Trimcon Civil Contracts Pty Ltd v Powerlink Investment (Australia) Pty Ltd

[2019] NSWSC 1494

Supreme Court

New South Wales

Medium Neutral Citation:	Trimcon Civil Contracts Pty Ltd v Powerlink Investment (Australia) Pty Ltd [2019] NSWSC 1494
Hearing dates:	On the papers
Date of orders:	31 October 2019
Decision date:	31 October 2019
Jurisdiction:	Equity
Before:	Darke J
Decision:	Cross-Claim transferred to Local Court. Plaintiff’s application for costs refused.
Catchwords:	COSTS – proceedings commenced by plaintiff lessee seeking injunctive and declaratory relief in relation to lease – defendant lessor filed cross-claim seeking injunctive and declaratory relief and damages – remaining term of lease was less than ten months – where lease expired during the course of proceedings – where all claims other than damages rendered otiose – where defendant seeks to transfer the proceedings to the Local Court – whether defendant’s conduct unnecessarily prolonged proceedings which resulted in the plaintiff incurring wasted costs – not appropriate to order the defendant to pay the plaintiff’s costs – each party ordered to pay its own costs of the proceedings to date apart from costs attributable to damages claim   PRACTICE AND PROCEDURE – transfer of proceedings – application by defendant to transfer proceedings to Local Court – where only remaining claim is defendant’s damages claim – where the defendant’s damages claim is less than $100,000 – proceedings transferred to Local Court
Legislation Cited:	Civil Procedure Act 2005 (NSW), s 146 Local Court Act 2007 (NSW), s 30 Uniform Civil Procedure Rules 2005 (NSW), r 42.7
Category:	Costs
Parties:	Trimcon Civil Contracts Pty Ltd (Plaintiff) Powerlink Investment (Australia) Pty Ltd (Defendant)
Representation:	Counsel: Mr M Sheldon (Plaintiff) Mr D S Weinberger (Defendant)   Solicitors: Storey & Gough (Plaintiff) Dentons (Defendant)
File Number(s):	2018/318682
Publication restriction:	Nil

Judgment

Introduction

1. This is an application by the defendant for the transfer of the proceedings to the Local Court. There is no dispute that the proceedings (or at least part of them) should be transferred. The real controversy between the parties concerns the costs of the proceedings to date.

2. The plaintiff was the lessee of a certain part of industrial premises in Smithfield. The defendant was the lessor of that part of the property. The demised area of the property largely comprised an office building with a paved yard surrounding the building. The lease was for a term of two years, commencing on 7 August 2017 and ending on 6 August 2019, with no option to renew.

3. These proceedings were commenced by the plaintiff by way of Summons on 18 October 2018 in response to a notice of re-entry and termination served by the defendant in respect of the lease. The plaintiff sought interlocutory injunctive relief, declarations that the notice of re-entry and termination were invalid and, in the alternative, orders in the nature of relief against forfeiture. The defendant subsequently filed a Cross-Summons seeking injunctive relief, and later filed a Statement of Cross-Claim seeking a declaration that the lease had been terminated, injunctive relief, and damages.

4. Whilst the proceedings were on foot, the lease expired. This effectively rendered otiose the plaintiff’s claims for relief. It similarly rendered otiose most of the defendant’s claims. The only claim left in the proceedings is the defendant’s claim for damages.

5. The plaintiff contends that as a result of the defendant’s conduct in allegedly delaying the determination of the issues with respect to the lease, the defendant should bear the costs of the proceedings in this Court as a condition of any transfer. The defendant contends that each party should pay its own costs with respect to the proceedings in this Court or, alternatively, that the costs be determined by the Local Court.

6. Both parties were content for the Court to deal with the application on the papers. The Court accordingly made directions for the parties to provide written submissions in respect of the application. The plaintiff relies upon the affidavit of its solicitor dated 30 January 2019. The defendant relies upon the affidavit of its solicitor dated 6 September 2019.

Summary of salient evidence

7. The impetus for the proceedings was the breach notice served by the defendant on 29 August 2018. The notice referred to articles 6.08 and 12.03 of the lease. Article 6.08 stated in terms that the plaintiff should not store any materials outside the walls of the building. Article 12.03 stated that the common areas of the property shall only be used for ingress and egress from the property and shall not be used for the storage of materials. The notice alleged that the plaintiff had been storing trucks, pylons and building materials outside the building and also in the common areas of the property. The notice gave the plaintiff until 5pm on 17 September 2018 to remedy the breaches.

