The Trust Company (Australia) Ltd in its capacity as custodian of the Asia Pacific Data Centre Trust v Nextdc Limited [No 2]

[2018] NSWSC 1384

Supreme Court

New South Wales

Medium Neutral Citation:	The Trust Company (Australia) Ltd in its capacity as custodian of The Asia Pacific Data Centre Trust v NEXTDC Limited [No 2] [2018] NSWSC 1384
Hearing dates:	Written submissions
Decision date:	07 September 2018
Jurisdiction:	Equity - Real Property List
Before:	Hammerschlag J
Decision:	The plaintiffs are to pay the defendant’s costs of the proceedings. Those costs are to be on the indemnity basis from 6 July 2018
Catchwords:	COSTS – INDEMNITY COSTS – UCPR rr 20.26, 42.1, 42.15A – whether indemnity costs should be ordered because two offers of settlement and an offer of compromise were not accepted and the plaintiffs did no better than what the defendant offered; HELD – refusal of the two offers of settlement did not justify indemnity costs – no reason to otherwise order than that the defendant should get indemnity costs because the plaintiffs did no better than the terms of the offer of compromise
Legislation Cited:	Civil Procedure Act 2005 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Corporations Act 2001 (Cth)
Cases Cited:	The Trust Company (Australia) Ltd in its capacity as custodian of The Asia Pacific Data Centre Trust v NEXTDC Limited [2018] NSWSC 1361
Category:	Costs
Parties:	The Trust Company (Australia) Ltd in its capacity as custodian of The Asia Pacific Data Centre Trust - First Plaintiff Asia Pacific Data Centre Limited - Second Plaintiff NEXTDC Limited - Defendant
Representation:	Counsel: A. J. McInerney SC with G. P. Gee - Plaintiffs I. R. Pike SC with J. Lazarus - Defendant   Solicitors: HFW - Plaintiffs Herbert Smith Freehills - Defendant
File Number(s):	2018/122670

Judgment

1. HIS HONOUR:   On 4 September 2018, I dismissed the principal proceedings: The Trust Company (Australia) Ltd in its capacity as custodian of The Asia Pacific Data Centre Trust v NEXTDC Limited [2018] NSWSC 1361. This judgment deals with costs. Definitions used in the principal judgment are used here.

2. The parties have agreed that I should determine costs on the papers. I have received written submissions from both sides.

3. Costs are in the discretion of the Court. They will follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs: Civil Procedure Act 2005 (NSW) s 98; Uniform Civil Procedure Rules 2005 (NSW) Pt 42 r 42.1 (UCPR). The discretion must be exercised in light of the particular circumstances of each case.

4. UCPR r 20.26 makes provision for any party to make a written offer of compromise. UCPR r 42.15A has the effect, relevantly, that if a party obtains an order or judgment on the claim no less favourable to it than the terms of the offer, unless the Court otherwise orders, it is entitled to an order against the opponent on an indemnity basis from the beginning of the day following the day on which the offer was made.

5. There is no issue that the defendant victor is entitled to its costs of the proceedings. However, the defendant seeks an order that the plaintiffs pay its costs on the ordinary basis up to 21 April 2018, or alternatively 24 April 2018, or alternatively 5 July 2018, and on an indemnity basis thereafter.

6. For the 21 April 2018 date, the defendant relies on a ‘Without prejudice, save as to costs’ offer of settlement made in a letter from its solicitors to the plaintiffs’ solicitors dated 21 April 2018, in which it (as it describes it) offered to consent to an order allowing access to a prospective purchaser to the Macquarie Park premises on certain conditions, that the proceedings be dismissed and there be no order as to costs. It puts that this offer represented a genuine compromise because it allowed access to at least one of the premises and provided for a substantial costs compromise. It puts that it was unreasonable for the plaintiffs not to have accepted it.

