New South Wales Court of Appeal CITATION: VAMEBA PTY LTD v MAXWELL DANIEL MARKSON & ORS [2008] NSWCA 266 HEARING DATE(S): 17 - 21 December 2007 JUDGMENT OF: Allsop P at 1; McColl JA at 15; Young CJ in Eq at 16 EX TEMPORE JUDGMENT DATE: 26 September 2008 DECISION: 1. Extend time for the application for leave to appeal to be filed up until and including 21 April 2008. 2. Application for leave to appeal dismissed with costs. Civil Procedure Act 2005 (NSW) LEGISLATION CITED: Fair Trading Act 1987 (NSW) Trade Practices Act 1974 (Cth) Uniform Civil Procedure Rules 2005 (NSW) CATEGORY: Principal judgment Gould v Vaggelas (1984) 157 CLR 215 CASES CITED: Latoudis v Casey (1990) 170 CLR 534 Ohn v Walton (1995) 36 NSWLR 77 PARTIES: VAMEBA PTY LTD MAXWELL DANIEL MARKSON & 2 ORS FILE NUMBER(S): CA 40093/2008 COUNSEL: J E Sexton SC, J B Spinak J E Armfield - 1st respondent SOLICITORS: Tress Cox Lawyers N/A 1st respondent, Neil Lawson & Co - 2nd & 3rd respondents LOWER COURT JURISDICTION: Supreme Court - Equity Division LOWER COURT FILE NUMBER(S): 2851/2007 LOWER COURT JUDICIAL OFFICER: Brereton J LOWER COURT DATE OF DECISION: 21 December 2007 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40093/08 ALLSOP P McCOLL JA YOUNG CJ in Eq 26 September 2008 VAMEBA PTY LTD v MAXWELL DANIEL MARKSON & ORS JUDGMENT 1 ALLSOP P: This is an application for leave to appeal from a costs order made by a judge of the Court (Brereton J) in a vendor-purchaser suit. The facts are straightforward. The first respondent (Mr Markson) sought to purchase the house of the second and third respondents (Mr and Mrs Cutler) at Dover Heights. The purchase price was $5.1 million. The contract on its face provided for the usual ten percent deposit. The applicant was the real estate agent retained by the Cutlers to sell the house. A contract was signed between Mr Markson and the Cutlers. Mr Markson did not pay a ten percent deposit. He paid a deposit of five percent. He did this because the representative of the applicant estate agent (Mr Finger) told him that the Cutlers had agreed to this course of action. There was no dispute between Mr Markson and Mr Finger that this conversation took place. 2 The Cutlers were later offered $5.5 million by another prospective purchaser. 3 Upon learning that a five percent deposit had been paid and not a ten percent deposit, the Cutlers purported to rescind in order to take advantage of this more attractive offer. 4 Mr Markson sought specific performance. The only issue between the parties in substance was whether a deposit had been paid in accordance with the contract. By reference to the terms of the contract and in particular special condition 41, the issue in the case was whether the applicant, through Mr Finger, had authority from the Cutlers to say what it was agreed he did say to Mr Markson, that is that five percent deposit could be paid. 5 The primary judge in an expedited hearing, but in a careful and comprehensive judgment, found that the applicant did not have authority to say what was said about the deposit. This involved the resolution of what had passed between the Cutlers and Mr Finger. The primary judge, as was entirely proper (if I may respectfully say so), made his findings on the balance of probabilities, without the need to find that Mr Finger was not telling the truth. See in particular the primary judge's reasons at [11]-[17]. Nevertheless, the primary judge's finding was that there was no conversation to justify what Mr Finger said to Mr Markson. 6 After the Cutlers had been sued by Mr Markson, they cross-claimed against the applicant claiming a breach of the retainer. In the circumstances where the judge found that the Cutlers had not authorised Mr Finger (and so the applicant) to reduce the deposit, the primary claim of Mr Markson for specific performance was dismissed, though he recovered his deposit. He was ordered to pay the costs of the Cutlers. The Cutlers' claim against the applicant succeeded in that it had breached its retainer with the Cutlers, but, given the result of the primary proceedings, only nominal damages resulted. Nevertheless, the applicant was required to pay the costs of the cross-claim by the Cutlers. No complaint is made about this order. 