Thalia Corporation Pty Ltd v Lidums - [2010] SADC 109

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil: Application)
THALIA CORPORATION PTY LTD v LIDUMS
[2010] SADC 109
Reasons for Decision of His Honour Judge Lovell
19 August 2010
PROCEDURE - COSTS - DEPARTING FROM THE GENERAL RULE - OTHER CASES - DISCONTINUANCE OR ABANDONMENT
Trial settled without a hearing but costs of action not agreed - general principles discussed.
Held: No order as to costs of the interlocutory proceedings.
Real Property Act 1886 Part XVII, referred to.
IB Consulting v Dare Sutton Clarke Pty Ltd SCCIV-96-1872; Boscaini Investments Pty Ltd & Ors v Corporation of the City of Kensington and Norwood [1999] SASC 327; Ex parte Lai Qin (1997) 143 ALR 1, considered.

THALIA CORPORATION PTY LTD v LIDUMS
[2010] SADC 109
Background

Dr Lidums, a dentist, practised from rooms leased from the plaintiff. The Lease ran from 1 April 2003 until 31 March 2010. Dr Lidums did not renew the Lease within the time period specified in the Lease.
On 15 February 2010, the plaintiff wrote to Dr Lidums confirming that the Lease expired on 31 March 2010 and that the plaintiff intended to use the premises for its own purposes. Dr Lidums wrote to the plaintiff, the letter being received on 16 February 2010, seeking to exercise “his right of renewal”. By letter of 17 February 2010, the plaintiff wrote to Dr Lidums rejecting the right of Dr Lidums to exercise any right of renewal and confirming that the plaintiff needed the space “for its own use”. The plaintiff required Dr Lidums to “make good and vacate” the premises by 31 March 2010. It was common ground that Dr Lidums had not exercised his right of renewal within the terms specified in the Lease.
Despite having stated 31 March 2010 as the date “when make good obligations” must be finalised, the plaintiff further stated, “I believe that legally you are entitled to six months from the time of service, being 15^th February, 2010”.
Six months therefore would expire on 15 August 2010.
The letter requested, “Please advise as to how much time you would like to manage this event”.
On 15 April 2010, the solicitors acting for the plaintiff, Piper Alderman, wrote to Dr Lidum’s solicitors (Georgiadis Lawyers). The letter enclosed a notice for the defendant to quit the premises forthwith, although it suggested that if the defendant wanted extra time he should “submit a written request to us by next Monday 19 April 2010 at 5.00 pm”.
No written request was made.
On 12 May 2010 the plaintiff issued a summons under Part XVII of the Real Property Act 1886 namely an order for possession.
On 28 May 2010 the defendant filed an application for injunctive relief and an affidavit.
He stated at paragraphs 42 and 43 of the affidavit:
42.     I understood from my consideration of the letters of 15 February 2010 and 17 February 2010 that:
42.1   The Plaintiff did not acknowledge that my intentions were to stay in the         premises for the renewal term of the lease.
42.2   The Plaintiff did not recognise my renewal and I relied on the 6 month          reference in the letter.
42.3   The worse case scenario was that I had to find alternative Premises, remove            all plant and equipment that had been installed (including recently) in the                Premises, move that plant and equipment to new Premises, fit out the new              Premises and make good the existing Premises and reschedule all my clients               to the new Premises on or before 15 August 2010.
42.4   I would be hearing from the Plaintiff or her architects as to what work they             would consider that I needed to do to make good (assuming that I was not           entitled to a five year renewal).
42.5   I needed to consider the terms of the lease and in particular its renewal          obligations and seek advice in regard to whether I was entitled to my further               5 year term.
43.     I relied on the 6 month reference in the letter of 17 February 2010 in making my     decision as to what to do. I did not start looking for alternative premises, organising       approvals and builders for any relocation as I believed that I had some time to first       try and resolve the matter with the Plaintiff to obtain a renewal or a new lease.
On 1 June 2010 by email, the plaintiff offered to extend the time the defendant could stay to 15 August 2010 on certain conditions. There was no offer in relation to the costs of the summons for possession. The defendant’s solicitors queried the question of costs and were told there was no offer on costs.
Application
The plaintiff’s application for possession and the defendant’s application for injunctive relief came on before me on 3 June 2010. It was not argued on that day for a number of reasons including the fact that other matters needed to be done prior to the argument. It was adjourned to 18 June 2010. Orders were made including, requiring that pleadings in draft form be served prior to the adjourned date.
It should be noted that on 3 June 2010, the plaintiff was still “pressing for possession” but indicated that “there have been negotiations and open offers made to extend the period”.
Prior to 18 June 2010 the parties complied with the court orders and pleadings and further affidavit material were filed.
The matter did not proceed to be argued as an interlocutory matter on 18 June 2010 as the court was able to offer the parties an expedited full hearing date of 2 August 2010. The matter was adjourned to a full hearing on that date.
The matter was settled before trial. The question of the costs of the interlocutory applications was unresolved. That matter was argued before me on 27 July 2010.
Mr Ross-Smith for the defendant conceded, properly in my view, that in relation to the costs incurred by the plaintiff on his client’s claim, the plaintiff would be entitled to those costs whether they were incurred before or after 18 June 2010.[1]
[1] T 22.
The Law
What is left for me to decide is the question of the costs of the interlocutory application on the summons under Part XVII of the Real Property Act seeking possession. The application, as can be seen from the history, was never determined by me.
