Gino Andrew Bisognin and Leah Joan Bisognin v Hera Project Pty Ltd (ACN 163 685 041) [No 2]
[2018] VSCA 129
•18 May 2018
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2017 0079
| GINO ANDREW BISOGNIN and LEAH JOAN BISOGNIN | Appellants |
| v | |
| HERA PROJECT PTY LTD (ACN 163 685 041) [No 2] | Respondent |
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| JUDGES: | TATE, KYROU and COGHLAN JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | Determined on the papers |
| DATE OF JUDGMENT: | 18 May 2018 |
| MEDIUM NEUTRAL CITATION: | [2018] VSCA 129 |
| JUDGMENTS APPEALED FROM: | [2017] VSC 268 (Riordan J), [2017] VSC 383 (Riordan J) and [2017] VSC 439 (Riordan J) |
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COSTS – Application for indemnity costs – Whether special circumstances justify special costs order – Leave to appeal granted on principal ground but appeal dismissed - Relevance of failure to disclose a rival contract of sale late in trial below - Abandonment of proposed ground of appeal – Relevance of offers of compromise made in earlier proceeding – Ettinghausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404 distinguished – Application refused.
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| APPEARANCES: | Counsel | Solicitors |
| For the Appellants | No appearance | CBL Business Lawyers (as agents for Ace Solicitors) |
| For the Respondent | No appearance | Russell Kennedy |
TATE JA
KYROU JA
COGHLAN JA:
On 17 April 2018 this Court granted Gino and Leah Bisognin (‘the Bisognins’) leave to appeal but dismissed the appeal.[1] The grant of leave to appeal was confined to one ground (ground 2). The successful respondent to the appeal, Hera Project Pty Ltd (‘Hera’), now applies for its costs to be paid on an indemnity basis. The Court granted the parties leave to file written submissions on costs and indicated that the matter would be determined ‘on the papers’.
[1]Bisognin v Hera Project Pty Ltd [2018] VSCA 93. These reasons assume a familiarity with the Court’s reasons published on 17 April 2018.
For the reasons that follow, we refuse the application for an order that Hera’s costs be paid on an indemnity basis. We consider that it is appropriate that an order be made that the Bisognins pay Hera’s costs of the application for leave to appeal and the appeal[2] on a standard basis.
[2]For convenience, in what follows, we simply refer to ‘the appeal’.
The dispute over the sale of land
The appeal arose from a dispute with respect to a contract for the sale of land. The Bisognins, who owned land in East Cranbourne, entered into a contract of sale for southern Lot 1 (‘the land’) with Hera for $3.6 million. Hera is a developer who planned to build a supermarket. The contract of sale (‘the 2015 Contract’) was subject to the registration of a plan of subdivision by a specified date. That date was extended when disputes arose about which party should pay fees to authorities for various services and utilities (‘the referral fees’). The Bisognins unsuccessfully sought to terminate the 2015 Contract, while Hera sought to enforce it. The trial judge granted specific performance.[3] On appeal the Bisognins submitted that the judge erred in failing to determine, or by determining wrongly, that Hera was ready, willing and able to perform its obligations under the contract. This Court rejected those submissions.
[3]Hera Project Pty Ltd v Bisognin [No 3] [2017] VSC 268.
Hera’s application for an indemnity costs order
Hera submits that there are special circumstances that justify a special costs order. It contends that the Bisognins should pay costs on an indemnity basis because the appeal was in part ‘hopeless’ and in part ‘extremely weak’, and impermissibly attempted to re-run issues already decided in other proceedings.[4] It submits that the Bisognins’ conduct in maintaining the litigation in the present proceeding was part of a strategy to terminate the 2015 Contract and instead sell the land to another entity, CMJ Property Group Pty Ltd (‘CMJ’), for a higher purchase price. It submits that such conduct should not be condoned.
[4]In particular, with respect to issues decided by the Court of Appeal in Bisognin v Hera Project Pty Ltd [2016] VSCA 322, the appeal from Sloss J: Bisognin v Hera Project Pty Ltd [2016] VSC 75.
Hera points to the contract that the Bisognins had entered into with CMJ (‘the CMJ Contract’) for the sale of the land for $7.1 million. Hera observes that the judge found that the CMJ Contract contained a best endeavours clause that was inconsistent with the Bisognins’ obligations under the 2015 Contract. Under the CMJ Contract the Bisognins undertook to use their best endeavours to terminate the 2015 Contract and to do so by way of ‘facilitating the earliest termination’, where this obligation was directly inconsistent with their obligations under the 2015 Contract.
