D.R. Design (NSW) Pty Limited v Grand City International Development Pty Ltd

Supreme Court of NSW|2018-03-08|Before: Ball J

Introduction

In these proceedings, the plaintiff, D.R. Design (NSW) Pty Limited (DR), sought to recover architectural and project management fees said to be owing by the defendant, Grand City International Development Pty Ltd (GCI), under a contract entered into on 8 October 2014.
I delivered judgment in the proceedings on 19 December 2017 (see D.R. Design (NSW) Pty Limited v Grand City International Development Pty Ltd [2017] NSWSC 1778) and, in accordance with that judgment, the parties brought in short minutes of order which were made by the Court on 14 February 2018, by which the Court gave judgment in favour of DR against GCI in the sum of $131,870.73 and gave directions for the filing of additional evidence and submissions in relation to costs, with the intention that the question of costs would be dealt with on the papers.
This judgment concerns that question.
DR claims that it is entitled to its costs of the proceedings on the ordinary basis in accordance with Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.1, which provides: General rule that costs follow the event 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.
GCI advances three reasons why the Court should depart from the general principle set out in UCPR r 42.1. First, it relies on a number of offers of compromise. Second, it relies on UCPR r 42.34. Third, it contends that the Court should, in the exercise of its general discretion in relation to costs, refuse to make a costs order in DR's favour because the costs of the proceedings were completely disproportionate to the amount recovered.

UCPR r 42.34

UCPR r 42.34 relevantly provides: Costs order not to be made in proceedings in Supreme Court unless Court satisfied proceedings in appropriate court (1) This rule applies if: (a) in proceedings in the Supreme Court, other than defamation proceedings, a plaintiff has obtained a judgment against the defendant or, if more than one defendant, against all the defendants, in an amount of less than $500,000, and (b) the plaintiff would, apart from this rule, be entitled to an order for costs against the defendant or defendants. (2) An order for costs may be made, but will not ordinarily be made, unless the Supreme Court is satisfied that: (a) for proceedings that could have been commenced in the District Court - the commencement and continuation of the proceedings in the Supreme Court, rather than the District Court, was warranted, or (b) …
The rule clearly applies. DR recovered less than $500,000 and, apart from the rule, is entitled to a costs order in its favour in respect of costs incurred before the offer of compromise was made on 18 August 2017.
The question, then, is whether the proceedings could have been commenced in the District Court and, if so, whether commencement and continuation of the proceedings in the Supreme Court, rather than the District Court, was warranted.
In my opinion, the claim made by DR could not properly have been made in the District Court because the amount claimed exceeded the jurisdictional limit of the Court: see Liprini v McIntyre [2017] NSWSC 1753 at [18] per Adamson J.
In any event, in my opinion, the commencement and continuation of the proceedings in the Supreme Court was warranted. DR had an arguable case that it was entitled to claim the amount that it did. Essentially, its case was that on early termination of the contract it was entitled to recover its fees on a time basis. It might be said that that case lacked merit because the amount it claimed far exceeded the amount it would have been entitled to recover had the contract been completed according to its terms. However, as I observed in my principal judgment, the contract was poorly drafted and the interpretation contended for by DR was certainly an available one. There was no suggestion that it had not done the work or that its hourly rates were unreasonable. Consequently, there was a real prospect that it could have recovered the total amount it claimed, which exceeded the jurisdictional limit of the District Court. That position did not change during the course of the proceedings.
It follows that UCPR r 42.34 does not provide a reason for refusing to permit DR to recover costs before 19 August 2017.

The general discretion in relation to costs

GCI submits that the amount recovered was disproportionate to the costs involved, particularly having regard to the informal offers made by it before the proceedings were commenced. For that reason, it submits that the Court should refuse to make a costs order in DR's favour.
I do not accept that submission. It appears that the work involved in fulfilling its contractual obligations was substantially more than DR had anticipated and had it been remunerated on a time basis, it would have been entitled to substantially more than the contract price. As a consequence of the early termination of the contract (in accordance with its terms) by GCI, DR was deprived of earning the balance to which it would have been entitled. The contract was poorly drafted and it was unclear from its terms how DR was to be remunerated in the event of its early termination. It was in that context that DR made the claim that it did. As I have said, that claim itself was arguable. The hearing lasted two days, which, in the context of the amount claimed, was reasonable. The case itself was run efficiently. Part of DR's claim related to variations for which DR was entitled to charge separately on a time basis under the contract. Much of the evidence filed by DR which sought to quantify that aspect of its claim was rejected. However, I do not think it could be said that in advancing that evidence DR acted unreasonably. Taking those matters into account, I do not think there is a basis for rejecting DR's claim for costs because of the way in which the proceedings were conducted.

Orders

The orders of the Court are: 1. The defendant pay the plaintiff's costs to be assessed on the ordinary basis up to and including 18 August 2017; and 2. The plaintiff pay the defendant's costs on an indemnity basis on and from 19 August 2017.

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: 08 March 2018

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