Sanders v Constantine

[2006] NSWSC 534

CITATION:	Sanders v Constantine [2006] NSWSC 534 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	25/05/06
JUDGMENT DATE :	25 May 2006
JURISDICTION:	Equity Division
JUDGMENT OF:	White J
EX TEMPORE JUDGMENT DATE:	05/25/2006
DECISION:	I order that there be no order as to the costs of the proceedings with the intent that each party bear his or her own costs. Otherwise I order that the summons be dismissed.
CATCHWORDS:	COSTS – Plaintiff and defendant in dispute over possession of retail premises – Mediation pursuant to Retail Leases Act 1994 (NSW) – Mediation successful in resolving dispute – Plaintiff sought order for costs – Defendant countered with Calderbank letter – Offer open for less than twenty-four hours – Offer not accepted – Defendant sought order for costs on indemnity basis – Incurrence of further costs by both parties contrary to s 56 Civil Procedure Act 2005 (NSW) – Usual principle that Court not to order costs where proceedings not determined on merits and no capitulation – Re the Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia - Ex parte Lai Qin (1987) 186 CLR 621 considered – Whether usual principle applicable – Principle applicable – No order as to costs made.
LEGISLATION CITED:	Retail Leases Act 1994 (NSW) Civil Procedure Act 2005 (NSW)
CASES CITED:	Calderbank v Calderbank [1976] Fam 93 Re The Minister For Immigration And Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1987) 186 CLR 621
PARTIES:	Basil Sanders v Mary Constantine
FILE NUMBER(S):	SC 2724/06
COUNSEL:	Plaintiff: J O'Connor Defendant: T Edwards (solicitor)
SOLICITORS:	Plaintiff: Boyd House & Partners Defendant: Truman Hoyle Lawyers

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

WHITE J

Thursday, 25 May 2006

2724/06 Basil Sanders v Mary Constantine

JUDGMENT

1 HIS HONOUR: These proceedings were commenced on 12 May 2006 when an application was made ex parte to the duty judge for an order restraining the defendant from taking or keeping possession of cafe premises in Burton Street, Darlinghurst. It appears that the plaintiff is an assignee of a lease of those premises, which are a retail shop within the meaning of the Retail Leases Act 1994 (NSW). In April 2006, the defendant lodged an application for mediation pursuant to that Act. The matter was listed for mediation on 17 May 2006. The application was brought urgently on 12 May 2006 because the plaintiff said that the defendant was attempting to change the locks on the premises to exclude him from trading. An injunction was made ex parte as sought, on the basis of the plaintiff giving the usual undertaking as to damages. The mediation proceeded on 17 May 2006 and an agreement for the resolution of the dispute in relation to the non-payment of rent was reached.

2 That should have been the end of the matter so far as the expenditure of costs in these proceedings was concerned. Subsection 56(1) of the Civil Procedure Act 2005 (NSW) provides that the overriding purpose of the Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in dispute. Subsection 56(3) provides that:

"a party to civil proceedings is under a duty to assist the court to further that overriding purpose."

3 For some reason, which is not entirely clear to me, when the matter came back before the court on 18 May 2006 and the proceedings were mentioned for the defendant, the matter was adjourned until today. The existing injunction was extended until today with the plaintiff providing a further undertaking as to damages. Today it is accepted that the existing injunction should be dissolved or should lapse. Having obtained the order he sought, the plaintiff accepts that it is appropriate now to dismiss the summons.

4 The only outstanding issue is costs. On 18 May 2006, the plaintiff's solicitors advised that they would be seeking an order for costs against the defendant but no further relief would be sought. They also advised that further evidence would be submitted in relation to the issue of costs.

5 On 22 May 2006, at about 16:48 the defendant's solicitors sent what was described as a Calderbank letter. They advised that the defendant would consent to the proceedings being dismissed if each party agreed to pay its own costs. However, they went on to say that if the offer were not accepted by 9.00 the following day, they were instructed to file affidavit evidence in reply in order to have the summons dismissed with costs. They foreshadowed in this regard that they would seek indemnity costs on the basis of the decision in Calderbank v Calderbank [1976] Fam 93.

