Petracca v Boyana Pty Ltd

[2006] NSWSC 386

CITATION:	Petracca v Boyana Pty Ltd [2006] NSWSC 386
HEARING DATE(S):	4 May 2006
JUDGMENT DATE :	4 May 2006
JURISDICTION:	Equity
JUDGMENT OF:	Campbell J
EX TEMPORE JUDGMENT DATE:	05/04/2006
DECISION:	Plaintiffs, first and fourth defendants to pay costs of second and fifth defendant thrown away by adjournment. Plaintiffs, first and fourth defendants to bear own costs thrown away by adjournment.
CATCHWORDS:	PROCEDURE - Supreme Court procedure - joinder of extra defendants at a time when some affidavits already served in the proceedings - which party has obligation to serve the new parties with those affidavits - PROCEDURE - Uniform Civil Procedure Rules 10.2 - who is a party "using" an affidavit and hence obliged to serve it
LEGISLATION CITED:	Supreme Court Rules 1970 Uniform Civil Procedure Rules 2005
PARTIES:	Antonio Petracca - First Plaintiff Nancy Petracca - Second Plaintiff Boyana Pty Limited - Defendant Havenkite Pty Ltd T/A Harcorp Consulting - Second Defendant Jo-Al Pty Ltd - Third Defendant John Patrick Deevy - Fourth Defendant Harcorp Consulting (NSW) Pty Ltd - Fifth Defendant
FILE NUMBER(S):	SC 4678/03
COUNSEL:	C Harris SC - Plaintiffs G R Graham - First Defendant A F Fernon - Second and Fifth Defendants G M McGrath - Fourth Defendant
SOLICITORS:	Willis and Bowring Solicitors - Plaintiffs Lamrocks Solicitors - First Defendant Low Doherty & Stratford - Second and Fifth Defendants Stojanovic Solicitors - Fourth Defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
EQUITY LIST

CAMPBELL J

THURSDAY 4 MAY 2006

4678/03 ANTONIO PETRACCA & ANOR v BOYANA PTY LIMITED & ORS

JUDGMENT – Ex Tempore

1 HIS HONOUR: This is an argument about costs. It arises from the adjourning of the hearing which was set to take place on 21 February this year.

2 The issues in the proceedings arise from an aborted contract for the sale by the first defendant to the plaintiffs of a petrol station and convenience store at Wallacia.

3 The second defendant and the fifth defendant are companies closely related to one another, and one or other of them was the real estate agent engaged to negotiate the sale.

4 The third defendant is a company which was the tenant of the business. The fourth defendant, Mr Deevy was the man behind the third defendant.

5 It is common ground the contract for sale has now come to an end but there is a dispute about whether it was the plaintiffs or the first defendant who was justified in bringing it to an end.

6 The plaintiffs say that they were induced to enter into the contract by misrepresentations conveyed to them about the profitability of the business which the tenant was conducting and the satisfactoriness of the third defendant in paying rent.

7 The case as it was formulated in the second further amended statement of claim filed in July 2005 was that while the lease stated the rent was payable at one particular rate, there was a side agreement between the owner of the premises and the tenant under which part of the rent was rebated to the tenant each month. The plaintiffs’ case was that side agreement was not disclosed to them, in consequence of which the representations about the rent that was payable under the lease and the satisfactoriness of the tenant were fraudulent, or else were misleading and deceptive.

8 The first defendant for its part says that, while it was making some payments to the tenant, they did not have the character of a rent rebate and there is a completely innocent commercial explanation for them.

9 When the case was listed for hearing on 21 February 2006 I granted the adjournment on the plaintiffs’ application. That adjournment was granted because the plaintiffs had that morning been served with an affidavit which Mr Deevy had sworn that morning. The thrust of the critical part of Mr Deevy’s affidavit was that before the lease was entered the first defendant promised to pay a premium for the $100,000 if he would cause the tenant to enter into a lease at a rental that was above the market value.

10 The provision of that affidavit led the plaintiffs to wish to re-cast the statement of claim to make an extra allegation that the first defendant had been fraudulent in entering into that agreement and that this provided an additional ground for the plaintiffs to terminate the contract. I agreed to the adjournment so as to give the plaintiffs that opportunity.

11 At the time, the circumstances which led to the adjournment were not able to be fully laid out before me, so the parties were given an opportunity to put on affidavits which set out relevant facts. Today, the matter comes back to argue about the cost of the adjournment.

12 The late affidavit of Mr Deevy was one which was sworn in response to an affidavit of Mr Sgro, who is the man behind the first defendant, which had been sworn on 31 August 2004.

13 When the proceedings were begun, there was only one defendant. A second defendant was joined in March 2004. On 16 September 2004 there was the hearing of a Notice of Motion which the plaintiffs had filed seeking to join the third and fourth defendants. Those orders for joinder were made. The solicitor for the first defendant filed in court on that occasion the affidavit of Mr Sgro of 31 August 2004 and gave a copy of it to the representative of the plaintiffs and the second defendant who were present at court.

