Sandpiper Developments Pty Ltd v Main Beach Developments QLD Pty Ltd & Ors

2 Following the hearing of submissions concerning the costs summons on 18 July 2024 I published a ruling[1] and made orders on 13 August 2024. I ordered that Sandpiper and Mr Priest pay the costs of the defendants' dismissal summons filed 8 May 2023 ('dismissal summons') on an indemnity basis. I also ordered that the defendants' costs of and incidental the proceeding be paid by Sandpiper on the standard basis.

3 The remaining issue relates to the costs of the defendants and the non‑parties of the costs summons which were reserved.

4 The relevant principles as to costs are well known. The court has a broad discretionary power to make orders as to costs.[2] The court's discretion is unfettered but is exercised judicially upon facts connected with the litigation and not by reference to irrelevant or extraneous considerations.[3] Although costs are in the discretion of the court the ordinary rule is that, in the absence of sound reasons to the contrary, a successful litigant should receive his or her costs.[4] The purpose of an order for costs is to compensate the successful party and not to punish the unsuccessful party.[5]

5 In the present case, there are four main matters to be considered in the exercise of the discretion as to costs. They are:

(a) the extent to which the parties were successful on the costs summons;

(b) the effect of the defendants' Calderbank offer of 23 March 2023;

(c) the effect of the breach by Sandpiper and Mr Priest of their overarching obligations under ss 20 and 25 of the CP Act to co-operate in the conduct of the proceeding, and to use reasonable endeavours to act promptly and avoid delay; and

(d) the matters raised by the defendants in their reply submissions filed 27 August 2024 ('reply submissions').

6 In their written submissions filed 20 August 2024, the non‑parties referred to authority dealing with proceedings where a plaintiff is partially successful and partially unsuccessful. They referred to McFadzean v Construction Forestry Mining & Energy Union,[6] where the Court of Appeal adopted a passage from Pricom Pty Ltd v Sgarioto[7] and said:

As a general rule costs should follow the event, and a successful party should obtain all of the costs of the action even although it failed to establish some of the alternative heads of its claim: ... However, in the exercise of its discretion the court may decline to order costs in favour of a successful party, or may order the successful party to pay the costs of the unsuccessful party, where the plaintiff failed to establish discrete heads of claim, or failed to establish issues which it pursued in its claim, although ultimately succeeding on the basis of another discrete head of claim: ...

7 Similar observations were made in Thurin v Krongold Constructions Pty Ltd (No 2), where the Court of Appeal said:

Pursuant to s 24(1) of the Supreme Court Act 1986, the Court has a broad costs discretion. In exercising its discretion, the Court is entitled to look to the realities of the litigation and it will attempt to do 'substantial justice' between the parties. Accordingly, while the general position is that costs should follow the event, such an order may not be appropriate in every case. In particular, where there is a multiplicity of issues, and mixed success has been enjoyed by the parties, the Court may take a pragmatic approach in framing the order for costs, taking into consideration the success (or lack of success) of the parties on an issues basis. [8]

8 The non-parties' submissions referred to the decision of Robson J in GT Corporation Pty Ltd v Amare Safety Pty Ltd (No 3), where his Honour adopted the following passage from Ruddock v Vadarlis (No 2):[9]

Within the general discretion of the courts to award costs it is accepted by decisions in both Australian and English jurisdictions that:

• Ordinarily costs follow the event and a successful litigant receives costs in the absence of special circumstances justifying some other order.
• Where a litigant has succeeded only upon a portion of the claim, the circumstances may make it reasonable that the litigant bear the expense of litigating that portion upon which he or she has failed.
• A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other parties' costs of them. In this sense 'issue' does not mean a precise issue in the technical pleading sense but any disputed question of fact or law.[10]

9 As the defendants submitted, these authorities are principally relevant in the award of costs following a contested trial. Nonetheless, they have application by analogy to an interlocutory application brought by summons.

