Supreme Court New South Wales Medium Neutral Citation: Payce Communities Pty Ltd v Canterbury-Bankstown Council (No 5) [2021] NSWSC 710 Hearing dates: On the papers Decision date: 17 June 2021 Jurisdiction: Equity - Technology and Construction List Before: Stevenson J Decision: Defendant to pay the plaintiff's costs Catchwords: COSTS – where plaintiff sought payment for variations – where defendant had made payment to plaintiff on account of variations following an adjudication under the Building and Construction Industry Security of Payment Act 1999 (NSW) – where plaintiff sought damages for variations in amount exceeding amount so paid – where plaintiff established entitlement to variations less than amount so paid – where costs should follow the event – whether plaintiff in substance successful Legislation Cited: Building and Construction Industry Security of Payment Act 1999 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Payce Communities Pty Ltd v Canterbury-Bankstown Council (No 2) [2021] NSWSC 404 Payce Communities Pty Ltd v Canterbury-Bankstown Council (No 3) [2021] NSWSC 464 Payce Communities Pty Ltd v Canterbury-Bankstown Council (No 4) [2021] NSWSC 558 Payce Communities Pty Ltd v Canterbury-Bankstown Council [2021] NSWSC 331 Sze Tu v Lowe (No 2) [2015] NSWCA 91 Windsurfing International Inc. v Petit (1987) AIPC 90-441 Category: Costs Parties: Payce Communities Pty Ltd (Plaintiff) Canterbury-Bankstown Council (Defendant) Representation: Counsel: D T Miller SC with M Sheldon (Plaintiff) B DeBuse with J E F Brown (Defendant) Solicitors: Vincent Young (Plaintiff) Marsdens Law Group (Defendant) File Number(s): SC 2019/133490 Judgment 1. I delivered my principal judgment in these proceedings on 6 April 2021. [1] I will use the same abbreviations in these reasons. 2. I have since delivered three further judgments in the proceedings dealing with various issues that arose out of the 6 April 2021 judgment. [2] 3. In my 6 April 2021 judgment I said [3] : "The central issue is whether the work that Payce contends to be a series of variations was in truth part of the work that Payce agreed to perform for the [Fit Out Agreement] Contract Price or as part of the 'Base Build'. Payce has already recovered from the Council the bulk of the amount it claims for variations by reason of an adjudication in its favour under the Building and Construction Industry Security of Payment Act 1999… The Council sought, unsuccessfully, to challenge that adjudication… In these proceedings the Council seeks to recover the whole of the amount that it has paid Payce and Payce seeks to retain the money received and to recover a further amount of some $228,000 from the Council. In effect, these proceedings are those contemplated by s 32 of the…Act as resolving, finally, the issues provisionally determined by the adjudication under the…Act. It is common ground that Payce must make out its entitlement to claim for the variations and that determination of that issue will determine what the parties must do in relation to the amount paid under the…Act." 1. On 18 May 2021 I made the following declaration, notation and order: "1. Declare that the Plaintiff is entitled to $1,068,304.75 (ex GST) on account of the variations it claimed under the Fit Out Agreement made between the Plaintiff and the Defendant on 4 December 2015. 1A. Note that the Plaintiff accepts that by reason of the payment made by the Defendant pursuant to the orders of Ball J in Canterbury-Bankstown Council v Payce Communities Pty Limited [2019] NSWSC 1803 it has received payment from the Defendant of the amount of the declaration in [1]. 2. Pursuant to section 32(3)(b) of the Building and Construction Industry Security of Payment Act 1999, the Plaintiff pay the Defendant the sum of $255,728.99 (ex GST) inclusive of pre-judgment interest to 18 May 2021." 1. These final reasons deal with the costs of the proceedings. 2. The declaration that I made on 18 May 2021 reflected what was in substance the outcome of the proceedings, namely, that Payce established an entitlement to variations under the Fit Out Agreement in the sum of $1,068,304.75. 3. This reflected the fact that, before me, Payce was obliged to run its case for variations on a final basis. 4. The Council's position before me was that Payce was not entitled to any amount on account of the variations and that Payce should refund all of the amount paid to it by the Council on an interim basis under the Building and Construction Industry Security of Payment Act 1999 (NSW) ("the Act"), being an amount of $1,285,660.65. 5. The Council has failed to make out that position. What it has established is that the amount to which Payce is entitled is a little less than the amount that the Council paid under the Act. The result is the order I made on the 18 May 2021 pursuant to s 32(3)(b) of the Act. 6. But Payce has established that it is entitled to retain the bulk of the amount paid to it by the Council under the Act. 7. In these circumstances, it appears to me that the "practical outcome of the proceedings" [4] is that Payce has been successful. 