This is the Court's third judgment about the disputed subdivision of the parties' land. The Court's principal judgment on 29 October 2013 granted a decree for specific performance of the terms of an agreement made in February 2011 to settle matters originally at issue in these proceedings: Western Land Developments Pty Limited & Anor v Maganic Brothers and Sister Pty Limited & Anor [2013] NSWSC 1574.
At the time of its first judgment the Court also made orders to facilitate the resolution of the issues that remained concerning the February 2011 settlement. The Court's second judgment given on 13 May 2016 dealt with those remaining questions, which included claims for damages for the alleged breach of the February 2011 settlement: Western Land Developments Pty Limited & Anor v Maganic Brothers and Sister Pty Limited & Anor (No. 2) [2016] NSWSC 598.
This judgment should be read with the Court's principal judgment and the second judgment. Events, persons and things are generally referred to in this judgment in the same way they are in both the principal judgment and the second judgment. Once again for convenience, in this third judgment the two plaintiffs are generally referred to as "Western" and the three defendants are generally referred to together as "Maganic". Once again where the context requires, Mr Maganic and Mr Kelly are referred to by those names, so as to distinguish them from their respective companies.
The second judgment considered four issues:
1. Whether there is an implied term in the February 2011 settlement for each party to do all things reasonably necessary to ensure that the other party received the benefit of that agreement. The alleged breach of this implied term is the subject of issues (3) and (4).
2. What rental monies were received by each of the parties after the February 2011 settlement for which they must now account, and in consequence what adjustments should be made between them on account of such rent received.
3. What costs were associated with effecting the subdivision in accordance with the February 2011 settlement and to what extent have those costs been incurred only because of the conduct of one or other of the parties.
4. What expenses were incurred solely on account of Maganic improving its own lot in the subdivision, Lot 1, and should Western be liable to bear any part of such improvement expenses.
In its second judgment the Court ultimately only needed to decide issues (3) and (4). On issue (1), the parties did not contest one another's respective contentions: that each of them was obliged to do all things reasonably necessary to ensure that the other received the benefit of the February 2011 settlement agreement; and, that neither party could take advantage of that party's own wrong such that either party's contractual entitlement arising upon a particular event would not be enlivened if the event came about through that party's own wrongful conduct: Western Land Developments Pty Limited & Anor v Maganic Brothers and Sister Pty Limited & Anor (No. 2) [2016] NSWSC 598 at [9].
In relation to issue (2), the parties ultimately agreed upon what rental monies each of Maganic and Western had respectively received.
That left issues (3) and (4). The outcome of issue (3) was fully recorded within paragraphs [92] - [99] of the second judgment, which provided as follows:
"[92] First, there are holding costs such as land tax and the like incurred in respect of the land whilst it awaited subdivision. The parties agreed under clause 5(j) of the February 2013 settlement to pay such costs "up to the time of settlement". In my view the parties would always have incurred all such costs that they did actually incur up to 31 December 2012. But the Court accepts that Mr Maganic's own decision to import concrete chip fill onto the land without seeking prior development consent caused delay to the subdivision. But that delay only occurred in my view for 4 months until 2 May 2013, when that problem could have been cured by Mr Kelly's co-operation. But he refused to provide that co-operation.
[93] In my view any delays since then and until Mr Kelly was forced to sign the Development Application by the Court on 20 December 2013, were wholly caused by and are to the account of Mr Kelly. His conduct in my view was wrongful and a breach of his obligation to do all things reasonably necessary on his and Western's part to ensure that Maganic had the benefit of the agreement. But his breaches only had effect until 20 December 2013 when the Court forced him to sign the agreement. Thereafter in my view any delays are equally the responsibility of both parties as they were before 31 December 2012.
[94] Mr Maganic is responsible for the delays that occurred for the first 4 months in 2013. He too, in my view, was in breach of his obligation to do all things reasonably necessary to ensure that Western had the benefit of the agreement for those five months. By placing fill on Lot 1 without seeking prior consent he risked the very reaction that Council predictably had to his conduct. That was a breach in my view to his obligations. But to his credit he tried to do something to fix the problem up. It was then that Mr Kelly thwarted him.
[95] Secondly, the costs incurred of and in importing the concrete fill will be considered under Issue 4.
