Johnson v Clancy

[2010] NSWSC 1301

CITATION:	Johnson & Anor v Clancy & Anor [2010] NSWSC 1301
HEARING DATE(S):	9 November 2010
JUDGMENT DATE :	15 November 2010
JUDGMENT OF:	Hallen AsJ
DECISION:	(a) The Plaintiffs to pay such of the Defendants’ costs as, at the date on which the notice of discontinuance was filed, had been incurred by the Defendants in relation to each claim in respect of which the proceedings have been discontinued. (b) In relation to the notice of motion filed on 8 October 2010, the result of the proceedings is that the Defendants have achieved the relief that they sought and had been seeking for some time. Accordingly, there is no reason why they should not have their costs of the notice of motion as well. (c) The Plaintiffs to pay the costs of the Defendants of the hearing of the costs argument. (d) The exhibits on the costs application to be returned.
CATCHWORDS:	Procedure under Uniform Civil Procedure Rules 2005 - costs - leave granted, by consent, to the discontinuance of the Plaintiffs’ proceedings - where no determination on the merits - default provision for costs in UCPR 42.19 - approach to costs - whether to depart from ordinary position - need for reason to depart from ordinary position - costs of notice of motion where orders made by consent which result in relief sought being granted by consent - costs of argument as to costs of proceedings where discontinuance
LEGISLATION CITED:	Civil Procedure Act 2005 Real Property Act 1900 Uniform Civil Procedure Rules 2005
CATEGORY:	Separate question
CASES CITED:	Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 Beeson v Carrello As Liquidator of Gecko Management Pty Ltd (In Liq) [2010] WASCA 155 Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 Fordyce v Fordham [2006] NSWCA 274 Foukkare v Angreb Pty Limited [2006] NSWCA 335 Luxmore Pty Ltd v Hydedale Pty Ltd [2008] VSCA 212 McClure v City of Stirling (No 3) [2009] WASC 247 Metro Chatswood Pty Ltd v CRI Chatswood Pty Ltd [2007] NSWSC 1120 Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 O'Neill v Mann [2000] FCA 1680 Ohn v Walton (1995) 36 NSWLR 77 One.Tel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548 Oshlack v Richmond River Council (1998) 193 CLR 72 Pentroth Pty Ltd v Kirschild Pty Ltd (2006) 96 SASR 129 Perre v State of New South Wales [2009] NSWLEC 51 Pharmaust Ltd v Advance Healthcare Group Ltd [2007] WASC 125
PARTIES:	Andrew Johnson (First Plaintiff) Arrow Constructions (NSW) Pty Ltd (in liquidation) ACN 094 730 177 (Second Plaintiff) Paul John Clancy (First Defendant) Scott Robert Matheson (Second Defendant)
FILE NUMBER(S):	SC 2010/289447
COUNSEL:	Mr J T Johnson (First and Second Plaintiffs) Mr J Darams (First and Second Defendants)
SOLICITORS:	Yates Biaggi Lawyers (First and Second Plaintiffs) Eakin McCaffery Cox (First and Second Defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

HALLEN AsJ

15 NOVEMBER 2010

2010/289447 JOHNSON & ANOR v CLANCY & ANOR

JUDGMENT

: This is the hearing of a costs application, following leave having been granted, by consent, to the Plaintiffs, to discontinue the proceedings and consequential orders made on 19 October 2010. Whilst the relevant parties were able to agree on the substantive outcome of the proceedings, including in respect of a notice of motion for the removal of the first Plaintiff’s caveat, they were not able to agree on the matter of costs. Thus, on that date, how the burden of the costs of the proceedings and of the notice of motion were to be met, was reserved for further argument. Subsequently, the costs argument was set down, and was heard on 9 November 2010.

2 The first Plaintiff is the Official Liquidator of the second Plaintiff, having been appointed by the Court on 1 June 2006. The first and second Defendants are the former directors of the second Plaintiff and the joint trustees of the Brookvale Property Unit Trust. As trustees, they were the registered proprietors of certain land at Brookvale, Sydney (“the Property”).

3 On, or about, 9 November 2006, the first Plaintiff lodged a caveat on title to the Property.

Background Facts in relation to Present Proceedings

4 I am satisfied that the following background facts relating to the present proceedings, are not in dispute between the parties.

