Piety Constructions Pty Ltd v Megacrane Holdings Pty Ltd (Administrator Appointed) (No 3)

1. [1]

   On 30 March 2023 I delivered judgment in these proceedings dismissing the application of the plaintiff (Piety) for an order quashing an adjudication determination made by the second defendant under s 22 of the Building and Construction Industry Security of Payment Act 1999 (NSW) (the Act), or declaring it void: Piety Constructions Pty Ltd v Megacrane Holdings Pty Ltd [2023] NSWSC 309 (first judgment). On 21 June 2023, I made orders disposing of Piety’s application for a Brodyn/Grosvenor stay which adopted the proposed orders provided by the Administrator of the first defendant (Megacrane) at the hearing: Piety Constructions Pty Ltd v Megacrane Holdings Pty Ltd (Administrator Appointed) (No 2) at [17] and [37] (second judgment). I now deal with the two residual issues in dispute which are: first, the appropriate order as to costs of the proceedings and; second, whether any costs order which is made against Piety should be stayed.

Costs

1. [2]

   The usual order is that costs follow the event: Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 42.1. The usual order reflects two important principles; first, that a successful party in litigation is entitled, subject to certain limited exceptions, to an award of costs in its favour, and; second, that the purpose of an award of costs is to indemnify the successful party for the costs which, if the litigation had not been brought or defended by the unsuccessful party, the successful party would not have incurred: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [67] per McHugh J.

2. [3]

   The first judgment dealt with the main substantive issue in the proceeding which was whether the adjudication determination was valid. Megacrane was wholly successful on that issue.

3. [4]

   Megacrane relies on two offers of compromise in support of an order for its costs to be assessed on the indemnity basis.

4. [5]

   On 29 November 2022, Megacrane served on Piety an offer of compromise (first offer) which complied with r 20.26 of the UCPR, which provided for:

5. [6]

   I note that the offer of judgment for Megacrane (on the summons) and Piety (on the cross-summons) with no order as to costs is permitted by r 20.26(3)(a)(i) of the UCPR.

6. [7]

   As a result of the first judgment, Megacrane obtained orders on 6 April 2023 which were no less favourable to Megacrane than the terms of the first offer. Accordingly, Megacrane is entitled to indemnity costs from 30 November 2023 on the indemnity basis unless the Court otherwise orders: UCPR r 42.14(2), and r 42.15A(2).

7. [8]

   On 8 May 2023 the solicitors for Megacrane sent two letters to the solicitors for Piety. The first was an open letter setting out certain undertakings to be offered by the Administrator. The second letter (further offer) was a Calderbank offer expressed to be without prejudice save as to costs and stated, relevantly:

8. [9]

   At the hearing on 29 May 2023 Piety sought a Brodyn/Grosvenor stay and Megacrane resisted that application on the basis that the undertakings which had previously been proffered in the open letter dated 8 May 2023 provided sufficient protection to Piety, relying on the line of authority referred to in the second judgment at [27]–[29]. As recorded in the second judgment, Piety objected to the Administrator’s proposal on the basis that the proposal did not incorporate an undertaking by the Administrator to be personally liable for any adverse costs order made against Megacrane: second judgment at [25]–[26]. This matter had been the subject of correspondence between the parties before the hearing on 29 May 2023.

9. [10]

   By letter dated 15 May 2023, the solicitors for Piety responded to the open letter of 8 May 2023 by raising a number of queries, including:

10. [11]

    By letter dated 17 May 2023, the solicitors for Megacrane responded, relevantly as follows:

11. [12]

    Megacrane submits that in this correspondence the Administrator had stated that his position was that he would be personally liable for costs of any appeal from Piety’s proof of debt in the liquidation of Megacrane; that while Mr Weinberger, counsel for Piety, had made submissions at the hearing on 29 May 2023 to the effect that the Administrator was mistaken, since as a matter of law he would or might not be liable, the matter was put beyond doubt because the Administrator volunteered an undertaking at the hearing; and the undertaking was entirely consistent with the Administrator’s position stated in the letter of 17 May 2023.

