New South Wales Court of Appeal CITATION: Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32 HEARING DATE(S): 17 February 2009 JUDGMENT DATE: 27 February 2009 JUDGMENT OF: Hodgson JA at 1; Tobias JA at 65; Basten JA at 66 (1) Appeal allowed. DECISION: (2) Orders 2 to 5 below set aside. (3) In lieu thereof, order that Parkline pay the applicants' costs of the proceedings not dealt with by any previous costs order, excluding the costs of the hearing on 2 November 2005. (4) Order that Parkline pay the applicants' costs of the leave application and the appeal, and have a certificate of the Suitors' Fund Act 1951 if otherwise eligible. CATCHWORDS: PROCEDURE – Costs – Discontinuance – Default provision for costs in UCPR 42.19 – Need for reason for departing from the default provision – Primary judge makes costs order in favour of discontinuing plaintiff – Whether decision vitiated by error – Re-exercise of discretion – Whether appropriate to determine outstanding questions of costs prior to considering costs order to be made on discontinuance – Whether circumstance that discontinuance was not tantamount to capitulation justified departing from the default provision – Reasonableness of commencement of proceedings challenged by defendant, and not resolved because of plaintiff's decision to discontinue – Relevance of late application by defendant to amend defence. Building and Construction Industry Security of Payments Act 1999 Civil Procedure Act 2005 (NSW) LEGISLATION CITED: High Court Rules 1952 (Cth), O 71, r 39 Migration Act 1958 (Cth) Uniform Civil Procedure Rules 2005 (NSW) r 12.1, r 12.3, r 42.1, r 42.19, r 42.10 Trade Practices Act 1974 (Cth) CATEGORY: Principal judgment Australian Coal & Shale Employees' Federation v The Commonwealth [1953] HCA 25; 94 CLR 621 Australiawide Airlines Limited v Aspirion Pty Limited [2006] NSWCA 365 Bitannia Pty Limited v Parkline Constructions Pty Limited [2006] NSWCA 238; (2006) 67 NSWLR 9 Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 Fordyce v Fordham [2006] NSWCA 274; (2006) 67 NSWLR 497 CASES CITED: Foukkare v Angreb Pty Limited [2006] NSWCA 335 McCormack v Federal Commissioner of Taxation [1979] HCA 18; 143 CLR 284 Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; 186 CLR 622 Newcastle Wallsend Coal Co Pty Ltd v Industrial Relations Commission of NSW [2006] NSWCA 129; 153 IR 386 One.Tel Ltd v Commissioner of Taxation [2000] FCA 270; 101 FCR 548 O'Neill v Mann [2000] FCA 1680 Ritter v Godfrey [1920] 2 KB 47 PARTIES: BITANNIA PTY LIMITED (ACN 062 312 323) and ROSSFIELD NOMINEES (ACT) PTY LTD (ACN 008 657 190) (Applicants) PARKLINE CONSTRUCTIONS PTY LIMITED (ACN 098 171 996) (Respondent) FILE NUMBER(S): CA 40763/07 COUNSEL: R F MARGO SC/ J J YOUNG (Applicants) D T MILLER/ D A MOUJALLI (Respondent) SOLICITORS: JPR Legal (Applicants) MasseyBailey (Respondent) LOWER COURT JURISDICTION: District Court LOWER COURT FILE NUMBER(S): DC 1998/05 LOWER COURT JUDICIAL OFFICER: J C Gibson DCJ LOWER COURT DATE OF DECISION: 19 October 2007 IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40763/07 DC 1998/05 HODGSON JA TOBIAS JA BASTEN JA 27 FEBRUARY 2009 BITANNIA PTY LTD & ANOR v PARKLINE CONSTRUCTION PTY LTD Judgment 1 HODGSON JA: On 19 October 2007, Gibson DCJ granted leave to the respondent (Parkline) to discontinue proceedings it had brought in the District Court of New South Wales against the applicants, and made the following orders concerning costs: (2) The defendants pay the plaintiff's costs of the notice of motion filed on 11 November 2005 for leave to cross-claim and further to amend their defence. (3) The defendants pay the plaintiff's costs up to 10 November 2005. (4) The defendants pay the costs of the plaintiff in relation to the notice of motion filed on 24 April 2007. (5) The defendants' notice of motion filed on 11 September 2006 (and in particular prayer 2 concerning costs) is dismissed. 2 By their summons filed 1 February 2008, the applicants sought leave to appeal from those costs orders. The application for leave to appeal has been heard on the basis that, if leave is granted, the appeal will be determined without further argument. At the conclusion of the oral argument, the Court granted leave to appeal. Circumstances 3 On 19 May 2003, a building contract was entered into for the construction of a building known as the Ettalong Hotel. Parkline was the builder, and the proprietor was a partnership comprising the two applicants. 4 Mr Jim Patetsos was Parkline's principal representative in relation to the contract. 5 S & S Quirk Pty Limited (Quirk) was the architect for the project, and was by the contract given the power to act as the applicants' agent generally for the project. Another company, W Waugh Hotel Management Services Pty Limited (Waugh) administered the contract for the applicants; and Mr Michael Brown was the general manager of that company. 6 Prior to a payment claim submitted on 15 February 2005, Parkline had submitted all payment claims under the contract to Quirk, which responded with payment schedules and provided copies of payment claims and schedules to Mr Brown for him to arrange approved payments. 7 On 15 December 2004, Parkline served payment claim 20 seeking release of the first half of the retention monies amounting to $174,092.05; and on the same day Quirk provided a payment schedule rejecting that claim. 8 On 25 December 2004, Parkline served a further claim, re-submitting claim 19 and also claim 20, for a total around $500,000. On 6 January 2005, Quirk provided a payment schedule dealing with those claims. 9 On 28 January 2005, Mr Brown faxed the following letter to Quirk: Following our conversation yesterday and arising out of the report from Tyrrells that I will be sending to you today, please be advised that any decisions to be made concerning the present status of the Ettalong project and the outstanding work must be referred to us for approval PRIOR TO agreement between yourselves and the builder and/or any sub-contractor. 10 On the same day, Quirk responded: Thank you for your facsimile of 28 January. We will copy your correspondence to Parkline to inform them that any future approvals or agreements with regard to the Ettalong Hotel project must be directed to yourselves for determination. 11 A copy of that letter and Mr Brown's letter was sent to Parkline. 12 On 15 February 2005, Parkline sent a facsimile to Mr Brown with the following message: Please find attached claim for retention release and variations as previously forwarded to S&S Quirk. 13 This facsimile showed that a copy had been sent to Quirk. 14 The claim attached to the facsimile was dated 14 February 2005 and it stated that it was made under the Building and Construction Industry Security of Payments Act 1999 (the Act) for an amount of $525,669.10. 15 In fact, the attached claim was not "as previously forwarded to" Quirk, being for a slightly greater amount and purporting to be a new payment claim; and neither it nor the covering facsimile were sent to Quirk. 16 No payment schedule was served within the time limited by the Act; and on 24 May 2005, Parkline sued the applicants for $525,669.10. 17 The applicants put on a defence and later an amended defence, denying that the document served on 15 February 2005 was a payment claim because Parkline was not entitled to progress payments, and alleging that the payment claim had not been made in good faith and that the proceedings were an abuse of process. 18 On 10 August 2005 the applicants commenced proceedings in the Supreme Court against Parkline claiming damages for breach of the building contract; and also against Quirk claiming damages, alleging inter alia that Parkline had served a payment claim dated 14 February 2005 on Quirk and that Quirk in breach of its duties to the applicants had failed to prepare and serve a payment schedule within the time limited by the Act. 19 On 2 November 2005, the District Court proceedings came before the primary judge. Mr Patetsos was cross-examined, and this evidence was given: MARGO: Q. Mr Patetsos, when you sent your claim to the defendants on 15 February 2005 you said in the covering letter, "Please find enclosed claim for retention release and variations as previously forwarded to S&S Quirk," do you remember that? A. That's correct. Q. Did you forward a copy of that claim to S&S Quirk as well? A. No I did not. Q. When you referred to as previously forwarded to S&S Quirk what were you referring to? A. The variation schedule. What I meant by that fax was it was a quick cover note to say that the variation schedule had been previously sent to S&S Quirk for-- Q. So you did not forward that payment claim to S&S Quirk? A. No I did not. Q. You had forwarded every previous payment claim to S&S Quirk, hadn't you? . A. That's correct. Q. Why did you not forward this one to S&S Quirk? A. Because late in January and I can't remember the exact date but it would have been the last week in January I received a fax from S&S Quirk stating that Britannia and Rossfield were nominees for the Ettalong Beach Hotel, who I knew as my client had - we moved them as their representatives on the project. On that basis I took it that I wasn't to send any more