Palmer v Gayler trading as Farrell Lusher

This is a troubling example of a case where the costs of documenting a settlement of proceedings have got entirely out of hand.

The plaintiffs are a married couple.

In 2015, the plaintiffs purchased a property in Wagga Wagga from the fourth and fifth defendants, also a married couple.

The plaintiffs allege that the fourth defendant performed residential building work within the meaning of the Home Building Act 1989 (NSW) on the property and in so doing performed, supervised, coordinated, project managed and controlled an extension and renovation to the property pursuant to an owner-builder permit.

The plaintiffs allege that there were defects in the property.

On 28 September 2021, the plaintiffs commenced these proceedings. The defendants in the proceedings are the fourth and fifth defendants, together with:

The defendants cross-claimed against each other.

The proceedings were listed for hearing for 10 days commencing 24 February 2025 before me.

On 10 February 2025, the plaintiffs, through their solicitor, put this offer to all of the defendants:

The defendants accepted that offer the following day.

The resultant settlement left two significant matters unresolved. The first was the time at which the $1,655,000 was to be paid. The second was the manner in which the promise to pay was to be documented, it otherwise being agreed that there would be judgment in favour of all defendants and cross-defendants.

Thus, although there was a binding settlement, the parties intended the terms be restated “in a form which will be fuller or more precise but not different in effect”. [1]

The defendants proposed that the settlement be documented by deed.

On 12 February 2025, the plaintiffs’ solicitor wrote to the defendants’ solicitors:

On 13 February 2025, my chambers were notified of the settlement:

On 17 February 2025, the defendants circulated a proposed deed of settlement under cover of a letter stating:

The plaintiffs’ solicitor replied on 19 February 2025, stating that the plaintiffs’ offer did “not require them to enter into a settlement deed”, and that the plaintiffs would not agree to enter the proposed deed but were willing to enter into negotiations regarding the terms of the deed provided that “your clients agree to pay our clients’ reasonable costs associated with reviewing and negotiating the terms of the deed, capped at $3,500”.

Having had no response to that proposal, the following day, the plaintiffs’ solicitor circulated proposed consent orders which provided for judgment for the defendants and cross-defendants, and an order that:

The plaintiffs’ solicitor was thus suggesting two matters which were not part of the settlement. One was that there be an order of the Court that the agreed amount be paid. The second was that the amount be paid by 11 March 2025 or such other date as the Court determined.

The matter was listed for directions before me on 21 February 2025.

I was then told that there was a dispute about the “settlement not having taken effect yet”.

I directed that by 5pm on 28 February 2025, the plaintiffs file and serve any motion under s 73 of the Civil Procedure Act 2005 (NSW) concerning the question of whether the proceedings were settled.

I made that order because there was some suggestion in the submissions before me that the proceedings may not have, in fact, settled.

However, email communications between the parties later that same day made it clear that the defendants considered that the matter had settled. Thus, the solicitor for the sixth defendant circulated a proposed deed “which reflects our view of the consensus reached outside court today”.

The debate between the parties continued until 28 February 2025, being the date by which the plaintiffs were to file any motion concerning the settlement.

At 9:45am on 28 February 2025, the defendants sent to the plaintiffs’ solicitor these proposed short minutes, executed on behalf of all defendants:

Mr Klooster, who appeared for the plaintiffs, described this document as representing a “capitulation” by the defendants.

I do not see it that way.

Evidently, the defendants were not prepared to fund the plaintiffs’ consideration of the draft deeds that had been circulated. Understandably, in my view, the defendants proposed that rather than delay matters further the settlement forthwith be implemented on the basis of judgments being entered as the plaintiffs had proposed, [2] together with a notation concerning the payment of the agreed sum; as opposed to the Court order that the plaintiffs’ solicitor had proposed.

The sensible and appropriate course would have been for the plaintiffs’ solicitor to have advised the plaintiffs to agree to judgment being entered on these terms and thus finalise the matter there and then.

Instead, later that same day, the plaintiffs’ solicitor filed a Notice of Motion seeking these orders:

There was no utility in seeking the declaration in (1).

There was no longer any justiciable controversy between the parties. The matter had settled and there was no dispute that the matter had settled. There was no prospect of the plaintiffs obtaining the declaration proposed.

It is obvious that the real reason that the plaintiffs’ solicitor caused the motion to be filed was to seek the costs orders proposed in (2) and (3) of the motion, including the proposal that there be a gross sum costs order of $28,000 for the plaintiffs’ costs on and from 12 February 2025.

That this is so is revealed by the following passages from the plaintiffs’ solicitor’s email sent at 1:50pm on 28 February 2025 in response to the email referred to at [26] above, enclosing the short minutes of order executed on behalf of all the defendants:

The motion was merely a device adopted, ostensibly on behalf of the plaintiffs, to endeavour to secure payment of the extraordinary amount of costs evidently generated since the matter settled.

Such conduct of litigation is not to be encouraged. The matter had settled. It was necessary that it be documented more fulsomely than in the original exchange of emails. It was not unreasonable for the defendants to propose that the settlement be recorded in a deed. The plaintiffs’ solicitor proposed orders inconsistent with their original proposal and then somehow incurred expenses of $28,000, much of which was associated with a notice of motion that did not need to be filed. The matter could have been resolved, finally, on 28 February 2025.

I decline to make any of the orders sought in the plaintiffs’ Notice of Motion of 3 March 2025.

I order that the plaintiffs’ Notice of Motion of 3 March 2025 be dismissed with costs.

I am concerned about whether it would be appropriate for those advising the plaintiffs, rather than the plaintiffs themselves, to bear those costs and the costs generally incurred on the plaintiff’s behalf during the events I have described.

I will stand the matter over for directions before me at 2pm on 14 March 2025 to hear from the plaintiffs about what further costs order is appropriate.

The defendants need not appear on that occasion.

In the meantime, I direct that the plaintiffs’ solicitor provide the plaintiffs with a copy of these reasons by 5pm today.