Penrose v Fernandez

[2024] NSWSC 1207

Supreme Court

New South Wales

Medium Neutral Citation:

Penrose v Fernandez [2024] NSWSC 1207

Hearing dates:

On the papers

Decision date:

24 September 2024

Jurisdiction:

Equity - Real Property List

Before:

Peden J

Decision:

See [38]

Catchwords:

COSTS — Party/Party — Costs orders in interlocutory proceedings — Where consent orders made without merits hearing — Whether plaintiff should pay defendants’ costs — Whether costs should be payable forthwith

Legislation Cited:

Civil Procedure Act 2005 (NSW) ss 56, 57, 58, 99

Uniform Civil Procedure Rules 2005 (NSW) rr 19.5, 42.7

Cases Cited:

Bevillesta Pty Ltd v D Tannous No 2 Pty Ltd [2010] NSWCA 277

Chahwan v Euphoric Pty Ltd t/as Clay & Michel [2009] NSWSC 805

Hartnett t/as Hartnett Lawyers v Bell as Executor of Estate of late Deakin-Bell (2023) 112 NSWLR 463

Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622

Category:

Costs

Parties:

Rui Yan Xie Penrose (Plaintiff)
Jose Luis Guerrero Fernandez (First Defendant)
Ozziemarket Pty Ltd (Second Defendant)

Representation:

Counsel:
G O’Shea (Plaintiff)
Solicitors:
John Hertz & Associates (Plaintiff)
Finn Roache Lawyers (Defendants)

File Number(s):

2023/00149995

Publication restriction:

Nil

JUDGMENT

1. This judgment concerns the costs involved in an amendment to the plaintiff’s amended statement of claim. These costs include the costs of two notices of motion. By the first notice of motion, dated 7 May 2024, the plaintiff, Rui Yan Xie Penrose, sought leave to further amend her amended statement of claim, filed on 9 November 2023.

2. By the second notice of motion, dated 11 June 2024, the first and second defendants, Jose Luis Guererro Fernandez and Ozziemarket Pty Limited, sought orders striking out the amended statement of claim filed on 9 November 2023, removing a caveat lodged by the plaintiff over the subject property and dismissing the proceedings.

3. On 23 August 2024, the Court made orders, by consent, granting leave to the plaintiff to further amend her amended statement of claim, in the form annexed to the affidavit of John Richard Hertz, solicitor, filed in support of the plaintiff’s motion on 16 August 2024. The Court was therefore not required to determine the substance of the plaintiff’s motion.

4. No explicit order was made in relation to the defendants’ strike out motion. However, the defendants consistently accepted that their motion should be dismissed if the plaintiff were granted leave to amend. It is therefore apparent that the Court is no longer being asked to determine the defendants’ motion.

5. The only remaining issue in respect of the motions is as to costs. In this respect, the plaintiff seeks an order that her costs of both motions be costs in the cause, save for her costs of appearing in relation to the motions on 28 June and 26 July 2024, in respect of which she seeks an order that there be no order as to costs. The plaintiff also seeks an order that the defendants’ costs of appearing in relation to the motions on 28 June 2024 be costs in the cause.

6. The defendants seek an order that the plaintiff pay their costs of, incidental to and occasioned by the amendment to the amended statement of claim and that these costs be payable forthwith. The defendants further seek an order that the proceedings be stayed until their costs are paid. In the event that the plaintiff fails to pay their costs by 28 February 2025, the defendants seeks orders that the proceedings by dismissed, as well as other ancillary orders.

Procedural history

7. On 10 May 2023, the plaintiff filed her original statement claim, alleging, inter alia, that she was deprived of her interest in the subject property by the first defendant, who was said to have fraudulently procured the registration of the second defendant, of which the first defendant is the sole director, as the registered proprietor. The pleading ran for approximately 1 page and included no particulars of the alleged fraud.

8. On 2 November 2023, Lindsay J granted leave to the plaintiff, by consent, to amend the statement of claim. The amended statement of claim was subsequently filed on 9 November 2023. It ran for approximately 2 pages and still failed to particularise the alleged fraud.