correspondence to them and I forwarded the correspondence to the client directly or to-- Q. And otherwise you would have sent the claim to S&S Quirk would you in the usual way? A. Yeah if they were still representing Britannia and Rossfield nominees I would have forwarded the claim to their representatives. Q. Do you have a copy of that fax? I call for the fax. HICKS: Which fax? MARGO: From Quirk to-- WITNESS: I don't have it here, no, I don't have a copy of that fax here but we probably have it in the files over there. HER HONOUR: Hang on a minute and we'll see if we can find it. While that's being sought, have you got another question? MARGO: Yes. HICKS: I will leave it to my solicitor. MARGO: Q. Could you just look at that payment claim of 15 February 2005, Mr Patetsos please? Do you see on the fax copy sheet from Parkline, do you have that? A. Yes, I do. Q. You've marked copy to Stewart Quirk? A. Yes. Q. Is it your evidence that although you marked on this fax to the defendants that you had sent a copy to Stewart Quirk that you in fact hadn't sent one? A. That's correct. We have as a standard Word document fax coversheets for projects that we have on at the time and this would have been our fax coversheet that would have client and client representative that we would put on correspondence that we would send to either clients or client's representative. Obviously, for the last year and a half or year or so on the project we've been using this coversheet and S&S Quirk-- MARGO: I object to any further answer, it's non-responsive. HICKS: He's answering the question. HER HONOUR: If he's answering a question we will let him finish and then if you want to submit that part of the answer is not responsive to the question you can ask it to be struck out but I think to interrupt him in mid-sentence when I'm trying to still trying to work out what he's saying. What about if you would let him finish the question and then we'll hear what he's got to say and then I'll see lf I should strike it out. Bearing in mind the very limited circumstances in which Mr Justice Young says you should strike out such matters. Q. On you go, what were you saying? A. Solely that the standard fax coversheet that we had had both the client and S&S Quirk in various circumstances where we had copied both parties into the correspondence. In this instance it seems that we left S&S Quirk on the coversheet and it had just gone onto the coversheet of the claim and I can't remember whether I typed this coversheet, I certainly signed it but I can't remember whether I typed this coversheet or not or whether it was my secretary. But it had gone in by mistake to be copied by S&S Quirk because at the time we had been advised that S&S Quirk were no longer representing or we were not to have S&S Quirk as the client's representatives any further. The date, I think, to help Evan out I think was 22 or 23 January. 20 The evidence in the case was concluded on that day, and the proceedings were stood over to 30 November 2005 for submissions. 21 On 10 November 2005, there was a notice of motion filed by the applicants to re-open the case, and to file an amended defence and to put on a cross-claim relying on misleading conduct and seeking remedies under the Trade Practices Act 1974 (Cth). One paragraph of the proposed amended defence sought to rely on the matters arising under the Trade Practices Act referred to in the cross-claim as a defence. 22 This notice of motion was heard by the primary judge on 9 and 16 February 2006. Mr Brown's affidavit of 8 November 2005 was read, and it included the following evidence: 12. On or about 16 February 2005, I saw in my in-tray at 1 Lackey Street a facsimile dated 15 February 2005 from Mr Patetsos/ Parkline to me, a true copy of which is Annexure D to this affidavit ( the 15 February facsimile ). It had been received by facsimile at the premises of the Ettalong Hotel in Ettalong on 15 February 2005 and the manager on duty there had forwarded it to me by facsimile at the defendants' Summer Hill offices. The system in place at those offices at the time was for the Summer Hill office administrator, Tracey, to collect facsimiles from the facsimile machine and distribute them into the in-trays of the addressees. I assume that this occurred on that occasion as the document arrived by facsimile, was addressed to me, and I found it in my in-tray. 13. I note that the printed notation at the top of the 15 February facsimile records that it was sent from Ettalong to the Summer Hill office on 15 March 2005. But I clearly recollect seeing it in my Summer Hill office on 15 February 2005 or shortly thereafter so the notation must be an error caused by the facsimile machine and should have read on or about 15 February 2005. The facsimile machine at Ettalong at the time was a loan machine, as the fax machine that I purchased at some considerable expense was unreliable and had constantly malfunctioned. I have since had it replaced. 14. When I saw the 15 February 2005 facsimile, I read the first two pages carefully and looked through the rest of it. I saw on the front sheet that it had been copied to S&S Quirk. I showed the facsimile to Phillip Johnson, the financial controller for the Project and said words to the effect: "We are not going to pay any of this claim. They are not entitled to any of it. It is virtually the same as they had claimed before but the building is not finished yet. Anyway, it has to be approved first by Quirks." I knew that Quirks had rejected much the same claim twice before. I assumed that Quirks would deal with the claim in the 15 February facsimile because they had dealt with all previous claims on behalf of the Defendants. 15. When I learned subsequently that Parkline were demanding payment because no payment schedule had been served by S&S Quirk in response to the 15 February facsimile, I regarded S&S Quirk as negligent. One of the claims subsequently made by the Defendants in Supreme Court proceedings No 20273 of 2005, in which they are Plaintiffs, and Parkline and S&S Quirk are Defendants, is that S&S Quirk was negligent in failing to send a payment schedule in response to the 15 February 2005 facsimile. 16. I have been informed by the defendants' solicitor, Joe Ryan, that in Court on 2 November 2005, Jim Patetsos gave evidence to the effect that he did not in fact send the 15 February facsimile to S&S Quirk Pty Ltd. When I was informed of that, I became aware for the first time that S&S Quirk might not have been sent the 15 February facsimile. 17. Had I not seen on the face of the 15 February facsimile that it had been sent to S&S Quirk, I would have checked with them forthwith whether they knew about it and, if not, would have forwarded it to them myself. 23 Mr Brown was cross-examined, and this cross-examination included the following: Q. You knew didn't you by May 2005 that Parkline had commenced proceedings against the defendants seeking payment of 15 February progress claim on the basis that no payment schedule had been delivered? A. That's correct. Q. And you knew didn't you that in August 2005 the defendants in these proceedings commenced proceedings against Quirks? A. Yes that's true. Q. And you knew at that time or about that time that Quirks were saying, hang on, we never received the payment schedule? A. No I'm not aware of that. Q. When you say you're not aware of it, what's the answer, did you know or not? A. No I did not. Q. Nobody told you, is that what you honestly tell her Honour that you did not know that Quirks were saying that they didn't get the payment schedule, they didn't get the payment? A. That was my answer yes. …… Q. Do you accept with the benefit of hindsight that you were negligent in not following up with Quirks immediately the question of why you had not received a copy of a payment schedule? A. No I do not. Q. Would you accept that you were at the very least careless? A. No definitely not. Q. Why not? A. Because it wasn't past practice that I ever did that. Quirks were employed to do that side of the field for us. Q. But in previous cases, you either got a payment schedule on that day or the following day didn't you and this was the only case where you hadn't, you agree with that don't you? OBJECTION. QUESTION ALLOWED. Q. Do you accept that in respect of the December 2004 and January 2005 claims you received the payment schedule from Quirks on the day that you got the payment claim? A. I believe that's correct yes. Q. What you're telling her Honour is that you have no recollection whether that occurred in all previous cases? A. Could you ask me that question again please? Q. Are you telling her Honour that you have no recollection of whether or not, in respect of all previous claims you received a payment schedule from Quirks on the same day? A. That's correct. Q. But you can't say you didn't? A. I can't say I did or I didn't. Q. No recollection? A. None at all. Q. In paragraph 16 of your affidavit, you say that the defendant's solicitor, Joe Ryan, informed you that in court on 2 November 2005, Jim Petetsos gave evidence to the effect which is there set out, do you see that? A. Yes. Q. And do you remember when he told you that? A. Would you ask the question