Supreme Court New South Wales Medium Neutral Citation: Hanave Pty Ltd v Nomad Sydney Pty Ltd [2024] NSWSC 624 Hearing dates: 8 December 2023 Date of orders: 24 May 2024 Decision date: 24 May 2024 Jurisdiction: Equity - Real Property List Before: Richmond J Decision: The summons be dismissed. No order as to costs with the intention that each party bear their own costs of the proceedings. Catchwords: COSTS — party/party — general rule that costs follow the event — proceedings discontinued or dismissed — no final hearing on the merits Legislation Cited: Civil Procedure Act 2005 (NSW) Environmental Planning and Assessment Act 1979 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 Knox Farms Pty Limited v Upper Lachlan Shire Council [2023] NSWSC 1601 Nabilo v Eagleton [2021] NSWCA 232; (2021) 250 LGERA 89 Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 Category: Costs Parties: Hanave Pty Ltd (Plaintiff) Nomad Sydney Pty Ltd (Defendant) Representation: Counsel: JE Lazarus SC and Y Truong (Plaintiff) G Sirtes SC and A Oakes (Defendant) Solicitors: Gilbert Mane (Plaintiff) Peterson Haines (Defendant) File Number(s): 2021/180550 Publication restriction: Nil JUDGMENT 1. Before the Court are applications for costs by both parties in relation to proceedings with a protracted procedural history but which ultimately required no final relief from the Court. Background 1. The plaintiff, Hanave Pty Ltd (Hanave), is the owner of a property located at 16–28 Foster Street, Surry Hills and the landlord of the building constructed on it. The defendant, Nomad Sydney Pty Ltd (Nomad), formerly known as Wine Nomad Pty Ltd, is the lessee of the ground floor of that building from which premises it operates a restaurant under the name 'Nomad' (Nomad Premises). 2. Clause 7(h) of the relevant lease required Nomad at its 'own expense with all due despatch to make any repairs additions improvements or alterations and to do all other things necessary to comply with notice or order issued by any public authority relating to the premises and occasioned by the use of the premises' by [Nomad] or by any 'neglect or default of [Nomad]'. 3. On 16 March 2021, the Council of the City of Sydney (Council) issued a fire safety order to Hanave under the Environmental Planning and Assessment Act 1979 (NSW) in relation to the building as a whole, but mostly relating to the Nomad Premises. This followed a fire at the Nomad Premises in September 2019, remediation works undertaken by Nomad during 2020 which Hanave alleged were unauthorised and which prompted a stop work order from the Council on 8 October 2020, and notification to Hanave from the Council on 23 December 2020 of its intention to issue a fire safety order. 4. The fire safety order required compliance by 20 July 2021. Nomad engaged consultants to undertake works and on 18 June 2021 sent an email to the Council requesting that a Council officer attend for a site inspection of the Nomad Premises on 25 June 2021. However, on 21 June 2021, Hanave instructed the Council by email to ignore Nomad's request for inspection. 5. On 23 June 2021, Hanave commenced proceedings by Summons seeking an interlocutory injunction restraining Nomad from taking steps to interfere with or prohibit Hanave from entering the Nomad Premises and 'carrying out any works reasonable or necessary to comply with the fire safety order'. 6. Hanave also sought the following final relief: 3. A declaration that the defendant is liable to the plaintiff for all costs incurred by the plaintiff in entering onto the Nomad Premises and carrying out the works reasonable and necessary to comply with the fire safety order. 4. Costs. 5. Interest, including interest on costs. 1. On 25 June 2021, which was around the time one of the COVID-19 lockdown periods commenced in Sydney, Nomad asked the Council whether it was possible to obtain an extension of time for compliance with the fire safety order. The Council informed Nomad that it could look into this, but Hanave (rather than Nomad) would have to make the request in writing. On 1 July 2021, Nomad asked Hanave to request the extension but it did not do so until about 20 July 2021. 2. Various interlocutory hearings ensued. They included a contested hearing on 8 July 2021 of Hanave's application for interim injunctive relief. However, by the end of that hearing, the parties were largely agreed as to the form of orders to be made by Darke J. Nomad gave an undertaking to the Court regarding a timeframe for compliance with specified items required by the fire safety order. 3. The compliance deadline was not met and on 13 October 2021, subsequent undertakings as to a compliance date were given to the Court by Nomad following a further interlocutory hearing. 4. The costs of both those interlocutory hearings were reserved by Darke J, that is, to await the ultimate outcome of the proceedings. 5. At the 13 October hearing, Hanave informed Nomad for the first time that in early August the Council had extended the time for compliance with the fire safety order to 15 December 2021. 6. The compliance date provided for by Nomad's 13 October 2021 undertaking was not met. 7. On 22 December 2021, Hanave served a Scott Schedule on Nomad incorporating 25 defects which it alleged required rectification by Nomad in order to comply with the fire safety order. 8. Various expert consultants were engaged by the parties to advise on these issues, but the parties and their consultants were unable to reach any consensus. 