New South Wales Supreme Court CITATION : Refina Pty Ltd v Binnie (Costs) [2009] NSWSC 1098 HEARING DATE(S) : 18 September 2009 JURISDICTION : Equity Division JUDGMENT OF : Brereton J EX TEMPORE JUDGMENT DATE : 18 September 2009 DECISION : Decline to make indemnity costs order CATCHWORDS : PROCEDURE – costs – indemnity costs – where claimed that proceedings were doomed to fail from outset – whether proceedings were obviously or manifestly hopeless at outset – held: proceedings not obviously hopeless at outset – whether Calderbank offer unreasonably rejected – held: in context of quantum of dispute and minimal compromise element in offer, its rejection did not warrant indemnity order (NSW) Civil Procedure Act 2005, s 98 LEGISLATION CITED : (NSW) Real Property Act 1900, s 195H (NSW) Uniform Civil Procedure Rules 2005 r 24.25 CATEGORY : Consequential orders Refina Pty Ltd (plaintiff) PARTIES : Kevin Douglas Binnie (first defendant) Registrar General of NSW, Dept of Lands (second defendant) FILE NUMBER(S) : SC 1437/08 COUNSEL : Mr P Tomasetti SC w Mr J Atkin (plaintiff) Mr M K Meek (first defendant) Gregory J Halpin (plaintiff) SOLICITORS : Diamond Conway (first defendant) Registrar General of NSW, Dept of Lands (second defendant) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EXPEDITION LIST BRERETON J Friday 18 September 2009 1437/08 Refina Pty Limited v Kevin Douglas Binnie JUDGMENT (ex tempore) 1 HIS HONOUR: On 3 September 2009, I ordered that the proceedings be dismissed with costs, directed that the order not be entered prior to 11 September 2009 and reserved leave to either party to apply to vary the costs order. I expressed the view that prima facie the plaintiff should pay Mr Binnie's costs, but noted that the parties had, in the course of the substantive hearing, sought an opportunity to be heard on the question of costs; so it was without foreclosing that opportunity that I made what I thought was the prima facie proper order, and reserved leave to apply for some other order if so advised. 2 By written submission of 14 September 2009, Mr Binnie seeks an order that the costs payable under the order be assessed on an indemnity basis, either from the institution of the proceedings or, alternatively, from 2 April 2008, being the day after a "without prejudice save as to costs" offer was made on his behalf to Refina. Refina opposes that application. 3 At the outset I observe, first, that the Court's discretion as to costs as provided by (NSW) Civil Procedure Act 2005, s 98, is wide; but the starting point, as provided by r 42.1, is that if the Court makes any order as to costs, it is to order that costs follow the event unless it appears that some other order should be made. And, by r 42.2, unless the Court orders otherwise or the rules otherwise provide, costs payable under an order of the court or the rules are to be assessed on the ordinary basis. 4 Although applications for indemnity costs have become increasingly prevalent, and indeed seem now to be commonplace after the resolution of contentious proceedings, it needs to be borne in mind that an indemnity costs order is an exceptional order. Rule 42.2 makes that clear enough, as do a number of authorities in which the indemnity costs jurisdiction has been reviewed. 5 In the present case, Mr Binnie invokes two main grounds, recognised as proper bases for an indemnity costs order: first, it is said that the proceedings were doomed to fail from the outset; secondly it is said that Refina unreasonably rejected a Calderbank offer made on 1 April 2008. That is not to say that the Court would be bound to make an indemnity costs order if either of those grounds were established. No offer of compromise in accordance with UCPR r 20.26 was served, so that the prima facie consequence of a party failing to better an offer of compromise under the rules does not follow. Where a party relies on a Calderbank offer as distinct from an offer of compromise under the rules, for an indemnity costs order, it is necessary to establish, at least, that the offer was unreasonably rejected; and even then, there is no rule that an indemnity order must follow, although a discretion to make such an order is enlivened. 6 As to the proposition that the proceedings were doomed to fail, it is easy to say after proceedings are decided adversely to a plaintiff, that they were doomed to fail from the outset. In a sense, subject to appeal, they were. Any proceedings that ultimately fail can be said to be doomed to fail. A better way of expressing what I think is intended by the concept is to ask whether the proceedings were obviously or manifestly hopeless at the outset, or at some earlier stage. It has been suggested that the instant proceedings were obviously and manifestly hopeless from the outset on three grounds. 7 As to the plaintiff's claim that it had a personal equity, I have concluded that that argument was ultimately untenable, and that the authorities that were invoked for it did not, in fact, support it. In that light, it is easy to rationalise that that result ought to have been foreseen at the outset. The most telling argument to the contrary, however, is that neither counsel for Mr Binnie nor the Court adverted to the precise basis upon which I ultimately concluded that those cases did not support the proposition until after judgment was reserved, and I was in the course of preparing the judgment. In those circumstances, I think it would be unduly harsh to conclude that it ought to have been obvious at the outset that the authorities in question did not support the proposition for which they were invoked. 