again please? Q. Read paragraph 16. A. Yep. Q. Have you read it? A. Yes. Q. When did Joe Ryan tell you what you set out? A. As I've written in there, it was after apparently Mr Petetsos stated that in court. I remember Jim – sorry Joe Ryan coming and speaking to me about what had happened in the court. HER HONOUR: Q. This evidence was given on 2 November and you swore your affidavit on 8th, so obviously sometime in the interim, this was when you had that conversation, is that right? A. Yes. 24 The primary judge gave her decision on 3 March 2006. She rejected the existing defences. In relation to the notice of motion to re-open the case and to amend the defence and put on a cross-claim, the primary judge rejected the applicants' contention that s 15(4) of the Act was invalid insofar as it purported to prevent a cross-claim based on the Trade Practices Act; but did not explicitly consider whether the pleaded defence based on the Trade Practices Act was maintainable. On the question of discretion, she said this: Judicial discretion on applications to reopen 111. In relation to this issue, as well as to the other applications to re-open, I should say something very briefly about the exercise of discretion. While a cross-claim can be filed at any time up to and including the giving of judgment, there are discretionary factors to be taken into account. The first and most important of these is the hopelessness of the application to reopen the case. I am satisfied that the defendants' argument concerning good faith is misconceived and I have rejected the argument that s. 15(4) of the NSW Act should be struck out because of inconsistency. I should briefly note that an additional factor, although one of very little weight, is the lateness of the application. Notwithstanding the defendants' assertion that the defendants only became aware that S & S Quirk never received a copy of the payment claim after Mr Patetsos gave evidence that contrary to what the fax cover sheet said, the schedule had only been served on Mr Brown at the defendants' office and not on S & S Quirk. Bearing in mind that this particular progress claim did contain some new material, it is hard to see how Mr Brown's failure to check with S & S Quirk that the appropriate objection had been lodged was anything other than negligent, particularly given S & S Quirk's practice of reporting such matters to Mr Brown, which is what happened with the two prior claims that were rejected. I note Mr Brown's concessions in cross- examination to Mr Rudge SC in this regard. 25 The primary judge then dismissed the applicant's notice of motion and gave judgment for Parkline for $525,699.10. 26 The applicants appealed to the Court of Appeal, and the appeal was allowed, not on the basis that s 15(4) of the Act was invalid and that a cross-claim could be brought, but on the basis that the defence based on the Trade Practices Act could be raised: Bitannia Pty Limited v Parkline Constructions Pty Limited [2006] NSWCA 238; (2006) 67 NSWLR 9. 27 On 12 September 2006, the applicants filed a further amended defence alleging misleading conduct in relation to the service of the payment claim and relying on the Trade Practices Act. This defence, in addition to alleging at length all the material relied on in relation to the Trade Practices Act, also contained an allegation that the proceedings were an abuse of process and should be dismissed or permanently stayed. 28 The matter then proceeded towards a hearing, until 30 January 2007 when the new solicitors acting for Parkline proposed to discontinue the District Court proceedings on a basis set out in a letter of that date. 29 In their reply to that letter dated 13 February 2007, the applicants' solicitors sought costs in relation to the District Court proceedings, which they said totalled $299,782.15, but which they were prepared to compromise at $179,568.09. 30 After further correspondence, Parkline brought a notice of motion to discontinue the District Court proceedings and seeking a special costs order; and that notice of motion was heard by the primary judge on 12 September 2007, giving rise to the orders noted above. Decision of primary judge 31 The primary judge referred to the Supreme Court proceedings, and assumed that, if the parties were as ready as they appeared to be, the Supreme Court could give the parties a hearing date in early 2008. 32 The primary judge considered cases in relation to applications to amend, late applications and discontinuance, and identified three issues: 27. There are thus three issues to determine. The first is what costs consequences should flow when there is an amendment to pleadings. The second is what should occur when that amendment is made very late in the piece (and it must be recalled that the proceedings at first instance had already been not reached once and were then heard before me before the application to amend was made) and in circumstances where but for the amendment the claim would fail. The third matter is what should costs orders should be made where there is a discontinuance by the plaintiff. 33 In relation to costs concerning the applicants' late amendment application, the primary judge said this: 31. The circumstances to which the plaintiff draws my attention to the late amendment are as follows: 1. The proceedings were commenced on 24 May 2005, and the original defence filed on 24 June 2005 was confined to claims of good faith and abuse of process. 2. The matter was listed for hearing and not reached, and then heard by me on 2 November 2005, following which the proceedings were stood over to 30 November 2005 for any oral submissions, with directions for the parties to exchange written submissions. It was only at this time that the defendants sought to re-open their case to rise for the first time the Trade Practices Act claim. 3. The late amendment necessitated the adjournment of the hearing on 30 November 2005, and required the parties to return early to the court in November 2005. The matter could not be heard on 9 December 2005 due to over listing or 9 February 2006 when the court registry had mislaid the file and eventually was heard on 16 February 2006. 32. The explanation for the lateness of the raising of the Trade Practices Act claim is that the defendants first become aware that the payment claim had not been served on S & S Quirk when Mr Patetsos gave this evidence. This is not supported by any evidence, as the plaintiff point out in their written submissions at paragraph 19. The plaintiff draws my attention to the following exchange between myself and Mr Margo SC on 2 November 2005: "Her Honour: And you clients didn't put in the schedule. Why not? Margo: All previous claims have been served on our superintendent S & S Quirk and again we don't say anything more than the fact was served on the proprietors personally and for whatever reason they did not - this is just speculation here as to why they didn't put - didn't respond. Her Honour: But anyway it was served on the proprietors firstly, I hear what you say." 33. It was never any secret that Mr Patetsos did not forward a copy of the payment claim to S & S Quirk. It was certainly never any secret that S & S Quirk denied receiving it and were, as I understand what fell from the bar table (and again there was no evidence in this regard), at all relevant times denied ever receiving the letter from Mr Patetsos. In addition, Mr Patetsos understood from S & S Quirk's letter to him of 28 January 2005 that S & S Quirk has ceased to act as the defendants' representative on the project (paragraph 22 plaintiff's written submissions) and given the minatory terms of Mr Brown's correspondence and his insistence that everything be referred to him, I have to agree with the plaintiff that there is an air of unreality about the whole claim that Mr Brown was in some way misled. It was because I regarded the claim as being so hopeless, for this reason, that I declined to grant leave to amend. But I have already noted, the Court of Appeal considered that I failed to exercise my discretion correctly. 34. It was made clear to me that the Court of Appeal had some other evidence before it (unknown to me at first instance) which may have been of assistance to the Court on the subject of whether or not the amendment was hopeless. In the course of submissions, Mr Margo referred to a witness who claimed Mr Patetsos had boasted to him of having sent the payment claim in such a way as to trick Mr Brown. In the course of endeavouring to ascertain why the hearing in the District Court would take four days, I enquired about witnesses for the defendants and in particular as to whether this person would be a witness in the hearing. Mr Margo SC told me that this witness might not come up to proof and, when the availability of s 38 of the Evidence Act 1995 (NSW) for such witnesses was discussed, then indicated there might not be a statement from this witness. On applications such as these, the general principle is that the court must not have regard to the merits of the case. However in the present case, I exercised my discretion not to allow the amendment because, having heard Mr Brown cross-examined, I thought the claim hopeless, but my finding that the amendment is hopeless has been set aside by the Court of Appeal. Clearly the Court of Appeal must have had evidence before it indicating that the defendants' claim was not hopeless. It is not apparent to me from Basten JA's judgment what that evidence is. However, I think it only fair to the defendants to assume that their case is far from hopeless, and accordingly I propose to disregard submissions by the plaintiff that the defendants' claim has an "air of unreality". 