These reasons deal with the costs of the defendant's notice of motion seeking leave to amend and withdraw its Cross-Claim (Notice of Motion), which is the subject of my judgment and orders made in Burwood Council v Visy Paper Pty Ltd atf Southern Paper Converters Trust [2021] NSWSC 565 (Judgment). These reasons assume familiarity with and adopt the same terms used in that Judgment.
The orders made in the Judgment granted leave to the defendant, Visy, to file a Further Amended Points of Defence and dismissed its Cross-Claim. A consequential order was made vacating the hearing that was listed to commence on 24 May 2021 and orders were later made by consent for Visy to pay Burwood Council's costs thrown away by reason of the filing of Visy's Further Amended Defence and the withdrawal of its Cross-Claim. The outstanding issue for determination is the costs of Visy's Notice of Motion. The parties have served written submissions on that issue and are content for it to be dealt with on the papers.
Visy seeks an order that the costs of the Notice of Motion be costs in the cause or, alternatively, that there be no order as to costs. Burwood Council seeks an order that Visy pay its costs of the Notice of Motion.
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Legal principles
The principles applicable to the making of an order for costs are well established. The starting point is that the award of costs is a matter within the Court's discretion: Civil Procedure Act 2005 (NSW) (CPA), s 98(1). While the Court's discretion is broad, it must be exercised judicially and consistently with the overriding mandate provided for in ss 56-60 of the CPA.
The usual rule is that costs follow the event unless it appears that some other order should be made as to part or all of the costs: Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 42.1.
Underlying both the general rule that costs follow the event and the qualifications to that rule is the idea that costs should be paid in a way that is fair, having regard to what the Court considers to be the responsibility of each party for the costs that are incurred: Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 at [9].
Rule 42.7 of the UCPR relates specifically to interlocutory applications and reserved costs. The general position with respect to the costs of interlocutory applications is that they are to be paid and dealt with in the same way as the general costs of the proceedings.
As Burwood Council's submissions noted, there is a line of authority to the effect that a party who seeks and obtains an indulgence from the Court, such as in an application for leave to amend, should pay the costs of the application. In Wang v ABC Homes (NSW) Pty Ltd (No 2) [2018] NSWSC 1736, Parker J observed, at [5], that a party applying for leave to amend its pleading is frequently required to pay the costs of the amendment application and the costs thrown away, even if it is successful. His Honour also noted the adoption of a general rule to that effect by the Western Australian Court of Appeal for litigation in that state, referring to Stanley v Layne Christensen Company [2006] WASCA 56 (Stanley).
In Stanley, Wheeler JA (with whom Steytler P and Pullin JA agreed) said at [52]:
The general rule is, and should remain, that where a party is seeking the indulgence of the Court, that party will be required to pay the costs of the application, including costs thrown away, and will not normally receive the costs of the application. However, it is also a normal rule that the Court will have regard to the extent to which it might be said that costs were unnecessarily incurred by a party, and will have regard to the reasonableness of the party's conduct in determining how costs should be awarded. In particular, where a contested application, even for an indulgence, is unnecessary because a party acting reasonably would have consented to appropriate orders, the party who has caused the costs to be unnecessarily incurred will not obtain its costs of such a proceeding merely because the application is for some indulgence. That is implicitly recognised in Briggs at 14, where Owen and Parker JJ appear to accept that an unreasonable withholding of consent might form an appropriate basis for a ruling on costs which departed from the "normal rule" relating to indulgences. However, in that case their Honours considered that it could not be said that the other party was unreasonable to require that the proposed amendment be justified to the satisfaction of a judicial officer.
In Celermajer Holdings Pty Ltd v Kopas [2011] NSWSC 619 (Celermajer Holdings), Ward J (as her Honour then was) referred, at [22]-[25], to Wheeler JA's statements in Stanley as set out above and the observations of Young CJ in Eq (as his Honour then was) in The Presbyterian Church (NSW) Property Trust v Scots Church Development Ltd (No 2) [2007] NSWSC 797 (Presbyterian Church) at [6], where His Honour stated:
Despite what the Court of Appeal said in Fordham v Fordyce [2007] NSWCA 129, that there was no overarching principle known as "The Indulgence Principle", there are a series of decisions in this Division which made it clear that where one is seeking a boon one usually has to pay the costs and even if the boon is granted, that those principles should be applied.
