D Capital 2 Pty Ltd v Western (No 2)

1. [1]

   HIS HONOUR: On 12 August 2022 I delivered reasons for judgment in relation to a claim for specific performance in respect of 10 contracts for sale of land comprising a block of units at Terrigal, and claims for other relief.

2. [2]

   I found against the plaintiff (DC2) on its claim: D Capital 2 Pty Ltd v Western [2022] NSWSC 1064 (principal judgment).

Request for minutes of orders to give effect to the principal judgment

1. [3]

   These reasons assume a familiarity with the principal judgment and will adopt its abbreviations.

2. [4]

   For the purposes of the hearing the parties were directed to prepare an ‘Agreed Statement of Issues’. For the purposes of this judgment I will distinguish between those issues as being ‘agreed hearing issues’ and the issues which emerged in relation to giving effect to the reasons for judgment as being the ‘outstanding order issues’

3. [5]

   I directed the parties to submit agreed short minutes of order to give effect to the reasons for judgment including as to costs. In the event that there was no agreement between the parties, I directed that respective draft orders, submissions and any affidavits be provided to my Associate by 4:00 PM on 19 August 2022.

4. [6]

   I adjourned the proceedings to 25 August 2022.

5. [7]

   On 19 August 2022 the solicitors for DC2 provided my Associate with proposed draft orders that had been prepared by the second group and amended by DC2 in markup, which orders SBS had agreed to. The position of the first group with respect to the orders was not then known.

6. [8]

   DC2 also provided submissions in respect of the proposed orders.

7. [9]

   Separately counsel for the second group provided my Associate with a draft form of notice of motion seeking certain injunctive relief, an affidavit of Karen Watson sworn 19 August 2022 and an outline of submissions in support of costs orders and freezing orders.

8. [10]

   On 22 August 2022 (4:59 PM) the solicitor for the first group provided to my Associate a draft of proposed orders sought and submissions of Francisco Gutierrez in support of the draft orders.

9. [11]

   On or about 22 August 2022 the solicitor for the first group provided my Associate with an affidavit of Francisco Gutierrez sworn 19 August 2022 and an exhibit "FG" to that affidavit.

10. [12]

    On 23 August 2022 (10:53 AM) Mr Maccallum, the solicitor for SBS, provided to my Associate the submissions for SBS as defendant and a cross-defendant. Mr Maccallum noted SBS’s position as being that the question of costs could be determined on the papers.

11. [13]

    On 24 August 2022 (9:35 AM) the solicitor for DC2 sent my Associate an email noting that there was no uniform agreement as to the proposed short minutes of order nor agreement by the defendants to the matter being dealt with on the papers.

12. [14]

    The parties were not available to attend at 10:00 AM on 25 August 2022 and proposed an alternative timing.

Common ground and outstanding issues

1. [15]

   Having considered the short minutes of order it appeared at first blush that there was common ground in relation to at least some of the orders that the parties considered would give effect to the reasons for judgment.

2. [16]

   In those circumstances on 24 August 2022 (4:07 PM) my Associate sent an email to the parties, legal representatives in the following terms:

3. [17]

   The email correspondence and materials provided by the parties did not identify any clear way what remained as outstanding issues.

4. [18]

   I pause to note that where a judge delivers reasons for judgment and directs parties to bring in proposed short minutes of order to give effect to the reasons for judgment, it is of assistance to the Court if the parties themselves are able to do that in a form which clearly identifies to the judge (a) the orders that are agreed as between the parties and (b) a concise list of the outstanding disputed matters.

5. [19]

   In those circumstances on 25 August 2022 (4:22 PM) my Associate sent an email to the parties, legal representatives in the following terms:

6. [20]

   On 25 August 2022 following a series of emails between the parties’ legal representatives and my Associate, relevantly:

   1. (1)

      the parties consented to the orders set out below being made and

   2. (2)

      the matter was listed for 9:00 AM on 26 August 2022.

7. [21]

   As a consequence of the consent to specified orders being made to give effect to my reasons for judgment on 25 August 2022 I made the following orders:

8. [22]

   On 25 August 2022 (8:51 PM) Mr Crossland sent an email to my Associate with the consent of the other parties identifying the additional issues which the parties indicated were in dispute between them.

9. [23]

   On 26 August 2022 at the listing of the matter Mr Stapleton appeared for DC2, Mr Corsaro SC appeared with Mr Allen for the first group, Mr Crossland appeared for the second group and Mr Maccallum appeared for SBS.

