Joseph Street Pty Ltd v Tan (Costs Ruling)

[2011] VSC 41

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 5948 of 2008

JOSEPH STREET PTY LTD (ACN 094 588 271) JONATHON O'DWYER PRUE O'DWYER	Plaintiffs
v
KHAY TEK TAN GWEK LIENG REGISTRAR OF TITLES	Defendants

AND BETWEEN:

KHAY TEK TAN GWEK LIENG	Plaintiffs by Counterclaim
v
JOSEPH STREET PTY LTD (ACN 094 588 271) JONATHON O’DWYER PRUE O’DWYER	Defendants by Counterclaim

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JUDGE:	J FORREST J
WHERE HELD:	Melbourne
DATES OF HEARING:	11, 12 March, 15, 16, 17 June, 5, 6, 9, 10 August and 17 December 2010 (Written submissions as to costs filed on 17 January 2011 and 17 February 2011).
DATE OF RULING:	25 February 2011
CASE MAY BE CITED AS:	Joseph Street Pty Ltd & Ors v Tan & Ors (Costs Ruling)
MEDIUM NEUTRAL CITATION:	[2011] VSC 41

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PRACTICE AND PROCEDURE – Costs – Plaintiff failed on primary issue, but successful on other issues – Part of the defendants’ counterclaim abandoned in running – Apportionment of costs.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr G.D. Bloch	Hughes Legal Pty Ltd
For the Defendants	Mr F. Lim	Francis Lim

HIS HONOUR:

Introduction

1. On 17 December 2010, I dismissed the plaintiffs’ claims against the defendants and also dismissed the defendants’ counterclaim as to quantum.[1]

   [1]Joseph Street Pty Ltd & anor v Tan [2010] VSC 586.

1. Although the end result was that the defendants successfully resisted the plaintiffs’ claim, the defendants agitated a number of issues which were resolved against them.  As I indicated in my reasons, I thought this was a case in which it was appropriate to make a proportionate costs award in favour of the defendants.

1. Ultimately, I have determined that the defendants should be allowed 75% of their costs and I now explain my reasoning.

Relevant principles

1. In recent years, the Court of Appeal has had much to say about the making of proportionate costs awards and, indeed, the desirability of such a course in complicated proceedings.[2]

   [2]Spotless Group Limited v Premier Building and Consulting Pty Ltd and Northern Suburban Properties Pty Ltd [2008] VSCA 115, [14]; McFadzean v Construction Forestry, Mining and Energy Union (2007) 20 VR 250 [157]–[158]; Major Engineering Pty Ltd v Helios Electroheat Pty Ltd (No 2) [2006] VSCA 114, [5]; Tayles v Davis (No. 2) [2010] VSCA 107; Investec Bank (Australia) Limited v Glodale Pty Ltd [2009] VSCA 113; Zachariadis v Allfolks Australia Pty Ltd [2009] VSCA 258.

1. In Chen v Chan,[3] the Court set out the relevant principles to the making of an order for costs in circumstances where a proportionate order might be contemplated and I repeat those relevant to this application:

   [3][2009] VSCA 233, [10].

(1)       The general rule is that costs should follow the event. Absent disqualifying conduct, the successful party should recover its costs even where it has not succeeded on all heads of claim.

(2)The Rules of Court permit significant flexibility in determining questions of costs.  In particular, the Court is entitled to examine the realities of the case and will attempt to do ‘substantial justice’ as between the parties on matters of costs.

(3)Where there is a multiplicity of issues and mixed success has been enjoyed by the parties, a Court may take a pragmatic approach in framing the order for costs, taking into consideration the success (or lack of success) of the parties on an issues basis.  Generally, if such an order is made, it is reflected in the successful party being awarded a proportion of its costs but not the full amount.

(4)A Court may, when fixing costs in a claim where there has been mixed success, take into account complications which it considers will arise in the taxation of costs, as part of its consideration of the overall interests of justice.

(5)Where a Court determines to make an order apportioning costs, then it does so primarily as ‘a matter of impression and evaluation,’ rather than with arithmetical precision, having considered the importance of the matters upon which the parties have been successful or unsuccessful, the time occupied and the ambit of the submissions made, as well as any other relevant matter.