10 The non-parties submitted that they substantially succeeded as to the costs summons and ought to receive 75% of their costs. They submitted that the defendants ultimately succeeded in respect of only one of the four main arguments on which they relied. The defendants did not succeed in their arguments that:

(a) Sandpiper's proceeding lacked merit from the outset;

(b) Mr Priest misled the court about the extent of Sandpiper's acquisition of units in the complex; or

(c) Sandpiper was insolvent from the commencement of the proceeding.

11 The non-parties submitted that the argument as to the conduct of Sandpiper during the second period described in the ruling occupied somewhere between 5% and 22% of the total arguments, and that the costs order should reflect this.

12 On 23 March 2023, the defendants served a Calderbank offer. The Calderbank offer has previously been the subject of submissions by the parties and is discussed at some length in the ruling.[11] The Calderbank offer proposed an order that Sandpiper pay 80% of the defendants' standard costs. The offer was a very reasonable offer given that Sandpiper had decided not to prosecute the proceeding with the result that the defendants were the successful parties in the litigation and were entitled to an order for the costs of the proceeding on the standard basis. Acceptance of the offer would have ended the proceeding.

13 Mr Priest, the first non-party, and the sole director of Sandpiper, caused Sandpiper to fail to accept the Calderbank offer and end the proceeding. If he had caused Sandpiper to accept the Calderbank offer, the position would have been:

(a) Sandpiper would have secured a 20% discount from a standard costs order against it for the costs of the proceeding instead of a standard costs order against it without discount for the first period and an indemnity costs order against it for the second period which was its ultimate position;

(b) there would have been no indemnity costs order against Mr Priest;

(c) the non-parties would not have incurred any costs at all; and

(d) the defendants would not have incurred any costs after 23 March 2023.

14 In the event, the non-parties sustained a significantly worse outcome and much greater expenditure of costs than they would have sustained had Mr Priest caused Sandpiper to accept the Calderbank offer.

15 The principal reason why the non-parties incurred costs on the costs summons is because Mr Priest chose not to direct Sandpiper to accept the Calderbank offer. Instead he chose to take no action thereby requiring the defendants to bring the costs summons to recover their costs following the dismissal of the proceeding on 14 July 2023.

16 The failure to accept the Calderbank offer and the decision to put Sandpiper into administration immediately before the hearing of the dismissal summons inevitably caused the defendants to pursue the non-parties to seek recompense for the costs that they had incurred in the proceeding. To a significant degree the non-parties have only themselves to blame for the costs incurred subsequent to the expiration of the Calderbank offer. Acceptance of the Calderbank offer would have ended the litigation 17 months ago and saved all parties a considerable amount of costs.

Breach of overarching obligations under the CP Act by Sandpiper and Mr Priest

17 In the ruling I held that Mr Priest was the real party to the litigation during the second period from 5 March 2023 until the proceeding was dismissed on 14 July 2023. During this period he directed and authorised Sandpiper to act in the manner in which it did. Both Sandpiper and Mr Priest acted in breach of their overarching obligations in Part 2.3 of the CP Act by failing:

(a) to cooperate with the defendants and the Court in the conduct of the proceeding (s 20); and

(b) to use reasonable endeavours to act promptly and minimise delay (s 25).[12]

18 Breaches of the overarching obligations set out in the CP Act are serious matters and ought be taken into account and given weight in the exercise of the Court's discretion as to costs.

(a) the Court held in the ruling that Mr Priest was the real party to the proceeding during the second period;[13]

(b) Sandpiper was owned and controlled by the non-parties;[14]

(c) on 13 February 2024 Sandpiper's current solicitors, Hall & Wilcox, filed a notice of change of practitioners advising that they were now acting on behalf of Sandpiper;

(d) the same solicitors acted for the non‑parties in respect of the costs summons, filing written submissions on 12 April 2024;

(e) on the return of the costs summons on 18 July 2024, counsel announced that they were appearing only for the non-parties and did not anticipate an appearance for Sandpiper. This was although their instructing solicitors were the solicitors on the record for Sandpiper;

(f) there had been no previous advice to the defendants or the Court that there would be no appearance for Sandpiper on the return of the costs summons;

(g) Mr Priest made a tactical decision not to have Sandpiper appear although its lawyers were in court;

(h) this was disrespectful conduct by Mr Priest;

(i) the defendants expected Sandpiper to appear; and

(j) Sandpiper did not advise the defendants or the Court before the hearing that it did not intend to oppose the making of a costs order against it. Rather, it stood mute and as a result the defendants needed to make an application for costs and appear to obtain orders against it.