8. That reflects the fact that Payce has achieved complete success on two of the issues debated before me, the scope of works covered by the agreed Fit Out Agreement Contract Price and whether it was necessary for Payce to point to written directions to varying the works in order for it to be entitled to claim variations; and substantial success on the remaining issue, quantification of its entitlement to variations. 9. Costs follow the event and, in my opinion, the "event" here is Payce's establishment of a very significant claim for variations. 10. Payce should therefore have its costs of the proceedings. 11. The Council pointed to a number of affidavits that were served by Payce but not read. On the face of it, Payce should not have its costs of those affidavits. But that is a matter best left to the costs assessor. 12. Payce seeks a stay of the order that I made on 18 May 2021 under s 32(3)(b) of the Act pending assessment of its costs and points to evidence of its solicitor suggesting that the quantum of its costs is likely to exceed the amount of my s 32(3)(b) order. 13. The basis given for such a stay is stated in submissions to be: "Payce is a special purpose vehicle. If it is ordered to pay the Council immediately, Payce will need to incur further costs in obtaining intercompany loans or alternate sources of finance. Payce should not be put to that inconvenience or expense when it will ultimately receive a positive payment in its favour". 1. This submission strays a little wider than the evidence upon which it relies, which is this statement in Payce's solicitor's affidavit of 19 May 2021, evidently given on information and belief: "If Payce is required to pay the adjustment amount prior to costs being paid, Payce will need to obtain an intercompany load or obtain funds from another source". 1. There is no suggestion in that evidence that Payce cannot obtain "an intercompany loan" or "funds from another source". Nor is there any evidence as to what, if any, costs would thereby be incurred. 2. If it be the fact that Payce "is a special purpose vehicle" and does not itself have the funds to meet the s 32(3)(b) order that is presumably a consequence some benefit that those behind Payce saw in structuring matters this way. 3. I am not persuaded that these matters constitute a reason to order the stay that is sought. 4. Payce also seeks an order for indemnity costs on the basis of a Calderbank offer it made on 24 December 2020. 5. That letter offered to settle these proceedings on the basis of: 1. a payment by the Council to it of $983,000 plus costs; 2. in effect a stay of Payce's obligation to refund to the Council the difference between that sum and the amount paid by the Council to Payce under the Act; and 3. entry by the parties into a "deed of settlement and release". 1. Payce has achieved a more favourable result than this offer in that it has established an entitlement to a slightly higher amount for variations. 2. But it has not achieved a "stay" of the amount to be repaid to the Council pending assessment of its costs. 3. Nor has it obtained the benefit of an unqualified "deed of settlement and release" which may well have been wider than the res judicata that will arise from these proceedings. 4. In those circumstances, I do not see the Calderbank offer as one which should give rise to an order for indemnity costs. 5. There are two other matters in respect of which I understand there be no dispute. 6. The first is that Payce should have interest on its costs. 7. The second is that the Council should return to Payce an original bank guarantee dated 31 July 2019 that Payce provided as security for costs. 8. I make the following orders: 1. The defendant pay the plaintiff's costs of the proceedings (including in respect of the Cross-Summons) on the ordinary basis. 2. The defendant to pay interest on the plaintiff's costs from the date the costs were incurred at the rate as set out in r 36.7 of the Uniform Civil Procedure Rules 2005 (NSW). 3. Within 72 hours of these orders being entered, the defendant to deliver to the offices of the plaintiff's solicitor the original bank guarantee dated 31 July 2019, and any copies. ********** Endnotes 1. Payce Communities Pty Ltd v Canterbury-Bankstown Council [2021] NSWSC 331. 2. Payce Communities Pty Ltd v Canterbury-Bankstown Council (No 2) [2021] NSWSC 404; Payce Communities Pty Ltd v Canterbury-Bankstown Council (No 3) [2021] NSWSC 464; Payce Communities Pty Ltd v Canterbury-Bankstown Council (No 4) [2021] NSWSC 558. 3. At [11]-[14]. 4. For example, Windsurfing International Inc. v Petit (1987) AIPC 90-441 at 37,861-37,862 (Waddell J); and Sze Tu v Lowe (No 2) [2015] NSWCA 91 at [39] (Gleeson JA; Meagher and Barrett JJA agreeing). 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: 17 June 2021