Merilla Pty Ltd v Commonwealth of Australia
[2015] WASC 309 (S)
•11 SEPTEMBER 2015
MERILLA PTY LTD -v- COMMONWEALTH OF AUSTRALIA [2015] WASC 309 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2015] WASC 309 (S) | |
| Case No: | CIV:1879/2014 | ON THE PAPERS | |
| Coram: | BEECH J | 11/09/15 | |
| 10 | Judgment Part: | 1 of 1 | |
| Result: | No order as to costs | ||
| B | |||
| PDF Version |
| Parties: | MERILLA PTY LTD ARTUS PTY LTD COMMONWEALTH OF AUSTRALIA |
Catchwords: | Costs Whether any party was successful in the action Appropriate exercise of the costs discretion Turns on own facts |
Legislation: | Rules of the Supreme Court 1971 (WA), O 66 r 1, O 66 r 2 |
Case References: | Chen v Chan (No 2) [2009] VSCA 233 Merilla Pty Ltd v Commonwealth of Australia [2015] WASC 309 Souter v Condor Developments Pty Ltd [2012] WASCA 227 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA CITATION : MERILLA PTY LTD -v- COMMONWEALTH OF AUSTRALIA [2015] WASC 309 (S) CORAM : BEECH J HEARD : ON THE PAPERS DELIVERED : 11 SEPTEMBER 2015 FILE NO/S : CIV 1879 of 2014 BETWEEN : MERILLA PTY LTD
- ARTUS PTY LTD
Plaintiffs
AND
COMMONWEALTH OF AUSTRALIA
Defendant
Catchwords:
Costs - Whether any party was successful in the action - Appropriate exercise of the costs discretion - Turns on own facts
Legislation:
Rules of the Supreme Court 1971 (WA), O 66 r 1, O 66 r 2
Result:
No order as to costs
Category: B
Representation:
Counsel:
Plaintiffs : No appearance (on the papers)
Defendant : No appearance (on the papers)
Solicitors:
Plaintiffs : Lawfield Legal Practice
Defendant : Minter Ellison
Case(s) referred to in judgment(s):
Chen v Chan (No 2) [2009] VSCA 233
Merilla Pty Ltd v Commonwealth of Australia [2015] WASC 309
Souter v Condor Developments Pty Ltd [2012] WASCA 227
- BEECH J:
Introduction
1 On 20 August 2015, I delivered reasons for decision after the trial of this action.1 On that day, I made declarations that:
(1) the rent payable under the Lease for the period from 4 May 2013 to 3 May 2014 has not been agreed or determined in accordance with cl 5.7.1 of the Lease;
(2) the rent determination (the Determination) of Mr Ross A Hughes dated 17 April 2014 was not made in accordance with the terms of the Lease and is not binding on the plaintiffs and the defendant; and
(3) cl 5.7.1 of the Lease is not void for uncertainty.
2 I also made orders otherwise dismissing the plaintiffs' claims and dismissing the defendant's counterclaim; and for the exchange of submissions and affidavits on the question of costs. I ordered that the question of costs be determined on the papers. These reasons deal with the costs of the action, including the counterclaim.
The competing positions on costs
3 The Owners seek an order that the Commonwealth pay their costs of the action, including the counterclaim. In summary, they point to the following matters in support of that conclusion:2
(1) the Commonwealth was entirely unsuccessful in its counterclaim;
(2) the Owners were generally successful in their claim, in that they obtained declaratory relief inconsistent with the Commonwealth's assertion that the Determination was binding;
(3) although the Owners were unsuccessful on some issues, those issues did not add to the costs of the proceedings in a significant and readily discernible way, and were, in any event, part of a single substantive contest about whether the Commonwealth was entitled to a reduction of the rent for the fourth Rent Period to $250,000 per annum, plus GST, in accordance with the Determination; and
(4) in 2014, the Owners asked the Commonwealth to accept that the Determination was not binding and that the Commonwealth was obliged to continue paying the rental for the previous rent period. The Commonwealth's refusal to accept that position was the effective cause of the action and the costs associated with it, and the Commonwealth failed to achieve a better outcome than that in the proceedings.
4 The Commonwealth submits that each party should bear its own costs. In support of that contention, it submits that:
(1) neither party should be considered to have been successful for the purposes of O 66 r 1;3 and
(2) alternatively, if and insofar as the Owners are considered to be the successful party for the purposes of O 66 r 1, they should nevertheless not recover their costs because of the limited extent of their success.4
Costs: general principles
5 The court's costs discretion under s 37 of the Supreme Court Act 1935 (WA) and O 66 of the Rules of the Supreme Court 1971 (WA) is broad.
6 Order 66 r 1(1), r 1(2) and r 1(3) are in the following terms:
1. General rules as to costs
(1) Subject to the express provisions of any statute and of these Rules the costs of and incidental to all proceedings including the administration of estates and trusts shall be in the discretion of the Court but, without limiting the general discretion conferred on the Court by the Act, and subject to this Order, the Court will generally order that the successful party to any action or matter recover his costs.
(2) If the Court is of opinion that the conduct of a party either before or after the commencement of the litigation or that a claim by a party for an unreasonably excessive amount has resulted in costs being unnecessarily or unreasonably incurred it may deprive that party of costs wholly or in part, and may further order him to pay the costs of an unsuccessful party either wholly or in part.
(3) Where a party though generally successful in an action has, by the introduction of some issue or issues on which he has failed, increased the costs the Court may order such party to pay the costs of such issue or issues.
8 Order 66 r 2(a) and 2(b) provide:
In the absence of any special order -
(a) where the statement of claim contains more than one cause of action and the plaintiff succeeds on one or more causes of action and the defendant succeeds on another or others, costs shall be allowed to the plaintiff on the cause or causes of action on which he succeeds and to the defendant on that or those on which he succeeds, in the same manner as if separate actions had been brought;
(b) where there is judgment for one party on the claim with costs and judgment for the other party on the counterclaim with costs, the costs shall be assessed as if each party had succeeded in an independent action and charges which cover without discrimination, work referable to the claim and work referable to the counterclaim, shall be divided between the claim and the counterclaim in the proportion in which the work covered by such charge is properly attributable to the claim and to the counterclaim.
9 I apply the following principles stated by Newnes JA (Buss & Murphy JJA agreeing) in Souter v Condor Developments Pty Ltd:5
First, where a party, although generally successful, has failed on some issue or issues which increased the costs of the action, the court may order the party to pay the costs of those issues: O 66 r 1(3). But that is a power to be exercised with caution and not as a matter of course. While parties should be encouraged to litigate only those matters which are properly and reasonably in issue, parties should not be dissuaded by the risks of an adverse costs order from canvassing all issues which might be material to the proper determination of a case: Keet v Ward [18]. Moreover, any practice of determining costs on the basis of a painstaking analysis of which party won on which issue would simply add to the time, costs and uncertainty of litigation: see Bowen v Alsanto Nominees Pty Ltd [2011] WASCA 39 (S) [6]. Such an approach may also fail to do justice in cases where the issues were intertwined or overlapped, or there was only one substantive issue. The exercise of the power to adjust an order for costs by reference to particular issues upon which an otherwise successful party has failed will ordinarily be appropriate only where the party has failed on discrete and severable issues which have added to the costs of the action in a significant and readily discernible way: Amaca Pty Ltd (formerly James Hardie & Co Pty Ltd) v Hannell [2007] WASCA 158 (S) [7].
Where the court considers that an order as to costs should reflect the failure of the successful party on some issues in the action, the better approach will often be to award the successful party a proportion of its costs, or to make no order as to costs, rather than attempt to award costs to the respective parties on an issue by issue basis: Phillips Fox (A Firm) v Westgold Resources NL [2000] WASCA 85 [28]. Where a party is awarded only a proportion of its costs, the exercise of discretion involved will inevitably be more a matter of art than science, depending upon matters of impression and evaluation, and mathematical precision will be illusory: Amaca [6]; Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261, 272.
Secondly, where a plaintiff pleads two or more causes of action but succeeds on only some of those causes of action, the general rule is that the plaintiff is entitled to costs on the causes of action on which it was successful and the defendant is entitled to costs on the causes of action on which it was successful, as if separate actions had been brought: O 66 r 2(a). Again, and for similar reasons, an order of that kind is not to be made as a matter of course. It is necessary for the court to look at the realities of the case and attempt to do substantial justice in the particular circumstances. In some cases, while it might be strictly correct to say there are different causes of action involved, there may have been only one contest in substance. That will often be so where all causes of action arise out of the one course of dealings, the one transaction, or the same facts, in which case there would usually be one order for the general costs of the action, moulded as necessary to ensure that substantial justice is done: Permanent Building Society v Wheeler [No 2] (1993) 10 WAR 569, 574 - 575; Keet v Ward [24].
10 In a case where the parties have had mixed success, in determining the appropriate costs order a court can take into account complications which might arise in the taxation of costs in determining where the overall interests of justice lie.6
The proper exercise of the costs discretion
11 In my opinion, when the result of the action is considered in the framework of the competing claims and counterclaims, an order that there be no order as to costs, so that each party bears its own costs, reflects the substantial justice of the case.
12 The Owners' claims and the Commonwealth's counterclaim were both substantial components of the trial; each occupied a significant part of the preparation and time at trial. None of the Owners' pleaded claims were upheld. The Owners succeeded in resisting the counterclaim.
13 In the circumstances of this case, it would be open to make a costs order in favour of the Owners in relation to the counterclaim, and a costs order in favour of the Commonwealth on the Owners' claims. However, in my view, the justice of the case is better served by an order that deals with all of the costs globally, without requiring a line to be drawn between the costs of the action and those of the counterclaim. All of the parties' various causes of action arise out of the one course of dealing between them, involving the same set of facts. The making of a single order in respect of the whole of the costs of the action and the counterclaim seems to me to be conducive to doing substantial justice. Further, a single order avoids the difficulties which would arise upon taxation in apportioning particular parts of the parties' costs as between the action and the counterclaim. I think there would be scope for considerable disagreement between the parties in that process.
14 Approaching the question of costs globally invites attention to the question of which party, if any, was successful in the action as a whole, including the counterclaim. The Owners submit that in substance, there was only one contest in the proceedings, namely whether the Determination was binding and had set the rent for the fourth Rent Period.7 I do not accept that characterisation of the substance of the proceedings. In my view, whether the Determination was binding and had determined the rent for the fourth Rent Period reflected the central issue raised by the Commonwealth's counterclaim. However, the Owners' claims travelled substantially beyond an attempt to meet, in anticipation, the Commonwealth's counterclaim.
15 In the Primary Reasons, I summarised the Owners' claims in the following way:8
The Owners' primary claim is that in June 2013, the parties agreed that the rent for the fourth Rent Period would be the rent calculated as an increase of the rent from the third Rent Period by the greater of 3.5% or annual CPI.
The Owners' alternative case is that the rent for the fourth Rent Period is the same as the rent for the third Rent Period, namely $307,977.24 per annum plus GST.
The Owners put two alternative routes to that conclusion.
First, the Owners plead that cl 5.7.1 of the Lease was void for uncertainty in that there was no procedure set out in sch 7 of the Lease for determining 'market rent' or for determining 'market rent' as at 4 May 2013.
