Medina Property Services Pty Ltd v Starin Ltd as trustee of the Macquarie Business Centre Unit Trust (No 2)

[2019] NSWSC 545

Supreme Court

New South Wales

Medium Neutral Citation:

Medina Property Services Pty Ltd v Starin Ltd as trustee of the Macquarie Business Centre Unit Trust (No 2) [2019] NSWSC 545

Hearing dates:

On the papers

Decision date:

15 May 2019

Jurisdiction:

Equity - Duty List

Before:

Ball J

Decision:

(1)   Each party pay its own costs of the proceedings on and from 20 December 2018; and

(2) Pursuant to s 8(1)(a) of the Court Suppression and Non-Publication Orders Act 2010 (NSW) the exhibit marked Confidential Exhibit BMG7 and pages 79 to 246 of Exhibit NM-3 be kept confidential and access to those exhibits be restricted to the defendants and their legal advisers on the ground that the order is necessary to prevent prejudice to the proper administration of justice.

Catchwords:

COSTS – Party/Party – General rule that costs follow the event – Proceedings discontinued or dismissed – conduct of parties – whether parties should pay bear their own costs – whether parties effectively capitulated or acted unreasonably

Legislation Cited:

Court Suppression and Non-Publication Orders Act 2010 (NSW)

Cases Cited:

Re The Minister for Immigration and Ethnic Affairs of The Commonwealth of Australia & Anor ex Parte Lai Qin (1997) 186 CLR 622

Category:

Costs

Parties:

Medina Property Services Pty Ltd (First Plaintiff)
Toga Hotel Management Holdings Pty Limited (Second Plaintiff)
Starin Limited as trustee of the Macquarie Business Centre Unit Trust (First Defendant)
Sydney Rainbow Pty Limited as trustee for the MBUT Operations Unit Trust (Second Defendant)

Representation:

Counsel:

 

JAC Potts with Alexander Langshaw (Plaintiffs)
David R Stack (Defendants)

 

Solicitors:

  Speed and Stracey Lawyers (Plaintiffs)
Norton Rose Fulbright (Defendants)

File Number(s):

2018/377547

Publication restriction:

Pursuant to s 8(1)(a) of the Court Suppression and Non-Publication Orders Act 2010 (NSW) the exhibit marked Confidential Exhibit BMG7 and pages 79 to 246 of Exhibit NM-3 be kept confidential and access to those exhibits be restricted to the defendants and their legal advisers on the ground that the order is necessary to prevent prejudice to the proper administration of justice.

Judgment

Background

1. These proceedings concern a contract relating to the development of an apartment hotel in Macquarie Park. On 11 August 2016, the parties entered into an Agreement for Management Agreement (AFMA) by which the first defendant, Starin, agreed to build a hotel on land it owned in Macquarie Park (the Land), and upon completion to grant to the first plaintiff, Medina, management rights over the hotel in accordance with the management agreement that was annexed to the AFMA.

2. Under the terms of the AFMA, Starin is prohibited from dealing with the Land or with its rights, obligations and liabilities under the AFMA without Medina’s consent, such consent not to be unreasonably withheld. The AFMA also prohibits the parties from using or disclosing “Confidential Information”, which is defined in the AFMA to include the contents and subject matter of the AFMA except, relevantly, as the parties may agree in writing.

3. In June 2018, the plaintiffs became aware that Starin was marketing the Land for sale to third parties. There were then negotiations between the parties between about August 2018 and October 2018 on the terms on which the defendants could disclose the existence and the terms of the AFMA to prospective purchasers.

4. On 4 December 2018, while negotiations were continuing, Starin purported to terminate the AFMA.

5. The plaintiffs disputed the validity of the termination and, on 7 December 2018, commenced these proceedings. By their summons, the plaintiffs sought the following final relief:

3.   A declaration that the first defendant’s purported termination of the Agreement for Management Agreement between the plaintiffs and the defendants dated 11 August 2016 is invalid and of no effect.

