Formequip Pty Ltd v Nahas Construction Pty Ltd acting as Trustee for the Nahas Family Trust - [2012] NSWSC 496 - NSWSC 2012 case summary — Zoe

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Formequip Pty Ltd v Nahas Construction Pty Ltd acting as Trustee for the Nahas Family Trust

[2012] NSWSC 496

Supreme Court of NSW|2012-04-24|Before: Davies J

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Source facts

Court

Supreme Court of NSW

Decision date

2012-04-24

Before

Davies J

Source

Original judgment source is linked above.

Judgment (14 paragraphs)

[1]

Judgment 1These proceedings were listed for hearing on 23 April 2012. At the outset the Parties agreed that there was no utility to the proceedings continuing. They could not agree, however, on what costs orders should be made in respect of the proceedings. This judgment deals with what costs order should be made in light of the resolution of the proceedings.

[2]

Contractual arrangements 2The Plaintiff was in the business of hiring for reward equipment used in the construction of formwork. The Plaintiff alleged that pursuant to an agreement of 11 May 2010 it agreed to hire the equipment particularised in Schedule "A" to the Statement of Claim, to a company called Formtec (Aust) Pty Ltd formerly known as Actiform Pty Ltd. The Plaintiff and the company which entered into the contract with the Plaintiff were part of a group of companies controlled by members of the Placanica family. 3On 21 August 2009 the Defendant, Nahas Construction Pty Ltd, a building company, entered into a subcontract with Form (Aust) Pty Ltd, trading as Formtec, in relation to the provision by Form (Aust) of formwork for use at a building site at 61-65 Wentworth Avenue, Sydney. Form (Aust) was a further company within the Formtec group. 4Disputes arose between the Defendant and Form (Aust) leading to the issue of four default notices by the Defendant dated 16, 17, 18 and 21 February 2011. Those notices in turn led to Form (Aust) being excluded from the building site on the 25 February 2011. In the meantime, Form (Aust) had been placed in liquidation in November 2010.

[3]

The demand and the response 5After the exclusion of Form (Aust) from the site, the Plaintiff's solicitors wrote to the Defendant on 1 March 2011 noting the dispute between the Defendant and the subcontract company, and noting the exclusion of the subcontract company from the site. The letter asserted that the Plaintiff had hired out the formwork and falsework material which was located at the site and sought that arrangements be made so that the Plaintiff could retrieve its equipment. The letter noted that the equipment was being hired at the rate of $6700 per week, and warned that if access was not granted proceedings would be commenced seeking orders for the recovery of the equipment together with a claim for damages. 6The Defendant replied on 3 March 2011 saying (relevantly): You do not however provide us with any evidence that your client in fact has any legal right to take possession of such "equipment" and neither do you provide us with an inventory of the "equipment" your client states is their property and located at our Site. Given that:

