Solicitors:
Chambers Russell Lawyers (Plaintiff)
Christopher C. Freeman & Co (Defendants)
File Number(s): SC 2016/75863
[2]
Judgment
I delivered judgment in this matter on 28 May 2019: The Owners - Strata Plan 89041 v Galyan Pty Ltd [2019] NSWSC 619.
I shall use the same abbreviations here as in that judgment.
I decided that the Builder should pay the Owners Corporation's costs of the proceedings.
My decision was based on the Heads of Agreement made by the parties on 12 September 2017, and varied on or about 9 February 2018; and in particular cl 19, which provided follows:
"The parties agree that on determination of this matter on the question of costs that neither will raise a [Re Minister for Immigration and Ethnic Affairs; Ex parte] Lai Qin [(1997) 186 CLR 622; [1997] HCA 6] point, the only matter to be determined being that stated by his Honour Justice Hammerschlag in Court on 12 September 2017".
The matter "stated" by Hammerschlag J on 12 September 2017 was:
"My understanding is, so that the transcript is entirely clear, that there will be left open a question for costs and the only question will be whether, in all the circumstances, the [Owners Corporation's] refusal previously to allow the [Builders] in to carry on work on the premises was unreasonable. If that is not established to have been unreasonable, the [Owners Corporation] will get its costs."
I determined that the Builder had not established that it was unreasonable for the Owners Corporation to refuse to allow the Builder back on site to carry out remedial work and, accordingly, the Builder should pay the Owners Corporation's costs.
Further issues now arise because of other provisions in the Heads of Agreement.
By cl 2 of the Heads of Agreement, the parties agreed:
"[Ms] Grey to determine the following issues (in way she sees fit):
a. existence of defective work (where not agreed by experts);
b. necessary scope of work to rectify defects (as agreed or as found by [Ms] Grey), including any necessary work to be undertaken to ensure compliance, safety and amenity of the Southern lobby/foyer consequent on removal of the illegal wall and roof structure currently in existence;
c. quantum to undertake rectification of all defects (as agreed or as found), including trade costs and determination of all variable on-costs claimed by Plaintiff in respect thereto; and
d. a detailed construction programme for the rectification of all defective work, including obtaining of any necessary approvals and superintendence and certification of all work.
Such programme to identify all critical stage inspection hold points." (Emphasis in original.)
The parties agreed to vary the Heads of Agreement by a document called "Variation to Heads of Agreement" signed by counsel for the parties on or about 9 February 2018 (the "Variation Agreement").
Relevantly to cl 2 of the Heads of Agreement, the parties agreed in the Variation Agreement:
"Paragraph 2(a), (b) and (c)
In addition to the contents of each sub-paragraph, the parties agree that:
1. where agreements have been reached by the expert witnesses and recorded in the joint reports, [Ms] Grey will adopt those agreements in her determination;
2. where agreements have not been reached by the expert witnesses, [Ms] grey will determine those issues;
3. to the extent there is disagreement or it is unclear whether agreements have or have not been reached, then [Ms] Grey will determine if agreement has been made and if it is determined that no agreement has been reached, then [Ms] Grey will determine the issue;
4. [Ms] Grey is not required to distinguish between lot and common property;
5. the parties are entitled to make short oral submissions to [Ms] Grey regarding the material she is to consider as to what the experts have agreed and not agreed; and
6. before making a determination on any issue in dispute, [Ms] Grey will produce and provide the parties with a schedule listing each allegation of defective work, the scope(s) of rectification work contended for and the estimate(s) of the cost of this work. This schedule will indicate where agreements between experts have been reached, where there is contention about any issue and where there is any uncertainty about whether agreements have or have not been reached. Counsel for each party will then be given an opportunity to address Ms Grey on any issues identified in the schedule. After this conference Ms Grey will complete the schedules by recording the adoption of agreements and determinations on any issues in dispute as she sees fit."
In cl 5 of the Heads of Agreement the parties also agreed:
"A fire engineer to determine the fire safety issues (matter: 2a-b), such appointment to be made by the Resolution Institute. [Ms] Grey to determine quantum."
