GRUZMAN PTY LTD v BATEMAN SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL COLE JA, GILES and ABADEE AJJA 17 October 1996, 17 October 1996 [1996] NSWCA 235 FINDINGS on fact not disturbed — appeal withdrawn on day of hearing — appellant ordered to pay costs on solicitor client basis. Cole JA The issue before the Court relates to costs of this appeal. That is so because the appellant Gruzman Pty Ltd this morning first sought to withdraw the appeal and subsequently consented to the appeal being dismissed. Once that consent was forthcoming the respondents to the appeal sought an order for costs against the appellant on a solicitor and client basis. The respondents made other applications which have subsequently been withdrawn and that is the only extant application with which this Court must deal. Before turning to the history of the events leading up to today it is important to have regard to the nature of the litigation and the findings of the trial judge, Sinclair DCJ. The appellant Gruzman Pty Ltd sued the respondents for architectural fees for alterations. Shortly put, the respondent's defence raised was that the contract between the parties provided that the cost of work should be approximately $80,000, whereas the building as designed by Gruzman Pty Ltd would have cost some $330,000 to construct. Further the respondents said they had made known to the appellant that they had entered into a conditional contract to purchase the building subject to development approval being obtained from the relevant counsel by 24 October 1987 and that the appellant was obliged to prepare and lodge an appropriate development application and plans to permit that approval to be obtained. They alleged there was no specific agreement between the parties concerning the payment of fees on account and that in breach of contract the appellant had withdrawn the development application thus resulting in approval not being obtained and the consequence that the conditional contract lapse. The appellant Gruzman Pty Ltd in response to that denied that there was any agreed monetary limit on the works, it denied that it was informed of any time limits regarding the obtaining of development approval to permit completion of the conditional contract, it asserted that there were arrangements for payment on account of fees and contended for an agreed entitlement to withdraw the development application on non-payment of fees. Resolution of the issues between the parties depended upon the evidence of Mr Neville Gruzman on behalf of the appellant and Mr and Mrs Bateman on behalf of the respondent. As the trial judge found, "The assessment of credibility in this case depends to a very large extent upon their demeanour in the course of giving evidence, the consistency of the evidence and the extent to which in particular as the cross-examination progressed the reliability of these witnesses was either enhanced or cut down". On all critical issues the trial judge accepted the evidence of Mr and Mrs Bateman in preference to the evidence of Mr Gruzman. In consequence his Honour made a number of findings. First, the substance of the contract between 2 UNREPORTED JUDGMENTS the parties was that the plaintiff would design a photographic studio and residence for the defendants and would obtain development approval for such a project. Second, that the defendants had made known to the plaintiff that their contract to purchase the site was conditional upon obtaining development approval from the Sydney City Council by 24 October 1987. Third, that the defendants had made known to the plaintiff that they were bound by financial restraints for the construction of the project, namely $80,000. Fourth, that there was unreasonable delay on the part of the plaintiff in preparing the development application. Fifth, that there was no agreement for the plaintiff to receive fees based on a percentage of an estimated cost of construction in the order of $330,000. Six, that there was no specific term of the contract, that the plaintiff was entitled to receive payment on account prior to lodging the development application with the council. Seventh, that in breach of contract the plaintiff wrongfully and without instructions from the defendants withdrew the development application before it was considered by the council. And, finally, that the plaintiffs breach of contract was a fundamental breach going to the root of contract amounting to a repudiation by the plaintiff of his obligations under the contract and absolving the defendants from their obligation to pay the fees claimed by the plaintiff. As the resolution of the matter in dispute depended upon the trial judge's assessment of credit of the competing witnesses, the circumstances in which an appellate court may interfere with such findings is limited. See Abalos v The Australian Postal Commission! and Devries and Anor v Australian National Railways Commission and Anor?. As the High Court has said in Devries, as the trial judge's findings depend to a substantial degree on the credit of witnesses the finding must stand unless it can be shown that the trial judge has failed to use or has palpably misused his advantage or has acted upon evidence which was inconsistent with the facts incontrovertibly established by the evidence or which was glaringly improbable. Thus that was the task facing the appellant on this appeal. Four grounds of appeal only were filed and each of them challenged one of the findings of fact made by the trial judge which, as I have said, were based upon his assessment of the competing credit of Mr Gruzman on one hand and Mr and Mrs Bateman on the other. The task of the appellant of succeeding in the appeal was in my view an overwhelmingly difficult task such that I would regard the prospects of success as non-existent. The appeal on the grounds filed can properly be described as manifestly hopeless. The notice of appeal was filed on 21 October 1993. Various directions were given by the registrar in December 1993, but no steps were then taken in relation to the appeal until about March 1995. The appeal books were filed on 21 April 1995 and the matter was called over on 24 April 1995. Throughout this time there remained outstanding in favour of the respondents both an order for costs of the proceedings in the District Court and a verdict on a cross-claim in the sum of $1463.67. Neither of those were paid. On 21 August 1995 the respondents brought, by way of notice of motion, an application for security for costs of the appeal. By consent on 4 September 1995, security was ordered in the sum of $ 12,000 and that was provided by way of 1. (1991) 171 CLR 167. 