These reasons address the costs arising from a Notice of Motion filed by the plaintiff on 3 September 2021. By its Motion, the plaintiff sought leave to file an Amended Statement of Claim and rely upon certain affidavits. The parties reached a consensual position about those issues, and the plaintiff consequently filed an Amended Statement of Claim on 24 September 2021. The question of costs remained unresolved. The Court directed the parties to provide written submissions accordingly.
The defendant seeks an order that the plaintiff pay the defendant's costs thrown away by reason of the amendment to the Statement of Claim. Those costs are sought on the indemnity basis. The plaintiff seeks an order that it pay the defendant's costs thrown away by reason of the amendment but only on the ordinary basis. The parties are also at issue as to whether the costs should be payable forthwith.
[2]
Background
These proceedings concern a dispute between the plaintiff lessor and the defendant lessee. By its Statement of Claim filed on 11 June 2020, the plaintiff sought damages for the costs of "make good works" in the sum of $1,274,869.22. The plaintiff also claimed damages for loss of rental income in the period that it says it was unable to relet the premises due to its condition.
Annexed to the Statement of Claim was a "Scott Schedule", detailing the works the plaintiff alleges the defendant was required to complete under the lease. The defendant produced a Scott Schedule in response with the assistance of a qualified consultant and the defendant's legal team. The defendant denied liability except where expressly admitted in its Scott Schedule. The defendant also denied that the plaintiff was required to carry out certain repair works, and the defendant further relied on section 133A(1) of the Conveyancing Act 1919 (NSW) as limiting its liability.
As noted, the plaintiff's Amended Statement of Claim was filed on 24 September 2021. Instead of seeking $1,274,869.22 in respect of the make good works, the plaintiff now seeks $834,766.42. The reduction in the amount reflects some deletions to the plaintiff's original claim. Certain items in the Scott Schedule (now described as "Schedule A" in the Amended Statement of Claim) are no longer relied upon to particularise the alleged breaches of the lease.
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Determination
The defendant submits that the amendments mean the plaintiff has created an entirely new Scott Schedule. Consequently, the defendant's work in preparing its detailed response is said to have been wasted. Further, the defendant will have to produce another response to the plaintiff's new Scott Schedule. The defendant also submits that the plaintiff has, by reconstituting its case, taken the benefit of the defendant's detailed response. The defendant submits that in these circumstances it is fair that the defendant should be compensated on the indemnity basis, and that amount should be payable forthwith.
The plaintiff submits that the appropriate order is that it pays the defendant's costs thrown away by reason of the amendment on the ordinary basis. That is said to be the usual order in these circumstances. The plaintiff also submits that interlocutory costs are generally payable at the conclusion of the proceedings (see Uniform Civil Procedure Rules 2005 (NSW), rule 42.7(2)). The plaintiff submits that the defendant has failed to establish any grounds to depart from these usual positions.
The plaintiff also characterises the amendments to its claim as consistent with the just, quick and cheap determination of the real issues in the proceedings. The amendments were made in response to the evidence once finalised, and are said to reduce the quantum of the plaintiff's claim while retaining the claim's substance. The plaintiff submits that its decision to amend its pleadings was not unreasonable and does not warrant an order on the indemnity basis. Such an order is submitted as being antithetical to a system that "encourages pleadings to match the evidence".
In my opinion, the plaintiff's submissions should be preferred. The plaintiff modified its case in accordance with the evidence. That alone is not delinquent behaviour that would justify a costs order on the indemnity basis. The defendant did not submit that the plaintiff's first Scott Schedule, which prompted the defendant to produce a Schedule in response, was put forward improperly. Neither was it suggested that the later amendments were made without a proper purpose.
The defendant's complaint that the plaintiff's amendments took the benefit of the defendant's work is unconvincing. It might be unreasonable if the plaintiff had ignored the defendant's Scott Schedule and proceeded with its case regardless. In my view, litigants should be commended for communicating productively to identify the real issues in dispute. That process can and should, in appropriate cases, result in amendments to the pleadings.
I therefore see no basis to depart from the usual order in these circumstances. The Court will order that the plaintiff pay the defendant's costs thrown away by reason of the amendment to its Statement of Claim, on the ordinary basis.
As to whether those costs should be paid forthwith, the defendant submits that the defendant incurred significant expense in preparing its Scott Schedule in response, and the reformulation of the plaintiff's case means the defendant will have to prepare a new Scott Schedule. The defendant thus submits that it "should not be required to await the conclusion of the proceedings and thereby initially bear the costs twice".
The plaintiff submits that a forthwith order would be futile because it cannot yet be determined what costs have been thrown away by the amendment; the Defence is not due to be filed until February 2022. Further, it is submitted that the proceedings are expected to be ready to obtain a hearing date early next year, so there is no "inordinate delay" for the defendant to receive the benefit of the costs order at the conclusion of the proceedings.
The usual position is that the costs of interlocutory applications are not payable until the end of proceedings: UCPR r 42.7(2). In Wang v Cai (No 2) [2021] NSWSC 1268, Ward CJ in Eq recently summarised the principles for when a Court might depart from the usual position and make an order for costs forthwith at [23]-[24]:
It is noted that in Solarus, Campbell J (as his Honour then was) summarised (at [4]) three non-exhaustive factors relevant to the discretion, as discussed by Barrett J (as his Honour then was) in Fiduciary Ltd v Morningstar Research Pty Ltd (2002) 55 NSWLR 1; [2002] NSWSC 432 (Morningstar), namely that: the subject matter of the interlocutory application is discrete and self-contained making it a suitable vehicle for a separate order for costs; whether some of the conduct of the unsuccessful party to the motion may be seen as being unreasonable; and that there is still some considerable distance to go in the litigation so that it may be appropriate that the successful party obtain the fruits of its costs order now.
It is noted that the third factor is particularly apt where costs of the interlocutory application are significant, and the successful party's limited resources have been substantially diverted to contesting an interlocutory application on which it succeeded (see Royal Australian Naval Reserve Rifle Club Inc v New South Wales Rifle Association Inc [2010] NSWSC 351 at [29] per Biscoe AJ).
The costs thrown away by the amendments are suitably self-contained. But the defendant has not adduced evidence that its costs have been significant or that its limited resources have been substantially diverted. Moreover, I do not consider that the plaintiff has acted unreasonably. It is therefore not appropriate to depart from the usual position. I decline to make an order that the costs be payable forthwith. I will add that even if such an order was made it is unlikely that the quantum of the costs will be fully ascertained for some time.
The plaintiff submits that the defendant's application for costs should itself be dismissed with costs. The plaintiff successfully resisted the defendant's claim for a costs order on the indemnity basis to be paid forthwith. Accordingly, I think that the plaintiff should be awarded its costs on the costs dispute.
One area of costs remains outstanding. That is the costs of the Notice of Motion itself. Most issues in the Motion were resolved by the parties without judicial determination. I think that in these circumstances the Court should order that the costs of the Notice of Motion be the parties' costs in the cause, subject to the costs orders that I have already mentioned, namely, that the plaintiff pay the defendant's costs thrown away by reason of the amendment, and that the defendant pay the plaintiff's costs of the defendant's application for costs.
[4]
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Decision last updated: 03 November 2021