Speets Investment Pty Ltd v Bencol Pty Ltd

SUPREME COURT OF QUEENSLAND

CITATION: Speets Investment Pty Ltd v Bencol Pty Ltd (No 2) [2021] QCA 39

PARTIES: SPEETS INVESTMENT PTY LTD / ACN 607 713 164 / (appellant) / v / BENCOL PTY LTD / ACN 010 066 681 / (respondent)

FILE NO/S: Appeal No 10496 of 2019 / DC No 242 of 2016

DIVISION: Court of Appeal

PROCEEDING: General Civil Appeal – Further Orders

ORIGINATING COURT: District Court at Townsville (Coker DCJ) – Unreported, 29 August 2019

DELIVERED ON: 9 March 2021

DELIVERED AT: Brisbane

HEARING DATE: Heard on the papers

JUDGES: Sofronoff P and Bond and Callaghan JJ

ORDER: It is declared that the appellant is liable under clause 7.2 of the lease to replace the Motel’s shower system (excluding shower screens) in rooms 1 to 8 and 10 to 30.The respondent must pay 60 per cent of the appellant’s costs of the appeal, to be assessed on the standard basis.The costs order made at trial by the primary judge should be set aside and in lieu thereof it should be ordered that there should be no order as to the costs of the proceeding in the District Court.

CATCHWORDS: EQUITY – EQUITABLE REMEDIES – OTHER REMEDIES – where the parties provided further submissions regarding the appellant’s responsibility for the shower system defects – where it was common ground between the parties that the Court should declare that the appellant is so liable under clause 7.2 of the lease – where the respondent also sought declarations concerning the quality of the appellant’s actions in discharging its liability and the time in which the work ought be carried out / PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – GENERAL RULE: COSTS FOLLOW THE EVENT – PARTIAL SUCCESS – where the parties provided further submissions on the issue of costs – where the appellant succeeded in setting aside all the orders made against its interests in relation to the defects at trial – where the respondent succeeded on the question of liability for a particular defect – whether the general rule that costs should follow the outcome of the appeal should apply – whether, in light of the successful appeal, there should be an order as to the costs of the trial – where the appellant submitted that its success on appeal added to its success at trial – where the respondent contended for an issues-based costs order / Uniform Civil Procedure Rules 1999 (Qld), r 681, r 766(1)(d) / Allianz Australia Insurance Ltd v Swainson [2011] QCA 179, cited / BHP Coal Pty Ltd v O & K Orenstein & Koppel AG (No 2) [2009] QSC 64, cited / Chief Executive, Department of Transport and Main Roads v Cidneo Pty Ltd [2015] QCA 168, cited / Courtney v Chalfen [2021] QCA 25, approved / Interchase Corporation Limited (in liq) v Grosvenor Hill (Queensland) Pty Ltd (No 3) [2003] 1 Qd R 26; [2001] QCA 191, cited / Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11, applied / Sequel Drill & Blast Pty Ltd v Whitsunday Crushers Pty Ltd (No 2) [2009] QCA 239, cited / Thiess v TCN Channel 9 Pty Limited (No 5) [1994] 1 Qd R 156; [1992] QSCFC 4, cited / Wollongong Coal Ltd v Gujarat NRE India Pty Ltd (No 2) [2019] NSWCA 173, approved

COUNSEL: P A Travis for the appellant / J A Griffin QC for the respondent

SOLICITORS: Carroll Legal & Compliance for the appellant / Guides & Elliott for the respondent

1. SOFRONOFF P: I agree with the reasons of Bond J and with the orders proposed.

2. BOND J: Speets Investment Pty Ltd v Bencol Pty Ltd [2020] QCA 247 (the first decision) dealt with an appeal from orders made by a judge of the District Court in relation to a dispute between the appellant (who was the landlord) and the respondent (who was the tenant) as to which of them was responsible for certain repair works to leased motel premises. In the District Court each party advanced its own positive case (the respondent by claim and the appellant by counterclaim) and claimed relief allegedly founded in the terms of the lease between them. I identified the nature of the relief sought by the pleadings in the first decision at [5] to [8].

