Liangis v IPEX ITG Pty Ltd [2005] ACTCA 28

The submissions filed on behalf of the appellant have now referred to an offer by the appellant to carry out rectification work in order to bring the air conditioning equipment, which was the subject of the dispute between the parties, up to the standard required by the contract between them. The offer was made well prior to the hearing but the respondent declined to accept it or, indeed, to settle for anything less than a system that suited its then current business needs. The learned magistrate’s impression as to the adequacy of this offer, and hence as to the extent to which the parties had behaved reasonably, had clearly been coloured by his view that the respondent had been entitled to such a system. Since it has now been held that the respondent had no such entitlement under the contract, the issue should be reconsidered. Whilst conceding that allowance should be made for costs incurred by the respondent before the offer was made and for certain aspects of the appellant’s conduct which the magistrate criticised, it is contended that the respondent’s unreasonable failure to accept the offer caused the appellant to unnecessarily incur very substantial costs. Hence, the existing order should be set aside and, in lieu thereof, the respondent ordered to pay two-thirds of the appellant’s costs.

On the other hand, the submissions filed on behalf of the respondent assert that the existing order should not be set aside. No appealable error has been demonstrated in relation to that order and it “bears no relationship” to the issues upon which the appellant succeeded on appeal. The respondent had not been able to accept the offer referred to in the appellant’s submissions because what had been proposed was only an “in-principle system” which was never augmented by design specifications or drawings and did not take into account the need to upgrade the electrical system. Furthermore, the respondent had earlier urged the appellant to resolve the matter without recourse to litigation and suggested arbitration by an independent engineer.

The competing contentions fall to be considered in the context of s 154 of the Leases (Commercial and Retail) Act 2001 (ACT) which provides that: The parties in a proceeding under this Act must bear their own costs unless the Magistrates Court or Supreme Court makes an order about costs.

Whilst the discretion implicit in this provision is not constrained by any requirement that special or exceptional circumstances be demonstrated, there must be some identifiable factor or factors sufficient to justify a departure from the normal rule.

The magistrate gave a number of reasons for departing from that rule and, in the context of his view as to the standard of air conditioning to which the respondent had been entitled, it was clearly open to him to be satisfied that the combination of factors he identified warranted such a course. However, since that view was not upheld on appeal, the issue must be reconsidered.

Each party relied, in essence, upon the contention that the other had behaved unreasonably in failing to embrace overtures of settlement from the other but it is by no means easy to now determine the knowledge and understanding which each party had at the dates in question. Furthermore, whilst I am conscious of the limitations on an appellate court’s capacity to review issues of this kind, I must say that I formed the distinct impression that the proceedings in the Magistrates Court had been unnecessarily protracted due to the apparent inability of either party to adequately identify the real issues in the case. The same problem was evident during the conduct of the appeal. Whilst I am unable to determine whether the somewhat desultory offers of settlement made during 2001 failed for similar reasons, I am not satisfied that either party has established any adequate justification for an order departing from the normal rule.

I would set aside the existing order in the respondent’s favour and make no other order as to costs. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.