The general principles relating to the costs discretion on a matter settled without a hearing were helpfully reviewed by Debelle J in Boscaini Investments Pty Ltd & Ors v Corporation of the City of Kensington and Norwood.[2]
[2] [1999] SASC 327.
They are as follows:
(1)     Where neither party desires to proceed with litigation the court should be ready to      facilitate the conclusion of the proceedings by making a cost order.
(2)     It will rarely, if ever, be appropriate, where there has been no trial on the merits for a court determining how the costs of the proceeding should be borne, to endeavour      to determine for itself the case on the merits or, as might be put, to determine the        outcome of a hypothetical trial. This is particularly so where a trial on the merits    would involve complex factual matters where credit is an issue.
(3)     Depending on the circumstances, where the applicant has acted reasonably in commencing proceedings, has an arguable case, and it is reasonable to conclude that the respondent has acted in consequence of the commencement of proceedings,     the court may be prepared to make an order as to costs in favour of the applicant.
(4)     In a particular case it might be appropriate for the court in its discretion to consider    the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation.
(5)     Where the proceedings terminate after interlocutory relief has been granted, the       court may take into account the fact that the interlocutory relief has been granted.       The fact that interlocutory relief was granted is not conclusive and will be of no     force where it is not possible to assess the prospects of success.
(6)     The court will not make an order where the subject matter of the action has ceased    to exist through the lawful action of a person who is not a party to the proceedings.
Discussion
In this matter interlocutory relief was sought but the question not decided. To resist the interlocutory relief sought the defendant needed to show it had an arguable case.
The affidavit of Dr Lidums and in particular his assertion of reliance on the “6 month” representation made by the plaintiff, was not contested. Indeed on 18 June 2010, counsel for the plaintiff Mr Britten-Jones, announced that the plaintiff had conceded that issue. The only issue left to be decided had the matter proceeded, was the defendant’s argument relating to a “right of renewal” of the Lease extending occupation past 15 August 2010.
I accept that the concession of the issue relating to the representation of the “6 months” was not necessarily a concession that the interlocutory application would fail. Practical considerations, not least of which was the timing of the hearing itself being only just less than two months before 15 August 2010, no doubt played a part. Indeed as Mr Britten-Jones stressed, during the course of his helpful submissions, that the plaintiff had invited the defendant to put forward a proposal concerning how much time was required to “make good” the leased premises.
On the application for costs Mr Ross-Smith submitted that the plaintiff’s application was “ill fated” and “unmeritorious” causing the defendant to incur costs. He submitted therefore that the defendant should have his costs of that application. Whilst he conceded that the defence of the application included not just the estoppel point, but also the argument regarding the “right to renew” he submitted that as a result of settlement of the whole action his client would have to pay those costs.
Mr Ross-Smith submitted that to not award his client costs would work an unfairness on his client in all the circumstances.
Mr Britten-Jones pointed to the correspondence that indicated that his client had always attempted to speak to the defendant about the question of time to vacate but was unable to get a response. The correspondence exhibited to the affidavits supports, in general terms, that submission.
Indeed Mr Grant, solicitor for the defendant in his affidavit dated 28 May 2010 stated at paragraphs 5 and 6:
5. Mr Britton Jones informed me that the notice was a “notice to quit” and that the notice was provided on the basis that his client’s present intentions are to not forcibly remove the Defendant from the Premises or to seek orders from the Court for possession.
6. Mr Britton Jones said to me that his client has instructed him to nevertheless serve the notice so that it can bring matters to a head in relation to the Premises. Given that at this stage I had not received the letter enclosing the notice to quit I asked Mr Britton Jones whether or not the notice to quit nominates a date on which his client sought possession. I asked this question because I knew it would be necessary for me to issue proceedings urgently prior to that date. The dispute between my client and the Plaintiff had onset before my conversation with Mr Britton Jones and I had been endeavouring to resolve the matter without the need for legal proceedings. Mr Britton Jones told me that there was no date for possession set out in the notice.
Conclusion
In the circumstances I find it was reasonable for the plaintiff to commence proceedings. True it is it could have specified a date for the defendant to vacate rather than argue for immediate possession, but given the lack of response to the offer to negotiate time and the stated reliance by the defendant on his alleged “right to renew” in any event, it was reasonable for the plaintiff to commence proceedings.
I have taken into account the factors mentioned by Debelle J. It could not be said that the defendant acted unreasonably in defending the proceedings initially at least.
Once the matters were before the court both parties acted sensibly and reasonably and the matters resolved (subject to this application).
In Ex parte Lai Qin[3] a case where the eventual granting of a protection visa rendered the continuation of the High Court proceedings unnecessary, McHugh J said:
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 until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to costs.[4]
[3] (1997) 143 ALR 1.
[4] Supra at page 3.
In the circumstances of this case I adopt those remarks. In my view there should be no order as to costs of the interlocutory proceedings.