Big Money World Pty Ltd v Red Hair Entertainment Pty Ltd

Background

1. The applicant sub-leased from the first respondent premises in Strathfield, in which a newsagency was operated by the applicant. On 15 May 2016, the first respondent's solicitors gave notice that the term of the applicant's sub-lease would expire on 30 November 2018.
2. On 30 October 2018, the applicant commenced proceedings in the Equity Division of the Supreme Court seeking an injunction to restrain the respondents from taking any steps to lock-out the applicant from the Strathfield property. After various interlocutory steps before different judges of the Court, the matter came before Ward CJ in Eq who made orders for the urgent determination of the question of the right to possession of the Strathfield property.
3. On 29 November 2018, following a hearing the day before, her Honour made the following orders in Big Money World Pty Ltd v Red Hair Entertainment Pty Ltd [2018] NSWSC 1837: "1 Discharge order 7 made by Lindsay J on 13 November 2018. 2 Dismiss paragraph 1 of the relief claimed in the statement of claim. 3 Judgment for possession of the newsagency premises at shop 1/15 Parnell Street, Strathfield, in favour of the first defendant. 4 Leave to issue a writ for possession forthwith. 5 The plaintiff pay the defendants' costs of the application for and hearing of the separate question for determination the subject of the order made by consent on 27 November 2018. Such costs to be assessable and payable forthwith."
4. The effect of her Honour's orders was to grant possession of the Strathfield property to the first respondent. Her Honour stood over for hearing in the Equity Division a separate claim by the applicant against the respondents for damages for misleading and deceptive conduct.
5. On 4 December 2018, the respondents entered into possession of the Strathfield property. On 6 December 2018, the respondents moved the contents of the Strathfield property (other than certain pieces of furniture) to a storage facility.
6. On 10 December 2018, the applicant filed in Court a summons seeking leave to appeal. On 11 December 2018, by notice of motion, the applicant sought orders including: "4 A stay of Orders 1-5 made on 29 November 2018 in the proceedings below. 5 That such stay be until resolution of the appeal from the decision in the proceedings below. 6 That the applicant be granted possession of the retail premises at [the Strathfield property]. 7 That such grant of possession be until resolution of the appeal from the decision in the proceedings below. 8 That the respondent be restrained from leasing the retail premises at [the Strathfield property] until resolution of the appeal from the decision below. 9 That the property taken from the retail premises be returned to the applicant by the respondent by 14 December 2018. 10 That the applicant gives the usual undertaking to damages."
7. On 13 December 2018, the matter came before Emmett AJA, who made the following orders: "THE COURT ORDERS THAT, upon the applicant giving to the Court the undertakings set out below, the first respondent be restrained, until resolution of the appeal, if leave to appeal is granted pursuant to the summons filed on 10 December 2018, or until the refusal of leave to appeal, from leasing to any person other than the applicant the newsagency premises at shop 1/15 Parnell Street, Strathfield (the demised premises). UNDERTAKINGS TO THE COURT BY THE APPLICANT A. If the first respondent restores vacant possession of the demised premises to the applicant no later than 17 December 2018 then: (1) The applicant will enter into occupation of the demised premises on the terms of the sub-lease of the demised premises dated 21 November 2014 (the sub-lease). (2) During such occupation the applicant will pay to the first respondent rent at the rate of $12,184 per month in advance together with all outgoings payable under the sub-lease and will perform all other obligations of the lessee under the sub-lease. (3) The applicant will not later than 19 December 2018 pay to the first respondent the sum of $22,712 by way of arrears of rent payable under the sub-lease. (4) The applicant will not later than 19 December 2018 pay into its solicitors' trust account, to be retained by the solicitors until further order of the Court, the sum of $22,200 representing: (a) $18,000 on account of costs ordered by Ward CJ in Eq; (b) $850 for removal costs; (c) $350 for storage costs; (d) $500 for locksmith's expenses; and (e) $2,500 for security guards. (5) Forthwith upon breach by the applicant of any undertaking given to the Court or of any obligation of the lessee under the sub-lease the applicant will deliver up vacant possession of the demised premises to the first respondent. (6) If leave to appeal is refused or if leave to appeal is granted and the appeal is dismissed, the applicant will forthwith deliver up vacant possession of the demised premises to the first respondent. B. The applicant will submit to such order, if any, as the Court may consider to be just for the payment to the first respondent of compensation to be assessed by the Court or as it may direct, as a result of the making by the Court of the order referred to above. THE PARTIES ACKNOWLEDGE THAT, if either party seeks leave to appeal to the High Court from any order made by the Court of Appeal, it may be necessary to put in place a new interlocutory regime."
8. On 17 December 2018, the applicant re-entered into possession of the Strathfield property.
9. On 19 December 2018, the matter was listed by the Registrar of this Court for concurrent hearing on 19 February 2019. Orders were made as follows: "1 Hearing (concurrent) on 19/02/2019. 2 Applicant's submissions to be filed and served by 22/01/2019. 3 Respondent's submissions to be filed and served by 12/02/2019. 4 White Folder by 22/01/2019. 5 Reply to be filed and served by 18/02/2019. 6 Applicant notify respondent."
10. None of those orders were complied with by the applicant.
11. No money was paid by the applicant in accordance with orders A(2), (3) and (4) made by Emmett AJA on 13 December 2018.
12. On 21 December 2018, the first respondent re-entered occupation of the Strathfield premises.
13. On 31 January 2019, the applicant's then-solicitor sought leave to file a notice of ceasing to act. Leave was required as there were fewer than 28 days until the hearing, which had been fixed.
14. On 5 February 2019, the matter was listed for directions before Payne JA, at which time a new solicitor for the applicant appeared. The applicant sought to file a notice of discontinuance. In error, notice of the directions hearing had not been given to the respondents so the matter was adjourned to 7 February 2019.

