New South Wales Supreme Court CITATION : DCT v Bowen & Anor [1999] NSWSC 881 CURRENT JURISDICTION : Equity FILE NUMBER(S) : 2907/97 HEARING DATE(S) : 16 & 17 August 1999 JUDGMENT DATE : 17 August 1999 Deputy Commissioner of Taxation (P) Ann Maree Bowen (D1) PARTIES : John B Gerathy (D2) Constantine Karageorge (1XD) Deputy Commissioner of Taxation (2XD) JUDGMENT OF : Hamilton J S J McMillan (P) COUNSEL : M B Evans (D1 & 2) C Karageorge in person Australian Government Solicitor (P) SOLICITORS : Bowen & Gerathy (D1 & 2) C Karageorge in person CATCHWORDS : PROCEDURE [553] - Costs - Costs of whole action - Generally - Where action settled - Usual rule. CASES CITED : Re The Minister for Immigration and Ethnic Affairs of The Commonwealth of Australia; Ex parte Lai Qin (1977) 186 CLR 622 DECISION : Agreement as to costs binding. No order as to costs not subject of agreement. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J TUESDAY, 17 AUGUST 1999 2907/97 DEPUTY COMMISSION OF TAXATION v ANN MAREE BOWEN & ORS JUDGMENT - On costs HIS HONOUR: 1 These proceedings were brought by the Deputy Commission of Taxation to enforce a claim he made to the proceeds of a property owned by the first defendant. The proceedings were fixed for hearing before me yesterday. They did not proceed. Some time in the couple of weeks preceding the date of the fixture the plaintiff indicated to the defendants that he would not continue to press the claim against them. There was then, as will appear, negotiation as to the costs of the proceedings. It is asserted by the plaintiff, but denied by the defendants, that as a result of the negotiation a binding compromise as to the costs was reached, to the effect that the plaintiff would pay the defendants' costs of the proceedings in the sum of $25,000. After discussion between the Bench and counsel, orders have been fashioned which dispose of the proceedings by agreement between the parties. However, there has been argument as to what order for costs should be made. This turned on whether or not the alleged compromise was in fact a binding agreement, and on what should be done about the costs that have been incurred in the proceedings since 12 August 1999, the day up to which the agreement, if binding, dealt with the costs of the proceedings. In relation to the agreement, two matters have been agitated. The first is whether the agreement is binding at all. The second is as to whether the agreement, if it is binding, upon its proper construction includes in the $25,000 stipulated the costs under an interlocutory order for costs made by Registrar Berecry, which still subsists. 2 The correspondence leading to the "agreement" as to costs has been tendered. The situation is that the offer which, if accepted, would constitute the contract was made by the defendants by fax on 12 August 1999, it being stipulated that the offer was open only until noon on the following day. At 9.14 am the following morning the plaintiff faxed the defendants accepting the offer. Despite the shortness of the time between offer and acceptance, the defendants alleged that the offer was made in a different factual context as to the overall settlement than that which prevailed the following morning when the plaintiff purported to accept it. This difference in context was said to relate principally to the disposal of a cross claim. On looking at the nature of the matter and reading the correspondence, I am unable to see that the situation did in reality change between offer and acceptance. Whilst there has been some further working out of the precise orders to be made, and this working out continued after the fax of acceptance on the morning of 13 August, and indeed continued in Court both yesterday and today, it seems to me that the real and substantial subject matter of the proposed agreement between the parties was exactly the same at the time of the offer as at the time of the acceptance and has indeed continued to be the same since that time. Only the mode of working out has been changed as to mechanics or detail in the formulation of the precise orders that I now propose to make. In those circumstances, I am of the opinion that there was a binding contract that the plaintiff should pay the defendants' costs of the proceedings but that those costs should be fixed at $25,000. 