10. [24]

    In summary, the following occurred:

    1. (1)

       Mr Crossland handed up on behalf of the second group an outline of submissions in reply to DC2’s submissions on costs and a further form of a notice of motion;

    2. (2)

       it became obvious that in relation to the disputed matters at least some of the parties wished to refine their submissions in a written form and potentially provide further materials on the disputed issues;

    3. (3)

       there was some interaction between myself and counsel in respect of the disputed issues essentially to get a flavour of the nature of the issues and for me to understand broadly speaking what was contended in respect of them;

    4. (4)

       during the course of that discussion I made some preliminary observations in respect of the issues, although not forming any concluded view in respect of them;

    5. (5)

       Mr Stapleton on behalf of Mr Danckert drew to my attention that on the part of his instructing solicitors there might have been an accidental inclusion of Mr Danckert’s name in order 5 that I had made (following email correspondence suggesting consent of the parties), in relation to an order that DC2 (and Mr Danckert) pay the costs on an ordinary basis of the second group and SBS of the proceedings on the main claim as agreed or assessed;

    6. (6)

       in relation to the injunctive relief sought by the second group Mr Stapleton disclosed that the monies that were in the Westpac account, in respect of which the second group sought to restrain dealings with such monies, had in fact been removed from the account; and

    7. (7)

       Mr Maccallum indicated that there had been agreement reached between SBS and the second group in respect of the costs of SBS on the cross claim.

11. [25]

    In light of the above I made the following directions:

Motions and further evidence and submissions

1. [26]

   On 29 August 2022 (4:31 PM) the solicitor for DC2 provided my Associate with the parties’ agreed list of outstanding order issues for determination to give effect to the reasons for judgment.

2. [27]

   The outstanding order issues are as follows:

3. [28]

   The 29 August 2022 (4:31 PM) email from HFW noted:

   1. (1)

      SBS in its capacity as tenth defendant and second cross claimant has no position with respect to the outstanding issues or cost orders and it consents to an amendment of order 5 of the orders made on 25 August 2022 such that Mr Danckert (personally) does not have any direct liability to SBS's costs as tenth defendant; and

   2. (2)

      the other parties had not provided consent to a variation of order 5.

4. [29]

   In those circumstances Mr Danckert filed a Notice of Motion seeking to vary order 5 pursuant to “r.36.15(3) and or (3A) and or (3B) of the UCPR 2005” to omit from the order the words "and the Third Cross-Defendant (Wayne Danckert)".

5. [30]

   Despite the reference to “r.36.15(3) and or (3A) and or (3B)”, it is apparent that the reference was intended to be to “r 36.16(3) and/or (3A) and/or (3B)” of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR).

6. [31]

   In support of the Notice of Motion Mr Danckert relied upon an affidavit of Anthony Riordan sworn 26 August 2022.

7. [32]

   On 29 August 2022 (6:04 PM) Mr Crossland provided further supplementary submissions on behalf of the second group on costs and notified my Associate of an intention to rely upon a further short affidavit of Ms Watson.

8. [33]

   I was informed that the second group and SBS have compromised SBS’s claim for costs on the cross-claim the sum of $25,000 and accordingly “there is no basis or need for the court to make an order in respect of the Watson Defendants’ liability for those costs”: Second group’s submissions 29 August 2022.

9. [34]

   On 30 August 2022 (10:58 AM) Ms Watson, solicitor for the second group, provided my Associate with a copy of an affidavit sworn by herself on 30 August 2022.

10. [35]

    On 31 August 2022 (3:59 PM) a solicitor for DC2 provided to my Associate reply submissions and two annexures being documents described as "Agreement re security" dated 27 January 2022 signed by the solicitor for DC2 and the solicitor for the first group, being Annexure A and a document headed "Agreement re security" dated 7 February 2022 signed by the solicitor for DC2 and the solicitor for the second group being Annexure B.

11. [36]

    On 2 September 2022 (5:03 PM) having seemingly received no further materials my Associate at my request sent the following email to the legal representatives for the parties:

12. [37]

    Prior to the email being sent submissions were received by my Associate on the part of Mr Allen, counsel for the first group.

13. [38]

    On 2 September 2022 (5:16 PM) Mr Maccallum on behalf of SBS helpfully notified my Associate that SBS withdrew its cost submissions dated 23 August 2022 and did not wish to be heard on any of the issues.

14. [39]

    On 5 September 2022 (4:30 PM) Mr Crossland by email to my Associate reported that the parties had conferred and:

    1. (1)

       noted that the second group not press orders sought in either of the versions of the notice of motion handed up in court;

    2. (2)

       clarified details in the listing of notices of motion, affidavits and submissions; and

    3. (3)

       noted the parties were content for me to deal with the costs dispute in chambers.