2. (1993) 177 CLR 472 at 479. URJ GRUZMAN PTY LTD v BATEMAN (Cole JA) 3 bank guarantee. On 4 September 1996 the matter was given a hearing date of today, namely 17 October. It seems that at that point of time it was the appellant's contention to proceed with the appeal. On 9 September 1996 Messrs Watson and Watson, solicitors for Gruzman Pty Ltd wrote to their opponents indicating that an application would be made to seek to rely on a further ground of appeal. Prior to that occurring, namely in May 1996, a creditor's statutory demand in respect of monies payable under the cross-claim judgment had been served upon Gruzman Pty Ltd, but was not complied with. It seems from searches tendered to this Court that on 13 June 1996 the appellant company was in fact deregistered, it would seem for failing to file annual returns for the years 1994 and 1995. It is not known to this Court whether or not that deregistration was known to those who direct Gruzman Pty Ltd. What is clear is that it was not known to the respondent to this appeal that the appellant company had become deregistered. However that information did come to their knowledge apparently on | October or shortly before, because on that date a notice of motion was filed which in substance sought to strike out the appeal upon the basis that the appellant company had been deregistered and no longer existed. That notice of motion filed on 1 October was returned before me on 4 October. Undoubtedly it would have succeeded had the company remained dissolved and off the register. However as appeared when the matter was returned before me on 4 October, at 5.15pm on the preceding day 3 October, the company had been reregistered. Accordingly that notice of motion was dismissed, but costs of it were reserved until the hearing of the appeal. Application was made for the appeal date to be vacated, but I declined to make that order. That application for vacation of the hearing date was made by Gruzman Pty Ltd. The matter was listed for hearing today. In accordance with the practice of this Court, submissions in support of those grounds of appeal which were desired to be argued should have been filed four working days ago. None were filed. This morning the solicitor for the appellant apparently received instructions from his client Gruzman Pty Ltd that it did not intend to proceed with the appeal and sought to withdraw it. That information was conveyed to the solicitors for the respondent for the first time at about 8.30am this morning. When the matter came before the Court I sat alone as information given to the Court was that the matter was going to be discontinued, I had understood, by consent. Such an order would have carried with it an order for costs had the rules been complied with and a notice of discontinuance filed, but the rules were not complied with. When the matter was mentioned before me counsel for the respondent sought to have the appeal dismissed. That was not by consent and accordingly the Court was reconstituted as it is presently constituted. It was then that the solicitor for the appellant indicated that his instructions were to consent to the appeal being dismissed. That generated the application for costs by the respondent on a solicitor client basis which this Court must now resolve. As I have said, the appeal in my opinion was manifestly hopeless. No submissions were advanced in support of it. No information has been given to the Court in the form of evidence as to why it is that the appeal was not prosecuted. No information has been placed before the Court as to why any discontinuance that was intended did not occur some time ago which undoubtedly would have saved costs. The only reason advanced was that one senior counsel was today unavailable although he had been available when the matter was given today's 4 UNREPORTED JUDGMENTS hearing date. That is an obviously inadequate reason for the matter not proceeding in light of the number of available members of the bar who could readily have conducted this matter. Accordingly, the circumstance is that the respondent has been put to costs which should never have been incurred and the reason they have been incurred is because the appellant has prosecuted a patently hopeless appeal and then withdrawn it on the day of the hearing; Those circumstances, in accordance with established principle, are sufficient to attract an order for costs on a solicitor and client basis. The discussion of relevant principles in such circumstances is to be found in Huntsman Chemical Co (Australia) Ltd v International Pools (Australia) Ltd3 in particular in the judgment of Mr Justice Rolfe commencing at 272 to 273 with which in substance Mr Justice Mahoney agreed. The solicitor for the appellant has drawn attention to the passage in the judgment of Justice Kirby appearing at 249 where his Honour indicated that where a party intends to seek a special order for costs in circumstances where it regards the appeal as manifestly hopeless it is preferable if notice of that application be given to the opponent at an early point of time. It is to be observed that his Honour did not suggest that absence of notice necessarily meant that an application for a special order for costs would not succeed. Each case obviously depends upon its circumstances. Whether it be preferable or not it seems to me that in a case such as this where it must have been apparent to any competent attorney or counsel who gave serious consideration to this appeal in light of the principles enunciated in Abalos And Devries that the appeal was hopeless. I do not think the absence of any notice of an application for a special order for costs should be a barrier to success of that application. It has been put on behalf of the respondent that the appeal itself is an abuse of process aimed at seeking to avoid or at least delay the impact of the order of the District Court in relation to the cross-claim and costs. There is no material before this Court which would enable this Court to reach such a finding and I do not do so. It is sufficient in my view to note that the circumstances raised in the grounds of appeal had such little prospect of success that the appeal can be regarded as manifestly hopeless and that it was withdrawn on the morning of the hearing. Those two circumstances in my view justify the making of an order that the appellant pay the respondent's costs of the appeal on a solicitor and client basis. Accordingly I would propose that the orders of the Court be: 1. Appeal dismissed. 2. The appellant is to pay the respondent's costs of the appeal upon a solicitor and client basis. 3. The respondents are to have access to the security for costs which have previously been ordered in satisfaction or part satisfaction of the order for costs in relation to the appeal. Giles AJA I agree with the orders proposed and with Mr Justice Cole's reasons for those orders. Abadee AJA I also agree. Cole JA: The orders will be as I have indicated. 1. Appeal dismissed. 3. (1995) 36 NSWLR 242. URJ GRUZMAN PTY LTD v BATEMAN (Abadee AJA) 5 2. The appellant is to pay the respondent's costs of the appeal upon a solicitor and client basis. 3. The respondents are to have access to the security for costs which have previously been ordered in satisfaction or part satisfaction of the order 5 for costs in relation to the appeal. Counsel for the appellant: RA Watson (Solicitor) Solicitors for the appellant: Watsons 10 Counsel for the respondent: JS Wheelhouse Solicitors for the respondent: Thomas Osborne Kitamura