[96] Thirdly, the costs incurred in defending the Council's proceedings in the Land and Environment Court directly follow in my view from Mr Kelly's breach of his obligations under the benefit of the agreement implied term. But for his refusal to sign the 2 May 2013 Development Application those costs would not have been incurred.
[97] Fourthly, in my view, the costs that Maganic had to pay the Council by reason of those proceedings are also recoverable against Western in addition to the costs incurred in defending those legal proceedings.
[98] Fifthly, the costs incurred in preparing the 2 May 2013 Development Application for submission to Council and the costs involved in attempting to persuade Council that it should be accepted by Council should be entirely to Western's account. Maganic was in breach of the benefit of the agreement implied term and needed to take action to prevent the consequences of that breach getting any worse. Most of the costs of the s 96 application would not have been necessary if Maganic had not breached its obligation in the first place.
[99] The essence of that breach was failing to get consent before doing what it did to import the fill. This means that to the extent that there would have been some costs associated with getting consent to importing some of the fill in the first place some of these costs may be chargeable to both parties to the extent of the fill, or part of it, was a legitimate subdivision expense. This category of expense is dealt with under Issue 4."
On issue (4), the Court concluded that it should allow as an expense of the subdivision "such amount of concrete chip as would legitimately protect the land against becoming a local hazard due to truck activity". The Court further concluded "that would represent 40 per cent of the costs of the concrete chip which was laid down": Western Land Developments Pty Limited & Anor v Maganic Brothers and Sister Pty Limited & Anor (No. 2) [2016] NSWSC 598 at [104].
After the Court's second judgment, between 13 May 2016 and 10 June 2016 the parties endeavoured with considerable success to agree upon such of the calculations as they could, to give effect to the Court's second judgment.
On 10 June 2016, with the very considerable assistance of counsel and solicitors on both sides of these proceedings, as a result of the hearing that took place that day the Court was able to enter a number of judgments to give effect to the reasons in the Court's second judgment. Those respective judgments are contained in and represented by paragraphs [2], [3], [4] and [4a] of the orders made on 10 June 2016, which are as follows:
"2. Notes that for the purposes of these short minutes of orders, there are four period of time which are relevant to orders 3(c) to (f) below, by which:
(a) between 21 February 2011 to 31 December 2012, each of the Western and Maganic are liable to share equally (50/50) all council rates, water rates and land tax;
(b) between 1 January 2013 to 2 May 2013, Maganic is solely liable to for all council rates, water rates and land tax;
(c) between 3 May 2013 to 20 December 2013, Western is solely liable to for all council rates, water rates and land tax;
(d) after 21 December 2013, each of Western and Maganic are liable to share equally (50/50) all council rates, water rates and land tax;
3. Orders that there be judgment for the defendant / cross-claimant ("Maganic") against the plaintiffs / cross-defendants ("Western") in the sum of $513,855.61 plus interest, representing:
(a) costs and expenses as to the LEC and Penrith Local Court proceedings awarded in favour of Maganic in the sum of $83,811.32 plus interest {[2016] NSWSC 598 at [96], [97]};
(b) Western's 40% share of the total of the costs of the concrete chip in the sum of $18,942.43, in favour of Maganic {[2016] NSWSC 598 at [104]} (as per the attached schedule marked "A" extracted from the Defendant's Schedule of Income and Expenses and being items 5-17, 19-50, 52, 54-56, 58-60, 67 and 70 of the Defendant's Schedule of Income and Expenses);
(c) Western's share of the council rates in favour of Maganic in the sum of $67,692.47 {[2016] NSWSC 598 at [104]};
(d) Western's share of the water rates in favour of Maganic in the sum of $13,121.18 {[2016] NSWSC 598 at [104]};
(e) Western's share of the water rates paid by Maganic since the hearing in favour of Maganic in the sum of $866.98; {[2016] NSWSC 598 at [104]};
(f) Western's share of the land tax in favour of Maganic in the sum of $257,465.24; {[2016] NSWSC 598 at [104]};
(g) rental monies payable by Western to Maganic in the sum of $71,955.99 in accordance with SMO dated 21 February 2011 as calculated in items no. 1 to 6 of Issue 2(ii) of the Defendant's Amended Items of Issues 1-5 Schedule.
