MPA Motors Pty Ltd & Anor v D & L Schmidt Pty Ltd
[2008] VSC 237
•19 June 2008
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
No. 6722 of 2007
| MPA MOTORS PTY LTD and McLEOD TREES PTY LTD | Plaintiffs |
| v | |
| D & L SCHMIDT PTY LTD | Defendant |
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JUDGE: | HOLLINGWORTH J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 10 and 19 June 2008 | |
DATE OF JUDGMENT: | 19 June 2008 | |
MEDIUM NEUTRAL CITATION: | [2008] VSC 237 | |
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COSTS – Substantive application not proceeded with – Application by one party for costs – Whether interlocutory injunction effectively resolved application for final relief – Partial award of costs.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr A. Schlicht with Ms M. Schilling | Ashley West & Co |
| For the Defendant | Mr C. Connor | Kliger Partners |
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HER HONOUR:
Background
The applicants are tenants of retail premises in Elsternwick, which are owned by the defendant. The parties were involved in a VCAT proceeding (No R28 of 2006), in which the landlord was applicant and the tenants were respondents. The first VCAT proceeding was settled by terms of settlement dated 30 March 2007, on the basis that there would be a grant of a new lease, provided certain preconditions were met within specified time frames.
The landlord disputed that the tenants had complied with those preconditions and sought to re-enter the premises. The tenants issued a second VCAT proceeding (No R97 of 2007), and sought an interlocutory injunction to restrain the landlord from re-entering the premises, pending the determination of their substantive application to enforce the terms of settlement.
The first return date of the VCAT injunction application was before Deputy President McNamara on 8 June 2007. On that occasion, the landlord undertook not to attempt to re-enter the premises prior to the hearing of the injunction application during the following week.
The injunction application came on before Senior Member Lothian on 13 June 2007. The landlord's counsel conceded that the balance of convenience favoured the tenants. However, argument proceeded as to whether there was a serious question to be tried concerning the tenants’ ability to obtain specific performance of the terms of settlement.
The Senior Member gave ex tempore reasons, in which she indicated that because the tenants had not established that there was a serious question to be tried in relation to one of the preconditions, they had therefore not established that there was a serious question in relation to specific performance. Accordingly, the tenants’ application for an interlocutory injunction was refused.
Two days later, on 15 June 2007, the tenants issued this proceeding in the Supreme Court and sought an interlocutory injunction in the Practice Court, seeking to restrain the landlord from re-entering the land. The injunction application was opposed.
Osborn J held that based on the limited material before him, there was a serious question to be tried as to whether the Senior Member had denied the tenants natural justice in the way in which she had dealt with the particular precondition. As the balance of convenience clearly favoured allowing the tenants to remain in the premises until the appeal against the Senior Member's orders could be determined, his Honour granted an injunction until 2 July 2007.
Six further affidavits were filed between 15 and 29 June 2007, at which time the application for leave to appeal came on before the Senior Master. The application was opposed. The Senior Master granted leave to appeal and adjourned the proceeding to the Listing Master, for her to fix the appeal for hearing.
On three occasions between 2 July and 15 October 2007, Osborn J's interlocutory injunction was extended by consent by various judges sitting in the Practice Court.
The final VCAT hearing was heard on 21 to 24 August 2007, with judgment reserved. When the appeal came on before the Listing Master on 11 September 2007, she adjourned it by consent on the papers to 25 February 2008, noting in other matters that “the parties are awaiting decision of VCAT proceeding”.
On 9 October 2007, Senior Member Walker delivered his decision in the VCAT proceeding. The Senior Member held that the tenants had complied with all preconditions in the terms of settlement and were entitled to final relief. The effect of the final VCAT orders was to render this Supreme Court proceeding redundant, leaving only the question of costs to be determined.
On 14 March 2008, the Listing Master fixed the matter for hearing on 10 June 2008, for argument as to costs.
The tenants seek an order that the landlord pay the costs of:
(1) The interlocutory injunction application in the Practice Court;
(2) The application for leave to appeal; and
(3) The directions hearing on 25 February 2008.
The landlord resists any such order. Further, it argues that the parties should bear their own costs up to 16 May 2008, and the tenants should pay the landlord’s costs from 17 May 2008 on an indemnity basis, by reason of a Calderbank offer.
Directions hearing on 25 February 2008
I will deal first with the directions hearing on 25 February 2008, as it raises a short, discrete issue. This was a directions hearing before the Listing Master, of which both parties had prior notice. The landlord simply failed to appear. No explanation has been given to the court for its non-attendance.
The tenants’ costs of the day were completely wasted, as all the Listing Master could do was adjourn the directions hearing off to another date. No satisfactory reason has been given as to why the landlord should not pay the tenants’ wasted costs of 25 February 2008 in any event, and I will so order.
The other costs
General principles
Generally speaking, when there has been no hearing on the merits, the court is usually deprived of the factor that determines whether or how it will make a costs order.[1]
[1]Re the Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia ex parte Lai Qin (1997) 186 CLR 622 at 624 per McHugh J.
However, a costs order may be appropriate where:
(1)One of the parties has acted so unreasonably that the other party should obtain the costs of the action; or
(2)A judge feels confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried.[2]
[2]Ibid at 624-5.
In Australian Securities Commission v Aust-Home Investments Ltd,[3] Hill J enumerated five principles to guide the exercise of the court's discretion in determining whether to grant costs where a proceeding has been discontinued without final hearing. Those principles have been adopted on numerous occasions.[4]
[3](1993) 116 ALR 523.
