Michael Anthony Luxury Cars Pty Ltd v Connexwire Ltd (No 2)

[2019] NSWSC 1188

Supreme Court

New South Wales

Medium Neutral Citation:	Michael Anthony Luxury Cars Pty Ltd v Connexwire Ltd (No 2) [2019] NSWSC 1188
Decision date:	10 September 2019
Jurisdiction:	Common Law
Before:	Button J
Decision:	The plaintiff, Connexwire Ltd, must pay the costs of the first and second defendants, Michael Anthony Luxury Cars Pty Ltd and Michael John Anthony, of the application to transfer the proceedings to the Supreme Court of Queensland, on the ordinary basis.
Catchwords:	COSTS – party/party – general rule that costs follow the event – whether refusal to transfer proceedings to Queensland was unreasonable – whether indemnity costs should be ordered
Legislation Cited:	Uniform Civil Procedure Rules 2005 (NSW) Civil Procedure Act 2005 (NSW)
Cases Cited:	Calderbank v Calderbank [1976] Fam 93 Michael Anthony Luxury Cars Pty Ltd v Connexwire Ltd [2019] NSWSC 1084 Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 The Owners – Strata Plan 30791 v Southern Cross Constructions (ACT) Pty Ltd (in liq) (No 3) [2019] NSWSC 560
Category:	Costs
Parties:	Connexwire Ltd (Plaintiff) Michael Anthony Luxury Cars Pty Ltd (First Defendant) Michael John Anthony (Second Defendant)
Representation:	Counsel: M Keene (Plaintiff) J P Lo Schiavo (First and Second Defendants)   Solicitors: BCP Lawyers and Consultants (Plaintiff) Certus Legal (First and Second Defendants)
File Number(s):	2019/75937

Judgment

Introduction

1. I ordered that these proceedings be transferred to the Supreme Court of Queensland on 22 August 2019: Michael Anthony Luxury Cars Pty Ltd v Connexwire Ltd [2019] NSWSC 1084. The background to that hotly disputed order is summarised in my judgment, and I shall not repeat it here. I shall also replicate in this judgment about costs the nomenclature adopted in my substantive judgment.

2. Despite my wish to receive submissions on costs at the time of the substantive hearing, at the request of counsel I reserved the question of costs. I have since received helpful written submissions about this further dispute from counsel for both the substantive plaintiff and the two substantive defendants.

Chronology of correspondence

3. Both parties rely on correspondence that passed between their solicitors. I proceed to summarise it very concisely. For further brevity, I shall refer to correspondence between firms of solicitors as if it passed directly between the parties.

4. On 2 November 2017, the defendants wrote to the plaintiff proposing a way forward, which included that the vehicle the subject of dispute be returned to the defendants so that its condition could be assessed.

5. On 27 March 2018, the defendants made an offer to the plaintiff to settle the matter, which included a request that, if any proceedings were to be commenced by the plaintiff, they be commenced in the District Court of Queensland.

6. On 14 June 2018, the defendants made an offer to settle the plaintiff’s substantive claim. That offer included inspection of the vehicle at the cost of the defendants and a full refund, should it be determined that the vehicle was in the same condition as at the time of sale.

7. On 14 November 2018, the defendants made an offer to consent to the transfer of proceedings with no order as to costs. That letter provided reasons why New South Wales was not the appropriate jurisdiction in which to commence proceedings. That letter also explained that the defendants were able to establish that there was no nexus between the parties and New South Wales, and that, for that reason, the proceedings were likely to be transferred. Finally, that letter warned that the defendants may seek indemnity costs should they be required to bring a transfer application.

8. On 26 February 2019, the defendants sent the plaintiff a letter with an offer to transfer the matter to Queensland. That offer was stated to be made in accordance with the principles in Calderbank v Calderbank [1976] Fam 93 and to expire on 5 March 2019. It explicitly stated that indemnity costs would be sought on the basis of the letter.

9. On 4 March 2019, the plaintiff sent the defendants a letter asking for clarification about the defendants’ letter of 26 February 2019. The clarification was as to costs in the offer, in particular whether each party was to bear their own costs in respect of the motion.

10. The following day, on 5 March 2019, the defendants confirmed their offer of 26 February 2019. In my opinion, that letter does not absolutely clarify the plaintiff’s query. However, it can be inferred from their letter that, if the plaintiff were to transfer the proceedings without the defendants bringing an application, each party would bear their own costs. There is no evidence that the plaintiff responded.

11. I note that the matter was heard before me on 26 June 2019. As I have said, I delivered my judgment on 22 August 2019.

12. On 12 July 2019, the plaintiff emailed the defendants offering that each party bear its own costs up to 12 July 2019, subject to the defendants agreeing that the proceedings remain in the District Court of New South Wales. There is no evidence the defendants responded.

Written submissions about costs

13. In a nutshell, the defendants assert that they should have the costs of the proceedings before me. And they go further, and submit that costs should be ordered on the indemnity basis.

14. In support of that submission, they rely upon the correspondence that I have summarised above. They also submit that the resistance by the plaintiff to the transfer of the proceedings was so unmeritorious as to justify that special order being made.

15. The plaintiff puts forward three positions, the latter two as alternatives.

16. The first is that the costs of the proceedings before me should be costs in the cause. In a nutshell, it is said that the true merits of the substantive matter are yet to be determined.

17. The second is that costs should be costs in the cause whereby “if that party succeeds in the overall proceedings, it recovers the costs of the interlocutory application, but if it does not succeed, it does not recover those costs but does not have to pay the other party’s costs of the interlocutory application”. Again, I understood that to be a variant on the proposition that nothing has yet been decided about the substantive question of the state of the Mercedes-Benz, and the defendants should not have the costs of the transfer application if their substantive position is ultimately found to be unmeritorious.