4. Order that there be a judgment for the plaintiffs/cross defendants ("Western") in the sum of $661,833.89 representing:
(a) rental monies payable by Maganic to Western in the sum of $261,833.89 in accordance with SMO dated 21 February 2011 as calculated in items 1 to 5 of Issue 2(i) of the Defendant's Amended Items of Issues 1-5 Schedule
(b) the sum of $400,000 payable to Western by Maganic in accordance with SMO dated 21 February 2011
4A. Order that there be set off of respective judgments giving rise to a judgment at $147,978.28 against Maganic in favour of Western."
But other matters still remained unresolved. On 10 June 2016 the Court made directions for Western and Maganic to exchange written submissions on the remaining issues. The matter was then stood over to 23 August 2016 for the hearing of those remaining issues. The five issues outstanding and requiring resolution at the hearing on 23 August 2016 were as follows:
(a) costs argument;
(b) assessment and orders concerning interest;
(c) orders concerning the remainder of the subdivision costs of $67,645.50 (as per the attached schedule marked "B" extracted from the Defendant's Schedule of Income and Expenses and being items 18, 51, 53, 57, 61-66, 68 and 69 of the Defendants Schedule of Income and Expenses);
(d) orders concerning Other Costs or Expenses (page 8) and Unpaid Costs & Expenses items 123-126 (page 9) concerning the subject lands as per the Defendant's Amended Items of Issues 1-5 Schedule; and
(e) the issues reserved for further consideration in paragraph [105] of the Court's judgment of 13 May 2016.
At the hearing on 23 August 2016, the five issues reserved in order 6(c) of the orders made on 10 June 2016 were reduced. The confining of the issues and the various agreements were recorded in the four orders made at the hearing on 23 August 2016 as follows:
"1. In relation to the Order 6(c) amount ("remaining subdivision expenses of $67,645.50"):
(a) The Court notes that the "driveway" expense is in the sum of $44,490;
(b) Western claims - and Maganic disputes - that Western is only liable for 25% of the driveway costs of $44,490, being $11,122.50; Maganic claims that Western is liable for 50% of the driveway costs of $44,990, being $22,245; this issue the Court is invited to determine;
(c) Western concedes it is liable to pay Maganic 50% of the balance of the "remaining subdivision expenses of $67,645.50", being $11,577.75, which Maganic agrees.
2. In relation to the first limb of the Order 6(d) amount ("Other Costs or Expenses"), Western concedes it is liable to pay Maganic $26,755.98, which Maganic agrees.
3. In relation to the second limb of the Order 6(d) amount ("Other Unpaid Costs & Expenses"), Western concedes it is liable to pay Maganic $69,031.77 (being the amount claimed by Maganic of $71,687.77 minus costs relating to concrete chip in the amount of $2,656.50), which Maganic agrees.
4. In relation to Order 6(e) (the [105] issue), the parties agree that this issue falls away at is the same amount already dealt with as per paragraph 2 above."
Thus, issues (d) and (e) of the 10 June 2016 orders set out in [10] above are now resolved. The Court must now deal with the following three issues: (a) costs; (b) interest; and (c) the remainder of the subdivision costs. These reasons now address these three remaining issues.
[2]
(a) Costs
The parties put strongly contrasting submissions on the issue of costs. Western submits it should pay Maganic's costs of appearances on 20 December 2014, 25 February 2015, 9 April 2015, 31 July 2015 and 18 September 2015 and that otherwise Maganic should pay 25 per cent of Western's costs of the proceedings. In the alternative, Western submits that it should pay Maganic's legal costs of the appearances on those same specified dates but, apart from those dates submits that there should be no order as to costs. Western's concession that it should bear the costs of various dates between December 2014 and September 2015 was quite appropriate, because after the conclusion of the December 2014 hearing that led to the second judgment Western changed solicitors and neither Mr Kelly nor any new solicitors attended a number of directions hearings that had been appointed by the Court, which occasioned almost 12 months delay in the proceedings between December 2014 and September 2015.
Maganic's costs submissions are quite different. Maganic submits that Western should pay the whole of Maganic's costs both as a defendant and as a cross-claimant and that there is no basis upon which the Court should order otherwise.
The costs issue is complicated by a number of occasions on which the matter has returned to Court and the fact that the Court has given several judgments dealing with the issues between the parties.