3. The parties did not litigate at trial the issues as joined on the pleadings between them. Instead they took a course which was trenchantly criticised by this Court. In the first decision, see my reasons for judgment at [9] to [14] and the reasons for judgment of Callaghan J at [94] to [96]. The President agreed with both Callaghan J and me. For present purposes it suffices to quote the summary I previously expressed:

“The position may be summarised in this way: the parties by their conduct invited the primary judge to exercise only an ill-defined part of his jurisdiction to hear and determine the proceeding at trial, to do so in an inappropriate way, and to do so by leaving other matters to be dealt with by some sort of extrajudicial arrangement between them which involved an independent expert, but about which he was not to be concerned.”

4. In the first decision, the Court set aside most of the operative orders made by the primary judge and made certain declarations as to responsibility of the respondent under the lease. Two questions only were left unresolved, namely the form of the declaration which should be made in relation to the shower system defects and the question of costs. To that end, the Court directed the parties -(a)to bring in agreed minutes of order declaring the appellant’s responsibility for the shower system in terms consistent with the Court’s reasons and to file further submissions on that question in the event that no agreement could be reached; and(b)to file submissions as to the orders which should be made in relation to costs.

5. I address those two subject matters under separate headings below.

The form of order in relation to the shower system

6. The parties were not able to reach agreement on minutes of order and, accordingly, filed further written submissions.

7. Having regard to the written submissions, it was common ground that in order to reflect the Court’s reasons in relation to the shower systems the Court should declare that the appellant is liable under clause 7.2 of the lease to replace the Motel’s shower system (excluding shower screens) in rooms 1 to 8 and 10 to 30.

8. Accordingly, that declaration should be made.

9. The respondent’s written submissions, however, also sought to have the Court make declarations addressing both the quality of what the appellant should do in order to discharge its liability so declared, and the time within which the appellant should carry out that work. The respondent submitted that “if necessary” this Court should state that the District Court should specify the rate of replacement. The respondent submitted that “each of the parties should have liberty to apply to the District Court on three days’ notice in relation to any orders or matters not inconsistent with the declarations” which they sought.

10. Those submissions should be rejected. They go beyond the scope of the permitted further submissions and are, in any event, inconsistent with the way in which the respondent pursued its case at trial and in this Court. It may be that the nature of the parties’ contractual obligations as to the quality of any work they were required to perform and the time within which they were required to perform it could have been properly litigated below, but it was not. The respondent cannot seek to do so now.

Costs

Relevant principles

11. The applicable general rule is that costs of a proceeding are in the discretion of the Court but follow the event unless the court orders otherwise: r 681 Uniform Civil Procedure Rules 1999 (Qld). The rule which specifically relates to appeals is r 766(1)(d). It provides that the Court may make the order as to the whole or part of the costs of an appeal it considers appropriate. However that rule is not regarded as altering the general rule: see Sequel Drill & Blast Pty Ltd v Whitsunday Crushers Pty Ltd (No 2) [2009] QCA 239 at [3]–[4] and Allianz Australia Insurance Ltd v Swainson [2011] QCA 179 at [5].

12. The policy considerations which underly both rules are those McHugh J explained in Oshlack v Richmond River Council (1998) 193 CLR 72 at 97 [67]-[68], namely:

“… the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is granted in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.

As a matter of policy, one beneficial by-product of this compensatory purpose may well be to instil in a party contemplating commencing, or defending, litigation a sober realisation of the potential financial expense involved. Large scale disregard of the principle of the usual order as to costs would inevitably lead to an increase in litigation with an increased, and often unnecessary, burden on the scarce resources of the publicly funded system of justice.”

13. The word “event” in the general rule is to be approached distributively with the consequence that it refers to the event of an issue or of each separate issue, if there is more than one, in the proceeding: Thiess v TCN Channel 9 Pty Limited (No 5) [1994] 1 Qd R 156 at 207–8; Interchase Corporation Limited (in liq) v Grosvenor Hill (Queensland) Pty Ltd (No 3) [2003] 1 Qd R 26 at 60-1 [82]–[84]; Sequel Drill & Blast Pty Ltd v Whitsunday Crushers Pty Ltd (No 2) at [3]–[7]; Allianz Australia Insurance Ltd v Swainson at [4]–[5].