18. The third position of the plaintiff was that costs should be reserved, yet again pending determination of the substantive dispute.

19. Separately, the plaintiff engaged with the question of whether indemnity costs should be ordered. Amongst other things, it was said that the correspondence between the parties did not justify an order for indemnity costs.

Determination

20. In my respectful opinion, the alternative theses of the plaintiff can be concisely rejected, for the following reasons (I shall deal with them out of order for convenience).

21. There is no question of me transferring a matter to Queensland with a question of costs reserved from New South Wales – thereby calling upon another judge, in another State, ultimately to untangle all that occurred months beforehand and hundreds of kilometres away. That could involve yet further oral and written submissions, and recourse to the transcript of the proceedings before me, along with the evidence and submissions at that stage. I have no doubt that it is my responsibility to determine this question of costs before transfer.

22. In similar vein, with regard to the other two positions of the plaintiff, this was a very hard fought transfer application that was conceptually and procedurally separate from the substantive question, and that featured significant evidential and legal resistance on the part of the plaintiff. In my opinion, there is no reason to depart from the ordinary rule that costs follow the event: Uniform Civil Procedure Rules 2005 (NSW), r 42.1; Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [67]-[68]. The defendants were wholly successful on their application to transfer the proceedings, and I see no reason to make any other order about costs than one that is explicitly in their favour.

23. In short, there is no question of the defendants not having their costs of these interlocutory proceedings; the only question is whether they should be costs on the ordinary or the indemnity basis.

24. I accept that the submissions of the defendants in support of the latter have force. And it is true that I found that “this matter has nothing inherently to do with New South Wales”. But that adverse finding does not of itself mean that the position of the plaintiff was not arguable at all, or so unmeritorious as to call for indemnity costs.

25. In similar vein, I accept that the defendants took significant steps to avoid the entirety of the process that unfolded before me.

26. Having said that, the power to order costs is discretionary: Civil Procedure Act 2005 (NSW), s 98. It is well established that such discretion must be exercised judicially. And it is also the case that indemnity costs are exceptional, in that they are a special order for costs. Whether a special costs order is justified depends entirely on the facts of each case, and specifically whether justice, on those facts, calls for the order.

27. In the recent case of The Owners – Strata Plan 30791 v Southern Cross Constructions (ACT) Pty Ltd (in liq) (No 3) [2019] NSWSC 560 at [36]-[38], Stevenson J with respect very helpfully reiterated the relevant principles on this point:

A Calderbank offer may attract an order for indemnity costs from the time that such an offer is rejected or not accepted if the offeree achieves a result no more favourable than the offer: Calderbank v Calderbank [1976] Fam 93 at 106; [1975] 3 All ER 333 at 342.

…

However an order for indemnity costs does not necessarily follow. The relevant principles were summarised by the Court of Appeal in Ku-ring-gai Council v Chan (No 2) [2018] NSWCA 73 at [6]:

“An offeree who does not accept an informal Calderbank offer and thereafter obtains a judgment less favourable than the offer will not necessarily be required to pay indemnity costs from the date of the offer. Such a requirement usually depends on two central considerations, namely, whether there has been a genuine offer of compromise and whether in all the circumstances it was unreasonable for the offeree not to accept it: Jones v Bradley (No 2) [2003] NSWCA 258 at [6]–[9]; Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8] (Basten JA, McColl and Campbell JJA agreeing).”

28. Contrary to the plaintiff’s written submissions, there is no reason to think that the offers to transfer the proceedings, with each party to bear their own costs, were not genuine offers of compromise. In my opinion, there is certainly an aspect of genuine compromise in the attempt by the defendants to resolve this discrete aspect of the dispute quickly and cost effectively.

29. However, I do not think that “in all the circumstances it was unreasonable for the [plaintiff] not to accept” the offer. In other words, I do not think that the commencement of proceedings in the District Court of New South Wales, and in particular the subsequent refusal to transfer, was so devoid of legal merit as to warrant the exceptional remedy of indemnity costs.

30. It follows that I reject the submission of the defendants, and propose to order costs on the ordinary basis in accordance with the usual rule. To be clear: that order extends to the costs of this dispute about costs, not least because the defendants have substantively succeeded for a second time.

31. The final aspect of this question of costs requiring analysis on my part is the costs order made in the District Court with regard to a notice of motion of the defendants staying the proceedings in that jurisdiction pending the transfer application before me. On 22 February 2019, the learned District Court judge ordered that costs of that motion be the defendants’ costs in the cause.

32. It is not entirely clear whether the defendants seek revisitation by me of that order, in that it is possible that there is a disjunction between the recent affidavit of a solicitor for the defendants relied upon with regard to the general question of costs, and the written submission of counsel for the defendants.

33. But in any event, even assuming that revisitation is sought, and even assuming that I possess jurisdiction to effect it, I would not do so. That is because the countervailing factors for and against that motion are by no means clear to me; costs in the cause generally is not inherently adverse to either party; and I believe that I should confine my orders to the dispute with which I was fully engaged.

Order

34. For the foregoing reasons, I make the following order:

1. The plaintiff, Connexwire Ltd, must pay the costs of the first and second defendants, Michael Anthony Luxury Cars Pty Ltd and Michael John Anthony, of the application to transfer the proceedings to the Supreme Court of Queensland, on the ordinary basis.

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Decision last updated: 10 September 2019