By the Variation Agreement, cl 5 was varied as follows:
"Paragraph 5
The parties agree to appoint Carlos Quaglia…as an expert under Part 31 Division 2 Subdivision 5 of the [Uniform Civil Procedure Rules (2005) NSW] to determine the fire safety issues outlined in paragraph 2(a) and (b) of the [Heads of Agreement]. [Mr] Quaglia's report is to be produced as soon as possible. The parties have agreed to instructions for [Mr] Quaglia's appointment. The parties agree to the following in respect of [Mr] Quaglia's appointment:
1. where agreements have been reached by the expert witnesses and recorded in the joint reports, [Mr] Quaglia will adopt those agreements in his determination;
2. where agreements have not been reached by the expert witnesses, [Mr] Quaglia will determine those issues;
3. to the extent there is disagreement or it is unclear whether agreements have or have not been reached, [Mr] Quaglia will determine if agreement has been made and if it is determined that no agreement has been reached, then [Mr] Quaglia will determine the issue;
4. the parties are entitled to make short oral submissions to [Mr] Quaglia regarding the material he is to consider as to what experts have agreed and not agreed; and
5. before making a determination on any issue in dispute, [Mr] Quaglia will produce and provide the parties with a schedule listing each allegation of defective work and the scope(s) of rectification work. This schedule will indicate where agreements between experts have been reached, where there is contention about any issue and where there is any uncertainty about whether agreement have or have not been reached. Counsel for each party will then be given an opportunity to address [Mr] Quaglia on any issues identified in the schedule. After this conference [Mr] Quaglia will complete the schedules by recording the adoption of agreements and determinations on any issues in dispute as he sees fit."
The question of costs was dealt with at cll 4, 18 and 19 of the Heads of Agreement. The Variation Agreement recorded, in terms, that there was to be "no change" to any of those paragraphs.
Clause 4 read:
"The costs of 2 and 5 above [sic] are to be shared equally between the parties."
Clause 18 provided:
"The Defendants are to pay the Plaintiff's following costs of the proceedings forthwith:
- costs wasted by reason of the concessions made by the Defendants as to sections 18BA and 18E, and cross claim
- all costs already made against the Defendants or costs orders made in favour of Plaintiff."
The third clause dealing with costs was cl 19 which I have set out at [4] above.
The first question concerns cl 18 of the Heads of Agreement.
The question is whether that clause constitutes an agreement by the Builder forthwith to pay any costs orders made in favour of the Owners Corporation including costs orders made after the date of the Heads of Agreement.
This is not how I read cl 18. Clause 18 deals with 2 matters. The first is costs "wasted by reason of concessions" evidently made by the Builder as to the operation of ss 18BA and 18E of the Home Building Act 1989 (NSW).
The balance of cl 18 deals with costs orders "already made" against the Builder "or costs orders made in favour of" the Owners Corporation.
When read as a whole, I think it is clear that cl 18 is directed to costs arising from events that had occurred prior to the date of the Heads of Agreement; the "concessions" made by the Builder and costs orders "already made".
In my opinion, the second limb of cl 18 records the parties' agreement about costs orders "already made" both against the Builder and in favour of the Owners Corporation. The paragraph should be read as if the words "already" appeared after the words "or costs orders" and before the words "made in favour of Plaintiff".
The second question is more difficult.
Clause 4 of the Heads of Agreement provides that the "costs of" Ms Grey and Mr Quaglia "are to be shared equally between the parties" whereas cl 19 provides that "on determination of this matter on the question of costs…the only matter to be determined" was that enunciated by Hammerschlag J on 12 September 2017 when his Honour said what I have set out at [5] above.
Although cl 19 does not say so in terms, its form and place as the last clause in the Heads of Agreement shows that it is concerned with the final determination of costs between the parties and that it should be read as if the word "final" was included between the words "on" and "determination".
Mr Jedrzejczyk, for the Owners Corporation, submitted that, in effect, cl 4 should be construed as the parties' agreement to pay the costs of Ms Grey and Mr Quaglia on an interim basis pending final determination of the proceedings.
Thus Mr Jedrzejczyk submitted:
"5. The [Owners Corporation] submits that, contrary to the [Builder's] position, the [Heads of Agreement] should not be construed as precluding the [Owners Corporation] from seeking an order that the [Builder] pay its costs of the expert determination. This is for the following reasons.