(a) In the substantive proceedings, which were commenced by Summons filed on 31 August 2010, the Plaintiffs sought orders that the Defendants, as vendors of the Property, by themselves, their servants and agents, specifically perform a contract of sale which had been exchanged with Barrenjoey Securities Pty Limited as Trustee for the Lighton Superannuation Fund, as purchaser. The contract was exchanged on 24 May 2010.

(b) On 31 August 2010, upon an undertaking given to pay the necessary filing fees, the Plaintiffs’ Summons was filed in Court, the time for serving the Summons was abridged to 3 September 2010, certain directions as to service were made, and the matter was made returnable on 3 September 2010.

(c) On 3 September 2010, orders were made directing the matter to proceed by pleadings, with a direction that a statement of claim was to be filed by the Plaintiffs within 14 days.

(d) The Plaintiffs filed a Statement of Claim on 17 September 2010. The matter was made returnable before the Registrar on 18 October 2010.

(e) On 8 October 2010, there was a Notice of Change of Solicitor filed on behalf of the first Defendant and a Notice of Appearance filed on behalf of the second Defendant. These documents were sent to the Plaintiffs’ solicitors under cover of letter dated 8 October 2010.

(f) On 8 October 2010, the Defendants also filed a notice of motion seeking an order, pursuant to s 74MA of the Real Property Act 1900, that the first Plaintiff withdraw an identified caveat which he had lodged on title to the Property by 13 October 2010. With various affidavits, the notice of motion for the withdrawal of the Plaintiffs’ caveat, were also served upon the Plaintiffs’ solicitors on 8 October 2010.

(g) The notice of motion was listed for hearing on 19 October 2010 “for referral”. The Plaintiffs were also directed to file an amended statement of claim by 13 October 2010.

(h) On 18 October 2010, in a letter from the Plaintiffs’ solicitor to the Defendants’ solicitors, which letter was headed “Without prejudice save as to costs”, the Plaintiffs advised, for the various reasons set out in the letter, that they:

(i) wished to discontinue the proceedings commenced on 31 August 2010; and

(ii) would hand over a withdrawal of the caveat which had been lodged on title to the Property.

5 On 19 October 2010, by consent, leave was granted to the Plaintiffs to discontinue the proceedings, with costs being reserved. The Defendant’s notice of motion was also dismissed with costs being reserved. There were other orders and directions made dealing with the withdrawal of the caveat and the application of the proceeds of sale of the property.

6 In a subsequent letter, dated 8 November 2010, the Plaintiffs’ solicitors noted that the Defendants’ solicitors were entitled to be paid their reasonable and proper conveyancing costs and disbursements from the net proceeds of sale and they requested a copy of any costs agreement relating to so acting and also for acting for the Defendants in the proceedings, together with a properly itemized bill of costs.

7 There is no evidence that the Defendants’ solicitors met the requests made by the Plaintiff’s solicitors.

8 I have received written submissions from counsel for each of the Plaintiffs and the Defendants, which I shall leave with the court file. Oral submissions were also made.

9 The Plaintiffs submit that there should be no order as to the costs of the proceedings, to the intent that each party should pay his, or its, own costs. The Defendants submit that the Plaintiffs should pay the Defendants’ costs of the proceedings.

10 The Plaintiffs relied upon an affidavit sworn by each of two solicitors, being Farshad Amirbeaggi, the principal of the Plaintiffs’ solicitors and of Danielle Cavill, a solicitor employed by the solicitors for the Plaintiffs with the day-to-day conduct of the matter. No cross-examination of either deponent occurred. There was no affidavit by the first Plaintiff.

11 The Defendants relied upon the affidavit of Christine Perry, the former solicitor of the first Defendant and that of Mark Doble, a solicitor and partner of the Defendants’ solicitors, in support of their application for costs. These were affidavits served upon the Plaintiffs on 8 October 2010. No cross-examination of either deponent occurred.

12 In reply, the Plaintiffs relied upon two affidavits served by the Defendants on 8 October 2010, being the affidavit of Paul John Clancy, the first Defendant and that of Glenn James Lighton, the director of the purchaser of the Property. No cross-examination of either deponent occurred.

