Supreme Court New South Wales Medium Neutral Citation: Amirbeaggi and Anor v Matrix Group Co Pty Limited (No. 2) [2020] NSWSC 962 Hearing dates: On the papers Date of orders: 29 July 2020 Decision date: 29 July 2020 Jurisdiction: Common Law Before: Johnson J Decision: The costs order made on 30 June 2020 is varied and an order is made that the Appellants pay the Respondent's costs of the Summons and the proceedings in this Court on an indemnity basis. Catchwords: COSTS – application for indemnity costs by successful respondent - application for leave to appeal from Local Court in civil proceedings - proceedings on foot in District Court raising same issue - unnecessary duplication of proceedings by appellants - proportionality of costs under s.60 Civil Procedure Act 2005 - duty of parties under s.56 Civil Procedure Act 2005 - unreasonable conduct by appellants established - costs awarded on indemnity basis Legislation Cited: Building and Construction Industry Security of Payment Act 1999 Civil Procedure Act 2005 Home Building Act 1989 Local Court Act 2007 Uniform Civil Procedure Rules 2005 Cases Cited: Amirbeaggi and Anor v Matrix Group Co Pty Limited [2020] NSWSC 827 Bon Appetit Family Restaurant Pty Limited v Mongey [2009] NSWCA 14 Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353 Harrison v Schipp [2001] NSWCA 13 Leichhardt Municipal Council v Green [2004] NSWCA 341 Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No. 3) [2010] NSWSC 1139 Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 Rosniak v Government Insurance Office (1997) 41 NSWLR 608 White Constructions (ACT) Pty Limited (in liquidation) v White and Ors [2004] NSWSC 303 Texts Cited: --- Category: Costs Parties: Farshad Amirbeaggi and Brooke Maniscalco (Appellants) Matrix Group Co Pty Limited (Respondent) Representation: Counsel: Mr AF Fernon (Appellants) Mr D Ward, solicitor (Respondent) Solicitors: Yates Beaggi Lawyers (Appellants) Advanta Legal Pty Limited (Respondent) File Number(s): 2019/397879 Publication restriction: --- Judgment 1. JOHNSON J: On 30 June 2020, I gave judgment refusing the Appellants leave to appeal under the Local Court Act 2007 and dismissing the Summons filed on their behalf on 18 December 2019: Amirbeaggi and Anor v Matrix Group Co Pty Limited [2020] NSWSC 827 ("Amirbeaggi (No. 1)"). 2. As part of the orders made on 30 June 2020, the Appellants were ordered to pay the Respondent's costs of the Summons. A further order was made that, if a special costs order was sought by the Respondent, written submissions were to be furnished concerning that application and the Court would determine the application on the papers and without the need for a further hearing: Amirbeaggi (No. 1) at [82](c) and (d). 3. By written submissions dated 7 July 2020, the Respondent sought an order that the Appellants pay the Respondent's costs of the Summons and the proceedings on an indemnity basis. 4. In written submissions dated 14 July 2020, the Appellants resisted the application that they pay costs on an indemnity basis and sought the vacation of the order made that the Appellants pay the Respondent's costs of the Summons, with an order sought in its place to which reference will be made later in this judgment (at [16]). 5. In submissions in reply dated 21 July 2020, the Respondent maintained its application for costs on an indemnity basis and resisted the Appellants' submission that some other costs order should be made. The Respondent's Application for Costs on an Indemnity Basis 1. In support of the application for a special costs order, it was submitted for the Respondent that the determination of the Court in Amirbeaggi (No. 1) was such that the proceedings may be categorised as effectively hopeless with no chance of success in this Court. Reliance was placed upon Bon Appetit Family Restaurant Pty Limited v Mongey [2009] NSWCA 14 ("Bon Appetit"), where Tobias JA observed (at [2]) that the bringing of untenable appeals was to be discouraged (giving rise to a waste of Court time and the expenditure of resources of the parties) so that an order for indemnity costs may be utilised in such a case. 2. The Respondent submitted that the conduct of the Appellants in the commencement and maintenance of the proceedings was unreasonable and that the decision of the Court in Amirbeaggi (No. 1) confirmed this view. It was submitted, as well, that the First Appellant is a legal practitioner who ought to have been in a strong position to form a view with respect to the merits of the appeal. Reliance was placed upon the decision of Nicholas J in Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No. 3) [2010] NSWSC 1139 at [60]. 3. It was submitted that an unreasonable burden was placed upon the Respondent in defending the appeal to the Supreme Court at the same time as defending the related District Court proceedings commenced by the Appellants. 4. It was emphasised, as well, for the Respondent that the limited quantum of the disputed sum in Amirbeaggi (No. 1), being $58,848.25, was such that the bringing of the appeal should be considered unreasonable and contrary to the interests of justice. 