14. It is important to recognise, however, that it does not follow from the foregoing that the application of the general rule should usually lead to costs orders which reflect different results on separate events or issues. The Court is given a broad discretion and is specifically empowered to determine that some other order is more appropriate.

15. In practice, courts often take the approach of identifying heads of controversy or “units of litigation” (rather than what might technically be regarded as issues on the pleadings) regarding success or failure on the head of controversy or unit of litigation as the criterion for awarding costs: see Thiess v TCN Channel 9 Pty Limited (No 5) at 207-8 and Chief Executive, Department of Transport and Main Roads v Cidneo Pty Ltd [2015] QCA 168 at [1].

16. The general approach is that there must be special or exceptional circumstances to warrant depriving a successful party of its costs and the mere fact that the successful party has been unsuccessful on some issues will ordinarily not be sufficient to do so: Courtney v Chalfen [2021] QCA 25 at [5]. On an appeal, for example, where a party has succeeded on one of two ways to the same outcome, the Court of Appeal might well regard the costs of the second way on which that party failed as not so distinct conceptually or practically as to warrant making a costs order which reflected that party’s failure: Chief Executive, Department of Transport and Main Roads v Cidneo Pty Ltd at [1]. On the other hand, one circumstance in which it might be appropriate to award costs of a particular question or part of a proceeding is where that matter is definable and severable and has occupied a significant part of the proceeding: see Courtney v Chalfen, in which the Court of Appeal referred with approval to the decision of McMurdo J (as his Honour then was) in BHP Coal Pty Ltd v O & K Orenstein & Koppel AG (No 2) [2009] QSC 64 at [8].

17. Of course, it does not follow that an issues-based costs order should always be made in circumstances analogous to those described by McMurdo J in BHP Coal Pty Ltd v O & K Orenstein & Koppel AG (No 2). Where there are multiple issues which are determined in different directions as between the parties, a court might form an overall impression having regard to the significance of the issues, the way they were determined, and the amount of time and cost spent on them, and order one party to pay a proportion of another party’s costs as a way to reflect fairly the parties’ comparative success or failure in the outcome which was obtained. Courts often prefer to avoid the complicated form of costs assessment that would follow if different issues are determined in different directions as between the parties and costs were to be awarded in respect of issues. In this regard, in [2019] NSWCA 173, the New South Wales Court of Appeal observed at [9] where taking such an approach might result in a protracted assessment process:

“… It is more efficient, and fairer, for the court simply to net-off [orders for issues in different directions as between the parties], which it is entitled to do (see Day v Humphrey [2018] QCA 321 at [13] per the court). Such an assessment will, undoubtedly be ‘rough and ready’ (Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107 at [5]), and that is entirely permissible.”

Discussion

The submissions

18. At the trial and on the appeal, argument was presented in relation to particular items of alleged defect. The extent of success which each party had at trial and on appeal in relation to each item is identified in annexure 1 to these reasons. As is there apparent, on appeal the appellant has succeeded in setting aside all the orders which were made against its interests below in relation to the defects that were the subject of the trial. The respondent has succeeded on the question of liability for the shower systems, albeit by obtaining only a declaration rather than the ill-conceived orders which it sought below.

19. The appellant submitted that the proper response to the degree of success on either side on appeal was that the respondent should be ordered to pay 80 per cent of the appellant’s costs of the appeal, to be assessed on the standard basis. It also submitted that, having regard to the fact that the success on appeal added to its partial success at trial, the order which should be made in relation to trial costs was that the respondent pay 80 per cent of the appellant’s costs of the proceeding below, to be assessed on the standard basis.

