Magnate Projects Pty Limited v Youma Constructions Pty Limited

CATCHWORDS : COURTS - Orders - Construction - extension of time for compliance - no question of principle

FAI General Insurance Company Limited v Southern Cross Exploration NL (1988) 165 CLR 268 CASES CITED : Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Limited [2005] NSWCA 331 Paino v Hofbauer (1988) 13 NSWLR 193

Magnate Projects Pty Limited (CAN 088 303 879) (Plaintiff) Youma Constructions (No 2) Pty Limited (ACN 082 889 674) (Defendant) PARTIES : Youma Constructions (No 2) Pty Limited ACN 082 889 674) (Cross-Claimant) Magnate Projects Pty Limited (CAN 088 303 879) (Cross-Defendant)

COUNSEL : D Allen (P) R Horsley (D)

SOLICITORS : J Kekatos Lawyers (P) Meyer Solomon & Associates, Solicitors & Attorneys (D)

• 9 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

50049/04 Magnate Projects Pty Limited v Youma Constructions (No 2) Pty Limited JUDGMENT (ex tempore) 1 HIS HONOUR: By Notice of Motion filed on 27 March 2006, the plaintiff Magnate Projects Pty Limited moves for (1) a declaration that the sum of $97,105.53 is a debt due and payable, jointly and severally, by the defendant Youma Constructions (No 2) Pty Limited and the defendant's solicitor Paul Marsh to Magnate, pursuant to orders made in this Court on 16 December 2005, and (2) judgment for the plaintiff against the defendant and Mr Marsh in that sum. 2 The history can conveniently be taken from the judgment of Hodgson JA in Magnate Projects Pty Ltd v Youma Constructions (No 2) Pty Limited [2005] NSWCA 331. On 23 March 2005, Master Macready (as his Honour then was) gave judgment in favour of Magnate against Youma for $3,773,861.12, and interest and costs. That judgment was given in the absence of Youma, the matter having been set down for final hearing on 21 March. On 23 June 2005, Nicholas J, on Youma's application, ordered that the Master's judgment be set aside, and that Mr Marsh pay, on an indemnity basis, Magnate's costs thrown away by reason of the judgment being set aside, together with the costs of the Notice of Motion to set aside the judgment. Magnate, which wished to retain the judgment in its favour, applied to the Court of Appeal for leave to appeal from Nicholas J's decision. The Court of Appeal by majority (Hodgson JA; MW Campbell AJA concurring; Handley JA dissenting) granted leave to appeal and allowed the appeal in part, setting aside the judgment of Nicholas J but ordering in lieu that, conditional upon Youma and/or Mr Marsh paying Magnate $20,000 on account of costs within 28 days as required by the subsequent orders, the Master's judgment be set aside, imposing a condition that Youma not apply for security for costs against Magnate beyond an order that could be satisfied by its principal accepting personal liability for Magnate's costs thereafter, and ordering Youma, as well as Mr Marsh, to pay Magnate's costs thrown away by reason of the original judgment being set aside and the costs of the motion to set it aside, on an indemnity basis - of which $20,000 was to be paid on account within 28 days. The Court further ordered that Youma pay Magnate's costs of the application for leave to appeal and of the appeal, but have a Suitors' Fund Act 1951 (NSW) certificate if otherwise eligible. 3 The proceedings in this Division came before Einstein J on 16 December 2005. So far as I can tell, from what has been revealed in the course of today's hearing, his Honour indicated that he proposed to make orders to the general effect that were thereafter made, and the parties then agreed on the precise form and terms of those orders. In those circumstances, I do not accept that those orders are properly described as consent orders, such as would give them a contractual status in addition to their status as Orders of the Court. Nor are they expressed to be consent orders, either within the minute which incorporated them or in the record of proceedings; indeed, the words "by consent" have been struck out of his Honour's note endorsed on those orders. 4 Nonetheless, those orders relevantly provided as follows: 2. By 20 December 2005, the plaintiff serve on the defendant and its solicitor a bill of costs for the plaintiff's costs ordered to be paid by the defendant and by the defendant's solicitor.

The defendant and its solicitor may object to any items in the plaintiff's bill of costs by service on the plaintiff of a notice of objection by the later of - (i) 14 January 2006; or (ii) the 21st day after the plaintiff served its bill of costs.

The plaintiff is to respond to the defendant's and the defendant's solicitors objections within 7 days of receipt of the defendant's said objections.

If either or both of the defendant and its solicitor does so object.

