Coast Property Realty Pty Ltd v Falconer [2016] NSWSC 214

Supreme Court New South Wales

Medium Neutral Citation: Coast Property Realty Pty Ltd v Falconer [2016] NSWSC 214 Hearing dates: 25 February 2016 Decision date: 25 February 2016 Before: White J Decision: Order that there be no order as to the costs of the proceedings with the intention that each party pay its and his own costs. Catchwords: COSTS — Application for alternative costs order — Rule 42.19(2) Uniform Civil Procedure Rules 2005 — Plaintiff acted reasonably in commencing proceedings — Defendant acted reasonably in defending proceedings — Plaintiff discontinued proceedings on the basis of an undertaking given by the defendant to the Court — Significant compromise by both parties — Plaintiff achieved practical success — No order as to costs — Parties to pay their own costs Cases Cited: Re Minister for Immigration & Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622 Australiawide Airlines Limited v Aspirion Pty Limited [2006] NSWCA 365 Bitannia Pty Ltd v Parkline Constructions [2009] NSWCA 32 Ibrahim v PERI Australia Pty Ltd [2013] NSWCA 328 Category: Costs Parties: Coast Property Realty Pty Ltd (Plaintiff) Scott Falconer (Defendant) Representation: Counsel: J R Clarke SC with T Kane (Plaintiff) L Chan (Defendant)

Solicitors: Swaab Attorneys (Plaintiff) n/a (Defendant) File Number(s): 2016/53916

Judgment 1. HIS HONOUR: This application concerns questions of costs. On 19 February 2016 the plaintiff filed a summons in which it sought orders to restrain the defendant from, amongst other things, soliciting or accepting any instructions to perform any work for any client of the plaintiff who had been a client of the plaintiff during the period of the defendant's employment. It also sought other forms of relief in the alternative, seeking to restrain the defendant from soliciting or accepting instructions to perform work for any person with whom the defendant had direct dealings in the course of his employment with the plaintiff. 2. The plaintiff carries on business as a real estate agency under the name of Century 21. It has offices in The Entrance and Berkeley Vale in New South Wales. The defendant had been employed with it as a sales representative. 3. On 23 February 2016 the proceedings were resolved, save as to questions of costs. I gave leave to the plaintiff to discontinue the proceedings. It did so on the basis of the defendant's giving undertakings to the Court, on a without admissions basis, in substance that the defendant would not solicit or accept instructions to perform any work for any person with whom he had had direct dealings in the course of his employment with the plaintiff after 30 January 2015. There was a definition of "direct dealings" that excluded from the scope of the undertaking persons who were described as landlord clients of the plaintiff. Those persons had been included within the alternative form of relief sought by the plaintiff in its summons. 4. The commencement of the proceedings had been preceded by extensive negotiations between the solicitors for the plaintiff and the solicitors for the defendant and his new employer that trades as McGrath Long Jetty. The resolution of the proceedings involved compromises on both sides. The position initially taken by the plaintiff was that the defendant should give an undertaking, in effect, to comply with all of his obligations set out in the terms of his employment agreement dated 14 March 2012. Those obligations were wider than those sought to be enforced by the plaintiff in its summons. They included a restriction on the defendant's working for a competitor. During the course of negotiations the plaintiff did not press for that form of relief. The negotiations led to the defendant, through his solicitors, making an offer on 11 February 2016 that was substantially to the same effect as the undertakings ultimately proffered on 23 February 2016 as undertakings to the Court. There were some differences in that the definition of the clients for whom the defendant had direct dealings, which were to be the subject of his undertaking, related only to a period after 9 February 2015 rather than the slightly longer period contained in the undertaking finally offered. 5. The defendant proffered his undertaking on 11 February 2016 only on the basis that the plaintiff correct records appearing on a website called www.realestate.com.au. The defendant complained that the plaintiff had changed the records on that website so as to state that another agent employed by the plaintiff had effected sales that the defendant had in fact made when working for the plaintiff. He said the plaintiff should record that he had effected the relevant sales. The plaintiff did not accept that condition of the provision of the undertaking. 