Payce Communities Pty Ltd v Canterbury-Bankstown Council (No 5)

I delivered my principal judgment in these proceedings on 6 April 2021. [1] I will use the same abbreviations in these reasons.

I have since delivered three further judgments in the proceedings dealing with various issues that arose out of the 6 April 2021 judgment. [2]

In my 6 April 2021 judgment I said [3] :

On 18 May 2021 I made the following declaration, notation and order:

These final reasons deal with the costs of the proceedings.

The declaration that I made on 18 May 2021 reflected what was in substance the outcome of the proceedings, namely, that Payce established an entitlement to variations under the Fit Out Agreement in the sum of $1,068,304.75.

This reflected the fact that, before me, Payce was obliged to run its case for variations on a final basis.

The Council’s position before me was that Payce was not entitled to any amount on account of the variations and that Payce should refund all of the amount paid to it by the Council on an interim basis under the Building and Construction Industry Security of Payment Act 1999 (NSW) (“the Act”), being an amount of $1,285,660.65.

The Council has failed to make out that position. What it has established is that the amount to which Payce is entitled is a little less than the amount that the Council paid under the Act. The result is the order I made on the 18 May 2021 pursuant to s 32(3)(b) of the Act.

But Payce has established that it is entitled to retain the bulk of the amount paid to it by the Council under the Act.

In these circumstances, it appears to me that the “practical outcome of the proceedings” [4] is that Payce has been successful.

That reflects the fact that Payce has achieved complete success on two of the issues debated before me, the scope of works covered by the agreed Fit Out Agreement Contract Price and whether it was necessary for Payce to point to written directions to varying the works in order for it to be entitled to claim variations; and substantial success on the remaining issue, quantification of its entitlement to variations.

Costs follow the event and, in my opinion, the “event” here is Payce’s establishment of a very significant claim for variations.

Payce should therefore have its costs of the proceedings.

The Council pointed to a number of affidavits that were served by Payce but not read. On the face of it, Payce should not have its costs of those affidavits. But that is a matter best left to the costs assessor.

Payce seeks a stay of the order that I made on 18 May 2021 under s 32(3)(b) of the Act pending assessment of its costs and points to evidence of its solicitor suggesting that the quantum of its costs is likely to exceed the amount of my s 32(3)(b) order.

The basis given for such a stay is stated in submissions to be:

This submission strays a little wider than the evidence upon which it relies, which is this statement in Payce’s solicitor’s affidavit of 19 May 2021, evidently given on information and belief:

There is no suggestion in that evidence that Payce cannot obtain “an intercompany loan” or “funds from another source”. Nor is there any evidence as to what, if any, costs would thereby be incurred.

If it be the fact that Payce “is a special purpose vehicle” and does not itself have the funds to meet the s 32(3)(b) order that is presumably a consequence some benefit that those behind Payce saw in structuring matters this way.

I am not persuaded that these matters constitute a reason to order the stay that is sought.

Payce also seeks an order for indemnity costs on the basis of a Calderbank offer it made on 24 December 2020.

That letter offered to settle these proceedings on the basis of:

Payce has achieved a more favourable result than this offer in that it has established an entitlement to a slightly higher amount for variations.

But it has not achieved a “stay” of the amount to be repaid to the Council pending assessment of its costs.

Nor has it obtained the benefit of an unqualified “deed of settlement and release” which may well have been wider than the res judicata that will arise from these proceedings.

In those circumstances, I do not see the Calderbank offer as one which should give rise to an order for indemnity costs.

There are two other matters in respect of which I understand there be no dispute.

The first is that Payce should have interest on its costs.

The second is that the Council should return to Payce an original bank guarantee dated 31 July 2019 that Payce provided as security for costs.

I make the following orders: