Supreme Court New South Wales Medium Neutral Citation: Urban Fortune Global Ltd v Deicorp Projects (Partridge Ave) Pty Ltd (No 3) [2023] NSWSC 498 Hearing dates: On the papers, final submission received 26 April 2023 Date of orders: 12 May 2023 Decision date: 12 May 2023 Jurisdiction: Equity - Expedition List Before: Parker J Decision: See [46] Catchwords: COSTS – party/party costs – rule that costs follow the event – where defendant failed in denial of genuineness of signature on contract but succeeded overall – apportionment Legislation Cited: Civil Procedure Act 2005, s 98(1) Uniform Civil Procedure Rules 2005, r 42.1 Cases Cited: Adey v Fisher (1914) SR (NSW) 407 Akierman Holdings Pty Limited v Akerman (No 3); In the matter of Akierman Holdings Pty Limited (No 2) [2021] NSWSC 869 Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 Commonwealth v Gretton [2008] NSWCA 117 Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373 Harkins v Butcher (2002) 55 NSWLR 558 Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34 James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 Kanjian Holdings No 1 Pty Ltd v Kanjina (No 4) [2021] NSWSC 1390 Parker v McKenna [1874] LR 10 Ch App 96 Re Consort Deep Level Gold Mines Ltd; Ex parte Stark [1897] 1 Ch 575 Rosniak v Government Insurance Office (1997) 41 NSWLR 608 Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 Thomson v Eastwood (1877) 2 App Cas 215 Urban Fortune Global Ltd v Deicorp Projects (Partridge Ave) Pty Ltd [2022] NSWSC 1352 Urban Fortune Global Ltd v Deicorp Projects (Partridge Ave) Pty Ltd (No 2) [2022] NSWSC 1703 Texts Cited: Nil Category: Costs Parties: Urban Fortune Global Limited (First Plaintiff) Polytec Australia One Pty Ltd (Second Plaintiff) Deicorp Projects (Partridge Ave) Pty Ltd (Defendant) Representation: Counsel: AJL Bannon SC/GW Stapleton (Plaintiffs) ARR Vincent (Defendant) Solicitor: HFW Australia (Plaintiffs) HWL Ebsworth (Defendant) File Number(s): 2021/229404 Publication restriction: Nil JUDGMENT 1. This is a costs dispute. I have delivered two prior judgments in the relevant proceedings. The first concerned an expedited hearing in September. I delivered my judgment in October: Urban Fortune Global Ltd v Deicorp Projects (Partridge Ave) Pty Ltd [2022] NSWSC 1352. I will refer to paragraphs of that judgment as "J1". The second concerned the orders to give effect to that decision, and included finally resolving an issue on which I offered a preliminary view in my October judgment. I delivered my judgment in December: Urban Fortune Global Ltd v Deicorp Projects (Partridge Ave) Pty Ltd (No 2) [2022] NSWSC 1703. I will refer to that judgment as "J2". This judgment assumes familiarity with both of those judgments. 2. The plaintiffs' claims have been dismissed, with costs reserved. The plaintiffs submit that the Court should order that the plaintiffs pay only 50% of the defendant's costs of the proceedings, as agreed or assessed. The defendants press for an order that the plaintiffs pay their costs of the proceedings on an ordinary basis, as agreed or assessed. Background and procedural history 1. The background to the proceedings is set out at J1 [1]-[12]. A chronology of key facts is at J1 [13]-[45]. Those matters are further summarised at J2 [3]-[17]. I provide a further condensed summary, sufficient for present purposes. 2. The proceedings concerned the potential sale of properties at Castle Hill. They have centred upon a written agreement bearing the date 23 April 2021 ("the Agreement") between the first plaintiff, UFG, and the defendant, Deicorp PA. The Agreement contemplated the sale of the properties. The second plaintiff, Polytec A1, was incorporated to be the special purpose vehicle which would be the purchasing entity. 3. The Agreement provided for a "due diligence" period of thirty days. This was to allow the purchaser to conduct investigations and consider whether to proceed. Any purchase was to involve a special purchase vehicle, nominated by the purchaser, as purchasing entity. There was also a reasonable endeavours obligation. The parties disputed whether that obligation could be enforced. The obligation provided that the parties were to: use all reasonable endeavours to agree the terms of a Contract for Sale … to the intent that the Contract for Sale will be available for execution and exchange upon the Purchaser's successful completion of due diligence 1. The Agreement was followed by the exchange of two draft contracts between the solicitors for the first plaintiff and the defendant. The first was sent by the solicitors for the defendant on 5 May. The second was sent by the solicitors for the first plaintiff on 14 May. Then, on 19 May, the defendant's solicitors advised that their client did not wish to proceed with the contract. The first plaintiff's solicitors responded on 20 May. They protested the breakdown in negotiations. They also made an offer which involved the first plaintiff accepting the terms of the 5 May draft contract. The defendant did not respond before the expiry of the due diligence period. 