Evidence on the question of costs

1. The applicant's evidence comprised an affidavit sworn on 11 February 2019 by Mr Im Kwang Kim, a director of the applicant. Mr Kim says that he was not made aware of the orders made by Ward CJ in Eq on 29 November 2018 until 8 December 2018, although it is apparent that counsel for the applicant was present when the orders were pronounced on 29 November 2018.
2. On 4 December 2018, Mr Kim became aware that the applicant had been locked out of the Strathfield property by the respondents. He called the police, who told him that they would not intervene.
3. On 6 December 2018, Mr Kim observed the second respondent and her family removing merchandise belonging to the applicant from the Strathfield property. Mr Kim remonstrated with the second respondent and alleged that the police (who he had called) instructed the second respondent not to remove merchandise from the Strathfield property. Mr Kim says that he observed the second respondent continuing to remove merchandise from the Strathfield property later that evening.
4. On 17 December 2018, following the orders of Emmett AJA described at [9], the applicant re-entered into possession of the Strathfield property.
5. On 18 December, Mr Kim visited the storage unit where the respondents stored the merchandise removed from the Strathfield property to recover the applicant's property. Mr Kim asserts that "around $10,000" worth of the applicant's merchandise was missing.
6. The applicant's affidavit in reply from its former solicitor, Mr Min Woo Yun, was sworn 19 February 2019 (but served on 21 February 2019). Mr Yun provided further documents about the negotiations between the applicant and the respondents concerning access to the storage facility. Essentially, Mr Yun complains that although the applicant and respondents had come to an agreement for the recovery of shop merchandise on 12 December 2018, this was frustrated by the respondents until 17 December 2018.
7. The respondents' evidence comprised an affidavit from the second respondent, Ms Song, sworn 18 February 2019 and an affidavit from the respondents' solicitor, Mr Marsh, sworn on the same date.
8. Ms Song stated that on 9 December 2018, she caused all of the applicant's goods and chattels located at the Strathfield property, with the exception of a couple of items of large furniture, to be transported to a storage unit. She took steps to provide keys to the premises and the storage unit to the applicant's lawyers on 17 December 2018.
9. The affidavit of the respondents' solicitor Mr Marsh provided, relevantly, that: 1. On 5 December 2018, the applicant's then-solicitor attended Mr Marsh's office and said: "Is your client's lockout entirely about our client's arrears of rental?" Mr Marsh responded: "The dispute between our clients has gone beyond that. There is no prospect of my client agreeing to allow your client back into possession of the premises to operate the newsagency." The applicant's then-solicitor asked: "Is it possible that your client could allow Mr Kim to enter the shop for a brief time as he wants access to the machine he uses to operate his money exchange business?" On 5 December 2018, Mr Marsh arranged access to the shop for Mr Kim for this purpose. 2. On 7 December 2018, the applicant was told in correspondence that it could arrange to collect its property and that the respondents were "waiting for [the applicant's] advice as to the arrangement it proposes to uplift its property". 3. On 17 December 2018, Ms Song gave him the keys to the Strathfield premises and to the storage unit. On 17 December 2018, Mr Marsh gave both sets of keys to a representative of the applicant. 4. On 21 December 2018, Mr Kim returned the keys to the Strathfield property.

