Walker Leppington Pty Ltd (ACN 131799007) v Leppington Park Pastoral Pty Limited

Legal principles 29It is useful to know what is the proper approach of the Court when determining matters such as the present. The principles normally applied in these circumstances were summarised by Hill J in Australian Securities Commission v Aust-Home Investments Limited (1993) 44 FCR 194. At Page 201 his Honour summarised the cases in the following way: "1. Where neither party desires to proceed with litigation the Court should be ready to facilitate the conclusion of the proceedings by making a cost order: Stratford and the SEQUEB case. 2. It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a Court determining how the cost of the proceedings should be borne to endeavour to determine for itself the case on the merits, or, as it might be put, to determine the outcome of a hypothetical trial; Stratford . This will particularly be the case where a retrial of the merits would involve complex factual matters, where credit could be an issue. 3. In determining the question of costs it would be appropriate, however, for the Court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them ( SEQUEB ). 4. In a particular case it might be appropriate for the Court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such may have precipitated the litigation: cf Sunday Times Newspaper Co Ltd v Macintosh (1933) 33 SR (NSW) 371. 5. Where the proceedings terminate after interlocutory relief has been granted, the Court may take into account the fact that interlocutory relief has been granted: cf Re Asiatic Electric Co Pty Ltd (1973) 1 NSWLR 603 at 606, a case which, however, depended upon the specific working of the statute under consideration." 30Some of these principles have been approved by McHugh J in Re Minister for Immigration and Ethnic Affairs; ex Parte QIN (1997) 186 CLR 622. His Honour noted that the Court when it does not determine a matter is deprived of the factor that usually determines whether or how it will make a costs order, namely, the result. He then went on to say: "In an appropriate case, a Court will make an order for costs even where 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. 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 unreasonable that the other party should obtain the costs of the action. 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 , the Full Court of the Supreme Court of Queensland gave a Prosecutor seeking mandamus the cost 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 grounds 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. Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission , where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs, even though his Honour found that those parties had acted reasonably in respect of the litigation. But such cases are likely to be rare. If it appears that those parties have acted reasonably in commencing and defending the proceedings, and the conduct of the parties continued to be reasonable until the litigation was settled, or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the Court will make no order as to the costs of the proceedings. This approach has been adopted in a large number of cases." 31In One Tel Ltd v Deputy Commissioner of Taxation (2000) FCA 270 Burchett J had reason to comment on the above two cases. In paragraphs 6 he said: "6. In my opinion, it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court's discretion, otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs." 32In the present case the parties have discontinued with the leave of the court under UCPR 42.19. The principles I have mentioned above apply where there has been such discontinuance for example in Fordyce v Fordham [2006] NSWCA 274 it was stated: "84 It is apparent from this review of authority that the UCPR 42.19 and 42.20 default orders do not create a presumption that the opponents ought pay the cost of the Equity Division proceedings. They are a relevant, but not determinative, consideration. Other relevant considerations were, as the primary judge concluded, usefully gathered in Lai Qin and Australian Security Commission v Aust-Home Investments Ltd & Ors (1993) 44 FCR 194, notwithstanding, as the discussion below reveals, that they were decided in a different statutory context. 85 Lai Qin turned on the application of Order 71 r 39 of the High Court Rules 1952 (Cth) which dealt with the situation in which "the further prosecution of a proceeding becomes unnecessary, except for the purpose of determining by whom the costs of the proceeding should be paid" and enabled any party to apply to the Court or a Justice to determine the question and "thereupon the Court or Justice must make such order as is just." 86 Australian Security Commission v Aust-Home Investments Ltd & Ors, upon which McHugh J drew heavily in Lai Qin, turned on O 62 r 3 of the Federal Court Rules which, as Hill J observed at (198-199) did not "lay down [any] criteria to determine how costs should be awarded", leading him to conclude that "ultimately costs in interlocutory proceedings, like costs in the main proceedings, lie in the discretion of the Court, which discretion must be exercised judicially." The same Rule was, no doubt, the subject of Pincus J's decision in South-East Queensland Electricity Board v Australian Telecommunications Commission (unreported, Federal Court of Australia, 10 February 1989) to which Hill J referred (at 199). It was the same situation in the two Queensland cases to which Hill J referred (at 200) both of which were dealt with pursuant to O 91 r 16 of the Supreme Court Rules (Qld) 1981 which was in substantially the same terms as O 71 r 39 of the High Court Rules 1952. In addition O 30 r 2 of the Supreme Court Rules (Qld) which was referred to in Austcorp Finance and Leasing Pty Ltd v Thomas (unreported, Supreme Court of Queensland, 23 August 1991) to which Hill J referred (at 200) dealt with discontinuance, but provided that on discontinuance the Court or Judge should make costs orders "as may be just". Similarly in J T Stratford & Sun Ltd v Lindley (No 2) [1969] 1 WLR 1547 (to which Hill J referred at 200-201) which dealt with the consequences of an order giving the plaintiffs leave to discontinue, RSC 0 21, r 3(1) left it to the Court to make such order as to costs "as it thinks just." 87 Once it is recognised, however, that the costs discretion conferred by UCPR 42.19 and 42.20 is unconfined, the matters referred to in the Lai Qin line of authority are plainly pertinent, although, again, not necessarily determinative." 33Given some evidence in this case it is also useful to note what was said in Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 at [81] where the Court said: "As has been noted on more than one occasion, the variety of relevant factors renders it difficult to reduce the exercise of discretion by characterisation of the reason for discontinuance: see, eg, O'Neill v Mann [2000] FCA 1680 at [13] (Finn J). There is also a risk that the subjective motivations of the plaintiff in discontinuing may be put forward as a basis for some other order. Except to the extent that such views may have been put before the defendant, for example as a basis for settlement, and be established as such on the evidence, subjective considerations of one party will generally be immaterial, so that the discretion will be exercised on the basis of the objective circumstances established on the evidence."

