Supreme Court New South Wales Medium Neutral Citation: Yeshiva Synagogue Incorporated 9893834 v Karimbla Properties (No 10) Pty Ltd (No 2) [2017] NSWSC 1504 Hearing dates: On the papers Date of orders: 03 November 2017 Decision date: 03 November 2017 Jurisdiction: Equity Before: Darke J Decision: Plaintiffs ordered to pay 50% of defendant's costs. Catchwords: COSTS – defendant claims that plaintiffs unreasonably refused to accept open offer at early stage of proceedings – plaintiffs did not act unreasonably – two issues remained at hearing of proceedings – defendant successful on one issue – other issue not determined on the merits – appropriate for plaintiffs to pay 50% of defendant's costs Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW), r 42.1 Cases Cited: Edwards Madigan Torzillo Briggs Pty Ltd v Gloria Stack [2003] NSWCA 302 Elite Protective Personnel Pty Ltd & Anor v Salmon (No 2) [2007] NSWCA 373 Hancock v Rinehart (Costs) [2016] NSWSC 11 Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 Yeshiva Synagogue Incorporated 9893834 v Karimbla Properties (No 10) Pty Ltd [2017] NSWSC 1368 Category: Costs Parties: Yeshiva Synagogue Incorporated 9893834 (First Plaintiff/First Cross-Claimant to Second Cross-Claim/First Cross-Defendant) Sydney Talmudical College Association (Second Plaintiff/Second Cross-Claimant to Second Cross-Claim/Second Cross-Defendant) Rabbi Yosef Feldman (Third Cross-Claimant to Second Cross-Claim) Karimbla Properties (No 10) Pty Ltd (Defendant/First Cross-Claimant) Representation: Counsel: Mr S A Lawrance and Mr A R Jordan (Defendant/First Cross-Claimant) Solicitors: Joseph Callaghan – General Counsel, Meriton Group (Defendant/First Cross-Claimant) File Number(s): 2017/117412 Publication restriction: None Judgment 1. The Court delivered judgment in these proceedings on 10 October 2017 (see Yeshiva Synagogue Incorporated 9893834 v Karimbla Properties (No 10) Pty Ltd [2017] NSWSC 1368). The plaintiffs alleged that two deeds granted them rights of possession or occupation over premises in Bondi after 19 December 2017, when the leases they currently enjoy over those premises expire. The Court concluded that those rights of possession or occupation had not been established. 2. A second issue in the proceedings, whether the defendant had validly terminated the current leases, fell away at the commencement of the hearing (see judgment at [4]). The defendant gave undertakings not to rely on two sets of termination notices it had served, and not to otherwise rely on a certain provision of the leases to terminate the leases prior to 19 December 2017. 3. Directions were made for the parties to bring in short minutes of order dealing with the form of orders and costs, and submissions if agreement was unable to be reached (see judgment at [46]). The parties are agreed on the form of the substantive orders but are not agreed on costs. Submissions have been received from both parties on the issue of costs and the Court will proceed to determine that issue on the papers. 4. The plaintiffs submit that the defendant should pay its costs of its Statement of Claim as the defendant "effectively abandoned" its defence to the Statement of Claim on the morning of the hearing by undertaking not to rely on its notices of termination. The plaintiffs submit that those costs should be paid on the indemnity basis as the defendant's claim based on the first set of notices "could be considered hopeless". The plaintiffs also submit that the Court should infer from the defendant's settlement of the issue that the defendant recognised that its second set of notices was also defective. The plaintiffs accept that they should pay the defendant's costs of defending the second cross-claim, by which the plaintiffs asserted the right of occupation or possession which the Court found had not been established. They also accept that they should pay the defendant's costs of prayer 5(b) of the first cross-claim, which was a declaration to the effect that the plaintiffs had no such right of occupation. 5. The defendant submits that it should pay the plaintiffs' costs up to 28 April 2017, but that the plaintiff should pay its costs after that date. On that day, the parties appeared before the Equity Duty Judge, at which time the defendant says it offered to settle the proceedings by allowing the plaintiffs to remain in occupation of the premises until the expiry of the leases. That offer was conditional on the plaintiffs accepting that they had no right to remain in occupation of the premises after that date. The defendant submits that, given that is the same as the position that has now been reached, the "only reason the proceedings were not concluded on 28 April 2017" was the plaintiffs' assertion of a right to remain in occupation after expiry of the leases. 6. In relation to the defendant's submission regarding the proceedings before the Duty Judge, the plaintiffs submit that there was no genuine offer of compromise made on that date which the plaintiffs could be accused of unreasonably failing to accept. 7. The transcript of the listing on 28 April 2017 before the Duty Judge reveals that Mr Lawrance, appearing for the defendant, initially put his client's position in relation to the notices of termination of the lease as follows (T4.2-5): "We are, essentially, prepared not to enforce those notices for the remainder of the lease, provided that the plaintiffs comply with their obligations under the lease to permit certain works to be done." Mr Cohen, for the plaintiffs, then expressed a concern that the defendant's offer "is in relation to work that goes beyond fire safety" (T6.31-2). In the absence of agreement by the plaintiffs, the defendant pressed for the interlocutory hearing to proceed (T9.1-5). 