Some explanation of each of the parties' costs positions is now required in order to gain a better understanding of the contest between them.
[3]
Western's Submissions
In overview, Western asks the Court to take a broad view of the costs discretion looking at all the circumstances of the litigation itself and the conduct leading up to the litigation. Western points to Mr Maganic's actions in breaching the implied term by depositing fill on Lot 1 and destroying what is described as "the fragile peace" of the February 2011 settlement agreement. Western also points to what it calls the "preponderance of success of Western in the proceedings". Western acknowledges that Maganic is entitled to rely upon Mr Kelly's breach of the implied term by refusing to sign the s 96 authorisation and the way that Mr Kelly conducted this aspect of his transactions with Western. But Maganic says that when the final result of the proceedings is properly analysed, Western and Mr Kelly were both successful and that conclusion justifies the exercise of the Court's discretion for which Western now contends.
In the alternative to Western's contention that Maganic pay 25 per cent of the legal costs of Western, apart from the particular days it concedes should be the subject of orders in favour of Maganic, the making of no order as to costs, Western says, would reflect the reality that although the Court's second judgment held that Mr Kelly may have acted unreasonably it must be recognised that both parties breached the implied term and that Mr Maganic did so first, triggering the next regrettable phase of this dispute.
Western accepts the fact that apart from costs, which after set off Maganic would likely have to pay Western money, is not determinative of the costs issue. But Western says that but for Mr Maganic's importation of the fill in breach of the development consent and in breach of the implied term this litigation would probably never have occurred.
Western developed its submissions further. Western pointed to the history of the making of the February 2011 settlement agreement between the parties, describing the 2011 agreement as a "fragile peace" achieved in the midst of a long running dispute between two former business partners of advanced years who had fallen out irreparably and with considerable acrimony on both sides. Western said that the situation was akin to the bitterness one might expect of former spouses engaged in family law litigation.
Western contends that Mr Maganic chose to "pour fuel on a fire that had been brought under control". Western says that the reality was that the dispute that flared into the current litigation in relation to the February 2011 settlement agreement led to the contentious hearings in October 2013 and December 2014 and that the second judgment was "directly caused" by Mr Maganic's actions in putting the additional fill onto Lot 1, despite the objections of Mr Kelly. Western points out that the consensus achieved in the February 2011 settlement agreement was in the background of a contest about bringing fill onto the land and that in the teeth of that agreement Mr Maganic "brought further fill onto the land" in a manner which was not provided for in the February 2011 agreement. Western's submission is that if Mr Maganic had sought authority in negotiating the February 2011 settlement agreement to bring in further fill onto the land that it would have been rejected and the agreement would never have been made.
But Mr Maganic went ahead anyway, so Western submits, and without Mr Kelly's consent and in circumstances where he knew how deeply opposed Mr Kelly was to him bringing in further fill. Western says that there was bound to be further disputation from this conduct of Mr Maganic.
Western submits that there was indeed an element of "contumelious disregard" of Western's rights in both Mr Maganic and Maganic proceeding in this way and occasioning significant expense to the subdivision. Western seeks to downplay the contribution of Mr Kelly's later refusal to sign a s 96 order to sanction Mr Maganic's breach. Western submits that "as a matter of everyday experience" apart from the previously established mutual acrimony in this case, a joint co-owner is unlikely to consent to sign a s 96 authority to sanction a co-owner's breach where that breach took place in the face of direct opposition. In other words Western characterises Mr Kelly's refusal to sign this s 96 application as a predictable response to Mr Maganic's wilful misconduct.
Western's argument then seeks to analyse in more detail what happened in the first and second judgments. As to the first judgment, Western's characterisation of it is as flowing from Western's own motion of July 2013, in which Western first sought partition of the property and its share of rent earned by Maganic since the February 2011 settlement agreement.
Western points out that before the first judgment Western was contending that Maganic should pay the whole cost of the construction required by the development consent and that Maganic had sabotaged the subdivision by depositing the fill both before and after the February 2011 agreement. Maganic's position, in contrast, was that the fill it had deposited after the February 2011 agreement did not impede the subdivision and that Western was responsible for any fill before February 2011. Western's claim for rental monies under the February 2011 settlement agreement in respect of four Maganic tenants was resisted with Maganic denying any obligation to account to Western for the receipt of that rent.