9. Ultimately, by order of Darke J on 20 May 2022, Mr Broadhead was appointed as an expert pursuant to Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 31.46 to inquire and report to the Court and the parties (at the joint cost of the parties) on fire safety issues by reference to the Scott Schedule. 10. Mr Broadhead reported as required and provided a series of updated reports over the subsequent 12 months or so. A final report was issued by Mr Broadhead on 15 June 2023 together with a final Fire Safety Certificate. 11. On 20 September 2023 the Council inspected the Nomad Premises. 12. On 21 September 2023 the Council sent a letter to Hanave confirming that the fire safety order had been satisfied. 13. Hanave seeks its costs of the proceedings on an indemnity basis, or alternatively on an ordinary basis. 14. Nomad seeks orders which may be summarised as follows: 1. Hanave pay Nomad's costs of and incidental to the interlocutory hearing held on 8 July 2021 on the ordinary basis; 2. Hanave pay Nomad's costs of and incidental to the interlocutory hearings held on 8 and 13 October 2021 on the ordinary basis; 3. Hanave pay Nomad's costs of the proceedings from 17 May 2022 on an indemnity basis; and 4. The parties otherwise bear their own costs. Relevant principles 1. The Court has a broad discretion as to costs pursuant to s 98 of the Civil Procedure Act 2005 (NSW). This discretion must be exercised judicially. Where there has been a hearing on the merits, the usual rule is that costs will follow the event: UCPR r 40.1. 2. Where, as in the present case, there has been no hearing on the merits, the authorities make clear that the proper exercise of this discretion will usually mean that there will be no order as to costs unless: 1. if the case had proceeded to a full trial, one party was almost certain to have succeeded; 2. one party has had a substantial victory and the other a substantial loss; or 3. there has been a marked difference in the reasonableness of the actions taken by the parties. 1. In each case it is necessary that the matters can be assessed by the Court determining the costs question on the basis of known and undisputed facts. 2. In Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6, McHugh J said at 624–625: In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties (Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201). To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action (Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201). … Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. … If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. 1. In Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84, Payne JA (Meagher JA agreeing) applied at [27], [33], the principle articulated by Court of Appeal in Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 at [5]: The Court must be satisfied there has been a marked difference in the reasonableness of the actions taken by the parties so that it can be said that one should be rewarded for its reasonable actions and the other should suffer a detriment in costs. 1. As Basten JA observed in Nichols at [8], if a question of whether a party has acted unreasonably can only be assessed by reviewing 'large swathes of evidence' and 'resolving on a tentative basis disputed questions of fact', the task 'should not be embarked upon'. See also at [47] per Payne JA (Meagher JA agreeing) and Knox Farms Pty Limited v Upper Lachlan Shire Council [2023] NSWSC 1601 at [43]. The parties' key contentions 1. The parties collectively filed 12 affidavits and about 8 sets of submissions on the question of costs, not including notes and chronologies handed up at the hearing of the application for costs. I have taken into account all of this material. The parties' contentions may be summarised briefly as follows. 2. Hanave contends that: 1. In a practical sense it has succeeded in the proceedings, with its object being compliance with the fire safety order. 2. The Scott Schedule effectively served as a 'form of pleading' and Havane was 'proven correct' in relation to 'most of the contested items'. 3. Nomad's conduct both before and during the proceedings was unreasonable including because it did not perform the works needed to comply with the fire safety order in a timely manner and obstructed Hanave's and Council's attempts to inspect the works, and failed to comply with its undertakings to the Court to complete the works by the specified dates. 1. Nomad contends that: 1. It has always been willing to do what is necessary to satisfy the fire safety order. 2. Hanave acted unreasonably in commencing and continuing the proceedings. 3. In assessing the timeliness of its compliance with the fire safety order, a relevant factor was the imposition of the COVID-19 lockdowns and the seriously adverse effect of this on restaurant businesses. 4. The delays in the fire safety order compliance certification at least were due in part to issues relating to the rest of the building outside of the Nomad Premises. 5. Nomad acted reasonably in contesting the relief sought at the interlocutory hearings which was open ended due to the failure to plead the work which Hanave sought access to the Nomad premises to undertake. 1. I accept that there is some force in this last point, as the Summons merely referred to 'carrying out any works reasonable or necessary to comply with the fire safety order'. Nomad said it opposed giving access to Hanave without greater specificity in what it was permitted to do on the premises because of the potential impact it would have on its restaurant business on the premises. 