Claims of the parties 34The plaintiff's application was that each party should bear its own costs. 35The defendant's position was that the plaintiff should pay the defendant's costs as it did not act reasonably in commencing the proceedings, or alternatively, it ought to in the very least pay the defendant's costs from 11 February 2011 in circumstances where: (a) The plaintiffs representative Mr Hughes notified the Defendant's representative Mr Stambe that the issue with the Bank had been resolved; (b) The defendant, through its solicitors, clearly told the plaintiffs solicitors in a letter of 11 February 2011 that the defendant was ready, willing and able to perform the contract and implored the plaintiff not to put it to the expense of preparing evidence to meet the case; (c) The plaintiffs solicitors did not respond, thereby forcing the defendant to prepare evidence in order to comply with court orders. The contract was completed less than a month later after significant costs had been incurred by the defendant. 36The factors that the plaintiff suggest demonstrate that it had reasonable belief that litigation would be necessary to enforce its rights were as follows: (a) The defendant waited until 12 October 2010, 3 days prior to the 15 October 2010 deadline, to inform the plaintiff of NAB's mortgage (despite being aware at least since 6 October 2010 of the issue); (b) The defendant had previously, on 27 September 2010, refused the plaintiffs request for a three month extension of time to complete the subdivision; (c) The defendant apparently did not respond to NAB's email seeking confirmation in writing that the defendant wished NAB to assist the plaintiffs request for documents to achieve subdivision; (d) It was not until 30 November 2010, following a letter from the defendant threatening to commence proceedings, that the defendant finally informed the plaintiff that it would "tomorrow" instruct NAB to consider the plan of subdivision, and finally did so on 1 December 2010; (e) Prior to commencing proceedings, on 29 November 2010 the plaintiff sought confirmation from the defendant in writing that it would not purport to terminate the contract. Although the defendant responded by stating, finally, that "LPP will tomorrow instruct its bank to consider, and if appropriate to the Bank, consent to the plan of subdivision", the defendant insisted that it "reserves all its rights under the contract of sale". 37It is plain there were delays in obtaining the National Bank's consent and that these delays lay at the feet of the defendant. However, the plaintiff is an experienced developer and the fact that the mortgage was no doubt known to it and that it was the plaintiff who, in those circumstances, was responsible for securing the registration of the plan shows that party would have known that in any event consent was necessary. 38Certainly there was the reservation of rights by the defendant, but that is not much more than a careful preservation of its rights. 39It was suggested in submissions that the plaintiff used the litigation as a misguided bargaining strategy and not because it lived in any fear that the contract would be terminated. Such a submission depends upon inferences drawn against Mr Livanes from the plaintiff. He is presently in gaol and the plaintiffs did not read his evidence. Accordingly, he was not available for cross-examination. He took no part in the factual matters after the litigation was commenced and it seems that by 8 February, as a result of conversations between Mr Stambe of the defendant and Mr Walker and Mr Hughes of the plaintiffs, the National Bank's attitude was completely resolved in a satisfactory way for the conveyancing to continue. In the absence of any further evidence there is nothing which would enable me to conclude that Mr Livanes caused the litigation to be brought as some misguided bargaining strategy. 40I think that the plaintiff was reasonable in commencing proceedings. It had sought an assurance that matters would be resolved and they were not - the defendant reserved its rights. It did not thereafter take any interlocutory action and, plainly, by the beginning of February each party was satisfied that the matter was proceeding properly towards settlement. In my view the failure of the plaintiff's solicitors to release the defendant from having to prepare its evidence unnecessarily from 11 February 2011 is a matter of some significance. 41In my view the appropriate order is that each party should pay their own costs of the proceedings up until 11 February 2011 and the plaintiff should pay the defendant's costs thereafter on the ordinary basis and I so order.

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