United Petroleum Pty Ltd v Pentaco Oil

1. The respondents pay the applicant's costs of the proceeding, including reserved costs, to be taxed if not agreed.
2. Within 14 days, the applicant notify the respondents and the Court whether it seeks a hearing on loss or damage. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

MOSHINSKY J: 1 On 19 February 2016, I gave judgment in this matter: United Petroleum Pty Ltd v Pentaco Oil (Aust) Pty Ltd [2016] FCA 118 (the Reasons). On that occasion, the only order made was that, within 7 days the parties file minutes of orders to give effect to my reasons for judgment. I also indicated that if there was an issue as to costs, I was content to deal with this on the papers or at a hearing, depending on the view of the parties. Subsequently, on 2 March 2016, I made orders in a form agreed between the parties to give effect to my reasons for judgment. In summary, there was an order that the second respondent (Yarraside) be restrained from disposing any freehold, leasehold or beneficial interest in any of the six sites referred to in sub-paragraphs (a)-(f) of paragraph [13] of the Reasons during the term of the Supply Agreement unless it had complied with clause 13 of the Supply Agreement. A comparable injunction was ordered against the third to seventh respondents (the Directors) in respect of the Richmond site. 2 In relation to costs, while one party was content for the matter to be dealt with on the papers, the other requested an oral hearing. Accordingly, I listed the matter for hearing today. 3 On behalf of the applicant (United), it is submitted that costs should follow the event. It submits that, although it did not succeed on its contract case, it succeeded on its estoppel and misleading or deceptive conduct cases, and therefore there should be an order that the respondents pay the applicant's costs. Further, the applicant submits that costs should be awarded on an indemnity basis because, it says, the respondents engaged in unreasonable or inappropriate conduct in the course of the litigation. 4 On behalf of the respondents, it is submitted that there should be an order that the applicant pays their costs of the proceeding. The respondents submit that this order should be made because the applicant failed in its contract case and the injunction which was ordered was limited, in effect, to rectification of the Supply Agreement. If this is all that had been sought, the respondents contend, the trial would have been unnecessary. 5 For the following reasons, in my view, there should be an order that the respondents pay the applicant's costs of the proceeding, including reserved costs, to be taxed if not agreed. In my view, the costs should be on a party-party basis not on an indemnity basis. 6 The principles applicable to the award of costs are well established. The usual rule is that costs follow the event, although there may be circumstances where the "event" is contestable, and also circumstances where it is appropriate to adopt an issue-based approach. See Latoudis v Casey (1990) 170 CLR 534 at 567; Ruddock v Vardarlis (No 2) (2001) 115 FCR 229 at [11]-[12]; Bowen Investments Pty Ltd v Tabcorp Holdings (No 2) [2008] FCAFC 107 at [3]-[5]; Queensland North Australia Pty Ltd v Takeovers Panel (No 2) [2015] FCAFC 128 at [11], [16]-[18]; Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53 at [6]. 7 The principles applicable to the award of indemnity costs based on the way a party conducted the case at trial were considered in, for example, Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 400-401; Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 230-234. 8 In the present case, the applicant's case at trial comprised three components: contract; estoppel; and misleading or deceptive conduct. 9 Although the applicant was unsuccessful its contract case, because I concluded that the failure to agree a commencement date meant that the alleged agreement to lease lacked an essential term, the applicant was successful in its estoppel and misleading or deceptive conduct cases (which largely overlapped). I concluded that the alleged representations were made and that they were relied upon by the applicant. Each of these matters was contested at trial. 10 It is true that the terms of the injunctions which I ordered are not the same as the injunctions sought by the applicant in its pleading and at trial. The injunctions which I ordered were described in paragraph [162] of the Reasons, which reads as follows: It is appropriate in these circumstances for the respondents to be estopped from denying the representations or assumptions. In practical terms, this would be achieved by an injunction restraining Yarraside and the Directors from disposing of a freehold, leasehold or beneficial interest in any of the seven sites during the term of the Supply Agreement unless they have complied with the right of first refusal in clause 13 of the Supply Agreement (as if it applied to them). This puts the parties in effectively the same position as if Yarraside and the Directors had been included as parties to the Supply Agreement for the purposes of binding them to clauses 12 and 13. 