Submissions

1. The applicant submitted that this Court should exercise its discretion under r 42.19(2) of the Uniform Civil Procedure Rules and s 98(1) of the Civil Procedure Act 2005 (NSW) to make costs orders in the appeal as follows: "Such order as the Court considers just, in the light of the applicant failing to notify the respondents of the change of solicitor. That each party is to pay their own costs, in all other respects."
2. The applicant submitted that the conduct of the respondents caused goodwill in the business to be lost. It was submitted that the appeal was prosecuted to maintain the goodwill of the newsagency. The applicant submitted that the orders made by Emmett AJA on 13 December 2018 were for the purpose of "preserving the goodwill in the retail shop". After possession of the newsagency was lost the applicant discontinued the litigation as the goodwill had by that time dissipated. It was submitted that the respondents' conduct in resuming possession of the Strathfield property was not reasonable. In reply, the applicant originally submitted that it was prejudiced by the service (one business day late) of the respondents' affidavits. Additional time was granted to the applicant to file evidence in reply and the objection was withdrawn. The only additional submission made was that "[i]t is clear the applicant had sought to recover its shop merchandise by 12 December 2018 at the latest and that such attempt was frustrated by the respondents".
3. The respondents submitted that under r 42.19(2) of the Uniform Civil Procedure Rules, there must be some positive ground or good reason for departing from the ordinary course, and that the discontinuing party bears the onus of proving any necessary factual basis for such an order and bears the burden of persuading the court that some other order is appropriate.
4. The respondents submitted that they have acted lawfully and reasonably at all times, while the applicant has failed to comply with its undertakings to the Court on 13 December 2018. The respondents submitted that, in these circumstances, the applicant should be ordered to pay the costs of the appeal on an indemnity basis.