13 Both parties tendered documents upon which they placed reliance.

Evolution of the Dispute

14 I am also satisfied that the following facts are not in dispute between the parties. These facts relate to events of the transaction giving rise to the dispute that occurred prior to, and following, the commencement of the proceedings:

(a) On 18 January 2008, the first Plaintiff commenced proceedings against the Defendants in the Corporations List of the Supreme Court, which proceedings related to the determination of the ownership of the Property.

(b) On, or about, 29 September 2009, with the leave of the court, the first Plaintiff filed an Originating Process and amended statement of claim in those proceedings.

(c) In November 2009, the first Defendant filed a defence to the amended statement of claim; a short time later, the second Defendant filed a separate defence to the amended statement of claim.

(d) Pursuant to court order, a mediation of the dispute took place on 20 May 2010, at which the parties attended, and as a result of which the dispute settled.

(e) On 31 May 2010, Barrett J made orders and notations in accordance with a document headed “Terms of Settlement”.

(f) The terms of the settlement reached at the mediation included one that required the sale of the Property at a minimum price of $475,000 “plus GST”.

(g) In May 2010, the Defendants exchanged a contract for the sale of the Property; whilst the purchase price shown on the contract was $522,500, a square was printed on the contract, described by the parties as “the GST Optional Box”, in which was inserted the words and figures “GST amount (optional). The price includes GST of: $47,500”. A copy of the front page of the contract was made available to the Plaintiffs.

(h) On 25 May 2010, the Defendants’ solicitors sent an email to the Plaintiffs’ solicitors confirming that “the contract exchanged at $475,000 yesterday…”.

(i) In fact, the parties agree the Property was sold for $475,000 plus GST ($47,500), leading to a total purchase price of $522,500.

(j) Settlement of the contract for the sale of the Property was arranged to take place on 24 August 2010. On that date, the Defendants’ solicitors provided to the Plaintiffs’ solicitors “a settlement statement as at 24 August 2010 and cheques to be provided on settlement”. That settlement statement revealed that the purchase price ($522,500) was “including GST”. One of the cheques required was “Australian Taxation Office $47,500”.

(k) On 24 August 2010, following the email from the Defendants’ solicitors, the solicitors for the Plaintiffs replied, by email, that “the Terms of Settlement do not make reference to any payment to the ATO for GST from the sale proceeds”. It was also stated that “[T]he GST should be distributed to the Liquidator…”. An earlier email of the same day asserted that the first Plaintiff “is to receive the proceeds without any deduction for GST” and that “this was contemplated at the time of the terms of settlement”.

(l) On 25 August 2010, the Plaintiffs’ solicitors sent an email to the different firms of solicitors involved in the conveyancing transaction stating that “Our client entered into the terms on the expectation that he would receive all of the proceeds – not net of GST”. The solicitor acting for the first Defendant forcefully disputed this statement in an email in reply. It was asserted that the Plaintiffs had been aware that the purchase price was $475,000. It was also asserted that the Plaintiffs’ solicitor had accepted that “the issue of GST was … neutral in that any GST received would have to be remitted and would therefore have a neutral effect on any … settlement”.


(m) On 25 August 2010, the solicitors then acting for the first Defendant, wrote to the Plaintiffs’ solicitors noting that there had been a refusal to attend settlement to provide a withdrawal of caveat to enable settlement to proceed. A request was made for a withdrawal of caveat.

(n) On 26 August 2010, the first Defendant’s solicitors wrote requesting the payment of GST from the proceeds of sale.

(o) On 26 August 2010, the Plaintiffs’ solicitors asserted that the front page of the contract “GST Optional Box” was blank and that the part GST Taxable Supply was marked “No”. (A copy of the document referred to was not identified by the Plaintiffs during the hearing, and I am not aware of any document that accords with what was asserted by the Plaintiffs’ solicitor.)

(p) There was then provided to the Plaintiffs’ solicitors, a copy of the front page of the contract signed by the vendor and a copy of the front page of the contract signed by the purchaser. On each, the GST Optional Box was completed stating the GST amount. The statement relating to “GST Taxable Supply” was not completed.

(q) On 30 August 2010, there was email correspondence between the solicitors acting for the Defendants regarding the payment of GST on the sale of the Property. It was concluded, at least by the solicitors acting for the second Defendant, that “as long as the vendors are not required to pay GST on the transaction, the vendors and the purchaser can agree to vary the contract accordingly”.