8. At approximately 3 o'clock, Mr Cohen indicated that the plaintiffs had accepted the short minutes proposed by the defendants, "but my learned friend now tells me that they entail something that is not actually in those short minutes" (T12.1-4). Mr Lawrance stated that the defendant's proposal not to rely on the notices of termination was conditional upon the plaintiffs not asserting a right to remain in the premises after the expiry of the leases on 19 December 2017 (T12.29-46). It seems, however, that that proviso was not contained in the terms of the proposed orders. Mr Lawrance then indicated that the defendant did not consent to the proposed orders and stated that the plaintiffs should proceed with their application for interlocutory relief. The parties eventually agreed a consent position which involved adjourning the interlocutory hearing to the following Monday (1 May 2017). The defendant continued its undertaking not to act upon the notices of termination, and the plaintiff gave an undertaking not to obstruct the fire safety works proposed by the defendant. 9. On 1 May 2017 orders were made by consent which noted that the defendant's undertaking was extended until the final determination of the proceedings, and noted further undertakings by the plaintiffs not to interfere with the defendant's fire safety works. 10. The first question is whether the defendant should pay the plaintiffs' costs of the proceedings up to and including 28 April 2017, as the defendant itself submitted. In my opinion, the defendant's conduct up to 28 April 2017 does not call for a costs order against it. The consent position that was reached on 28 April and confirmed on 1 May 2017 avoided the need for a contested interlocutory hearing and allowed the matter to be made ready for the allocation of an early hearing date. The issue of the fire safety works proposed by the defendant, which had also been a matter in dispute, was resolved by the plaintiffs' undertakings. I consider that the parties acted reasonably in the conduct of the proceedings up until 28 April 2017, and that there is no basis for a costs order against either party up until that date. 11. The second question is the defendant's claim for its costs after 28 April 2017. I am not persuaded that the plaintiffs should pay the defendant's costs of the proceedings after 28 April 2017 based on their failure to accept an open offer on that day. The defendant's position (that its offer not to rely on the notices of termination was conditional on the plaintiffs not asserting any right to remain after expiry of the leases) only became clear late in the afternoon on that day, and seems to have not been expressed in the terms of its proposed orders. It also appears that the plaintiffs were not entirely clear on the way in which their claim for a right of occupation would be cast. Although the plaintiffs maintained that they had accepted the defendant's offer, the defendant stated that it would not consent to the proposed orders if the plaintiff continued to assert that right. 12. I do not think that the plaintiffs can be said to have acted unreasonably. The proceedings had been on foot for just over a week. The defendant's position only became clear late on a Friday afternoon after numerous interchanges before the Duty Judge. In my opinion, the plaintiffs acted reasonably in seeking to have the matter stood over to the following Monday in order to properly consider their position. I do not accept the defendant's submission that the only reason the proceedings were not conluded on 28 April was because of the plaintiffs' assertion of the right of occupation. Thereafter, the defendant maintained the validity of the termination notices and sought relief in relation to them up until the commencement of the hearing. 13. That leaves the question of the costs of the proceedings in general. As stated above, the two issues at the hearing were the defendant's purported termination of the leases, and the plaintiffs' claim to a right of occupation. In my view, those issues were distinct and severable to an extent that renders it appropriate for them to be considered separately (see Elite Protective Personnel Pty Ltd & Anor v Salmon (No 2) [2007] NSWCA 373 at [6]). Although the ordinary rule is that a successful party is entitled to its costs irrespective of the outcomes on particular issues, a different order may be made where that is necessary to ensure that costs are borne in a way that is fair (see Hancock v Rinehart (Costs) [2016] NSWSC 11 at [7]-[8]). 14. As to the first issue, I am unable to accept the plaintiffs' submission that the defendant's decision at the commencement of the hearing to give further undertakings not to rely on both sets of termination notices amounted to a capitulation. I regard this as a case where both parties acted reasonably in commencing and defending the issue (see Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624-625). I do not think the issue was almost certain to be determined in either party's favour. I also do not think that either party has enjoyed a substantial victory or effectively surrendered (see Edwards Madigan Torzillo Briggs Pty Ltd v Gloria Stack [2003] NSWCA 302 at [5]). It would not have been an easy matter for the plaintiffs to establish that the notices of termination issued by the defendant were based upon a "sham". I do not think that the defendant's case could be considered "hopeless". I also do not think any inference about the validity of the termination notices can be drawn based on the defendant's offer to resolve that issue. The defendant's approach avoided the need for a second day of the hearing. In short, I do not think that either party should be regarded as the successful party in relation to this issue. There is certainly no basis for an indemnity costs order against the defendant as submitted by the plaintiffs. 