6. First, cl 4 must be read together with cl 19, which expressly provides that the question of costs would be determined by the Court at a later date.
7. Second, nothing in the text of cl 19 carves out the costs of the expert determination from the costs which are to be determined by the Court.
8. Third, the presence and language of cl 18 supports the argument that the parties did not intend to carve out the costs of the expert determination from the costs referred to in cl 19. This is because the parties did turn their minds to the categories of costs referred to in cl 18 and agreed that those costs would be paid forthwith.
9. Fourth, when the [Heads of Agreement] is read as a whole, it is clear that the parties agreed upon a process whereby the experts would determine the necessary scope and quantum for rectifying the defects in the [Owners Corporation's] property, the rectification work would be undertaken by a third-party builder, and then the parties would return to Court to determine the question of costs. The orders sought by the [Owners Corporation] are consistent with that process."
Mr Jedrzejczyk also referred to matters put to Hammerschlag J by Mr Corsaro SC on behalf of the Owners Corporation on 12 September 2017 as "matters of context". I do not think I can take into account what Mr Corsaro said. That would amount to allowing evidence of the parties' subjective intentions on the question of construction of their written agreement.
However, overall, I am persuaded that Mr Jedrzejczyk's submissions are correct and that cl 4 of the Heads of Agreement should be read as being subject to cl 19. Clause 4 thus represents the parties' agreement as to how Ms Grey's and Mr Quaglia's costs were to be paid in the first instance and was subject to the final determination of costs in accordance with cl 19.
In my opinion, the better view of the parties' agreement is that they intended that the question of who ultimately should bear the costs of the proceedings, including the costs of Ms Grey and Mr Quaglia, and the parties' costs arising from the references to Ms Grey and Mr Quaglia, should be determined on the basis that the parties set out in cl 19.
A third question of construction arose which, in view of the conclusions I have reached, is not necessary to determine.
That issue is whether "the costs of 2 and 5" in cl 4 were intended by the parties to mean only costs of Ms Grey and Mr Quaglia, or to include costs and disbursements incurred by the parties in their dealings with Ms Grey and Mr Quaglia.
In my opinion, the words used by the parties, especially the reference to "sharing equally" the costs concerned, showed that their intention was that cl 4 only govern the costs of Ms Grey and Mr Quaglia.
The final issue between the parties was whether the costs of the Owners Corporation should be "payable forthwith" or within a reasonable time of the assessment of those costs. I propose to order that the costs be paid within 28 days of service of a Certificate of Assessment.
There was no dispute that the Owners Corporation should have interest on its costs.
For those reasons I make the following orders:
1. Without limiting the Owners Corporation's ability to make any further application in respect of costs incurred in the proceedings, the Builder is to pay the Owners Corporation costs of the proceedings up to and including 20 June 2019, including the Owners Corporation's costs of the references to Ms Grey and Mr Quaglia and the Owners Corporation's costs of the application the subject of my judgment The Owners - Strata Plan 89041 v Galyan Pty Ltd [2019] NSWSC 619, on the ordinary basis, as agreed or assessed.
2. The costs referred to in order (1) above be paid within 28 days of service of a Certificate of Assessment.
3. Order pursuant to s 101 of the Civil Procedure Act 2005 (NSW) that the Builder is to pay to the Owners Corporation interest on costs and disbursements, at the rates set out in r 36.7 of the Uniform Civil Procedure Rules 2005 (NSW) applicable from time to time, on the Allowable Percentage of each amount of costs and disbursements actually paid by the Owners Corporation, from the date of payment by the Owners Corporation of each such amount of costs and disbursements until such time as the Builder has paid the costs referred to in order (1) above.
4. In order (3) above, the "Allowed Percentage" equals ((y/x) x 100%) where:
1. "x" equals the total amount of costs and disbursements which the Owners Corporation has paid or is liable to pay to its legal advisors and experts in connection with these proceedings; and
2. "y" equals the total amount of costs and disbursements allowed on assessment to the Owners Corporation or agreed between the Owners Corporation and the Builder in connection with these proceedings.
[3]
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Decision last updated: 26 June 2019