Property Builders Pty Limited v Adelaide Bank Limited

Court of Appeal (NSW)|2011-07-27|Before: Bathurst CJ, Allsop P, Simpson J

Judgment 1BATHURST CJ: The effect of the orders made by the Court in these proceedings was that the first appellant ("Property Builders") was unsuccessful in its appeal from the judgment of the primary judge whilst the second appellant ("Mr Phontos") was successful in his appeal from the judgment against him in favour of the first respondent ("Adelaide Bank"). 2In these circumstances the Court directed the parties to file written submissions on the question of costs.

The appellant s' submissions 3The appellants submitted that Property Builders should pay the costs of Adelaide Bank on appeal, less the amount of costs included in the money judgment obtained by the first respondent and the orders of the Court of Appeal. It is not clear what submissions the appellants make in respect of Adelaide Bank's costs at first instance. 4The appellants further submitted that each respondent pay the costs of Mr Phontos of the appeal and the proceedings in the court below. 5In addition, Property Builders submitted it should have its costs of both the proceedings at first instance and on appeal from the second and third respondents. This is apparently on the basis that it was necessary to defend the claims of those parties as well as the claim of Adelaide Bank. So far as the appeal was concerned, this submission was made notwithstanding the acknowledgement in the written submissions of the appellants that the only interest the second and third respondents had on the appeal was on the question of costs.

The respondents ' submissions 6The respondents submit that there should be no order as to the costs of the second and third respondents in the court below but the second and third respondents should have their costs of the appeal. This was on the basis that no order was sought against those respondents in the appeal. 7Adelaide Bank submitted that as the successful party both in the court below and on appeal, it should have its costs against the first appellant. 8So far as Mr Phontos was concerned, the respondents contend that either there should be no order as to costs or that the second appellant's costs should be paid by Property Builders. The bases of these submissions were, first, that the great bulk of time was spent litigating the claim by Adelaide Bank against Property Builders, second, that Mr Phontos was the alter ego of Property Builders (respondent's submissions on costs at [28]), third, that Mr Phontos has had the benefit of a costs order on the adjournment of the appeal on 27 July 2011 which would exceed the quantum of costs actually incurred and, fourth, the fact that there was common representation. 9The respondents made the following alternative submissions: "Alternatively, any order for costs in favour of the 2 nd Appellant ought to be subject to a set off, whereby the costs of the 2 nd Appellant found to be payable by the 1 st Respondent themselves should be payable only to the extent that, upon set off, such costs exceed the costs of the appeal to be paid by the Appellants to the 2 nd & 3 rd Respondents." The basis for these alternative submissions was not made clear and there does not seem to be any justification for such an order.

Consideration 10Section 98(1) of the Civil Procedure Act 2005 provides: "(1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid ..." 11Part 42 r 42.1 of the Uniform Civil Procedure Rules 2005 ("UCPR") provides: "Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs." 12In Ohn v Walton (1995) 36 NSWLR 77 Gleeson CJ said: "The usual rationale of making a costs order is that it is just and reasonable that the successful party should be reimbursed for costs incurred, in the absence of grounds connected with the charge or conduct of the proceedings which make it unjust or unreasonable that there should be such reimbursement." (at [79]) 13It is in that context that the respective claims of the parties fall to be considered.

The costs of Adelaide Bank 14Adelaide Bank was successful against Property Builders both at first instance and in this Court. In those circumstances, prima facie, it should be entitled to its costs both at first instance and in the Court of Appeal. This does not appear to be contested by Property Builders. However, it submits that because the amounts recovered by Adelaide Bank in the exercise of its rights under the mortgage included costs of the second and third respondents, the quantum of costs payable to Adelaide Bank should be reduced by that amount. 15This submission seeks to reagitate the matters dealt with in pars [42]-[46] of my judgment of 15 September 2011, with which Allsop P and Sackville AJA agreed. Having regard to what was said in that judgment there is no basis for the set off asserted. 16It follows that Property Builders should be ordered to pay the costs of Adelaide Bank, both of the trial and the appeal.

The costs of the second respondent, Mr Phontos 17Mr Phontos was entirely successful on the appeal. Prima facie in those circumstances, Adelaide Bank should pay his costs both of the trial and the appeal. 18None of the reasons referred to in the submissions of Adelaide Bank justify a conclusion to the contrary. If the greater amount of time was spent on the claim against Property Builders, this will be reflected in the assessment of any costs. The fact that Mr Phontos was the alter ego of Property Builders (if this in fact be the case) does not mean he should not have his costs in circumstances where he was successful in resisting the claim under the guarantee. The fact that there was common representation will again be reflected in the assessment of costs. Finally, the fact that there was an earlier costs order in favour of Mr Phontos will not affect the total amount of costs recovered by him. 19In these circumstances, Adelaide Bank should be ordered to pay the costs of Mr Phontos both at first instance and on appeal.

The costs of the second and third respondents 20The primary judge made no order as to the costs of the second and third respondents. In my opinion, there was no error of discretion in her not doing so. The reason they were joined was presumably to avoid the consequences set out in the submissions referred to in pars [32], [39] and [40] of my judgment of 15 September 2011, each of which submissions were held to be incorrect. Their joinder does not appear to me to have added any further costs to the proceedings, nor in any way prolonged the trial. In those circumstances, the learned primary judge did not err in the exercise of her discretion in declining to make any order in respect of those respondents' costs. 21So far as the appeal is concerned, the second and third respondents as parties to the proceedings in the court below were properly joined to the appeal. As the appellants point out in their submission, it was clarified on the first day of the hearing of the appeal that the only issue so far as they were concerned was the question of costs. No submissions were addressed on this issue during the course of the appeal. 22It follows in those circumstances that, in my view, there should be no order in respect of the second and third respondents' costs of the appeal. 23It follows that the orders as to costs I would make are: (1) In respect to the proceedings brought by Adelaide Bank against Property Builders, Property Builders pay the costs of Adelaide Bank both at first instance and on appeal. (2) In respect to the proceedings brought by Adelaide Bank against Mr Phontos, Adelaide Bank pay Mr Phontos' costs of the proceedings at first instance and on appeal. 24ALLSOP P: I agree with the Chief Justice. 25SACKVILLE AJA: I agree with Bathurst CJ.

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