Judgment was delivered in this matter on 5 August 2022 (see Jarjo v Patterson [2022] NSWSC 1049). The Court rejected the plaintiffs' claim that they entered into a valid and binding contract to purchase a property owned by the defendants. The claim failed even though there was an exchange of executed contracts, and the vendors' counterpart had apparently been signed by both the first defendant (Mr Patterson) and the second defendant (Ms Patterson).
Ms Patterson had not in fact signed the contract. Her apparent signature was made by Mr Patterson, and the Court found that he lacked authority to bind her to the contract. The proceedings were accordingly dismissed.
There is an outstanding question of costs.
The plaintiffs contend that, in the circumstances, there should be a departure from the usual position that costs follow the event. They primarily submit that there should be no order as to costs. In the alternative, the plaintiffs contend that Mr Patterson should be ordered to pay Ms Patterson's costs and that there otherwise be no order as to costs, or that Mr Patterson should pay half of Ms Patterson's costs with the plaintiffs paying the other half.
Each of the defendants resists the making of such orders.
Mr Patterson seeks an order that the plaintiffs pay his costs, including on an indemnity basis from 21 September 2021, being the date that a Calderbank offer was jointly made by the defendants to the plaintiffs.
Ms Patterson seeks an order that the plaintiffs pay her costs, including on an indemnity basis from either 15 April 2021, being the date she made an Offer of Compromise and a Calderbank offer, or 21 September 2021, the date of the joint offer.
The Court has received and considered written submissions from the plaintiffs (dated 2 September 2022 and 22 September 2022 in reply), Mr Patterson (undated) and Ms Patterson (dated 16 August 2022 and 8 September 2022).
The submissions may be briefly summarised as follows.
The plaintiffs submitted that a departure from the usual position was warranted because the litigation was caused by the unethical, unreasonable (and potentially criminal) conduct of Mr Patterson in relation to the execution and exchange of contracts. It was also submitted that Ms Patterson acted unreasonably in failing to provide requested information prior to the commencement of proceedings, and that in the litigation she has taken the benefit of Mr Patterson's conduct. The plaintiffs submitted that the fairest order in the circumstances is for there to be no order as to costs, but if costs were to be awarded to Ms Patterson, they should be ordered to be paid by Mr Patterson, or equally by Mr Patterson and the plaintiffs.
As for the offers made by Ms Patterson on 15 April 2021, the plaintiffs submitted that they were walk-away offers with no real element of compromise, and made at an early stage of the proceedings. The plaintiffs submitted that it was not unreasonable to fail to accept the offers at that stage. In relation to the joint offer made on 21 September 2021, the plaintiffs pointed to the fact that the offer involved entry into another contract for sale at a price almost $1.2 million higher than the price on the contract the subject of the proceedings.
Mr Patterson submitted that his conduct, about which complaint is made, was not relevantly conduct relating to the litigation, or in respect of the proceedings. He submitted that he acted reasonably in the litigation and made a reasonable offer of settlement.
Ms Patterson submitted that costs should follow the event in relation to her costs, and that there was no basis for those costs to be ordered to be recovered from the other successful defendant. She submitted that it is conduct during litigation that is relevant for the Court's discretion as to costs, not conduct that may have led to the litigation. Ms Patterson relied upon Uniform Civil Procedure Rules 2005 (NSW) r 42.15 and r 42.15A in relation to the Offer of Compromise made on 15 April 2021. In relation to the Calderbank offers made on that day and on 21 September 2021, she submitted that it was unreasonable of the plaintiffs not to accept those offers.
For the following reasons, I consider that the appropriate order to be made in the exercise of the Court's discretion as to costs under s 98 of the Civil Procedure Act 2005 (NSW) is to order that the plaintiffs pay Ms Patterson's costs of the proceedings on the ordinary basis, and that there otherwise be no order as to costs.
As between the plaintiffs and Ms Patterson, I do not see any good reason to depart from the usual position that costs follow the event. Ms Patterson, who was innocent in relation to the circumstances surrounding the execution and exchange of contracts that in my view gave rise to the litigation, is justified in looking to the unsuccessful plaintiffs for her costs. I do not accept that she acted unreasonably in failing to provide information to the plaintiffs prior to the commencement of the proceedings. I also do not regard Ms Patterson as having taken any "benefit" from Mr Patterson's conduct.
However, I do not think that any order should be made for her costs to be paid on an indemnity basis. In the particular circumstances of this case, it was reasonable for the plaintiffs to consider the central question of authority in detail, once the pleadings and evidence had closed and with the benefit of relevant documents, including telephone records. The plaintiffs had not had that opportunity by the time the 15 April 2021 offers had lapsed. In those circumstances, and bearing in mind that the offers involved only a relatively minor element of compromise (merely the costs incurred to date), I would "order otherwise" pursuant to Uniform Civil Procedure Rules r 42.15 and r 42.15A, and also hold that it was not unreasonable of the plaintiffs to fail to accept the Calderbank offer. Further, I do not think it was unreasonable of the plaintiffs to fail to accept the offer jointly made on 21 September 2021. That offer not only provided for the proceedings to be dismissed with no order as to costs, it also required the making of a new contract at a price almost $1.2 million higher than that under the contract the subject of the proceedings. The price was apparently based on a market appraisal. I am not satisfied that it was unreasonable for the plaintiffs to fail to accept the offer which entailed entry into that proposed new contract. I would add that although the evidence had largely been served by 21 September 2021, the plaintiffs had not yet obtained production of many of the relevant documents.
As between the plaintiffs and Mr Patterson, I consider that there is good reason to depart from the usual position, and make no order as to those costs. There is ample authority for the proposition that a court may, in the proper exercise of a discretion conferred by a costs provision similar to s 98 of the Civil Procedure Act, order that a successful party bear the costs of an unsuccessful party (see, for example, Oshlack v Richmond River Council (1998) 193 CLR 72 at 88). The position is a fortiori in respect of an order that a successful party be deprived of its costs.
There is also ample authority for the proposition that a basis for the making of an order depriving a successful party of its costs is that the conduct of the successful party "brought about the proceeding" (see, for example, Knight v Clifton [1971] Ch 700 at 718, cited by Bryson JA in GR Vaughan (Holdings) Pty Ltd v Vogt [2006] NSWCA 263 at [18]; see also Ritter v Godfrey [1920] 2 KB 47; Redden v Chapman (1949) 50 SR (NSW) 24 at 25; and Wood v Crawford (No 2) [2010] NSWSC 252 at [21]).
In the present case, the conduct of Mr Patterson in placing Ms Patterson's signature on the contract without authority, and thereafter allowing the contract to be exchanged, created the impression that a binding contract had come into existence. Even though he (and Ms Patterson) soon thereafter denied that that was the case, Mr Patterson's conduct can be regarded as conduct that led the plaintiffs to think, not unreasonably, that they had a case to enforce the contract. That plainly unreasonable conduct can be seen as a significant contributor to the litigation and its costs, much as the plaintiffs' decision to proceed can be so regarded. Although the plaintiffs were ultimately unsuccessful, it could not be said that their case was less than reasonably arguable, or that the plaintiffs otherwise acted in any unreasonable manner in relation to the proceedings.
For the above reasons, the Court will order:
1. that the plaintiffs pay the second defendant's costs of the proceedings on the ordinary basis; and
2. that there otherwise be no order as to costs.
[2]
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Decision last updated: 28 September 2022