John Street JV Co Pty Ltd v A-Link Technology Pty Ltd - [2020] NSWSC 160

Supreme Court

New South Wales

Medium Neutral Citation: John Street JV Co Pty Ltd v A-Link Technology Pty Ltd [2020] NSWSC 160
Hearing dates: On the papers
Date of orders: 02 March 2020
Decision date: 02 March 2020
Jurisdiction: Equity
Before: Darke J
Decision:
Defendants ordered to pay the plaintiffs’ costs.

Catchwords: COSTS – proceedings to challenge validity of Notices to Complete – proceedings commenced after defendants failed to withdraw notices – interlocutory injunction obtained by plaintiffs – defendants subsequently accept that notices were invalid and acquiesce in the making of a declaration to that effect – no substantive hearing on the merits – conduct of defendants held to be unreasonable in the circumstances – defendants ordered to pay plaintiffs’ costs
Cases Cited: Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622
Category: Costs
Parties: John Street JV Co Pty Ltd (First Plaintiff)
Billco Partner Pty Ltd (Second Plaintiff)
A-Link Technology Pty Ltd (First Defendant)
Sydney Constructions & Developments Pty Ltd (Second Defendant)
Representation:
Counsel:
Mr S Phillips (Plaintiffs)
Mr G Foster (Defendants)
Solicitors:
Corestone Lawyers (Plaintiffs)
Zali Burrows Lawyers (Defendants)

File Number(s): 2019/294497
Publication restriction: None

Judgment

These proceedings were commenced on an urgent basis by Summons filed in Court on 20 September 2019. The final relief claimed was an order that two Notices to Complete, issued by the defendants on 9 September 2019 in respect of two contracts for the sale of land, were invalid and should be set aside. Interim relief was also sought, including an injunction restraining the defendants from issuing any Notice of Termination.
On 23 September 2019, when the Summons was returnable before the Duty Judge (Pembroke J), an interlocutory injunction was granted restraining the defendants until further order from, inter alia, treating the Notices to Complete as valid. Directions were also made for the service of evidence, and for the matter to be listed for directions on 25 October 2019.
On that occasion, the defendants were directed to file and serve any cross-claim by 14 November 2019, and the matter was listed for directions on 15 November 2019. No cross-claim was ever filed.
On 15 November 2019 the plaintiff was directed to serve any evidence in reply to the defendants’ evidence by 29 November 2019, and the matter was listed for directions on 5 December 2019.
On 5 December 2019, counsel for the defendants informed the Court, in effect, that the defendants did not contend that the Notices to Complete were valid. There was, however, no agreement as to the orders that should be made to bring the proceedings to an end, including as to costs. The matter was adjourned to 19 December 2019.
On that occasion, there was no appearance by the defendants. Directions were made to facilitate the provision of written submissions by the defendants in answer to written submissions of the plaintiffs on the questions of final orders and costs. The matter was adjourned to 13 February 2020.
By that time, the defendants had provided written submissions in response (only on the question of costs) and the plaintiffs had provided further written submissions in reply. Counsel for the defendants consented to, or at least did not oppose, the making of a final declaration that the Notices to Complete were invalid and of no force or effect. There was also no opposition to the dissolving of the interlocutory injunction granted on 23 September 2019. A declaration and order was made accordingly. The question of costs remained unresolved.
Counsel for the defendants sought an opportunity to provide further brief written submissions on costs. That opportunity was given; the Court directed that any further submissions of the defendants be provided to the Court by 20 February 2020. The further submissions were received on 25 February 2020. The parties accepted that the question of costs could be dealt with on the papers. The Court has proceeded accordingly.
