Piety Constructions Pty Ltd v Megacrane Holdings Pty Ltd

Costs

1. The usual order is that costs follow the event: Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 42.1. The usual order reflects two important principles; first, that a successful party in litigation is entitled, subject to certain limited exceptions, to an award of costs in its favour, and; second, that the purpose of an award of costs is to indemnify the successful party for the costs which, if the litigation had not been brought or defended by the unsuccessful party, the successful party would not have incurred: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [67] per McHugh J.
2. The first judgment dealt with the main substantive issue in the proceeding which was whether the adjudication determination was valid. Megacrane was wholly successful on that issue.
3. Megacrane relies on two offers of compromise in support of an order for its costs to be assessed on the indemnity basis.
4. On 29 November 2022, Megacrane served on Piety an offer of compromise (first offer) which complied with r 20.26 of the UCPR, which provided for: 1. judgment in favour of Megacrane, that is dismissal of the summons filed by Piety, with no order as to costs; 2. judgment for Piety on the alternative relief on the cross-summons filed by Megacrane, in the event that there was a payment claim but no payment schedule, with no order as to costs; 3. payment out of Court as to 95% to Megacrane and 5% to Piety with Megacrane to pay Piety's costs of that aspect of the proceedings.
5. I note that the offer of judgment for Megacrane (on the summons) and Piety (on the cross-summons) with no order as to costs is permitted by r 20.26(3)(a)(i) of the UCPR.
6. As a result of the first judgment, Megacrane obtained orders on 6 April 2023 which were no less favourable to Megacrane than the terms of the first offer. Accordingly, Megacrane is entitled to indemnity costs from 30 November 2023 on the indemnity basis unless the Court otherwise orders: UCPR r 42.14(2), and r 42.15A(2).
7. On 8 May 2023 the solicitors for Megacrane sent two letters to the solicitors for Piety. The first was an open letter setting out certain undertakings to be offered by the Administrator. The second letter (further offer) was a Calderbank offer expressed to be without prejudice save as to costs and stated, relevantly: 2. We also refer to our open correspondence today giving notice of the undertaking to be offered by the Administrator on behalf of the first defendant at this hearing. 3. This undertaking is consistent with the precedent in Paul Michael Pty Ltd (subject to the deed of company arrangement) v Urban Traders Pty Ltd [2010] NSWSC 1246. We suggest that, on this undertaking, there is no proper basis for a Grosvenor stay (if there ever was a basis). 4. We note that on 29 November 2022 the first defendant served a notice of offer of compromise, which offer was not accepted and which was no less favourable to the first defendant in the judgment delivered on 30 March 2023. 5. Without prejudice to our client's previous offer (which we say has already accrued rights to indemnity costs) we have instructions to make a further offer of compromise, which is in terms of the attached short minutes of consent order, which incorporates the undertaking by the first defendant in our open letter today. 6. Given that there is no reasonable prospect of obtaining a stay in light of the undertaking, this compromise is more than reasonable and ought to be accepted. If accepted our client agrees that costs are to be payable on the ordinary basis. If the stay is pressed, then the notice of offer of compromise dated 29 November 2022 will be relied upon in seeking an order that the first defendant's costs be paid on the indemnity basis. 7. This offer may be accepted in writing until 4:00pm on 18 May 2023, after it lapses. 8. This letter will be relied upon in respect of the costs of the proceeding, according to the Calderbank principles and the general discretion of the Court in relation to costs.
8. At the hearing on 29 May 2023 Piety sought a Brodyn/Grosvenor stay and Megacrane resisted that application on the basis that the undertakings which had previously been proffered in the open letter dated 8 May 2023 provided sufficient protection to Piety, relying on the line of authority referred to in the second judgment at [27]-[29]. As recorded in the second judgment, Piety objected to the Administrator's proposal on the basis that the proposal did not incorporate an undertaking by the Administrator to be personally liable for any adverse costs order made against Megacrane: second judgment at [25]-[26]. This matter had been the subject of correspondence between the parties before the hearing on 29 May 2023.
9. By letter dated 15 May 2023, the solicitors for Piety responded to the open letter of 8 May 2023 by raising a number of queries, including: If and to the extent that a costs order is made against your client in these proceedings, which entity or individual would make good that costs order? Further, does that costs entity have sufficient funds to satisfy a costs order?
10. By letter dated 17 May 2023, the solicitors for Megacrane responded, relevantly as follows: We assume "these proceedings" to refer to proceedings in relation to the final rights, whether by appeal from a proof of debt or (by leave) by way of Court proceedings. If a proof of debt is adjudicated and then appealed, that appeal would be against the liquidator, who would be personally liable for any adverse costs order (subject to indemnity from the company). If your client obtains leave to bring Court proceedings, then such proceedings would be against the company, who would be responsible for an adverse costs order.
11. Megacrane submits that in this correspondence the Administrator had stated that his position was that he would be personally liable for costs of any appeal from Piety's proof of debt in the liquidation of Megacrane; that while Mr Weinberger, counsel for Piety, had made submissions at the hearing on 29 May 2023 to the effect that the Administrator was mistaken, since as a matter of law he would or might not be liable, the matter was put beyond doubt because the Administrator volunteered an undertaking at the hearing; and the undertaking was entirely consistent with the Administrator's position stated in the letter of 17 May 2023.
12. In my opinion, the submission made by Mr Weinberger at the hearing on 29 May 2023 referred to in the previous paragraph was correct. The authorities indicate that if proceedings brought against a liquidator are successful, generally a costs order will be made in such a way that the liquidator does not incur any personal liability unless the liquidator has acted unreasonably in defending the litigation: see Silvia v Brodyn Pty Ltd [2007] NSWCA 55 at [52]-[54]; Commissioner of Taxation v Warner (No 2) (2015) 244 FCR 498; [2015] FCA 1281 at [39]. It is by no means clear that the liquidator of Megacrane would be acting unreasonably in rejecting Piety's proof of debt for the cross‑claim.
13. The undertaking by the Administrator as to personal ability is recorded in the second judgment at [31] and was first proffered during the hearing (T5.1 and 12.35). In light of the undertaking given by the Administrator, Piety achieved a better outcome than had been offered by Megacrane prior to the hearing.
14. In all the circumstances, in my view the appropriate order in relation to the hearing on 29 May 2023 is that there be no order as to costs with the intention that each party pay their own costs. Accordingly, I will make an order to this effect in exercise of the discretion to order otherwise under UCPR r 42.14(2) and r 42.15A(2).

