and on the indemnity basis thereafter.
The first respondent points to correspondence dated 30 July 2021 annexed to Mr Macinnis’ affidavit which is expressed to be a “Calderbank letter”.
The offer was open for seven days which the first respondent contends was not an unreasonably short period of time in the circumstances. The first respondent contends that the reasonableness of the timeframe is evidence from the fact that a response to that letter with a counteroffer by the applicant solicitor to the solicitor of the first respondent on 10 August 2021 (being the Tuesday after the Friday on which the offer in the first respondent’s Calderbank letter was expressed to expire).
The first respondent contends that the offer set out in that letter was a plainly genuine compromise in that it offered to the applicant a repayment of some of the deposit which has been found by the Court that the first respondent was entitled to retain, together with the release by the first respondent of its claim against the applicant.
The applicant contends that the offer was written well before trial when the evidence of the parties was incomplete, and the applicant did not unreasonably fail to accept the offer contained in the letter.
The first respondent invites the Court to reject that submission by the applicant pointing to some issue which was critical to the resolution of the case arising after the date on which the offer was made. The first respondent points out that by August 2021 the applicant’s evidence and the evidence of Mr Felix Milgrom had been filed. The applicant was aware by this time that he was attempting to run an oral representation case that had been made in language in which he was not proficient. The first respondent contends that an analysis of the Reasons for Judgment, the reasons why the applicant was ultimately unsuccessful, or all matters which were known, or should have been known, to the applicant well before August 2021.
Consideration
Section 190 of the FCFCA Act provides a directive to the Court, in the application of its practice and procedure, to facilitate the just resolution of disputes “according to law and as quickly, inexpensively and efficiently as possible”. This reflects the objects of the FCFCOA Act as contained in s.5 and is referred to as the court’s “overarching purpose”.
Section 190(2) of the FCFCOA Act provides that the court’s “overarching purpose” includes the following objectives:
(a)the just determination of all proceedings before the Federal Circuit and Family Court of Australia (Division 2);
(b)the efficient use of the judicial and administrative resources available for the purposes of the Court;
(c)the efficient disposal of the Court’s overall caseload;
(d)the disposal of all proceedings in a timely manner;
(e)the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute.
The fundamental purpose of a costs order is to compensate a successful party, rather than punish an unsuccessful party. In the absence of good reason to the contrary, generally, a successful litigant should receive their costs. This is reflected in the general rule that costs follow the event. The principle applicable in any consideration of an award of costs is that the party that is successful be permitted to recover so much of its costs as are reasonably incurred. The just resolution of disputes does not necessarily require that a successful party recover all of its costs and disbursements. Awards of costs even on an indemnity basis do not always fully compensate a party. None of the rules referred to above are expressed in mandatory terms and it is within the discretion of the Court to determine the mechanism for the assessment of costs in any given case paying due regard to the objectives and overarching purpose of the FCFCOA Act.
I do not consider this case to be an appropriate one where I exercise my discretion to order costs otherwise than in accordance with Part 1 of Schedule 2 to the Rules.
The matter proceeded to hearing, Counsel was retained, oral and written submissions were advanced on behalf of the parties in an appropriate and economical manner.
There is nothing to suggest that the amounts provided in Part 1 of Schedule 2 to the Rules would not be likely to represent a fair indemnity. The matter was not a complex matter, it progressed steadily, without delay, over two days including oral addresses.
There was no conduct by either of the parties that departed from the overarching purpose requirements under the Act. There are no particular facts which drew this matter to a special or unusual category of case so as to warrant a departure from the applicable rules concerning costs.
The applicant is to pay the costs of the first respondent in accordance with Part 1 of Schedule 2 of the Rules.
E. STAY
The applicant seeks a stay of the final orders to enable the pursuit of an appeal. The affidavit of Mr David Charles Balog, solicitor for the applicant annexes a draft Notice of Appeal. Mr Balog says that upon final orders being made the applicant will file and serve his Notice of Appeal with any necessary modifications which may be appropriate arising out of the determination of the outstanding matters.
No application in a proceeding seeking a stay has been filed. The first respondent submitted that the Court should refuse to entertain the application for stay in circumstances where no application in the proceeding has been filed seeking to invoke r.25.04 of the Rules.