The plaintiffs seek an order that the defendants pay their costs of the proceedings. The plaintiffs rely, in support of their application, upon the affidavit of their solicitor, Mr Walid Alameddine, affirmed on 19 September 2019. In brief, it appears from that affidavit that two contracts to purchase were entered into by the plaintiffs on 5 December 2018. The first contract was entered into with the first defendant in respect of a property at 19 John Street, Lidcombe; the second contract was entered into with the second defendant in respect of a property at 21 John Street, Lidcombe. Each contract provided for completion within nine months; that is, by about 5 September 2019. It further appears that on 14 August 2019, Deeds of Variation were exchanged which extended the times for completion to “no earlier than 30 December 2020”. The deeds were signed for each defendant by Ms Zenah Osman, as sole director.
However, on 9 September 2019, Notices of Completion of Sale were sent by Ms Osman to Mr Alameddine. The first notice concerned the 19 John Street property; the second notice concerned the 21 John Street property. Each notice referred to a contract for sale made on 6 September 2018, and referred to purchasers other than the plaintiffs. Each notice essentially stated that completion of the sale was due on 6 September 2019, and that unless the default was remedied within 14 days of service of the notice, the vendor may proceed to exercise any powers conferred by the contract.
On 18 September 2019, Mr Alameddine sent a letter by email to the defendants and Ms Osman in relation to the notices. Mr Alameddine asserted that the Notices to Complete were “baseless” having regard to the Deeds of Variation which extended the settlement dates of the contracts for sale of the two properties. He also asserted that the vendors were in any event not ready, willing and able to complete the contracts. Mr Alameddine requested that the notices be withdrawn by 19 September 2019, failing which an urgent application would be made to the Court to seek a declaration that the notices are void and should be set aside. Mr Alameddine further stated that costs would be sought if an order was made in the plaintiffs’ favour.
The plaintiffs submitted that because they achieved a substantial degree of practical success as a result of commencing the proceedings, costs should follow the event. It was submitted that it was an appropriate case for a costs order even though there had been no substantive final hearing on the merits (see Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624). It was put that had the proceedings not been commenced, it is likely that the defendants would have relied on the notices, including by seeking to terminate the contracts. It was submitted that this should be inferred from the affidavit of Ms Osman of 22 September 2019. It was put that by this affidavit Ms Osman sought to defend the validity of the notices and maintained that the defendants were ready to settle sales of the two properties.
The defendants submitted that the Notices to Complete incorrectly referred to earlier contracts for sale, entered into with other purchasers, that had been rescinded and replaced by the contracts with the plaintiffs as purchasers. It was submitted that the notices were invalid, and as they were not addressed to the correct purchasers, should have been ignored. It was further submitted that the proceedings were “totally unnecessary” given that the plaintiffs, to whom the notices were not addressed, had no standing to seek to set the notices aside. The defendants submitted that the Summons never had any prospect of success. The defendants further submitted that in the circumstances no order for costs should be made in favour of the plaintiffs, and indeed indemnity costs should be awarded in favour of the defendants. It was put that the defendants had incurred unnecessary costs “in defending an action that did not need to be the subject of Court proceedings”. It was further submitted that a costs order should be made against the plaintiffs’ solicitor because he should have acted more quickly to clarify the position for the defendants as to the existence of the later contracts for sale entered into between the plaintiffs and the defendants.
In their submissions in reply, the plaintiffs submitted:

that they achieved substantial practical success in the proceedings;

that the defendants sought to defend the validity of the notices for a time and proposed the bringing of a cross-claim; and

that the proceedings would have concluded soon after their commencement were it not for that conduct of the defendants.

The plaintiffs submitted that the purpose of the Summons was to prevent the defendants from relying upon the notices or seeking to terminate the contracts with the plaintiffs, and this purpose was achieved by the relief granted. The plaintiffs further submitted that whilst the notices were invalid, they could not have been simply ignored; rather, it was reasonable for the plaintiffs to take the notices seriously. It was put that had the defendants withdrawn the notices when requested to do so, the proceedings may have been unnecessary. Finally, it was submitted that there was no proper basis for the submissions of the defendants for indemnity costs, and a costs order against the plaintiffs’ solicitor.
By their further submissions, the defendants contended that at no stage of the proceedings did they assert that the notices were valid. The defendants stated that they did raise the issue of the standing of the plaintiffs to bring proceedings in relation to the notices which were not addressed to them. The defendants further submitted that they were unable to ascertain the true position about the sales of the properties because relevant documents were being withheld from them by a former solicitor.
The issue raised by the plaintiffs in these proceedings was whether the Notices to Complete served on 9 September 2019 were valid and effective. Ultimately, the defendants acquiesced in the making of a declaration that the notices were invalid and of no force or effect. As recognised by the plaintiffs, this determination was not the outcome of a substantive hearing on the merits. It is thus not a situation where the Court can simply apply the usual rule that costs follow the event.
Nevertheless, in an appropriate case, an order for costs can be made even when there has been no hearing on the merits. The applicable principles in this regard are as stated by McHugh J in Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (supra) at 624-5.
In my opinion, it is appropriate in the present case to exercise the Court’s discretion as to costs to order that the defendants pay the plaintiffs’ costs of the proceedings.
It is not disputed that the Notices to Complete were invalid. The defendants appear to accept that the notices were entirely misconceived, as they were based on the mistaken assumption that the two properties were the subject of contracts for sale which had actually been superseded by the contracts entered into with the plaintiffs. The defendants seek to make a virtue of the defective character of the notices by asserting that this should have been obvious to the plaintiffs, and the notices simply ignored as a result. I agree that the content of the notices would readily suggest invalidity, but coming from Ms Osman on behalf of the respective owners of the two properties the subject of the contracts with the plaintiffs, I do not think it was unreasonable of the plaintiffs to take the notices seriously.
The plaintiffs asserted that the notices were invalid, and sought their withdrawal. The failure of the defendants to withdraw the notices was the immediate cause of the commencement of the proceedings. I do not accept that it was totally unnecessary for the plaintiffs to commence the proceedings. In my view it was not unreasonable for them to take a cautious approach in the circumstances.
The defendants, as the owners of the two properties, ought to have quickly ascertained the facts and accepted that the notices were in fact invalid, but failed to do so. Had they done so, it is likely that the proceedings would have quickly terminated. That the defendants may have been hamstrung by an inability to obtain documents from a former solicitor is a misfortune for them. It is not a situation that can be said to have been brought about by any actions on the part of the plaintiffs. I do not accept that the plaintiffs, or their solicitor Mr Alameddine, should be held responsible for the defendants’ delay in coming to realise that the notices were bad. The defendants’ delay in this regard brought about an unnecessary prolongation of the proceedings.
The conduct of the defendants in issuing the defective notices, and failing to promptly withdraw them or clearly state that no reliance would be placed upon them, was in my view unreasonable. Moreover, this unreasonable conduct effectively caused the commencement and continuation of the proceedings until 5 December 2019 when the defendants’ counsel informed the Court that the defendants accepted that the Notices to Complete were not valid. It is a situation where legal costs were unnecessarily incurred as a result of the unreasonable conduct of one of the parties (see Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (supra) at 624-5).
I am not satisfied that the defendants never asserted the validity of the notices, but rather raised the issue of standing. In this regard I note that Ms Osman’s affidavit of 22 September 2019 makes reference to:

contracts for sale made on about 5 December 2018, which were to be completed on 6 September 2019;

the Deeds of Variation she signed; and

the Notices to Complete.

There is a suggestion in the affidavit that Ms Osman did not understand the provisions of the Deeds of Variation. There is no positive assertion that the Notices to Complete are either valid or invalid. However, there is also no clear statement that the Notices to Complete did not concern the plaintiffs, or that the plaintiffs could not raise any challenge to them.

I should add that I do not accept the submission that the proceedings never had any prospect of success. The submission is falsified by the final declaration made on 13 February 2020. Further, I do not discern any proper basis for any order for costs against the plaintiffs or, a fortiori, Mr Alameddine. In my opinion, they cannot be considered to have acted in any way unreasonably in relation to the proceedings.
For the above reasons, the Court will order that the defendants pay the plaintiffs’ costs of the proceedings.

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Decision last updated: 02 March 2020

Medium Neutral Citation:	John Street JV Co Pty Ltd v A-Link Technology Pty Ltd [2020] NSWSC 160
Hearing dates:	On the papers
Date of orders:	02 March 2020
Decision date:	02 March 2020
Jurisdiction:	Equity
Before:	Darke J
Decision:	Defendants ordered to pay the plaintiffs’ costs.
Catchwords:	COSTS – proceedings to challenge validity of Notices to Complete – proceedings commenced after defendants failed to withdraw notices – interlocutory injunction obtained by plaintiffs – defendants subsequently accept that notices were invalid and acquiesce in the making of a declaration to that effect – no substantive hearing on the merits – conduct of defendants held to be unreasonable in the circumstances – defendants ordered to pay plaintiffs’ costs
Cases Cited:	Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622
Category:	Costs
Parties:	John Street JV Co Pty Ltd (First Plaintiff) Billco Partner Pty Ltd (Second Plaintiff) A-Link Technology Pty Ltd (First Defendant) Sydney Constructions & Developments Pty Ltd (Second Defendant)
Representation:	Counsel: Mr S Phillips (Plaintiffs) Mr G Foster (Defendants) Solicitors: Corestone Lawyers (Plaintiffs) Zali Burrows Lawyers (Defendants)
File Number(s):	2019/294497
Publication restriction:	None