4.   The defendants be restrained from taking any step in reliance on the purported termination of the Agreement for Management Agreement between the plaintiffs and the defendants dated 11 August 2016.

6. The plaintiffs also sought an urgent interlocutory injunction restraining the defendants from dealing with the Land and with their rights, obligations and liabilities under the AFMA. An ex parte injunction was granted by Stevenson J in those terms on that day.

7. The matter came back before the Court on 10 December 2018 and again on 11 December 2018, at which time the matter was adjourned until 14 December 2018. In the meantime, on 12 December 2018, the defendants entered into voluntary liquidation.

8. On 14 December 2018, Stevenson J granted the plaintiffs leave to proceed against the defendants and made orders for the preparation of the case for a final hearing that was set down for 12 and 13 February 2019. His Honour continued the interlocutory injunction until that time.

9. On 20 December 2018, the defendants unconditionally withdrew the termination notice and asserted that, as a result, the proceedings were no longer of any utility and sought to dispose of them efficiently.

10. The plaintiffs did not agree with that course and instead proposed final orders which included a declaration that the AFMA remains on foot and an undertaking by the defendants that they will not, so long as the AFMA remains on foot, deal with the Land or with their rights, obligations and liabilities under the AFMA without the plaintiffs’ consent, such consent not to be unreasonably withheld.

11. On the same day, the defendants by their solicitor, refused to consent to the order sought by the plaintiffs or to give the undertaking, on the basis that the order and undertaking went beyond what was sought in the summons. They offered to consent to alternative short minutes of order and threatened to list the matter before the Duty Judge if agreement could not be reached by 9.00 am the following morning. The matter was said to be urgent because of the directions that had been given by the Court for the preparation of a hearing commencing on 12 February 2019.

12. There was further correspondence between the parties. On 21 December 2018, the plaintiffs’ solicitors wrote to the defendants’ solicitors pressing for the orders sought by the plaintiffs and querying the urgency of resolving the matter, particularly having regard to the intervention of the Christmas vacation.

13. On 27 December 2018, the defendants’ solicitors took steps to relist the matter before the Duty Judge. Subsequently, they filed a motion returnable on 11 January 2019 seeking an order that the interlocutory injunction be discharged, that the hearing date be vacated and that the summons be dismissed.

14. On 8 January 2019, the plaintiffs’ solicitors wrote to the defendants’ solicitors giving notice that they proposed to seek leave to amend the summons to seek a declaration that the AFMA remains on foot and an injunction restraining the defendants from dealing with the Land or with their rights, obligations and liabilities under the AFMA without the plaintiffs’ consent.

15. There was then further substantial correspondence between the parties’ solicitors before the matter came before Robb J on 11 January 2019. At that time, the Court made the following directions by consent:

1.   Directs the plaintiffs to file and serve a notice of motion seeking leave to amend, and an affidavit in support, by 21 January 2019.

2.   Directs the defendants to file and serve any evidence on that application to amend together with any interlocutory application and supporting evidence, by 29 January 2019.

3.   Directs the parties to liaise with the chambers of Stevenson J to obtain a hearing date for the motion.

16. Following further correspondence between the parties, on 8 February 2019, the Court made the following orders by consent:

1.   Note that the first and second defendants have unconditionally withdrawn their notice of termination dated 4 December 2018 of the Agreement for Management Agreement between the plaintiffs and the defendants dated 11 August 2016 (AFMA).

2.   Note the agreement of the parties that the AFMA presently remains on foot, without prejudice to the rights of the plaintiffs or the defendants or of the liquidators of the defendants under the AFMA and/or under statute or to the exercise of such rights.

3.   Note the undertaking of the defendants (by their liquidators) to the plaintiffs and to the Court that the defendants will not, without first giving the plaintiffs 14 days' prior notice, by themselves, their servants or agents, take any steps to mortgage, charge, encumber, sell, dispose, transfer, assign or grant a concurrent lease of their interest in [the Land], or their rights, obligations and liabilities under the AFMA.