20. The respondent submitted that proportionately more time was taken at trial and on appeal in relation to the shower systems issue than in relation to the other issues on the case. Ultimately the respondent seemed to support an issues-based costs order both in relation to the costs of the proceeding below and the costs of the appeal. It proposed:

“The appellant will pay the respondent’s costs of and incidental to the District Court proceedings and the Court of Appeal proceedings, such costs to include the costs of the issues relating to the independent expert, subject to the respondent paying to the appellant the costs of the issues on the following matters, both in relation to the District Court proceedings and Court of Appeal proceedings:

(a) Cold room

(b) Pipe columns

(c) Window seals and grills”.

As to the costs of the appeal

21. It is most undesirable in the circumstances of this case that there be an issues-based costs order in relation to the appeal.

22. I agree with the appellant that, in principle, this is a proper occasion for the application of the approach referred to at [17] above. The appellant has been the successful party. It should be compensated for having had to appeal in order to obtain the success that it had. It would also be appropriate to reduce the proportion of its costs which the respondent has to pay, in order to reflect the degree of success had by the respondent.

23. Having regard to the course of argument and hearing on appeal, a 20 per cent reduction is insufficient. I would order the respondent to pay 60 per cent of the appellant’s costs of the appeal, to be assessed on the standard basis.

As to the costs of the proceeding below

24. At trial, the primary judge made a costs order in these terms:

“That the [appellant] pay the [respondent’s] costs of and incidental to the proceedings as agreed between the parties, and, failing agreement, as may be assessed at 80 per cent of costs assessed on a standard basis.”

25. In light of the outcome of the appeal, the primary judge’s costs order cannot stand.

26. The respondent submitted that the case (that is the proceeding which involved a claim and a counterclaim) was “primarily concerned with the shower replacement issues, and may not have proceeded at all had that issue not been the major live issue between the parties.” The respondent sought to supplement this contention by reference to the alleged quantum of the relevant claims. However, although quantum was in issue on the pleadings, quantum was not litigated at trial. This aspect of the respondent’s argument must be rejected. In my view there was no sufficient evidentiary basis to regard the submission that the claim and counterclaim may not have proceeded at all but for the issue on which the respondent succeeded, as anything other than speculative. The respondent’s submission reflects a gross overreach.

27. A significant complicating factor is that both parties agreed on a course of action which blurred the distinction between the claim and the counterclaim, which involved each of them failing to press at trial many aspects of their pleaded claims for relief, and which ultimately caused the trial to miscarry.

28. To the extent that the respondent has now established by declaration that the appellant is liable under clause 7.2 of the lease to replace the Motel’s shower system (excluding shower screens) in rooms 1 to 8 and 10 to 30, the respondent must be regarded to have had partial success relating to part of one of the claims advanced in its statement of claim which it decided to press at trial. On the other hand, to the extent that the appellant added to its success at trial on some other issues, it too must be regarded to have had partial success relating to parts of some of the claims advanced in its counterclaim which it decided to press at trial. Both parties had failures on parts of the other claims which they advanced.

29. It is most undesirable in the circumstances of this case that there be an issues-based costs order in relation to the costs of the District Court proceeding. At first blush, one might imagine that the costs of trial was also a proper occasion for the application of the approach referred to at [17] above. However the appellant’s submission in this regard reflects a gross overreach. The interrelationship between claim and counterclaim below and the way in which the parties redefined the issues at trial by proceeding in the way criticised by the first decision of this Court, make it impossible rationally to justify making an order in that form, whether in relation to the proceeding as a whole or in relation to the claim or the counterclaim separately considered.

30. In all of the circumstances, especially in light of the complicating factor earlier identified and bearing mind the policy considerations identified at [12] above, the appropriate course is that there should be no order as to the costs of the proceeding in the District Court.

Conclusion

31. I would make the following orders:(a)It is declared that the appellant is liable under clause 7.2 of the lease to replace the Motel’s shower system (excluding shower screens) in rooms 1 to 8 and 10 to 30.(b)The respondent must pay 60 per cent of the appellant’s costs of the appeal, to be assessed on the standard basis.(c)The costs order made at trial by the primary judge should be set aside and in lieu thereof it should be ordered that there should be no order as to the costs of the proceeding in the District Court.