Nahas does not have any contractual arrangement with your client; 2.The subcontractor company that Nahas has a contract with is under "external administration"; and 3.The absence of the abovementioned documentation (that is, evidence of legal right to take possession and inventory), Nahas will not be providing access to your client and will vehemently defend any proceedings or legal action taken by your client as proposed seeking appropriate orders for costs to be made in its favour. 7It appears that the Defendant must have made inquiries of the liquidator about the equipment because the liquidator wrote a "without prejudice" email to the Defendant's general counsel on 8 March 2011 saying this: We refer to your previous correspondence and our telephone conversation today, and, advise that records in our possession do not indicate the Company is the proprietor of equipment situated at 61-65 Wentworth Avenue, Surry Hills (site). Notwithstanding the above, we reserve our rights with respect to the equipment located at the site, in the event that circumstances change. The email made clear that "the Company" was a reference to Form (Aust) Pty Ltd (in liquidation). 8On 9 March 2011, the solicitors for the Plaintiff, then also acting for Formtec (Aust) Pty Ltd, wrote to the Defendant. The letter noted the email from the liquidator, said that the Defendant was aware that the works on the project had been undertaken by Formtec (by which it appears they meant Formtec (Aust) Pty Ltd and not Form (Aust) Pty trading as Formtec - see para [3] above) and that the equipment was brought on site by Formtec, said that Formtec had an inventory for "most of the equipment on site" and enclosed a copy of the inventory together with copies of invoices between Formtec and the Plaintiff for the hire of the equipment. The letter offered that the directors of Formtec and Formequip would provide statutory declarations about the ownership of the equipment. The letter then went on to deal with the issue as between the Defendant and Form (Aust) (the company locked out of the site). 9The inventory with the Plaintiff's name on it referred to the head contractors as the Defendant, the client as Formtec (Aus) Pty Ltd (sic) and the project as 61-65 Wentworth Avenue, Sydney. It then listed a large number of items delivered on different docket numbers over a period from 2 July 2010 to 18 February 2011. They were tax invoices from the Plaintiff addressed to Actiform Pty Ltd. 10On 9 March 2011 the Defendant wrote to the Plaintiff's solicitors acknowledging the letter of 9 March 2011. In relation to the claim for equipment the letter relevantly said: You have now provided us with the following claiming to be evidence of such legal title: 1.A document titled (sic) "Material hire summary sheet" whereby the "client" is noted to be "Formtec (Aus) Pty Ltd" and for which the "Hire start date" is stated to be 2.7.10; 2.Tax invoice issued by Formequip Pty Ltd dated 31.8.10 to Actiform Pty Ltd; 3.Tax invoice issued by Formequip Pty Ltd dated 31.10.10 to Actiform Pty Ltd. We do not believe the abovementioned documentation is sufficient evidence proving your client's legal title nor is it evidence that your client has a legal right to take possession of such material on demand. Furthermore, we note that our additional checks on Formtec (Aus) Pty Ltd, your other client, have indicated that no such company exists. We accordingly maintain that the material and equipment located on the site is owned by Form (Aust) Pty Ltd under external administration and unless otherwise advised by the administrator appointed the material and equipment will not be released to your client as requested. 11The letter went on to reject an offer for the directors of Formtec (Aus) Pty Ltd and the Plaintiff to provide the Defendant with a statutory declaration confirming ownership of the material and equipment because it was said there was no such company as Formtec (Aus) Pty Ltd and therefore no "director" to provide the declaration. 12On 10 March 2011 the liquidator sent a further email to the Defendant's general counsel saying that he was in possession of further records of Form (Aust) Pty Ltd. The email went on to say: I advise that the Company does not appear to be the proprietor of equipment located at 61-65 Wentworth Avenue, Surry Hills. Further, I advise that I was appointed liquidator of the Company on 25 November 2010, the Company had ceased to trade prior to that date. 13On 13 March 2011 the Defendant wrote to the Plaintiff's solicitors acknowledging receipt of the email of 10 March from the liquidator. The letter concluded by saying: With regard to our position as to the lease of the equipment, please note that following receipt of Mr Cooper's email we are willing to release the said equipment from the Site to your client, Formequip Pty Ltd subject to the prior provision of the following: 1.An indemnity and release provided by each of the Directors of Formequip Pty Ltd and Formtec (Aust) Pty Ltd; 2.An indemnity and release provided by each of the companies, Formequip Pty Ltd and Formtec (Aust) Pty Ltd. The letter went on to say that the Defendant was preparing the requisite documentation and would forward it for review as soon as possible. 14A follow up letter was sent the following day attaching the draft deed. The letter noted that the deed was drafted so that an inventory listing the equipment was annexed to it. The Plaintiff's solicitors were asked to provide the Defendant with a list as soon as possible. 15Lengthy correspondence then ensued with various drafts of the deed passing between the parties. Ultimately, the Plaintiff's solicitors wrote to the Defendant on 21 March 2011 enclosing a further draft of the Deed and giving the Defendant until the next day to accept it failing which proceedings would be commenced by 10.00 am on that day. No response was received to that letter. One possible reason for that was that the Plaintiff had made at least two earlier threats to approach the Court, the most recent being on 17 March when the Plaintiff's solicitors had said that unless the Defendant agreed to give a release the Plaintiff would file a summons by 12noon the following day.