8. On 21 September 2018, the defendant served a notice of re-entry and termination of lease. After some discussions between the parties, and certain attempts by the defendant to re-enter the premises, the plaintiff commenced proceedings on 18 October 2019 seeking urgent injunctive relief to restrain the defendant from re-taking possession. When the matter was before the Court on that day, the Court was informed that undertakings had been provided to the plaintiff to the effect that the defendant would not act on the breach notice until further order of the Court or final determination of the proceedings.

9. The Court made directions for the plaintiff to serve its evidence by 1 November 2018; for the defendant to serve its evidence in response by 8 November 2018; and for the plaintiff to serve any evidence in reply by 22 November 2018. The Court stood the matter over to 23 November 2018 with a view to allocating a hearing date.

10. The plaintiff filed and served its evidence in support of the Summons by 1 November 2018. However, the defendant did not serve its evidence by 8 November 2018. On 9 November 2018, the plaintiff’s solicitor sent an email which enquired as to when the plaintiff would receive the defendant’s evidence. It was noted that the delay may result in delays in responding to the defendant’s evidence. No response was provided to this email.

11. A further email was sent by the plaintiff’s solicitor on 15 November 2018, in broadly the same terms. Prior to this email being sent, the plaintiff’s solicitor had a telephone conversation with the defendant’s solicitor in which the plaintiff’s solicitor said that her clients would be away in December 2018 and January 2019.

12. On about 22 November 2018, the defendant served its evidence. On 22 November 2018, the plaintiff’s solicitor sent an email to the defendant’s solicitor noting the delay in the service of the evidence. The email reiterated that the clients would be away throughout December 2018 and January 2019, and requested the consent of the defendant to orders that the plaintiff have until 31 January 2019 to serve its evidence in reply, with the matter listed for directions on 1 February 2019.

13. On 23 November 2018, the Court directed that the plaintiff file and serve its evidence in reply (including any expert evidence) by 8 February 2019. The matter was stood over for directions on 15 February 2019.

14. On 14 December 2018 (the last day of the 2018 law term), the defendant served a second breach notice. The notice referred to articles 6.04, 6.08 and 26.01. Article 6.08 has been referred to above. Article 6.04 prohibited the plaintiff from bringing onto the property any heavy machinery or other plant or equipment without the defendant’s consent, and provided that in any event such machinery, plant or equipment must not, in the reasonable opinion of the defendant, be of such nature, weight or size as to cause structural or other damage to the floors and walls of the building. By article 26.01, the plaintiff acknowledged that it would repair certain pavement at the office block entry to the property.

15. The notice set out with some particularity the breaches said to have occurred. It noted the types of heavy machinery said to have been brought onto the property without the defendant’s consent, and specified the machinery that was said to be likely to cause structural or other damage to the property. Similar to the first breach notice, the notice also alleged that the plaintiff had stored debris and other material outside the building area and in the common areas. A new allegation was made that the plaintiff had failed to repair the damaged pavement at the office block entry to the property.

16. On 18 December 2018, the defendant’s solicitor sent a letter to the plaintiff’s solicitor. By that letter, the defendant’s solicitor gave an undertaking on behalf of the defendant not to take any action in relation to the second breach notice until 25 January 2019. The undertaking was proffered on the condition that the plaintiff refrain from moving its plant and equipment into and out of the premises during the period of the undertaking. The letter also foreshadowed that the defendant intended to file a cross-summons.

17. The terms of the above undertaking were not accepted by the plaintiff. After some further correspondence, the defendant proffered an undertaking that it would not seek to re-enter or determine the lease until 29 January 2019, and that the undertaking would not affect the undertaking provided in respect of the first breach notice. This undertaking was accepted by the plaintiff.

18. On 21 December 2018, the plaintiff’s solicitor sent a letter to the defendant’s solicitor expressing concerns that the issues in respect of the second breach notice were at risk of being confused with the issues in respect of the first breach notice. The letter went on to propose a new timetable which included an order that the matter proceed by way of pleadings and consequential directions in relation to filing and service of such pleadings and any evidence.

19. On 14 January 2019, the defendant’s solicitor responded. The defendant’s solicitor disagreed that the matter should proceed by way of pleadings (noting that the issues for determination were particularly detailed in the second breach notice) and suggested that the issues could be appropriately dealt with by means of a cross-summons. The letter stated that a draft cross-summons would be provided prior to the directions hearing appointed for 15 February 2019.

20. On 23 January 2019, the defendant’s solicitor sent a letter to the plaintiff’s solicitor consenting to the continuation of the undertaking until 15 February 2019. This undertaking was subsequently revised on 1 February 2019 at the plaintiff’s request to the effect that the defendant would not take any action to re-enter the property or take steps to determine the lease without giving the plaintiff 7 days’ notice of its intention to do so.

