Ramm Investments Pty Ltd v Nguyen

These proceedings were resolved by agreement except as to costs. The plaintiffs, for whom Mr Bennett appeared, sought an order that the defendant pay their costs. In the alternative, they sought an order that each party pay its, his or her own costs. The defendants, for whom Mr Freeman appeared, sought an order that the plaintiffs pay the defendants’ costs of the proceedings. In the alternative, Mr Freeman submitted that there ought be no order that the defendants pay the plaintiffs’ costs after 21 September 2017.

In order to address the question of costs it is necessary to summarise the background to the proceedings.

Ramm Investments Pty Ltd (the first plaintiff) is the registered proprietor of land known as 248 Queen Street, Campbelltown (Lot 248). Ralph Mesiti, Nick Pahos and George Leros (the second plaintiffs) operate a pharmacy business from part of the first plaintiff’s property. Hung Trun Nguyen and Khanh Ngoc Huynh (the defendants) are the registered proprietors of land known as 250 Queen Street, Campbelltown (Lot 250), which is immediately adjacent to Lot 248.

In January 2009 there was a fire on Lot 250, as a consequence of which a concrete slab on Lot 250 was excavated. The plaintiffs alleged the excavation had the consequence that Lot 248 was affected by water which was said to flow from Lot 250 to Lot 248, causing damage to Lot 248. On 22 April 2015 the plaintiffs commenced proceedings against the defendants seeking relief in respect of the alleged damage. These proceedings were resolved at mediation on 23 February 2017 by heads of agreement, which relevantly provided:

It was common ground that the first plaintiff’s obligation under cl 4 and the defendants’ obligation under cl 1 were independent obligations.

After signing the heads of agreement the defendants contacted their architect and project manager, Vuong Tran, and asked him to seek tenders and quotations to construct the concrete slab. However he was unable to be retained as he was ill. The defendants then retained another architect, Vinh Trang, to seek tenders and quotations for such work.

On 3 March 2017 the defendants received a quotation from Technique Plumbing Pty Ltd for the work for a total of $297,750 plus GST. By letter dated 3 March 2017 the defendants’ solicitor wrote to the plaintiffs’ solicitor and confirmed his instructions that the defendants had called for quotations to construct and lay the concrete slab. He also confirmed that the defendants would use their reasonable endeavours to complete the work within four months.

There is no evidence that the defendants did anything after sending that letter until they received a quotation from JLN Group Pty Ltd dated 1 June 2017 which was forwarded to Mr Tran, who may by that time have recovered. The amount of the quotation was $227,890 plus GST.

As far as the plaintiffs were aware, the works were not progressing since they did not observe any work being done on Lot 250.

On 7 June 2017 the plaintiffs’ solicitors wrote to the defendants’ solicitor and referred to cll 1 and 7 of the heads of agreement. They continued:

No response was received. The defendants received a further quotation on 8 June 2017 from Corvus Primesite Pty Ltd in an amount of $176,771.96 plus GST. However, this was not communicated to the plaintiffs.

On 20 June 2017 the defendants’ solicitors again wrote to the plaintiffs’ solicitor. They said, of present relevance:

The only response received to this letter was an email dated 21 June 2017 from the defendants’ solicitor to the plaintiffs’ solicitors which forwarded an email dated 9 June 2017 from Vuong Tran, the defendants’ architect, to the defendants’ solicitor which said:

The date of 23 June 2017 provided for in cl 1 of the heads of agreement came and went without any works having been done.

On 4 July 2017 the plaintiffs’ solicitors again wrote to the defendants’ solicitor. They said, of present relevance:

As no response to the letter of 4 July 2017 was received, the plaintiffs commenced the present proceedings by filing a statement of claim on 26 July 2017. The date of filing was 19 days after 7 July 2017, being the time allowed for a response in the letter of 4 July 2017. In the statement of claim the plaintiffs alleged that the defendants had breached cl 1 of the heads of agreement. They claimed specific performance of cl 1 of the heads of agreement and, in the alternative, they sought damages.

By email sent on 28 July 2017 the plaintiffs’ solicitors asked the defendants’ solicitor whether he had instructions to accept service of the statement of claim. Eventually, on 19 September 2017, the defendants’ solicitor communicated that he had those instructions. The statement of claim was served on 21 September 2017 under cover of a letter which informed the defendants’ solicitor that there was a return date of 31 October 2017.

