Nowland v Maiolla Casbee Properties Pty Ltd v Eastwood Air Conditioning Pty Ltd (No 2)

[2014] NSWSC 289

Supreme Court

New South Wales

Medium Neutral Citation:

Nowland v Maiolla Casbee Properties Pty Ltd v Eastwood Air Conditioning Pty Ltd (No 2) [2014] NSWSC 289

Hearing dates:

19 February 2014

Decision date:

19 March 2014

Jurisdiction:

Equity Division

Before:

Robb J

Decision:

(1)Substantive orders made on the basis of reasons for judgment published on 20 December 2013 as set out in par 16.

(2)In proceedings No 2012/85607 order the first defendant to pay the plaintiffs' costs of the proceedings on the ordinary basis.

(3)In proceedings No 2012/85607 make no order for costs for or against the second defendant, with the intent that the second defendant and all other parties will pay their own costs of the proceedings in so far as they involve the second defendant.

(4)In proceedings No 2012/136262 make no order for costs, with the intent that each party will pay its own costs of the proceedings.

(5)Order for the return of exhibits and subpoenaed material as set out in par 18 of the reasons for judgment.

Catchwords:

COSTS - Costs follow the event in first proceeding - Order each party to pay own costs in second proceeding - Plaintiff failed on case originally pleaded - Original case based upon false claim of execution of lease

Cases Cited:

Hooker v Gilling (No 2) [2007] NSWCA 214
James v Surf Road Nominees Ltd (No 2) [2005] NSWCA 296
Waters v PC Henderson (Australia) Pty Ltd [1994] NSWCA 338; (1994) 254 ALR 328
Turkmani v Visalingham (No 2) [2009] NSWCA 279

Category:

Costs

Parties:

2012/85607

Dean Nowland (First plaintiff)
Taimi Nowland (Second plaintiff)
Gian Franco Maiolla (First defendant)
The Casbee Group Pty Limited (Second defendant)

2012/136262

Casbee Properties Pty Limited (Plaintiff)
Eastwood Air Conditioning Pty Limited (Defendant)

File Number(s):

2012/85607; 2012/136262

Judgment

1. On 20 December 2013 I published reasons for judgment in these two disputes.

1. In the first matter the plaintiffs in substance sued the first defendant in order to enforce their rights under an agreement that came to be called the "demerger agreement", which principally required the first defendant to ensure that each plaintiff held 15% of the shares in the second defendant. As the claim was in essence in the nature of the dispute between shareholders, the second defendant was joined as a proper party to the proceedings. It did not take an active part in the case.

1. The second matter concerned a claim by the plaintiff in that proceeding against the defendant for payment of unpaid rent and outgoings, or an occupation fee.

1. I set out in pars 202 and 203 of the reasons for judgment the orders that I tentatively proposed to make in each of the proceedings. I gave the parties an opportunity to bring in short minutes to reflect my reasons for judgment. I also invited the parties to make submissions as to the costs orders that should be made.

1. The outstanding issues were the subject of a hearing that took place on 19 February 2014. Mr Kidd SC again appeared for the plaintiffs in the first proceeding and the defendant in the second. Mr Grant appeared for the defendants in the first proceeding and the plaintiff in the second.

1. After submissions I made substantive orders in the terms that I will set out below, so that there is a record of the orders that I ultimately made. Those orders are different in various ways to the tentative orders set out in the reasons for judgment.

1. I will deal with the issue of costs in these reasons for judgment.

1. The plaintiffs' position in relation to the first proceeding was that the court should make an order that the first defendant pay their costs of the proceedings on the ordinary basis, and that no order should be made for or against the second defendant, as in reality it was only joined as a proper party, and no relief was sought against it other than to the extent that it was sought to be bound by the orders made by the court. The first defendant's position was that even though the plaintiffs succeeded against him on aspects of their claim, they failed in relation to others, being part of their oppression claim, their estoppel claim, and their various misleading and deceptive conduct claims. The first defendant submitted that he should only be ordered to pay 50% of the plaintiffs' costs in respect of the first proceeding. As I understand it, the first defendant relied in part in suggesting the 50% figure on the submission that the second defendant was not a mere cipher in the proceedings, and the plaintiffs had not obtained any positive relief against it.