(a) the parties and the defendant's solicitor shall refer the dispute for expert determination by an expert agreed upon by the parties, but if there is not such agreement with [sic] 7 days of the objections being notified, by and expert appointed by the President for the time being of the Law Society of New South Wales;

(b) the expert's determination will be final and binding on the parties; and

(c) for the purpose of order 7 below, the plaintiff's costs shall be taken to have been determined on the date on which the expert notified his determination to the defendant and the defendant's solicitor, and in the amount so notified.

If neither the defendant nor its solicitor does so object, then for the purpose of order 7 below the plaintiff's costs shall be taken to have been determined on the later of - (i) 14 January 2006; or (ii) the 21st day after the plaintiff served its bill of costs.

The defendant and the defendant's solicitor shall pay the plaintiff's costs within 28 days of their having been determined.

Stay of proceedings 8. The proceedings shall be stayed until further order if -

(a) the plaintiff does not serve its bill of costs on the defendant on or before 20 December 2005; or

(b) Luong Dinh Luu does not give to the court, within 7 days of performance of the obligation in para 7 above an undertaking to the court, in a form acceptable to the court, to be liable for any costs that are - (i) incurred after 26 September 2005, and

(ii) awarded against the plaintiff in the proceedings ("the Undertaking").

9. The proceedings shall be stayed permanently if -

(a) the plaintiff does not serve its bill of costs on the defendant on or before 14 January 2006; or

(b) Luong Dinh Luu does not give the Undertaking to the court within 14 days of performance of the obligation in para 7 above being carried out.

Further steps in the proceedings 10. Subject to any stay -

(a) the plaintiff file and serve its amended summons by 23 December 2005;

(b) the defendant file and serve its amended defence and cross-claim by 14 January 2006;

(c) the plaintiff file and serve an amended defence to the cross-claim by 3 February 2006.

(d) Matter re-listed for further directions on 19 February 2006.

10A. Costs of Notice of Motion dated 29 July 2005 reserved.

11. Liberty to restore, including to apply to have a stay lifted. 5 Despite the terms of paragraph 2 of those orders, Magnate did not serve its bill of costs by 20 December 2005. Accordingly, the interim stay referred to in paragraph 8(a) of those orders thereupon came into effect. Nor did Magnate serve its bill by 14 January 2006. Accordingly, the permanent stay referred to in paragraph 9(a) of the orders of 16 December 2005 thereupon came into effect. Then, on 17 January 2006, Magnate served six bills of costs, totalling $97,105.53. The 21 day period referred to in order 3(b)(ii) and 6 expired on 7 February 2006. No notice of objection was served. 6 The matter next came before the Court on 10 February 2006, when there was an appearance only on behalf of Magnate. Directions were made for the filing of evidence by Magnate, relisting the matter on 24 February 2006 and providing for Magnate to notify Youma of those orders. Notwithstanding a suggestion in the evidence to the contrary, those orders are not, on their face, consent orders, and are not expressed to be made by consent, and I do not accept that they were consent orders. 7 On 24 February 2006, there was again an appearance only on behalf of Magnate. On that day, the matter was listed for hearing on 24 July 2006 for four days. The usual order for hearing was made, and Bergin J ordered "that any stay in respect of the order made by Einstein J on 9 December 2005 be lifted".

8 The 28 day period referred to in order 7 expired on 7 March 2006.

9 The matter came back before Bergin J on 10 March 2006, when this time there was an appearance by Mr Horsley for Youma as well as by Mr Allen for Magnate. Her Honour confirmed the hearing date. 10 The present Notice of Motion was filed on 27 March 2006, and first came before the Court on 31 March 2006, when Bergin J ordered that the respondent to the motion, Youma, file and serve any evidence by 6 April, and stood the matter over to today for hearing of the motion. Neither Youma nor Mr Marsh has filed or served any evidence pursuant to that direction. 11 The present application essentially involves the construction of the orders made by Einstein J on 16 December 2005, in the events which have happened. 12 In my view, the process for determination of "the plaintiff's costs ordered to be paid by the defendant and by the defendant's solicitor", referred to in paragraph 2 of those orders, was not conditional upon service of a bill of costs by 20 December 2005. That that is so apparent from the circumstance that, though failure to serve a bill by that date would result in an interlocutory stay, the orders clearly contemplated that the bill might be served at a later date: see, for example, paragraph 3(b)(ii) and paragraph 9(a), which plainly contemplated that the bill might be served after 20 December, at least if before 14 January. 13 Consistently with that, I do not think that the stay of proceedings referred to in paragraph 8(a) and 9(a) was a stay of the process for determination of costs pursuant to the regime set out in paragraphs 2 - 7. One reason for that is that the orders clearly contemplated that such a process may continue, notwithstanding an interlocutory stay pursuant to paragraph 8(a), and I do not see any reason why the position should be any different so far as a permanent stay pursuant to paragraph 9(a) is concerned. 14 A second reason, which accords with Mr Horsley's submission that these orders involved a balancing of the desire of the defendant to have some security for its costs with the desire of the plaintiff to be paid the costs payable to it, is that the stay is to be seen as very much like a stay given in aid of an order for security for costs, so that the substantive proceedings would go no further while the stay is in place, and the plaintiff would be prevented from prosecuting the substantive proceedings; but it is unlikely in the extreme that it was intended to take away the plaintiff's right to enforce the costs orders which had already been made in its favour - including, but not limited to, those made in the Court of Appeal. 15 In those circumstances, it seems to me that the consequences of what has happened is that the stays - which were imposed by paragraphs 8(a) and 9(a), though subsequently lifted by Bergin J on 24 February 2006 - had no impact on the process for determination of "the plaintiff's costs ordered to be paid by the defendant and the defendant's solicitor" pursuant to paragraphs 2 - 7 of the orders of 16 December 2005.