Maganic claimed Western owed Maganic's share of the expenses, but Western submitted that in reality Maganic had continued to fail to account for the rent that it had received.
In the first judgment, the Court held that Maganic should pay 65 per cent of the subdivision costs on an interim basis. Those orders supported the Court's decree that the parties do all things necessary to perform the February 2011 settlement agreement. The Court's main priority in giving the first judgment was to remove obstacles to the parties' joint co-operation to give effect to the February 2011 settlement agreement. Some interim orders for ongoing expenditure were necessary for this purpose.
To achieve that end the Court came up with a practical solution that was never designed to be a final solution to the proceedings or to reflect the probable culpability of the parties.
The Court's second judgment followed a hearing on 9, 10, 11 and 12 December 2014. Five other individual hearing days or mentions occurred throughout 2015. Maganic characterises the central issue determined in this second judgment as a breach of the implied term and that the other issues were structured around that central question.
Western's primary submission on the central question of breach was that Maganic was in breach of the implied term by failing to co-operate with the drawing up of the subdivision and the introduction of fill which delayed the subdivision and the subdivision costs. Maganic says that in substance the Court found that Maganic's submissions were correct and awarded Western damages for that breach.
Western's submissions then cover the Court's findings in the second judgment, including the findings of breach by both Western and Maganic. It is not necessary to record that submission further as the Court's relevant findings have been identified earlier in these reasons.
Western finally submits that the parties ultimately agreed about accounting for rental monies and that Western did not press its claim for market value rent, resulting in final orders being made in relation to the rent on 10 June 2016.
But in relation to subdivision costs Western says that it was substantially successful in its contentions as to the proper allocation of subdivision costs under the February 2011 settlement agreement and that some of the expenses related solely to Maganic's improvement of its own lot rather than being proper subdivision costs to be split equally.
Western claims considerable success on a number of components of the distribution of costs. Western points out it had a substantial victory on the issue of concrete chip costs, with Western only being held liable for a fraction of the costs Maganic claimed. Western also submitted that it had success in the Court's determination that it should not have to pay costs caused by Maganic's breach of the implied term. Western also submitted that the Court had not found that Mr Kelly actually disrupted the development by his correspondence with counsel, although the Court did accept that delay was caused by Mr Kelly's failure to sign documents in a timely way. In summary and in justification of Western's draft costs order, Western submitted: (1) both parties had a considerable degree of success in respect of the issues not considered by either side; and (2) Western's breach of the implied term really only arose out of Maganic's prior breach which caused the dispute to flare up again.
[4]
Maganic's Submissions
As might be expected, Maganic's costs submissions emphasise very different aspects of the hearing and the Court's judgments from those highlighted by Western.
Western begins its costs submissions with a number of general points which are shortly summarised in this paragraph. Western commenced proceedings in July 2013 by motion primarily seeking orders for partition, despite the detail of the February 2011 settlement agreement. In its first judgment the Court did not accede to Western's claim for partition but instead ordered specific performance of the February 2011 settlement agreement. But Western still failed to comply with the Court's orders for specific performance, by: (1) failing to pay Western's agreed one half-share of all costs and expenses pertaining to the land and the subdivision; and (2) failing to offer elementary co-operation to Maganic in progressing the subdivision works. Except for a short period between 1 January 2013 and 2 May 2013, Western not Maganic, was the party in breach of the February 2011 settlement agreement. Even though Western obtained a net money judgment for $147,978.28, the two sums for which Western obtained money judgments (the rental monies received as adjusted and the $400,000 capital value adjustment for Lot 1) were never disputed by Maganic but the very significant money judgment which Maganic obtained was almost entirely disputed by Western. Thus Maganic submits, on the disputed items Maganic was the complete and substantial victor in the proceedings.
Western then referred at some length in its submissions to the Court's findings in various paragraphs of the second judgment as follows: Western's abandonment of claims for an account of rents not received (at [11]); the Court's findings as to Mr Kelly's unreliability as a witness (at [18] et seq and at [21], [35] and [68]); Mr Kelly's conduct making the subdivision proceed slowly (at [51]); "Mr Kelly's conduct in refusing to sign the application has important consequences in these proceedings" (at [65]); "elementary contractual co-operation meant that the 2 May 2013 development application should have been signed as soon as it was presented to Mr Kelly on the first occasion" (at [56]); Mr Kelly told deliberate falsehoods (at [67]); Western denied Maganic the benefit of the agreement (at [69]); and the Land and Environment Court proceedings were avoidable (at [72], [74], [79], [80] and [81]). Western's submissions then refer to the passages from the second judgment set out earlier in this judgment.