5. Accordingly, the Respondent sought an order that the Appellants pay the Respondent's costs of the Summons and the proceedings on an indemnity basis. The Appellants' Response to the Respondent's Costs Application 1. It was submitted for the Appellants that the present proceedings should not be characterised as untenable or hopeless so as to warrant an order for indemnity costs. The Appellants submitted that the fact that they had failed in the proceedings was not enough to warrant an indemnity costs order and that there were arguable issues which the Court determined adversely to the Appellants. 2. The Appellants submitted that there were viable issues concerning the proper construction of ss.92 and 94 Home Building Act 1989 and that these issues were arguable in the appeal brought to this Court under the Local Court Act 2007. 3. The Appellants submitted that there was no misconduct on their part with respect to the appeal and that the appeal was run efficiently and in a timely manner. 4. The Appellants submitted that the Court should guard against applying a standard in awarding indemnity costs whereby the unsuccessful party is at risk of such a costs order absent some blameworthy conduct on its part: Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353. 5. The Appellants submitted that the application for indemnity costs should itself be dismissed with costs. 6. The Appellants submitted that the appropriate order was that the costs of the proceedings in the Supreme Court be the Respondent's costs in the District Court proceedings commenced by the Appellants, given the finding of this Court that the appropriate jurisdiction to determine the s.94 Home Building Act 1989 point is the District Court where those proceedings are presently located. The Respondent's Submissions in Reply 1. In submissions in reply, the Respondent emphasised the finding of the Court that the matters sought to be raised by the Appellants had not been raised in the Local Court. It was submitted that this was a fundamental defect in the appeal so that the proceedings in this Court were hopeless. 2. The Respondent submitted that the capacity of the Appellants to ventilate the arguments concerning ss.92 and 94 Home Building Act 1989 in the District Court meant that the appeal to this Court lacked utility and that this served to emphasise the hopelessness of the proceedings. 3. The Respondent submitted that the fact that the Appellants sought to advance arguments concerning ss.92 and 94 Home Building Act 1989 in their District Court proceedings, whilst bringing an appeal to this Court seeking to raise similar issues, emphasised the difficulties flowing from duplication of proceedings and further expenditure of costs where the Appellants sought to litigate similar issues in two different courts at the same time. It was submitted that this aspect was relevant to the reasonableness of the conduct of the proceedings by the Appellants so that an order for indemnity costs was appropriate in the circumstances. 4. With respect to the Appellants' application for a different costs order, the Respondent submitted that the Appellants sought to revisit the order for costs already made by the Court in favour of the Respondent and against the Appellants. The Respondent opposed the making of an order which, in some way, sought to link the costs of the Supreme Court proceedings to the future outcome of the unresolved District Court proceedings. Decision on Application for Indemnity Costs 1. Costs are in the discretion of the Court: s.98(1)(a) Civil Procedure Act 2005. The Court has full power to determine by whom, to whom and to what extent costs are to be paid: s.98(1)(b). The usual rule is that costs follow the event: Rule 42.1 Uniform Civil Procedure Rules 2005 ("UCPR"). 2. The successful party in litigation ordinarily is entitled to an award of costs in its favour: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [67]. This discretion is to be exercised judicially in accordance with established principles and factors directly connected with the litigation: Oshlack v Richmond River Council at [65]. 3. The power to order indemnity costs is found in s.98(1)(c) Civil Procedure Act 2005 and Rules 42.1, 42.4 UCPR. 4. Costs are to be assessed on the ordinary basis unless the Court orders otherwise: Rule 42.2 UCPR. Departure from the usual practice of costs on the ordinary basis is discretionary. Beyond the need for a sufficient special or unusual feature in the case, no fixed rule can be laid down: Harrison v Schipp [2001] NSWCA 13 at [139]. 5. An order for indemnity costs may be appropriate where the case involves some relevant delinquency on the part of the unsuccessful party: Oshlack v Richmond River Council at [44]. In this context, some "relevant delinquency" does not mean moral delinquency or some ethical shortcoming, but delinquency bearing a relevant relation to the conduct of the case: White Constructions (ACT) Pty Limited (in liquidation) v White and Ors [2004] NSWSC 303 at [10]-[11]. 