Judgment in this matter was given on 28 October 2020 (see Australia City Properties Management Pty Ltd v The Owners - Strata Plan No 65111 [2020] NSWSC 1505), and various directions and orders were made on that day. The question of costs remained unresolved. As the parties were not able to agree on orders as to costs, directions were made by the Court for written submissions to be made on the question.
In accordance with those directions, the parties provided written submissions on 20 November 2020, in each case supported by an affidavit of a solicitor retained in the proceedings. The Court has read and considered the submissions and supporting evidence so provided.
The nature of the claims made in the proceedings by the plaintiffs against the defendant Owners Corporation, and by the Owners Corporation against the first plaintiff, are broadly summarised in the principal judgment at [4]-[7].
The Court determined that the first plaintiff's claim for loss of bargain damages failed. It was held that the Owners Corporation had not wrongfully terminated the Caretaker Agreement, but had validly exercised a right of termination under cl 9.3 of the agreement. The first plaintiff was however successful in obtaining relief to recover possession of Lot 179 in the strata scheme, and be compensated for loss suffered as a result of being deprived of possession for a period. In that regard, the first plaintiff obtained a monetary judgment (including interest) of $32,896.13.
In relation to the second plaintiff's claim in respect of Lot 162 in the strata scheme, the Court made a declaration, but this was not the declaratory relief that had been sought by the second plaintiff.
The Further Amended Statement of Claim was otherwise dismissed.
In relation to the Owners Corporation's Cross-Claim against the first plaintiff, the Court determined that the Owners Corporation's claims for damages and other monetary relief against the first plaintiff failed. Accordingly, the Amended Cross-Claim was dismissed.
The plaintiffs, who relied upon the affidavit of Mr Scott Freidman of 20 November 2020, submitted that the appropriate orders for costs would be:
1. that the Owners Corporation pay 80% of the first plaintiff's costs of the Further Amended Statement of Claim;
2. that the Owners Corporation pay the second plaintiff's costs of the Further Amended Statement of Claim; and
3. that the Owners Corporation pay the cross-defendant's (the first plaintiff's) costs of the Amended Cross-Claim.
The Owners Corporation, which relied upon the affidavit of Mr Josh Sukkar of 20 November 2020, submitted that the appropriate orders for costs would be:
1. as between the Owners Corporation and the first plaintiff, that the first plaintiff pay 90% of the Owners Corporation's costs (of both the Further Amended Statement of Claim and the Amended Cross-Claim) up to 9 July 2020 on the ordinary basis and thereafter on an indemnity basis; and
2. as between the Owners Corporation and the second plaintiff, that the second plaintiff pay 5% of the Owners Corporation's costs of the Further Amended Statement of Claim up to 9 July 2020 on the ordinary basis and thereafter on an indemnity basis.
The Owners Corporation's claims for indemnity costs rest upon the failure of the plaintiffs to accept Offers of Compromise made on 9 July 2020 and 29 July 2020. The Offers of Compromise were expressly stated by the Owners Corporation to be relied upon as Calderbank offers in the event that they were found not to comply with the requirements of the Uniform Civil Procedure Rules 2005 (NSW) ("the UCPR").
Each Offer of Compromise concerned the whole of the proceedings, and provided:
Judgment for the First Plaintiff against the Defendant in the sum of $465,933.
The First Plaintiff is to sell lot 179 in Strata Plan 6511 to the Defendant in accordance with the methodology set out in clause 10 of the Caretaker Agreement entered into between the First Plaintiff and the Defendant on 30 March 2001.
The Court declares that the Caretaker Agreement entered into between the First Plaintiff and the Defendant on 20 March 2001 does not confer upon the Defendant any rights in respect of Lot 162.
The balance of the principal proceedings commenced by the Plaintiffs against the Defendant is dismissed.
The proceedings commenced by way of Cross Claim are dismissed.
Each party is to bear its and his own costs of the principal proceedings and the proceedings commenced by way of Cross Claim.
It should be noted that the Offer of Compromise of 9 July 2020 was made subject to the Owners Corporation in general meeting approving the terms of the offer.
The plaintiffs advanced numerous arguments to the effect that the Offers of Compromise were not capable of giving rise to costs consequences in the event the offers were not accepted. It is not necessary to set out or deal with each of these arguments. It is sufficient to state that I agree with at least the submissions of the plaintiff to the effect that:
1. the offers do not comply with UCPR r 20.26(2)(c) because the terms of the offers are such that the offers are expressed to be inclusive of costs for the purposes of the rule;
2. the offers do not in any event engage UCPR rr 42.15 or 42.15A because the offers were made jointly to the plaintiffs, each of whom had a separate claim or cause of action against the Owners Corporation (see Sahade v Bischoff (No 2) [2016] NSWCA 45 at [19]-[22]); and
3. insofar as the offers are regarded as Calderbank offers, the joint nature of the offers means that it cannot be concluded that either plaintiff acted unreasonably by failing to accept the offer (see Sahade v Bischoff (No 2) (supra) at [23]).
Accordingly, I do not consider that the failure of the plaintiffs to accept either Offer of Compromise gives rise to a reason for any award of indemnity costs in favour of the Owners Corporation.