9. Between 20 November 2023 and 11 March 2024, the solicitors for the parties engaged in correspondence concerning the adequacy of the amended statement of claim. In response to the defendants’ concerns around the pleading of fraud, the plaintiff accepted that the amended statement of claim should be further amended. Several versions of a proposed further amended statement of claim were served over the course of this period. However, each version was rejected as defective by the defendants.

10. The solicitor correspondence concerning the amended statement of claim resulted in the plaintiff filing a notice of motion, seeking formal leave to replead her case. That motion was dismissed by Registrar Walton on 3 May 2024, apparently for the reason that the plaintiff’s proposed amended pleading failed to comply with the formalities required pursuant to r 19.5 Uniform Civil Procedure Rules 2005 (NSW) (UCPR). The Registrar reserved the question of the costs of the motion.

11. On 7 May 2024, the plaintiff filed a further notice of motion seeking leave to replead. Two further version of the proposed further amended statement of claim were served on the defendants between the filing of the motion and its initial hearing date on 28 June 2024. Both versions were, again, considered defective by the defendants.

12. On 11 June 2024, the defendants filed their own motion, seeking to have the amended statement of claim struck out and the proceedings dismissed. The motion was listed for hearing, along with the plaintiff’s motion, on 28 June 2024.

13. On 28 June 2024, both motions came before Williams J. On that occasion, Counsel for the plaintiff, Mr O’Shea, made an adjournment application on the basis that the plaintiff’s previous counsel, Mr Van Allst, had recently retired, and he had not had sufficient time to familiarise himself with the matter.

14. Her Honour made the following observations concerning the quality of the proposed amended pleading before the Court:

The present pleading, I regret to say, is barely coherent. It really is a dreadful state of affairs that so long after proceedings have been commenced the plaintiff's case is still not articulated in any reasonable way. The plaintiff may have a very good case, for all I know, but it's not articulated in the document I'm looking at …

15. Notwithstanding the deficiencies identified by her Honour, the Court adjourned the determination of both notices of motion to 26 July 2024, affording the plaintiff the indulgence of a further opportunity to draft a proposed amended pleading, with the benefit of new counsel. All questions of costs were reserved.

16. On 26 July 2024, both motions again came before the Court. Notwithstanding the earlier observations of Williams J, and the involvement of the plaintiff’s new counsel, the proposed pleading remained in an unsatisfactory state, despite substantial amendments having been made. The Court again expressed serious concerns as to the indecipherability of various aspects of the pleading, particularly those which alleged fraud.

17. Once again, however, the Court adjourned the motions, granting the plaintiff the indulgence of yet a further opportunity to redraft and serve her proposed amended pleading, on the representation by Mr O’Shea, on instructions, that senior counsel would be briefed to settle the pleading. The Court ordered the plaintiff to pay the defendants’ costs of the appearance on that day. The Court also directed the plaintiff’s solicitor to provide an affidavit setting out the costs incurred by the plaintiff in relation to the various iterations of the amended pleading since November 2023.

18. In compliance with the Court’s direction, the solicitor on the record for the plaintiff, John Richard Hertz, provided an affidavit sworn 2 August 2024. Mr Hertz’s evidence was that he had not charged the plaintiff in relation to the “the work performed in endeavouring to amend and particularise the proposed Further Amended Statement of Claim” and would not be charging further fees up until the date he briefed the plaintiff’s new counsel, Mr O’Shea. He deposed further that the plaintiff’s previous counsel would not be charging “additional fees” following a tax invoice already paid on 29 December 2023.

19. The affidavit did not explain the fees charged by the previous counsel or Mr O’Shea in relation to the failed amendments. It is also not clear from the affidavit exactly what fees Mr Hertz has charged or intends to charge his client in relation to the multiple pleading attempts.