Summary of evidence regarding outstanding order issues

1. [40]

   Mr Riordan states that on 18 August 2022 HFW received proposed short minutes of order from the second group’s solicitors. He, on the morning of 19 August 2022, caused one of his associates to send an email to the second group’s solicitors attaching proposed amendments to the short minutes of order.

2. [41]

   Mr Riordan states that the proposed amendments sought to remove references to Mr Danckert in draft orders 7 and 8 as being personally liable for any costs order in circumstances where he was not a party to the main proceedings and the cross-claim asserted a range of breaches of duty which were not generated (Mr Riordan asserts) by anything said or done by DC2.

3. [42]

   Mr Riordan frankly states that when he reviewed the amended proposed orders he inadvertently overlooked the fact that they did not remove the words "and the Third Cross-Defendant (Wayne Danckert)".

4. [43]

   He further states that his instructions and his intentions at all times were to oppose any costs order against Mr Danckert in his personal capacity in respect of the main claim.

5. [44]

   In December 2021 without the need for Court intervention the first group and DC2 agreed that DC2 would hold funds by way of security for costs for the benefit of the first group defendants.

6. [45]

   On 27 January 2022 agreement was reached between DC2 and the first group in relation to security for costs.

7. [46]

   A sum of $175,000 is held in a controlled monies account plus interest pursuant the 27 January 2022 agreement.

8. [47]

   On 18 October 2021 the second group filed a notice of motion seeking expedition and the following orders:

   1. (1)

      that the plaintiff give security for the second to seventh and ninth defendants' costs in defending the claim against them by payment into Court of the sum to be determined by the Court; and

   2. (2)

      that the proceedings be stayed until such security is paid.

9. [48]

   The second group and DC2 filed evidence and served submissions in relation to the notice of motion seeking security. Sackar J sitting as Expedition List Judge set the application down for hearing on 7 February 2022.

10. [49]

    The application for security was settled before it was heard and an agreement between the parties on 7 February 2022 was recorded.

11. [50]

    A sum of $210,000 is held in a controlled monies account plus interest pursuant the 7 February 2022 agreement.

12. [51]

    The agreements for security for costs secured by each of the first group and the second group against DC2 are relevantly in the following terms:

13. [52]

    On 8 July 2022 DC2's Westpac account held $1,013,062: CB 2724.154.

14. [53]

    On 17 August 2022 (after the hearing) Ms Watson sent to HFW a letter seeking an undertaking from DC2 that it retain a balance in its Westpac account of at least $301,063.58 until any costs orders against DC2 were satisfied.

15. [54]

    As at 19 August 2022 Ms Watson had not received a response to that letter nor an undertaking on DC2's part to retain any sum in the Westpac account.

16. [55]

    Ms Watson estimates that the second group's costs of the cross claim against Ms Western and SBS to be $21,942.

17. [56]

    Ms Watson had been informed by Mr Maccallum for SBS that SBS's costs as at 19 August 2022 for defending the cross claim against it were about $50,000 on a solicitor-client basis.

18. [57]

    Ms Watson sought an estimate of the costs of Ms Western for defending the cross claim against her and as at 19 August 2022 had not received a response.

19. [58]

    Mr Gutierrez estimated that as at 19 August 2022 the costs of the first group for the defence of the main claim and the costs of Ms Western on the cross claim were in an excess of $450,000.

20. [59]

    Mr Gutierrez estimated the costs of the first group in relation to defending the claim of DC2 on a costs assessment would be in the order of $338,237 and that apart from the sum of $175,000 held as security for costs there would, in respect of the likely amount of assessed costs, be a shortfall in the sum of $163,237.

21. [60]

    On 6 May 2022 the solicitor for the first group forwarded to the solicitors for DC2 a Notice to Admit Facts (NAF).

22. [61]

    The NAF was said to be served on the part of Ms Western and SBS as first and tenth defendants respectively. It appears to be a mistake because Avondale lawyers were acting for Ms Western and Mr O'Connell as first and eighth defendants. Nonetheless despite the apparent mistaken party reference the intent of the notice was clear.

23. [62]

    The notice requested admission of two propositions, namely:

    1. (1)

       that the plaintiff was not ready, willing and able to settle on 27 July 2021 and

    2. (2)

       the plaintiff did not accept the vendors’ invitations to ten separate workspaces on PEXA on or before 27 July 2021.