2. The plaintiffs contended that the defendant was required to execute and exchange contracts in the form proposed on 14 May, in favour of the second plaintiff. Alternatively, they contended that the requirement was to execute and exchange contracts in a form the Court might decide would have resulted from negotiations in good faith. 3. The Agreement bore what purported to be the signature of Mr Fouad Deiri (J1 [9]) on behalf of the defendant. Mr Deiri controlled the group of companies of which the defendant formed part (J1 [3]). The defendant denied in its Defence that the signature was in fact Mr Deiri's. Alternatively, the defendant contended that if it was bound by the Agreement, the Agreement did not create enforceable obligations to sell the property. In the further alternative, the defendant contended that the Agreement was invalid or unenforceable for non-compliance with provisions of the Conveyancing Act 1919 applicable to options to purchase residential property (J1 [9]). 4. The plaintiffs initially sought an order for specific performance of the 14 May draft contract. In closing submissions, counsel indicated that this was no longer pressed, on the basis that such an order would be impracticable (J1 [11]). The plaintiffs still pressed for damages, in lieu of specific performance, under Lord Cairns' Act, which meant it was still necessary to determine entitlement to specific performance (J1 [11]). The plaintiffs also sought, in the alternative, damages at law for breach of contract (J1 [12]). The assessment of any damages was to be deferred, with the expedited hearing confined to the issue of the enforceability of the contract (J1 [10]). 5. The plaintiffs' lay evidence concerning the genuineness of Mr Deiri's signature came from Mr Walton Chu. Mr Chu was a real estate agent acting for the defendant on the proposed sale. His evidence was that he took the Agreement to Mr Deiri and obtained his signature on it (J1 [49]). At the September hearing, Mr Chu was cross-examined at length, including extensively on points going to his credit (J1 [50]). The plaintiffs also led evidence from Ms Melanie Holt, a forensic document examiner. She was briefly cross-examined on her report (J1 [60]). 6. In advance of the September hearing, the plaintiffs had served an affidavit from Mr Deiri denying that he signed the Agreement. But in the event he was not called. I was told that the defendant also retained a handwriting expert, but there was no evidence from any such expert at the hearing. 7. In my October judgment (J1 [46]), I identified the issue of whether the signature on the Agreement was in fact Mr Deiri's, as "[t]he only factual issue in dispute at the hearing". I concluded that the signature was genuine (J1 at [71]). 8. The parties were in dispute as to the reasonable endeavours obligation in the Agreement. As a matter of construction (J1 [91], [125]), I concluded that: the defendant was obliged to make an offer capable of being accepted by the Purchasing Entity; the defendant was obliged to keep such an offer "in play"; and offers made by the defendant needed to be consistent with the terms of the Agreement. Significantly, however, I found that there was no contractually enforceable prescribed content of the offer (J1 [130]). On breach, I concluded that the plaintiffs were not entitled to require the defendant to proceed with a contract in the terms proposed on 14 May (J1 at [150]). This meant that the plaintiff had no entitlement to specific performance (J1 [150]). I also rejected an argument of the defendant that the Agreement could not be enforced based on parts of the Conveyancing Act 1919 (J1 [131]-[139]). 9. In my October judgment, I only gave a tentative conclusion on the plaintiffs' claim for damages for breach of contract. This was that the first plainitff failed to validly nominate a special purpose vehicle, such that the defendant's obligation to make an offer, capable of acceptance, to the nominated special purpose vehicle, did not arise. Therefore, there was no breach of an enforceable obligation (J1 [151]-[161]). 