By Interlocutory Application seeking final relief filed on 18 May 2017, the Applicant, Dispute Resolution Associates Pty Ltd ("DRA") sought, inter alia, permanent injunctive relief including an order restraining several Respondents from entering into a contract for the sale of a property unless that contract contained specified terms and seeking a declaration that DRA's lease of the property dated 6 December 2016 was a valid and binding equitable lease in registrable form with respect to the property and other relief. By a second Interlocutory Application also filed on that date, DRA sought, inter alia, interlocutory orders that the First and Second Respondents to the proceedings, including Mr Sampson, a receiver appointed by the Court who had been authorised to sell the relevant property, be restrained from completing the sale of the property, and that the Respondents be restrained from entering into a further contract, until DRA's application for final relief was heard and determined. By my judgment delivered on 19 May 2017 ([2017] NSWSC 627), I dismissed DRA's claim for interlocutory relief, and indicated that I would order DRA to pay Mr Sampson's costs of the application. Mr Sampson sought to be heard as to the basis of that costs order and orders were made for written submissions in that respect.
Allplastics Engineering Pty Ltd v Dornoch Ltd [2017] NSWSC 695 | Case summary | Zoe
By Mr Sampson's submission dated 22 May 2017, he applied for an order for costs on an indemnity basis. By its submissions dated 31 May 2017, DRA opposed Mr Sampson's application for indemnity costs and sought its costs of and incidental to that application. Section 98 of the Civil Procedure Act 2005 (NSW) confers a discretionary power to determine costs on the Court and requires that that discretion be exercised judicially, and s 98(1)(c) permits the Court to order costs on an ordinary or an indemnity basis. Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) in turn provides that:
"Subject to this Part, if the court makes any order as to costs, the court is to order that the costs 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."
Rule 42.2 in turn provides that, unless the Court orders otherwise or the rules otherwise provide, costs payable are to be assessed on an ordinary basis. Rule 42.5 deals with an order for costs on an indemnity basis.
Mr Sampson submitted, and it was common ground, that whether an indemnity costs order should be made depends, at least in part, on whether there was a relevant delinquency on the part of the unsuccessful party: Oshlack v Richmond River Council (1998) 193 CLR 72 at 89; Westpac Banking Corporation v Ollis [2007] NSWSC 1008 at [6]. DRA in turn points out that costs are awarded on the ordinary basis unless there are exceptional circumstances: Leichhardt Municipal Council v Green [2004] NSWCA 341. DRA also emphasises that the jurisdiction to order costs is compensatory and not punitive: Allplastics Engineering Pty Ltd v Dornoch Ltd [2006] NSWCA 33. In Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) [2008] NSWSC 199; (2008) 65 ACSR 324, McDougall J observed (at [24]) that there must usually be some special or unusual feature to justify departure from the ordinary rule as to costs, and that delinquency is not necessary for an order for indemnity costs, but is relevant to whether it should be made. The relevant principles were also considered by the Court of Appeal in Cabport Pty Ltd v Marinchek (No 2) [2013] NSWCA 131 at [6] where the Court observed that an order for indemnity costs may be made where conduct in proceedings is plainly unreasonable or involves an element of delinquency.
Mr Sampson submits that an order for costs should be made in his favour on an indemnity basis by reason that he and the Court were first given notice of DRA's application immediately after the Court gave judgment dismissing another application for interlocutory relief by ABCD Corporation Pty Ltd ("ABCD") on 16 May 2017, an entity which has the same director as DRA. Mr Sampson submits that the relevant act of delinquency on DRA's part which supports an order for indemnity costs was its failure to make its application earlier.
DRA responds that Mr Sampson's submissions wrongly focus on the delay by DRA in bringing its application, rather than on the conduct of the litigation after it had commenced. I accept that an order for indemnity costs is not properly made to indicate disapproval of the conduct that is in issue in proceedings, as distinct from by reference to the conduct of the proceedings. However, it seems to me that the delay in commencement of the proceedings can properly be treated as an aspect of the conduct of the proceedings. DRA also submits that the significance of delay had already been addressed by the Court in considering the balance of convenience and was not relevant to costs. It does not follow that, because delay was relevant to the balance of convenience, it cannot also be relevant to the question of costs. However, DRA also points out, and I accept, that the proceedings, once commenced, were conducted efficiently and determined within a short period, and that both parties acted constructively in dealing with a compressed timetable.