Maganic's submission in summary is that by reason of these matters, except for the short period of time between January 2013 and May 2013 Maganic was the "complete victor" up to and including the handing down of the Court's second judgment and that it should therefore have an order for costs in its favour.
[5]
Costs - Consideration
In my view, Western should pay a significant proportion of Maganic's costs for the following reasons.
In this case, a matter to be weighed heavily in the exercise of the costs discretion is the amount of court time that was spent on issues on which one or other party was successful. Even though Western obtained a net money judgment for $147,978.28 (subject to the adjustments that are still to take place arising out of the supplementary issues) Maganic's submission is correct that the two sums which constitute Western's victory, being one half of the rental monies received as adjusted in the sum of $261,833.89, together with the $400,000 otherwise due under the February 2011 settlement agreement, were sums not substantially disputed by Maganic. They occupied very little hearing time. In contrast, significant parts of the money judgment which Maganic obtained in the sum of $513,855.61 were strongly disputed by Western.
But Maganic's submissions are somewhat overstated on this issue. I do not accept Maganic is correct when it says that the sums comprising Western's judgment for $661,833.89 were "never at all material times disputed". It is true that Maganic never disputed its obligation to pay the $400,000. But that money was not due until the subdivision plan was registered and the effect of clause 5(j) of the February 2011 settlement agreement was that final accounting in respect of rental money received should probably occur at about the same time. But very early in the proceedings it was evident that Western was having difficulty in getting a reliable account of exactly what rent had been received by Maganic. Although this was sorted out well before the Court's first judgment was delivered, the early correspondence shows that Mr Maganic had been somewhat difficult about this issue in part because Mr Kelly was being difficult about other issues. I do not agree with Maganic's contention that this issue was dispute-free.
Much of the hearing in December 2014 was spent with Mr Kelly denying responsibility for any delays to the subdivision occasioned by his conduct. Some of Mr Kelly's denials of contributing to delay related to Mr Kelly's correspondence with the Council. No findings were ultimately made against Mr Kelly of causing delay on these grounds. So he was victorious on some matters relating to his alleged delay-related conduct and this will be taken into account. But when it came to the delays to the subdivision for which the Court has found the parties were responsible during 2013, the findings in the second judgment are that Western was responsible almost twice as much for that period of delay (8 months), as Maganic (4 months).
The net money judgment in Western's favour is not decisive on the issue of costs but is nevertheless relevant. On the balance of judgments Western was entitled to a net money judgment for $147,978.28. Some weight should be given to the fact that Western has proved itself entitled to a judgment in that amount, when the success of the proceedings that Western commenced is being considered. But as earlier indicated, the issues which were strongly contested and on which the Court has found in Maganic's favour after findings of deliberate misconduct on Mr Kelly's part were the centerpiece of the forensic contest in December 2014.
Western seeks to argue that Mr Kelly's conduct in refusing to sign the s 96 development application in May 2013 is really to be explained by Mr Maganic's own more egregious conduct before that time, which disturbed the peace created by the February 2011 settlement agreement. On this argument Western looks right back to the period before the February 2011 settlement agreement. There is some substance in Western's submission to the extent that it characterises Mr Kelly's conduct in May 2013 as reactive to Mr Maganic's more recent conduct in adding unauthorised fill to Lot 1. But in awarding costs the Court's central focus is on the way the proceedings were conducted and which party was successful on the main issues in contest at the various hearings. The fact is that by May 2013, just a moment before the proceedings were commenced, Mr Maganic seems to have repented his mistake in adding the fill to Lot 1 and the proceedings were conducted for approximately the first six months in the context of Mr Kelly's refusal to sign the s 96 application, which refusal was responsible for much of the forensic contest leading to the first judgment. In my view, Western was largely unsuccessful in that first hearing in late October 2013 and then in December 2013, because (1) the agreement was specifically performed and (2) Mr Kelly was ordered to sign the s 96 development application. Mr Kelly's conduct caused considerable forensic distraction and delay by that early point even taking into account Mr Maganic's conduct in adding unauthorised fill to Lot 1.