[4]

Commencement of proceedings 16Presumably because no response had been received from the Defendant to the letter of 21 March, on 28 March 2011 the Plaintiff sought leave for short service of a summons from Brereton J. His Honour granted leave to file a summons and directed that it be returnable on 31 March before him. The matter was then listed before the Duty Judge on a number of occasions and orders were made to prepare the matter for hearing. In the meantime the parties continued their correspondence and negotiations partly with a view to providing a proper inventory of the property. A meeting at the site was arranged for this purpose on 1 April 2011 but was ultimately unsuccessful, with allegations being made by the Plaintiff (denied by the Defendant) of intimidation by various people on behalf of the Defendant. 17On 6 April 2011 solicitors acting for the Defendant wrote two letters to the Plaintiff's solicitors. The first was an open offer which involved issues between the Defendant and Formtec as well as issues concerning the equipment. The second letter was a Calderbank letter in relation to the equipment. The offer involved an inventory which had been prepared by the Defendant that was said to be all of the Plaintiff's equipment at the site. 18In a letter of 8 April 2011 the Plaintiff's solicitors rejected the inventory reflective of the equipment that belonged to the Plaintiff and had been brought onto the site. 19When the matter came before Bergin CJ in Eq as the Duty Judge on 13 May 2011 orders were made by consent which relevantly provided: 3. The Court notes the agreement of the Parties that (without admission) (a) If the liquidator of Form (Aust) Pty Ltd (in liq) provides a letter stating "he has no objection to the delivery of any equipment held by the Defendant to the Plaintiff" the Defendant will consent on the adjourn date to the following orders (1) On the usual undertaking of the Plaintiff and Rosemary Placanica the Defendant its servants and agents make available for collection the equipment identified in the list which is tab 13 to VP1 in the affidavit of Vittorio Placanica including cranes and forklifts as required. (2) The Defendant will allow the representatives of the Plaintiff to enter and remove the equipment and will co-operate in creating an inventory of the equipment removed. (3) The proceedings are to continue on pleadings. 20The correspondence does not disclose a further letter from the liquidator. However, when the matter again came before Bergin CJ in Eq on 20 May 2011 (the Record of Proceedings wrongly refers to 19 May) a solicitor appeared on behalf of the liquidator to say that he did not oppose the proposed orders. Orders were made in terms of Short Minutes of Order that had been agreed between the parties in precisely the terms envisaged in the orders of 13 May.

[5]