Alternatively, the Owners plead that:
(1) on a proper construction of the Lease, there were terms to the effect that:
(a) if a party wanted the rent to be reviewed for the fourth Rent Period it was to give the other party a notice to the effect that it wished the rent to be reviewed and, thereafter, the parties were to genuinely attempt to reach agreement on the rent for that period;
(b) if no notice of a rent review was given for the fourth Rent Period or no genuine attempt to reach agreement on the rent for that period was made in the period between 4 May and 4 August 2013, the Commonwealth was to pay the Owners the same rent as for the third Rent Period; and
(2) the Commonwealth made no genuine attempt to reach agreement with the Owners as to the rent for the fourth Rent Period before 4 August 2013 in that it did not attempt to process the rent review and respond to the Owners' offer of 4 April 2013 until 21 October 2013 by reason of which the rent for the fourth Rent Period was the same as the rent for the third Rent Period.
16 By their claims, the Owners did not merely deny that the Determination had binding effect. Rather, the Owners' claims positively asserted that the course of events meant that the rent for the fourth Rent Period was either 3.5% more than the rent for the third Rent Period, or the same as for that previous period.
17 All three of the Owners' claims in this respect were entirely unsuccessful. I rejected the Owners' contentions that:
(1) rent for the fourth Rent Period had been agreed;
(2) cl 5.7.1 was void for uncertainty; and
(3) cl 5.7.1 had never been engaged because there was no genuine attempt by the Commonwealth, before 4 August 2013, to agree rent for the fourth Rent Period.
18 Just as the Commonwealth failed its assertion (through the counterclaim) that in the events that had happened it was entitled to pay a reduced annual rent of $250,000 plus GST for the fourth Rent Period, the Owners failed in their claim that in the events that had happened, rent for the fourth Rent Period was either 3.5% more than, or was the same as, the rent for the preceding year.
19 The outcome of the litigation does not reflect the position, or even an alternative position, asserted by the Owners. The result of the litigation is that the rent for the fourth Rent Period is, at present, unknown and yet to be determined, but is open to be determined by a valuer who determines the market rent for the Premises as at 4 May 2013.
20 I have considered the chain of correspondence between the parties annexed to Mr Hicks' affidavit sworn 28 August 2015 in relation to costs. I am not persuaded that those communications sustain an order for costs in favour of the Owners.
21 Insofar as the Owners submit that the parties' correspondence shows that the real contest in the proceedings was whether the Determination was binding, I reject that submission. The subject matter of the litigation is as revealed by the pleadings and the conduct of the action, not by correspondence preceding or during the action.
22 The Owners submit that the outcome of the proceedings was substantially the same as the position the Owners requested the Commonwealth to accept by correspondence in May 2014. By their solicitors' letter in May 2014, the Owners requested the Commonwealth to accept that the Determination was not binding (although for different reasons than those found by the court) and, consequently, that the Commonwealth was obliged to continue paying the rent applicable for the preceding year.
23 I do not accept the Owners' submission that the result of these proceedings is substantially the same as that offered by the Owners in May 2014. The Owners' offer of May 2014 involved an acceptance that the rent for the fourth Rent Period was the same as the rent for the third Rent Period. That is not the result of this action. Rather, the result of this action is that the rent for the fourth Rent Period has yet to be determined. That rent may be determined by a valuer who determines the market rent for the Premises as at 4 May 2013 in accordance with sch 7 of the Lease, with the necessary changes identified in the Primary Reasons.
Conclusion
24 For these reasons, I order that there be no order as to the costs of the action, including the counterclaim.
1Merilla Pty Ltd v Commonwealth of Australia [2015] WASC 309 (Primary Reasons). In these reasons I use the terminology and abbreviations used in the Primary Reasons.
2 Plaintiffs' submissions dated 28 August 2015 [2].
3 Defendant's submissions dated 28 August 2015 [5] - [8].
4 Defendant's submissions dated 28 August 2015 [10].
5Souter v Condor Developments Pty Ltd [2012] WASCA 227 [28] - [30].
6Chen v Chan (No 2) [2009] VSCA 233 [10] (Forrest AJA, Maxwell P & Redlich JA agreeing).
7 Plaintiffs' submissions dated 28 August 2015 [19].
8 Primary Reasons [68] - [72] (footnotes omitted).
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