6. It has been said that it is necessary to demonstrate some delinquency or unreasonableness on the part of the unsuccessful party: Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 616. The need for unreasonableness is an underlying feature of an indemnity costs order: Leichhardt Municipal Council v Green [2004] NSWCA 341 at [51], [57]. The power to order costs on an indemnity basis may arise in different circumstances, including the manner in which a litigant has conducted proceedings. 7. Self-evidently, to contest and lose litigation does not of itself expose the losing party to an order for costs on an indemnity basis: Chaina v Alvaro Homes Pty Limited at [113]. 8. In Amirbeaggi (No. 1), I determined the proceedings in a manner which was clearly and emphatically adverse to the Appellants. The judgment under appeal was in the sum of $60,253.02: Amirbeaggi (No. 1) at [7]. 9. The Court determined that the issues sought to be ventilated on appeal had not been squarely raised at first instance in the Local Court. Further, the Court had regard to the fact that the Appellants had already commenced separate proceedings against the Respondent in the District Court in which the same issues which were sought to be litigated in the Supreme Court appeal were to be argued and determined. Regard was had, as well, to ss.56 and 60 Civil Procedure Act 2005. 10. To assist an understanding of the magnitude of the Appellants' failure in the present appeal, it is appropriate to set out what was said in Amirbeaggi (No. 1) at [70]-[80]: "70 I am not satisfied that it is appropriate to grant leave to appeal in this matter for a number of reasons. 71 Firstly, I am not persuaded that the arguments sought to be put in this Court were in fact advanced in the Local Court so that it can be submitted here that the learned Magistrate has, in some way, erred in law in the approach adopted in determining the stay application. 72 It is sufficiently clear from the record of the Local Court proceedings that the s.94 issue was raised by the Appellants in support of an argument that the Respondent was insolvent and without insurance cover. I am not satisfied, however, that a submission was put that there was non-compliance with s.94 so that this aspect itself constituted a foundation for a stay of enforcement of the Local Court judgment. 73 In any event, there was a live issue before the Local Court concerning the later contract of insurance for the purpose of s.94(3) HB Act. As is clear from her Honour's judgment (at [52]-[53] set out at [63] above), reference was made to these aspects in the context of any protection which the Appellants may obtain from the Respondent's insurance cover. This was, in truth, the way in which the Appellants sought to agitate this issue in the Local Court. The submission related to the central argument as to whether the Respondent was insolvent or at risk of insolvency. 74 Secondly, the Appellants did not seek judicial review of the adjudication certificate, nor was there any application to set aside the Local Court judgment (if that course was open to them). The Appellants sought a stay of enforcement of the Local Court judgment which led to a protracted and costly hearing in the Local Court in which they failed. 75 Nevertheless, it remains open to the Appellants to agitate the proper construction of ss.92 and 94 HB Act in the District Court proceedings which are still on foot. As the learned Magistrate observed (at [58] of her judgment at [67] above), the purpose of the adjudication certificate procedure in s.25 SOP Act is to allow for prompt payment to a builder, but with the rights of other affected parties being preserved so that it is open to the Appellants to seek to recover the sum which they have paid (pursuant to the Local Court judgment) in the District Court proceedings which are yet to be heard. Her Honour's understanding of the purpose of the adjudication certificate procedure was correct: TFM Epping Land [[2020] NSWCA 118] at [22]-[25]. [78]-[86]. An essential aspect of the regime for progress claims under the SOP Act is that the rights created under it are enforceable as if there had been a final determination by a court, save only for the fact that they do not create a res judicata or any issue estoppels: TFM Epping Land at [78]. 76 Thirdly, in these circumstances, there is simply no useful purpose to be served by this Court granting leave to appeal for the purpose of considering the proper construction of provisions of the HB Act, especially where the Magistrate was not asked to deal squarely with these issues, nor was her Honour assisted by submissions concerning the construction of the provisions. 77 To the extent that the Appellants submit that the issues raised in this litigation may warrant this Court construing ss.92 and 94 HB Act as a matter of general importance, it is sufficient to note that the Appellants will have an opportunity to ask the presiding Judge at the District Court hearing to consider these questions, with the prospect of possible later consideration by the Court of Appeal if the occasion arose. 