In Celermajer Holdings, her Honour was fortified by the approach in Stanley and the comments in Presbyterian Church in coming to the view that the plaintiff should bear the costs of its application to vary the judgment and for leave to amend even though there had been a contest about those matters. Her Honour held that the case was an instance of exceptional circumstances in which departure from the usual rule was warranted and the costs are an appropriate price that the plaintiff should pay for its success: at [25]-[26].
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Consideration and determination
Visy submits that the starting point is that it was successful in its application to amend and that costs should follow the event. Notwithstanding that position, Visy is content for costs to abide by the outcome of the proceedings, which would mean that Burwood Council would only pay the costs of the Notice of Motion if Visy's defence succeeds.
Visy submits that the Court should not order it to pay Burwood Council's costs of the Notice of Motion at this stage as such an order represents an unwarranted departure from the ordinary rule that costs follow the event. It submits that, in the circumstances of this case, Burwood Council cannot demonstrate why such a departure should occur. Visy relies on the Court having found that the amendments were important to Visy, raised for the purposes of determining the real issues in dispute, and sufficiently arguable to be allowed to be progressed at trial notwithstanding the necessity that the trial date be vacated: Judgment at [46], [55]. It submits that Burwood Council should have consented to the amended pleading being filed rather than opposing the application, which produced substantial costs and was ultimately unsuccessful.
Having regard to the timing of Visy's application to amend, I do not think it was unreasonable for Burwood Council to have opposed the amendments in order to prevent the hearing date from being vacated. This is particularly in the context where Visy's position prior to the hearing of the Notice of Motion had been that the trial date did not need to be vacated and that the contract extension issue could be heard as a separate question during the week of the scheduled trial. Relevantly, Visy changed its position regarding the maintenance of the trial date only at the hearing of the Notice of Motion and failed on the second contention regarding the separate question. In my view, it is not to the point that Visy's position was, and remains, that it could have met the trial date as all that was needed to occur for it to run its case was the production of documents. The position of Burwood Council also required consideration and its evidence was that it could not be ready for a hearing on the scheduled dates if the amendment was granted.
I am also unpersuaded by Visy's submission that a costs order in favour of Burwood Council is not warranted as the lateness of its application to amend was due, and is not significant when compared, to Burwood Council's failure to disclose the existence of the 2019 Audit in breach of its contractual obligations and its maintenance of proceedings that seek to recover an inflated Commodity Rate. The Court made no finding that Visy's delay in bringing the application was due to any failure or breach by Burwood Council of any obligation to bring the 2019 Audit to Visy's attention. The Court also concluded that there was a failure on the part of Visy's internal management to communicate and act with utmost due diligence upon receiving the email from Anne Prince Consulting dated 9 February 2021 that was not "entirely justified", although it accepted that Visy's explanation for the timing of amendments was sufficient in this case: Judgment at [51].
In this case, Visy sought and obtained a significant indulgence from the Court at a very late stage of the proceedings that enabled it to completely change the way in which its defence was to be presented. That indulgence also had the effect of vacating the hearing dates, which could have been prevented if Visy's application to amend had been made earlier. There were a number of issues that were debated and had to be resolved at the hearing of Visy's Notice of Motion, including the vacation of the hearing dates and whether a separate question should be determined. Those two matters alone warranted Burwood Council responding to Visy's application in the way that it did, which included adducing evidence from its solicitor as to why the trial date could not be maintained and to establish the prejudice that would be occasioned by the amendments.
Further, and although leave to amend was granted because the legal and factual issues raised by the new defence were considered to be arguable and should be dealt with at a final hearing, Burwood Council's arguments opposing the new defence were not found to be without substance, with the Court noting that the matter was "very finely balanced": Judgment at [55].
Having regard to the above matters, Burwood Council could not, in my view, be said to have acted unreasonably or caused costs to be unnecessarily incurred by failing to consent to the orders sought by Visy.
Visy also contends that Burwood Council's costs thrown away will be accounted for by the costs order already made such that they do not favour the making of a costs order in favour of Burwood Council in relation to the application itself. As observed by Markovic J in GAIN Capital UK Ltd v Citigroup Inc (No 3) [2016] FCA 582, an order for costs thrown away addresses the consequences of the indulgence sought by the amending party, not the costs of the indulgence that was sought, namely the seeking of leave to file and rely on a new defence: at [13].
For these reasons, I make the following order:
1. The Defendant is to pay the Plaintiff's costs of the Defendant's Notice of Motion filed on 14 May 2021, with such costs to be agreed or assessed.
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Decision last updated: 17 August 2021
Parties
Applicant/Plaintiff:
Burwood Council
Respondent/Defendant:
Visy Paper Pty Ltd atf Southern Paper Converters Trust