Hera submits that much of the Bisognins’ conduct on the appeal (and in previous proceedings) is only explicable in the context of their best endeavours obligation under the CMJ Contract. The Bisognins, by delaying the approval of the relevant Urban Development Framework and falsely representing that they were obtaining finance to pay the referral fees, prevented the registration of the plan of subdivision by the date specified in the 2015 Contract, in an attempt to terminate that contract. Moreover, the Bisognins failed to reveal the existence of the CMJ Contract in the earlier proceeding heard by Sloss J, or on the appeal from her Honour, and continued to conceal its existence in the trial before Riordan J until the fourth day of the hearing.
Had the CMJ Contract been disclosed earlier, Hera submits, a different result might have been obtained in the proceeding heard by Sloss J and on the appeal from her Honour, and the trial before Riordan J would probably have been avoided, as his Honour found.[5] The effect of this is that the appeal to this Court, and the costs Hera incurred in respect of the appeal, would have been avoided.
[5]Hera Project Pty Ltd v Bisognin [No 7] [2017] VSC 439 [22].
Hera submits that the Bisognins’ rejection of various offers by Hera to pay the referral fees and settle the dispute was not only imprudent, but could only be explicable in the context of the best endeavours obligation under the CMJ Contract to terminate the 2015 Contract. These offers from Hera included offers made by letter from Hera’s solicitors dated 13 August 2015 and orally on 11 July 2016.[6] Hera also made Calderbank offers[7] on 2 September 2015 and 13 October 2015.
[6]See, respectively, Bisognin v Hera Project Pty Ltd [2018] VSCA 93 [33], and [72].
[7]Calderbank v Calderbank [1975] 3 All ER 333, Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority [No 2] (2005) 13 VR 435.
Hera contends that there is nothing in principle requiring this Court to view these various offers as exhausted by reason of the conclusion of the trial, particularly where the Court would be entitled to view the litigation as one long continuum. Hera points to the observations of Gleeson CJ and Priestley JA in Ettinghausen v Australian Consolidated Press Ltd[8] about the ongoing relevance of offers of compromise made before the original trial, an appeal and a second trial, to an order for indemnity costs. Having noted that the Supreme Court Rules 1970 (NSW) enabled a party to make to the other party ‘an offer to compromise any claim in the proceedings’,[9] their Honours rejected the notion that the costs consequences of an offer made and not accepted are exhausted once the trial comes to an end, saying:
There is nothing in that [the time limits for when an offer may be made] which either requires or justifies the conclusion that the consequences of an offer are ‘exhausted’ once the trial, prior to which the offer was made, comes to an end. As was noted, the offer is made, not in respect of a trial, but in respect of a claim. Depending upon the circumstances of a case, a claim may not be finally heard and determined until after there have been a number of appeals, and, perhaps, a number of trials.[10]
[8](1995) 38 NSWLR 404 (‘Ettinghausen’).
[9]Rule 26.02(1) of the Victorian Supreme Court (General Civil Procedure) Rules 2015 (‘the Rules of Court’) similarly provides: ‘A party may, in respect of any claim in a proceeding, serve on another party an offer of compromise on the terms specified in the offer.’
[10]Ettinghausen (1995) 38 NSWLR 404, 409.
Hera says there were other weaknesses and deficiencies in the Bisognins’ case:
(1) The argument that Riordan J had failed to deal with whether Hera had established that it was ready, willing and able to perform its obligations under the 2015 Contract (ground 1 of the grounds of appeal) was found to be without merit and leave was refused.[11] The fact that the judge had at least appeared to have dealt with that issue was earlier noted by this Court in the stay application.[12]
[11]Bisognin v Hera Project Pty Ltd [2018] VSCA 93 [136], [216], [217].
[12]Bisognin v Hera Project Pty Ltd [2017] VSCA 195 [46].
(2) The challenge to the judge’s finding that Hera was ready, willing and able to perform its obligations (ground 2(b)(i)) ultimately rested on the Bisognins’ own acts of prevention.
(3) There was an entirely new case not run at trial that had a number of flaws. This was the argument that it was open to use as a measure of whether Hera was ready, willing and able to perform, that Hera had not raised finance in response to an ‘offer’ made by Mr Bisognin on 7 September 2016 (after the sunset date), to let Hera step in and assume the Bisognins’ obligation to pay fees (ground 2(b)(ii)). The Court of Appeal had already rejected the notion that Hera should perform the Bisognins’ obligations.[13] The argument was based on a misreading of DTR Nominees Pty Ltd v Mona Homes Pty Ltd.[14] It ignored the circumstances that the Bisognins also needed to take other steps under the 2015 Contract, for example, entering a s 173 agreement,[15] executing National Broadband Network agreements and consenting to registration of the plan, all of which they refused to do.