The filing of the statement of claim (of which the defendants’ solicitor was aware) apparently produced results. On 21 September 2017 the defendants’ solicitor wrote to the plaintiffs’ solicitor and foreshadowed that “the works are estimated to be finished by the end of September 2017”. He suggested that the proceedings ought be dismissed at the first return date (31 October 2017) with no order as to costs. The defendant’s solicitor then set out the matters which he was instructed had been done by his clients commencing with the heads of agreement as follows:

The letter continued:

It is common ground that this was the first occasion on which the plaintiffs’ obligation to comply with cl 4, and their breach of the obligation, was mentioned by the defendants. It is common ground that the works required to be done by the defendants pursuant to cl 1 of the heads of agreement were completed by 16 October 2017.

On 16 October 2017 the defendants’ solicitor wrote to the plaintiffs’ solicitors confirming that they had complied with its obligations under the heads of agreement; noting that the plaintiffs were in default of their obligations under cl 4 of the heads of agreement; and seeking a response to their letter of 21 September 2017 and confirmation of when the plaintiffs would complete the works required by cl 4. The letter concluded:

The plaintiffs completed those works by 27 October 2017. On that day the defendants’ solicitor wrote to the plaintiffs’ solicitors attaching two short minutes of order: the first provided for dismissal of the proceedings with no order as to costs; the second provided for a timetable for the further conduct of the proceedings. Also on 27 October 2017 the plaintiffs’ solicitors wrote to the defendants’ solicitor and rejected the first version of the short minutes and enclosed an executed version of the second suggesting that they be filed “to avoid any appearance on 31 October 2017”.

When the matter came before the Registrar on 31 October 2017, Mr Bennett appeared for the plaintiffs and mentioned the matter on behalf of the defendants. He informed the court that the matter had been resolved and that the only outstanding issue was costs. Directions were made for evidence and submissions on that question.

The defendants argued that it was not appropriate that there be an order for costs in favour of the plaintiffs as there had been no hearing on the merits and, accordingly, no assumption could be made as to whether the plaintiffs would have been successful had the matter not been resolved. In particular, Mr Freeman emphasised that the defendants’ obligation was only to use their best endeavours to have the work completed within four months and that, accordingly, breach ought not be assumed merely because the date passed without the works having been completed. He submitted that the effect of s 13 of the Conveyancing Act 1919 (NSW) was to require the plaintiffs to serve a notice to make time of the essence before the defendants would be in breach of their obligation under cl 1 of the heads of agreement. Mr Freeman argued that, as the plaintiffs had not served such a notice, the defendants were not in breach.

He submitted further that the plaintiffs were in breach of their obligation under cl 4 of the heads of agreement to remove the pipes and therefore, even if they would otherwise have been entitled to specific performance, their own breach would have disqualified them from a favourable exercise of this Court’s discretion to order specific performance.

The defendants submitted that before the first return date they had proposed that the proceedings be dismissed with no order as to costs and that, if this was the result, they ought have their costs of the costs’ argument paid by the plaintiffs. The defendants also submitted that the plaintiffs were seeking to re-litigate the original dispute which had been resolved by the heads of agreement and, accordingly, ought not have their costs of that attempt.

The plaintiffs submitted that the chronology demonstrated that the self-help measures they had employed to get the defendants to do the works were plainly insufficient and that, had they not had recourse to this Court, the work would not have been done as quickly as it eventually was once the statement of claim had been filed. Mr Bennett submitted that the defendants’ solicitor failed to respond to the plaintiffs’ solicitors for a considerable period at a time when there was no discernible progress. He emphasised that the plaintiffs were next door and could see that no work, whether preparatory or actual, was being done and were not appraised of any progress which the defendants were making behind the scenes. Mr Bennett submitted that, in that event, they were entitled to their costs of the proceedings as well as the costs of the costs’ argument.

This case demonstrates the benefits of communication between solicitors and the harm that can be caused by silence. This is not to suggest that the solicitors themselves were at fault since solicitors are bound by their instructions and, if instructions are not forthcoming, may not be in a position to communicate to the other side. The chronology demonstrates that there was a degree of dilatoriness on the part of the defendants in communicating with the plaintiffs. The defendants were still “negotiating with the builder” in June 2017, although they were obliged to have used their best endeavours to construct the concrete slab by 23 June 2017. It was little wonder that the plaintiffs were concerned. The two letters of demand which they wrote before the contractual date (set out above) and the letter of 4 July 2017 (after the contractual date but before commencing proceedings) put the defendants on notice of their concerns. The letter which foreshadowed proceedings, dated 4 July 2017, did not receive an appropriate response until 21 September 2017.

