Chateau Constructions (Aust) Ltd v Zepinic & Anor [2010] NSWSC 680 | Case summary

JUDGMENT 1 HIS HONOUR: This is my seventh judgment in this matter. In my sixth judgment given on 21 May 2010 I found that I was not persuaded that as a result of my judgment on 8 April 2010 (Chateau Constructions (Aust) Ltd v Zepinic & Anor [No. 5] [2010] NSWSC 265) that costs of the proceedings should not follow the event in respect of the proceedings after 3 December 2009. I made a costs order in the plaintiff's, Chateau's favour on the ordinary basis in respect of the portion of the hearing after 3 December 2009. On the day my sixth judgment was given, 21 May 2010, Chateau applied for an order for costs on the indemnity basis. I allowed liberty to apply in relation to that question. I directed that the parties advance any written submissions on the issue of indemnity costs in accordance with the following timetable. Chateau was to file and serve its written submissions in support of its application for indemnity costs by 11 June 2010. Dr and Mrs Zepinic, the defendants, were required to file and serve any written submissions in opposition to Chateau's claim for indemnity costs by 23 June 2010. The parties have filed submissions in accordance with this timetable. Background 2 On 3 December 2009 the Court ordered that Dr and Mrs Zepinic pay Chateau's costs of and incidental to the proceedings from 9 September to 3 December 2009 on an indemnity basis. Chateau now applies for an additional order that the costs order made on 21 May 2010 should provide Dr and Mrs Zepinic pay the plaintiff's costs of and incidental to the proceeding from 4 December 2009 on an indemnity basis. 3 Chateau's submissions set out the course of these proceedings. That account includes that on 9 September 2009 Dr and Mrs Zepinic caused a lapsing notice to issue against the caveat that Chateau had lodged over the Turramurra property; on 22 September 2009 Chateau moved for short service of a summons to extend the operation of the caveat; on 28 September 2009 the caveat was extended and Dr and Mrs Zepinic did not appear in Court; on 8 October 2009 the proceedings were adjourned to 3 December 2009 to await the outcome of the District Court appeal; on 3 December 2009 the non-appearance of Dr and Mrs Zepinic did not appear at the hearing that day and the Court's gave final relief; on 15 December 2009 Dr and Mrs Zepinic filed a notice of motion seeking to set aside the Court's orders made on 28 September 2009; on 17 December 2009 Dr and Mrs Zepinic purported to file a cross-claim in the proceedings; and, on 21 December 2009 Dr and Mrs Zepinic failed again to appear and the matter was adjourned to 18 February 2010 for further hearing. A fully contested one day hearing took place on 18 February 2010. I gave judgment in relating to the matters argued at that 18 February hearing on 8 April 2010: Chateau Constructions (Aust) Ltd v Zepinic & Anor [No. 5][2010] NSWSC 265. Chateau's Submissions On the Application for Costs 4 Chateau accepts that the usual order for costs is on the ordinary basis. But Chateau points to what it submits are instances of Dr and Mrs Zepinic's unreasonable conduct as litigants which justify departure from the usual costs rule. Chateau's three main points are economically made and are reproduced in full in an extract from its written submissions below: "D. APPLICATION TO THESE PROCEEDINGS

The Plaintiff was forced to commence these proceedings because the Defendants caused the lapsing notice to issue. In the context of having precipitated the commencement of these proceedings, the Defendants' decision not to attend on 3 December and 21 December 2009, knowing the cost and inconvenience to the Court and to the Plaintiff, was unreasonable conduct amounting to a relevant delinquency. The consequence of those non appearances was this litigation was unnecessarily prolonged, the Court was unnecessarily inconvenienced, public resources were unnecessarily wasted and the Plaintiff suffered unreasonable delay and incurred further unnecessary legal costs. b. (the Defendants arguments were doomed to failure) The Defendants principal substantive argument to vacate the orders made on 28 September 2009 and 3 December 2009 was that the Plaintiff repudiated the Contract and, thus, did not have a caveatable interest in the Property. This argument was doomed to fail, and properly advised, the Defendants should have known that: i. the orders of 28 September 2009 (to extend the caveat) were necessary for the Plaintiff to protect its security because of the lapsing notice that the Defendants caused to be issued; ii. the elements of the charging clause in the Contract had been fulfilled upon the making of the orders for the payment of money by the CTTT, and satisfied (as the Court found) the necessary elements in section 7D(3) of the Home Building Act 1989; the Defendants assertion of the Plaintiff's repudiation of the Contract was no answer to the making of the declaration. c. (unjustified allegations) The Defendants made a serious but baseless assertion in support of their argument that the indemnity costs order made on 3 December 2009 should be set aside, namely that the Plaintiff, by its legal representatives, had misled the Court about when and to whom the Calderbank letter was sent. This submission sought to capitalise on a typographical error in the Court's judgment of 3 December 2009 and provided no bases for a serious assertion that Plaintiff, by its legal representative, misled the Court." 