32. CALLAGHAN J: I agree with the reasons of Bond J and with the orders proposed by his Honour.

Annexure 1

Defect item Relevant order at trial Party successful at trial Relevant order on appeal Party successful on appeal

(a)Shower system defects (1)That there be a declaration as to the defects identified at the [motel].(a)Structural defects in rooms 1 to 8 and 10 to 30 relating to shower recesses which cause or allow water to leak from the shower stalls into adjoining areas, including bedrooms, adjacent rooms, skirting boards, walls and wall recesses.(2)That there be a declaration as to the party responsible for the works to be performed pursuant to declaration 1 as may be directed by an independent expert.(a)The [appellant] is to be responsible for the costs of works required pursuant to declarations (1)(a), (c), (d) and (f).(3)That there be a declaration that the timeframe for works to be performed pursuant to declarations (1) and (2) as herein as may be directed by an independent expert.(a)Insofar as declaration (1)(a) is concerned, two bathrooms per month, beginning within 30 days of any direction or determination of the independent expert. Respondent Orders 1(a), 2 and 3 are set aside / It is declared that the appellant is liable under clause 7.2 of the lease to replace the Motel’s shower system (excluding shower screens) in rooms 1 to 8 and 10 to 30. The appellant succeeded in having inappropriate orders set aside. / However the respondent obtained a declaration that the appellant was liable to replace the shower system. / There was partial success for each party, although the ultimate form of order favoured the respondent.

(b)Areas surrounding swimming pool and adjacent covered areas. (1)That there be a declaration as to the defects identified at the [motel].(b)Rectification works as required to the surface finish in areas surrounding the swimming pool and adjacent covered areas.(2)That there be a declaration as to the party responsible for the works to be performed pursuant to declaration 1 as may be directed by an independent expert.(b)The [respondent] is responsible for the costs of works required pursuant to declaration (1)(b) and (g).(3)That there be a declaration that the timeframe for works to be performed pursuant to declarations (1) and (2) as herein as may be directed by an independent expert.(b)Insofar as declarations (1)(b), (c), (d), (e), (f) and (g) are concerned, works are to be commenced within two months of direction determination of the independent expert and, unless otherwise agreed in writing, completed within four months of any such determination direction. Appellant Orders 2 and 3 are set aside The appellant succeeded below. The respondent did not cross-appeal. Orders were set aside as a logical consequence of appellant’s success in other areas.

(c)Pipe columns at the front entry to motel (1)That there be a declaration as to the defects identified at the [motel].(c)Rust to the bases of pipe columns at the front entry to the said motel.(2)That there be a declaration as to the party responsible for the works to be performed pursuant to declaration 1 as may be directed by an independent expert.(a)The [appellant] is to be responsible for the costs of works required pursuant to declarations (1)(a), (c), (d) and (f).(3)That there be a declaration that the timeframe for works to be performed pursuant to declarations (1) and (2) as herein as may be directed by an independent expert.(b)Insofar as declarations (1)(b), (c), (d), (e), (f) and (g) are concerned, works are to be commenced within two months of direction determination of the independent expert and, unless otherwise agreed in writing, completed within four months of any such determination direction. Respondent Orders 2 and 3 are set aside / In place of Orders 2 and 3, the Court orders that: Appellant

(d)Boundary fence (1)That there be a declaration as to the defects identified at the [motel].(d)Poor and damaged portions of the boundary fence between the said motel and adjoining property.(2)That there be a declaration as to the party responsible for the works to be performed pursuant to declaration 1 as may be directed by an independent expert.(a)The [appellant] is to be responsible for the costs of works required pursuant to declarations (1)(a), (c), (d) and (f).(3)That there be a declaration that the timeframe for works to be performed pursuant to declarations (1) and (2) as herein as may be directed by an independent expert.(b)Insofar as declarations (1)(b), (c), (d), (e), (f) and (g) are concerned, works are to be commenced within two months of direction determination of the independent expert and, unless otherwise agreed in writing, completed within four months of any such determination direction. Respondent Orders 1(d), 2 and 3 are set aside Appellant.