Against the contingency that I consider that DRA's delay in bringing its application is potentially relevant, as I do, DRA submits that its application did not delay Mr Sampson's sale of the property. I accept that submission. DRA's application for interlocutory relief was foreshadowed on 16 May 2017, was heard on 18 May 2017 and judgment was delivered on 19 May 2017. During the whole of that period, Mr Sampson could not have proceeded to a sale of the property, because he had undertaken not to deal with the property until 5pm on 22 May 2017, pending ABCD's application in the Court of Appeal for an injunction pending its appeal from the judgment delivered on 16 May. That application was refused by Basten JA in the Court of Appeal on 22 May 2017.
Mr Sampson also submits that DRA's delay in bringing its application was such that its case was "hopeless", as to the balance of convenience, and that damages were an adequate remedy. DRA responds that the characterisation of its case as "hopeless" cannot be accepted, where the determination of the proceedings involved the exercise of a judicial discretion in respect of the grant of injunctive relief. DRA also submits that damages were not an adequate remedy in the relevant circumstances, but that submission does not seem to me to be open to it, so far as it depends on the matters previously determined against it in the application for injunctive relief. It seems to me that Mr Sampson had the far stronger case in respect of the exercise of the discretion whether to grant an injunction, as the result of the proceedings indicated. However, it also seems to me that DRA's case could not properly be described as "hopeless" or not properly arguable, although it was not successful, and that matter does not support an order for indemnity costs against it.
Mr Sampson also submits that DRA's delay in bringing the application was productive of unreasonable delay and expense in the conduct of the proceedings. I have indicated above that the delay in bringing that application did not delay either the determination of the application or the sale of the property. It also seems to me that that delay did not increase the costs of the proceedings, since the hearing of DRA's application at the same time as ABCD's application, where they involved different claims with different factual and legal bases, would have substantially increased the complexity of the hearing and the time required to determine it. In my view, it may ultimately have been more efficient to determine the matters separately, as was done, rather than together.
Mr Sampson also points to my observation, in my judgment dismissing DRA's application, that the delay in bringing the application had exposed Mr Sampson to additional risk, in respect of the entry into a sale contract for the property and an exposure to a risk of damages and a deterioration in the property market if interlocutory relief was granted. That matter was relevant to why an interlocutory injunction should not have been granted on DRA's application, but does not seem to me to support an order for indemnity costs, particularly where DRA's delay ultimately did not cause any detriment to Mr Sampson beyond the detriment which would already arise from ABCD's application.
Mr Sampson also submits that the timing of DRA's application suggests that it was brought for a collateral purpose of seeking to frustrate his exercise of his powers to sell the property after the failure of ABCD's application. DRA responds that its approach was explicable, since its application would have been unnecessary, had the sale of the property been restrained by the Court on ABCD's application and had ABCD's application for final relief succeeded. I would not readily reach the finding of collateral purposes for which Mr Sampson contends, where an alternative explanation of the delay is plainly available, namely that DRA's application would not have been necessary had ABCD's application succeeded and that there was an obvious benefit to DRA (and indeed to both parties) of avoiding the costs of that application, if it was not necessary for it to be made. In any event, it does not seem to me to be necessary to reach a finding as to that matter, where I have found that there was no real detriment to Mr Sampson as a result of DRA's application that would not be addressed by an order for costs on the ordinary basis.
For these reasons, I am not satisfied that an order for indemnity costs against DRA is warranted. Mr Sampson should therefore have his costs of the interlocutory application brought by DRA on an ordinary basis and DRA should have its costs of the argument as to indemnity costs on an ordinary basis.
I make the following orders as to costs:
The Applicant, Dispute Resolution Associates Pty Ltd, pay the costs of the First Respondent, Mr David Sampson, of and incidental to the Applicant's Interlocutory Application foreshadowed on 16 May 2017 and filed 18 May 2017, up to and including the close of business on 19 May 2017, on an ordinary basis, as agreed or as assessed.
The First Respondent pay the Applicant's costs of and incidental to the application for indemnity costs, as agreed or as assessed.
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Decision last updated: 02 June 2017