6. On 12 February 2016 there were some further negotiations between the parties. The plaintiff had taken the position that it would simply nominate Century 21, that is the plaintiff itself, as being the selling agent in relation to properties that had been sold through the defendant. That offer was rejected. Undertakings were again offered on the basis that in relation to all sales that the defendant effected as the nominated listing agent on behalf of the plaintiff, the records on the website should reflect that fact, and that this should necessitate the removal of another nominated agent, Mr Hampton, as being the relevant selling agent. 7. On 12 February 2016 the plaintiff said that for the purpose of resolving the matter the plaintiff was prepared to accept undertakings proffered by the defendant in his solicitor's letter of 12 February 2016 but did not accept the proviso on which those undertakings had been offered. 8. The plaintiff's solicitor said, in relation to the website, that the plaintiff would "remove references to any person selling a particular property where your client was involved as the selling agent". The plaintiff rejected the defendant's request that the defendant's name be reinstated but said that the plaintiff's proposal was "to remove any reference to who sold a property (when your client was the selling agent)". 9. On 16 February, the defendant's solicitor rejected the plaintiff's offer in the letter of 12 February 2016. These proceedings were commenced on 19 February. 10. The defendant complains that the website in question has not been wholly changed to remove any reference to who sold property when the defendant was the selling agent. It appears that if the website is accessed, by linking to a named agent, Mr Hampton, it will produce listings of properties apparently sold by him where in fact the defendant was the selling agent. The plaintiff has said (and there is no issue about this) that this was due to inadvertence. The plaintiff did not realise that was still the position. It will take steps to correct it. 11. The starting position on the question of costs is that, where proceedings are discontinued by the plaintiff, unless the court orders otherwise or the notice of discontinuance otherwise provides, the plaintiff is to pay the defendant's costs (r 42.19(2)). The defendant submits that there is no reason for the court to make a contrary order to displace the order of r 42.19, and the plaintiff should be ordered to pay his costs of the proceedings. 12. The plaintiff submits that the defendant should pay its costs of the proceedings. It says that the undertakings which have been given to the court, provide it with a substantial measure of success. It submits it is the substantially successful party. More particularly, it says that it was required to commence these proceedings because the defendant had proffered undertakings which would have been acceptable to it if given without condition. This would have meant that no proceedings needed to be instituted. But because the undertakings were proffered only with the condition, which the plaintiff was not prepared to accept, the proceedings were instituted. But on the return date of the claim for interlocutory relief, the defendant withdrew the condition on which he had formerly insisted. The plaintiff says that that involved relevant capitulation by the defendant. Had he taken that position from 12 February, the proceedings would have been unnecessary. 13. The parties acknowledge that the authorities, on the operation of r 42.19, indicate that circumstances in which it may be appropriate for a court to make a contrary order include where the plaintiff has achieved practical success in the proceedings or where the defendant's unreasonable conduct has caused unnecessary costs. The defendant also submits that a contrary order may be made if a judge could feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried (Re Minister for Immigration & Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622 at 624). In that case, McHugh J said that, although in an appropriate case, a court may make an order for costs, even where there has been no hearing on the merits, the court cannot try a hypothetical action between the parties so as to burden the parties with the costs of a litigation action, which by their settlement they have avoided. And that if it appears that both parties have acted reasonably in commencing a proceedings and continued to act reasonably until settlement or until the further prosecution of the proceedings became futile, then the appropriate exercise of the costs discretion will usually mean that the court makes no order as to costs (at 624-625). 14. In Australiawide Airlines Limited v Aspirion Pty Limited [2006] NSWCA 365 at [64], and Bitannia Pty Ltd v Parkline Constructions [2009] NSWCA 32 at [78], the Court of Appeal has said that McHugh J's statements in Re Minister for Immigration & Ethnic Affairs; Ex Parte Lai Qin are not readily applicable to a decision to be made in Pt 42 (under UCPR in r 42.19) or rule 22.1, because the starting point is different than the starting point considered in Re Minister for Immigration & Ethnic Affairs; Ex Parte Lai Qin. That case involved different rules of court. 