1. In relation to the second proceeding the defendant to that claim submitted that the appropriate order for the court to make was that each party should pay its own costs. That submission was based primarily on the fact that ultimately the plaintiff succeeded on a claim for payment of an occupation fee, which was a different claim to that originally mounted by the plaintiff. The original claim was based upon the alleged existence of a lease under which the plaintiff was not only entitled to rent, but was also entitled to payment of outgoings. Almost all of the costs of the proceedings related to this claim. The claim failed as I held that the alleged lease was never validly executed by the defendant, and that the execution of the document by the first defendant in the first proceeding was not authorised by the defendant. The plaintiff in the second proceeding submitted that the court should make an order for costs in its favour, as it ultimately succeeded in the proceeding. The plaintiff also asked the court to take into account a Calderbank offer made by the plaintiff, which was for a sum which was slightly more than the amount of occupation fee that the court ultimately ordered the defendant to pay.

1. There was no issue between the parties as to the principles that the court should apply in determining the appropriate costs orders to make. First, the general rule is that costs follow the event: UCPR r 42.1. Secondly, a successful party may be deprived of its costs in respect of an issue on which it failed, or alternatively be ordered to pay the costs of that issue, where that issue was "clearly dominant or separable" from the issues in respect of which the party succeeded: Waters v PC Henderson (Australia) Pty Ltd [1994] NSWCA 338; (1994) 254 ALR 328 at 331 per Mahoney JA; cited with approval in James v Surf Road Nominees Ltd (No 2) [2005] NSWCA 296 at [31] - [33]; and in Turkmani v Visalingham (No 2) [2009] NSWCA 279 at [9]. Thirdly, a successful party may be deprived of its costs in respect of any aspect of the proceeding for which the party raised issues or made allegations improperly or unreasonably, and in exceptional cases such a party may be ordered to pay the whole or part of the unsuccessful party's costs: Hooker v Gilling (No 2) [2007] NSWCA 214 at [21].

1. In relation to the first proceeding I propose to order that the first defendant pay the plaintiff's costs of the proceeding on the ordinary basis.

1. The plaintiffs substantially succeeded in obtaining the relief that they sought. Specific performance of the demerger agreement, which required the first defendant to ensure that each plaintiff ultimately held 15% of the shares in the second defendant, was made subject to a condition that the first plaintiff cause the company that has been called Eastwood in this matter to pay a certain amount of unpaid rent to the company known as Casbee Properties. The making of the condition to the relief granted is not a basis for denying the plaintiffs their costs. It is true that the plaintiffs failed on the issues of estoppel, misleading and deceptive conduct, and part of their oppression claim. They succeeded on another part of their oppression claim, which had the effect that the first defendant was ordered to cause the company known as Casbee also to pay unpaid rent to Casbee Properties. The issues upon which the plaintiffs failed were in effect alternative claims based upon substantially the same facts as the plaintiffs' principal claim. They failed largely for reasons of legal principle, and did not significantly expand the ambit of the forensic enquiry in the case.

1. I will not make any costs order for or against the second plaintiff in the first proceeding. This was a classic case in which it was appropriate to join the company in respect of whom the shareholders were litigating concerning the entitlement to shares in the company, as well as the conduct of the company's affairs in an oppressive manner. Mr Grant's solicitor filed an appearance for the second defendant, as well as the first defendant, but quite properly the case was not conducted in a manner by which the second defendant took any positive and independent part in the proceeding.

1. I also propose to make in the second proceeding the costs order for which the defendant in that proceeding contends. I will order that each party pay its own costs of those proceedings. In the period before the plaintiff served a Calderbank offer on the defendant on 3 October 2012, the plaintiff's claim was based upon an alleged, written lease between itself and the defendant. On the one hand, it is true that the defendant originally responded to the plaintiff's statement of claim by a series of bare denials. On the other hand, I ultimately found that the alleged lease was not valid; it had been executed by the first defendant in the first proceeding without the authority of the defendant, and that ultimately the evidence given in support of the lease was false evidence. The plaintiff succeeded in obtaining a judgment based upon a continuation of an occupation fee that the defendant had previously paid, before it unilaterally decided to cease paying any fee for the occupation of the property. The claim for an occupation fee was introduced into the proceeding after the date of the Calderbank offer. Almost the entirety of the costs incurred by the parties in relation to the second proceeding related to the claim on the lease for which the plaintiff failed. In the circumstances an order that has the effect that the defendant must pay its own costs is probably favourable to the plaintiff.

1. I do not intend to give any effect to the Calderbank offer. As Mr Grant conceded, it was for an amount that proved to be $4000 more than the amount for which the plaintiff in the second proceeding succeeded. It was also made in respect of a cause of action that failed utterly. In my view it was reasonable for the defendant to ignore the offer.