6 The prospect that the parties would incur further substantial costs in order to resolve a question of costs is appalling. It is contrary to the obligations of the parties to further the overriding purpose of the Act of ensuring that issues in the proceedings are resolved justly, quickly and cheaply. By this time the issue in the proceedings had been resolved as a result of the mediation.

7 The principles in relation to the exercise of the court's power to order costs where the proceeding has not been determined on its merits and there has been no capitulation by one party or the other is well established. As McHugh J said in Re The Minister For Immigration And Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1987) 186 CLR 621 at 624-625:

“Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion ... when there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.

In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs ... they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. …

Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. … But such cases are likely to be rare.

If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable ... will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.”

8 Accordingly, when the issue between the parties was resolved at mediation, the position was that, prima facie, the court would make no order as to the costs of the proceedings because to do so would require the parties to go to the expense of trying an issue on the merits when there was no need to do so.

9 In this case the defendant made an offer for the proceedings to be dismissed with each party to pay his and her own costs. The offer, however, was only open until the following day. Following that letter, the defendant has sworn and served no fewer than four affidavits in relation to the dispute. These include an affidavit from the managing agent of the property of some 47 paragraphs, an affidavit from the defendant's solicitor, plus further affidavits which address, amongst other things, the circumstances in which the lease was assigned to the plaintiff, conversations concerning the threat to change the locks on 12 May 2006, the mediation, and the non-payment of rent. This was a substantial body of evidence, apparently put on in order to establish that the merits of the dispute lay with the defendant and that the defendant ought to receive her costs on the principle that where a tenant obtains relief against forfeiture for non-payment of rent, the price of obtaining such relief is that the tenant pay the outstanding rent, plus interest, plus the costs of the proceedings. Of course that assumes that the lessor is entitled to forfeit the lease for non-payment of rent, which was an issue, it would seem, in the proceedings.

10 I cannot regard the expenditure of such costs with equanimity. For his part, the plaintiff contended that he should have his costs of the proceedings because the defendant acted unreasonably in threatening to change the locks when mediation was pending. He also sought a further opportunity to put on evidence to meet the evidence of the defendant. I declined to allow an adjournment for that purpose. I think it would be scandalous to allow the parties to incur further costs in putting on affidavit evidence in relation to the merits of the dispute.

11 But for the Calderbank letter of 23 May 2006, I would have ordered that there be no order as to costs in the proceedings with the intent that each party pay its own costs. That is the usual principle. Without investigating the merits of the case, it is impossible to say that one or other party would almost certainly have won. Nor can I say that one or other party acted unreasonably in bringing or defending the proceedings. Nor will the court countenance the incurring of further substantial costs in order for there to be an hypothetical trial of the merits.

12 The defendant did offer to consent to the proceedings being dismissed on the basis that each party pay his and her own costs. That is the order that I will make in substance. Had the defendant maintained today that that was the proper order to make, it would follow, in my view, that the defendant would be entitled to her proper costs of arguing what costs order was appropriate. However, on no basis would it be proper to allow the defendant costs, either on a party/party or an indemnity basis, of preparing the affidavits to which I have referred, which were prepared solely to deal with the question of costs.

13 As it was, the defendant before me did not contend that no order should be made as to costs but argued for a costs order in her favour. In those circumstances, and having regard to the shortness of time for which the Calderbank offer was open for acceptance, I do not think that that offer provides a sufficient reason for departing from the usual principle that there be no order as to the costs of the proceedings in circumstances such as the present.

14 For these reasons, I order that there be no order as to the costs of the proceedings with the intent that each party bear his or her own costs. Otherwise I order that the summons be dismissed.

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16/06/2006 - amended to reflect correct date of judgment. - Paragraph(s) 0