Abandonment of damages claim 21Thereafter, lengthy correspondence ensued between the solicitors for the parties about the removal of the equipment from the site. This correspondence extended throughout June and July 2011. On 18 July the Plaintiff's solicitors wrote "Without prejudice save as to costs" to the Defendant's solicitors. The letter noted that the Plaintiff had now removed all of its equipment located at the site and the Defendant's holding yard. The letter said that the client had made a commercial decision not to pursue its damages claim for detention and/or conversion or the costs of retrieval. The letter said that the client's claim would now be limited to seeking a declaration that they were the lawful owner of the equipment as they were now in possession and costs. The letter noted that no other party had come forward to claim any interest in the property and noted the appearance of the solicitor for the liquidator on 20 May confirming that he had no objection to the orders which were made by the Court. 22The letter concluded by saying this: We are instructed, however, that as our client has received the returnable majority of its equipment and in order to avoid incurring further unnecessary costs in respect of the current proceedings and on a commercial basis our client proposes the following offer of settlement of current proceedings: 1.That the current proceedings be dismissed; 2.That your client pay our clients' costs of the Supreme Court proceedings as agreed or set. The offer was said to be made pursuant to the principles in Calderbank and was said to remain open for a period of 14 days. 23On the same day an open letter was sent saying that although the Plaintiff had not received the entirety of its equipment on a commercial basis the Plaintiff was not seeking to pursue any damages for detention and/or conversion, loss of profits, or the costs of retrieving the equipment. The letter noted that counsel would be in a position to settle a statement of claim within seven days. 24On 3 August 2011 the solicitors for the Defendant responded in a lengthy letter marked "Without prejudice except as to costs". It is not necessary to set out all that appears in that letter. It is sufficient to note that the solicitors disagreed with a number of matters raised in the letter of 18 July. The letter relevantly concluded by saying: In our view, there was no proper basis on which Formequip should have commenced the Supreme Court proceedings in circumstances where Formequip had not provided evidence to Nahas of its ownership of the formwork equipment. Formequip and Nahas were in the advanced stages of finalising an agreement for the release of the equipment in circumstances where Formequip was to provide Nahas with the provision of an indemnity in respect of any claims brought against it by third parties in respect of the release of the formwork equipment by Nahas to Formequip. We also point out that the Offer of Compromise made in our letter of 6 April involving complete resolution of the Supreme Court proceedings with each party to pay its own costs was not accepted by Formequip. Since that time Nahas has been forced to defend the Supreme Court proceedings at its considerable expense. We also note your reliance on the Consent Orders made before the Court on 20 May 2011 in which the Solicitor for the liquidator confirmed it had no objections to the Orders made by the Court This with respect does not establish that your client has an entitlement to legal title to the equipment. The matter was subsequently set down for hearing on 3 June 2011 with a timetable ordered by the Court and agreed by the parties for the provision of a Statement of Claim to be served by the Plaintiff in which it was to set out the matters establishing its legal right to ownership of the equipment. With respect, it is for your client to establish that it is the rightful owner of the equipment by evidence served on the Defendant. With respect we have not seen that evidence in support of your client's legal title to the equipment. In these circumstances our client denies your client's claim that there was 'no legal basis on which to deny our client the return of its equipment' Our client rejects your offer on the basis that it is not reasonable in the circumstances bearing in mind the background to this matter and our client's request for provision since early March 2011 for evidence establishing its title to the equipment. The agreement by the liquidator that it had no objection to release of the equipment by the Defendant to your client was merely a vindication of our client's position which it had taken since early March 2011. In these circumstances your offer of settlement in your letter of 18 July is unreasonable and is therefore rejected. 25On 9 August 2011 the Plaintiff filed and served its Statement of Claim. The Statement of Claim sought only declarations as to ownership and possession of the equipment, and an order for costs. 26On 16 August the solicitors for the Plaintiff wrote and said (inter alia): We dispute that Nahas has been forced to defend the proceedings. Nahas elected to defend the proceedings and incur unnecessary costs. The option was always available for Nahas to have filed a consenting appearance thereby obtaining the courts [sic] protection if the court made orders for the return of the equipment to our client and your client would not have incurred any expenses in those circumstances. The liquidator only confirmed their earlier position that they had no claim to the equipment. 27In the meantime, the Defendant issued a Notice of Motion on 6 July 2011 seeking security for costs. That motion was determined on 22 September 2011 with the plaintiff being required to provide security in the sum of $107,000 by way of bank guarantee and to pay the Defendant's costs of the Motion. 28Subsequently, lengthy affidavits were served on both sides and other interlocutory steps were taken including the filing of Notices to Produce and a Notice of Motion by the Defendant on 10 November 2011 seeking that the proceedings be dismissed under various Rules. I was informed that that Motion was dismissed by consent in February 2012. 29On 14 February 2012 the proceedings were fixed for hearing before me on 23 and 24 April 2012. 30On 5 March 2012 the Defendant's solicitors wrote a letter to the Plaintiff's solicitors marked "Without prejudice except as to costs". The letter proposed that the proceedings be resolved on this basis: (1)Proceedings dismissed. (2)Plaintiff to pay Defendant's costs on a party/party basis up to 5 April 2011, thereafter to 9 August 2011 on an indemnity basis, and thereafter each Party pay its own costs except insofar as costs orders had been made. (3)No further proceedings, claims or demands will be brought in relation to the same or substantially similar subject matter. 31The letter then made reference to the Calderbank offer made by the Defendant on 6 April 2011. It then set out the rationale for the offer being made in these terms: 1.Up to 9 August 2011 your client's primary claim was for damages based on its claim to a declaration that it is the lawful owner and entitled to possession of the equipment referred to in the Schedule annexed to the Summons. 2.On filing a Statement of Claim on 9 August 2011 your client no longer pursued any damages claim, but only sought declaratory relief in respect of the equipment. 3.As the damages component of your client's claim is no longer pursued, the parties themselves, no longer, have any legitimate or practical interest in the outcome of this litigation, in the sense that any declaration the Court makes, costs aside, can be of no consequence or benefit to them now. 4.The costs orders proposed therefore, reflect our client's "measure of success" on the damages aspect, and take into account, as we believe, the Court would, in any event, our Calderbank offer by letter dated 6 April 2011. 5.In short, even if your client were to succeed in its present claim for declaratory relief, there are still good prospects that our client will obtain a costs order proposed on page 1 in paragraphs 2 and 3. 32The Plaintiff's solicitors did not respond to this letter. 33When the matter commenced on 23 April 2012 I enquired of the parties what the real dispute was. This was because (a) the Plaintiff had obtained the goods from the Defendant as a result of the orders made 13 and 20 May 2011, (b) the Plaintiff had abandoned any claim for damages, and (c) the Defendant made no claim for the goods and had no apparent interest in the outcome of the declarations sought by the Plaintiff. The parties confirmed that the position was as I have set out and that the only issue was the costs of the proceedings. 34The first time that the futility of continuing with the proceedings was first squarely raised by the Defendant when it served its outline submissions on 20 April 2012. It is fair to say, however, that the matter was raised obliquely by both the Calderbank offer from the Plaintiff to the Defendant of 18 July 2011 and by the Calderbank offer of the Defendant to the Plaintiff of 5 March 2012.