5 After identifying the relevant conduct relied upon Chateau submits that the fact that Dr and Mrs Zepinic were self represented for much of the proceedings does not excuse their conduct and especially so given they apparently chose not to be legally represented. Chateau says that it has been doubly prejudiced by the Zepinic's self representation. It has occurred additional costs that it would not otherwise have incurred if the Zepinic's had been and continued to be legally represented. In addition Chateau says was the Zepinic's unreasonable conduct prolonged the proceedings and significantly added to their cost. Dr and Mrs Zepinic's Submissions 6 In response to the Court's orders Dr and Mrs Zepinic filed a submission that ranged over many topics but barely dealt with the question of the plaintiff's application for indemnity costs. The submission was primarily concerned with advancing reasons why the Court's previous orders should not have been made and should be set aside. It is not necessary for present purposes to elaborate upon the full range of the submission. The Court's alleged errors for proceeding in the way that it had were said by the Zepinic's to include denial of procedural fairness, failure to take into consideration evidence filed on behalf of Dr and Mrs Zepinic, serious error of law, violation of fundamental rights, discrimination against Dr and Mrs Zepinic, "actual and comprehensive bias", the alleged misleading of the Court by Chateau's solicitor; the Court's alleged violation of procedural rules; and, the Court acting upon a "non-existing Calderbank letter". The Zepinic's submitted that the result of all of these alleged errors was that the Court should set aside its orders and judgments made and given on 8 April and 21 May 2010 and order Chateau to pay the amount claimed in the cross-claim to rectify defects omissions and unapproved variations and finish the incomplete construction works. 7 The relief Dr and Mrs Zepinic seek setting aside the Court's previous orders on the grounds stated is relief, with but one exception, that can only be obtained on appeal. Dr and Mrs Zepinic have their appeal rights and may exercise them as they see fit. 8 Although it is theoretically open to me to deal with their application relating to bias and to disqualify myself were the application made good, there seems little point in considering that application at this stage of these proceedings. But for this relatively short judgment all my judgments in the proceedings have been delivered and have disposed of the issues. The Zepinic's allegation of bias appears to arise out of the content of my reasons. This is a matter that can be conveniently be dealt with upon any appeal when my reasons are being examined, if there is an appeal. 9 To the extent the allegation is said to be one of actual bias I reject it. I have no actual bias of any kind against Dr and Mrs Zepinic. Consideration of Chateau's application 10 The principles applicable to applications for indemnity costs are not controversial. The starting point for any consideration of an application for indemnity costs is that in the ordinary case costs of a successful party will be ordered on a party party basis, which falls short of a complete indemnity: in Re Wilcox; Venture Industries Pty Ltd (No. 2) (1996) 72 FCR 151 at 152-153. The exercise of discretion to order costs upon an indemnity basis does not exist for the purposes of punishing an unsuccessful party: Oshlack v Richmond River Council (1998) 193 CLR 72 at [1], [44] and [67] and Latoudis v Casey (1990) 170 CLR 54 at 542-543 per Mason CJ. The conduct of a party relevant to the issue of indemnity costs is the party's conduct as litigant, especially where the successful party's money and the Court's time are wasted on totally frivolous and thoroughly unjustified defences or proceedings are maintained which are an abuse of process or where an unsuccessful party prolongs a trial by deliberately false defences and allegations of fact: Baillieu Knight Frank (NSW) Pty Ltd v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359 at 362 and Degman Pty Limited (In liquidation) v Wright [1983] 2 NSWLR 354. This is a sufficient recitation of relevant authority. I am mindful of the Court of Appeal's statements as to the desirability of avoiding unnecessary recitation of case law in relation to the exercise of this broad costs discretion where the principles are well settled: Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd (No 2) [2009] NSWCA 12 at [5]. Applying the Principles to the Present Case 11 In my judgment on 3 December 2009 I awarded indemnity costs on the basis of Dr and Mrs Zepinic's failure to respond to Chateau's Calderbank letter: Chateau Constructions (Aust) Limited v Zepinic & Anor [No. 3][2009] NSWSC 1373 at [56] and [57]. I declined to award indemnity costs on the alternative basis sought that the Zepinic's had no defence to the claim and should always have known that: Chateau Constructions (Aust) Limited v Zepinic & Anor [No. 3][2009] NSWSC 1373 at [60] and [61]. 