10. The conclusion was tentative because it was not the subject of argument, or at least full argument (J1 [162]). Accordingly, I gave the plaintiffs the opportunity to be heard further on the question, should they wish. They took up that opportunity (J2 at [15]). Both parties filed written submissions. Supplementary oral submissions were heard on 9 December. Counsel for the plaintiffs disputed my tentative conclusion and, alternatively, submitted that even if correct, there had been a valid nomination on 14 May (J2 at [16]). Counsel also submitted that their claim should not be defeated by an "unpleaded defence" and pointed out that the failure to validly nominate a special purpose vehicle had not been taken at the time. Counsel sought a declaration that the defendant breached its obligation to take reasonable steps to accept the offer or put a counteroffer, or alternatively, a declaration that the obligation was enforceable. Counsel for the defendant sought judgment on the basis that my tentative conclusion was correct (J2 at [17]). 11. In my December judgment, I reconsidered my tentative conclusion (over objection) and reached the same view (J2 at [32]-[39]). I concluded that the pleading point was defeated by the fact that based on the pleading and conduct of the case, there was no allegation requiring the response in question (J2 at [24]-[31]). I concluded that the failure to take the point at the time argument was neither pleaded nor sufficiently supported by evidence (J2 at [40]-[43]). 12. In my December judgment (J2 [44]) I concluded that the plaintiffs' claim must be dismissed. At [45], I said the following regarding costs: There may be a debate before me about the costs of the proceedings, especially considering that Deicorp PA failed in its defence about execution of the Letter Agreement. I propose to reserve costs. If the parties can agree the costs outcome a minute of order may be submitted. Otherwise, I will hear further argument. Costs of proceedings Submissions 1. Counsel for the plaintiffs recognised that the defendant is prima facie entitled to a costs order in accordance with the general rule in r 42.1 of the Uniform Civil Procedure Rules 2005, having enjoyed ultimate success at trial. Counsel submitted that the general rule should be displaced, having regard to the plaintiffs' success in establishing, over the defendant's denial, that Mr Deiri did in fact sign the Agreement. 2. Counsel referred to the observations of Hodgson JA (Mason P agreeing) in Commonwealth v Gretton [2008] NSWCA 117 at [121], that both the general rule and qualifications to it are underlain by "the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs". Counsel noted that those observations were cited in Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34 at [98]. Counsel noted the wide statutory discretion given to the Court by s 98(1)(a)-(b) of the Civil Procedure Act 2005, to determine the payer, payee and extent of costs. 3. Counsel then referred to examples of circumstances (with reference to authorities) where separate costs orders have been made. These included a successful party unreasonably pursuing an issue, and plaintiffs making unnecessary allegations of fraud. Counsel submitted (with reference to authorities) that any exercise of the discretion to apportion costs is not to be undertaken with mathematical precision. 4. Counsel went on to outline why the defendant's failure to establish that Mr Deiri did not sign the Agreement gave rise to costs consequences. The reasons given were: first, this was a key element of the defence; second, the issue was first raised in correspondence of July 2021, prior to the plaintiffs filing their Statement of Claim in August 2021; third, the allegation of fraud was advanced clearly and consistently by the defendant during the proceedings, including in parts of Mr Deiri's November 2021 affidavit, and in cross-examination of Mr Chu in the September hearing; fourth, that the signature issue was the most material factual issue in dispute at the September hearing; fifth, despite maintaining the signature pleading at trial, the defendant's conduct was more consistent with not engaging properly with the issue, including by not calling Mr Deiri to give evidence, and withdrawing its own expert evidence; sixth, the Court drew a Jones v Dunkel inference on the issue, and was comfortably satisfied that the signature was genuine. 