[6]

Legal principles 35In Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622, McHugh J said at 624: In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. ... Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in The South East Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases. (Footnotes omitted) 36In Australian Securities Commission v Aust-Home Investments Ltd [1993] FCA 401; (1993) 44 CR 194 at [31] Hill J said: These cases [including R v Gold Coast City Council; Ex parte Raysun Pty Ltd [1971] QWN 13; Liddle v Kooralbyn Pty Ltd (unreported) Supreme Court Queensland 9 October 1987 per Ryan J, Austcorp Finance and Leasing Pty Ltd v Thomas (unreported) Supreme Court Queensland Master White 23 August 1991 and J T Stratford & Son v Lindley (No 2) [1969] 1 WLR 1547 [1969] 3 AllER 1122], seem to me to support the following propositions being made: (1) Where neither party desires to proceed with litigation the Court should be ready to facilitate the conclusion of the proceedings by making a costs order: Stratford and the SEQEB case. (2) It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial: Stratford . This will particularly be the case were a trial on the merits would involve complex factual matters where credit could be an issue. (3) In determining the question of costs it would be appropriate, however, for the Court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them ( SEQEB ). (4) In a particular case it might be appropriate to the Court in its discretion to consider the conduct of a respondent prior to the commencement of proceedings where such conduct may have precipitated the litigation: cf Sunday Times Newspaper Co Ltd v McIntosh (1993) 33 SR (NSW) 371. (5) Where the proceedings terminate after interlocutory relief has been granted, the Court may take into account the fact that interlocutory relief has been granted: cf Re Asiatic Electric Co Pty Ltd [1973] 1 NSWLR 603 at 605, a case, however, which depended on the specific wording of the statute under consideration 37In Fire Containment Pty Ltd v Robins (No 2) [2011] NSWSC 547 Gzell J considered what was said in those cases and went on to say: [10]Ward J recently considered these principles in Nauru Phosphate Royalties Trust (Rec & Mgr Apptd) v Wily [2011] NSWSC 281. Her Honour concluded at [40] that in McHugh J's reference to a party who had acted so unreasonably that the other party should obtain the costs of the action, the use of the word " so" indicated a level of unreasonableness that would warrant an order for costs being made having regard to the circumstances in which the costs were incurred. [11]What lies at the heart Lai Qin is that, without a hearing on the merits, there is no event to enliven Pt 42 r 42.1 of the Uniform Civil Procedure Rules. That may be concluded from the above passages. Success in an action or on particular issues is the fact that usually controls the exercise of the discretion as to costs. That is the event. But when there has been no hearing on the merits, there is no event. The court is deprived of the factor that usually determines whether or how it will make a costs order.