Submissions of the parties

1. At the conclusion of the delivery of my reasons I indicated to the parties that I would give them time before requiring submissions as to costs.

1. I believe that I directed that the submissions occupy no more than three pages and indicated that I did not want any references, perceiving that I was on top of the relevant authorities.[4]  Notwithstanding this plea, (or, perhaps, because of it) defendants’ counsel produced a three-page document with an annexed two page schedule and plaintiffs’ counsel a densely typed six-page document with footnotes and references.

   [4]T 2-3.

1. Counsel for the defendants submitted that the appropriate order should be for 90% of the defendants’ party/party costs.

1. Primarily, counsel relied upon the proposition that all but a skerrick of the evidence given at the trial was relevant to the primary issue:  whether the defendants’ conduct in relation to the registration of the plan of subdivision complied with their obligation to exercise “best endeavours” or “reasonable endeavours”.  Counsel also said that any costs incurred by the plaintiffs in relation to the privity of contract and the deposit guarantee defences must be minimal: only a small amount of Court time was taken up as demonstrated by references to the transcript.  In addition, he pointed to the fact that orders had already been made against the defendants on an indemnity basis in relation to the amendment to plead out the deposit guarantee expiry defence.

1. Counsel for the plaintiffs submitted that an appropriate allowance should be 50% of the defendants’ party/party costs.

1. He contended that the privity of contract and deposit guarantee defences were doomed to failure and involved effort and research that required recognition in any costs order.  He argued that examination of the transcript did not reveal the full picture of the work undertaken by each side.  He said that these were two clear issues on which the defendants had failed and any order for costs should reflect that failure.

1. Counsel also said that it should be recognised, in relation to the s 173 agreement issue – upon which the plaintiffs ultimately failed, that the defendants also failed on certain aspects and the order should reflect an adjustment on that basis.

Resolution of the issues

1. There are several matters which, it seems to me, require an adjustment to the usual rule that a successful party’s costs be met by the unsuccessful party.

1. First, that the defendants failed in relation to arguments based on privity of contract and the deposit guarantee.  I do not accept that determining the proportion of the allowance can necessarily be related to the volume of transcript occupied by evidence or discussion upon the particular topic although this, of course, does provide a guide as to the time spent in court dealing with the issue.  Both arguments (which were forcefully pressed by counsel for the defendants) required, I think, a considerable amount of research and preparation on the part of the plaintiffs’ counsel and solicitors.  Whilst I accept that a substantial portion of the case was directed to the argument upon which the plaintiffs failed, I am nonetheless satisfied that there was a respectable amount of time and effort involved in the defence of the plaintiffs to these unsuccessful aspects of the defendants’ case.

1. Secondly, in fixing the appropriate allowance, I take into account the fact that orders have already been made on an indemnity basis in relation to the amendment to the defence based on the deposit guarantee and the resultant adjournment.  However, such orders do not cover all the time and expense occasioned to the plaintiffs in meeting the allegations which failed.

1. Thirdly, it is not appropriate (contrary to the plaintiffs’ contention) to break up the s 173 agreement part of the case into sub-categories for the purpose of a costs determination.  The plain fact is that the plaintiffs failed on this issue and therefore any costs order should reflect that failure, bearing in mind that this was the issue that occupied the most significant amount of court time.  In addition, the plaintiffs also failed in their contention that, even in the absence of an agreement, the defendants failed to take reasonable steps to complete the building works.  The reality is that the plaintiffs chose to issue the proceeding relying essentially upon the failure by the defendants to enter into a s 173 agreement.  Ultimately, I concluded that the failure to do so, in the circumstances of this case, did not constitute a breach of the contractual term.

1. Finally (although not referred to in the plaintiffs’ submissions), the abandonment of the defendants’ quantum counterclaim during the course of the trial must be recognised in any costs apportionment.  This claim was well and truly alive from the commencement of the trial and, to the closing of the plaintiffs’ case.  A modest allowance must be made for the costs associated with the defence of this claim until its abandonment.

Resolution

1. The determination of this issue, as the authorities demonstrate, is not a process of mathematical calculation, but rather impression and evaluation.  Taking into account the matters I have adverted to, I think that an appropriate order is for the plaintiffs to pay 75% of the defendants’ costs, including reserved costs.