Consideration

1. Rule 51.56 of the Uniform Civil Procedure Rules allows the applicant to discontinue proceedings by filing a notice of discontinuance and serving it on each respondent who has been served with the relevant notice of appeal or summons seeking leave to appeal. Subrule (8) provides that r 42.19 applies to the discontinuance of appeal proceedings in the same way that it applies to the discontinuance of first instance proceedings under r 12.1.
2. Rule 42.19 states that the plaintiff (in this case the applicant) must pay the costs of the defendant (in this case the respondents) as at the date on which the notice of discontinuance was filed unless an order is made under r 42.19(2): "42.19 Proceedings discontinued (1) This rule applies to proceedings that are discontinued by the plaintiff, as referred to in rule 12.1. (2) Unless the court orders otherwise or the notice referred to in rule 12.1(2) otherwise provides, the plaintiff must pay such of the defendant's costs as, at the date on which the notice of discontinuance was filed, had been incurred by the defendant in relation to each claim in respect of which the proceedings have been discontinued. …"
3. Rule 42.19 of the Uniform Civil Procedure Rules does not create a presumption that costs will be ordered against a discontinuing party: Fordyce v Fordham [2006] NSWCA 274; 67 NSWLR 497 at [84]. Basten JA explained the effect of r 42.19 in Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 at [70]-[71]: "70 The first proposition, which should be uncontroversial, is that the discontinuing plaintiff must be the moving party on an application for an alternative costs order. If it is necessary to establish a factual basis for such an order, the plaintiff will bear the onus of proving the relevant facts. Similarly, if it is necessary to draw particular inferences from primary facts, the plaintiff will also bear that burden. Finally, the plaintiff will bear the burden of persuading the court that some other order is appropriate. 71 A significant fact underlying each notice of discontinuance will be that the party which commenced the proceedings has abandoned them, though without prejudice to its entitlement, such as it may be, to claim the same relief in fresh proceedings: r 12.3."
4. The Court has concluded that the applicant has not shown any sufficient justification for a different costs consequence in this case.
5. The respondents took possession of the Strathfield property on 4 December 2018. There is no issue about their entitlement to do so. Although the details differ in the accounts given by affidavit, it is common ground that on the evening of 6 December 2018 the respondents removed the applicant's stock from the Strathfield property and put it into storage. Mr Kim was aware on that date that the applicant's property was being removed by the respondents from the Strathfield property. By letter dated 7 December 2018, the respondents informed the applicant that the respondents were "waiting for [the applicant's] advice as to the arrangement it proposes to uplift its property".
6. The applicant did not file a summons seeking leave to appeal in this Court until 10 December 2018. On 13 December 2018, upon detailed undertakings being given by the applicant to the Court, the Court ordered that the first respondent be restrained from leasing the newsagency premises to any other person. On 17 December 2018, pursuant to that order, the first respondent restored vacant possession of the Strathfield property to the applicant. It is common ground that the applicant did not comply with any of the undertakings given to the Court about payment. The applicant led no evidence on this application explaining the failure to comply with undertakings given to the Court.
7. It is not appropriate for the purposes of considering the question of costs of the appeal to determine whether the allegation made by the applicant about property belonging to the applicant that is said to be "missing" are correct. If the truth of that allegation were to be determined, the Court would need to hear oral evidence from the affected parties and permit cross-examination. Such a course would be completely disproportionate to the costs involved in this costs dispute: s 60 of the Civil Procedure Act. In any event, even assuming that stock belonging to the applicant is now "missing", the present costs application is not the occasion to litigate that issue; the allegedly missing stock provides no reason to exercise the costs discretion about the appeal in the applicant's favour. That is because the truth or otherwise of the "missing" stock allegation could not properly be a matter the subject of the application for leave to appeal.
8. The essence of the applicant's claim is that the appeal was justified by the desirability of maintaining the goodwill of the newsagency being conducted at the Strathfield property and that the applicant was justified in discontinuing the appeal in circumstances where the respondents had now destroyed that goodwill.
9. We reject that submission.
10. Assuming, in favour of the applicant, that the goodwill of the newsagency was capable of being restored as at 10 December 2018 when the application for leave to appeal was lodged, nothing the respondents did after that date affected the maintenance of that goodwill. Having obtained interlocutory orders on 13 December 2018, the applicant failed almost immediately to comply with the undertakings it had given to the Court to obtain those orders. By reason of the failure to comply with the undertakings given to the Court, the applicant gave up possession of the premises less than a week after being restored to possession under the interlocutory regime. There was no possibility of maintaining the goodwill of the newsagency after that date.
11. The Court is not persuaded, however, that the behaviour of the applicant was so unreasonable as to justify an award of indemnity costs. A costs application conducted on the papers does not provide the occasion to make findings about the non-compliance with undertakings given to the Court. None of the other conduct relied upon by the respondents justifies an award of indemnity costs.
12. No reason has been shown to exercise the discretion in r 42.19(2) of the Uniform Civil Procedure Rules in favour of the applicant.
13. The Court orders that: 1. The applicant must pay the costs of the respondents of the application for leave to appeal including the costs of this application for costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 25 February 2019