[7]

Submissions 38Both parties draw attention to the correspondence that passed between them and their solicitors both before and after the commencement of the proceedings to show that the other has behaved unreasonably in the approach taken to the dispute. The Plaintiff submitted that, in circumstances where the liquidator disclaimed any interest in the equipment at an early time, there was no justification for the Defendant to refuse to return the goods. After commencement of proceedings the Plaintiff submitted that the appropriate course for the Defendant to have taken, where the Defendant made no claim itself, was to file a submitting appearance. 39The Plaintiff's final position in relation to the costs which ought to be ordered was that it sought its costs up to 5 July 2011 and the costs of the hearing concerning the issue of costs. Otherwise, the Plaintiff submitted that there should be no order as to costs. 40The Defendant submitted that the Plaintiff always had a hopeless case because the Plaintiff was without evidence to prove that it was the owner of the equipment. The Defendant relied on statements made in cases such as Colgate Palmolive Co Pty Ltd v Cussons Pty Ltd (1993) 36 FCR 225 at 233-234, Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 400-401 and Auswest Timbers Pty Ltd v Secretary to the Department of Sustainability and Environment [2010] VSC 513 at [9] to argue that the Defendant should receive indemnity costs from the date of service of the Summons. The Defendant argued in the alternative that it ought to receive indemnity costs from the Calderbank offer made on 5 March 2012 because the Plaintiff's refusal to accept that offer was plainly unreasonable. The Defendant's final fallback position was that the Plaintiff pay the Defendant's costs on the ordinary basis up to and including 13 April 2011 and thereafter on the indemnity basis by reason of the Calderbank offer of 6 April 2011 or on the basis up to 9 August 2011 and thereafter on the ordinary or the indemnity basis by reason of the 5 March 2012 Calderbank offer.

[8]

Consideration 41It is convenient to look at the matter by separating out particular time periods and then having regard to the reasonableness of the conduct of each party in that period. 42Before I consider the various time periods, however, I should first deal with the Defendant's submission that the Plaintiff could never have succeeded in the proceedings, and that it ought therefore receive costs on an indemnity basis for some or all of the relevant periods. I was taken to various contemporaneous documents as well as correspondence asserting the strength of the Defendant's position. It would have to be said that, for a party who repeatedly said that the position it was adopting was merely putting the Plaintiff to proof rather than raising any substantive defence or a jus tertii, the Defendant's approach to the litigation has been a fairly combative one. 43In considering this submission of the Defendant I have regard to what has been said in the authorities that I should not attempt to try a hypothetical action between the parties. Nevertheless, I do not consider that the Plaintiff's case, on the material to which I have been taken, was so hopeless that the Plaintiff would have inevitably failed. In this regard I note particularly that the Defendant filed a Notice of Motion which sought dismissal of the proceedings under various rules including Rule 13.4 UCPR. Ultimately, as I have noted, the Defendant did not proceed with that Notice of Motion and it was by consent dismissed. What was said in Wargent v Bellamax Investments [2011] NSWSC 1461 by Hallen AsJ at [64] is, thus, entirely pertinent: These matters also mean that the Plaintiff's submission that in all the circumstances it was unreasonable for the Defendants to have defended the proceedings should not be accepted. Each party could not convince the other that the result that was being contended for was the correct one. Even on the hearing of the costs application, they were not able to agree on who would have, ultimately, succeeded had the proceedings not resolved. Each maintained that her, or their, position was legally correct. Neither party had sought summary judgment in, or summary dismissal of, the proceedings. This suggests that the other party's position was not unarguable. (emphasis added) 44This conclusion is made stronger in the present case where the Defendant filed a motion for that purpose and then abandoned it. In my opinion, it cannot be said that the Plaintiff's case (or the Defendant's for that matter) was unarguable. It is not appropriate (for the reasons I have given) to delve into all the reasons why the Plaintiff's case was not unarguable. However, three things stand out. First, the Plaintiff could have demonstrated, prima facie, that it hired some equipment to Formtec (Aust) some little time before an associated company (Form (Aust)) went onto the site with (at least) similar equipment that did not form part of its assets (or so the liquidator concluded) and that the liquidator made no claim for it. Secondly, the Defendant agreed to the return of the equipment when the liquidator disclaimed an interest. Thirdly, the Defendant neither claimed an interest nor raised an interest on any other person's part.

