New South Wales Supreme Court CITATION : Cyrene Holdings Pty Ltd v Ambermill Pty Ltd & 4 Ors [1999] NSWSC 1199 revised - 09/12/99 CURRENT JURISDICTION : Equity FILE NUMBER(S) : 5132/98 HEARING DATE(S) : 2 December 1999 JUDGMENT DATE : 8 December 1999 Cyrene Holdings Pty Limited (Plaintiff) PARTIES : Dunecar Pty Limited (Third Defendant) JUDGMENT OF : Bergin J COUNSEL : G Sirtes (Plaintiff) W Haffenden (Third Defendant) SOLICITORS : Price & Co (Plaintiff) Cowley Hearne (Third Defendant) CATCHWORDS : Application by plaintiff (the unsuccessful party in a claim for specific performance) for a costs order to facilitate payment of indemnity costs by the defendant claimed to have been agreed to in a Deed settling the main proceedings. CASES CITED : Re a Solicitor's Bill of Costs; in Re Shanahan & Anor (1941) 58 WN 132; Elders Trustee & Executor Co Ltd v Eagle Star Nominees Ltd & Ors (1987) NSW Conv R 57045. DECISION : Application refused. Plaintiff to pay the third defendant's costs of the motion. THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BERGIN J DATE 8 DECEMBER 1999 5132/98 - CYRENE HOLDINGS PTY LTD v AMBERMILL PTY LTD & 4 ORS JUDGMENT 1 This matter was the subject of a hearing on 27 and 28 October 1999 on which latter date I dismissed a notice of motion brought by the plaintiff seeking an order for specific performance. 2 On that occasion application was made by the third defendant (the defendant) for costs as it had been successful in resisting the motion brought by the plaintiff. Although I acceded to that application I subsequently vacated that order upon the application of the plaintiff when it was indicated that there were matters material to the decision as to costs which had not been brought to my attention. 3 I heard further argument in the Duty List on 2 December 1999 when Mr Sirtes appeared for the plaintiff and Mr Haffenden appeared for the defendant. The history of the matter is set out in my judgment of 28 October 1999 and I do not intend to repeat it here. The issue for decision on this occasion is whether by reason of Clause 11 of the Deed entered into at the time of settlement of the main proceedings the plaintiff should have a costs order made in its favour notwithstanding the claim for specific performance was dismissed. 4 Order 11 of the Short Minutes of Order provides: THAT in the event that the judgment debt of $637,500 is not paid on or before 18 October 1999 then the Defendants shall pay upon demand and shall be jointly and severally liable to pay on an indemnity basis the Plaintiff's costs of and incidental to all and any enforcement proceedings which the Plaintiff undertakes against all or any one or more of the Defendants arising out of and incidental to these Orders or any aspect thereof, and such costs as incurred by the Plaintiff shall be liquidated debt at law due and payable to the Plaintiff by the Defendants jointly and severally. 5 Clause 11 of the Deed provides: In the event that the Defendants or any of them have not complied with any aspect of this deed or the consent orders by no later than 5 pm on 18 October 1999, then the Plaintiff shall be at liberty to undertake all such steps and action as the Plaintiff in its discretion deems fit including but not limited to: i. Enforcement proceedings for recovery of the outstanding balance of the Judgment (as referred to in the Consent Orders) and all other moneys owing to the Plaintiff by the Defendants against all or any of the Defendants; and/or ii. Enforcing the Plaintiff's rights as a mortgagee of the hotel; and/or iii. Enforcing the Plaintiff's rights pursuant to this deed or the Consent Orders; and/or iv. Such other action as the Plaintiff is legally entitled to undertake; and the defendants shall be jointly and severally liable to pay the plaintiff's costs of and incidental to any such action as referred to in sub clauses 11(i)-(iii) above inclusive, on an indemnity basis, which costs shall be payable by the defendants upon demand and shall form a liquidated debt due and payable at law to the plaintiff by the defendants jointly and severally. 6 The Deed and the Consent Orders were structured to facilitate the payment of the judgment debt to the plaintiff. One of the steps to be taken to enable the judgment debt to be paid was the auction or re-financing of the Rutherford Hotel. The regime set up for the auction of the hotel is referred to in some little detail in my judgment of 28 October 1999 but is set out in particular in paragraph 3 of the Deed. 7 Although a properly based application for specific performance may be a step along the way to recovery of a judgment in my view they are not proceedings that fall within the description outlined in clause 11(i) nor are they proceedings that fall within the description in Clause 11(ii) of the Deed. 8 The real question in my view is whether the proceedings fall within the description in Clause 11 (iii) of the Deed "enforcing the plaintiff's rights pursuant to this deed or the consent orders" 9 Clause 11 of the Deed entitles the plaintiff to take action for non-compliance with "any aspect of this Deed". If such action is one that falls within the description of enforcing the plaintiff's "rights pursuant to the deed" then the plaintiff submits the defendant has agreed to pay "the plaintiff's costs of and incidental to any such action" on an indemnity basis. 10 Assuming that the plaintiff's contention is sound it would mean that the plaintiff would be entitled to indemnity costs for any unsuccessful action it brought that fell within that category. Mr Sirtes does not shy away from this proposition, indeed he submits that is exactly what the parties agreed to in this Deed. He relies upon the authorities referred to by Mr Haffenden to submit that the only costs that would not be covered in an unsuccessful application would be those that were "unjustifiably or vexatiously incurred" (Re a Solicitor's Bill of Costs; in Re Shanahan & Anor (1941) 58 WN 132 per Street J, as His Honour then was, at 135) or not "properly incurred" (Elders Trustee & Executor Co Ltd v Eagle Star Nominees Ltd & Ors (1987) NSW Conv R 57045 per McLelland J, as His Honour then was at 57048). 11 Mr Haffenden relied on these authorities in support of his submission that the defendant should have its costs paid because the plaintiff was unsuccessful and therefore the costs of the application were not "properly incurred". 12 Both of the cases relied upon involved a clause in a mortgage. In the latter case McLelland J in analysing the limitation upon the meaning of the clause in the mortgage said at 57,048: In my opinion there is a necessarily implied qualification that the provision applies only to costs, charges, expenses or payments properly incurred. .. For this purpose I consider that "properly" means reasonably and in good faith. 13 That analysis is not truly analogous to the situation with which I am dealing and is therefore not decisive. However His Honour dealt with another matter at 57,049 when he said: The fate of the respective proceedings and the making of orders for costs are relevant only insofar as they may assist a conclusion to be reached on the question whether it was "proper" for Eagle to institute and prosecute the proceedings. 14 Although the plaintiff may suggest that this may 'beg the question' for decision in this matter I am of the view that this passage of His Honour's judgment favours the defendant's submissions. This passage, leaving aside the reference to the costs order, is a recognition that the outcome or "fate" of the proceedings is a relevant consideration as to whether the costs incurred were "proper". 15 This analysis assists me in the view that I have formed in respect of the meaning of Clause 11. I am of the view that the proceedings contemplated by the Clause are proceedings that are successful. In reaching this view I have paid particular regard to the use of the word "enforcing" in Cl 11(iii). Such a term leads me to the conclusion that they have to be proceedings in which the plaintiff's rights are enforced not merely sought to be enforced. These were not such proceedings. 16 In all these circumstances I am persuaded that the appropriate order is that the plaintiff pay the defendant's costs of the application. I make that order. **************************** Last Modified: 12/09/1999 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.