8 Next, it was said that the case based on the (NSW) Real Property Act 1900, s 195H, was obviously hopeless, because the section conferred no power on the Court but only on the Registrar General, and the application could not have succeeded, at least in the absence of a prior application to the Registrar General. 9 In my view there is considerable force in the argument – which I address in paragraph 47 of the substantive judgment – that the application could not have succeeded on that ground in the absence of a prior application to the Registrar General. However, assuming that to be so, it does not follow that because one ground that might be said to be doomed is pressed, that an indemnity costs order is attracted in respect of the proceedings if they were otherwise reasonably constituted. The ground in question was introduced at a late stage, and while it added somewhat to the issues at trial and the time taken, its absence would not have avoided a hearing of the proceedings, although it might have reduced it somewhat. Moreover, there was some authoritative basis for supposing that the Court could at least declare the rights of the parties in a manner to which the Registrar-General would subsequently give effect. 10 I do not think that this was so obviously hopeless as, in the context of the plaintiff's case as a whole, to warrant an indemnity costs order. 11 The third basis upon which it was suggested that the plaintiff's claim was obviously hopeless was the conclusion that I ultimately reached that the disputed land was not included in the development application. I am comfortably of the view that the converse was not obviously hopeless. 12 It was plainly arguable, though I concluded ultimately incorrect, that on the face of the written description in the development application, it did not include the subject lot. Ultimately, my conclusion involved having regard to the attached plan and to the intent of the Council, ascertained by implication from the local environment plan and its requirements, as well as from the plan attached to the DA, to conclude what was its intent. 13 I would therefore not make an indemnity costs order on the basis that the proceedings were obviously hopeless from the outset. 14 As to the offer of compromise, the question – as I have foreshadowed, bearing in mind that it was not an offer of compromise made under the rules – is whether its rejection was unreasonable. On the one hand, had it been accepted, Refina would have been in a significantly better position than has transpired: the proceedings would have been dismissed, but with no order as to costs, whereas the proceedings have been dismissed and will, on any view, carry a costs order adverse to Refina. However, as Mr Tomasetti points out, there was very little element of compromise in the offer at the time it was made, because at that point Mr Binnie had incurred very little in the way of costs. The matter had been before the Court once only, when Mr Binnie's appearance had been mentioned by Refina's representative. A further consideration is that there had been a previous apparent agreement to compromise the dispute – referred to in the substantive judgment – which, for one reason or another, did not proceed. And all that has to be seen in the light of the quantum of the dispute as a whole which, as I have previously pointed out, was over a strip of land which appears to be worth not much more than $4,000. 15 Mr Tomasetti rightly says that that cuts both ways. On the one hand, there is an element of injustice in the defendant, who having been brought to Court has successfully vindicated his rights, being left out of pocket at all, particularly in the light of the Calderbank offer. But on the other hand, the amount in dispute suggests that the matter should have been conducted very economically so that it is not entirely unjust that Mr Binnie should have to bear so much of his costs as exceed what is recoverable on a party/party basis. 16 I return to the proposition that an indemnity costs order is an exceptional one. In this case, I am unsatisfied that either of the matters invoked in support of an indemnity costs order justify such an order. I decline to make an indemnity costs order. 17 That leaves the question of the costs of today. Despite Refina's success on this application, I am inclined to the view that, having regard to the outcome of the proceedings as a whole, and to Mr Meek for Mr Binnie, having indicated when judgment was given that he was then and there in a position to deal with the question of costs, there should be no order as to the costs of today, since the separate occasion was necessitated by Refina's inability to deal with the question of costs when judgment was given. 18 In respect of the application for indemnity costs, including the costs of today, there will be no order as to costs, to the intent that each party bear their own costs. 19 I direct that the exhibits may be returned to the parties upon the undertaking of the respective parties that they will be returned to the Court if required for the purposes of an appeal. ********** 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.