(r) On 30 August 2010, the purchaser’s solicitors issued a Notice to Complete the contract for the sale of the Property.


(s) On 31 August 2010, the Plaintiffs’ solicitors asserted, in an email, that there was no liability on the part of the Defendants to pay GST, following which the solicitors for the Defendants advised that, in those circumstances, the amount payable under the contract was, in fact, $475,000 and not the price shown on the contract; alternatively, they stated that if any GST was payable, it was not to be paid to the Plaintiffs, but was to be remitted to the ATO.

(t) The Plaintiffs refused to complete the contract on either basis.

(u) On 31 August 2010, the Plaintiffs’ solicitors wrote to the first Defendant’s solicitors asking whether instructions to accept short service had been obtained.

(v) On 2 September 2010, the first Defendant’s solicitor wrote to the Plaintiffs’ solicitors notifying them of 8 different matters, including that neither the Defendants nor the Brookvale Property Unit Trust were registered for GST; that the contract prepared by the second Defendant’s solicitors stated that the sale was not a taxable supply; and that all handwritten details on the front page of the contract (other than signatures) were inserted by the agent at the time of the exchange of the contracts on 24 May 2010. There was also a reference to a “proposed order” but I am unable to glean from the email what were the terms of the order.


(w) On 3 September 2010, an email was sent to the Plaintiffs’ solicitors, together with a document headed “Deed of Variation of Contract”. The parties to the Deed were shown as being the Defendants in their capacity as trustees of the vendor, and the purchaser as trustee for the Lighton Superannuation Fund. The Deed was unsigned but it was stated that the parties proposed to exchange it on Tuesday 7 September 2010. The Deed included the following Recitals:


“C The Vendors are not required to be registered for GST in that the GST turnover of the Vendors is less than $75,000 and in circumstances where the sale of the capital asset being the Property is not included in the calculation of GST turnover.
D As such the sale of the Property is not a taxable supply for the purposes of Section 9.5 of the GST Act .
E In all the circumstances the Vendors cannot provide a tax invoice to the Purchaser on completion of the sale of the Property showing any amount of GST and the Purchaser is not entitled to a GST input credit pursuant to Section 29.70 of the GST Act .

F The parties acknowledge and agree that a bargain was reached for a sale by the Vendors and the purchase by the Purchaser of the Property for a price of $475,000 plus GST to the extent applicable.

G The Contract was prepared on the basis that the sale of the Property was not a taxable supply because the sale is by a Vendor who is neither registered, nor required to be registered, for GST.
H The Vendors and the Purchaser acknowledge and agree that on 24 May 2010 the Vendor’s agent, Martin O’Brien of Jones Lang LaSalle and the Purchaser by reason of a common mistake as to any liability for GST inserted a price of $522,500 on the Contract and completed the box on the front page of the Contract that the Price included GST of $47,500 instead of the agreed price of $475,000 and incorrectly calculated and inserted on the front page of the Contract a balance of $475,000 instead of $427,500 (the “Common Mistake”).
I The Vendors and Purchaser have agreed to vary the Contract ab initio as set out in this Deed of Variation by reason of the Common Mistake and to avoid legal costs involved on an application to the Supreme Court of New South Wales for relief in the form of rectification of the Contract arising from the Common Mistake and wish to avoid any breach of the GST Act and/or any fine or offence under the Taxation Administration Act 1953 or any false and misleading conduct.”

(x) On 9 September 2010, in an email headed “Without Prejudice, Save as to Costs”, the Plaintiffs’ solicitors repeated that the withdrawal of caveat would be handed over upon condition that the purchase price of $522,500 was paid, in full, by the purchaser, and that $47,500 was to be retained in the second Defendant’s solicitors’ trust account, pending determination by the Court of the proceedings that were on foot.

Alternatively, the Plaintiffs’ solicitors offered to resolve the dispute upon the basis that included a term that the vendors and purchaser agreed to vary the contract to provide for a purchase price of $500,000 (with no GST).

(This email was tendered, without objection, by the Defendants on the hearing of the costs application.)

(y) On 10 September 2010, the second Defendants’ solicitors indicated that the proceedings could be resolved only upon the basis of the Deed of Variation being entered into.


