Heaps v Longman [2000] NSWSC 542

Reported Decision : [2001] ANZ ConvR 103 [2000] NSW ConvR 55-945

New South Wales Supreme Court

CITATION : Heaps v Longman [2000] NSWSC 542 CURRENT JURISDICTION: Equity Division FILE NUMBER(S) : SC 2690/1999 HEARING DATE(S) : 29/05/2000 JUDGMENT DATE : 19 June 2000

PARTIES : BARRY WILSON HEAPS & ANOR v ADDISON WESLEY LONGMAN AUSTRALIA PTY LTD JUDGMENT OF : Master Macready at 1

COUNSEL : W. Haffenden for plaintiff S.A. Benson for defendant SOLICITORS : Edington & Alfonso for plaintiff Stephen Blanks & Associates for defendant CATCHWORDS : Landlord and Tenant. - Order for costs in proceedings Consideration of basis of assessment. Whether it should be on a party and party or indemnity basis. Consideration of a clause in a lease dealing with costs. Held only entitled to costs on party and party basis. - - Mortgages - costs and other matters. Re: Adelphi Hotel (Brighton) Ltd (1953) 2 All ER 498; Jamieson v Gosigil Pty Ltd (19983) 2 Qd R 117; Re: A Solicitor's Bill of Costs; in re Shanahan (1941) 58 WN 132; CASES CITED : AGC (Advances) Ltd v West AGC (Advances) Ltd v Cranston (1986) 5 NSWLR 301; ANZ Banking Group (NZ) Limited v Gibson (1986) 1 NZLR 556; Gomba Holdings UK Ltd v Minories Finance Ltd (1993) Ch 171 DECISION : Paragraph 24

- 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

MASTER MACREADY

Monday 19 June 2000

2690/99 BARRY WILSON HEAPS & ANOR v ADDISON WESLEY LONGMAN AUSTRALIA LTD

JUDGMENT

1 MASTER: This is the hearing of a notice of motion filed on 22 May 2000 in which the plaintiff seeks certain orders consequent upon a decision of His Honour Mr Justice Austin on a separate question which he determined under Part 31 on 2 November 1999. The notice of motion seeks orders for damages, interest and costs. Damages are now agreed by the parties in the sum of $21,444.24 and interest is agreed in the sum of $5,737.99. The remaining matter concerns the third claim in the notice of motion that the defendant pay the plaintiffs' costs on an indemnity basis or alternatively on such other basis as the court thinks fit. 2 The actual order for costs was made by His Honour when he ordered the defendant to pay the plaintiffs' costs of the determination of the separate question. The parties are agreed that His Honour had not determined the basis upon which those costs would be paid and it is appropriate that the matter now be determined. I note that as a result of the answer to the separate question and the agreement between the parties as to the amount of damages and interest there is no further utility in the proceedings continuing. 3 The principal proceedings concerned the construction of a rent review clause and the procedure to resolve a disagreement between valuers appointed to determine the further rent due under the lease. There was the appointment of an umpire who was required to make his decision within a certain time which he failed to do. This led to the question which was separately determined by His Honour. 4 The difference between the parties in the matter argued before me arises because the plaintiffs submits it is appropriate that costs be on an indemnity basis while the defendant submits it should be on a party and party basis. The basis for the claim is based upon the provisions of the lease itself and in particular clause 13.5 which provides as follows:- "The Lessee will pay all stamp duty (including penalties and fines other than penalties and fines due to the default of the Lessor) and all the Lessor's reasonable legal and other costs charges and expenses of and incidental to the preparation completion stamping and registration of this lease and any certified copy thereof required by the Lessor and of any consent required hereunder and of any subletting and of any surrender or termination of this Lease otherwise than by effluxion of time and in case of default by the Lessee in observing or performing any covenants of this Lease contained or implied the Lessee shall pay the Lessor all legal and other costs charges and expenses for which the Lessor shall become liable or which the Lessor shall suffer or incur in consequence of or in connection with such default." 5 The defendant placed reliance on the case of Re: Adelphi Hotel (Brighton) Ltd (1953) 2 All ER 498. The case concerned a bank issuing a writ to enforce its security. The question arose as to the basis upon which an order for costs should be made. His Honour Mr Justice Vaisey held that a mortgagee is entitled as against a mortgagor and against the mortgage property to his "full costs". But that expression meant ordinary party and party costs and not costs as between solicitor and client. His Honour excluded cases where there was some special bargain such as the terms of the relevant clause in the mortgage and he himself considered in that case whether or not the relevant mortgage had an effect on the basis on which costs would be paid. His Honour's conclusion was followed by Williams J in Jamieson v Gosigil Pty Ltd 1983 2 Qd R 117. His Honour Mr Justice Williams also referred to the decision of Street J in Re: A Solicitor's Bill of Costs; in re Shanahan & Anor (1941) 58 WN 132. Mr Justice Street in that case referred to the general rule being that only those costs are recoverable by a mortgagee which are properly payable on a party and party taxation. 6 In addition Adelphi's case has been followed by His Honour Mr Justice Hodgson as he then was in AGC (Advances) Limited v West and AGC (Advances) v Cranston & Ors (1986) 5 NSWLR 301. His Honour in that case was dealing with the rules as they existed in Part 52 at that time. At the present time the provisions of Part 52A which came into force in 1994 apply. The relevance of this is that the rules now provide for only two bases of taxation, namely, party and party and indemnity. 7 His Honour Mr Justice Hodgson's judgment is useful in that he deals with the different bases of assessment of costs under those rules as I have mentioned. Costs on a party and party basis are normally those that are "all such costs as were necessary or proper" in connection with the proceedings. The common fund basis which is a more generous basis extended to "a reasonable amount in respect of all costs reasonably incurred". He pointed out that the difference between this and solicitor and client or solicitor and own client basis is that costs may be allowed on the latter even though they are an unreasonable amount and even though they may have been unreasonably incurred if, in either case, this has happened with the approval of the client. 8 The parties have assumed that the principles to be derived from these cases should also apply in case of a lease and this is plainly correct. It is the effect upon the court rules of any contract between the parties "plainly and unambiguously expressed" which has to be considered. See ANZ Banking Group (NZ) Limited v Gibson (1986) 1 NZLR 556. 9 Under Part 52A Rule 32 costs are payable on a party and party basis unless the rules or an order provide that they are payable on an indemnity basis. A party and party basis is defined as the basis of costs assessment provided for in Part 11 Division 6 of the Legal Profession Act 1987. Sections 208F and 208G of that Act refer to the factors that a costs assessor must consider. 10 Part 52A Rule 37 provides as follows:- "37 Where, in any proceedings, costs are payable to a person by or under the rules or any order of the Court on an indemnity basis—