(e)External windows and frames (e)That there be a declaration as to the defects identified at the [motel].(e)Replacement or repair of the external windows and/or frame.(2)That there be a declaration as to the party responsible for the works to be performed pursuant to declaration 1 as may be directed by an independent expert.(c)The [appellant] is responsible for the costs of works required pursuant to declaration 1(e) should the independent expert direct the removal and replacement of external windows and frames.(d)The [respondent] is responsible for the costs of works required pursuant to declaration (1)(e) should the independent expert direct resealing of the existing external windows and frames.(3)That there be a declaration that the timeframe for works to be performed pursuant to declarations (1) and (2) as herein as may be directed by an independent expert.(b)Insofar as declarations (1)(b), (c), (d), (e), (f) and (g) are concerned, works are to be commenced within two months of direction determination of the independent expert and, unless otherwise agreed in writing, completed within four months of any such determination direction. Each party had some success. / The respondent succeeded in relation to the possible removal and replacement of external windows and frames. / The appellant succeeded in relation to the possible resealing of the existing external windows and frames. Orders 2 and 3 are set aside / In place of Orders 2 and 3, the Court orders that: Appellant

(f)Cold room (1)That there be a declaration as to the defects identified at the [motel].(f)Replacement or repair of the cold room.(2)That there be a declaration as to the party responsible for the works to be performed pursuant to declaration 1 as may be directed by an independent expert.(a)The [appellant] is to be responsible for the costs of works required pursuant to declarations (1)(a), (c), (d) and (f).(3)That there be a declaration that the timeframe for works to be performed pursuant to declarations (1) and (2) as herein as may be directed by an independent expert.(b)Insofar as declarations (1)(b), (c), (d), (e), (f) and (g) are concerned, works are to be commenced within two months of direction determination of the independent expert and, unless otherwise agreed in writing, completed within four months of any such determination direction. Respondent Orders 2 and 3 are set aside / In place of Orders 2 and 3, the Court orders that: Appellant

(g)Dropped undercroft ceiling (1)That there be a declaration as to the defects identified at the [motel].(g)Repairs as necessary to the dropped ceiling in the under-croft over the walkway on the right-hand side of the driveway entrance to the said motel.(2)That there be a declaration as to the party responsible for the works to be performed pursuant to declaration 1 as may be directed by an independent expert.(b)The [respondent] is responsible for the costs of works required pursuant to declaration (1)(b) and (g).(3)That there be a declaration that the timeframe for works to be performed pursuant to declarations (1) and (2) as herein as may be directed by an independent expert.(b)Insofar as declarations (1)(b), (c), (d), (e), (f) and (g) are concerned, works are to be commenced within two months of direction determination of the independent expert and, unless otherwise agreed in writing, completed within four months of any such determination direction. Appellant Orders 2 and 3 are set aside The appellant succeeded below. The respondent did not cross-appeal. Orders were set aside as a logical consequence of appellant’s success in other areas.

(h)Driveway and carpark pavers (1)That there be a declaration as to the defects identified at the [motel].(h)Replacement of loose and cracked pavers constituting part of the driveway and carpark, and defects as may be identified in the substrata underneath the driveway and carpark pavers.(2)That there be a declaration as to the party responsible for the works to be performed pursuant to declaration 1 as may be directed by an independent expert.(e)The [respondent] is responsible for the costs of replacing loosed, loose or cracked pavers constituting part of the driveway and carpark pursuant to declaration (1)(h) as directed by the independent expert.(f)The [appellant] is responsible for the costs of rectification to the substrata of the driveway and carpark pursuant to declaration 1(h) as directed by the independent expert.(3)That there be a declaration that the timeframe for works to be performed pursuant to declarations (1) and (2) as herein as may be directed by an independent expert.(c)Insofar as declaration (1)(h) is concerned, any works required pursuant to a direction determination of the independent expert should be commenced within six months of such determination direction and completed within nine months. Each party had some success. / The respondent succeeded in relation to the possible rectification to the substrata of the driveway and carpark pavers. / The appellant succeeded in relation to the possible replacement of pavers. Orders 1(h), 2 and 3 are set aside Appellant