By its concession that each party should bear the costs of the various mention days between December 2013 and September 2014, Western is properly conceding that these hearing days and the delay associated with that period is Western's responsibility. Indeed it is. There were a series of unexplained non-appearances by Mr Kelly, or anyone on Western's behalf, during this period. Solicitors were engaged for Western and sought adjournments and then new solicitors were engaged. Substantial periods of time and of legal costs were wasted because of Western's obstructive conduct in the proceedings during this period. But in my view, the best way to deal with the costs for this period is not to make a separate costs order in respect of these days, as Western proposes but to take that period into account for the benefit of Maganic when an overall costs order is made.
The principles applicable to the Court's costs discretion are not in issue. The parties were more concerned about the application of those principles in this case. In my view, taking into account all the matters raised on the question of costs by each side, the appropriate order here is that Western pay two-thirds of Maganic's costs of the proceedings.
[6]
(b) Interest
Maganic claims an award of interest up to judgment under Civil Procedure Act 2005, s 100. Western resists Maganic's claim for interest and says that claim was probably so complex to calculate that it is too difficult to calculate and that is a reason not to do it.
In my view, interest under Civil Procedure Act, s 100 should not be awarded in this case for several reasons. First, I do not think that for the purposes of assessing pre-judgment interest that Maganic should be seen as the successful party without taking into account the money-success which Western has also had in the proceedings. Successful parties are entitled to pre-judgment interest under Civil Procedure Act, s 100: MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657. But on the balance of judgments entered in this case a net amount of money of $147,978.28 is due not to Maganic but to Western. In strict money terms Western not Maganic was the successful party.
Secondly, on issues of interest Maganic strongly argued that the fact that Western obtained a higher money judgment than Maganic should be ignored by the Court, because most of the time spent at the hearing was occasioned by Western's dispute with Maganic's claim against Western.
But there are two answers to this argument. In the first place Maganic's argument fails to take proper account of the principle that the nature of the award of discretionary interest under s 100 is essentially compensatory and that the other party's conduct in contesting the proceedings, whether or not reasonable and diligent, does not ordinarily provide a proper basis for either making or refusing an award of interest: Bennett v Jones [1977] 2 NSWLR 355 at 356 and Falkner v Bourke (1990) 19 NSWLR 574. Just because Western unsuccessfully contested matters that resulted in a substantial judgment against it does not mean that Western is now deprived of its own rights of interest up to judgment and that Maganic alone should have interest up to judgment when the balance of judgments shows the net amount due from Maganic to Western. And in the second place, Western's unsuccessful conduct of the proceedings on the centerpiece issues in dispute has already been taken into account against Western in the Court's exercise of its costs discretion.
Thirdly, an order for interest in Maganic's favour would not sit comfortably with the fact that on balance money was found due from Maganic to Western. But that does not alone entitle Western in this case to Civil Procedure Act, s 100 interest against Maganic. Much of the money that is due to Western on its judgment against Maganic has only become due recently, whereas the money due from Western to Maganic to compensate for expenditure incurred has been due for some time. This is no doubt why Maganic feels sufficiently aggrieved to apply for an order for s 100 interest.
In my view, the Court would not be warranted in ignoring Western's legitimate claim for being kept out of its money, merely because Maganic also has a claim for interest for monies due at an earlier time. Western's claim for interest is not insignificant. The better course, in my view, is to make no order for interest for the benefit of either party.
[7]
(c) The Remaining Subdivision Costs In Issue
Issue (c) is readily explained by reference to the agreement that the parties announced at the hearing on 23 August 2016. In the second judgment the Court dealt with the burden between the parties of expenses in respect of the concrete chip material that was laid on the driveway of Lot 1 (Western's lot), when the driveway was constructed during the subdivision works. But the parties remain at issue about the burden of other general development expenses, including other driveway-related expenses that do not involve the laying of concrete chip. These other subdivision expenses that have not yet been dealt with amount to a total of $67,645.50.
