The Owners - Strata Plan No. 80436 v Sezone Pty Ltd and Daphne Street No 1 Pty Limited

Consideration 13No response was ever filed to the Commercial List Statement, and no evidence has been filed by either defendant in these proceedings as to the merits of the plaintiff's claims. 14The building defect reports were served on the first defendant on 14 October 2013. The report of the quantity surveyor, Mr David Kelly, was served on the first defendant on 26 February 2014. 15The plaintiff notified the first defendant of the listing of the matter today in a letter dated 5 March 2014. I am satisfied that the first defendant was given appropriate notice of today's hearing. 16At the hearing before me today, there was no appearance on the part of the first defendant. 17Having considered the materials advanced in relation to the claims against the first defendant, and having been taken through the relevant documentation by the solicitor for the plaintiff, I am satisfied that the plaintiff's case on damages is made out and appropriately quantified. 18In addition the plaintiff seeks an order that the judgment is to take effect from 1 January 2014. Under UCPR r 36.4(3), the court may order that a judgment is to take effect as of a date earlier or later than the date on which it is given or made. 19The plaintiff submitted that this was an appropriate case in which to order a judgment take effect at an earlier date on the basis that the report of Mr David Kelly was dated December 2013. I am persuaded that, as the quantification of the plaintiff's damages is calculated at a particular time and as Mr David Kelly notes that "any delay in commencing the works may result in an escalation of prices", it is appropriate to order that my judgment take effect from 1 January 2014. 20On the issue of costs, the plaintiff seeks an order that the first defendant pay the plaintiff's costs of these proceedings. I would order as such, following the rule that costs follow the event under UCPR r 42.1 in the absence of any reason as to why another order should be made. 21However, the plaintiff sought those costs on the indemnity basis, or alternatively interest on their costs pursuant to section 101(4) of the Civil Procedure Act 2005. 22In Harrison v Schipp [2001] NSWCA 13 at [139], Handley JA observed in relation to indemnity costs that "departure from the settled practice of costs on a party and party basis is discretionary, and beyond the need for a sufficient special or unusual feature in the case no fixed rule can be laid down". Caution must be exercised when departing from making costs orders on the usual basis: Leichhardt Municipal Council v Green [2004] NSWCA 341. 23An order for indemnity costs is based on the conduct of a party against whom it is made that relates to the proceedings themselves. While the categories of conduct giving rise to a claim for indemnity costs are not closed, cases brought without chances of success, cases that are an abuse of process and unreasonable conduct in the proceedings such as fraud or misleading the court may all constitute grounds for the granting of such an order. Attempts to settle the proceedings through offers of compromise and Calderbank letters, along with the giving of notice that a party intends to claim indemnity costs, are also relevant factors. 24In oral submissions as I understood him, the solicitor for the plaintiff raised two matters in support of the claim for indemnity costs. First, the first defendant had initially defended the proceedings in the Consumer, Trader and Tenancy Tribunal, albeit without vigour and without filing a defence once the proceedings were transferred to this Court. Secondly, my attention was drawn to a judgment against the first defendant in unrelated proceedings: Owners Corporation SP 74584 v Sezone Pty Ltd [2013] NSWSC 999 (24 July 2013, per McDougall J). The resignation of Mr Anthony Younan as a director of the first plaintiff on 29 July 2013 was asserted to have been prompted by that decision. 25However, I am not persuaded that the resignation of a director following an adverse judgment in unrelated proceedings is even relevant to the exercise of my discretion to award indemnity costs. Indeed, in my view, the plaintiff has not established any sufficient reason to warrant an order for indemnity costs. In particular, the defendants have not appeared and therefore cannot logically be said to have caused delay or engaged in any misconduct in the proceedings. 26In the alternative, the plaintiff claims interest on their costs pursuant to section 101(4) of the Civil Procedure Act 2005. 27The purpose of the power to order interest on costs "is to compensate the party entitled to costs for having been out of pocket as a result of paying legal costs over a period of time before being able to recover those costs from the other party": Idoport Pty Ltd v National Australia Bank Ltd [2007] NSWSC 23 at [176]. 28In Idoport, Einstein J observed that the factors relevant to the exercise of discretion included (a) the amount of costs paid by the party entitled to costs; (b) the length of time for which the claimant is out of pocket before recovering its costs; (c) whether, during that time, the respondent has had the use of the money in a commercial enterprise; and (d) how the parties have conducted themselves during the litigation: at [177]. 29In Lahoud v Lahoud [2006] NSWSC 126 at [82], Campbell J observed that "there is no requirement, before an order for payment of interest on costs is made, for the Court to be satisfied that the circumstances of the case are out of the ordinary". 30It is also useful to bear in mind the comments of Campbell J at [81] in regards to a lack of evidence regarding whether the plaintiff had actually paid certain costs and disbursements: [81] Mr Gyles [counsel for the defendant] submits that this lack of evidence means that there is an insufficient evidentiary foundation for the making of the order. I do not agree. The various proceedings which were determined by Palmer J are ones which, now, were commenced over five years ago. The plaintiffs have been represented by various firms of solicitors, and various counsel, in that time. There has been extensive preparation, including by making interlocutory applications to the Court. The litigation is commercial litigation, a species of litigation concerning which there is no regular practice of lawyers accepting work on a speculative basis. In my view it is more likely than not that the plaintiffs have had to pay some amounts of costs and disbursements as the litigation has progressed. Further, even if I were wrong in drawing this inference, the form of order which the plaintiffs seek is one which makes interest on a particular amount of costs run only from the date when an actual payment of that amount is made. If an order in that form were to be made, it would contain its own safeguard against the plaintiffs being able to recover interest concerning amounts of costs and disbursements which they had not actually paid. 31A similar approach was adopted in Drummond v Rosen Pty Ltd v Easey (No 2) [2009] NSWCA 331 (per Macfarlan JA, Tobias JA agreeing). 32In this case, particularly as the plaintiff is an owners corporation and it is assumed that all costs are funded by levies on owners, it does seem to me to be appropriate to ensure that, so far as possible, the orders that the Court makes in relation to costs provide as full compensation as appropriate in the circumstances. 33Accordingly, I order that judgment be entered for the plaintiff in the sum of $5,044,013.13 as against the first defendant, to take effect from 1 January 2014. The first defendant is to pay the plaintiff's costs, and I will also order that interest is to be paid on those costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 17 March 2014