[13]Bisognin v Hera Project Pty Ltd [2016] VSCA 322 [103].
[14](1978) 138 CLR 423. See Bisognin v Hera Project Pty Ltd [2018] VSCA 93 [161]-[165].
[15]Section 173 of the Planning and Environment Act 1987 allows a ‘responsible authority’ to enter into an agreement with an owner of land subject to a planning scheme or with a person in anticipation of that person becoming the owner of the land.
(4) The Bisognins abandoned proposed ground 3 before the hearing. Hera contends that this ground was entirely without merit and contrary to High Court authority. Hera incurred costs and expenses in preparing for this ground before it was abandoned.
(5) Leave was refused for proposed ground 4, which challenged the exercise of Riordan J’s discretion in refusing to attach a condition requiring Hera to pay security for costs to his order granting specific performance.
(6) Leave was also refused for proposed ground 5, which sought to raise whether the judge erred in granting Hera access to the land under s 9AD of the Sale of Land Act 1962. Given that access had taken place by the time of the appeal, Hera submits that the Bisognins should not have persisted with this ground.
(7) Finally, the Bisognins were refused leave on proposed ground 6. That too was a challenge to the judge’s exercise of his discretion in awarding indemnity costs of the trial below in favour of Hera. That challenge was found to be without merit, and this Court observed that the award of the trial costs on an indemnity basis was not only open but appropriate.
The Bisognins’ response
The Bisognins submit that a special costs order in relation to the appeal would not be appropriate. The mere fact that leave to appeal was refused on the majority of the grounds is not of itself a reason to make such an order. The Bisognins emphasise that this Court did grant leave on ground 2 and considered that ground in considerable detail.
Moreover, both parties had made offers in relation to the payment of the referral fees, which if accepted, would have allowed those fees to be paid earlier and for the settlement of the sale of land transaction to have taken place, thereby avoiding the trial before Riordan J and the appeal to this Court.
The Bisognins further submit that it is not helpful to speculate about what factors might have motivated them to bring the appeal. Hera does not assert that the proceeding was an abuse of process; the Bisognins were entitled to come to the court seeking to have their legal rights under the 2015 Contract determined. The reasons they had for wanting to terminate the 2015 Contract are not relevant. They submit that the CMJ Contract and its late disclosure cannot be a determinative factor on whether an indemnity costs order should be made, especially where the Bisognins have already been ordered to pay indemnity costs of the trial below.
Moreover, the Bisognins maintain that even if the CMJ Contract had been disclosed to Sloss J it would not have made any material difference to the outcome before her Honour. Sloss J had already found that the Bisognins were to blame for the delay in registering the plan of subdivision.
Analysis
In summary, Hera invites this Court to exercise its general discretion to award indemnity costs on the basis that, first, the Bisognins’ conduct in bringing, and then maintaining, the appeal is discreditable or delinquent and secondly, in reliance on the Calderbank letters made in 2015.
Turning first to the exercise of the general costs discretion, in seeking an indemnity costs order Hera asks this Court to depart from the usual basis for awarding costs, namely, that costs be made in favour of the successful party on a standard basis.[16] When judgment was delivered on 17 April 2018, the solicitor for the Bisognins indicated that there was no opposition to the usual order for costs. This application therefore is concerned with whether Hera’s costs should be assessed on the basis that it can recover all costs reasonably incurred and of a reasonable amount (the standard basis),[17] or on the basis that all costs shall be allowed except in so far as they are of an unreasonable amount or have been unreasonably incurred (an indemnity basis).[18]
[16]The Rules of Court r 63.31.
[17]The Rules of Court r 63.30.
[18]The Rules of Court r 63.30.1(1).
Hera has acknowledged that in order to be granted a special costs order it must show that there are special circumstances to justify the court departing from the usual order. Special circumstances may include the commencement or continuation of proceedings in wilful disregard of known facts or clearly established law, the commencement or continuation of proceedings for an ulterior motive, and conduct which delays proceedings or misuses court time.[19] As Sifris J correctly observed in Almond Investors Ltd v Emanouel,[20] ‘[t]he threshold for departing from the ordinary rule in relation to costs is high’.[21]
[19]Ugly Tribe Pty Ltd v Sikola [2001] VSC 189 (Harper J) [7]. See also Bass Coast Shire Council v King [1997] 2 VR 5, 29, Spencer v Dowling [1997] 2 VR 127, 147 and Chen v Chan [No 2] [2009] VSCA 233 [10].
[20][2012] VSC 479.
[21]Almond Investors Ltd v Emanouel [2012] VSC 479 [14].
In the present case, Hera faces the obstacle that while leave to appeal was refused on proposed grounds 1, 4, 5 and 6, the Bisognins were granted leave to appeal on ground 2. Moreover, this was the principal proposed ground of appeal that occupied the hearing and the bulk of the ultimate determination. The grant of leave demonstrates that the prospects of success on proposed ground 2 were not fanciful.[22] It cannot be concluded that the commencement or continuation of the appeal occurred in wilful disregard of clearly established law nor that the hearing of appeal was consumed by a ground without some foundation.
[22]Kennedy v Shire of Campaspe [2015] VSCA 47 [12].
Furthermore, while the failure of the Bisognins to disclose the CMJ Contract at an appropriate time formed a proper basis on which Riordan J awarded indemnity costs, because it could have avoided the trial, nevertheless, the trial having been heard and determined, the CMJ Contract and its terms formed only part of the background circumstances on which the appeal was heard. It would be to order double compensation for the same delinquent behaviour were indemnity costs to be awarded on the appeal for the same reason they were imposed at trial. We consider that the connection between the delinquent conduct of the Bisognins, with respect to the CMJ Contract, and the appeal is too remote for that conduct to amount to exceptional or special circumstances as identified in Oshlack v Richmond River Council.[23] We do not consider that that conduct has a direct correlation with unnecessarily exposing Hera to the incurrence of costs of the appeal.
[23](1998) 193 CLR 72, 89 [44]. See Bisognin v Hera Project Pty Ltd [2018] VSCA 93 [209]-[211].
We do not consider the fact that ground 3 was abandoned is a sufficient basis for a special order. A party should not be deterred from either bringing a claim to a court for determination or narrowing the issues before the court by appropriately abandoning a proposed ground of appeal. Hera will be able to recover its standard costs thrown away in preparing its submissions to meet ground 3 as part of its costs of the appeal. We do not consider that the other weaknesses in the Bisognins’ case establishes that there are here special circumstances justifying departure from the usual costs order.
We turn now to the second basis of the application.
We do not consider that the observations made in Ettinghausen apply to the offers made by Hera in 2015. In our opinion, it cannot be said that the ‘claim’ under consideration before Sloss J, and the Court of Appeal in 2016, was the same ‘claim’ under consideration by Riordan J and this Court. The ‘claims’ between the parties in 2015 were bound up with answering the following questions: does Special Condition 8 enable either party to terminate the 2015 Contract if the plan of subdivision is not registered, and does Special Condition 10 require the Bisognins to pay the referral fees?[24] By contrast, the hearing before Riordan J was concerned not with construing the terms of the 2015 Contract to identify the parties’ respective contractual obligations but with whether, in the circumstances, the Bisognins had breached their obligations under the 2015 Contract and thereby lost any right of termination, and, in particular, whether Hera was entitled to specific performance of the 2015 Contract. This latter issue was at the heart of the appeal.
[24]These were questions 2 and 3 raised by way of an Originating Motion in proceeding S CI 2015 04285, brought pursuant to s 49(1) of the Property Law Act 1958: Bisognin v Hera Project Pty Ltd [2016] VSC 75 [10].
Moreover, the Calderbank offer included express dates on which the offers expired. The Calderbank offer made by letter on 2 September 2015 expired on 4 September 2015 and the Calderbank offer made by letter of 13 October 2015 expired on 16 October 2015. We consider that there is no room for regarding these offers as having a continuing operation up until the appeal was heard on 29 August 2017 (especially given that the appeal was from a decision of Riordan J in a different proceeding from the proceeding in the 2015 litigation).[25]
[25]The proceeding before Sloss J was Proceeding S CI 2015 04285. The appeal from Sloss J was Proceeding S APCI 2016 0117. The proceeding before Riordan J, from which the appeal was brought, was Proceeding S CI 2016 03457.
The Rules of Court make provision for offers of compromise to be served in respect of an application for leave to appeal or an appeal.[26] No evidence of such an offer has been adduced by Hera. This Court has observed that the rules with respect to the making of an offer of compromise before trial do not operate of their own force in relation to an appeal and such offers, and their rejection, are unlikely to affect the discretion to award costs of an appeal.[27]
[26]The Rules of Court r 26.12
[27]Rosa v Galbally & O’Bryan [No 3] [2013] VSCA 159.
Conclusion
The application by Hera for its costs to be paid on an indemnity basis should be refused. The Court will make orders that the Bisognins are to pay Hera’s costs of, and incidental to, the application for leave to appeal and the appeal on a standard basis. In relation to the costs of Hera’s application for indemnity costs, we consider that each party should bear its own costs.
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