I reject Mr Freeman’s submission that it was necessary for the plaintiffs to make time of the essence before they could sue for specific performance. The principal purpose of such a notice is to permit the injured party to terminate a contract in circumstances where there might otherwise be doubt about whether a termination for breach would be lawful or might amount to repudiation. The effect of the plaintiffs’ conduct in sending letters of demand was, although not in terms to make time essential, to ensure that they were not taken to have waived the time provision in cl 1 of the heads of agreement. In Time in the performance of contracts: especially for the sale of land (2nd ed, 1982, Butterworths), Professor Lindgren said, of present relevance at [240]:

While cl 1 of the heads of agreement cast the defendants’ responsibility in terms of “reasonable endeavours”, it does not follow that the time-frame of four months was not important, could be disregarded or that the clause would not be specifically enforced. The risk of water damage if the slab was not constructed was plainly foreseeable; delay was accordingly prejudicial to the plaintiffs; and damages were unlikely to be found to be an adequate remedy.

In these circumstances it was reasonable for the plaintiffs to commence proceedings since all matters within their knowledge pointed to a disinclination on the part of the defendants to construct the slab in a timely way. The plaintiffs were obviously and understandably concerned to protect their property from the damage that water could cause. I infer that they were also concerned that if they did not move to enforce their rights they might be taken to have waived insistence on compliance with the time provision in cl 1 of the heads of agreement.

The statement of claim relied on the defendants’ obligations under the heads of agreement. It did not amount to an attempt to re-litigate that which had been resolved by the heads of agreement. To the extent to which the background to the making of the heads of agreement was alleged, it was by way of recitation of material background facts.

What occurred after the service of the statement of claim is consistent with the commencement of proceedings having a salutary effect on the defendants. I am satisfied that, in these circumstances, that it was reasonable, and apparently necessary, for the plaintiffs to commence the proceedings.

My conclusion is not altered by the fact that the plaintiffs themselves were in breach of their obligation under cl 4 of the heads of agreement. As referred to above, this obligation was entirely independent of the defendants’ obligation to construct the slab. Moreover, as the plaintiffs was required only to remove pipes from the common wall the delay was not such as would cause prejudice to the defendants since the presence of the pipes did not cause any damage to the defendants’ property or their enjoyment of it. The plaintiffs’ obligation to remove pipes is to be distinguished from the defendants’ obligation to construct the concrete slab which was regarded as necessary to prevent water damage to the plaintiffs’ premises. Whether non-compliance by the plaintiffs with their obligation under cl 4 of the heads of agreement would have operated to disqualify them from specific performance of cl 1 of the heads of agreement need not be decided. However, it cannot be assumed that it would have had that effect. Their non-compliance was plainly not a matter of great moment to the defendants who mentioned it for the first time on 21 September 2017 in an apparent attempt to equate the plaintiff’s breach with their own delay and thereby diminish the gravity of their own conduct. In any event, the breach was remedied well before the first return date of the proceedings on 31 October 2017. It did not excuse the defendants’ apparent breach since the promises were independent.

I do not regard it as unreasonable for the plaintiffs not to accept the defendants’ offer of 27 October 2017. The plaintiffs had incurred costs in drafting the statement of claim and commencing the proceedings as well as corresponding with the defendants’ solicitor concerning service. It was not unreasonable of them to refrain from accepting an offer which would require them to forego such costs. Although the plaintiffs’ solicitors chose to sign the alternative short minutes of order, this did not signify that they intended to pursue the proceedings; rather, it indicated that they wanted to avoid the further costs of appearing on 31 October 2017. As referred to above, Mr Bennett appeared on that day and informed the court that the plaintiff would not proceed on its statement of claim, save as to costs.

In Edwards Madigan Torzillo Briggs Pty Ltd v Gloria Stack [2003] NSWCA 302 Davies AJA (Mason P and Meagher JA agreeing) said at [5]:

I regard the present as an example of the last category of case referred to in the passage set out above. I am satisfied that there has been a marked difference in the reasonableness of the parties’ action so that the plaintiffs should be rewarded for their reasonable actions and the defendants should suffer a detriment in costs.

As there is no further relief sought, it is necessary to make orders finally disposing of the proceedings. The parties agreed that the proceedings ought be dismissed.

For the reasons set out above, I make the following orders: