Quinn Chi On v Karen Gore (Costs)

These reasons relate to the submissions on costs filed by the parties consequent upon the judgment in the main proceedings Quinn Chi On v Karen Gore [2016] NSWSC 950 (the Judgment). These reasons should be read with the Judgment.

The proceedings were commenced on 7 March 2016 when the plaintiff filed a Statement of Claim seeking, inter alia, a declaration that the defendant had validly exercised the Option and an order pursuant to s 35 of the Partnership Act 1892 dissolving the partnership. As recorded in the Judgment, on 16 May 2016 the parties reached an agreement that the only issues to be determined by the Court were whether the defendant had validly exercised the Option and whether the plaintiff was entitled to an order that the defendant pay him $775,000 plus interest (the separate issues). The parties also agreed that once those issues were determined the partnership was to be dissolved in accordance with clause 20 of the relevant Partnership Agreement, with the respective shares of the partners being assessed in accordance with the Court’s determination and the partnership assets sold in the manner agreed between them (at [83]).

A declaration was made that the defendant validly exercised the Option. However the plaintiff’s claim that the purchase price was $775,000 was rejected and a finding was made that the purchase price was $750,000. The plaintiff’s application for an order that the defendant pay him $775,000 was also rejected.

The plaintiff seeks an order that the defendant pay his costs of the proceedings. The defendant seeks an order that the costs of both parties, as agreed or assessed, be costs of the partnership or alternatively that each party pay their own costs.

The plaintiff submitted that by at least 6 May 2016 the parties had agreed that their partnership would come to an end after the Court had determined the separate issues. The plaintiff’s submissions included the following (at [7]):

The plaintiff also submitted that had the defendant not maintained her position that the Option had not been validly exercised, the proceedings would likely have been entirely unnecessary. It was submitted that the defendant lost on the substantive issue and costs should follow the event. The plaintiff also submitted that the so-called “usual rule” that applies in relation to partnership proceedings that costs of the proceedings consequent upon and necessary for the dissolution should be paid out of the partnership assets unless there is good reason for making some other order (Slim & Ors v Kabra & Ors [2006] NSWSC 837 at [20]) does not apply to this case. It was submitted that where an action is in substance to try some disputed right (as it was submitted was the case on the separate issues) the unsuccessful party will ordinarily be ordered to pay the costs of those proceedings: Kardos v Sarbutt (No 2) [2006] NSWCA 206 at [28].

The defendant relied upon the following portion of the Judgment to submit that the proceedings can be viewed as analogous to the process of taking an account (at [141]):

In all the circumstances I am satisfied that the determination of the separate issues was a necessary step in and intrinsically intertwined with the proceedings for the dissolution of the partnership. In all those circumstances I am satisfied that it is appropriate to make an order that the costs of both parties, as agreed or assessed, be costs of the partnership.

Even if that view were not to prevail, I am satisfied in the circumstances of the outcome of the proceedings that it would be appropriate to make an order otherwise that each party pay their own costs. The plaintiff was only partially successful and the defendant successfully resisted the plaintiff’s claims in respect of the amount of the purchase price and for the order for payment.

I order that the costs of both parties in the proceedings, including in respect of the determination of the separate issues, as agreed or assessed, be costs of the partnership.