34 She referred to the applicants' argument that they had a valid abuse of process defence, and held that the Court of Appeal in its previous decision had not overturned her previous rejection of that defence. She noted that the amendment would have required a lengthy further hearing, and continued: 42. The defendants submit that it was the plaintiff's misleading and deceptive conduct which caused the delay (written submissions paragraph 38). This effectively asks me to make a finding of fact that the plaintiff did in fact mislead the defendants. The defendants had been authorising payment claims on a monthly basis for some time; they had rejected the last two payments; Mr Brown knew that there was likely to be another payment claim in the pipeline. It is clear from the Court of Appeal's judgment setting aside my exercise of discretion to permit this new defence that the Court of Appeal took a view on this evidence contrary to mine. 43. However, even if the defendants succeeded in establishing that the conduct of Mr Patetsos in ticking the box was misleading and deceptive, it would be an entirely new trial and the costs to date would be thrown away. The abuse of process defence would depend upon this evidence as well. Notwithstanding the comparatively small compass of this new evidence, the whole case would be different. 44. Accordingly, it is my view that the plaintiff has established a strong argument for an order that the defendants pay the plaintiffs costs up until 10 November 2005 and the costs throwaway by reason of the late amendment of these proceedings. 35 In relation to costs arising from discontinuance, the primary judge referred to further cases, and then continued: 53. An additional factor in my views has been the reasonableness of the plaintiff in proposing the cause of action of discontinuance and the unreasonableness of the defendants in maintaining a complex and fanciful claim for abuse of process. 54. As Ms Bailey notes in her letter of 30 January 2007, the defendants have instituted legal proceedings in the Supreme Court in relation to the same factual matrix as these proceedings and the existence of two sets of proceedings creates some real problems. These problems may not go so high as issue estoppel, it can hardly be desirable to have two courts looking into issues such as the credit of the main protagonist or to have events the subject of litigation in these proceedings the subject of findings in the Supreme Court. Ms Bailey's letter contains some sensible suggestions and the reply from Mr Ryan, which acknowledges there was no utility in continuing the District Court proceedings, agreed with the commonsense of these propositions and essentially disputed only the issue of costs. 55. Mr Ryan's letter clearly indicates the real dispute between the parties is contained in the Supreme Court litigation; the dispute in this Court relates only to the summary judgment application which is interlocutory in nature. 56. I should note that Mr Margo SC informed me that his clients do not consent to the discontinuance. If they cannot be awarded their costs, then his clients want their day in court. The spectre of a case continuing in court solely because of the costs is unattractive. Lord Denning MR noted in J T Stratford & Son Ltd v Lindley (No 2) [1969] 1 WLR 1547, concerning an application for leave to discontinue where neither side wanted to pay the costs of the other side: "So what is to be done? Is this case to go on simply about costs? I think not." 57. In my view it would be contrary to the provisions of s 56 Civil Procedure Act for practical result of any order by me that the defendants pay any part of the plaintiff's costs that the hearing must continue, yet that is what I understand to be the defendants' position. I find such a position unhelpful and somewhat intransigent. I have not, however, given the defendants' position on this issue any particular significance when determining other issues relating to costs. 58. The plaintiff acted reasonably in commencing the proceedings. There was a payment claim made and there was a failure by the defendants to comply with the necessary steps set out in the New South Wales Act, steps which were very familiar to Mr Brown. The defendants did not act unreasonably in insisting upon its costs, notwithstanding the somewhat unpleasant terms of the correspondence. However, it was unreasonable of the defendants to include a complex abuse of process claim in its amended defence. It is my view that a careful reading of Basten JA's judgment does not show that Basten JA has set aside my findings in relation to the abuse of process claim. This is an unmeritorious claim and should not have been included in the litigation, as it will add to the complexity. It is regrettable that a case that I was able to complete in one day needs a rehearing that is estimated at four days. That is an indication of the introduction of a degree of unnecessary complexity in the litigation. No wonder the plaintiff wants to discontinue. 59. The defendants would have lost in the summary judgment application if they had not filed, after the hearing but before judgment, a motion which an appeal court held needed to be heard afresh. This is a classic example of the circumstances in which costs should be ordered against the party making the late amendment. Even if I had acceded to the defendant's application in the November 2005 hearing before me, the whole case would have had to be heard again, and submissions were made to me to this effect when I heard the case. Given the essentially interlocutory nature of relief under the Act, the plaintiff's decision to discontinue in these circumstances should not deny it the right to costs to which, in my view, the plaintiff would otherwise have been entitled. Accordingly I propose to make the costs orders sought by the plaintiff to the cutoff date nominated by them. 60. It may be that there are some costs which relate to the conduct of these proceedings which do not relate to the defendants' motion for leave to cross-claim and further to amend their defence. I note that there was an application for security for costs and clearly there has been some correspondence about the conduct of the matter and other relief was sought by the defendants in a notice of motion of 11 September 2006. However, this was not the subject of any submissions by either party. I assume therefore that these costs have been the subject of agreement or (in the case of the security for costs application) court orders which are not subject of dispute and shall not make any order. 36 It is agreed that Parkline's costs will be in the range of at least $300,000. Issues on application for leave to appeal 37 The applicants seek leave to rely on the following grounds of appeal: The exercise of discretion in the court below miscarried because the primary judge: 1. reached a result that is plainly unreasonable and unjust given the judgment of this Court in Bitannia Pty Ltd & Anor v Parkline Constructions Pty Ltd (2006) 67 NSWLR 9 and the history of the proceedings in the court below before and after that judgment; 2. acted on wrong principle by: (a) failing to apply the interpretation of UCPR rr 42.19 and 42.20 by this Court in Fordyce v Fordham [2006] NSWCA 274, Foukkare v Angreb Pty Ltd [2006] NSWCA 335 and Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365, to effect in relation to r.42.19 that, although there is no presumption that a discontinuing party must pay the other party's costs, that is the normal costs outcome provided by the statute, the onus therefore remains on a discontinuing party to justify any different order by reference to circumstances said to justify exception to the normal cost outcome, and there must be some sound positive ground or good reason for departing from the ordinary course; (b) failing clearly to identify any matter that could properly be said to be a sound positive ground or good reason for departing from the normal costs outcome of the respondent's unilateral decision to discontinue in this case; (c) failing to have regard to how the dictum of Burchett J, quoted at Judgment [48], was interpreted and applied by this Court in Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 and by not so applying it in this case; 3. erred by treating the respondent's unilateral decision in late January 2007 not to continue the proceedings, following the said judgment of this Court on 28 August 2006 and filing by the appellants of their Further Amended Notice of Grounds of Defence on 12 September 2006 ( the Further Amended Defence ), as equivalent to some supervening external event that had removed the dispute between the parties, leaving only