5. Counsel then pointed to the consequences of the signature issue. Counsel submitted that the plaintiffs spent considerable time and costs seeking to prove that the signature was genuine. Counsel submitted that the maintenance of the pleading by the defendant led to the plaintiff wasting significant time and costs. Counsel submitted that these costs included those associated with: (a) briefing and retaining a handwriting expert to provide expert evidence regarding Mr Deiri's signature (b) attending various directions hearings relating to the provision of documents to the Plaintiffs' handwriting expert; (c) preparing and serving multiple subpoenas to produce documents and attending various return of subpoena hearings; (d) preparing and serving various Notices to Produce; and (e) undertaking various other enquiries to obtain evidence that Mr Deiri executed the agreement relied upon by the Plaintiffs including drafting Outline of Evidence of Mr Walton Chu 1. Counsel also set out examples of the defendant incurring costs to address the signature issue, namely: (a) procuring an Affidavit from Mr Deiri regarding the validity of his signature on the Letter of Offer; (b) procuring an Affidavit from Mr Paul Cutcliffe regarding the whereabouts of the Defendant at or about the time the Plaintiffs alleged Mr Deiri executed the Letter of Offer; (c) attending directions hearings regarding the timetable for the service of the parties' handwriting evidence and documents required to be produced to the Plaintiffs' handwriting expert; (d) any costs paid to the Defendant's handwriting [expert] to prepare a report (albeit not served). Counsel submitted that the incurrence of these additional costs formed the basis of the defendant seeking additional security for costs in July 2022. 1. Counsel submitted that the issue unreasonably prolonged the proceeding, by requiring the original hearing date to be vacated and the matter to be listed for an increased number of days. Counsel submitted that the 50% reduction in costs sought was, in substance, equivalent to what the plaintiffs would have been awarded in costs of a hearing dedicated to the signature issue. 2. Counsel for the defendant relied upon the principle that courts ordinarily do not differentiate between issues the subject of mixed success, unless dominant and separable, citing Bostik Australia Pty Ltd v Liddiard (No 2) NSWCA 304 at [38]. Counsel further relied on the reluctance of courts to depart from the general rule, doing so only in the "most exceptional of circumstances", citing Kanjian Holdings No 1 Pty Ltd v Kanjina (No 4) [2021] NSWSC 1390 at [53]. 3. Counsel submitted that the defendant's position on the signature issue was not unreasonably taken. Counsel submitted that there were doubts as to the timing of signature, and referred to my comments in my October judgment (J1 [69]-[71]), where I expressed uncertainty as to timing. Counsel further submitted that the issue of the execution of the Agreement was relatively limited, and not the dominant issue at the hearing. Counsel submitted that the hearing was largely concerned with the enforceability and construction of the Agreement. 4. Counsel pointed to the plaintiffs' overall failure in their claim. Counsel submitted that in circumstances where this failure arose from the plaintiffs' pleading and failure to lead evidence, costs should not be dealt with on an issue-by-issue basis. 5. In reply submissions, counsel for the defendant submitted that the order sought by the plaintiffs was extravagant and lacked any proportionality with the result of the proceedings, or the limited success of the plaintiffs on issues in dispute. Counsel conceded that the defendant disputed the authenticity of the signature, that the issue was in dispute at the hearing, and that it failed on the issue. Nonetheless, counsel maintained that the defendant's challenge was not unreasonable, and pointed again to the doubt as to the circumstances and timing of the signature expressed in my October judgment. Counsel reiterated the limited nature of the signature issue at the September hearing. Counsel further submitted that the second hearing, resulting in my December judgment, had nothing to do with the signature issue. 6. Counsel submitted that the plaintiffs had failed to adduce evidence to support the costs order sought. Counsel submitted that there was insufficient evidence available to the Court to determine the proportion of costs said to have been incurred by the plaintiffs on the signature issue. Counsel submitted that was so in circumstances where no evidence had been provided to demonstrate that the time and costs incurred were reasonable and proportionate to the issue. 