IPL Medical Clinics v Charmen

[2018] NSWSC 1569

Supreme Court

New South Wales

Medium Neutral Citation:	IPL Medical Clinics v Charmen [2018] NSWSC 1569
Hearing dates:	16/10/2018
Date of orders:	16 October 2018
Decision date:	16 October 2018
Jurisdiction:	Equity - Commercial List
Before:	McDougall J
Decision:	Dismiss notice of motion. Order that costs of the motion be the defendant’s costs in the proceedings.
Catchwords:	COSTS – notice of motion sought to restrain defendant from calling on bank guarantee – where plaintiff withdrew application immediately prior to hearing – whether plaintiff should be ordered to pay costs on an indemnity basis – whether costs should be paid forthwith – factual matters go no further than suggesting that costs ought be the defendant’s costs in the proceedings – no question of principle.
Legislation Cited:	Uniform Civil Procedure Rules 2005 (NSW)
Category:	Costs
Parties:	IPL Medical Clinics Pty Ltd (Plaintiff) Charmen Pty Ltd (Defendant)
Representation:	Counsel: S Robertson / L Corbett (Plaintiff) AS Bell SC / AR Zahra (Defendant)   Solicitors: Kemp Strang (Plaintiff) Yeldham Price O’Brien Lusk (Defendant)
File Number(s):	2018/92975

Judgment (EX TEMPORE – REVISED ON 16 OCTOBER 2018)

1. HIS HONOUR: The plaintiff yesterday sought ex parte an injunction restraining the defendant from calling on a bank guarantee. I declined to grant relief ex parte but gave leave to serve on short notice.

2. The matter came back before me today. I was informed that the plaintiff no longer pressed for the relief sought by its Notice of Motion but that there would be a dispute as to costs.

3. The plaintiff's position is that no order should be made for it now to pay the defendant's costs. The defendant, by contrast, seeks its costs; that they be assessed on the indemnity basis; and that they be payable forthwith.

4. There was an obvious problem with the Notice of Motion. In terms it sought to restrain the defendant from calling on the relevant guarantee. However, the evidence showed that in fact the call had been made.    The bank, for reasons best known to itself and in apparent defiance of its obligations under the unconditional form of guarantee, chose not to make payment but, rather, inform the principal of the plaintiff of the call.

5. That technical problem could have been overcome. The defendant could have been restrained from disposing of the proceeds until the further order of the Court. It could indeed have been ordered to repay the money received by it into the relevant bank account.

6. Those matters no doubt would have been sorted out had the matter proceeded today and had the plaintiff succeeded in obtaining the relief that it sought (in substance, if not in precise terms).

7. The general position, in respect of interlocutory applications, is that costs should be reserved, or should follow the event of the proceedings. That flows from UCPR r 42.7. That rule in turn may be seen as a qualification or limitation upon the general power set out in r 42.1.

8. The substantial issue in relation to the Notice of Motion appears to have been whether the defendant was entitled to call upon the guarantee. That entitlement would only have arisen had the plaintiff failed duly and punctually to observe and perform its obligations under the lease.

9. The defendant says that the plaintiff has failed to make the premises good upon termination of the lease, that it has undertaken the necessary work itself, and that it is entitled to recover from the plaintiff the amount spent by it in making it good.

10. Underlying all that, the dispute appears to be the extent to which the plaintiff failed to make good, the extent to which work was necessary to put the premises back into the condition that they were at the commencement of the lease, and the extent and cost of the work.

11. Those are all objective matters. If they are resolved in favour of the plaintiff, it would follow, in terms of the lease, that it will have been shown not to have failed duly and punctually (or otherwise) to have observed and performed its obligations under the lease.

12. Leaving aside that underlying factual issue, there were, as Dr Bell of Senior Counsel, who appeared with Mr Zahra of Counsel, for the defendant submitted, other substantial impediments to obtaining the relief sought. One was that the Court will ordinarily be slow to interfere in the exercise of contractual rights, particularly where those rights are expressed in the form of a guarantee that is often said to be the equivalent of, or as good as, cash.

13. Another is that the prejudice alleged was not significant, and appears to have been to some extent self-induced. Related to that was the submission that the plaintiff may not have been good on its undertaking as to damages. Finally, Dr Bell submitted that the plaintiff had sought to interfere with its contractual relationship pursuant to the guarantee with the issuing bank. That was said to amount to the use of unclean hands.

14. The first and fundamental point may be accepted. The Court should not be speedy to interfere in the exercise of contractual rights. That is a consideration of particular significance in relation to bank guarantees, which are taken as an earnest of and security for performance, on the basis that they stand in the place of a cash deposit.

15. However, as Mr Robertson of Counsel, who appeared with Mr Corbett of Counsel for the plaintiff, submitted, the test of the defendant's entitlement to recover under the guarantee is an objective one. That is a test that will be considered by the judge who has the misfortune of hearing this case should it go to trial. If the defendant succeeds in showing substantial breach to the obligation to make good, then retrospectively its claim upon the guarantee will be seen to have been justified.

16. It may be accepted that the plaintiff was somewhat precipitate in coming to court. It may be accepted that the defendant incurred expense in resisting the plaintiff's demand. It may be accepted that notice of withdrawal of the application was made late. But all those matters do no more than show that there is a strong case for the proposition that the costs of the notice of motion should be the defendant's costs in the proceedings. To my mind, they do not go further.

17. In all the circumstances, I think the appropriate order is the one that I have just indicated. I am not prepared in those circumstances to direct that if costs are payable they should be assessed on the indemnity basis. That again is a matter that the trial judge can consider. I observe, in any event, that although the Court is always grateful for Dr Bell's assistance, it might have been thought to be a little bit of overkill to have senior counsel of such eminence appear on an everyday application such as this.

18. Accordingly, I order that the notice of motion filed in court on 15 October 2018 be dismissed with costs. I order that the costs of the notice of motion be the defendant's costs in the proceedings. I direct that the exhibit on the application be handed out.

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Decision last updated: 17 October 2018