In accordance with r.1.07 of the Rules, I dispense with the rule that the applicant file and serve an application in a proceeding.
Mr Fu paid a deposit of $160,000 (being 10 percent of the agreed purchase price) on or shortly after 3 June 2015. The deposit was originally placed in an interest-bearing account. On 23 August 2018 the deposit (and the interest earned) were transferred into the trust account of AMW Lawyers, legal representatives for the first respondent and cross-claimant. The total of the deposit and interest is $171,521.83.
The applicant submits that in circumstances where the first respondent is a single purpose company that is no longer trading, there is no evidence that it has any assets except for the disputed deposit, upon a successful appeal. The applicant fears that its claim on the deposit funds will be rendered nugatory.
The applicant also points to the first respondent failing to produce financial records under a Notice to Produce.
The first respondent submitted that if it receives the funds which are in Mr St Leon’s trust account, and if the applicant is ordered to pay the additional damages, there is no basis for suggesting that those funds will be dissipated or otherwise put beyond the reach of a recovery.
The first respondent points to the fact that it has a significant contingent asset in the form of an entitlement to costs as against the applicant. Further, the first respondent cannot be voluntarily deregistered if an appeal is commenced against it (see s.601AA(2)(f) of the Corporations Act 2001 (Cth)) and the applicant has protection of section 37A of the Conveyancing Act 1919 (NSW) which provides that “every alienation of property … with intent to defraud creditors, shall be voidable at the instance of any person thereby prejudiced”.
The first respondent submitted that there is no reason to keep the first respondent out of its money, including its money in the trust account, for any longer.
Principles
The principles upon which a stay may be granted are well-established.
Rule 25.04 of the Rules provides that “a party bound by a judgment or order may apply to the Court for an order that the judgment or order be stayed”. The rule confers a broad discretion.
White J in Bethell v Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs [2021] FCA 756, at [9] (references omitted) said as follows:
9. …
(a)prima facie, a successful party is entitled to the benefit of the judgment which it has obtained and the Court should commence with a presumption that the judgment is correct. A final judgment is not to be regarded as provisional, contingent or operating only subject to confirmation on appeal.
(b)nevertheless, the Court has a broad discretion under r 36.08 of the Federal Court Rules 2011 (Cth) to grant a stay pending an appeal in an appropriate case;
(c)an applicant for a stay should demonstrate that there is “a reason or an appropriate case” warranting an exercise of the discretion departing from the prima facie position. The mere filing of a notice of appeal is not sufficient;
(d)an applicant for a stay must usually demonstrate that the appeal has at least reasonably arguable prospects of success. The threshold is low and, in order to see whether an appellant has discharged it, the Court makes a “preliminary non-speculative assessment”;
(e)an applicant for the stay should also satisfy the Court that the proposed stay is “fair to all parties” having regard to the balance of convenience (i.e., the balance of risks and irremediable harm) and the competing rights of the parties”;
(f)the existence of a real risk that the appeal will be rendered nugatory if the stay is not granted is a substantial factor in favour of granting the stay, but it is not conclusive. It is to be weighed against the risk of prejudice to the successful party at first instance if execution of the judgment is stayed.
Consideration
The Draft Notice of Appeal articulates five grounds. I will not refer to all of them. Ground 3 contends an error in concluding that the evidence of one of the two directors of the first respondent at the relevant time, Mr Milgrom, was sufficient to discharge the onus of proof placed on the respondents that the representations made to the applicant were made on reasonable grounds. Ground 4 contends that Mr Milgrom’s evidence that “developers amended plans constantly” did not justify the respondent’s decision to add a twelfth floor to the building.
Noting the low threshold of arguable case, I consider it is arguable that, had I not found the evidence of Mr Milgrom sufficient to discharge the onus on the respondents, the result may well have been different. I find that there is some rational prospect of success of the appeal such as to warrant a stay of the orders until determination of the appeal.
I accept the submissions of the applicant that in circumstances where the first respondent is a single purpose company, and that it is no longer trading, there is no evidence that it has any assets except for the disputed deposit. Absent the stay, should the first respondent receive the funds which are in Mr St Leon’s trust account, there is no impediment to it dissipating those funds should it so wish.
The balance of convenience leans in favour of granting the stay.
I certify that the preceding one hundred (100) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Goodchild. Associate:
Dated: 2 October 2024
2