14 In October 2004, pursuant to the orders made on 16 September 2004, the third and fourth defendants were joined as defendants in the proceedings. The occasion for their joinder was that the first defendant had denied that there was a rental rebate agreement, and yet, before the plaintiffs had purported to terminate the contract, they had been informed of the existence of a rental rebate agreement by, amongst other things, correspondence from the solicitor for the third defendant. The case against the third and fourth defendants was a fallback case, brought against the possibility that this defence of the first defendant might be right. It alleged that the third and fourth defendants had engaged in misleading and deceptive conduct in stating that there was a rental rebate agreement.

15 On 9 November 2004 the third and fourth defendants filed an appearance in court with their address of service care of Stojanovic Solicitors. That appearance was, at least initially, not served on the second and fifth defendants. Though the second and fifth defendants were aware of Mr Stojanovic’s involvement in the proceedings, they took the view that it was appropriate for them to serve affidavits intended for the third and fourth defendants at the address of the third and fourth defendants which was shown in the Further Amended Statement of Claim. That address was, it seems, the address of Mr Deevy’s home.

16 When the third and fourth defendants were joined, they were not provided, by either the plaintiffs or the first defendant, with the affidavit that Mr Sgro had sworn on 31 August 2004. That affidavit was one which gave a quite detailed account of his negotiations with Mr Deevy prior to the entering of the lease, and while the lease was on foot.

17 On 18 April 2005 the solicitors for the first defendant wrote to the solicitors for the third and fourth defendants saying, “We enclose a further Affidavit of Mr Joseph Sgro that we are currently filing.” That letter enclosed an affidavit which Mr Sgro swore on 19 April 2005. The introductory paragraph of that affidavit includes the sentence, “I refer to paragraphs 22, 23, 24 and 29 of my Affidavit sworn 31 August 2005, and filed herein.” As it was in April 2005 that the affidavit was served, a moment’s thought would have made clear that that date “31 August 2005” must have been incorrect.

18 Mr Stephen Moore is the salesman, employed by either the second or fifth defendant who had the carriage of the negotiations for sale. He swore an affidavit of 1 November 2004, for the second defendant. It lists in its first paragraph the affidavits to which it was replying. One of them was the affidavit of Mr Sgro of 31 August 2004 filed by the first defendant. Mr Moore’s affidavit includes a reply to Mr Sgro’s affidavit, over some three pages of print. However, there is no evidence of Mr Moore’s affidavit ever having been served on the third and fourth defendants.

19 Mr Brett Harrod is the principal of the second and fifth defendants. He also swore an affidavit in reply of 23 November 2004, in reply to the affidavit of Mr Sgro of 31 August 2004. That affidavit was served on the third and fourth defendants, at the address for service which was noted in the Further Amended Statement of Claim.

20 There was a further affidavit sworn by Mr Harrod in January 2005 in substantially the same terms as his affidavit of 23 November 2004, save that it added an annexure which had been overlooked. That affidavit was also served at the home address of Mr Deevy.

21 There were numerous court appearances, and a mediation, in the course of none of which was there any indication from any legal representative of the third and fourth defendants that they had not received all of the affidavits that any party was relying on.

22 In February 2006 the legal representatives of the fourth defendant started paying closer attention to the evidence, and on 9 February 2006, wrote to the solicitors for the first defendant, asserting they did not have any affidavits which had been filed on behalf of their clients. They requested that the solicitors for the first defendant urgently fax which affidavits would be relied upon for the hearing and provide a copy of each affidavit.

23 Somewhat misleadingly, a reply was sent by the solicitors for the first defendant the same day, referring to that request and saying, “We note by letter dated 18 April, 2005 we served a copy of the Affidavit of Mr Joseph Sgro. We enclose a further copy for your information.” It did not mention Mr Sgro’s affidavit of 31 August 2004. That letter was sent by ordinary post.

24 By 15 February 2006 the solicitors for the third and fourth defendants had read and considered that affidavit, and realised the first paragraph referred to Mr Sgro’s affidavit of 31 August 2004 and requested a copy of it. A copy was not provided immediately (even though the letter of 15 February 2006 had been sent by fax), and eventually it was only on 20 February 2006 that the solicitors for the fourth defendant obtained that affidavit of Mr Sgro, after requesting it from the plaintiff. Mr Deevy’s affidavit in reply was filed fairly promptly after that.

25 It is appropriate at this stage to set out various of the rules which bear upon this matter. At the time of the joinder of the third and fourth defendants in 2004 the Supreme Court Rules 1970 applied. There was a specific provision in those rules, in Part 6 rule 5(4) requiring someone who joins on a cross-claim a person who is not a party to the proceedings, to serve on that person various documents, including affidavits, other than affidavits which are not relevant to the issues arising on the cross-claim.

26 There was no precisely analogous rule relating to late joinder of defendants to proceedings. Rather, Part 8 rule 8 permitted the court to join extra parties, and make further orders for the further conduct of the proceedings. Part 8 r 11 contemplated that those further orders might include orders relating to service of other documents in the proceedings - which would clearly include affidavits which had already been filed. However, on the occasion the third and fourth defendants were joined, no such orders were sought by any party.

