Court of Appeal Supreme Court New South Wales Medium Neutral Citation: Maxwell-Smith v Hall [No 2] [2013] NSWCA 3 Hearing dates: 31 August 2012 Decision date: 05 February 2013 Before: Basten JA; Tobias AJA Decision: (1) With respect to the application for leave to appeal from orders made in the District Court on 20 April 2012, in addition to the orders made on 31 August 2012, and with respect to the third respondent: (a) grant leave to the applicants to appeal in respect of orders 1-4; (b) by consent, allow the appeal and set aside orders 1-4. (2) As between the applicants and the third respondent, make no order as to the costs of the proceedings in this Court. [Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.] Catchwords: PROCEDURE - civil - costs - respondent accepted appeal to be allowed on new ground - grounds raised by appellant rejected - whether costs should follow the event Cases Cited: Maxwell-Smith v Hall [2012] NSWCA 284 Category: Consequential orders Parties: Inge Maxwell-Smith (First Applicant) Eugene Maxwell-Smith (Second Applicant) Steve Hall (First Respondent) S & E Hall Pty Ltd (Second Respondent) Hugo White (Third Respondent) Representation: Counsel: First Applicant self-represented Mr D H Hooke SC/Ms T Stevens (First and Second Respondents) Mr N J Beaumont (Third Respondent) Solicitors: Applicants self-represented Ellison Tillyard Callanan (First and Second Respondents) Middletons (Third Respondent) File Number(s): CA 2012/154529 Decision under appeal Jurisdiction: 9101 Date of Decision: 2012-04-20 00:00:00 Before: Colefax DCJ File Number(s): DC 2010/29575 Judgment 1THE COURT: On 31 August 2012 the Court handed down judgment in an application for leave to appeal from interlocutory orders made in the District Court: Maxwell-Smith v Hall [2012] NSWCA 284. Details as to the nature of the issues in dispute may be obtained from that judgment. 2In brief, there was a building dispute between the applicants (as owners) and the corporate respondent, S & E Hall Pty Ltd, a building contractor ("the builder"). A claim in relation to defective residential building work led to proceedings being brought by the applicants against the builder. Those proceedings resulted in the applicants being required to pay an amount to the builder, which through its solicitor, Mr White, it sought to enforce by the issue of bankruptcy notices. Three bankruptcy notices were issued in the Federal Court; the first was withdrawn, the second resulted in a sequestration order but was subsequently annulled and the third was set aside. The applicants then commenced proceedings in the District Court seeking damages for abuse of process against Mr Hall, the builder and Mr White. By orders made on 20 April 2012 Judge Colefax struck out much of the statement of claim. The applicants sought leave to appeal from those orders. 3The primary basis for the application for leave to appeal was that Colefax DCJ should have recused himself on the basis of a reasonable apprehension of bias, arising from a disclosed friendship with a solicitor who had been a partner of Mr White, but who had retired prior to the conduct the subject of the proceedings. No objection had been taken by the applicants to Judge Colefax sitting to dispose of the interlocutory application and this Court held in its earlier judgment that leave to appeal based on this ground should be refused. 4One result of the orders made by Colefax DCJ was that the first and second defendants (Mr Hall and the builder) were removed from the proceedings, which could thereafter be maintained only against Mr White (the third defendant). In this Court, the applicants did not seek to maintain proceedings against Mr Hall personally, but only against the company and against Mr White. Prior to the hearing in this Court there had been some difficulty in identifying the actual pleading which had been the subject of orders in the District Court. However, when the document was properly identified, it became apparent that Colefax DCJ might have made orders striking out parts of the pleading alleging abuse of process in respect of the bankruptcy notices under a misapprehension that they had not been properly particularised, whereas in fact amendments had been made providing adequate particulars. Upon clarification of that matter, the second respondent (the builder) agreed to the orders made by the District Court being set aside, which had the effect of reinstating paragraphs 18-34 of the most recent form of the statement of claim. Orders to that effect were made with the consent of the second respondent. 5Counsel for Mr White not being able to obtain instructions in the course of the hearing as to whether he consented to a similar course, the Court stood the application over to allow instructions to be obtained. 6By letter dated 7 September 2012 the solicitors for the third respondent advised that he consented to orders in similar form in respect of the application against him. Those orders will be made. However, he sought leave to make submissions in respect of the costs of the application for leave to appeal. The parties agreed that the issue could be disposed of by way of written submissions. Those have now been received and it is necessary to determine the appropriate order as to the costs of the application, as between the applicants and the third respondent only. 7The third respondent contended that the applicants should pay his costs of the leave application or, in the alternative, his costs up to the point at which the Court "in substance granted the applicants leave to amend" which was in the course of the oral hearing. Apart from the need to give further instructions and make submissions in respect of costs, the costs would have been identical on either basis. 8The basis for the application for costs was that as originally presented, the applicants' case based on a reasonable apprehension of bias was "hopeless", but the third respondent was required to address it. As the applicants had been unsuccessful on that ground, they should pay the costs, it was submitted, of the whole application. 9If that were the full story, there might be much to be said in favour of costs being payable by the applicants. However, that is not the full story. First, the applicants have been successful in obtaining a grant of leave and having the impugned orders set aside. The ordinary rule would allow them to have their costs of the proceedings in this Court. The fact that they succeeded upon a ground which they did not initially identify, might well be a reason to deprive them of those costs, but would not necessarily result in an adverse costs order against them. Secondly, the point on which they ultimately succeeded resulted from a clarification of the confusion in relation to the state of the pleadings in the District Court. Both before and after the orders of 20 April 2012, the third respondent was an active party to the proceedings. He should have at least been aware of the confusion which was apparent to this Court once the relevant documents were identified. The fact that he has now consented to the relevant orders indicates that he has accepted the justification for setting aside the orders made in the District Court. Whether or not he and his solicitors had identified the apparent mistake in the Court below is not a matter which needs to be explored. It is sufficient to say that they ought reasonably to have done so prior to the hearing in this Court and if they had, given that the applicants were litigants without legal representation, it would have been inappropriate for the third respondent to stand by and not assist in clarifying the matter in this Court. 10The proper result is that there be no order for costs in this Court. That is in no sense a punitive result: it merely reflects the fact that the orders below were properly set aside, but not on a ground identified by the applicants. 11Accordingly, the Court makes the following orders: (1) With respect to the application for leave to appeal from orders made in the District Court on 20 April 2012, in addition to the orders made on 31 August 2012, and with respect to the third respondent: (a) grant leave to the applicants to appeal in respect of orders 1-4; (b) by consent, allow the appeal and set aside orders 1-4. (2) As between the applicants and the third respondent, make no order as to the costs of the proceedings in this Court. ********** 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. Decision last updated: 06 February 2013