3 It has been suggested on the plaintiff's part by reference to words in the letter of offer, "Our client would be prepared to accept the sum of $25,000 for costs incurred to date in this matter", that the intention of the parties was that the agreement should subsume all costs, including any subsisting interlocutory order for costs. However, the letter of offer was written in a context in which the parties had exchanged their respective versions of short minutes, each of which contained an order for costs of the proceedings simpliciter without reference to subsisting interlocutory orders. Such an unqualified order for costs does not affect existing interlocutory orders. Bearing in mind this context, I do not think that the words "costs incurred to date in this matter" on their proper construction subsume the Registrar's existing order. That order is not caught by the agreement and, in my view, the obligation for costs created by that order will continue to exist, as well as the order for costs that I propose to make embodying the agreement for costs of $25,000. 4 However, the words "incurred to date" do have the effect, in my view, of defining the costs in respect of which the $25,000 is to be paid as the costs of the proceedings up to and including, but not after, 12 August 1999, the day on which the offer was made. In those circumstances, the costs of the proceedings since that day still fall to be decided. The defendants contend that they ought have those costs, as the plaintiff in effect abandoned his action. The plaintiff, on the other hand, contends that that ought not be so. His counsel refers me to what was said by McHugh J in Re The Minister for Immigration and Ethnic Affairs of The Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622 at 625, where his Honour said: "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. This approach has been adopted in a large number of cases. See, eg, Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194; Seventh Mingcourt Pty Ltd v Lawrence (unreported; Federal Court of Australia; 1 August 1996), per Branson J; Coleman v City of Melville (unreported; Supreme Court of WA; 22 September 1994), per Scott J; Compadres Australia Pty Ltd v Waterfront Place No 2 Pty Ltd (unreported; Supreme Court of Q; 15 August 1995), per MacKenzie J; Inprint Ltd v K & D Media Pty Ltd (unreported; Federal Court of Australia; 22 December 1995), per Einfeld J; Australian Securities Commission v Berona Investments Pty Ltd (1995) 18 ACSR 772." In a sense these proceedings, in the events which have happened, lie somewhere between the principle that applies in relation to abandoned proceedings, where the costs would prima facie fall on the abandoning party, and settled proceedings, where the principle stated by McHugh J would apply. The element of difference was that, on the one hand, the plaintiff, in the end, did not press his claim; on the other hand, the costs of the proceedings were still in issue and, as the correspondence makes plain, there was an element of compromise in the agreement that was come to as to costs. In addition, there is another factor in the plaintiff's favour on the exercise of the Court's discretion as to the costs after 12 August 1999. That is, the defendants denied the existence of the agreement which I have found to exist and brought to Court a claim for indemnity costs of the proceedings. On these matters they have failed in two ways. I have rejected their argument that the agreement was not binding, and I am also of the view that I should not order indemnity costs in any event, and certainly not in respect of the outstanding costs which remain to be dealt with by the Court. Bearing in mind these disparate factors, in my view the appropriate result is that each party should bear its own costs of the proceedings after 12 August 1999, the day up to which they are dealt with by the agreement. 5 Both parties have agreed that, if that were to be my decision, the simplest way to deal with the situation would be simply to make an order that the plaintiff pay the defendants' costs of the proceedings in the sum of $25,000 and, in due course, when making orders in the proceedings I shall do that. 6 In the meantime I make the following orders: (1) I direct that Mr Karageorge deliver to the plaintiff and to my Associate on or before 24 August 1999 a form of the second cross claim which he desires to file in these proceedings. (2) I stand Mr Karageorge's application for leave to file that cross-claim and his summons in proceedings 3575/99 over to 26 August 1999 at 9 am before me. (3) I direct the plaintiff to deliver to my Associate and to Mr Karageorge on or before 24 August 1999 short submissions as to the power to remove into this Court the District Court proceedings referred to in Mr Karageorge's summons. (4) These proceedings are also stood over to that time for the making of orders. …oOo… Last Modified: 09/07/1999 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.