4.   Note that the undertaking as to the giving of notice recorded in order 3 above does not otherwise affect or impinge upon any substantive rights of the defendants and of the liquidators of the defendants under the AFMA and/or under statute or to the exercise of such rights.

At the same time, the interlocutory injunction was discharged, the hearing date was vacated, the defendants were ordered to pay the plaintiffs’ costs up to 20 December 2018 and costs after 20 December 2018 were reserved.

17. The only outstanding issue is those costs.

18. The plaintiffs’ position is that the defendants should pay their costs from that date because the orders made on 8 February 2019 meant that the defendants had effectively surrendered. The plaintiffs also contend that they acted reasonably in insisting on the orders they sought because the refusal of the defendants to acknowledge that the AFMA was on foot gave rise to a justified suspicion that the defendants were in fact searching for some alternative basis on which to escape their obligation under the AFMA.

19. The position of the defendants, on the other hand, is that the plaintiffs should pay their costs on and from 20 December 2018 or, in the alternative, each party should pay their own costs for that period.

Consideration

20. The relevant legal principles are not in dispute. Normally, where proceedings are resolved before a contested hearing, the Court will not make an order for costs because it is deprived of information that usually determines the question of costs – namely, which party was successful; and it will not conduct a hypothetical trial to determine the answer to that question. However, a court may be prepared to make an order for costs where it is evident that the resolution of the proceedings represents effective capitulation by one party or the other or where one party has acted so unreasonably that the other party should have the costs of the action: Re The Minister for Immigration and Ethnic Affairs of The Commonwealth of Australia & Anor ex Parte Lai Qin (1997) 186 CLR 622.

21. In the present case, I do not think that it could be said that one party or the other capitulated or acted so unreasonably that costs should be awarded against that party. The orders sought by the plaintiffs went beyond the orders sought in the original summons. Consequently, the plaintiffs filed a motion seeking to amend their summons. Those amendments were resisted by the defendants. The question whether the amendments should be allowed was never finally resolved by the Court. Instead, the parties sensibly agreed on short minutes of order that disposed of the proceedings. I do not think those short minutes of order could be treated as a capitulation by the defendants on the motion and the amended claim. They were not orders by the Court in terms sought in the proposed amended claim.

22. The dispute between the parties after 20 December 2018 fell within a narrow compass. The defendants were correct when they took the position that the orders sought by the plaintiffs went beyond what was sought in the summons. On the other hand, the plaintiffs might reasonably have thought that it was prudent to obtain orders in the form that they ultimately sought having regard to the history of the matter. Given the limited difference between them, there may be a question whether the dispute warranted the time and costs both parties spent on it. But it is not obvious that either party was substantially less reasonable than the other in that respect.

23. It follows that each party should bear their own costs on and from 20 December 2018.

Confidentiality

24. The AFMA is expressed to be a confidential document and previously orders have been made under the Court Suppression and Non-Publication Orders Act 2010 (NSW) in respect of it. Consistently with those earlier orders, the plaintiffs seek an order pursuant to s 8(1)(a) of the Act that the exhibit marked Confidential Exhibit BMG7 and pages 79 to 246 of Exhibit NM-3 (which reproduces the AFMA) be kept confidential and that access to those exhibits be restricted to the defendants and their legal advisers on the ground that it is necessary to prevent prejudice to the proper administration of justice.

25. I am satisfied that the AFMA is a confidential and commercially sensitive document. Nothing about this matter and the resolution of the current application requires disclosure of the contents of the document beyond what is contained in this judgment. Consequently, I am satisfied that an order in those terms should be made.

Orders

26. It follows that the orders of the Court are:

1. Each party pay its own costs of the proceedings on and from 20 December 2018;

2. Pursuant to s 8(1)(a) of the Court Suppression and Non-Publication Orders Act 2010 (NSW) the exhibit marked Confidential Exhibit BMG7 and pages 79 to 246 of Exhibit NM-3 be kept confidential and access to those exhibits be restricted to the defendants and their legal advisers on the ground that the order is necessary to prevent prejudice to the proper administration of justice.

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Decision last updated: 15 May 2019