20 In my view, this submission has some substance. The incurrence of the costs by the defendants in proceeding against Sandpiper could have been reduced or avoided. I again note that s 20 of the CP Act provides that it is an overarching obligation for parties to cooperate with each other and the Court in the conduct of the proceeding.

21 As the defendants submitted, it would have been good practice for Sandpiper's solicitors to have informed the Court and the defendants as early as possible that they did not intend to appear before the Court on the return of the costs summons or oppose an order for costs against Sandpiper, even though they would be present at the hearing. This is despite any perceived tactical benefit of keeping the defendants ignorant of Sandpiper's real position until the last possible moment.

22 No explanation has since been advanced as to what occurred and why Sandpiper did not appear although it was a party to the summons and its solicitors on the record were present in court.

23 I am of the view that the matters raised by the defendants in their reply submissions should be taken into account and are entitled to some weight in determining the costs order to be made.

24 The defendants were unsuccessful in their claim for indemnity costs against the second and third non-parties. The second and third non-parties are holding companies of Sandpiper and are also under the direction of Mr Priest as their sole director and sole ultimate shareholder.

25 The second and third non-parties did not file any affidavits or separate submissions. They enjoyed common representation and relied on the same submissions as Mr Priest. There is no sign that they incurred any costs in their own right.

26 In exercising the broad discretion as to costs, I have endeavoured to give appropriate weight to the result of the proceeding; to the matters raised in the submissions of the parties and to the general circumstances of the case.

27 Doing the best that I can, it seems to me that the weight to the opposing considerations is about even. The main consideration favouring the non-parties is negated by the considerations favouring the defendants.

28 In my view, it is fair and just that there should be no order as to the costs of the summons as between the defendants and the non-parties. The defendants indicated that they would accept such an outcome which is also fair and reasonable to the non-parties for the reasons that I have given. Such a result will also contain taxation costs, at least to some extent.

29 I will order that there be no order as to the costs of the costs summons as between the defendants and the non-parties.

MAIN BEACH DEVELOPMENTS QLD PTY LTD (ACN 653 389 201)

PPA REALTY INVESTMENTS PTY LTD (ACN 150 701 652)

[1] Sandpiper Developments Pty Ltd v Main Beach Developments Qld Pty Ltd [2024] VSC 469 ('ruling').

[2] Supreme Court Act 1986 (Vic) s 24(1); Civil Procedure Act 2010 (Vic) s 65C; Supreme Court (General Civil Procedure) Rules 2015 (Vic) O 63.

[3] Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534, 537 (Dawson J) ('_Latoudi_s'); Oshlack v Richmond River Council (1998) 193 CLR 86 (Gaudron and Gummow JJ).

[4] _Milne v Attorney-General for the State of Tasma_nia [1956] HCA 48; 95 CLR 460, 477 (Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ).

[5] Latoudis (n 3), 562-563 (Toohey J), 567 (McHugh J).

[6] [2007] VSCA 289, [152] (Warren CJ, Nettle J and Redlich JJ) (citations omitted).

[7] (Unreported, Supreme Court of Victoria, Eames J, 10 April 1995)

[8] [2022] VSCA 252, [12] (McLeish, Niall, and Walker JJA) (citations omitted).

[9] (2001) 115 FCR 229, 234-235, [11] (Black CJ and French J).

[10] [2008] VSC 296, [43], [46].

[12] Ibid [38]-[40], [79]-[80].