12 Despite the wider range of arguments Chateau now deploys I do not think the position has much changed. The Calderbank letter was designed to put Dr and Mrs Zepinic at risk as to costs in relation to the extension of the caveat. The primary contest was then whether or not there was a caveatable interest. On 3 December 2009 I made declarations that there was a caveatable interest. That particular phase of the proceedings then came to an end. 13 Thereafter the proceedings took on a different character starting with the attempts to file a cross-claim and set aside the previous Court's order. Although it is true Dr and Mrs Zepinic did not appear on the 21 December 2009, with that exception, from the time in mid December they filed a motion to set aside the Court's orders and sought to file a cross-claim, they have been actively in contest with Chateau putting evidence and submissions to the Court. Whilst their arguments have not been successful they have generally participated in the proceedings by responding in a reasonably timely way to Court directions and they took part in the hearing on 18 February 2010. 14 In this later phase of the proceedings the issues shifted beyond what they were up to the 3rd of December 2009. This shift occurred partly because of Chateau's amendments to its Summons seeking extensive relief by orders for judicial sale of the Turramurra property. As my judgment on 8 April 2010 shows, the principal contests in this later phase of the proceedings related not just to the setting aside of my initial orders but to the form of any orders for judicial sale and to the filing of a cross-claim. The Zepinic's advanced substantial argument on all these issues. The arguments though unsuccessful could never be characterised as doomed to failure. My lengthy judgment on 8 April 2010 shows that there was a genuine contest about all of these issues : Chateau Constructions (Aust) Limited v Zepinic & Anor [No. 5] [2010] NSWSC 265. 15 The three main points that Chateau makes to justify an indemnity costs order fail in my view. Prolongation of the litigation 16 The only occasion in which the defendant's did not appear after the 3 December 2009 was the 21 December 2009. Whilst undoubtedly some costs were occasioned by their non-appearance that day, given the complexity of what needed to be argued on 18 February 2010, the day on 21 December may only in any event have been used as an extensive directions hearing. I doubt that orders for judicial sale could have been made on 21 December 2009 given the extensive range of arguments that were in contest between the parties at that time and given the then only recent amendment by Chateau of its summons seeking orders for judicial sale. The litigation has been prolonged by events and complexity that go well beyond the Zepinic's non-appearance on 21 December 2009. I am not persuaded that the Zepinic's otherwise prolonged the proceedings after that date by their conduct. Arguments doomed to failure 17 I do not agree that the Zepinic's arguments about vacating the orders made on 28 September 2009 and 3 December 2009 were doomed to failure. The arguments were extensively canvassed in my judgment of 8 April 2010. My reasoning demonstrates that legal subtlety was required to deal with the arguments but they were not arguments that should never have been put. They could not be characterised as frivolous or baseless. Unjustified allegations 18 Whatever be the merits of the Zepinic's arguments about the Calderbank letter, those arguments were only a small proportion of the issues in play on and before the hearing of 18 February 2010. Consideration of those issues alone would not provide a sound basis for making an indemnity costs order against Dr and Mrs Zepinic. Orders and Conclusions 19 I have found that Chateau's arguments to justify an order for indemnity costs since the 3rd of December 2009 have failed. Accordingly, I dismiss Chateau's application for indemnity costs after the 3rd of December 2009. 20 This matter commenced before me in the Equity Duty List on 28 September last year. I have now given seven judgments in the proceedings. This is the last judgment in relation to matters in issue between the parties. The file will now be returned to the Registry. Future applications in the matter should be made on notice to the Registrar in Equity in the usual way. **********

Chateau Constructions (Aust) Ltd v Zepinic & Anor

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