issues of costs to be resolved; 4. erred by regarding the alleged statutory foundation of the respondent's proceedings as relevant to the issue of costs on discontinuance, and by finding that the respondent had " acted reasonably in commencing the proceedings ", when the right of the respondent to commence the proceedings was disputed by the Further Amended Defence and there had been no hearing on the merits; 5. wrongly blamed and criticised the appellants, and treated that as relevant to exercise of her discretion, because they maintained their right to defend the proceedings, which this Court had upheld, and were not prepared to forego a trial on the merits unless their costs were paid; 6. erred by failing to distinguish between commercial considerations that the respondent alleged as reasons why it had decided not to continue its proceedings and matters that the respondent nonetheless bore an onus to establish if it sought to avoid the normal costs consequence of that decision; 7. failed to take into account the whole of the relevant correspondence between the parties from January to April 2007, and that it showed on a fair reading that it had been drafted on the respondent's side to try and avoid the normal costs consequences of its decision to discontinue and that the appellants had at no stage agreed to discontinuance unless the respondent agreed to pay their costs and that they required that the proceedings otherwise proceed to a trial on the merits, but instead: (a) failed to take into account that the respondent's letter selectively referred to with approval at Judgment [18] was full of contradictions, inconsistencies and errors of fact and law, was not a reasonable proposal, and was aimed at avoiding the normal costs consequences of discontinuance; (b) by incorrect interpretation of the appellants' letter selectively referred to at Judgment [19], and failure to take account of the whole of the relevant correspondence, wrongly proceeded to exercise her discretion as if the appellants had in effect agreed to discontinuance, leaving only issues of costs to be resolved; (c) wrongly took into account the respondent's self-serving letter selectively referred to at Judgment [20] as evidencing reasonableness on the part of the respondent and unreasonableness on the part of the appellants; 8. erred by regarding the history of delay in the District Court proceedings as relevant to the issue of costs on discontinuance although the appellants could not fairly be blamed for any delay and the respondent was responsible for a substantial part of it; 9. erred by regarding the procedural status of the Supreme Court proceedings as relevant to the exercise of her discretion as to costs of discontinuance of the District Court proceedings or, if they were relevant: (a) in not considering the status of the Supreme Court proceedings as at January 2007, when the respondent made its decision not to continue the District Court proceedings; (b) in preferring her own view as to the likely course of the Supreme Court proceedings to the affidavit evidence about that adduced by both parties to those proceedings and not challenged by either of them; 10. erred by failing to take into account, as had been submitted to her by both the appellants and the respondent, that the issues in the District Court proceedings were quite distinct from those in the Supreme Court proceedings, by holding, as relevant to exercise of her discretion, that the dispute between the parties in the District Court related only to a " summary judgment application which is interlocutory in nature ", and by taking into account as relevant to exercise of her discretion as to costs that because of the Supreme Court proceedings the continuation of the District Court proceedings would create " some real problems " and was undesirable; 11. failed to exercise her discretion on the basis that, as a result of this Court's judgment, the District Court proceedings remained at all times part heard and any evidence thus far adduced had accordingly to be viewed as incomplete unless and until the appellants were afforded the opportunity to re-open their case, and wrongly took into account in the course of her reasoning conclusions she had reached on incomplete evidence including: (a) that " a payment claim sent on 25 February 2005 [sc. 15 February] was validly served on a Mr Michael Brown " (Judgment [2]) whereas the validity of service and thus the very entitlement of the respondent to commence the proceedings below, was disputed by the Further Amended Defence; (b) that Mr Patetsos had sent the said payment claim to Mr Brown because of a copy he had received of a facsimile Mr Brown had sent to S & S Quirk on 28 January 2005 (Judgment [2]), which finding accepted an assertion by Mr Patetsos to that effect but did not take into account any of the matters suggesting different reasons or motives pleaded and particularised in paragraphs 11, 12, 16, 17-22, 23, 24 and 25 of the Further Amended Defence; (c) that the appellants had applied to her to re-tender MFI 1 on the issue of good faith only (Judgment [3]) whereas in fact they applied to re-tender it as also relevant to, and it was relevant to, the issues of misleading and deceptive conduct and abuse of process, as the proposed amended pleadings and the Further Amended Defence subsequently filed, made plain; (d) that S & S Quirk were required to consult Mr Brown before rejecting the 15 February 2005 payment claim, although it was substantially the same as the first and second payment claims which they had previously rejected and the reason for rejecting remained unchanged; (e) that Mr Brown " knew there was likely to be another payment claim in the pipeline "; (f) that there " was never any secret that Mr Patetsos did not forward a copy of the payment claim to S & S Quirk " and " It was certainly never any secret that S & S Quirk denied receiving it... " whereas the appellants' case was that they did not know until Mr Patetsos gave evidence on 2 November 2006 that the payment claim had not been forwarded to S & S Quirk, the appellants' Supreme Court claim on 10 August 2005 against S & S Quirk for negligence in not responding to the payment claim was in evidence, and there was no evidence that S & S Quirk had denied receiving the payment claim by filing a defence to that effect or otherwise; 12. erred by not holding that the appellants' application for costs of their application to amend had been overtaken by the respondent's decision to discontinue and that all costs not the subject of any previous order were covered in the circumstances by UCPR r 42.19; 13. found that the appellants' explanation for the lateness of their application to amend to raise the Trade Practices Act claim " is not supported by any evidence " (Judgment [32]) whereas it was in fact supported by affidavit evidence and by tender of the appellants' Statement of Claim filed on 10 August 2005 in the Supreme Court proceedings, alleging failure by S & S Quirk to respond to the third payment claim; 14. erred by characterising the grant to the appellants of leave to amend as an indulgence, and by treating the appellants' amendment application as having caused the respondent to incur unnecessary costs, whereas the appellants' explanation for the timing of their application was that it was a further result of the respondent's misleading and deceptive conduct and there had been no determination of that issue on the merits; 15. wrongly regarded it as relevant to exercise of her discretion as to costs on discontinuance that the Further Amended Defence contained a reference in one of its paragraphs to abuse of process, and failed to take into account in that connection the following matters: (a) that the Further Amended Defence was almost entirely in the form of the draft pleadings that had been referred to in the appellants' original application and that were before this Court on the interlocutory appeal, adjusted only to merge the proposed cross-claim into the defence in light of the reasons of the Court of Appeal, and in the year that had passed since it was filed the respondent had not raised any objection at all to that pleading; (b) that the respondent had informed the District Court on 7 December 2006 that it intended to file a Reply to the Further Amended Defence and had been ordered to do so by 15 December 2006 but in the event had not complied with that order by the time limited or at all; (c) that the abuse of process claim was a minor part of the Further Amended Defence which would not have added in any material way to the length of the hearing; (d) that it was not appropriate to enter into the merits of the claim in circumstances where the respondent had raised no objection to the Further Amended Defence on that or any other ground, the appellants had not been given any opportunity since the matter was remitted to the District Court to adduce the further evidence this Court had ruled they were entitled to adduce, and a hearing on the merits had been prevented by the respondent's unilateral decision in January 2007, five months after the judgment of this Court and the filing of the Further Amended Defence, not to file a Reply and to