20. On 16 August 2024, the plaintiff served a further proposed amended pleading on the defendants. The proposed pleading, which had been settled by King’s Counsel, was significantly altered. It replaced the entirety of the proposed pleading which had previously been before the Court on 26 July 2024 with approximately 20 pages of new pleadings and particulars. The defendants consented to leave being granted to file this version of the proposed pleading, with the question of the costs of the motions to be determined in Chambers.

Costs of the amendment

21. The costs principles in cases where a party brings a successful application for leave to replead were summarised by Brereton J in Chahwan v Euphoric Pty Ltd t/as Clay & Michel [2009] NSWSC 805 (Chahwan) at [43]:

On an application for leave to amend which succeeds, one starts from the position that the successful applicant for leave to amend pays the unsuccessful respondent’s costs, the amendment being an indulgence granted by the court, the costs associated with which could have been avoided had the applicant got the pleading right or complete in the first place. But the court may depart from that ordinary position, in particular where the opposition to the amendment is unreasonable, or where the opposition is on such a scale and to such an extent that it adds unnecessarily to the costs of the application. In such a case, the position involves balancing the relative responsibility of the respective parties for the costs associated with the amendment and the process of seeking leave to amend.

22. Here, the plaintiff submits the Court should depart from the ordinary position, on the basis that the defendants “strongly opposed” the plaintiff’s motion and refused to consent to leave to replead being granted. I reject that submission. As Brereton J makes clear in the above observations, opposition to an application for leave to replead will justify a departure from the ordinary position where the opposition was unreasonable or otherwise added unnecessarily to costs. That is not the case here.

23. As the procedural history set out above demonstrates, the defendants had legitimate reason to be concerned that the plaintiff’s various proposed amended pleadings were defective. The Court expressed similar concerns on both 28 June and 26 July 2024. It was not unreasonable for the defendants to oppose the plaintiff’s motion, particularly when the various earlier proposed amended pleadings made serious allegations of fraud with insufficient precision.

24. While a consent position has finally been reached in relation to the plaintiff’s pleading, I do not consider that it is in accordance with overriding purpose in s 56 Civil Procedure Act 2005 (NSW) for there to be no order as to costs. The consent position has been reached only because the Court granted the plaintiff multiple opportunities to redraft its proposed amended pleading. For there to be no order as to costs in these circumstances would be to disincentivise parties in protracted pleadings disputes from consenting to reasonable requests for consent to leave to replead, on the grounds that, in doing so, they would forsake the prima facie costs protections recognised by Brereton J in Chahwan.

25. Furthermore, it is well established that the Court may depart from the usual position that there be no orders as to costs where a consent position has been reached, where it is satisfied that “one party acted so unreasonably that the other party should obtain the costs of the action”, or where “although both parties have acted reasonably, one party was almost certain to have succeeded”: Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624 (McHugh J).

26. As already noted, the Court has granted the plaintiff multiple indulgences by postponing the determination of the motions and affording her further opportunities to redraft her proposed amended pleading. It did so in circumstances where, had the plaintiff’s motion then been determined, I consider it was almost certain that the motion would have been dismissed.

27. For the above reasons, I am satisfied the plaintiff should pay the defendants’ costs of the plaintiff’s motion. I am also satisfied that the plaintiff should pay the defendants’ costs of the plaintiff’s earlier notice of motion seeking leave to replead, which was dismissed by Registrar Walton.

28. In relation to the defendants’ motion, I do not consider, and no submissions have been made to support the proposition, that there are circumstances justifying a departure from the ordinary position as to costs in cases where the Court has not ultimately been required to determine a dispute. The appropriate order in relation to the costs of the defendants’ motion is therefore that there be no order as to costs.

29. I will direct the plaintiff’s solicitor on the record to file an affidavit as to the plaintiff’s personal exposure to paying the costs of the failed amendment attempts, including the defendants’ costs, in light of this judgment. I will reserve for further consideration whether the Court ought to commence a process of hearing from the parties, and the plaintiff’s lawyers, concerning those costs and whether it is appropriate for the Court to make an order under s 99 Civil Procedure Act or exercise its inherent supervisory jurisdiction to order legal representatives to pay the opposing party’s wasted costs: see eg Hartnett t/as Hartnett Lawyers v Bell as Executor of Estate of late Deakin-Bell (2023) 112 NSWLR 463 at [123(15)] (Bell CJ, Adamson JA and Griffiths AJA agreeing).