(z) The Plaintiffs, by their solicitors, attended at settlement to complete the contract on 15 September 2010, but would not accept the amount tendered by the Defendants because it did not include $47,500, being the difference between $475,000 and $522,500.

(aa) On 15 September 2010, the second Defendant’s solicitors wrote a lengthy letter to the Plaintiffs’ solicitors and to the first Defendant’s solicitors confirming events that had occurred, and noted that it was common ground that GST was not payable on the sale of the Property. A request, once again, was made that a withdrawal of caveat should be provided upon the basis that the sum payable to the Plaintiffs did not include $47,500 for GST.


(ab) On 28 September 2010, the Plaintiffs’ solicitors, wrote stating:

“It is clear that the purchaser was prepared to pay the purchase price reflected in the contract for sale of land dated 24 May 2010, and no proper basis has been given for the variation down, otherwise than to the detriment of our clients.”

The content of the letter was repeated subsequently.

(ac) The statement of claim pleaded by the Plaintiffs sought specific performance of the contract upon the basis that $161,692.78 was payable. (That sum included the additional amount of $47,500.)

Legislative Framework

15 It is next necessary to set out the legislative framework in which an application for costs in a case such as this should be determined.

16 Under s 98 of the Civil Procedure Act 2005, the court has a wide discretionary power to make orders for costs. The general principle concerning costs is that the unsuccessful party should pay the costs of the successful party. However that principle is subject to certain exceptions.

17 Although, in the instant case, the proceedings have been discontinued, and, to that extent, the Plaintiffs may be regarded as the unsuccessful party, nevertheless the proceedings were discontinued by consent of the Plaintiffs and the Defendants and there has been no hearing upon the merits.

18 The Uniform Civil Procedure Rules 2005 (‘UCPR’), rule 12.1, provides:

“(1) The plaintiff in any proceedings may, by filing a notice of discontinuance, discontinue the proceedings, either as to all claims for relief or as to all claims for relief so far as they concern a particular defendant:
(a) with the consent of each other active party in the proceedings, or
(b) with the leave of the court."

19 So far as is relevant, UCPR, rule 42.19, provides:

“(1) This rule applies to proceedings that are discontinued by the plaintiff, as referred to in rule 12.1.

(2) Unless the court orders otherwise, or the notice referred to in rule 12.1 (2) otherwise provides, the plaintiff must pay such of the defendant’s costs as, at the date on which the notice of discontinuance was filed, had been incurred by the defendant in relation to each claim in respect of which the proceedings have been discontinued.
(3) …”

20 It can be seen that the rule applies to proceedings that are discontinued either by consent, or pursuant to the leave of the court.

Legal Principles

21 The following principles may be regarded as relevant in determining who is to bear the burden of costs in a case where the proceedings are discontinued before a final hearing:

(a) Costs discretions are truly discretionary: see Oshlack v Richmond RiverCouncil (1998) 193 CLR 72 at 84 and there are no absolute rules; the discretion must be exercised "judicially".

(b) The purpose of a costs order is to compensate, or indemnify, the person in whose favour it is made, not to punish the person against whom it is made: Ohn v Walton (1995) 36 NSWLR 77 at 79 per Gleeson CJ.

(c) Rule 42.19 of the UCPR does not give rise to a presumption that costs will be ordered against the plaintiff: Fordyce v Fordham [2006] NSWCA 274; (2006) 67 NSWLR 497; Foukkare v Angreb Pty Limited [2006] NSWCA 335 at [65]; Pentroth Pty Ltd v Kirschild Pty Ltd (2006) 96 SASR 129; Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 at [53]; Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32. However, the rule does create a starting point by requiring “… the plaintiff must pay such of the defendant's costs …” unless that outcome is displaced by a discretionary decision (“unless the court orders otherwise”).

(d) The rule makes it clear that a court may order otherwise; but the burden is on the party who seeks to persuade the court that some other consequence should follow. Generally, there must be some proper justification, sound positive ground, or a good reason, for departing from the ordinary position: Fordyce v Fordham at [2] per Santow JA; Australiawide at [54] per Bryson JA; circumstances in which it has been held appropriate to depart from the ordinary position include where the proceedings have been rendered unnecessary by circumstances beyond the plaintiff’s control; where the plaintiff achieved practical success in the proceedings, or where costs have been significantly increased by the unreasonable conduct of the defendant. If there is to be a departure it should be done in a particularized, and principled way.