discontinue the proceedings; 16. despite professed obeisance to this Court's decision that the appellants had an arguable case, was influenced in the exercise of her discretion by her own very strong contrary view, which may reasonably be inferred from: (a) the fact that she repeatedly defended and referred to her own strong contrary view throughout her reasons (eg Judgment [4], [5], [7], [15], [32], [34], [41], [53]) (including her assumption, at Judgment [34], contrary to fact and the submissions about this made by the appellants, that the Court of Appeal must have had evidence before it which was not before her for it to have been able to reach a different conclusion to hers); (b) the number of times that she misstated in her reasons, and the degree to which she misstated, material written submissions by the appellants, indicating, with respect, that she had not been disposed to give them proper judicial attention; and (c) the matters referred to in grounds 7, 5, 4, 8, 11, 13, 14 and 15 of this appeal; 17. erred by not considering costs that had been incurred after the judgment of this Court other than in respect of the respondent's motion filed on 24 April 2007, which were not the subject of any previous order and were thus part of the costs covered by UCPR r.42.19 and sought by the appellants; And the appellants accordingly seek re-exercise by this Court of the discretion as to costs. Errors by primary judge 38 Extensive and elaborate written submissions have been provided by both sides and it is not necessary to set them out. 39 In my opinion it is clear that the primary judge has made errors which vitiate her exercise of discretion. 40 First, there is her statement in par [32] that the claim by the applicants that they first became aware that the payment claim had not been served on Quirk when Mr Patetsos gave evidence was "not supported by any evidence". In fact, this claim was directly supported by par 16 of Mr Brown's affidavit of 8 November 2005. It was submitted by Mr Miller, counsel for Parkline, that Mr Brown was not an officer or employee of either of the applicants, and could not speak for them. However, Mr Brown was the person administering the contract on behalf of the applicants, and there was no suggestion in the cross-examination of Mr Brown that there was anyone else connected with the applicants who might have known of the matter at some earlier time. In these circumstances, Mr Miller's contention has little force; and in any event, it was too late to raise it for the first time in February 2006. 41 Second, there is the primary judge's statement in par [33] that there was no secret that Mr Patetsos did not forward a copy of the payment claim to Quirk, or that Quirk denied receiving it. Mr Brown had given evidence that he did not know this, and the applicants' statement of claim filed on 10 August 2005 asserted that the payment claim had been forwarded to Quirk; and there was no evidence before the primary judge that Quirk had put on any defence to this statement of claim or had otherwise conveyed to the applicants that they had not received the payment claim (or that Parkline had conveyed this to the claimants). Although it would not have been appropriate for the primary judge to make a final decision that Mr Brown's evidence was to be accepted, equally it would not have been appropriate for her to reject this evidence, and there was no reasonable basis on which she could do so. 42 Third, there is the primary judge's assertion in par [33] that Mr Patetsos understood from Quirk's letter to him of 28 January 2005 that Quirk had ceased to act as the applicants' representative on the project. There is in fact nothing in the correspondence of 28 January 2005 that asserted this: what was asserted was that "any decisions" concerning the project must be referred to Waugh "for approval PRIOR TO agreement between" Quirk and Parkline and/or any subcontractor. Mr Patetsos asserted that his understanding was that Quirk had ceased to act as the applicants' representative; but that assertion was in fact inconsistent with the correspondence (the correspondence still contemplated agreement between Quirk and Parkline after approval by Waugh) and was a matter that would no doubt have been explored in a final hearing. 43 Fourth, there is her assertion in par [58] that Parkline acted reasonably in commencing the proceedings. This was a judgment that could not be made without a final hearing. There was an unresolved question whether the applicants' failure to provide a payment schedule had been brought about by Parkline's misleading conduct. It was in fact clear that Parkline's communication of 15 February 2005 was objectively false in at least two substantial respects: in asserting that a copy had been sent to Quirk, when it had not; and in asserting that the "attached claim for retention release and variations" was "as previously forwarded to S & S Quirk", when it was not but was a new and different payment claim intended to be relied on as such. Thus the communication had a clear potential to be misleading, and Mr Brown had given evidence that he had been misled. Mr Patetsos had given an explanation for not sending the documents to Quirk which, as noted above, was not in accord with the communication sent to him. The question whether there had been misleading conduct and whether, if there had been, Parkline had a satisfactory explanation for it, and thus whether Parkline acted reasonably in commencing the proceedings, could only be resolved at a final hearing. 44 In my opinion, although the primary judge said she assumed the applicants' case was "far from hopeless", these errors materially affected her decision. 45 In addition to those four errors, there are also indications of further errors in pars [58] and [59] of the primary judge's judgment. 46 The views expressed in the last three sentences of par [58] indicate misconception. The primary judge originally completed the case in one day, because a defence under the Trade Practices Act, the factual basis of which was (according to the evidence) unknown to the applicants, had not yet been raised. It was that defence, rather than the single paragraph suggesting abuse of process, that required a longer hearing; and that defence could not reasonably be considered as introducing unnecessary complexity. 47 The assertion in par [59] that the case was a classic example of the circumstances in which costs should be ordered against the party making the late amendment begs the question, what costs? Usually, the costs in question would extend to the costs of the application itself, so long as the opposition to it was not unreasonable and did not add to costs by raising issues apart from lateness on which the opposition failed, and also any costs wasted because of the late application. The former could include the costs of the hearing on 9 and/or 16 February 2006; and the latter would probably include the costs of the hearing on 2 November 2005. However, otherwise the relevant costs would not include the costs incurred up to 10 November 2005. 48 A further error in par [59] is that Parkline did not have an accrued right to those costs, in the absence of Parkline's decision to discontinue. A possible result of the final hearing was that Parkline was guilty of misleading conduct, that this was deliberate, and that the applicants did not find out about this until 2 November 2005; in which case Parkline's dishonesty would carry more weight than any possible lack of diligence by the applicants in not finding out about the deception, and Parkline would probably have been ordered to pay all costs. 49 Parkline's decision to discontinue deprived the applicants of the possibility of achieving this result; and this, together with the effect of UCPR 42.19 (set out below) and the relevant authorities, does provide reason for denying the costs in question to Parkline. 50 Having regard to these errors and to the amount of costs suggested to be involved, in my opinion it was appropriate to grant leave to appeal, and for this Court to exercise the discretion as to costs afresh. Re-exercise of costs discretion 51 Rule 12.1(1) of the UCPR provides as follows: 12.1 Discontinuance of proceedings (1) The plaintiff in any proceedings may, by filing a notice of discontinuance, discontinue the proceedings, either as to all claims for relief or as to all claims for relief so far as they concern a particular defendant: (a) with the consent of each other active party in the proceedings, or (b) with the leave of the court. 52 Rule 42.19 (as in force on 19 October 2007) provided as follows: 42.19 Proceedings discontinued (1) This rule applies to proceedings that are discontinued by the plaintiff, as referred to in rule 12.1. (2) Unless the court orders otherwise or the notice referred to in rule 12.1 (2) otherwise provides, the plaintiff must pay such of the defendant's costs as, at the date on which the notice of discontinuance was filed, had been incurred by the defendant in relation to each claim in respect of which the proceedings have been discontinued. 