7. Counsel's primary position remained that costs should follow the event, given that the plaintiffs' failure was attributable to their pleadings and failure to lead evidence. Counsel's alternative, fallback position, was that any costs order in favour of the plaintiff should be limited to the plaintiffs' costs of the handwriting expert. Conclusion 1. I do not understand the basic principles to be in dispute. Application of the general rule that costs follow the event would result in the plaintiffs paying the whole of the defendant's costs. The question before the Court is whether there should be a departure from that position. 2. The defendant's denial of the genuineness of Mr Deiri's signature was not a direct allegation of fraud, but it did implicitly involve an allegation of forgery. I am not, however, convinced that there is any general rule that failure to make out an allegation of fraud, per se, attracts costs consequences. I do not think that the authorities referred to by counsel for the plaintiffs (Parker v McKenna [1874] LR 10 Ch App 96; Thomson v Eastwood (1877) 2 App Cas 215; Re Consort Deep Level Gold Mines Ltd; Ex parte Stark [1897] 1 Ch 575; Adey v Fisher (1914) SR (NSW) 407) support that proposition. 3. Those authorities were referred to by the Court of Appeal in Harkins v Butcher (2002) 55 NSWLR 558 at [92], as supporting the proposition that "[p]laintiffs who make unnecessary allegations of fraud which fail will normally be ordered to pay the defendant's costs of those issues" (my emphasis). The allegation of fraud in that case was unnecessary because the relief sought could have been obtained based on innocent misrepresentation (see [91]). In the present case, the denial of the genuineness of Mr Deiri's signature was not unnecessary in that sense. Whether that denial amounted to an allegation of fraud for the purposes of the principle stated by the Court of Appeal does not arise for decision. 4. The fact remains however that the defendant failed on the signature issue. I discussed the principles applicable to determining costs where parties have enjoyed mixed success in Akierman Holdings Pty Limited v Akerman (No 3); In the matter of Akierman Holdings Pty Limited (No 2) [2021] NSWSC 869 at [54]-[84]. I do not propose to re-trace that ground here. It is sufficient to note that courts have been prepared to order that a party who has been successful overall pay the costs of an issue on which that party has been unsuccessful where the issue was "clearly dominant or separable": see Akierman at [67]-[68] and the authorities referred to there. Counsel for the defendant alluded to this principle in their submissions, but phrased it as "dominant and separable". 5. It may be that, viewed in the context of the proceedings as a whole, the signature issue was not "dominant". Separability, however, is a different matter. 6. The Court of Appeal noted in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38], with reference to James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34] and to Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373, that: A separable issue can relate to "any disputed question of fact or law" before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter 1. In my view, the signature issue was separable. Indeed, I separately identified it in my October judgment (J1 [46]) (referred to by counsel for the plaintiffs), by identifying it as the sole factual issue in dispute at the September hearing. There were aspects of the evidence and argument capable of being separately identified as concerned with the signature issue alone. The issue was also separable in the sense that had the defendant succeeded on it, that would have been fatal to the plaintiffs' claims. 2. The Court of Appeal in Bostik at [38], again with reference to Elite Protective Personnel v Salmon (No 2), summarised a principle from Sabah Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306 at [24], as follows: In relation to trials it has been said that it may be appropriate to deprive a successful party of costs or a portion of the costs if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument 1. In my view, the signature issue also attracts the operation of that principle. The cross-examination of Mr Chu on matters of credit, which was lengthy, ultimately only went to the signature issue. In fact, if the issue had not been raised, little or no time would have been occupied by the evidence. The issue (including the related credit points) also occupied a significant part of the argument. 