(e) The plaintiff should be the moving party on an application for an alternative costs order: Bitannia at [70] per Basten JA. If facts are to be relied upon to found the court making a different order, the plaintiff will bear the onus of proving the relevant facts.

(f) Where the proceedings are discontinued prior to any hearing on the merits, “the Court cannot try a hypothetical action between the parties” to determine the question of costs: Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201; Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624; Metro Chatswood Pty Ltd v CRI Chatswood Pty Ltd [2007] NSWSC 1120 at [35]. At the time of discontinuance, usually it will be impracticable to assess the eventual prospects of success in the action.

(g) It may be necessary to analyze the whole of the proceedings to determine the appropriate costs order: Fordyce at [67] per McColl JA. A relevant consideration is whether the plaintiff acted reasonably in commencing the proceedings and whether the defendant acted reasonably in defending them: Australian Securities Commission v Aust-Home Investments Ltd at 201 (cited with approval in Foukkare); all the relevant circumstances, and not just the fact of discontinuance, should be considered; thus, the reasons for the discontinuance can bear heavily on the exercise of the discretion as to costs: McClure v City of Stirling (No 3) [2009] WASC 247 [4]; O’Neill v Mann [2000] FCA 1680; Beeson v Carrello As Liquidator of Gecko Managment Pty Ltd (In Liq) [2010] WASCA 155 at [13].

(h) In a particular case, it might be appropriate for the Court, in its discretion, to consider the conduct of the defendant prior to the commencement of the proceedings where such conduct may have precipitated the litigation: Foukkare at [66] per Beazley JA;

(i) It is also important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event, or settlement, so removes, or modifies, the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the court’s discretion otherwise than by an award of costs by the successful party. It is the latter type of case that usually creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs: One.Tel Ltd v Deputy Commissioner of Taxation (2000) 101 FCR 548 at 553; cited with approval in Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 per Davies AJA (with whom Mason P and Meagher JA agreed) at [5].

(j) The distinction between the two categories referred to above is often helpful in exercising the costs discretion, notwithstanding that neither category can be precisely defined, the boundary between them is unclear and other factors may be relevant: Bitannia per Basten JA at [79]–[81]; Perre v State of New South Wales [2009] NSWLEC 51 at [49].

(k) Where the proceedings are discontinued after interlocutory relief has been granted, the court may take into account the fact that that interlocutory relief has been granted: Australian Securities Commission v Aust-Home Investments Ltd at 201.

(l) There is a risk that the subjective motivations of the plaintiff in discontinuing may be put forward as a basis for some other order. Except to the extent that such views may have been put before the defendant, for example as a basis for settlement, and are established as such on the evidence, subjective considerations of one party will generally be immaterial, so that the discretion will be exercised on the basis of the objective circumstances established on the evidence: Bitannia at [81].

(m) The court is required to make such order as it thinks just in the particular circumstances of the case.

22 In Luxmore Pty Ltd v Hydedale Pty Ltd [2008] VSCA 212; (2008) 20 VR 481, Maxwell P and Kellam JA said, at [12]:

“In the ordinary case, it is both appropriate and desirable that a costs question be decided at the conclusion of argument. Rarely will it be necessary for a judge to give detailed reasons for decision adverting to every matter debated in argument. This court will assume, as should the parties, that every matter addressed in argument on costs has been considered. This court will set its face against any proposition which would require judges disposing of questions of costs to give elaborate reasons.”

23 The summary of the principles set out above, lead me to the view that I should not accept the written submission, made on behalf of the Plaintiffs (Para 6), that “on the question of costs what is relevant is whether or not the parties have acted reasonably in relation to the commencement and maintenance of the proceedings and/or the defence of the proceedings so that the court can exercise its judicial discretion conferred by s 98 of the Civil Procedure Act 2005”. In my view, more than that is required to be taken into account to determine in whose favour a costs order should be made.