53 It has been said that UCPR 42.19 does not give rise to a presumption that costs will be ordered against the discontinuing party: Fordyce v Fordham [2006] NSWCA 274; (2006) 67 NSWLR 497; Foukkare v Angreb Pty Limited [2006] NSWCA 335 at [65]. 54 However, like UCPR 42.20, UCPR 42.19 states what the order for costs is to be unless there is a discretionary decision to order otherwise: Australiawide Airlines Limited v Aspirion Pty Limited [2006] NSWCA 365 at [53]. This means there is an onus on the discontinuing party to make an application in respect of costs if it does not propose to pay the costs of the other parties: Foukkare at [65]. In my opinion, it also means that there must be "some sound positive ground or good reason for departing from the ordinary course": Australiawide Airlines at [54]. 55 UCPR 42.19 would, unless the Court otherwise ordered, give the applicants such of their costs as they had incurred "in relation to each claim in respect of which the proceedings have been discontinued". The applicants had incurred the costs of the hearing of 2 November 2005 and the costs of the late amendment application "in relation to" Parkline's discontinued claim, so those costs would be included as costs to be paid by Parkline to the applicants unless the Court otherwise ordered. 56 In my opinion, it is not appropriate to make a separate determination of costs to which either Parkline or the applicants would be entitled if Parkline were not discontinuing, and then to consider if that should be changed because Parkline is discontinuing. Discontinuance both precludes full consideration of matters that could be relevant to previously undecided costs, and also provides a framework in which all undecided costs questions should be considered. 57 As mentioned earlier, there should not be a finding that Parkline acted reasonably in commencing proceedings: that was a question that could not be determined until the final hearing, which is precluded by the discontinuance. I accept that it would be wrong to treat this case as one in which the discontinuance is tantamount to capitulation by Parkline: the lapse of time due to the protraction of the District Court proceedings, and the progress towards resolution of the Supreme Court proceedings, did take away a substantial part, at least, of the utility to Parkline of the District Court proceedings, although in my opinion not all of it. Further, there is force in the consideration that it is undesirable that serious issues of credit concerning the same transaction be determined by different courts. In my opinion however, these considerations on their own would not justify departure from the ordinary course. They do not alter the fact that the applicants were brought to court and caused to incur costs by proceedings which they claim are unjustified, and the applicants are being denied the chance to make good this claim by Parkline's decision to discontinue. 58 Matters which could possibly justify departure from the ordinary course are the late application for amendment, and the attempt after the earlier Court of Appeal decision to rely on matters going beyond the Trade Practices Act defence endorsed by that decision. 59 As regards the latter, in my opinion it did not have any substantial impact on costs, because it did not introduce any factual matter for consideration that was not already relevant to the Trade Practices Act defence. 60 As regards the former, there was, as mentioned earlier, evidence that the applicants did not know that the payment claim had not been sent to Quirk until 2 November 2005. However, there was no satisfactory evidence explaining how it was that they did not know this. One would have thought that the applicants, acting reasonably in their own interests, would at least in May 2005 have asked Quirk why Quirk did not provide a payment schedule; and would prior to bringing proceedings against Quirk in August 2005 have communicated to Quirk the allegation that, having received the payment claim, Quirk failed to provide a payment schedule. In either case, one would expect that the applicants would have been informed by Quirk that it had not received the payment claim. 61 In the absence of evidence going to these matters, in my opinion it is very difficult for the Court to come to the conclusion that the applicants had offered a full and satisfactory explanation for the lateness of the application, even if it were to be accepted on a final basis that Mr Brown, and the applicants, did not in fact know that the payment claim had not been sent to Quirk until 2 November 2005. 62 In my opinion, those considerations would justify exclusion from a costs order in favour of the applicants of the largely wasted costs of the hearing of 2 November 2005. In my opinion, the circumstance that it was the decision of Parkline to discontinue the proceedings, and thus prevent final determination of issues, means that it would not be appropriate to make an order in favour of Parkline in respect of those costs. 63 As regards the costs of the late application itself, it seems to me that, even if the application to amend had been made much earlier, as may have been the case if the applicants had been exercising reasonable diligence, there is every likelihood that there would have been the same opposition and the same incurring of costs. In those circumstances, I would not deprive the applicants of the costs of the application itself. In all other respects, in my opinion, there should be an order that Parkline pay the applicants' costs of the proceedings. The question whether those costs will be assessed in the very large sum suggested by the applicants is not a matter for decision by this Court. Conclusion 64 For those reasons, I propose the following orders: (1) Appeal allowed. (2) Orders 2 to 5 below set aside. (3) In lieu thereof, order that Parkline pay the applicants' costs of the proceedings not dealt with by any previous costs order, excluding the costs of the hearing on 2 November 2005. (4) Order that Parkline pay the applicants' costs of the leave application and the appeal, and have a certificate of the Suitors' Fund Act 1951 if otherwise eligible. 65 TOBIAS JA: I agree with Hodgson JA. 66 BASTEN JA: As explained by Hodgson JA, this application concerns the costs of proceedings brought in the District Court seeking payment of an amount under the Building and Construction Industry Security of Payment Act 1999 (NSW). Following an appeal to this Court, which permitted the defendant in the District Court to resist a summary judgment on the basis of misleading and deceptive conduct by the plaintiff in the service of the relevant payment claim, the plaintiff discontinued proceedings in the District Court. The question is whether it should have to pay the costs, in whole or in part, of those proceedings. 67 In order to answer that question, the starting point is r 42.19 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), the terms of which are set out at [52] above. There is a precondition to the operation of the rule, namely, that proceedings are discontinued by a plaintiff as referred to in r 12.1, which provides for discontinuance by filing a notice of discontinuance either with the consent of the other party or with leave of the Court. The filing of such a notice is a precondition to the engagement of the costs consequence provided by r 42.19(2). That consequence is that, subject to two exceptions, "the plaintiff must pay … the defendant's costs as, at the date on which the notice of discontinuance was filed, had been incurred by the defendant …". The first exception arises where discontinuance is by consent, but the consent of the defendant is given on terms which vary the cost consequences. The second exception is where the court "orders otherwise". 68 If the plaintiff is unable to obtain consent to a different costs order, but intends to discontinue in any event, the plaintiff has two options: either it can accept an unconditional consent and seek by motion some other order with respect to costs, or it can file a notice of motion seeking leave to discontinue and seek an alternative costs order in that motion. Which course is adopted may depend upon whether it is thought to be better to file the notice of discontinuance, thereby stopping the accrual of costs which will be payable automatically, absent an alternative order, or to allow costs to accrue for the purpose of the leave application on the basis that they will be dealt with by the court in due course in any event. In the present case, the plaintiff appears to have delayed on the basis that discontinuing by consent might be taken as some degree of acceptance of the default consequences for costs under the rule. That fear, however, appears to be groundless as a matter of principle. 69 The substantial issue in dispute is the correct approach of the Court in considering whether to make some different order as to costs, thus varying the consequence prescribed by the rule. That is a question which has been considered by the courts on a number of occasions. 