The general principle in relation to costs is of course that costs follow the event. As I noted in the principal judgment (at [280]), the parties in the present case have each enjoyed at least some success, and otherwise failed. The Owners Corporation was entirely unsuccessful on its Amended Cross-Claim against the first plaintiff. The Owners Corporation succeeded, however, on the central issue on the Further Amended Statement of Claim, namely, whether it validly exercised a right of termination under cl 9.3 of the Caretaker Agreement. The Owners Corporation was thus able to defeat the first plaintiff's claim for loss of bargain damages, which was predicated upon the agreement being terminated by the first plaintiff when it purported to accept a repudiation by the Owners Corporation. Nevertheless, the Court found that, despite the valid termination by the Owners Corporation, it was not entitled to take possession of Lot 179. The first plaintiff was thus successful in obtaining relief in respect of this issue. In addition, declaratory relief was given in relation to Lot 162 owned by the second plaintiff, but in different terms to the relief that had been sought by the second plaintiff.
The plaintiffs submitted that as the Amended Cross-Claim was entirely unsuccessful, the Court should order that the Owners Corporation pay the first plaintiff's costs of the Cross-Claim. In relation to the costs of the Further Amended Statement of Claim, it was submitted that the first plaintiff succeeded, over the opposition of the Owners Corporation, in obtaining a monetary judgment in an amount that was not merely nominal or trivial, and orders for possession of Lot 179. It was submitted that whilst the claim for loss of bargain damages failed, almost all of the many grounds advanced by the Owners Corporation to justify its act of termination were either abandoned at the trial or not accepted by the Court. These grounds were said to be responsible for the overwhelming majority of time and expense involved in the proceedings. It was submitted that the two grounds upon which the Owners Corporation did succeed were "separable discreet issues". It was submitted that it would be appropriate in these circumstances that the Owners Corporation pay 80% of the first plaintiff's costs of the Further Amended Statement of Claim. As between the second plaintiff and the Owners Corporation, the plaintiffs submitted that the second plaintiff should have his costs as he was successful in obtaining declaratory relief.
The Owners Corporation submitted that it should be regarded as the successful party in relation to the claims made by the plaintiffs. It was submitted that it succeeded on the "primary claim", being the first plaintiff's claim for about $2 million for loss of bargain damages, albeit that it accepted that a number of the grounds it advanced justifying its termination of the Caretaker Agreement were not accepted. In relation to the second plaintiff's claim, it was submitted that the second plaintiff failed to obtain the relief he sought, and the relief granted was not contrary to any position advanced by the Owners Corporation. The Owners Corporation accepted that the first plaintiff was the successful party on the Amended Cross-Claim, but contended that the Amended Cross-Claim was "essentially parasitic upon the grounds advanced by the Owners Corporation as justifying the termination of the Caretaker Agreement". It was submitted that virtually all of the arguments so put would have been advanced in any event in defence of the first plaintiff's claim. The Owners Corporation, noting the substantial overlap between the first plaintiff's claim and the Amended Cross-Claim, submitted that as between it and the first plaintiff the Owners Corporation should be awarded 90% of its costs of the claim and Amended Cross-Claim.
It is clear that there is a degree of overlap between the first plaintiff's damages claim and the Owners Corporation's Amended Cross-Claim. This was noted in the principal judgment at [69]. Nonetheless, the extent of the overlap, insofar as the incurring of costs is concerned, is not clear. I have taken note of Mr Sukkar's evidence as the apportionment of costs by the Owners Corporation, but it seems to me that the question of reasonable apportionment as between the first plaintiff's damages claim and the Owners Corporation's Amended Cross-Claim remains debatable. In these circumstances I do not think that the Court should, for the purposes of costs orders, simply treat the costs of these claims as if they were the costs of a single proceeding. Although that approach might be simple and convenient, it could be productive of substantial injustice, particularly bearing in mind the very substantial amounts of costs incurred by the parties. In my opinion, it is preferable to treat separately the costs of the Further Amended Statement of Claim and the costs of the Amended Cross-Claim.
On that basis, it is clear that the Owners Corporation, as the unsuccessful party, should be ordered to pay the first plaintiff's costs of the Amended Cross-Claim.
The position is more complicated in relation to the Further Amended Statement of Claim. By that pleading, each plaintiff pursued its own separate claim or claims. It therefore seems to me that the Court should deal separately with the costs as between the first plaintiff and the Owners Corporation, and as between the second plaintiff and the Owners Corporation.
As to the costs between the first plaintiff and the Owners Corporation, it is my opinion that the costs of the first plaintiff's claim for loss of bargain damages may be fairly regarded as clearly separable from the costs of the first plaintiff's claims in relation to Lot 179. The Owners Corporation should be regarded as the successful party (and thus have its costs) in relation to the former, even though many of its arguments did not carry the day; the first plaintiff should be regarded as the successful party (and thus have its costs) in relation to the latter.
As to the costs between the second plaintiff and the Owners Corporation (which would be relevantly insignificant), it is my opinion that each party should bear its own costs. Declaratory relief was granted, but the relief was not in the terms sought by the second plaintiff. Neither side ought to be regarded as the successful party in these circumstances.
For the above reasons, the Court considers that the appropriate exercise of the discretion as to costs under s 98 of the Civil Procedure Act 2005 (NSW) is to order:
1. As to the costs of the Further Amended Statement of Claim as between the first plaintiff and the defendant:
1. order that the first plaintiff pay the defendant's costs in relation to the first plaintiff's claim for loss of bargain damages; and
2. order that the defendant pay the first plaintiff's costs in relation to the first plaintiff's claims in relation to Lot 179.
1. As to the costs of the Further Amended Statement of Claim as between the second plaintiff and the defendant, order that each party bear its own costs.
2. As to the costs of the Amended Cross-Claim, order that the cross-claimant pay the cross-defendant's costs.
The Court will further order that each party bear its own costs of the present application. No party can truly be regarded as the successful party against another party on this application.
[2]
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Decision last updated: 04 February 2021