Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd

Seymour Whyte Constructions Pty Ltd v Ostwald Bros Pty Ltd - [2019] NSWCA 64 - NSWCA 2018 case summary — Zoe

Judgment

THE COURT: The Court delivered judgment in this matter on 12 February 2019. [1] The Court reached the following conclusions: [2] "1. The primary Judge erred in making an order for rectification of the Contract. 2. The Adjudication Application was not made within the period specified in s 17(3)(d) of the Security of Payment Act and was therefore invalid. 3. Ostwald was entitled to institute proceedings against Seymour pursuant to s 16(2)(a)(i) of the Security of Payment Act seeking to recover the unpaid portion of the Scheduled Amount as a debt. 4. The fact that Ostwald's liquidation was deemed to have commenced before it filed its cross-claim seeking judgment against Seymour does not prevent it pursuing that claim to judgment."
The Court made the following orders: [3] "1. Direct the parties to file agreed short minutes of order within fourteen days giving effect to these reasons for judgment and dealing with the costs of the proceedings in this Court and the Equity Division. 2. To the extent that there is disagreement as to the proposed short minutes of order or costs, direct Seymour to file and serve its proposed short minutes of order (including on costs), together with written submissions in support (not to exceed five pages) within fourteen days. 3. Ostwald to file and serve its proposed short minutes of order (including on costs), together with written submissions in support (not exceeding five pages) within a further fourteen days."
The parties have largely agreed on short minutes of order, except in relation to costs. The only disagreement (other than costs) is whether the appeal and cross-appeal should be "allowed" or "allowed in part". Although nothing of substance turns on the difference in wording, the latter formulation is more appropriate.
Thus the following orders should be made:
Appeal allowed in part.
Cross-appeal allowed in part.
Set aside orders 5, 6, 7, 8 and 10 of the orders made on 2 May 2018, and in lieu thereof make the following orders: (a) an order in the nature of certiorari issue quashing the determination of the Second Defendant dated 1 November 2017; (b) there be judgment, pursuant to s 16(2)(a)(i) of the Building and Construction Industry Security of Payment Act 1999 (NSW), for Ostwald Bros Pty Ltd (in liq) (Ostwald) against Seymour Whyte Constructions Pty Ltd (Seymour) in an amount of $2,505,237.58 plus interest, at the rates prescribed under section 101 of the Civil Procedure Act 2005 (NSW) on and from 19 August 2017 until the date of these orders. The Court notes the undertaking given by Ostwald not to take steps for the enforcement of any judgment which this Court may make or sought in the Amended Cross-Appeal, without first giving 14 days' notice to Seymour.

[4]

Submissions

Seymour submits that it should be entitled to 75 per cent of its costs, on an ordinary basis, of the proceedings both in the Equity Division and in this Court. Seymour says that it succeeded in this Court in having an adjudication determination against it of $5,074,218.27 set aside and replaced with a judgment in Ostwald's favour of $2,505,237.58 (Scheduled Amount). Seymour submits that it should receive the bulk of its costs in the Equity Division proceedings because it succeeded in obtaining its primary relief, namely the setting aside of the Adjudication Determination.
Seymour criticises Ostwald's conduct of the proceedings in certain respects. It says that Ostwald waited until the hearing of the appeal to tender fresh evidence which resulted in Seymour withdrawing a ground based on s 109 of the Constitution. [4] Seymour also says that Ostwald unsuccessfully opposed the grant of leave to Seymour to commence the appeal.
Ostwald seeks an order that Seymour pay 80 per cent of Ostwald's costs of the appeal and cross-appeal. Ostwald points out that Seymour's only success on the appeal was in setting aside the order for rectification of the Contract. Ostwald also points out that this Court rejected Seymour's challenge to Ostwald's entitlement to a judgment in its favour for the Scheduled Amount, and also rejected Seymour's staunch defence (maintained until the hearing itself) of the decision in Façade Treatment Engineering Pty Ltd (in liq) v Brookfield Multiplex Constructions Pty Ltd (Façade). [5]
Ostwald contends that Seymour had, or should have had, the relevant information available to it well before the hearing in this Court, making it clear that its arguments regarding s 553C of the Corporations Act 2001 (Cth) and on the constitutional point "were doomed". Moreover Ostwald says that a grant of leave to commence and continue the appeal was an essential precondition to Seymour's appeal proceedings. It notes that Seymour did not seek costs at the hearing, at which leave to proceed against Ostwald was granted.
Ostwald agrees with Seymour that the costs of the proceedings in the Equity Division should follow the event, but asserts that the relevant "event" was a multi-million judgment in Ostwald's favour.

[5]

Reasoning

As was noted in the Principal Judgment, there were numerous twists and turns in the argument on appeal. [6] To some extent, similar twists and turns were evident in the Equity Division proceedings.
The ultimate result of the proceedings is that:

Ostwald has failed in its cross-claim seeking rectification of the Contract, and accordingly Seymour has succeeded in setting aside the Adjudication Determination; [7]
Ostwald has been held entitled to obtain judgment against Seymour for the unpaid Scheduled Amount; [8]
Ostwald has been held to be entitled to the benefit of the Security of Payment Act, notwithstanding that it is in liquidation; [9] and
Ostwald has given an undertaking not to take steps to enforce the judgment for the Scheduled Amount without first giving Seymour 14 days' notice. [10]

Each party has enjoyed some success and experienced some failures in the litigation. Our assessment is that Ostwald, since it has obtained the benefit of a judgment in its favour (albeit one that cannot be immediately enforced), has achieved somewhat greater success than Seymour, notwithstanding the dismissal of Ostwald's cross-claim seeking rectification. Justice will be done if Seymour is ordered to pay 25 per cent of Ostwald's costs of the proceedings in the Equity Division. It will be simpler and less likely to generate further disputation if a single order for costs is made, rather than separate orders in relation to the costs of Seymour's claim and Ostwald's cross-claim.
On the appeal:

Ostwald unsuccessfully supported the primary Judge's conclusion that the Contract should be rectified;
Seymour therefore succeeded in setting aside the Adjudication Determination;
Ostwald succeeded in upholding the primary Judge's decision that it was entitled to enter judgment against Seymour for the Scheduled Amount;
Ostwald succeeded in upholding the primary Judge's refusal to follow the decision of the Victorian Court of Appeal in Façade, and thus established that it was entitled to enter a judgment for the Scheduled Amount, notwithstanding that it had gone into liquidation;
Seymour belatedly abandoned its arguments based on s 109 of the Constitution; and
Ostwald accepted that it should give an undertaking in the terms recorded above.

Just as Ostwald has enjoyed rather more success than Seymour in the proceedings as a whole, it also enjoyed rather more success than Seymour on the appeal, suggesting that Ostwald should have the benefit of an order for payment of at least some of its costs on the appeal.
We do not accept Seymour's submission that Ostwald should bear responsibility for Seymour's belated decision to abandon its constitutional argument as Seymour had sufficient information available to assess the merits of the argument before the hearing commenced. The constitutional issue required a good deal of preparation on both sides prior to the hearing, and thus contributed significantly to the costs of the appeal. Moreover, Ostwald's approach to Seymour's application for leave to proceed was not unreasonable. In the absence of any order for costs in favour of Seymour at the time leave was granted, Ostwald should not be deprived of any costs to which it otherwise is entitled by reason of the application for leave.
In these circumstances, Seymour should be ordered to pay one third of Ostwald's costs of the appeal.

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