21. At the directions hearing on 15 February 2019, the Court made orders that the defendant file its proposed cross-claim by that day. The Cross-Summons (which was filed on 18 February 2019) sought permanent injunctive relief against the plaintiff, orders for delivery up of possession of the property, as well as damages. The Cross-Summons also sought interlocutory relief in the nature of an injunction compelling the plaintiff to remove certain heavy machinery from the property, including external and common areas, and restraining them from bringing such machinery onto the property until further order. The Court fixed the hearing of the defendant’s interlocutory application for 20 March 2019. The Court also made directions in relation to the service of evidence in respect of the application.

22. On 20 March 2019, the Court dismissed that application, with costs, giving ex tempore reasons. The Court also made orders requiring the defendant to file a Statement of Cross-Claim, specifying all the issues which the defendant relied upon, by 2 April 2019. Further directions were made for the filing and service of a defence to cross-claim by 16 April 2019, and with respect to the service of any further evidence. The matter was stood over for further directions on 10 May 2019 with a view to allocating a hearing date.

23. As events turned out, neither party complied with the Court’s directions. The defendant did not file the Statement of Cross-Claim until 8 April 2019. The plaintiff did not file its defence to the Statement of Cross-Claim until 30 April 2019. It is not apparent if either party served any additional evidence beyond the evidence relied upon in the defendant’s interlocutory application.

24. When the matter came before the Court for directions on 10 May 2019, the Court granted leave for the plaintiff to file an amended defence to the Statement of Cross-Claim. The Court extended the time for the defendant to serve any further evidence upon which it intended to rely, and made directions in respect of the service of further evidence by the plaintiff. The Court also referred the matter to Court-annexed mediation.

25. The matter did not settle at the mediation, which took place on 25 July 2019. When the matter came back for directions on 26 July 2019, the defendant’s solicitor informed the Court that the quantum of the defendant’s damages claim was likely to be less than $100,000, and that the defendant was considering whether the proceedings (or part thereof) should be transferred to the Local Court. The matter was adjourned to 16 August 2019 for further directions.

26. By that time the lease had expired. The defendant confirmed that it was seeking an order to have the proceedings (or part of them) transferred to the Local Court to determine the outstanding question of damages.

Submissions

27. In his written submissions, counsel for the plaintiff submitted that because of the defendant’s dilatory conduct, the proceedings were unnecessarily prolonged, with the consequence that the relief claimed by the plaintiff in its Summons was now otiose. It was put that the defendant’s conduct caused the plaintiff to waste costs, both in respect of the Summons and the Cross-Claim, and that the defendant should pay those costs forthwith as a condition of any transfer of the proceedings to the Local Court.

28. Several factors were said to support the finding that the defendant’s conduct was dilatory. Firstly, the defendant’s failure to comply with the orders of the Court on 18 October 2018 for the service of evidence. Secondly, the defendant’s decision to serve a breach notice on 14 December 2018, which had the effect of expanding the scope of the dispute in some respects, and rendering some issues obsolete. Thirdly, the defendant’s decision to make an application for interlocutory injunctive relief. Fourthly, the defendant’s request, made at the directions hearing of 10 May 2019, for more time to put on evidence. Fifthly, the seeking of a referral to Court-annexed mediation rather than having the matter set down for final hearing.

29. Counsel submitted that the effect of the defendant’s transfer application was in substance an abandonment of the defendant’s entire case before this Court and the commencement of new proceedings in the Local Court concerning new and discrete issues. I understood this submission to be to the effect that the defendant’s transfer application was in substance an application to discontinue the proceedings, and that the defendant should not avoid the normal costs consequences which flow from discontinuing proceedings simply because of the form of the application.

30. Counsel for the defendant denied that the defendant was guilty of any dilatory conduct which had the effect of unnecessarily prolonging the proceedings. It was put that even if the defendant was guilty of some dilatory conduct, it could not give rise to a liability to pay for all of the plaintiff’s costs. It was submitted that the plaintiff’s submissions in this respect were based upon an assumption that had the proceedings been finally heard the plaintiff would have been substantially successful.

31. Counsel for the defendant also submitted that the suggestion that the defendant was abandoning its case by making the transfer application was illogical. It was put that in reality all that had occurred was a change in circumstances as a result of the expiry of the lease. It was submitted that this meant that the prosecution of the majority of the issues raised by both parties became futile.