24 It is necessary to come to a view about why the Plaintiffs sought to discontinue the proceedings. What has been submitted on behalf of the Plaintiffs is that:

“7. Prior to the receipt by the Plaintiffs’ solicitor of the affidavits served under cover of letter dated 8 October 2010 by the solicitors for the Defendants, no proper or reasonable explanation had been given by the Defendants which would justify a variation to the contract for sale of land as exchanged and payments to the Plaintiffs of the balance of purchase monies. In commencing and maintaining these proceedings, the Plaintiffs have at all times taken proper and reasonable steps to preserve the funds the Liquidator (the First Plaintiff) is entitled to receive under the Terms of Settlement dated 31 May 2010.

8. Prior to the receipt of the affidavits referred to in paragraph 7 above, numerous requests had been made by the solicitors for the Plaintiffs, on behalf of the Plaintiffs, which in many respects remain unanswered by any documents served by the Defendants.
…
10. Within a reasonable time following the receipt of the materials under cover of letter from the solicitors for the Defendants on 8 October 2010, the Plaintiffs’ solicitor communicated a position in relation to settlement of the proceedings and settlement of the contract for sale of land in an amended/reduced purchase price form. This letter, for some unexplained reason, was not included in the substantial additional documentary material sought to be relied upon by the Defendants.”

25 I do not accept these submissions either. I do not accept that “no proper or reasonable explanation had been given by the Defendants which would justify a variation to the contract for sale of land as exchanged and payments to the Plaintiffs of the balance of purchase monies”. No explanation was required, since the Plaintiffs did not dispute that no GST was payable. In any event, a detailed explanation, which seemed to accord with the facts, was provided in the Recitals in the proposed Deed of Variation of Contract.

26 In my view, at all relevant times, from at least 3 September 2010, if not before, the Plaintiffs ought to have been aware that the purchase price disclosed in the contract for the sale of the Property had been calculated with the agreement reached at the mediation in mind, and in accordance with which Barrett J had made orders, namely that the minimum sale price was to be $475,000 “plus GST”. Paragraph 6(i) of the Terms of Settlement specifically provided that the contract was to so provide.

27 If, before the proceedings were commenced, the Plaintiffs were of the view that no GST was, in fact, payable, they should have appreciated that the purchase price was $475,000, and not $522,000. If it was then not clear, it should have been clear, no later than upon receipt and consideration of the proposed Deed of Variation, that is, well before the issue of the Statement of Claim on 17 September 2010.

28 The realization of something that the Plaintiffs ought to have realised before, or at about the time of, the commencement of the proceedings that have been discontinued is not the sort of “supervening event” to which Basten JA referred in Bitannia. That type of event, in my view, relates to circumstances beyond a plaintiff’s control, or which he, she, or it could not have foreseen: Pharmaust Ltd v Advance Healthcare Group Ltd [2007] WASC 125 (Le Miere J) at [34].

29 Thus, I do not accept that following receipt of documents sent on 8 October 2010, there was recognition that "some supervening event" had militated against the Plaintiffs’ success, rendered the Plaintiffs’ proceedings futile, or wholly removed the Plaintiff's cause of action. In my view, there was nothing that so removed, or modified, the subject matter of the dispute so that no issue remained except that of costs.

30 Furthermore, even if I were to consider that the Plaintiffs acted reasonably in commencing the proceedings, I am not satisfied that they did so in continuing the proceedings after 3 September 2010.

31 The Defendants did nothing to encourage the litigation. They provided sound reasons for the course they propounded. Rather than filing a defence to the statement of claim, which might have, for example, simply put the Plaintiffs to proof of the matters that were asserted, they served detailed affidavits, which affidavits confirmed, on oath, the events and documents upon which they intended to rely. In the events that happened, a short time later, the Plaintiffs offered to discontinue the proceedings. The Defendants submit, correctly, in my view, that they thereby achieved, by a settlement, the result that they were propounding in the proceedings.

32 The proper application of the principles to the facts of this case mandate the conclusion that the Plaintiffs should pay such of the Defendants’ costs as, at the date on which the notice of discontinuance was filed, had been incurred by the Defendants in relation to each claim in respect of which the proceedings have been discontinued. I so order.

33 In relation to the notice of motion filed on 8 October 2010, the result of the proceedings is that the Defendants have achieved the relief that they sought and had been seeking for some time. Accordingly, there is no reason why they should not have their costs of the notice of motion as well. I so order.

34 I also order the Plaintiffs to pay the costs of the Defendants of the hearing of the costs argument.

35 I order that the exhibits tendered on the costs application be returned.

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