DGF Property Holdings Pty Limited v Di Federico

Costs

DGF now seeks the following orders in relation to costs: 1. The Di Federicos pay 80% of DGF's costs of the Specific Performance Proceedings up to 23 March 2018, the date of the First Judgment. 2. Those costs be assessed on the indemnity basis or, alternatively, on the ordinary basis. 3. DGF pay the Di Federicos' costs of the directions hearings on 23 August 2018 and 30 August 2018. 4. There be no order as to the costs of DGF's application to reopen, with the exception of the costs of the directions hearings on 23 August 2018 and 30 August 2018. 5. The Di Federicos pay 50% of DGF's costs of the Specific Performance Proceedings after 1 February 2019 other than as indicated in the earlier orders.
Clearly enough, a distinction must be made between the costs of the concurrent hearing of the Rescission Proceedings and the Specific Performance Proceedings up to the time of the judgment of 24 July 2018 (the Second Judgment). [7] On that day, final orders were made in the Rescission Proceedings as between DGF, as plaintiff, and the defendants in the Rescission Proceedings other than the Di Federicos. It is therefore desirable to say something about the history of the Specific Performance Proceedings.
The Specific Performance Proceedings were commenced by DGF on 9 April 2015 and came before Sackar J on 22 October 2015 for hearing on the question of liability. On that day, the parties negotiated the 2015 Agreement, which reduced to writing a procedure for the completion of the subdivision of the Land. The Specific Performance Proceedings were stood over to 2 May 2016 for directions. On that day, Registrar Walton made orders for the further conduct of the Specific Performance Proceedings.
However, on 29 July 2016, DGF filed a notice of motion seeking an order that the Specific Performance Proceedings be stayed pending the outcome of further proceedings intended to be commenced by DGF. The Di Federicos also filed a notice of motion on 29 July 2016 seeking summary dismissal of the Specific Performance Proceedings for want of prosecution.
In his affidavit of 29 July 2016 filed in support of DGF's notice of motion, Mr Michael Simone, solicitor for DGF, said that DGF had been unable to complete the proposed subdivision of the Land as the sunset clauses contained within the sale contracts had expired. Mr Simone said that DGF had served notices under s 66ZL of the Conveyancing Act 1919 (NSW) on each of the purchasers, all of whom had refused to consent to the rescission of sale contracts with DGF.
Mr Simone said that DGF intended to commence proceedings seeking orders permitting DGF to rescind the sale contracts and a copy of a proposed summons was identified by Mr Simone, thereby foreshadowing the Rescission Proceedings. Mr Simone said that the damages that may be payable by the Di Federicos in the Specific Performance Proceedings may be dependent upon and would have a substantial bearing upon the orders that the Court may make in relation to the proposed further proceedings. In particular, Mr Simone said, any shortfall in costs suffered by DGF, or any adverse costs order against DGF, in the proposed further proceedings, would be sought as damages against the Di Federicos in the Specific Performance Proceedings. However, Mr Simone said, the losses suffered by DGF as a result of the breaches alleged against the Di Federicos will not be known until the proposed further proceedings have been finalised. Mr Simone asserted that it would therefore be in the best interests of the parties to the Specific Performance Proceedings that those proceedings be stayed pending the resolution of the proposed further proceedings.
Both motions were heard by Lindsay J on 9 September 2016, when his Honour ordered that each of the motions be dismissed. His Honour directed that the Specific Performance Proceedings proceed by way of pleadings but noted that the directions were given without prejudice to the question of whether there should be an order under r 28.2 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) for questions of liability and damages to be determined separately. His Honour indicated that the intention was that directions about the preparation of evidence going to questions of damages be reserved for further consideration. Finally, his Honour directed that the parties to the Specific Performance Proceedings bring to the attention of the Court on 16 September 2016, the return date of the Rescission Proceedings, the desirability of the two sets of proceedings being case managed together so far as it may be practicable to do so.
On 22 November 2016, DGF's solicitors wrote to the Di Federicos' solicitors in response to a notice of motion filed by the Di Federicos seeking security for costs of the Rescission Proceedings. DGF's solicitors said that the predicament in which DGF found itself in relation to the sale contracts had been caused entirely by the Di Federicos and that it was appropriate that the Di Federicos pay the costs of the Rescission Proceedings. They said that it had always been open to the Di Federicos not to take an active part in the Rescission Proceedings until their conclusion and that they could then be heard on the question of costs. The letter asserted that that was the appropriate role for the Di Federicos in circumstances where no relief was sought against them in the Rescission Proceedings, except in relation to costs. The solicitors asserted that the fact that the Di Federicos were joined as defendants did not make them defendants "in the usual sense" and that it was open to the Di Federicos to file a submitting appearance except as to costs but they had elected not to do so.