1. I record that I made the following substantive orders in the proceedings on 19 February 2014:

2012/85607

(1)   The First Defendant, by an agreement between the First Defendant and the Plaintiffs containing the terms set out in the letter dated 14 July 2008 written by Mr Kennedy to the Plaintiffs ('the 14 July 2008 Letter'), is obliged to transfer to each of the Plaintiffs a sufficient number of the shares held by the First Defendant in the Second Defendant so that each of the Plaintiffs will hold 15% of the issued capital of the Second Defendant.

(2)   The failure of the First Defendant to cause Casbee Pty Limited ('Casbee') to negotiate with Casbee Properties Pty Limited ('Casbee Properties') and enter into the lease required by the 14 July 2008 Letter was conduct by the First Defendant in the affairs of the Second Defendant that was contrary to the interests of the members of the Second Defendant as a whole and oppressive to the First Plaintiff as a member of the Second Defendant.

(3)   Subject to Order 4, the First Defendant specifically perform his obligation set out in Declaration 1.

(4)   The First Defendant's obligation in Order 3 is subject to the proviso that it need not be performed unless, at the same time as the transfers of his shares in the Second Defendant to the Plaintiffs takes place, the First Plaintiff causes Eastwood Air Conditioning Pty Limited ('Eastwood') to pay to Casbee Properties an amount of money equal to the amount by which A exceeds B, where:

A is the net present value (at the date of payment) of Eastwood's occupation of its premises at 4 Stanton Road, Seven Hills, New South Wales ('Stanton Road') between 26 August 2008 and 12 March 2012 on the basis that Eastwood was obliged to pay to Casbee Properties a market rent ; and

B is the net present value (at the same date as used in calculating A) of the rent previously paid by Eastwood for its occupation of Stanton Road between 26 August 2008 and 12 March 2012.

(5)   Provided that Eastwood pays Casbee Properties the amount of money referred to in Order 4 at the time of the transfers of the shares referred to in that Order, the judgment debt payable by Eastwood to Casbee Properties pursuant to the Orders made in Equity Division proceedings number 2012/136262 below is to be taken as paid and discharged in full.

(6)   The First Defendant pay or procure that Casbee pay, Casbee Properties (at the time of the transfers of the shares referred to in Order 4) an amount of money equal to the amount by which A exceeds B, where:

A is the net present value (at the date of payment) of Casbee's occupation of its premises at Stanton Road between 26 August 2008 and 12 March 2012 on the basis that Casbee was obliged to pay Casbee Properties a market rent; and

B is the net present value (at the same date as used in calculating A) of the rent previously paid by Casbee for its occupation of Stanton Road between 26 August 2008 and 12 March 2012.

2012/136262

(1)   Judgment for the Plaintiff (Casbee Properties) against the Defendant (Eastwood) in the sum of $125,609.60 (including GST of $9,100 and interest of $25,509.60), provided that Casbee Properties issues a tax invoice for that sum to Eastwood.

(2)   Stay the execution of the Judgment until the determination by the Court (or earlier agreement of the parties) of the amount to be paid by Eastwood referred to in Order 4 made this day in Equity Division proceedings 2012 / 85607.

1. I also make the following costs orders:

(1)   In proceedings No 2012/85607 order the first defendant to pay the plaintiffs' costs of the proceedings on the ordinary basis.

(2)   In proceedings No 2012/85607 make no order for costs for or against the second defendant, with the intent that the second defendant and all other parties will pay their own costs of the proceedings in so far as they involve the second defendant.

(3)   In proceedings No 2012/136262 make no order for costs, with the intent that each party will pay its own costs of the proceedings.

1. I also make the following order:

(4) Order pursuant to UCPR r 31.16A and r 33.10, and Practice Note No S C Gen 18 par 26:

(a)   that the exhibits be returned forthwith to the parties who tendered the exhibits to be held by them in compliance with Practice Note No S C Gen 18 par 28;

(b)   that the parties return any exhibits that were produced to the Court by any person in answer to a subpoena or notice to produce to the person who produced the document forthwith upon the expiry of any time for which the party to whom the exhibit is returned is required to retain the exhibit;

(c)   that all material produced directly to the Court by any party in answer to any notice to produce that has not become an exhibit be returned forthwith to the party who produced the material; and

(d)   that the Registry should forthwith return, or otherwise deal with in accordance with Practice Note No S C Gen 18 par 27, all material produced to the Registry in answer to any subpoena or notice to produce.

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Decision last updated: 20 March 2014