Stay of costs order

1. Piety seeks an order that there be a stay of any costs order made in relation to these proceedings pending the outcome of the appeal from the adjudication of a proof of debt to be lodged by Piety for its cross-claim.
2. There is a dispute between the parties as to whether at the hearing on 29 May 2023, Megacrane agreed to the grant of a stay. Piety relies on evidence as to disputed conversations between solicitors and counsel, and to the following exchange during the hearing on 29 May 2023: WEINBERGER: And one further matter, your Honour made a costs order against my client following your Honour's judgment. My friend has agreed-- HIS HONOUR: I thought I allowed the parties to make submissions on costs. GREINKE: You reserved. WEINBERGER: Sorry, I stand corrected. The parties have agreed that our costs order should be stayed pending the outcome of whatever might occur because, for example, if my client demonstrates its cross-claim is worth $300,000 (plucking a hypothetical figure) it will then wish to set off that $300,000 against the $100,000 judgment and any costs order so that is one aspect which can be dealt with by consent whichever path your Honour takes. HIS HONOUR: I will invite the parties to give me some appropriate orders to achieve that agreed position.
3. From the correspondence between the parties and other evidence before the Court it appears that the parties may have been at cross purposes in relation to the stay issue. The basis on which Piety raised the need for a stay of any costs order was that s 553 of the Corporations Act 2001 (Cth) would create a set-off of a costs order against Piety's cross-claim referred to in the second judgment at [20] - [21]. Megacrane rejected any claim for a set-off on the basis that as these proceedings were commenced and litigated after commencement of the winding up (being the prior appointment of the Administrator), a costs order made in these proceedings would not be captured by s 553: Metal Manufacturers Pty Ltd v Morton (2023) 406 ALR 711; [2023] HCA 1 at [45]; Central Queensland Development Corp Pty Ltd v Sunstruct Pty Ltd (2015) 231 FCR 17; [2015] FCAFC 63. It may be that while Megacrane's legal advisors were focusing on negating the argument that s 553 would support a stay, Piety's legal advisors were looking at the matter more broadly.
4. In my view, it is not necessary to determine what, if any, agreement was made between the parties on the question of a stay. This is because in my view whatever agreement the parties may have reached does not bind the Court in the exercise of its discretion whether or not to grant a stay of an order which it makes.
5. I decline to order a stay for essentially two reasons. First, given that the purpose of a costs order is to compensate the successful party for the expense which it would not have incurred if the proceedings had not been brought, I see no reason in principle why a stay should be granted. There is no relevant connection between Megacrane's recovery of its costs in these proceedings and the outcome of Piety's proof of debt for its cross-claim. Second, the general principle is that the Court should not be disposed to delay the enforcement of its orders because a successful party is entitled to the fruits of its judgment: McBride v Sandland (No 2) [1918] HCA 32; (1918) 25 CLR 369 at 374; Cook's Construction Pty Ltd v Stork Food Systems Australasia Pty Ltd [2008] 2 Qd R 453; [2008] QCA 322 at [12]. These are strong considerations against the grant of a stay.

Conclusion

1. Accordingly, the Court will make the following orders: 1. Subject to order 2, the plaintiff is to pay the first defendant's costs of the proceedings to be assessed: 1. until 29 November 2022 on the ordinary basis, and 2. thereafter on the indemnity basis. 1. There be no order as to the costs of and incidental to the hearing on 29 May 2023, with the intention that each party pay their own costs. 2. The plaintiff's application for a stay of the costs order is refused.

Amendments 21 August 2023 - typographical error corrected in [21]. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 21 August 2023