Total Special Projects Pty Ltd v Peter Kanak

The plaintiff's submissions

1. By its NOM filed 12 May 2021, the second defendant ("Rhino") sought the dismissal of these proceedings under r 13.4 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") or, in the alternative, that the Amended Statement of Claim filed 19 March 2021 ("ASC") be struck-out under UCPR rr 14.28 or 4.15.
2. The NOM was listed for hearing on 14 September 2021, however the defendant did not wish to proceed with its application on the basis that the ASC was no longer the operative pleading following the service of a proposed FASC on 8 September 2021.
3. Based on the oral submissions made on its behalf on 14 September 2021, Rhino seeks its costs as it says its NOM caused the service of the FASC.
4. The position of the plaintiff, as submitted orally on 14 September 2021, is that no order as to costs should be made with the intent that each party bear their own costs as: 1. there has been no determination of the NOM on the merits; 2. in such circumstances, the factor which usually determines who should pay the costs, namely there being a successful party, is absent and the court does not try a hypothetical case to determine who should pay the costs: Re Minister for Immigration and Ethnic Affairs (Cth); Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 at 624 ("Lai Qin"); "In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties [3]. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action [4]. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd [5], the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent Council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans." 1. in the present case, this means there has been no "event" for the purposes of UCPR r 42.1; and 2. the only exceptions to this which may lead to a costs order in the absence of a hearing on the merits is where a party has acted unreasonably in resisting the application, where one party would almost certainly have succeeded or where one party effectively surrendered the course it adopted: Carter v Greenwoods & Freehills Pty Limited [2014] NSWSC 917 at [11]: "[11] The second set of principles is those that govern the awarding of costs when there has not been any hearing on the merits (see Re Minister for Immigration and Ethnic Affairs (Cth); Ex parte Lai Qin [1997] HCA 6; 186 CLR 622 ("Lai Qin") and One.Tel Ltd v Deputy Commissioner of Taxation [2000] FCA 270; 101 FCR 548 ("One.Tel") at [6] per Burchett J). In such circumstances the Court does not undertake a hearing of the case or motion where it has no jurisdiction to determine who should pay the costs (Lai Qin at 624 per McHugh J). However it can consider if one party has behaved unreasonably in pursuing or resisting the application (Lai Qin id). Further it can consider whether one party would almost certainly have succeeded (Lai Qin at p 625) or whether it effectively surrendered by the course it adopted (One.Tel at [6] per Burchett J). A party's protestation that they did not surrender is not determinative."
5. The approach taken in Lai Qin was in the context of the proceedings having been overtaken by events so there was no need for a hearing on the merits, but the same approach is taken to applications such as the present, for example Carter.
6. It is not entirely clear which of the exceptions to the approach taken in Lai Qin is said by Rhino to apply here.
7. Rhino seeks to establish some link between the bringing of this application and the amendments contained in the proposed FASC, such amendments apparently amounting to an implicit acceptance of the criticisms of the pleading contained in correspondence and Rhino's written submissions.
8. The plaintiff says that such a submission should be rejected for several reasons.
9. Firstly, there is no relationship or nexus between those criticisms and the amendments which appear in the FASC.
10. The criticisms first appear in a letter from the solicitors for Rhino dated 10 May 2021, and then again in the written submissions filed by Rhino on 20 August 2021.
11. It should firstly be noted that Rhino gave insufficient opportunity to the plaintiff to consider the contents of this letter as it proceeded to file the NOM on 12 May 2021 less than two days later and without a supporting affidavit.
12. This was the subject of complaint made by the solicitors from the plaintiff after the NOM had been filed and served.
13. The plaintiff says this alone should disentitle Rhino to its costs of the NOM.
14. In addition, the criticisms of the ASC contained in correspondence and written submissions were made at the highest level of generality and, in some respects, were simply incorrect. Rhino has never elaborated on its complaints by reference to the relevant paragraphs of the ASC nor to any paragraph of the ASC.
15. At [3] of Rhino's written submissions contend there is "no triable issue", this is said at [4] to have been made plain by the particulars provided by the plaintiff although there is no explanation as to what particulars are relied upon and how they reveal that this action is doomed to fail.
16. It is said at [3] of the written submissions that the issue for the court on the application would have involved "simple questions of law" but those questions have never been identified.
17. Furthermore, the arguments raised by Rhino failed to grapple with the difficulty which Rhino would have faced in seeking to strike-out the ASC as the causes of action relied upon were in negligence and for a contravention of sch 2 s 18 of the Competition and Consumer Act 2010 (Cth) (Australian Consumer Law) ("ACL"), both of which involve factual issues which the court could not, and would not, determine on a summary basis.
18. Secondly, none of Rhino's criticisms of the ASC were reflected in the amendments contained in the proposed FASC in any event.
19. The causes of action under the ASC were in negligence and under s 18 of the ACL at [27] to [32] (negligence) and at [33] to [39] (ACL) and these paragraphs remain in the proposed FASC and without any amendment of substance at [27] to [32] (negligence) and [33] to [38] (ACL).
20. If there was any force in Rhino's criticisms, these paragraphs would have either been deleted or substantively amended. Neither of those steps were taken in the proposed FASC.
21. All that has occurred is that the claim has been expanded by the addition of another plaintiff and their causes of action and the existing causes of action pleaded by the original plaintiff have been refined and added to.
22. The appropriate order in such circumstances is that the plaintiff pay any costs thrown away by the amendments to the ASC, an order which the plaintiff has already indicated should be made.