[9]

(a)First Period - From demand to commencement of proceedings 45The Plaintiff became aware that the related company which had the subcontract with the Defendant had been excluded from the site. The Plaintiff's concern was to recover what it said was its equipment. The Plaintiff knew that it had hired the equipment to one of its related companies, being Formtec (Aust). The Plaintiff knew also that another of its related companies, Form (Aust), had entered into the subcontract with the Defendant. It may reasonably be inferred that the Plaintiff knew that the equipment hired to Formtec (Aust) had been used and taken onto the site by Form (Aust) pursuant to its subcontract with the Defendant. 46The Defendant, when faced with the demand for the return of equipment to the Plaintiff, knew only in the first instance that it had entered into a subcontract with Form (Aust) for the supply of the equipment. It knew also that that company had been placed into administration and that, prima facie, the liquidator had the right to that company's assets. It was concerned that if it surrendered the equipment, without argument or enquiry to the Plaintiff, it may be faced with a claim from the liquidator. 47Negotiations then ensued which involved exchanges of correspondence concerning a proposed deed which would enable the Plaintiff to take back the equipment it claimed but would, at the same time, protect the Defendant from claims. I have not set out all of this correspondence in the judgment because I do not believe it necessary to do so. I have, however, read all of the correspondence that is comprised in the exhibits on this costs application. It is apparent from this correspondence that each of the Plaintiff and Defendant had a position to protect and that during the course of the negotiations, particularly in relation to the precise wording of the deed, each of the parties conducted themselves in a reasonable way. For example, the Defendant first required an indemnity which was far too wide for any protection that it needed. It ultimately accepted that the indemnity should be narrowed to protect it against likely and appropriate claims concerning title to the equipment in issue. Similarly, the Plaintiff accepted the need for some of the matters in the deed which the Defendant required. 48In one sense, the problem was initially brought about by the rather informal way that the Plaintiff and its associated companies treated the assets under the control of the various companies. That led to the difficulty from the Plaintiff in showing that equipment brought onto the site by Form (Aust) was the same equipment that the Plaintiff had hired to Formtec (Aust). I do not consider, however, that this meant that the Plaintiff acted so unreasonably that the other party should obtain the costs of this period. As Ward J pointed out in Nauru Phosphate at [40], there needs to be a relationship between the incurring of the costs and the unreasonableness. The rather loose way that the Plaintiff and its associated companies dealt with the assets of those companies merely set the scene for the problems which followed rather than causing the incurring of costs. 49I do not consider that the Plaintiff acted unreasonably in not accepting the offer contained in the Calderbank letter of 6 April 2011. Apart from anything else, the offer involved the preparation of an inventory that was acceptable to both parties. That was not able to be achieved at the time for various reasons. Ultimately the Defendant accepted that the Plaintiff's refusal of this offer was not unreasonable. 50The only other specific consideration that needs mention in this period concerns the failure of the Defendant to respond to the Plaintiff's letter of 21 March 2011. That letter was the last piece of correspondence prior to the urgent application to Brereton J on 28 March 2011. 51I do not consider that the Defendant acted unreasonably in not having responded to that letter prior to the commencement of the proceedings. In that regard, I note that the letter said that the deed forwarded by the Defendant on 18 March was unacceptable, and that the Defendant was required to accept the form of the deed put forward under cover of the letter prior to 10.00am the following day failing which proceedings would be commenced. I note also that similar threats made earlier had not been carried out. I do not consider, in those circumstances, that a failure to comply within such a short time period was unreasonable on the Defendant's part.

[10]

