Supreme Court New South Wales Medium Neutral Citation: Leonard Markham v Charlotte Pass Snow Resort Pty Ltd [2020] NSWSC 1180 Hearing dates: On the papers Decision date: 01 September 2020 Jurisdiction: Equity - Expedition List Before: Sackar J Decision: See paragraph [15] Catchwords: COSTS — Party/Party — Discontinuance — Where settlement reached between plaintiff and defendant in related matter— Where neither party acted unreasonably in bringing and defending the action Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW) ('UCPR') Cases Cited: Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 Ralph Lauren 57 Pty Ltd v Byron Shire Council [2014] NSWCA 107 Re the Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia: Ex parte Lai Qin (1997) 186 CLR 662 Texts Cited: n/a Category: Costs Parties: Leonard George Markham (plaintiff) Charlotte Pass Snow Resort Pty Ltd (defendant) Representation: Counsel: T Cleary (plaintiff) G O'Mahoney (defendant) Solicitors: Gibbons Howlin, Lawyers (plaintiff) Norton White (defendant) File Number(s): 2020/181014 Judgment 1. These proceedings were expedited and were due to be heard on 27 to 31 July 2020. In fact there were to be two proceedings heard together. What remains outstanding is the question of costs. 2. The proceedings concerned a dispute between the Plaintiff who held five out of six of the shares in the defendant (CPV) which in turn owned a lease over a ski resort at Charlotte Pass. The lease was from the National Parks and Wildlife Service (NPWS). 3. Another entity, Snowy Mountains Resort (SMR), had by 2007 acquired all of the Plaintiff's shares in CPV. The consideration payable for the shares was in part contingent on certain events, namely the renewal of a long-term lease with NPWS. 4. Leaving aside somewhat complicated security arrangements between the parties to secure payment to the Plaintiff, the Minister responsible for NPWS granted a new long-term lease. This event triggered a dispute about whether the contingent consideration was payable. 5. The Plaintiff brought a claim against SMR for payment which was denied (2019/00399367). Indeed at the centre of those proceedings was the question of the Plaintiff's entitlement to the contingent consideration. SMR, however, asserted that the lease had been surrendered by CPV and hence there was no payment due. CPV was not a party to those proceedings. 6. The Plaintiff, however, brought a defensive claim against CPV in which he alleged that if the lease had been surrendered by CPV, then it should be liable in damages for breaching the terms of the security arrangements as it had compromised the integrity of the lease without notice to the Plaintiff (2020/00181014). 7. In the meantime, the claim by the Plaintiff against SMR was settled as a result of an offer of compromise by which the Plaintiff offered to accept $1.5m plus costs from SMR. Provided it was paid, that was to be the end of the matter. Accordingly, the plaintiff sought leave to discontinue the CPV matter but seeks his costs of the claim on the basis that it was appropriately brought and he was ultimately successful. On the other hand, CPV seeks the costs of the claim against the plaintiff. 8. On 27 July 2020 I dealt with a reserved costs order in the SMR proceeding. I ordered that costs should follow the event. 9. What remains are what other orders for costs are appropriate in the CPV matter. 10. I have received somewhat lengthy submissions from both sides and an affidavit of Ms Andrews for CPV of 20 July 2020. Her affidavit attaches material such as the Deed of Charge and other materials including maps. These materials were germane to aspects of the litigation but deploying them in this context only serves to underscore the artificial nature of such an exercise. They cannot be tested or sensibly dealt with. 11. The fundamental problem in any such argument is that the judge not having heard the case in the context of the evidence is left to speculate as to the outcome, however passionate and persuasive the costs submissions may sound. Often in such submissions neither side takes a backward step in order to persuade the judge they would have been successful. In almost all cases the undoubted discretion to be exercised on the question on costs is performed by the judge after a hearing on the merits where costs usually follow the event. However, the court cannot, indeed in my view should not, try a hypothetical action between the parties. In most cases the exercise would be wholly artificial, unsatisfactory and would arguably not involve the proper exercise of discretion. But in some cases the judge may be able to predict with some certainty who would likely have succeeded even though both parties acted reasonably in commencing or defending the litigation, in which case an order may be made in favour or substantially in favour of one of the parties: see Re the Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia: Ex parte Lai Qin (1997) 186 CLR 662 at 624-625. 12. UCPR 42.19 provides that where proceedings are discontinued by the plaintiff, the plaintiff must pay the defendant's costs unless the court orders otherwise. There must be some positive ground or good reason for departing from the ordinary course: Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 at [54]; Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 at [54]; Ralph Lauren 57 Pty Ltd v Byron Shire Council [2014] NSWCA 107 at [21]). As Basten JA noted in Britannia Pty Ltd v Parkline Constructions Pty Ltd at [75]: There are, nevertheless, circumstances in which it is entirely appropriate for the court, by order, to depart from the consequence provided by the rule. For example, discontinuance may result from the plaintiff obtaining a favourable result in other proceedings, in circumstances where it had not been unreasonable to commence the discontinued proceedings. Such cases frequently arose in challenges to decisions made under the Migration Act 1958 (Cth), when the scope for judicial review in the Federal Court was limited and it was commonplace for applicants to commence proceedings in both the Federal Court and in the original jurisdiction of the High Court. 1. Further, in Ralph Lauren 57 Pty Ltd v Byron Shire Council Preston CJ of LEC (Beazley P and Ward JA agreeing) said at [22]-[23]: The circumstances on which a discontinuing plaintiff may rely to persuade the court that an alternative costs order is appropriate are varied and those discussed in the authorities do not exhaust the circumstances in which the discretion might be exercised. However, the authorities reveal that circumstances where a court has made an alternative costs order have a common thread related to the reasonableness or unreasonableness of the conduct of the parties. Where the discontinuing plaintiff is seeking an order that the defendant pay the plaintiff's costs of the proceedings, the circumstances relied on tend to be that the defendant has acted so unreasonably that it should pay the discontinuing plaintiff's costs. The mere fact that the discontinuing plaintiff may have achieved some practical success, such as achieving the result it sought in the proceedings, does not by itself and without some extra circumstance, ordinarily justify the awarding of costs in favour of the discontinuing plaintiff. The extra circumstance needed is frequently found in the unreasonableness of the conduct of the defendant: Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201; Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624-625; One.Tel v Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548 at [5]. The unreasonableness in the conduct of the defendant may be prior to the commencement of the proceedings, where such conduct may have precipitated the litigation, or in the defence of the proceedings. 1. Here, I am not persuaded that the outstanding litigation would more probably have ended in favour of the Plaintiff or the Defendant. I accept, however, that given the circumstances as a whole neither side has acted unreasonably in bringing or defending the litigation. In all the circumstances it was not inappropriate for the Plaintiff to commence the proceedings against CPV. He did so prophylactically having been made aware of the central role CPV played in SMR's defence in the proceedings against SMR. The Plaintiff's claim against CPV is being discontinued because of his success in recovering from SMR under the plaintiff's and SMR's settlement agreement. On the other hand, CPV reasonably set about the preparation of a defence and cross-claim with the view that the CPV proceedings would be heard together with the SMR proceedings from 27 July 2020. In the first proceedings I am also of the view the parties acted entirely pragmatically and hence reasonably as well. 2. In my view in this case the proper exercise of discretion is that each party pay their own costs of the proceedings. ********** 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: 10 September 2020