Supreme Court New South Wales Medium Neutral Citation: Diveva Pty Limited v Port Macquarie-Hastings Council [2015] NSWSC 430 Hearing dates: 14 April 2015 Date of orders: 14 April 2015 Decision date: 14 April 2015 Jurisdiction: Common Law Before: Harrison AsJ Decision: The Court orders that: (1) The defendant is to pay the plaintiff's costs of the motions filed 21 August 2014 and 19 January 2015 on an ordinary basis as agreed or assessed. (2) The matter is stood over for directions before the Registrar at 9.00 am on 29 April 2015. Catchwords: COSTS – UCPR 42.1 - general rule that costs follow the event - s 98 Civil Procedure Act 2005 (NSW) - court's discretion to determine by whom, to whom and to what extent costs are to be paid Legislation Cited: Civil Procedure Act 2005 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Calderbank v Calderbank [1975] 3 All ER 333 Category: Costs Parties: Diveva Pty Limited t/as Mid Coast Road Services (Plaintiff) Port Macquarie-Hastings Council (Defendant) Representation: Counsel: B Hemsworth (Plaintiff) B DeBuse (Defendant) Solicitors: Somerville Legal (Plaintiff) Marsdens (Defendant) File Number(s): 2013/377766 Publication restriction: Nil Judgment 1. HER HONOUR: This is an argument about costs. The plaintiff has filed two notices of motion, one on 21 August 2014 seeking to conduct tests, the other on 19 January 2015, seeking to amend the statement of claim. Both motions have now been resolved. 2. The plaintiff seeks its costs of the motions. The defendant seeks its costs on an indemnity basis. The plaintiff is Diveva Pty Limited t/as Mid Coast Road Services ("Diveva"). The defendant is Port Macquarie-Hastings Council ("Port Macquarie Council"). Costs generally 1. Section 98 of the Civil Procedure Act 2005 (NSW) relevantly reads: "98 Courts powers as to costs (1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. … (4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount." 1. The Uniform Civil Procedure Rules 2005 (NSW), rules 42.1 and 42.2 read: "42.1 General rule that costs follow the event Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. 42.2 General rule as to assessment of costs Unless the court orders otherwise or these rules otherwise provide, costs payable to a person under an order of the court or these rules are to be assessed on the ordinary basis." Background 1. On or around 27 July 2011, the Council awarded Diveva a contract for the supply and lay of asphaltic concrete pursuant to Tender No: T-11-15 ("the Agreement") (at TB 4) and the instrument of agreement (at TB 43). 2. The contract was expressed to be for the supply materials and work to be carried out. The terms of the tender and the Agreement do not specify the amount of work that was required. The Agreement is expressed to be "for the supply and lay of asphaltic concrete with the Port Macquarie Hastings Council local government area." 3. Clause 10(c) provided: "The period of this Tender Agreement twenty-four (24) months commencing on the 1st August 2011 to 31 July 2013 with a further twelve (12) month option available." 1. Prices were only fixed for a period of 12 months with a formal review to take place at the end of each 12 month period (Clause 11). 2. It is the provision of an option that forms the basis of the dispute between the parties and this is reflected in the pleadings in the statement of claim. 3. In March 2013, Port Macquarie Council resolved to let a new tender at the expiry of the two year period with updated specifications in March 2013 (see letter p 45 tender bundle). On or around 4 April 2013, Diveva attempted to exercise an option to renew the Agreement for a further 12 months. The purported exercise of the option recognises the need for renegotiation. Without a mechanism for determination between the parties of any disagreement, which the Agreement did not provide, the defendant argues that there could only be an agreement to negotiate, not an enforceable agreement. 4. On or around 19 June 2013, Port Macquarie Council appointed a new panel of contractors to carry out the works. 5. Diveva alleges that Port Macquarie Council is in breach of the Agreement. Port Macquarie Council denies that it is in breach of the Agreement and says that Diveva did not have the ability to unilaterally exercise the option. The pleadings 1. On 16 December 2013, Diveva filed a statement of claim against Port Macquarie Council alleging breach of contract and repudiation. 2. On 20 January 2014, Port Macquarie Council filed a defence. At [24] and [25] it pleaded: "24. As a consequence of the plaintiff's breach of the Contract, the defendant has suffered loss and damage. Particulars The costs of rectification of the Lake Cathie Works, which will be particularised in evidence. 25. In the premises, the defendant determined to obtain goods and services from other suppliers in accordance with Section 1, clause 10(g) of the Tender Agreement." 1. It was paragraphs [24] and [25] of the defence that caused Diveva to elect to file the notices of motion, as those paragraphs seek the costs of rectification of the Lake Cathie works. 2. On 28 January 2015, Port Macquarie Council's solicitors wrote to Diveva's solicitors stating: "As you are aware, our client no longer intends to press paragraph 24 of the Defence and will not seek to rely upon it at the hearing of this matter. Accordingly in our view, it is no longer necessary to maintain your client's Notice of Motion for expert testing of the road. Our client makes the following offer: 1. The Notice of Motion filed 21 August 2014 by Diveva Pty Ltd, the Plaintiff ("Motion"), be dismissed. 2. Each party bear their own costs of the Motion." 1. This offer was expressed to be a Calderbank v Calderbank [1975] 3 All ER 333 offer (Ex 1). 2. On 2 February 2015, these motions came before me for hearing. The defendant in its submissions at [19] stated: "19. The Defendant no longer intends to press paragraph 24 of the Defence and will not seek to rely upon it at the hearing of this matter. This removes any issue as to the loss and damage suffered by the Council and the Council's case is that to the extent it is relevant that the plaintiff was obliged to follow specifications in accordance with the tender it didn't do so." 1. On 2 February 2015, I adjourned the motions to 5 March 2015 before the Registrar. I ordered that costs be costs in the cause and the balance of the costs of the motions were reserved. 