The defendant's submissions

1. Rhino submitted that the position is simple: had the plaintiff filed its FASC in March 2021, Rhino would never have filed the NOM. The filing of the NOM and the costs involved was the direct consequence of the filing of the original ASC. At the 11th hour, Total Special Products Pty Ltd ("TSP") chose not to defend the ASC, and instead relied on a radically new pleading introducing a new party, making it inutile for Rhino to proceed with its NOM.
2. This matter involves not 1 but 2 of the recognised exceptions to the rule in Lai Qin, ie abandonment/capitulation and acting unreasonably.
3. As to capitulation, it is difficult to comprehend a more patent capitulation by a party, a party keen to avoid severe consequences the following day (pleading struck out or proceedings dismissed). One is tempted to ask why, if the ASC disclosed a cause of action, was the FASC filed? The FASC is a substantially different document to the ASC which, significantly, introduces new alternative causes of action on the part of the plaintiff and a new plaintiff.
4. Further evidence that the plaintiff capitulated, and abandoned the ASC given the substantive defects Rhino raised, is evident from the following: (a) TSP had no contractual relationship with Rhino and could not sue Rhino in contract; (b) The absence of a contract between TSP and Rhino made TSP's claims in negligence and under the ACL doomed to failure: (i) The negligence cause of action hinged on an assertion that Rhino knew or ought to have known that TSP was the head contractor and reliant on Rhino to perform the Hot Works with reasonable skill and care (Court Book ("CB") p 24 at [27]). This was completely inconsistent with the terms of the contract Rhino signed, which provided that a completely different company was the Head Contractor: A. Parties are Total Construction Pty Ltd and Rhino (CB p 119 - "Total" throughout the contract means Total Construction Pty Ltd - see CB p 147); B. The contract is a "sub-contract agreement" (CB p 119); C. The sub-contract specifically identifies a Head Contract and Head Contract Works (CB p 146): Head Contract is the Head contract between Total and the Principal. In other, words, insofar as the parties were concerned, the Head contract was a head contract between Total Construction Pty Ltd and the Principal. There is no suggestion that the unknown company TSP (the plaintiff) had any involvement at all, let alone as a Head Contractor. (ii) The ACL claim hinged upon an assertion that cl 7.1 and par 21 of cl 3 of the Scope of Works in the subcontract was a representation by Rhino that it would perform the Hot Works to a certain standard (CB p 25 at [35]). On its face, those provisions of the subcontract were not such a representation or promise to perform, but a statement of an obligation (see CB pp 133, 178); and (iii) But in any event, the ACL pleading falls foul of the fundamental pleading defect that the fact that a promise is not performed does not per se make a promise misleading, and a failure to plead the matters which give rise to misleading conduct is fatal: Denian Enterprises v Northern Beaches [2021] NSWSC 109 at [33]. (c) Had the plaintiff had the courage to defend the ASC, it would have been struck out; (d) The plaintiff clearly did not have the courage to defend the ASC and radically amended it in the FASC. In the FASC, TSP added as a party the company Rhino contracted with (new Second Plaintiff, Total Construction Pty Ltd); (e) the FASC, compared with the ASC: (i) adds a new plaintiff; (ii) adds 30 new paragraphs; (iii) deletes 6 paragraphs entirely; (iv) amends almost every paragraph; (v) abandons the claim in contract by TSP; (vi) significantly alters TSP's claim in negligence, most obviously by the paragraphs relying on the new second plaintiff; (vii) embellished the claim under the ACL, again most obviously by reliance on the new second plaintiff and its contract with Rhino; and (viii) adds a new cause of action and new relief under the Law Reform Miscellaneous Provisions Act 1946 (NSW).
5. The FASC bears little resemblance to the ASC. The plaintiff's submissions that the FASC was not in response to Rhino's criticism and the FASC is simply the ASC "refined and added to" should be rejected. A cursory review of the documents shows otherwise.
6. But for the addition of the new second plaintiff, the NOM would have been pressed and in Rhino's view would have succeeded.
7. As to unreasonableness, the circumstances and history of the matter show that the plaintiff acted unreasonably, by persisting with the ASC until the day before the Strikeout Hearing (despite having express notice and reasons why the ASC was bad for over 4 months). The plaintiff had ample opportunity to amend its pleading and should have done so much earlier than it did. This would have avoided unnecessary costs being incurred on the NOM.
8. Rhino seeks indemnity costs (in the alternative, ordinary costs) in accordance with paragraph 3 of the NOM. In the alternative, Rhino seeks its costs up to 1.34pm on 13 September 2021, akin to the costs order made in Carter.

Resolution

1. There has been no determination of the NOM on its merits. There has been no "event" for the purpose of UCPR r 42.1. It seems that Rhino gave the plaintiff less than 2 days to consider its letter of 10 May 2021 pointing out what it says was the plaintiff's deficiencies in its statement of claim and inviting the plaintiff to discontinue before filing the notice of motion. On any view, this was insufficient time for the plaintiff to consider its contents. The plaintiffs have not acted so unreasonably that the defendant should obtain the costs of the notice of motion. The plaintiffs have already been ordered to pay the defendant costs thrown away by the further amendments to the amended statement of claim.
2. It is my view that the appropriate order for costs is that set out in Lai Qin. The Court cannot try a hypothetical action between the parties. In these circumstances, each party should pay its own costs in relation to the defendant's notice of motion filed 12 May 2021 including the costs of the written submissions.

The court orders: 1. Each party is to pay its own costs including the costs of the written submissions on this topic.

Amendments 06 October 2021 - Amendments to representation. 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: 06 October 2021