78 It is not for this Court to provide a type of advisory opinion by reference to issues not truly litigated at first instance in the Local Court, in particular where the challenge was interlocutory in nature. 79 Finally, the approach of the Appellants in bringing separate but related proceedings in the District Court (for damages) and in this Court (by way of the present appeal) does not sit comfortably with their duty to facilitate the just, quick and cheap resolution of the real issues in dispute: s.56 Civil Procedure Act 2005. Added to this, is a legitimate concern about the proper use of Court resources and the proportionality of costs being expended in proceedings arising out of the dispute between the Appellants and the Respondent: s.60 Civil Procedure Act 2005 (see [52]-[53] above). 80 The interests of justice going beyond those that arise between the parties do not warrant the grant of leave to appeal in this case: Schwartz at [47]." 1. I have kept in mind that a party's failure in litigation does not of itself expose that party to an order for costs on an indemnity basis: Chaina v Alvaro Homes Pty Ltd at [113]. It is necessary that unreasonableness be demonstrated on the part of the party against whom an indemnity costs order is sought. Whether unreasonableness is demonstrated requires examination of the particular facts of the case. 2. In the present case, the Respondent registered an adjudication certificate under s.25 Building and Construction Industry Security of Payment Act 1999 and obtained judgment against the Appellants in the Local Court for the amount contained in the adjudication certificate. Thereafter, the Appellants engaged in what became protracted and costly litigation in the Local Court seeking a stay of the judgment obtained following registration of the adjudication certificate. At the same time, the Appellants commenced proceedings in the District Court against the Respondent seeking damages including recovery of the sum which was the subject of the adjudication certificate. 3. Having failed to obtain a stay in the Local Court, the Appellants then sought to appeal to this Court under the Local Court Act 2007 in circumstances where their application for leave to appeal was significantly flawed and failed for a number of reasons explained in the extract from Amirbeaggi (No. 1) set out earlier at [30]. 4. I am satisfied that the Appellants advanced completely unmeritorious arguments in this Court in circumstances which did not sit comfortably with their obligations under s.56 Civil Procedure Act 2005 and the requirement for proportionality of costs under s.60 of that Act. The bringing of an unmeritorious appeal by the Appellants has wasted Court time and diminished the resources of the Respondent in a way which attracts application of the statement of Tobias JA in Bon Appetit (see [6] above). Further, the fact that the First Appellant is a legal practitioner is relevant in circumstances where he was not entirely dependent upon legal advice provided by his legal representatives concerning the bringing of this appeal. 5. I have considered the Appellants' submission that some other costs order should be made whereby the costs of the Supreme Court proceedings would be costs in the presently unresolved District Court proceedings. I do not accept that this is a proper approach to resolution of the costs issue in the Supreme Court proceedings. 6. Firstly, an order has already been made that the Appellants pay the Respondent's costs of the proceedings, with the only outstanding issue being the question of whether a special costs order should be made in favour of the Respondent. Secondly, the relevant "event" for the purpose of the costs ordering power is the appeal sought to be brought by the Appellants to this Court under the Local Court Act 2007. It is appropriate that costs follow the event in these proceedings with the only outstanding question being whether the costs to be paid by the Appellants to the Respondent are calculated on the ordinary basis or an indemnity basis. 7. It is not appropriate, in my view, to attach the costs resolution of the Appellants' unmeritorious and wasteful appeal to this Court to the presently unresolved District Court proceedings. The Respondent is entitled to recover its costs without delay arising from the completed Supreme Court proceedings. 8. Applying the principles referred to at [21]-[27] above, the Respondent has demonstrated a proper basis for the Court to depart from the usual practice of costs being calculated on the ordinary basis. I am satisfied that an order for costs on an indemnity basis is appropriate in the circumstances of this case. Order 1. For these reasons, I vary the costs order made on 30 June 2020 in Amirbeaggi (No. 1) at [82](c) and order that the Appellants pay the Respondent's costs of the Summons and the proceedings in this Court on an indemnity basis. ********** 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: 29 July 2020