15. In those cases, the Court of Appeal held that whilst the question of whether the plaintiff has acted reasonably in commencing and continuing proceedings is a relevant consideration, it is not determinative. In Ibrahim v PERI Australia Pty Ltd [2013] NSWCA 328, Beazley P said (at [16]-[18]): "[16] The primary judge, in determining whether a costs order ought to be made in the applicant's favour, on the discontinuance, reviewed the case law including, relevantly, Australian Securities Commission v Aust-Home Investments Ltd [1993] FCA 585; 44 FCR 194; Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; 186 CLR 622; ONE.TEL Ltd v Deputy Commissioner of Taxation [2000] FCA 270; 101 FCR 548; Fordyce v Fordham [2006] NSWCA 274; 67 NSWLR 497; and Bitannia Pty Ltd v Parkline Constructions Pty Ltd [2009] NSWCA 32. [17] Although each of those cases related to different facts, the principles that are to be derived from them, in circumstances where a Court is requested to make a costs order, when proceedings have not been heard to termination include the following: whether a party acted reasonably in commencing the proceedings; whether a party had been successful in obtaining interlocutory relief; whether the party sued had acted reasonably; whether the responding party had acted reasonably in defending the proceedings; whether the proceedings terminated after interlocutory relief had been granted; and further, whether the primary judge was satisfied that the party seeking to terminate the proceedings prior to a full hearing had almost a certain chance of success. [18] An applicant for costs where proceedings had not been heard to fruition need not prove each or every one of these matters but they are the factors that the courts have considered relevant to a determination as to whether to order costs." 1. I do not think that there was any unreasonable conduct on the part of the plaintiff in commencing the proceedings nor on the part of the defendant in defending the proceedings. Nor is this a case in which I could conclude that one or other of the parties would almost certainly have succeeded had the application either for interlocutory or final relief been tried. The undertakings that were proffered, which has led to the discontinuance of the proceedings, involved substantial compromises on both sides, and neither party has been wholly successful. But the extent of the plaintiff's success is sufficient, in my view, to warrant the making of a contrary order under r 42.19, which means that it should not be required to pay the defendant's costs of the proceedings. Does it mean that the plaintiff is entitled to have its costs paid by the defendant when the proceedings have been resolved by a compromise? But for the argument relating to the immediately prior negotiations, the answer would be clearly no. 2. It is true that the defendant proffered undertakings on 12 February 2016 subject to a proviso relating to the amendment to the records on the website www.realestate.com.au, but later gave the undertakings in substantially the same form (although not wholly in the same form as those proffered on 12 February 2016) not subject to such a proviso. I do not consider that circumstance is a sufficient reason for requiring the defendant to pay the plaintiff's costs. 3. It was said for the plaintiff that the collateral issue concerning correction of the record of the website should not have been introduced as a condition for agreeing to a compromise of the contemplated proceedings. I do not agree. I think where parties are in negotiations they are entitled to bring forward any matter of relevance to their position, which is important to them, in seeking an overall resolution. 4. In any event, the position ultimately taken by the defendant was taken after the plaintiff had made its proposal to remove reference to any person selling a particular property where the defendant was involved as the selling agent. It is true that the offer containing that proposal was rejected by the defendant's solicitor's letter of 16 February 2016. Nonetheless, I think clearly enough that the parties intended and expected that that proposal would be implemented in the terms in which it was offered. The plaintiff, indeed, has taken steps notwithstanding the rejection of its proposal of 12 February 2016 to correct the record of the website. It thought that it had been successful in its endeavours and it accepts whether it is legally obliged to do so or not, that it should now take steps to remove the remaining records, which incorrectly suggest that another person was responsible for particular sales made by the defendant when an employee of the plaintiff. I think those are matters which cannot be ignored. 5. As the defendant has, in my view, been reasonable in his response to the plaintiff's claim, as the plaintiff has not had complete success, as there has been a significant element of compromise by both parties in the proceedings, and as there has been the unfortunate complication concerning the correction of the website which informed the parties' negotiations that led to the compromise, I think the appropriate costs order is that there be no order as to the costs of the proceedings with the intention that each party pay its and his own costs, and I so order.