International Advisor Systems Pty Ltd v XYYX Pty Ltd (Costs)

[2008] NSWSC 312

CITATION:	International Advisor Systems Pty Ltd v XYYX Pty Ltd & anor (Costs) [2008] NSWSC 312
HEARING DATE(S):	14 March 2008
JURISDICTION:	Equity Division Expedition List
JUDGMENT OF:	Brereton J
EX TEMPORE JUDGMENT DATE:	14 March 2008
DECISION:	Cross-claimant to pay cross-defendant’s costs on an indemnity basis
CATCHWORDS:	COSTS – Indemnity costs – whether proceedings improperly brought or maintained – cross-claim against third party – where cross-claim depends an establishing reliance – where reliance is inconsistent with position maintained by cross-claimant in defence of principal claim
CATEGORY:	Consequential orders
CASES CITED:	Fountain Selected Meats (Sales) Pty Limited v International Produce Merchants Ltd (1988) 81 ALR 397 International Adviser Systems Pty Ltd v XYYX Pty Ltd [2008] NSWSC 2 PCRZ Investments Pty Ltd v National Golf Holdings Ltd [2002] VSCA 24
PARTIES:	International Advisor Systems Pty Limited (plaintiff/first cross-defendant) XYYX Pty Limited (first defendant/cross-claimant) Xin Yong (second defendant/cross-claimant) Jonamill Pty Limited (second cross-defendant) Ren Zhou Lawyers (third cross-defendant)
FILE NUMBER(S):	SC 2607/07
COUNSEL:	Mr M S Zammit (plaintiff/first cross-defendant) Mr MD Broun OAM QC (defendants/cross-claimants) Mrs C Champion (second cross-defendant) Ms F J Hayes (solicitor) (third cross-defendant)
SOLICITORS:	Baybridge Lawyers (plaintiff/first cross-defendant) Zelden Solicitors (defendants/cross-claimants) Mason Sier Turnbull Lawyers (second cross-defendant) Thomson Playford (third cross-defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EXPEDITION LIST

BRERETON J

Friday 14 March 2008

2607/07 International Adviser Systems Pty Ltd v XYYX Pty Ltd & anor

JUDGMENT (Costs) (ex tempore)

1 HIS HONOUR: On 31 January 2008 I gave judgment in these proceedings [International Adviser Systems Pty Ltd v XYYX Pty Ltd [2008] NSWSC 2]. Inter alia, I ordered that the second cross-claim be dismissed with costs, and made directions for the filing of written applications and submissions in the event that any party sought a different or special costs order. The cross-defendant, Jonamill Pty Limited, has availed itself of that opportunity by filing an application and submissions seeking an order that those costs be payable on an indemnity basis. Submissions in response have also been lodged on behalf of XYYX.

2 I accept that for an indemnity costs order to be made in this context, something unusual or amounting to special circumstances is required [Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397]. Fountain Selected Meats also establishes that an indemnity costs order may be appropriate where the unsuccessful party has misconducted itself in relation to the proceedings, or where the institution of the proceedings was plainly unreasonable, or where the proceedings were used for an ulterior or collateral purpose [PCRZ Investments Pty Ltd v National Golf Holdings Ltd [2002] VSCA 24, [36]]. One instance in which it will be taken that proceedings have been instituted unreasonably is where, on the facts known to the unsuccessful party, that party, properly advised, should not have instituted the proceedings.

3 In order to succeed on its cross-claim, XYYX had to establish, first, that Jonamill had engaged in misleading and deceptive conduct and, secondly, that XYYX had suffered loss as a result.

4 As to whether Jonamill had engaged in misleading and deceptive conduct, that turned on whether the representations alleged to have been made on behalf of Jonamill had, in fact, been made. On that, there was evidence from Xin Yong which, if accepted, would have established the relevant representations. I was not affirmatively convinced that those representations were made. However, although the evidence saw some evolution in the form of the representations from the original affidavit version (to the effect that there would be no problems in obtaining a new lease) to the ultimate version advanced in oral evidence (that the CBRE letter was, in fact, the new lease), some allowance must be made for linguistic difficulties, and I did not find that Mr Xin Yong's evidence was deliberately false; it simply failed to reach the requisite standard of proof. There is, indeed, ample evidence that he had expressed concern to Mr Stearn, on behalf of Jonamill, about the availability of a new lease. On the other hand, the form and content of the CBRE letter itself told very strongly against the representations being made, and as I recorded in my principal judgment, the construction which was placed upon that letter by and on behalf of Mr Xin Yong was manifestly untenable.

5 As to the question of causation and reliance, Mr Xin Yong had to establish that XYYX had entered into the Contract for Sale in reliance upon a belief, at the least, that there would be no problem in a new lease being granted, or, as the case ultimately was advanced, that there was in fact a new lease granted by the CBRE letter.

6 The problem with the case on the cross-claim was that that position was fundamentally inconsistent with XYYX's defence to the plaintiff's claim, that it was the common intent of IAS and XYYX that the contract would be subject to grant of a new lease.

7 It is, of course, not always impossible that a party can advance an alternative position quite properly. However, in this case, that the alternative involved in the cross-claim could not be advanced consistently with the claim in the defence as to the true intent of the parties at the time of the contract. To assert that XYYX relied on an assurance that there would be no problems in obtaining a new lease, or that there was a new lease in place, is irreconcilable with an assertion that XYYX believed that the contract was conditional on the grant of a new lease and that it was made so conditional in order to protect its position, lest the new lease not be granted.

8 The difficulties in proofs of the alleged representations would not of themselves have sufficed, in my mind, to justify an indemnity costs order, but having regard to the combination of that matter with the impossibility of succeeding on the cross-claim, so long as XYYX maintained its position in its defence to the plaintiff's claim, I have concluded that the cross-claim is one which, on the facts within the knowledge of Xin Yong and those advising him, he ought, properly advised, not to have brought. Not only was the relevant conduct unlikely to be found to be misleading in the context of the terms of the CBRE letter, but much more importantly, so long as XYYX maintained that its intent was that the contract be conditional and that it was entitled to rescind because of the failure to obtain a new lease, it could not succeed on the question of reliance.

9 Accordingly, I conclude that the costs which XYYX and Mr Xin Yong must pay the cross-defendant should be assessed on the indemnity basis; and I so order.

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