11 In its further amended statement of claim, the relief sought in relation to the estoppel and misleading or deceptive conduct cases was injunctions in the following terms: C. An injunction restraining Yarraside from disposing, leasing or otherwise dealing with the Yarraside Premises until Yarraside has granted a lease of the premises to United on the terms set out in the Yarraside Agreement. D. An injunction restraining Con Andrianopoulos, George Andrianopoulos and the fifth to seventh respondents from disposing, leasing or otherwise dealing with the Richmond Premises until they have granted a lease of the premises to United on the terms set out in the Richmond Agreement. 12 These injunctions are in some respects broader, and in other respects narrower, than the injunctions I ordered. The injunctions ordered are narrower in that they apply only during the term of the Supply Agreement. However, they are broader in that they apply to any proposal to dispose of a freehold or leasehold interest in the sites, not just the Puma proposal, which is implicitly the basis of the injunctions sought in the pleading. 13 In my view, while there are some differences between the injunctions as sought and the injunctions as granted, there is a large degree of overlap between the two. Both forms of injunctions preclude the respondents from disposing of a leasehold interest in the properties unless they have first given the applicant the opportunity to lease the sites. In my view, notwithstanding the differences to which I have referred, it is fair to say that the applicant was successful, or at least largely successful, in obtaining the relief which it sought in its pleading in respect of its estoppel and misleading and deceptive conduct cases. 14 It is also true that in its outline of submissions in advance of trial, the applicant sought a more ambitious form of injunction, namely an "order requiring the Respondents to fulfil their promise to offer the interest the subject of the proposed disposition [to Puma] to the Applicant on no less favourable terms" (see Applicant's Outline of Submissions dated 2 December 2015 at para 52(a)). For the reasons indicated in the Reasons, I did not consider it appropriate to grant an injunction in those terms. However, in my view, the fact that the applicant sought a more ambitious form of injunction at trial, which was not granted, does not warrant any departure from the application of the usual order as to costs. 15 Another point which it is relevant to note is the fact that, while the applicant was successful in its estoppel and misleading and deceptive conduct cases, it was unsuccessful in its contract case. In my view, in the circumstances of this case, it would not be appropriate to adopt an issue by issue approach to the question of costs. The contract case and the estoppel and misleading and deceptive conduct cases were intertwined. Although the contract case was centred on events in 2015, while the estoppel and misleading and deceptive conduct cases were concerned with events in 2011, the more recent events were an important, indeed essential, part of the narrative or chronology for the estoppel and misleading and deceptive conduct cases. I therefore see no reason, in this case, for adopting an issue by issue approach. 16 In relation to whether costs should be awarded to the applicant on a party-party or indemnity basis, the applicant relies on three matters which are said to constitute unreasonable or inappropriate conduct during the course of the litigation: (a) first, the pleading of certain matters in the defence, namely that United "properly advised" must have known there was no proper foundation in law or fact for the estoppel and misleading or deceptive conduct allegations; and that the entire proceeding was an abuse of process; (b) secondly, the respondents' denial at all times that there was an arrangement giving United any right of first refusal over the properties; and (c) thirdly, the pleading of a matter in paragraph 9A of the defence which, based on evidence given at trial, it is said, did not reflect instructions. 17 In my view, the first matter is not of such significance in this case that it warrants a departure from the usual party-party basis for the award of costs. There is no material before me which indicates whether there was a proper basis for the relevant paragraphs of the pleading when first pleaded. I note that the relevant paragraphs were removed when the pleading was amended in the course of the trial. Apart from the mere pleading of these paragraphs it is not apparent that they occasioned any, or at least any substantial, amount of additional work to be done. They did not occupy any time at trial. 18 In my view, the other two matters are not such as to warrant an order that costs be paid on an indemnity basis. The second is merely an issue that was tried and upon which the respondents failed. The third is a relatively minor matter. It may be no more than an error. In any event, the fact that the relevant witness did not understand or did not agree with that paragraph of the defence does not in my view warrant an order for indemnity costs. 19 For these reasons, there will be an order that the respondents pay the applicant's costs of the proceeding, including reserved costs, to be taxed if not agreed. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moshinsky.