70 The first proposition, which should be uncontroversial, is that the discontinuing plaintiff must be the moving party on an application for an alternative costs order. If it is necessary to establish a factual basis for such an order, the plaintiff will bear the onus of proving the relevant facts. Similarly, if it is necessary to draw particular inferences from primary facts, the plaintiff will also bear that burden. Finally, the plaintiff will bear the burden of persuading the court that some other order is appropriate. 71 A significant fact underlying each notice of discontinuance will be that the party which commenced the proceedings has abandoned them, though without prejudice to its entitlement, such as it may be, to claim the same relief in fresh proceedings: r 12.3. 72 One question raised in these proceedings is the relevance of the default provision with respect to the exercise of the discretion to otherwise order. In Fordyce v Fordham [2006] NSWCA 274; 67 NSWLR 497, McColl JA (Beazley JA agreeing) concluded that the "default orders do not create a presumption" that the plaintiff ought to pay the costs of the proceedings: at [84]. Her Honour also indicated that the default order is "a relevant, but not determinative, consideration". 73 The use of the term "presumption" in this context is unclear and was properly rejected. In some circumstances, a presumption may do no more than indicate on which party lies the onus of proof of primary facts. In other cases it will supply evidence of the fact presumed: see McCormack v Federal Commissioner of Taxation [1979] HCA 18; 143 CLR 284 at 314 (Jacobs J). In other cases again, clearly not relevant to the present circumstance, it may be a way of stating a rule of law, as with respect to the capacity of a young child to form a relevant criminal intent. In other circumstances, the burden of persuasion may be expressed in terms of a presumption. For example, in Australian Coal & Shale Employees' Federation v The Commonwealth [1953] HCA 25; 94 CLR 621 at 627, Kitto J expressed the principle limiting appellate review of discretionary judgments in terms that "there is a strong presumption in favour of the correctness of the decision appealed from, and that that decision should therefore be affirmed unless the court of appeal is satisfied that it is clearly wrong". This range of meanings undoubtedly renders adoption of such terminology undesirable. 74 However, it is less clear what was intended in Fordyce by stating that the default order constituted a material consideration in exercise of the discretion to otherwise order. No doubt it is true to say that the default order is relevant in the sense that it identifies that from which the court is invited to depart. Beyond that, the existence of the default consequence is not itself helpful in deciding whether to depart from it. Rather, it is the underlying reason for the default position with respect to costs that may bear upon the exercise of the discretion. A party which seeks to discontinue must generally, in a relevant sense with respect to costs, be treated as an unsuccessful party. The general costs rule set out in s 98 of the Civil Procedure Act 2005 (NSW) does not identify the limits of the court's discretion with respect to costs. The most important limitation for present purposes is the requirement that, again subject to the court otherwise ordering, costs should follow the event: see r 42.1. If that rule were to be applied, absent persuasion that the court should otherwise order, the plaintiff would be required to pay the costs of discontinuance. It seems likely that it is consistency with that general principle which underlies the default consequence provided in r 42.19. If that rule has application with respect to a discontinuance (and no reason was proffered as to why it should not) the discretion to make a costs order under r 42.19 will be confined by that general principle. In that respect, it may be misleading to describe the discretion under r 42.19 as "unconfined": see Fordyce at [87]. In some cases (though not necessarily all) discontinuance will involve the termination of proceedings without the court knowing what the result would have been had they been determined on the merits. In one sense, the existence of a hearing on the merits may be largely irrelevant, just as the actual result of a hearing on the merits will not be affected by the fact that the proceedings might have been run differently and might then have achieved a different result. 75 There are, nevertheless, circumstances in which it is entirely appropriate for the court, by order, to depart from the consequence provided by the rule. For example, discontinuance may result from the plaintiff obtaining a favourable result in other proceedings, in circumstances where it had not been unreasonable to commence the discontinued proceedings. Such cases frequently arose in challenges to decisions made under the Migration Act 1958 (Cth), when the scope for judicial review in the Federal Court was limited and it was commonplace for applicants to commence proceedings in both the Federal Court and in the original jurisdiction of the High Court. 76 Another example may arise where the unsuccessful plaintiff has been induced to commence proceedings by the unreasonable conduct of the defendant: see Ritter v Godfrey [1920] 2 KB 47. Indeed, any of the circumstances which might deprive a successful party of its costs after a contested hearing will apply in relation to a discontinuance. 77 Even if it be otherwise appropriate to allow the defendant its costs of discontinued proceedings, there may be specific issues upon which the defendant has failed and should either pay, or not recover costs. This principle applies in the present case. As explained by Hodgson JA, the belated reliance by the defendant upon a claim under the Trade Practices Act 1974 (Cth), the availability of which was affirmed by this Court on the first appeal, involved unnecessary expense which the plaintiff should not be required to pay. 78 This approach is not entirely consistent with that outlined in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; 186 CLR 622 at 624-625, where McHugh J concluded that where "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". However, the rule pursuant to which the applicant sought costs in the High Court conferred an open discretion: see High Court Rules 1952 (Cth), O 71, r 39, set out at 623. Further, his Honour held that where there had been no hearing on the merits, "a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order": at 624. UCPR rr 42.1 and 42.19 indicate that a different approach may properly be taken by this Court in respect of both issues upon which his Honour relied: see also Australiawide Airlines Ltd v Aspirion Pty Ltd [2006] NSWCA 365 at [64]. 79 In some circumstances it may be argued that a discontinuance does not involve a surrender or abandonment by the plaintiff, but recognition that "some supervening event" has militated against success, rendered the proceedings futile, or wholly removed the plaintiff's cause of action: see One.Tel Ltd v Commissioner of Taxation [2000] FCA 270; 101 FCR 548 at 553 (Burchett J); Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302 at [5] (Davies AJA, Mason P and Meagher JA agreeing); Australiawide Airlines at [50]-[52] (Bryson JA, McColl JA agreeing). 80 There may be cases in which the distinction sought to be drawn in One.Tel Ltd is of assistance: however, neither category can be precisely defined, nor is the boundary between them clear. For example, in Newcastle Wallsend Coal Co Pty Ltd v Industrial Relations Commission of NSW [2006] NSWCA 129; 153 IR 386 discontinuance could be explained by reference to a legislative amendment which removed the applicant's hopes of success. Amending legislation may readily be characterised as a supervening event, but in Newcastle Wallsend, a further question arose as to whether discontinuance in fact flowed from reliance upon the amending legislation, or from an earlier decision of the Court which indicated that the applicant would be unsuccessful if it pursued its claim. In the present claim, it could be said that the applicant's success on the first appeal in this Court may have rendered the summary proceedings available under the statute of limited benefit to the respondent, being a benefit which was further diminished by the effluxion of time and the likelihood that an essentially interlocutory remedy would be overtaken by a final decision with respect to the issues in dispute. 81 As has been noted on more than one occasion, the variety of relevant factors renders it difficult to reduce the exercise of discretion by characterisation of the reason for discontinuance: see, eg, O'Neill v Mann [2000] FCA 1680 at [13] (Finn J). There is also a risk that the subjective motivations of the plaintiff in discontinuing may be put forward as a basis for some other order. Except to the extent that such views may have been put before the defendant, for example as a basis for settlement, and be established as such on the evidence, subjective considerations of one party will generally be immaterial, so that the discretion will be exercised on the basis of the objective circumstances established on the evidence. 82 Bearing these considerations in mind, I agree with the reasons of Hodgson JA and with the orders his Honour has 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.