New South Wales Supreme Court CITATION : Bullabidgee Pty Ltd v McCleary; McCleary v Bullabidgee Pty Ltd [2010] NSWSC 345 HEARING DATE(S) : 19 April 2010 JURISDICTION : Equity JUDGMENT OF : Brereton J EX TEMPORE JUDGMENT DATE : 19 April 2010 DECISION : That the purchasers pay the vendors' costs in both proceedings and that there be no order as to indemnity costs. CATCHWORDS : COSTS – whether to order costs on indemnity basis LEGISLATION CITED : (CTH) Trade Practices Act 1974 (NSW) Fair Trading Act 1987 CATEGORY : Consequential orders CASES CITED : General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 Lahoud v Lahoud [2009] NSWSC 623 2008/277814 Bullabidgee Pty Ltd (P1) Towool Pty Ltd (P2) Towool West Pty Ltd (P3) Towool Water Pty Ltd (P4) Warrawool Pty Ltd (P5) Warrawool North Pty Ltd (P6) Warrawool Water Pty Ltd (P7) MHD Echuca Pty Ltd (P8) Ian Tayles (P9) PARTIES : Brian John McCleary and Peter Joseph Rae (D1) JP & M Kerr (Billabidgee) Pty Ltd (D2) Bullatale Pastoral Pty Ltd (D3) 2008/278153 Brian John McCleary (P1) Peter Joseph Rae (P2) Bullabidgee Pty Ltd (D1) Towool Pty Ltd, Towool West Pty Ltd & Towool Water Pty Ltd (D2) Warrawool Pty Ltd, Warrawool North Pty Ltd & Warrawool Water Pty Ltd (D3) MHD Echuca Pty Ltd (D4) Ian Tayles (D5) Ricegrowers Limited t/as Sunrice (D6) FILE NUMBER(S) : SC 2008/277814; 2008/278153 COUNSEL : A D Justice (Purchasers) S Galitsky (Trustees/Vendors) SOLICITORS : Cork Commercial Lawyers (Purchasers) Francis Kelly & Grant (Trustees/Vendors) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION BRERETON Monday 19 April 2010 2008/277814 Bullabidgee Pty Ltd v Brian John McCleary & Peter Joseph Rae as trustees of Billabidgee and Warrawool 2008/278153 Brian John McCleary v Bullabidgee Pty Ltd JUDGMENT (ex tempore) 1 HIS HONOUR: The vendors seek an order that the purchasers pay their costs in both proceedings, as assessed or agreed, with 50% of those costs incurred after 26 June 2008 to be on an indemnity basis. The purchasers do not dispute that in the events which have happened, the court would make an ordinary costs order that they pay the vendors' costs in both proceedings. The issue for consideration is whether any part of those costs should be assessed on an indemnity basis. 2 On 26 June 2008, the proceedings were before me for hearing on a final basis, but that hearing did not proceed, as the purchasers reformulated their case, advancing a claim that the court should reduce the purchase price under the contracts pursuant to the (CTH) Trade Practices Act 1974 or the (NSW) Fair Trading Act 1987, and require the vendors to complete at that reduced price. As recorded in the primary judgment of 4 March 2010, at the commencement of the hearing the purchasers abandoned that position, conceding that they were not then able to complete, even at a reduced price. They pressed their case as one for avoidance of the contracts and restitution, compensation and/or damages. The vendors obtained judgment for possession of the property at the conclusion of the hearing on 23 March 2009. 3 The court awards indemnity costs where there has been such delinquency in the conduct of the party against whom the costs order is made as to justify the costs creditor receiving a complete indemnity for its costs. Typical cases involve where the costs debtor has misled the court or engaged in entirely unnecessarily and pointless steps in the litigation, or deliberately imposed delay, wasted time, or failed to comply with directions of the court. One commonplace area in which the court is often asked to award indemnity costs, and would often do so, is where the costs debtor's claim or defence was obviously untenable or manifestly hopeless, such that it ought never have been brought or advanced, in which respect the test is essentially the same as that on an application for summary dismissal, as referred to in General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125. 4 As has been previously pointed out, for example, in Lahoud v Lahoud [2009] NSWSC 623, mere abandonment at the hearing of a claim previously advanced is not a safe or sound basis for inferring that the claim was not reasonably and properly brought in the first place. To do otherwise would deter the responsible conduct of litigation, and provide a disincentive for counsel and parties to make responsible judgments prior to a hearing as to which parts of the case should or should not be pressed and, conversely, which should or should not be abandoned. Such an abandonment can be no more than a starting point for an inquiry as to whether the claim or defence abandoned was originally hopeless. 5 It is true that, in this case, advancing the claim for specific performance, later abandoned, had the effect that the vendors were kept out of possession of the land for a period of about an additional nine months. However, for that they have been compensated in damages for trespass and, in addition, with interest for delay in bringing the case to finality. 6 The purchasers' abandonment of their claim for specific performance came after the intervention of the global financial crisis and consequent constrictions of credit. There is no evidence of that before me, but the purchasers do not have to prove the viability of their Trade Practices claim. This demonstrates that there may be an explanation for their change of position in that respect quite independent from any absence of merit in the claim when it was originally propounded. 7 What was abandoned was the specific relief claimed, namely, specific performance as distinct from avoidance of the contract. The claim under the Trade Practices Act was still pressed, and indeed succeeded in so far as I found that there was misleading and deceptive conduct, although ultimately that it was not relied upon. It is true that abandonment of the claim of specific performance would have resulted in some aspects of the case the vendors had to prepare becoming superfluous. They no longer had to refute readiness, willingness and ability to complete. It may be that they no longer had to advance all available arguments for refusing relief on discretionary grounds, although many of those arguments remained germane on the question whether, as a matter of discretion, rescission should be declined, or relief against forfeiture of the deposits should be granted. Ultimately, while I accept that some costs incurred by the vendors in defending the claim as it once was, have been wasted, I am unpersuaded that they amount to a large portion of those costs. 8 Moreover, it also needs to be borne in mind that, as things presently seem, the vendors may well have been in a sense overcompensated for the trespass, in that it appears that the value of the crops grown on the land during the period of the purchasers' occupation (from which the vendors benefit) exceeds (perhaps by $23,000, it is suggested) the prima facie damages for trespass. It is also to be borne in mind that the purchasers succeeded in establishing that there was misleading and deceptive conduct, albeit not that they relied on it. It would also seem that a substantial amount of costs was incurred by the vendors in proving the prima facie damages for trespass, including through valuation evidence, which on one view now was unnecessary since the value of the crops to which they became entitled exceeded those damages. 9 I am therefore unsatisfied that there was sufficient delinquency in the purchasers propounding and then abandoning a claim for specific performance to justify a special costs order. That conclusion is reinforced by the other countervailing considerations to which I have referred. 10 My order is that the purchasers pay the vendors' costs in both proceedings. I decline to make any indemnity costs order. 11 I direct that unless a notice of appeal has been filed within 28 days, the exhibits may be returned. ********** 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.