27 Part 38 rule 7(1) Supreme Court Rules 1970 provided that,

“A party intending to use an affidavit shall serve it on each other interested party not later than a reasonable time before the occasion for using it arises.”

28 The Uniform Civil Procedure Rules2005 came into operation on 15 August 2005. One relevant provision of them is rule 10.1(1) which provides:

“(1) Unless the court orders otherwise, a party that files a document must as soon as practicable serve copies of the document on each other active party.

29 Rule 10.2 is in the same terms as the old Pt 38 r 7.

30 As well, there is a practice note made under the Uniform Civil Procedure regime, Practice Note SC Gen 4, which includes provisions designed to accommodate the fact that under the new regime affidavits are not always filed. The relevant portions of that Practice Note are:

“6. As stated, an affidavit generally may not be filed in proceedings except by leave of the Court. An affidavit which has not previously been filed should be filed in Court at the hearing before it is read.

7. However, where an affidavit is to be read, unless it has already been filed and served (see UCPR 10.1), the party seeking to rely upon that affidavit must serve the affidavit on the relevant parties within a reasonable time before the hearing, unless the Court otherwise orders. See UPCR 10.2.

31 Mr McGrath for the fourth defendant submits that each of the plaintiffs and the first defendant intended to use the affidavit of Mr Sgro of 31 August 2004. That affidavit was, Mr McGrath submits, an important part of the plaintiff’s case against the third and fourth defendants. He submits that it is possible to “use” an affidavit either by reading it, or by tendering it, or by relying on the affidavit to prove a part of one’s own case.

32 While there was correspondence emanating from the solicitor for the third defendant, and business records, which showed the making of the payments which the plaintiff characterised as rental payments, and also an admission from Mr Sgro that certain payments (which he said were not rental rebate payments) had been made, to be able to prove the case against the third and fourth defendants, it would be necessary for the substance of Mr Sgro’s case to be accepted by the court. In that way, it seems to me that the plaintiff was intending to use the affidavit, even though it would not itself read or tender it. The nature of its case against the third and fourth defendants was, as I have said, a back-up, against the possibility that its case against the first defendant might fail.

33 As well, however, it seems to me the first defendant intended to use the affidavit. It was a necessary part of the first defendant’s case that that affidavit be read by the court.

34 Thus, in my view, both the plaintiffs and the first defendant were in breach of those rules by failing to serve the affidavit on the third and fourth defendants.

35 One does not decide a question about who should bear the costs of the adjournment solely by reference to the rules, however. As well, conduct which is reasonably to be expected of parties in litigation needs to be taken into account. It is clear that the occasion for the adjournment was the action of the fourth defendant in serving the affidavit of Mr Deevy very late. There is some substance, in my view, in Mr Harris’ submission that the allegation that there had been a premium for the entering into of the lease at an above market rent was evidence supportive of the fourth defendant’s contention that there had also been rental rebates. That is particularly so when it appears to be the contention of the fourth defendant that the premium was paid in the form of a rent-free period, and it was only after that rent-free period was over that the rental subsidy commenced to be paid. Thus, it would have been relevant evidence for the fourth defendant to have put on at a much earlier time.

36 As well, there was some inattention on the part of legal representatives of the fourth defendant, in failing to realise that they had not been served with all of the affidavits, when the affidavit of Mr Sgro sworn 19 April 2005 clearly referred to the 31 August 2004 affidavit (although incorrectly referred to as 31 August 2005). The evidence does not make clear whether the fourth defendant ever gave his solicitor the two affidavits of Mr Harrod which also referred to Mr Sgro’s 31 August 2004 affidavit – but one can say that either the fourth defendant or his solicitor showed some inattention in not picking up those references.

37 In these circumstances, it seems to me that the fourth defendant has been a significant contributing cause of the adjournment.

38 As well, even though there was no obligation under the rules at the time to do so, it is still a common practice, and a wise precaution, for any party who obtains the joinder of a new defendant to ensure that that defendant is supplied with all of the material which has passed between the legal representatives before the joinder and which is relevant to the future participation of the new defendant in litigation. The plaintiffs failed to do this.

39 In all the circumstances, in my view each of the plaintiffs, the first defendant and the fourth defendant have played significant contributing roles in bringing about the situation which has resulted in the adjournment.

40 I order each of the plaintiffs, the first defendant and the fourth defendant to pay the costs of the second and fifth defendants thrown away by reason of the adjournment. Obviously, when all three of them are ordered to pay the costs, there will be an equity of contribution between them. I do not think it is right, however, to simply make an order that they pay one third of the costs each as I do not know how solvent they are.

41 There is no reason to believe that the costs thrown away by either of the plaintiffs, the first defendant or the fourth defendant will differ very significantly one from the other. In those circumstances it is appropriate to order that each of the plaintiffs, the first defendant and the fourth defendant bear their own costs thrown away by reason of the adjournment.

42 Mr Fernon seeks an order for the costs payable to the second and fifth defendants be payable forthwith. In circumstances where there is not reason to believe the trial will be delayed to an unusual extent, and where there is the possibility of there being countervailing cost orders between the parties, I do not think it is appropriate to make that order.

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