[4]Including: ex parte Lai Qin op cit at 624-5; Champagne View Pty Ltd v Shearwater Resort Management Pty Ltd [2000] VSC 214; Ringwood Plus Pty Ltd v Commissioner of State Revenue [2004] VSC 494; Lion Nathan Australia Pty Ltd v Coopers Brewery Limited (No 3) [2006] FCA 1023; Ferny Sky Pty Ltd & Ors v Capital Finance Australia [2006] VSC 366; Fordyce v Fordham & Anor [2006] NSWCA 274.
In particular, his Honour noted that where the proceedings terminate after interlocutory relief has been granted, the court may take into account the fact that interlocutory relief has been granted. However, he noted that fact carries no implication as to the ultimate merits of the case, but does ordinarily suggest that the court granting interlocutory relief has accepted or found that there is an arguable issue to be tried between the parties, and that the balance of convenience favours the grant of relief.
It has been suggested, and I accept, that there may be a gloss on the general principle in a situation where the interlocutory relief granted has effectively resolved the application for final relief.[5]
[5]Lion Nathan op cit per Goldberg J, especially at [13], [16]-[17]. Similarly, in Gagarimabu v BHP Billiton Limited [2002] VSC 525, Bongiorno J ordered costs because it was clear that the plaintiff had, in effect, achieved at least part of the outcome which he sought to achieve by the institution of the proceeding.
Clearly, each case must turn on its own facts.
Reasonableness
The tenants do not contend that either party has acted unreasonably in bringing or defending the proceeding or the interlocutory injunction application.
However, the tenants say that the landlord was unreasonable in opposing the application for leave to appeal, given that Osborn J had already determined that there was a serious question to be tried for the purposes of the interlocutory injunction application.
I do not agree that it was unreasonable for the landlord to oppose leave. Osborn J had made it clear that he had considered the matter on a preliminary basis only and on limited material. In particular, he did not have the actual transcript from the hearing before Senior Member Lothian. The fact that he only granted the injunction until a few days after the leave application was to be heard indicates that his Honour was open to the possibility that leave to appeal might not be granted. He was merely and quite reasonably preserving the status quo until the matter could be argued more fully.
Senior Master Mahoney had before him six further affidavits which had not been before Osborn J. In all the circumstances, it was not unreasonable for the landlord to want to have the application for leave to appeal fully argued on the additional material. I therefore proceed on the basis that it cannot be said that either party has acted unreasonably in the relevant sense.
Merits
This is not a case in which the court can feel confident that one party was almost certain to have succeeded if the appeal had been fully tried. The courts have made it clear that such cases will be rare. In ex parte Lai Qin[6], McHugh J warned that to try a hypothetical action between the parties, for costs purposes, would potentially burden the parties with the very costs of a litigated action which by settlement or extra-curial action they had avoided.
[6]Op cit at 624.
It is therefore unfortunate that the landlord spent so much time last week trying to address the court on the merits of the appeal, trying to persuade me that the tenants’ allegation of a denial of natural justice at VCAT would never have succeeded.
Effect of interlocutory relief
Ultimately, this case is going to turn on the characterisation of the effect of the interlocutory relief. The tenants argue that the interlocutory injunction has effectively resolved the application for final relief in this court, that the tenants have achieved at least part of the substantive outcome sought in the proceeding.
All that the tenants sought in this proceeding was the very injunction which they say that VCAT should have granted them, namely an injunction restraining the landlord from removing them from the premises until their claim for specific performance of the terms of settlement could be heard and determined.
In the rather unusual circumstances of this case, I agree that the interlocutory injunction has effectively resolved the application for final relief in this court. In the circumstances, I propose to order that the landlord pay the tenants’ costs of the application for interlocutory relief, including all reserved costs.
However, I do not propose to make any order as to the costs of the application for leave to appeal. Having found that nobody acted unreasonably in relation to that, and being unable to say whether or not an appeal on natural justice grounds would have ultimately been successful, it seems appropriate that each party bear their own costs of that part of the case.
Calderbank offer
The landlord served an offer dated 12 May 2008, offering to pay $7,500 in full and final settlement of the tenants’ costs of this proceeding. The offer was open until 4.00pm on 16 May 2008. It was not accepted.
It is not now suggested, contrary to what was said last week, that the Calderbank letter is relevant to my general discretion as to costs, that is to say, whether I should order any costs at all. Rather, the landlord says it should get its costs since 17 May 2008 on an indemnity basis.
I am yet to hear from the parties as to the costs orders they say should be made in respect of the hearing last week and today; I will deal with the Calderbank letter in that context, as part of the costs argument which I will shortly hear.
Appeal Costs Act
The landlord says if the court determines to order any costs against it, then it seeks an indemnity certificate under s 4(1) of the Appeal Costs Act 1958.
I accept that VCAT is a court for the purposes of s 3 of that Act. However, s 4(1) only empowers this court to grant a certificate if an appeal “succeeds.” Here, there has been no determination of the merits of the appeal. I am not persuaded that the court can or should grant such a certificate, having regard to the relevant principles as set out by the Full Court of this court in Pickford v Incorporated Nominal Defendant.[7]
[7][1981] VR 583 per Brooking J, with whom Starke and Anderson JJ concurred.
Conclusion
There will be orders that the respondent pay the appellants’ costs of:
(a) The directions hearing on 25 February 2008; and
(b) The injunction application, including all reserved costs.
I will hear from the parties as to the costs of this application for costs, including as to the effect of the landlords’ Calderbank letter.
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