Whether the costs should be payable forthwith

30. Under r 42.7(2) UCPR, unless the Court orders otherwise, the costs of interlocutory applications are payable at the conclusion of the proceedings.

31. In considering whether to exercise its discretion to order otherwise, the Court must take into account the matters in ss 56 and 57 Civil Procedure Act. The Court may also have regard to the matters set out in s 58(2)(b) Civil Procedure Act, including the extent to which the parties have acted expeditiously and assisted the Court in facilitating the just quick and cheap resolution of the real issued in dispute: Bevillesta Pty Ltd v D Tannous No 2 Pty Ltd [2010] NSWCA 277 at [37] (McColl JA, Allsop P and Handley AJA agreeing) (Bevillesta).

32. Here, solicitor correspondence reveals that the plaintiff accepted the need to further amend her amended statement of claim by at least 24 November 2023. Despite this, and notwithstanding the continuous urging of the defendants’ solicitors, it took the plaintiff until 16 August 2024 to properly amend her pleadings. Over the course of this period, she served at least 8 versions of a proposed amended pleading on the defendants, brought one failed motion for leave to replead, and was notified of serious issues with her proposed pleadings by the Court on two occasions.

33. These circumstances demonstrate a failure to act expeditiously and assist the Court in facilitating the just, quick and cheap resolution of the real issue in dispute: Bevillesta at [39]. They also demonstrate a generally unreasonable approach taken by the plaintiff to the pleading of her case: Bevillesta at [38].

34. The plaintiff nevertheless objects to the making of a forthwith order on the basis that “there should not be any significant delay in the matter being brought ready for hearing” on the basis that some evidence has been relied upon by the parties at the interlocutory stage. However, the pleadings have not closed and the scope of the evidence concerning the plaintiff’s amended claim and any defence is currently unknown, including for example, whether the material used at the interlocutory stage will be relevant for the final hear. Further, there will be some time before a final hearing, because it could not occur before well into 2025. Consequently, I do not accept this submission.

35. For these reasons and having regard to the matters in ss 56 and 57 Civil Procedure Act, I am satisfied that the Court should exercise its discretion to order that the defendants’ costs of the plaintiff’s motions be payable forthwith.

Conclusion and orders

36. The defendants also seeks an order dismissing the proceedings in the event that its costs are not paid by 28 February 2025, as well as various ancillary orders disposing of the proceedings.

37. I do not consider it appropriate to make such orders at this stage and without the benefit of submissions by the plaintiff on the issue. However, the defendants may seek leave to bring a notice of motion seeking these orders in the event that their costs are not paid by 28 February 2025.

38. For these reasons, the appropriate orders are:

1. Plaintiff to pay the defendants' costs of and incidental to the plaintiff's motion filed on 7 May 2024, as agreed or assessed, with such costs to be payable forthwith.

2. Plaintiff to pay the defendants’ costs of and incidental to the plaintiff's motion filed on 21 December 2023, as agreed or assessed, with such costs to be payable forthwith.

3. Plaintiff’s solicitor on the record to provide to the chambers of Peden J by 4:00pm on 26 September 2024 an affidavit evidencing:

1. That he has informed the plaintiff of her liability pursuant to Orders 1 and 2;

2. The detail of all costs (including disbursements) of and incidental to the plaintiff's motions filed 21 December 2023 and 7 May 2024 (excluding the preparation of the 16 August 2024 pleading) charged or intended to be charged to the plaintiff by her solicitor; and

3. Any arrangements between the plaintiff and solicitor concerning compliance with Orders 1 and 2.

4. There be no order as to the costs in respect of the defendants' notice of motion filed on 11 June 2024.

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Decision last updated: 25 September 2024