32. Finally, it was submitted by the defendant that in circumstances where it gave undertakings on a without admissions basis that it would not act upon its breach notices, it would not be proper to burden the defendant with an adverse costs order.

Determination

33. The proceedings were commenced when less than ten months of the term of the lease remained. The issues arising from the first breach notice may have been able to be finally heard and determined within that period. It is even possible, although less likely, that the issues arising from the second breach notice may have been able to be finally heard and determined within that period. I accept that some of the conduct of the defendant contributed to those outcomes becoming unattainable. That conduct includes the delay in the service of its evidence in November 2018, service of the second breach notice itself, and the pursuit of the application for interlocutory injunctive relief. However, it does not follow that it is appropriate to order that the defendant pay all of the plaintiff’s costs of the proceedings on the basis that those costs were effectively wasted.

34. It should be noted at the outset that a not insignificant portion of the plaintiff’s costs would be attributable to the defendant’s interlocutory injunction application. That application was unsuccessful, and the Court ordered that the defendant pay the plaintiff’s costs of it. Moreover, that application failed on balance of convenience grounds after the Court had found that the defendant had established the existence of serious questions to be tried as to breaches of the lease by the plaintiff. It is therefore not possible to conclude that had the issues arising from the breach notices been finally determined, the plaintiff would have been successful. Neither should the plaintiff’s costs generally be regarded as wasted in circumstances where the proceedings constituted the means by which the plaintiff was able to protect its continuing occupation of the leased premises in the face of threats by the defendant to re-take possession.

35. I do not accept that the defendant’s transfer application should be regarded as in substance an application to discontinue. The defendant has not simply chosen to abandon a case in this Court in order to pursue a new case in another court. The expiry of the lease term rendered the defendant’s claims (except for its damages claim) otiose, and the claim for damages is of a magnitude that renders a transfer to the Local Court prima facie suitable. Further, as pointed out by counsel for the defendant, the logic of the plaintiff’s submission could be equally applied to the plaintiff’s own claims which are to be pursued no longer, having been rendered otiose.

36. Viewing the circumstances overall, it is my opinion that the appropriate exercise of the Court’s discretion is that each party pay its own costs of the proceedings to date, apart from any costs attributable to the defendant’s damages claim, and the costs of the interlocutory injunction application. In accordance with the order made on 20 March 2019, the defendant is to pay the plaintiff’s costs of that application.

37. I turn now to the question of transfer.

38. The parties have each confirmed that they are no longer seeking any of the declaratory or injunctive relief hitherto claimed in the proceedings. In these circumstances, there seems no reason why the plaintiff’s Summons should not now be dismissed. The Court will so order.

39. The only remaining claim is the defendant’s claim for damages, which forms part of its Cross-Claim. The defendant has informed the Court that the likely quantum of damages is less than $100,000, and on that basis seeks an order that the proceedings be transferred to the Local Court. Presumably, the defendant intends to seek damages of no more than $100,000.

33. Section 146(1) of the Civil Procedure Act 2005 (NSW) relevantly provides that if the Supreme Court is satisfied in relation to proceedings before it that the proceedings (and any Cross-Claim in the proceedings) could properly have been commenced in the Local Court, the Supreme Court may order that the proceedings, including any such Cross-Claim, be transferred to the Local Court.

34. Upon the dismissal of the Summons, the only proceedings that remain are those on the Cross-Claim. As the defendant has clearly stated that the only claim it seeks to pursue on the Cross-Claim is its claim for damages, I think that the proceedings, for the purposes of s 146(1), should be regarded as proceedings for damages where the amount claimed does not exceed $100,000.

35. I am satisfied that the proceedings, so understood, could properly have been commenced in the Local Court. The Local Court has jurisdiction to hear and determine a “money claim” of that type so long as the amount claimed does not exceed the jurisdictional limit (see s 30 of the Local Court Act 2007 (NSW)). The jurisdictional limit of the Local Court (in its General Division) is $100,000. Further, it seems to me that it is plainly appropriate to exercise the discretion under s 146(1) of the Civil Procedure Act to order that the Cross-Claim be transferred to the Local Court. An order to that effect will be made. Any costs incurred by the parties in the proceedings so transferred, and any costs incurred in these proceedings that are attributable to the damages claim, can be dealt with by the Local Court in due course. The costs of the interlocutory application, which was brought pursuant to the Cross-Summons, will be payable at the conclusion of the proceedings unless the Local Court orders otherwise (see Uniform Civil Procedure Rules 2005 (NSW) r 42.7).

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Decision last updated: 31 October 2019