New South Wales Supreme Court CITATION : Stateland Developments Pty Ltd v Princi [2007] NSWSC 709 This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 27/06/07 JUDGMENT OF : Gzell J EX TEMPORE JUDGMENT DATE : 27 June 2007 DECISION : No order as to costs. CATCHWORDS : PROCEDURE - Costs - Action settled before hearing on the merits - Whether Court should entertain a shadow hearing of issues on an application for costs - Appropriate principles CASES CITED : Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624-625 Chapman v Luminis [2003] FCA FC 162 PARTIES : Stateland Developments Pty Ltd - Plaintiff Rosaria Princi - Defendant FILE NUMBER(S) : SC 2883/07 COUNSEL : Mr F G Lever SC - Plaintiff Mr M Cashion SC/ Mr M Izzo - Defendant SOLICITORS : McGrath Dicembre & Co Solicitors - Plaintiff Watson Stafford Solicitors - Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION GZELL J WEDNESDAY 27 JUNE 2007 2883/07 STATELAND DEVELOPMENTS PTY LTD v ROSARIA PRINCI EX TEMPORE JUDGMENT 1 The parties to these proceedings, by considerable and commendable cooperation, have been able to resolve significant difficulties associated with the respective subdivisions of their properties without a hearing on the merits. 2 The plaintiff seeks an order for costs. The defendant submits that there should be no order as to costs. 3 In Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624-625, McHugh J considered the exercise of discretion with respect to costs where a hearing has not taken place. He said: "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). In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd [1971] QWN 13, the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent Council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans. 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. This is perhaps the best explanation of the unreported decision of Pincus J in South East Queensland Electricity Board v Australian Telecommunications Commission unreported, Federal Court of Australia, 10 February 1989, where his Honour ordered the respondent to pay 80 per cent of the applicant's taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare. 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." 4 A useful analysis of the authorities is also contained in Chapman v Luminis [2003] FCA FC 162 at [7]. 5 The plaintiff raised a number of issues in support of its application for costs. First, it is submitted that the argument in the defendant's cross-claim that a term was to be implied into the contract between the parties would not have succeeded had there been a hearing. 6 While I expressed a tentative view that there might be some problem associated with the imputation of a term where detailed contractual obligations were specified and then amended, there is no guarantee that that preliminary view would not have changed in the course of argument. It is inappropriate for me to conduct a shadow trial of that issue on an argument as to costs. 7 The second basis for opposition was that the argument raised in the cross-claim that clauses 10 and 11 of the deed of variation required additional work to be performed was not tenable. That type of argument falls into the same category as the first. It is inappropriate, on an application for costs, to analyse the necessary matrix of facts, including a deal of engineering evidence, correctly to interpret clauses 10 and 11. 8 Thirdly, it was submitted that the former solicitors for the defendant obstructed the plaintiff in the performance of its duties and obligations under the contract between the parties. Reference was made to a series of letters passing between the solicitors. For example, in a letter of 1 February 2007, the defendant's then solicitors said: "Pending exercise of the put option by our clients, your client may not enter the property for any purpose." 9 The correspondence does not take an absolute obstructive stance. It takes the stance that the defendant will comply with obligations cast upon her by the contract, but she will proffer no further assistance. That course of action has been overtaken by the cooperation that has clearly been evident in the settlement of these proceedings. That emerges from the terms of settlement that contained detailed reciprocal undertakings by the parties. 10 The fourth basis for the costs claim was that, by contrast with the attitude of the defendant, the plaintiff has been ready and willing and offered to compromise the proceedings. A large number of letters from the plaintiff's solicitors in relation to such compromise are relied upon in support of the application. 11 In my view, none of the matters discussed by McHugh J that would justify an order for costs in this case have been established. Furthermore, the court should be careful not to raise the ogre of shadow trials of issues in cases that have not comprised a hearing on the merits. That course of action would discourage parties from settling their disputes and is not a process that the court should encourage in the just, quick and cheap resolution of the real issues in the proceedings. 12 There will be no order as to costs. ********** 03/07/2007 - Date of teh judgment wrongly indicated - Paragraph(s) Coversheet 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.