2. The Court is not in a position to say whether or not it was unreasonable to raise the signature issue by way of defence or to pursue it to final hearing. Unreasonableness or impropriety has therefore not been established. But that does not prevent the Court from making a separate order with respect to the costs of that issue: Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 615D. In my view, it is sufficient that the signature issue was a discrete factual issue which took up significant time and would have significantly contributed to the overall costs of the proceedings. 3. For these reasons, I propose to make an order for apportionment of costs. But I am not prepared to make the 50% order sought by the plaintiffs. Accepting that an apportionment cannot be determined with mathematical precision, I nevertheless agree with counsel for the defendant that there is insufficient evidence to justify the figure sought. That difficulty is most acute for the costs of pre-trial steps such as preparing evidence and the disclosure of documents: the share of those costs attributable to the signature issue cannot realistically be assessed by the Court from an observation of the trial (see Akierman at [122]). 4. What I propose to do is to make an order apportioning the costs of the September hearing so as to reflect the time added to that hearing by the signature issue. I estimate that without the signature issue, the September hearing would have been completed within two days, not three. I will therefore discount the defendant's costs of the hearing by one-third and order the defendant to pay one-third of the plaintiff's costs of that hearing. 5. This apportionment will apply to the costs of the preparation for, as well as the conduct of, the September hearing. It will not, however, apply to the subsequent hearing. That hearing was not at all concerned with the signature issue, which I had already determined. 6. The apportionment will not apply to the costs of pre-trial steps in the proceedings. I have already referred to the practical difficulty in the Court making an apportionment of those costs. As well, there may be less justification for such an apportionment during the pre-trial phase of the proceedings, when the parties are still gathering evidence and the ultimate legal and factual issues may not be so clear. I think that confining the apportionment to the costs of the trial, when those issues have come into focus, or should have done so, strikes the right balance. But an exception needs to be made for the costs of obtaining expert handwriting evidence. Clearly such costs are relevant only to the signature issue, and they should readily be identifiable. The defendant will have to pay those costs of the plaintiffs and will be deprived of its own. Costs of the costs argument 1. The plaintiffs were required to approach the Court to seek a departure from the general rule. They have succeeded in obtaining orders departing from that position, even if not the precise orders sought. In those circumstances, the defendant ought to pay the plaintiffs' costs of the costs argument. Orders 1. The orders of the Court are: 1. Order that the defendant: 1. pay one-third of the plaintiffs' costs of and associated with the hearing which took place on 19, 20 and 21 September 2022; 2. pay the plaintiffs' costs of obtaining expert advice and evidence as to the genuineness of the signature of Fouad Deiri appearing on the "Letter of Offer and Exclusive Due Diligence Agreement" between the first plaintiff and the defendant, bearing the date 23 April 2021; and 3. pay the plaintiffs' costs of the argument concerning the costs of the proceedings. 1. Order that the plaintiffs: 1. pay two-thirds of the defendant's costs of and associated with the hearing which took place on 19, 20 and 21 September 2022; and 2. (b) otherwise pay the defendant's costs of the proceedings, apart from: 1. the defendant's costs of obtaining expert advice and evidence as to the genuineness of the signature of Fouad Deiri appearing on the "Letter of Offer and Exclusive Due Diligence Agreement" between the first plaintiff and the defendant, bearing the date 23 April 2021; and 2. the defendant's costs of the argument concerning the costs of the proceedings. 1. Order that the plaintiffs' costs entitlement under order 1 above be set off against the plaintiffs' costs liability under order 2. ********** 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: 12 May 2023