15. As to the issue of the right of occupation, the defendant has been wholly successful. There is no reason why costs ought not follow the event: UCPR, r 42.1. 16. In my opinion, each of the two issues at the hearing was of approximately equal significance. The termination issue involved a degree of evidentiary complexity, and would have required some cross-examination. Its resolution considerably shortened the hearing time required, allowing the matter to finish in one day. The issue of occupation after the expiry of the leases was largely a question of construction. It was, however, quite significant for the parties' relationship into the future, and was not free of difficulty. 17. Finally, I should state that I am not inclined to award costs by reference to particular pleadings or prayers for relief, as proposed by the plaintiffs. In my view, that approach would require a degree of apportionment and assessment that should be avoided. 18. In the circumstances, I consider that the plaintiffs should pay 50% of the defendant's costs of the proceedings. That reflects the defendant's success on the right of occupation issue, the resolution of the termination issue without a determination on the merits, and the equal significance of each of those issues in the proceedings. 19. The Court will make the following orders: The Court notes that: 1. The defendant, by its counsel, undertakes to the Court and to the plaintiffs that the defendant will not (by itself, its servants or its agents) rely upon the notices of termination issued by it and dated 15 March 2017 in order to terminate: 1. the lease dated 29 September 2011 in favour of the first plaintiff of part of the premises at 36 Flood Street, Bondi (being Lot 1 in Deposited Plan 1094020); 2. the lease dated 7 January 2011 in favour of the first plaintiff of part of the premises at 36A Flood Street, Bondi (being Lot A in Deposited Plan 340445); 3. the lease dated 29 September 2011 in favour of the second plaintiff of part of the premises at 36 Flood Street, Bondi (being Lot 1 in Deposited Plan 1094020); 4. the lease dated 29 September 2011 in favour of the second plaintiff of part of the premises at 36A Flood Street, Bondi (being Lot A in Deposited Plan 340445). 1. The defendant, by its counsel, undertakes to the Court and to the plaintiffs that the defendant will not (by itself, its servants or its agents) rely upon the notices of termination issued by it and dated 4 September 2017 in order to terminate: 1. the lease dated 29 September 2011 in favour of the first plaintiff of part of the premises at 36 Flood Street, Bondi (being Lot 1 in Deposited Plan 1094020); 2. the lease dated 7 January 2011 in favour of the first plaintiff of part of the premises at 36A Flood Street, Bondi (being Lot A in Deposited Plan 340445); 3. the lease dated 29 September 2011 in favour of the second plaintiff of part of the premises at 36 Flood Street, Bondi (being Lot 1 in Deposited Plan 1094020); 4. the lease dated 29 September 2011 in favour of the second plaintiff of part of the premises at 36A Flood Street, Bondi (being Lot A in Deposited Plan 340445). 1. The defendant, by its counsel, undertakes to the Court and to the plaintiffs that the defendant will not (by itself, its servants or its agents) rely upon clause 27 of any of the following leases in order to terminate that lease on or prior to 19 December 2017: 1. the lease dated 29 September 2011 in favour of the first plaintiff of part of the premises at 36 Flood Street, Bondi (being Lot 1 in Deposited Plan 1094020); 2. the lease dated 7 January 2011 in favour of the first plaintiff of part of the premises at 36A Flood Street, Bondi (being Lot A in Deposited Plan 340445); 3. the lease dated 29 September 2011 in favour of the second plaintiff of part of the premises at 36 Flood Street, Bondi (being Lot 1 in Deposited Plan 1094020); 4. the lease dated 29 September 2011 in favour of the second plaintiff of part of the premises at 36A Flood Street, Bondi (being Lot A in Deposited Plan 340445). The Court declares that: 1. On the proper construction of the Deed of Agreement concerning 36 Flood Street, Bondi, dated 20 December 2012 between the defendant, Chabad Lubavitch of Sydney Incorporated and others: 1. Clause 6 of that Deed of Agreement does not confer upon the plaintiffs any right to use or occupy the premises at 36 Flood Street, Bondi (being Lot 1 in Deposited Plan 1094020) or any part of those premises. 2. Clause 6 of that Deed of Agreement does not confer upon any party to that Deed of Agreement the right to compel the defendant to permit the plaintiffs to use or occupy the premises at 36 Flood Street, Bondi (being Lot 1 in Deposited Plan 1094020) or any part of those premises. 1. On the proper construction of the Deed of Agreement concerning 36A Flood Street, Bondi, dated 20 December 2012 between the defendant, FCSC Ltd and others: 1. Clause 5 of that Deed of Agreement does not confer upon the plaintiffs any right to use or occupy the premises at 36A Flood Street, Bondi (being Lot A in Deposited Plan 340445) or any part of those premises. 2. Clause 5 of that Deed of Agreement does not confer upon any party to that Deed of Agreement the right to compel the defendant to permit the plaintiffs to use or occupy the premises at 36A Flood Street, Bondi (being Lot A in Deposited Plan 340445) or any part of those premises. The Court orders that: 1. The proceedings (including the proceedings on the first cross-claim and the proceedings on the second cross-claim) be otherwise dismissed. 2. The plaintiffs and the third cross-claimant on the second cross-claim pay 50% of the defendant's costs of the proceedings on the ordinary basis. ********** Amendments 06 November 2017 - Punctuation errors corrected. 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