Only a part of this sum of $67,645.50 relates to the cost of the driveway installed on Lot 1 during the subdivision: the sum of $44,490. The balance of $23,155.50 ($67,645.50 less $44,490) is not in issue. The parties agree that this sum of $23,155.50 relates to non-driveway development expenses. The parties do not dispute that this amount should be borne equally and that each party should therefore bear $11,577.75 in respect of it.
But the $44,490 in non-concrete chip driveway construction expenses remains contentious. Western argues that the driveway constructed on Lot 1 during the subdivision resulted in a major capital improvement to Lot 1. As the driveway constituted a capital improvement to that lot, Western contends that the expense of its construction was not a "cost associated with the subdivision" within the February 2011 settlement agreement, clause 5 (e). Western contends as a result that the expense of construction of the driveway is therefore not liable to be borne equally, as clause 5 requires for costs "associated with the subdivision". In short, Western's contention is that the capital costs that resulted in improvement to Lot 1 cannot be "costs associated with the subdivision".
But Western's argument is not persuasive for several reasons. First, the construction of the driveway was an essential requirement of the subdivision. The local Council's relevant determination of development approval dated 8 March 2012 included a requirement under the heading "Engineering" that there be "(a) the provision of a heavy-duty vehicular crossing/s." The text of the development approval clearly contemplates that there may be more than one vehicular crossing. At least one crossing was essential for the subdivision to proceed. The requirement for a crossing to give access to the nearby road for the newly created subdivided lot appears to support the amenity of the subdivision being created. There is no doubt that a vehicular crossing is now constructed on Lot 1. As the subdivision could not proceed without satisfying this particular development application requirement, this is a short step, in my view, to classifying the driveway expenses as a "cost associated with the subdivision" within clause 5 (e).
Secondly, there is no express carve-out from clause 5 (e) of any kind of capital costs that may enhance the value of any lot being developed. The clause simply uses the word "costs", an expression which is undifferentiated between costs that may provide a capital benefit to the owner and costs that may not. There is no obvious mechanism for separating out, or even to value, such capital costs. This was evident in Western's approach which offered to take responsibility for only 25% of the $44,000 in driveway expenses on the basis that the other 75% represented a capital improvement to Lot 1. The basis for this assessment of value was not evident.
Moreover, the whole of the February 2011 settlement agreement contemplates, as one might expect, that the parties will expend money on the land being subdivided, for example in defining the boundary of the new lots (clause 5 (c)), and in registering plans of subdivision (clause 5 (g)), which may have the effect of permanently enhancing the capital value of the subdivided lots. The absence of anything in the settlement agreement to suggest that allowances be made between the parties for the value of such capital improvements, apart from clause 5 (i)(iv) in relation to the pre-existing improvements on Lot 1, is a strong indication that account was not to be taken between the parties of such changes in capital value.
In my view, the burden of all the non-concrete chip driveway expenses of $44,490 should be borne equally by the parties.
[8]
Conclusion and Orders
For these reasons in summary the Court concludes as follows. First, Maganic has been substantially but not wholly successful on the main issues that were disputed and occupied hearing time in the proceedings. As a result the Court will order Western to pay two-thirds of Maganic's costs of the proceedings. Secondly, due to the difficulty in establishing that either party should be compensated for interest up to judgment, no order for interest under Civil Procedure Act 2005, s 100 will be made. Thirdly, the non-concrete chip driveway expenses of $44,490 are all a "cost associated with the subdivision" within clause 5 and therefore should be borne equally by the parties, without any allowance for indirect capital benefit to the owner of Lot 1 from the creation of the subdivision.
The Court indicated in the course of argument that the parties would be given an opportunity to review these reasons and in light of them to attempt to calculate and agree upon the amounts now due between them. The orders below will provide an opportunity for that to occur.
Therefore the Court gives orders and directions as follows:
1. Order Western to pay two-thirds of Maganic's costs of the proceedings;
2. The parties should supply agreed short minutes of order to the Court within 14 days that is by 14 September 2016.
3. If by 14 September 2016 the parties cannot reach an agreed final calculation of the remaining monies due between them (excluding costs) based upon these reasons, then the parties should relist the matter for further final argument on calculation issues before the end of September;
4. Exhibits may be returned; and
5. Grant liberty to apply on two working days' notice in respect of the implementation of these orders.
[9]
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Decision last updated: 01 September 2016