12. [13]

    In my opinion, the submission made by Mr Weinberger at the hearing on 29 May 2023 referred to in the previous paragraph was correct. The authorities indicate that if proceedings brought against a liquidator are successful, generally a costs order will be made in such a way that the liquidator does not incur any personal liability unless the liquidator has acted unreasonably in defending the litigation: see Silvia v Brodyn Pty Ltd [2007] NSWCA 55 at [52]–[54]; Commissioner of Taxation v Warner (No 2) (2015) 244 FCR 498; [2015] FCA 1281 at [39]. It is by no means clear that the liquidator of Megacrane would be acting unreasonably in rejecting Piety’s proof of debt for the cross‑claim.

13. [14]

    The undertaking by the Administrator as to personal ability is recorded in the second judgment at [31] and was first proffered during the hearing (T5.1 and 12.35). In light of the undertaking given by the Administrator, Piety achieved a better outcome than had been offered by Megacrane prior to the hearing.

14. [15]

    In all the circumstances, in my view the appropriate order in relation to the hearing on 29 May 2023 is that there be no order as to costs with the intention that each party pay their own costs. Accordingly, I will make an order to this effect in exercise of the discretion to order otherwise under UCPR r 42.14(2) and r 42.15A(2).

Stay of costs order

1. [16]

   Piety seeks an order that there be a stay of any costs order made in relation to these proceedings pending the outcome of the appeal from the adjudication of a proof of debt to be lodged by Piety for its cross-claim.

2. [17]

   There is a dispute between the parties as to whether at the hearing on 29 May 2023, Megacrane agreed to the grant of a stay. Piety relies on evidence as to disputed conversations between solicitors and counsel, and to the following exchange during the hearing on 29 May 2023:

3. [18]

   From the correspondence between the parties and other evidence before the Court it appears that the parties may have been at cross purposes in relation to the stay issue. The basis on which Piety raised the need for a stay of any costs order was that s 553 of the Corporations Act 2001 (Cth) would create a set-off of a costs order against Piety’s cross-claim referred to in the second judgment at [20] – [21]. Megacrane rejected any claim for a set-off on the basis that as these proceedings were commenced and litigated after commencement of the winding up (being the prior appointment of the Administrator), a costs order made in these proceedings would not be captured by s 553: Metal Manufacturers Pty Ltd v Morton (2023) 406 ALR 711; [2023] HCA 1 at [45]; Central Queensland Development Corp Pty Ltd v Sunstruct Pty Ltd (2015) 231 FCR 17; [2015] FCAFC 63. It may be that while Megacrane’s legal advisors were focusing on negating the argument that s 553 would support a stay, Piety’s legal advisors were looking at the matter more broadly.

4. [19]

   In my view, it is not necessary to determine what, if any, agreement was made between the parties on the question of a stay. This is because in my view whatever agreement the parties may have reached does not bind the Court in the exercise of its discretion whether or not to grant a stay of an order which it makes.

5. [20]

   I decline to order a stay for essentially two reasons. First, given that the purpose of a costs order is to compensate the successful party for the expense which it would not have incurred if the proceedings had not been brought, I see no reason in principle why a stay should be granted. There is no relevant connection between Megacrane’s recovery of its costs in these proceedings and the outcome of Piety’s proof of debt for its cross-claim. Second, the general principle is that the Court should not be disposed to delay the enforcement of its orders because a successful party is entitled to the fruits of its judgment: McBride v Sandland (No 2) [1918] HCA 32; (1918) 25 CLR 369 at 374; Cook’s Construction Pty Ltd v Stork Food Systems Australasia Pty Ltd [2008] 2 Qd R 453; [2008] QCA 322 at [12]. These are strong considerations against the grant of a stay.

Conclusion

1. [21]

   Accordingly, the Court will make the following orders:

   1. (1)

      Subject to order 2, the plaintiff is to pay the first defendant’s costs of the proceedings to be assessed:

   2. (2)

      There be no order as to the costs of and incidental to the hearing on 29 May 2023, with the intention that each party pay their own costs.

   3. (3)

      The plaintiff’s application for a stay of the costs order is refused.