16 The orders of 16 December plainly contemplated that any stay imposed automatically pursuant to them might be lifted: see paragraph 11 of those orders. In any event, it is now clear enough that even a self-executing order which dismisses an action on default does not prevent a court from extending time for compliance after that dismissal and reinstating the proceedings: see FAI General Insurance Company Limited & Ors v Southern Cross Exploration NL & Ors (1988) 165 CLR 268 and Paino v Hofbauer (1988) 13 NSWLR 193. Where the orders clearly contemplate an application to have a stay lifted, and where what is involved is a stay and not a dismissal, that must be all the more clearly the case. 17 Mr Horsley has submitted that three of the bills which were served are not in respect of costs orders contemplated by paragraph 2 of the orders of 16 December. Mr Allen submits, rightly I think, that paragraph 2 is not limited to the orders made in the Court of Appeal, but contemplates all costs orders in favour of the plaintiff so far made in the proceedings against the defendant or the defendant's solicitor. I accept Mr Horsley's submission, however, that one of the bills, namely, the bill for $3,775.99 (Bill No 4), which relates to different proceedings, is not caught by that order. The others, I think, are. Youma and/or Mr Marsh has paid $20,000 on account of the costs order, as required by the condition imposed by the Court of Appeal, and are entitled to credit for that sum. 18 It therefore follows that, unless I make some orders varying the orders made by Einstein J, the current legal position is that Youma - and Mr Marsh, to the extent that some of the orders were made also against Mr Marsh - are liable to pay to the plaintiff the amounts claimed in all of the bills of costs referred to in Mr Kekatos' affidavit, save for the bill numbered 4, which relates to other proceedings, less $20,000 already paid. 19 The question which then falls for consideration is whether, as a matter of discretion on an interlocutory application, I should give judgment for the immediate payment of that sum (or make a declaration to that effect), or whether some further opportunity, albeit a short one, should be given to the defendant to have the bills of costs assessed. 20 It is notable that, despite an opportunity afforded by the adjournment last week to adduce evidence to explain the defendant's position, and despite the passage of some months now since the bill of costs were filed, no evidence is put before the Court to explain why nothing has been done to this point. It is not even as if evidence has been adduced to say that the defendant or its solicitor thought that there was a stay on foot. 21 The defendant's position, therefore, has very little claim to further sympathy and consideration in this respect, save for one matter, and that is that the plaintiff itself was out of time, and significantly out of time, in compliance with the direction made for service of a bill of costs. Mr Allen may well be right in saying it was not necessary for him to apply for an extension of time formally and, in any event, a grant of an extension must be implicit in the lifting of the stay; but it is not difficult to see that those circumstances could have caused confusion. And if time does not run strictly against Magnate, justice seems to require that some corresponding tollerance be afforded to Youma and Mr Marsh. With considerable reluctance, I have come to the view that the defendant should be afforded a modicum of tolerance, but a very limited one. It involves requiring payment of what on a very broad overview, is likely to be indisputably recoverable on assessment, while preserving the ability of Youma to have an assessment. 22 I make the following orders:

(1) Subject to and conditional upon the payment by the defendant and/or its solicitor Mr Marsh to the plaintiff of $45,000 by 19 April 2006, as referred to below, on account of their liability and the plaintiff's entitlement to costs, I extend time for the filing of objections, pursuant to order 3 of 16 December 2005, to 19 April 2006.

(2) I order that the defendant and Mr Marsh pay $45,000 to Magnate on account of the costs referred to in paragraph 2 of the order of 16 December 2005 by 19 April 2006.

(3) I order that the defendant pay the plaintiff's costs of this motion.

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