7 It can be noted that there was no direct claim between Mr Markson and the applicant. One could have been made based on breach of warranty of authority or the Trade Practices Act 1974 (Cth) or Fair Trading Act 1987 (NSW). Nevertheless, the primary judge in considering the position of Mr Markson made an order under the Civil Procedure Act 2005 (NSW), s 98 and the Uniform Civil Procedure Rules 2005 (NSW), r 42.1 that the applicant should indemnify Mr Markson in respect of the costs which Mr Markson had been ordered to pay the Cutlers. The reasons his Honour gave are contained in [46] of his reasons and were in the following terms: It is apparent, for the reasons I have already given, that the real cause of the litigation was the misstatement by Mr Finger to Mr Markson of the position as to a five percent deposit. [The applicant] and its conduct was the cause of the litigation and that is a strong reason why the costs of litigation should ultimately be borne by it. The fact that Mr Markson and [the applicant] are not directly in suit does not prevent the Court from making a costs order against a cross-defendant in that situation. Moreover, if it were necessary to find some basis upon which [the applicant] could be liable to the plaintiff, then on the findings that I have so far made, Mr Markson would have established a case of breach of warranty of authority against [the applicant] . In my opinion, the justice of the case requires that [the applicant] , whose conduct was the fundamental cause of the litigation, indemnify Mr Markson in respect of the costs which Mr Markson must pay the Cutlers. 8 The applicant says that this approach displays error. In circumstances where there was no deliberate dishonesty or false evidence found, the conduct of the applicant was said to be too remote from the litigation to be a legitimate basis for the order for costs. It was submitted that Mr Markson was fully aware of the landscape of the litigation at least by the time the affidavits were filed. It was submitted that the order was made to punish the applicant and such a consideration is foreign to the making of an order for costs: see Latoudis v Casey (1990) 170 CLR 534 and Ohn v Walton (1995) 36 NSWLR 77. 9 Further it was said that merely identifying the facts that ultimately gave rise to the litigation is not a sufficient or proper basis for ordering costs. Rather, a full assessment of the claims pursued and the reasons for the pursuit of the claim in the light of the affidavit evidence must be made in order to depart from the usual order that costs follow the event provided for by r 42.1 of the UCPR. 10 In my view, none of these propositions has any reasonable prospects of success. It is plain that the conduct of the applicant gave rise to the litigation. Looking at the matter from Mr Markson's perspective he was told by the agent of the vendors that he was entitled to undertake the conduct which he did. He was entitled to take the view that he was within his contractual rights. That this resulted from conduct of Mr Finger that was not dishonest is not determinative. Mr Markson was perfectly entitled to take the view that he was entitled to act on the reliability of the word of the agent of the vendors. As found by his Honour, he was not. 11 Mr Markson was, principally because of the conduct of the applicant, placed in a position of footing a sizeable bill for costs. 12 It was entirely within the legitimate scope of s 98 of the Civil Procedure Act for the primary judge to take the view that the professional who caused the dispute in the first place should pay the costs of its resolution, in the way he did: cf Gould v Vaggelas (1984) 157 CLR 215 at 230. This was not punishment; it was a just resolution of the costs of the litigation to which Mr Markson had reasonably engaged by reason of the conduct of the applicant. On one view, Mr Markson took his own chances of the litigation; however, a legitimate, and open, view was the one taken by the trial judge that a purchaser in this position was entitled to work on the basis of the accuracy and honesty of the real estate agent. The primary judge found that the real estate agent was not dishonest, but he had, on the findings, no basis to say what he did to Mr Markson. In these circumstances in my view the prospects of success of the appeal are remote. 13 Although this was a concurrent hearing I do not think it appropriate to grant leave should there be an extension of time for the filing of an application for leave. The matter was plainly within the confines of a legitimate exercise of discretion of the primary judge and I would not grant leave. 14 The applicant for leave was out of time in filing a holding summons and in filing the application for leave to appeal. The respective periods being out of time were one day and one month respectively. The affidavit of the solicitor for the applicant makes clear that in substance this has been brought about by an oversight. Given my views as to the fate of the application for leave should an extension of time be granted, it is appropriate to deal with the matter on the merits of the application for leave rather than on the extension of time. Therefore the orders that I would propose are: 1. Extend time for the application for leave to appeal to be filed up until and including 21 April 2008; 2. Dismiss the application for leave to appeal with costs. 15 McCOLL JA: I agree. 16 YOUNG CJ in Eq: I also agree. 17 ALLSOP P: The orders of the Court are as I have proposed. ********** 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.