7. For the 24 April 2018 date, the defendant relies on a ‘Without prejudice, save as to costs’ offer of settlement made in a letter from its solicitors to the plaintiffs’ solicitors dated 24 April 2018, which offered that paras 8 to 11 of the Summons (final relief) be dismissed, paras 2(b) and 2(c) (interim relief) be dismissed, and there be no order as to costs on the above issues.

8. For the 5 July 2018 date, the defendant relies on an offer of compromise under UCPR r 20.26 in which it offered that the proceedings be dismissed, there be no order as to costs and the costs order made by Parker J on 23 May 2018, that the plaintiffs pay the defendant’s costs of their motion for interlocutory relief, be vacated.

9. The plaintiffs argue that it was not unreasonable for them not to accept the offers of 21 and 24 April 2018. This is because, they say, the first offer was to allow a prospective purchaser access to one only of the premises and they were seeking access to all three. As to both offers, they say that it was not unreasonable to reject them because the defendant refused access for m3 Property, a valuer, in circumstances where access was needed to meet a condition of the plaintiffs’ refinancing and their obligations to obtain a valuation under the Corporations Act 2001 (Cth). They observe that access to an independent valuer was ultimately given on 20 and 21 June 2018.

10. As to the offer of compromise, they argue that the Court should ‘otherwise order’ under UCPR r 42.15A because, although by the dismissal of the proceedings, the defendant has obtained an order no less favourable than on the terms of that offer, the factual basis for that dismissal was not and could not have been known as at 5 July 2018. They say that, as at 5 July 2018, the defendant had refused each request for access for a valuer from m3 Property, which had been appointed for the purpose of the plaintiffs’ refinancing (including in the defendant’s first offer of 21 April 2018 and the defendant’s second offer of 24 April 2018).

11. They argue further that only on 14 August 2018 did the defendant agree to access and that it was only from this time that the dispute became hypothetical. They submit that this is an appropriate case for the Court to ‘otherwise order’ because, otherwise, the plaintiffs will be burdened by an order for indemnity costs in circumstances where they could not have known the central reason for the defendant’s success, as the relevant events had not occurred at the time the offer was rejected. They resist any order for costs on the indemnity basis but put, in the alternative, that any such order should be either from 14 August 2018 or 5 July 2018.

12. In my opinion, the defendant should have its costs on the indemnity basis from 6 July 2018. [1]

    1. Which is the date for which UCPR r 42.15A(2)(b)(i) provides.

13. As to the first offer, apart from what the plaintiffs argue, the difficulty with it is that the letter proposed an additional term that the parties enter into a deed of settlement reflecting the above terms as well as other standard and reasonable terms required to give effect to the settlement including, but not limited to, mutual releases as well as confidentiality provisions. These standard and reasonable terms are not defined. It does not appear to me that any additional terms would be necessary to give effect to the settlement, and the plaintiffs were entitled reasonably to decline to accept such an offer. Their failure to do so does not, in my opinion, provide a basis to order indemnity costs against them from 21 April 2018.

14. As to the second offer, the only compromise that it offered was no order as to costs. In effect, the offer called for capitulation at a very early stage of the proceedings. I do not consider that it represents a sufficiently genuine offer of compromise to warrant an indemnity costs order.

15. I do not consider that this is a case where, under UCPR r 42.15A, the Court should otherwise order. The plaintiffs’ case was in difficulty long before 14 August 2018.

16. Before Parker J, both parties were represented by senior and junior counsel and solicitors. It can be safely inferred that the costs of that contest were not insubstantial. The offer as to no order for costs, combined with the discharge of the order made by Parker J in the defendant’s favour, offered a genuine and substantial compromise. In the circumstances that have occurred, there is no warrant to depart from the normal consequences for which UCPR r 42.15A provides.

17. The plaintiffs are to pay the defendant’s costs of the proceedings. Those costs are to be on the indemnity basis from 6 July 2018.

Endnote

Decision last updated: 07 September 2018