2. In support of its indemnity costs application, Nomad relies on a Calderbank offer it made on 17 May 2022 in which it offered to resolve the proceedings on the basis that: 1. The proceedings be dismissed. 2. Each party to bear its own costs. 1. Ultimately, this offer reflects the conclusion to which I have arrived as to the proper resolution of the proceedings. However, Nomad has not done better than the offer so as to entitle it to its indemnity costs. In any event, at the time the offer was made it was not unreasonable for Hanave to reject it given that the fire safety order had not been fully complied with. 2. In support of its first contention as to its 'practical success' in the proceeding, Hanave relies on Nabilo v Eagleton [2021] NSWCA 232; (2021) 250 LGERA 89. However, Nabilo is distinguishable on its facts. It was a simple dispute over a non-compliant air conditioning unit which interfered with the amenity of a neighbour's home by emitting noise in excess of those permitted under relevant regulations. The respondents defended the proceeding until shortly before the final hearing they replaced the offending parts of the air conditioning system as a result of which there was no longer any non-compliance: Nabilo at [2]. At that time consent orders were made, including an order requiring the respondent to ensure on an ongoing basis that the air conditioning units met the relevant regulatory standards and otherwise dismissing the proceeding: Nabilo at [3]. 3. As Brereton JA observed in Nabilo at [10], [93] (Meagher JA agreeing), there was a 'clear winner' and the respondent completely surrendered. There was no question of compromise, even though the respondent's air conditioning unit may have breached only one and not both of the regulations pleaded (at [10], [95]). The respondent's delay in taking the actions it ultimately took and consenting to the orders was unreasonable (at [99]). 4. Because there has been no hearing on the merits, in the present case the Court has not been called upon to resolve the factual disputes on which Hanave contends it has succeeded in a 'practical sense'. There was always a dispute between the parties and their experts as to what was required to be done to comply with the fire safety order. Unlike the single issue in Nabilo, the dispute here was complex and multi-faceted. 5. Further, Hanave has not succeeded in achieving the substantive final relief it sought in its Summons, namely a declaration that Nomad is liable to it for all costs incurred by Hanave in entering onto the Nomad Premises and carrying out the works reasonable and necessary to comply with the fire safety order. This is, it seems, because Nomad itself undertook that work, which it says it always intended to do and was in fact undertaking it before the proceedings were commenced. 6. On the question of reasonableness of the parties conduct, without effectively conducting a trial of a 'hypothetical action' and determining the merits of each of the alleged defects in the Scott Schedule and whether Nomad proper attended to them in accordance with its obligations under the lease and the requirements of Council, there is no basis on which the Court can be satisfied that 'there has been a marked difference in the reasonableness of the actions taken by the parties'. 7. The evidence (including the copious inter partes correspondence contained in the multi-volumed court book that the Court received containing 1,894 pages) demonstrates that both parties bear some responsibility for the protracted nature of the proceeding and the failure to resolve it earlier. In any event I am not able to be satisfied that there is a marked difference in the reasonableness of the parties' actions without undertaking a review of 'large swathes of evidence' and 'resolving on a tentative basis disputed questions of fact', which would be inappropriate (see [27] above). 8. As was the position in Nicols (see e.g. at [54]), it is not a case where, without addressing the merits, the Court may find that the plaintiff acted reasonably in commencing and prosecuting the claim and the defendant acted unreasonably in defending it. Nor vice versa. Conclusion 1. For the above reasons, in my opinion, the appropriate order as to costs is that each party pay their own costs. Hanave accepts that the proceedings should be discontinued or dismissed upon determination of the costs applications. Accordingly the orders I make are: 1. The summons be dismissed. 2. No order as to costs, with the intention that each party bears its own costs of the proceedings. 1. Given the result, neither party has succeeded on its costs application and there will be no order as to costs in respect of those applications, with the result that each party bears its own costs. At the hearing, counsel for Nomad requested the opportunity to argue costs of the costs application. My preliminary view is that there is no basis for a different costs order on the application. If either party wishes to contend to the contrary, I will give the parties leave to file and serve short submissions of no more than two pages within seven days so that the Court can make orders on the papers. ********** Amendments 28 June 2024 - Corrections to typographical errors: [27] - In the first sentence, "Baston JA" changed to "Basten JA". [42] - In the second sentence, "At the hearing, counsel for Hanave..." changed to "At the hearing, counsel for Nomad..." 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: 28 June 2024