The Rescission Proceedings came before me for directions on 22 June 2017. At that time, the solicitor for the Di Federicos raised with the Court the desirability of the Specific Performance Proceedings being heard concurrently with the Rescission Proceedings. Counsel for DGF indicated that, if a proposal as to the reasons why that would be desirable were provided, DGF would give consideration to that matter before the next hearing on 31 July 2017. On that day, I made orders that the Specific Performance Proceedings and the Recession Proceedings be heard concurrently.
DGF contends that the need for the rescission of the sale contracts in respect of lots in the proposed subdivision arose out of breaches by the Di Federicos of the 2015 Agreement and the 2013 Deed, particulars of which are described in the First Judgment. DGF asserts that the concurrent hearing of the Rescission Proceedings and the Specific Performance Proceedings that resulted in the First Judgment was extended unreasonably by the failure of the Di Federicos to admit that they had acted in breach of the 2013 Deed and to admit that such breaches caused delay in the registration of the proposed plan of subdivision.
In addition, the Di Federicos prosecuted a crossclaim that DGF asserts was hopeless. In their crossclaim, the Di Federicos claimed recovery of the costs incurred consequent upon the alleged breach by DGF of a provision of the 2015 Agreement. I accepted DGF's contentions in relation to the crossclaim that it should be dismissed. [8]
There was an overlap between the facts of the Rescission Proceedings and the facts of the Specific Performance Proceedings because the basis of the claim for rescission was the breaches by the Di Federicos. DGF complains that the Di Federicos ought to have made appropriate admissions in respect of those breaches. In particular, DGF complains, the Di Federicos did not admit the allegation that they had caused or permitted large quantities of unauthorised fill to be deposited upon the Land without the consent of the Council, which, DGF asserts, was the crux of both the Specific Performance Proceedings and the Rescission Proceedings. In addition, the Di Federicos failed to admit that DGF had repeatedly requested them to remove the fill and that they had failed or refused to remove the fill. Accordingly, DGF asserts, it was necessary for them to prove all of those facts by lengthy affidavit material, which was filed in both proceedings.
DGF asserts that the vast bulk of the Di Federicos' opening submissions was devoted to the issues just outlined, on which they were unsuccessful, and that the Di Federicos' final submissions were devoted almost entirely to the issues on which they were unsuccessful. DGF says that, if the Di Federicos had admitted the factual matters referred to above, liability in the Specific Performance Proceedings and the central issue in the Rescission Proceedings would have boiled down to a legal argument concerning the legal effect of the change of position on the part of the Council in March 2017, as well as the exercise of the Court's discretion concerning rescission under s 66ZL of the Conveyancing Act. In those circumstances, DGF asserts, the concurrent hearing would not have occupied more than two days, leaving aside the assessment of damages. DGF asserts that the vast majority of the concurrent hearing was taken up with factual matters in respect of which the Di Federicos were unsuccessful and in respect of which they were bound to lose.
DGF contends that, since it was successful in the concurrent hearing, in so far as it concerned the Specific Performance Proceedings, it should have its costs of those proceedings on the indemnity basis, in essence, because the Di Federicos should have known that their denial of breaches of the 2015 Agreement and the 2013 Deed had no real prospect of success and they should have been advised that they had no chance of a successful defence of the claims.
It is clear that a substantial part of the concurrent hearing that led to the First Judgment was devoted to the question of breaches by the Di Federicos and that, ultimately, the Di Federicos were unsuccessful in relation to those questions. However, a substantial part of the concurrent hearing was also concerned with the Rescission Proceedings, to which the Di Federicos were not necessary parties. They were joined by DGF solely for the purposes of recovering costs of the Rescission Proceedings. I rejected that claim by DGF. [9]
Once the Di Federicos were joined as parties to the Rescission Proceedings, it was clearly appropriate that the two proceedings be heard together. That certainly had advantages for DGF, in that a concurrent hearing would incur lower costs than separate hearings. On the other hand, many of the issues in the Rescission Proceedings were of no relevance to the Di Federicos but it was nevertheless appropriate that they be represented in Court. I do not consider that the conduct of the Di Federicos in defending the allegations of breaches of contract made in the Specific Performance Proceedings was unreasonable. It is not therefore an appropriate case for the making of an order for the payment of costs on the indemnity basis.
A possible exercise of discretion as to the costs consequent upon the concurrent hearing would be to order that the Di Federicos pay DGF's costs of the Specific Performance Proceedings up to the date of the First Judgment and that DGF pay all of the costs of the Di Federicos of the Rescission Proceedings. There would be an order that the costs be set off against each other.
That would require a more complex assessment than an order that one party pay a proportion of the costs. My assessment is that DGF's costs of the Specific Performance Proceedings would considerably outweigh the Di Federicos' costs of the Rescission Proceedings.