2. On 4 March 2015, Port Macquarie Council filed the amended defence. Paragraphs [24] and [25] now plead: "24. In consequence of the failure of the plaintiff: (a) to provide material in accordance with the required specification; and (b) the failure of the plaintiff to make good the Lake Cathie Works, the plaintiff was at the time of the purported exercise of the Option, in breach of the Contract. 25. If, which is denied, the plaintiff was entitled to exercise any Option for further work, it was an implied term that the plaintiff would not at the time of exercise of the Option be in breach of the terms of the Contract to perform work Particulars The term is implied to give efficacy to the Contract." 1. On 4 March 2015, Port Macquarie Council's solicitors wrote to the Diveva's solicitors with proposed consent orders (Ex 2). Paragraph [1] of those consent orders read: "1. The Plaintiff's Notices of Motion filed 21 August 2014 and 25 January 2015 be dismissed with no order as to costs." 1. On 5 March 2015, the Registrar ordered the defendant to provide to the plaintiff further and better particulars in relation to paragraph [24] of the amended defence by 11 March 2015. The particulars were: "1.1 Please particularise the basis upon which it is alleged that the plaintiff failed to provide material in accordance with the Required Specifications referred to at paragraph 24(a) of the Amended Defence." 1. The proceedings were then stood over for further directions on 12 March 2015. 2. On 9 March 2015, Port Macquarie Council's solicitors wrote to Diveva's solicitors (after the Court order for the supply of particulars was made) (Ex A) and stated: "We do not really understand your request for particulars as paragraph 24 is pleaded as a consequence of the departures from the Plaintiff's contractual obligation identified and particularised in paragraphs 19, 21 and 22 of the Amended Defence. We enclose for your further information a copy of the Defendant's letter referred to in the Amended Defence dated 12 March 2013. That letter records that, in accordance with previous correspondence, there had been an agreement for the location of bore holes to test in situ voids on the Lake Cathie road works. The tests were conducted and the Defendant contends it was accepted that the test results demonstrated 'excessive voids' in all four agreed locations. What followed was apparently a dispute as to the interpretation of the specification. If the Defendant is correct, then it had reason to be dissatisfied with the conformance to the specification; if the Plaintiff is correct that the specification should be interpreted differently then no doubt it will argue it was not in breach. We do not see how the interpretation and state of evidence before the Defendant at the time of the exercise of the option can be subsequently altered by further testing. As has been made apparent by our client's amendment, it does not allege particular loss or damage, merely that having regard to the interpretation it says bound the Plaintiff to perform in a particular way, the evidence demonstrated that the Plaintiff was not performing in accordance with the contract; in those circumstances the Defendant had no obligation (if it had an obligation at all) to renew the Plaintiff's contract. We do not see how any further testing can relevantly be used to challenge the state of knowledge of the parties at the time or the correctness of their respective positions." 1. On 24 March 2015, Port Macquarie Council's solicitors wrote to Diveva's solicitors (Ex A): "We do not agree that our letter of 9 March 2015 failed to provide a proper reply to the particulars sought. However, for more abundant caution, we repeat that paragraph 24 is pleaded as a consequence of the departures from the Plaintiff's contractual obligations identified and particularised in paragraphs 19, 21 and 22 of the Amended Defence. If you are still unable to identify the issue, it is; that as a result of an agreed testing procedure, insitu voids found in the Lake Cathie road works do not comply with AUSSPEC C245, Section 32 Item (f) as the voids were not between 4% to 7%." 1. It is my view that it was only when Port Macquarie Council particularised paragraph [24(a)], by specifying that Diveva had failed to undertake the works in accordance with the AUSSPEC C245, Section 32 Item (f), that it alleged breach of contract and that the pursuing orders sought in the motions became unnecessary. Costs are discretionary 1. I accept it is not known whether Diveva would have been successful and orders made to allow its expert access to the site located at Ocean Drive, Lake Cathie to undertake the Dynamic Cone Penetrometer Test and the Benkelman Beam Test. However, it is my view that the orders sought were appropriate at the time the motions were filed. The orders sought were rendered otiose on 24 March 2015. Diveva says that in these circumstances it was entitled to appear at Court today to seek its costs. 2. Counsel for Port Macquarie Council referred to the Calderbank offer and submitted that it should have its costs from 28 January 2015 on an indemnity basis. That offer was that the notice of motion (relating to the penetration and beam tests being conducted) be dismissed with each party to bear its own costs. But by 28 January 2015, there were two motions running concurrently, the latter one seeking to join the party who supplied the asphalt for the Lake Cathie works. After 28 January 2015, Port Macquarie Council filed its amended defence (on 4 March 2015) and then provided proper particulars on 24 March 2015. It was not until the particulars were supplied that Diveva knew that the case it would have to meet would no longer include a claim for rectification of the works it carried out at Lake Cathie. It is my view that the appropriate order for costs in these circumstances is that Port Macquarie Council is to pay Diveva's costs of the motions filed 21 August 2014 and 19 January 2015 on an ordinary basis as agreed or assessed. The Court orders that: (1) The defendant is to pay the plaintiff's costs of the motions filed 21 August 2014 and 19 January 2015 on an ordinary basis as agreed or assessed. (2) The matter is stood over for directions before the Registrar at 9.00 am on 29 April 2015. ********** 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: 16 April 2015