(b)Second period - from commencement of proceedings to security for costs determination 52Two significant things happened during this period. The first was the making of Orders on 20 May 2011 which resulted in the return of the equipment. The second was the filing of the Statement of Claim abandoning relief other than declarations and costs. These matters were said to be important because the first represented some measure of success for the Plaintiff in having brought the proceedings, and the second represented some measure of success for the Defendant when the claim for damages was dropped. I do not consider that any success for either party that is judged to come from those events throws any light on the issue of costs in the matter. Rather, they both tend to highlight the reasonableness of the party not claiming the success from the event concerned. On the other hand, both events are significant for the course which ought to have been followed after the filing of the Statement of Claim. I shall return to that matter presently. 53Other questions of reasonableness are raised by the offer from the Plaintiff of 18 July 2011 and the response of the Defendant on 3 August 2011. 54The Plaintiff gave notice both in an open letter and a Calderbank letter of 18 July that it was abandoning any claim for damages. It was on that basis that the Plaintiff proposed that the proceedings be dismissed altogether but with the payment of costs by the Defendant. The proposal that the proceedings should be dismissed was entirely appropriate. Minds may differ, on the other hand, on the proposal that the Defendant should pay the Plaintiff's costs of the proceedings. For reasons I have given earlier the parties did not behave unreasonably up to and including the commencement of the proceedings although, as I have said, the problem was largely brought about in the first instance by the approach of the Plaintiff and its related companies to the equipment. 55The response of the Defendant was unfortunate in that it did not accept the suggestion that the proceedings ought to be dismissed. No doubt it responded the way it did because the Plaintiff was asking the Defendant to pay the Plaintiff's costs in circumstances where the Defendant still regarded the Plaintiff as having considerable difficulties in proving a right to possession of the equipment. A better response from the Defendant would certainly have been to agree that the proceedings ought to be dismissed but that the issue of costs should be argued in the way it now has been some eight or nine months later after the incurring of very considerable further costs on either side. Nevertheless, I cannot conclude that the rejection of the offer by the Defendant was so unreasonable that it ought to lead to the Defendant's being required to pay the Plaintiff's costs from this time onwards. 56One particular reason for so concluding is that it was always open to the Plaintiff to seek the leave of the Court to file a Notice of Discontinuance pursuant to UCPR 12.1(1b). If that had been done this issue of costs would have been squarely raised. It does not appear that the Defendant had any ability to bring about the ending of the proceedings in this way apart from suggesting it or agreeing to it in correspondence. However, the Defendant could have done that in the same way that the Plaintiff could have sought leave to file a Notice of Discontinuance. In my opinion, both parties acted unreasonably during this period for that reason. 57The failure to take this course by one or other of the parties is the more extraordinary when the parties appear to have engaged in battle over the issue of security for costs with the result that the Plaintiff was obliged to provide security for costs in a substantial amount of money and to pay the Defendant's costs of the Motion. Again, I consider that both parties behaved unreasonably in going through that process rather than working towards a sensible resolution of the little that remained in the proceedings.

[12]

58The unreasonableness which I have found for the second period continued, but in a considerably magnified way, during this period. Judging by the size of the court book (three ring-back binders and two additional binders being exhibits to two affidavits) the costs expended during this period to prepare the matter for hearing must have been very considerable. Of course, the amount ordered for security for costs gives some indication of the costs likely to have been incurred because the quantum of costs ordered by way of security is generally conservative. I can only conclude that the parties' positions had become so entrenched that they overlooked the fact that a much cheaper resolution was available bearing in mind the matters I noted in para [33] above. 59The only significant matter that occurred during this period (for present purposes) is the Defendant's Calderbank offer of 5 March 2012. In one sense, that offer could be seen as the response that ought to have been made by the Defendant to the Plaintiff's offer of 18 July 2011 so that the parties could have continued negotiating about the only matter which was in issue, being that of costs. The Plaintiff's explanation for not responding to this offer was that the letter could not have been understood as amounting to an invitation to argue costs or to put an alternative position in response. That response appears to me to be unsatisfactory. Nevertheless, the very strong likelihood is that even if the Plaintiff had responded with an alternative position the matter would still have come before the Court for an argument about costs. Bearing in mind that the Calderbank offer was put only a month and a half before the proceedings were due to be heard it is likely that the majority of the parties' costs had been incurred by that time in the preparation of the affidavits in the matter. Although it was unreasonable for the Plaintiff not to have responded, I do not consider that the failure to respond resulted in the incurring of costs because, as I have said, any response was unlikely to have resolved the costs issue. 60In my opinion, both parties acted unreasonably during this third period because they ought not to have incurred the costs they did. They ought, as the Defendant did on the Friday before the hearing, to have put forward the position that all that there was to argue about in the matter was costs. 61There is no doubt that there would have been considerable savings if that had been done by no later than August 2011. The issue of costs could have been decided (as I have now largely done) on the correspondence which had passed between the parties from March to August 2011. Although I was taken to a few other documents, the only other documents of any relevance to my decision were the contract of hiring between the Plaintiff and Formtec (Aust) and the sub-contract between the Defendant and Form (Aust).