I am mindful that, ultimately, DGF recovered not much more than $50,000 in the Specific Performance Proceedings. However, there was a very substantial question of damages and, as will be apparent from the earlier judgments, I withdrew my original findings that DGF was entitled to recover damages by way of interest. However, while that factor may be significant in relation to the costs incurred after the First Judgment, I do not consider that it is significant in relation to the costs up to the time of the First Judgment.
I was not satisfied in the Fourth Judgment that DGF had a liability for interest to the "investors" and, accordingly, that it had not established that it had a greater liability for interest than it would have had but for the breaches of contract by the Di Federicos. The result is that, while DGF has been successful in obtaining judgment against the Di Federicos for breach of contract, the quantum of the judgment is very significantly less than the amount claimed. Indeed, the amount recovered by DGF is such that, if the proceedings had been commenced for recovery of that sum only, in this Court rather than the District Court, it would not have been entitled to costs, having not recovered more than $500,000. [10] DGF contends that UCPR 42.34 should not be applied because the Specific Performance Proceedings were heard concurrently with the Rescission Proceedings and the District Court would not have had jurisdiction to deal with the questions raised in the Rescission Proceedings.
I have concluded that the Di Federicos were not necessary parties to the Rescission Proceedings. DGF acknowledged that it joined the Di Federicos only for the purposes of seeking an order in the Rescission Proceedings that any costs payable to the purchasers of lots in the subdivision of the Land should be borne by the Di Federicos as damages suffered by reason of their breach of contract. Even if, contrary to my conclusion, those costs were recoverable from the Di Federicos, joinder in the Rescission Proceedings was not the appropriate course to be adopted. If they were recoverable as damages, they were recoverable as a head of damage in the claim for breach of contract. Accordingly, the concurrent hearing is not a basis for declining to apply UCPR 42.34.
That leads to costs of the Specific Performance Proceedings after 23 March 2018, the date of the First Judgment. Having succeeded in establishing that the conduct of the Di Federicos constituted a breach of the contractual arrangements with it, DGF was given leave to adduce evidence in support of its claim for damages. In the Third Judgment, I intended to resolve all outstanding questions concerning the quantification of damages to which DGF was entitled. However, as indicated in the Fourth Judgment, I withdrew part of my reasons and conclusions in the Third Judgment and reconsidered the question of DGF's entitlement to interest, the most significant element in the quantification of its damages for breach of contract.
As indicated in the earlier judgments that I have given, the litigation between DGF and the Di Federicos has been conducted in a somewhat unusual fashion. In the circumstances, it is appropriate to treat the concurrent hearing of the Specific Performance Proceedings and the Rescission Proceedings quite separately from the subsequent hearing limited to the dispute between DGF and the Di Federicos as to the quantification of the damages suffered by DGF. In relation to that quantification, as I have said, DGF has had very limited success. The vast bulk of the subsequent hearings was concerned with the question of interest in respect of which DGF has been unsuccessful. On the other hand, that question has been fraught with difficulty. As is apparent from the Fourth Judgment, I withdrew my original conclusion that DGF was entitled to interest as a head of damage.
The costs of establishing the damages that make up the judgment to be entered for DGF would be very substantially outweighed by the costs of determining the dispute as to interest. The evidence to support the judgment of $53,660.86 was contained within a very narrow compass and could have been resolved in less than a day. In the events that happened, several days' hearing and many pages of written submissions have been devoted to the question of interest. In the circumstances, I consider that the appropriate result is that there be no order as to the costs incurred after 23 March 2018, save for the costs of the directions hearings on 23 August 2018 and 30 August 2018, which DGF accepts should be borne by it. The orders that I propose are therefore as follows: In proceedings 2015/105403, order that:
Judgment be entered for the plaintiff in the sum of $53,660.86 together with prejudgment interest from 16 June 2017.
The first and second defendants pay the plaintiff's costs on the ordinary basis up until 23 March 2018.
The plaintiff pay the first and second defendants' costs of the directions hearings of 23 August 2018 and 30 August 2018.
There be no other order for costs. In proceedings 2016/246532, order that:
The plaintiff pay the sixteenth and seventeenth defendants' costs on the ordinary basis up until 24 July 2018.
There be no further order for costs.
The respective costs should be set off against each other. If the parties require, I will make an order to that effect. I will reserve liberty to apply in the event that there is any dispute as to the entry of the orders.

Endnotes

See DGF Property Holdings Pty Limited v Di Federico (No 4) [2021] NSWSC 157.
See DGF Property Holdings Pty Limited v Di Federico [2018] NSWSC 344.
See DGF Property Holdings Pty Limited v Di Federico (No 3) [2020] NSWSC 510.
See ibid at [144].
See ibid at [145].
See ibid at [138].
See DGF Property Holdings Pty Limited v Di Federico (No 2) [2018] NSWSC 1137.
See First Judgment at [180]-[183].
See Fourth Judgment at [175].
By the operation of UCPR r 42.34. 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: 14 July 2021

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