24. [63]

    On 17 May 2022 a notice disputing facts was sent by the solicitor for DC2 to the solicitors for the first group. The notice relevantly disputed both facts.

25. [64]

    On 24 May 2022 Avondale on behalf of the first group defendants sent to HFW a letter without prejudice save as to costs enclosing an Offer of Compromise.

26. [65]

    The Offer of Compromise relevantly provided for judgment in favour of the first group defendants and for the amended statement of claim to be dismissed or withdrawn. It was open for a period of 28 days.

27. [66]

    The covering letter indicated that if for some reason the offer did not constitute an Offer of Compromise pursuant to the UCPR it would be relied upon as an offer in accordance with the principles enunciated in Calderbank v Calderbank [1976] Fam 93; [1975] 3 All ER 333.

28. [67]

    Further, on 24 May 2022 Avondale on behalf of Ms Western as a cross-defendant sent to Watson Law a letter without prejudice save as to costs enclosing an Offer of Compromise.

29. [68]

    The Offer of Compromise was, apart from the offering party, similar to the other Offer of Compromise served by it against DC2.

30. [69]

    The Offer of Compromise provided to compromise the proceedings on the cross-claim on terms that there be judgment in favour of Ms Western and that the amended cross-claim as it applied to her be dismissed. It was open for acceptance for a period of 28 days.

31. [70]

    The covering letter referred to the fact that at all material times the conveyancer was SBS and not Ms Western in her personal capacity and that there could be no claim against her in her personal capacity.

Comment regarding submissions

1. [71]

   Prior to addressing the outstanding orders issues I note that the parties have provided in a piecemeal way submissions on the various issues.

2. [72]

   I was informed by Mr Corsaro SC on the part of the first group on 26 August 2022 that “The only ground that we would seek to put is whether or not it was reasonable not to accept an offer of compromise”: T3.

3. [73]

   Mr Corsaro SC on 26 August 2022 kindly apologised for the fact that I have been asked to “distil … the parties’ position[s] … from a disparate set of submissions”: T3.

4. [74]

   The fact that parties’ submissions are provided in a piecemeal way per se is not necessarily problematic. Litigation is at times somewhat messy.

5. [75]

   Over the course of a two week period a number of short minutes of order and various submissions were provided by each of the parties in evolving circumstances leading to refinement of some issues and abandonment of other issues.

6. [76]

   Ultimately I received seven sets of submissions from three parties or party groups.

7. [77]

   Without naming the parties I simply note that certain of the later submissions indicated reliance upon earlier submissions with the result that a number of submissions were repeated and others addressed matters that were no longer seemingly in issue.

8. [78]

   Thus for the purpose of addressing the making of orders in relation to the outstanding order issues, it has not been straightforward to identify which submissions are ultimately relied upon.

9. [79]

   Practitioners, particularly in multi-party litigation, should endeavour to assist the Court by either refining or merging various sets of submissions into a single submission document or otherwise clearly identifying what submissions are pressed, without the Court being left to task of attempting to identify whether there are remnants of matters still contended for in earlier submissions.

10. [80]

    Ultimately what I have done is to principally focus upon the later submissions from DC2 (31 August 2022), the first group (2 September 2022) and the second group (26 August 2022, 29 August 2022) whilst attempting to identify whether there are any relevant matters still contended for in earlier submissions.

Order in which issues are to be addressed

1. [81]

   Despite the way the issues have been numbered, self-evidently certain issues really need to be dealt with before others partly as a matter of logic and partly as a matter of convenience.

2. [82]

   For those reasons I propose to deal with the issues in the following order:

   1. (1)

      leave for DC2 to file a notice of motion to vary or set aside the entered orders: issue 9;

   2. (2)

      DC2’s claim to vary entered Order 5: issue 8;

   3. (3)

      the first group’s claim for indemnity costs: issue 1;

   4. (4)

      the claims for personal third-party costs orders;

   5. (5)

      the cost orders sought on the balance the cross-claim: issue 3;

   6. (6)

      whether DC2 and Mr Danckert should indemnify the cross claimants for their costs liability to Ms Western and SBS: issue 4;

   7. (7)

      the request for release of sums held by way of security for costs: issue 5;

   8. (8)

      alternative claims: issue 6;

   9. (9)

      the claim for orders to make security separately available for other costs: issue 7; and

   10. (10)

       the claim by Mr O'Connell for recovery of the commission sum plus interest: issue 2.

Issue 9 (leave for DC2 to file notice of motion)

1. [83]

   Issue 9 is whether leave ought to be granted to DC2 to file a notice of motion in Court seeking leave to vary order 5 pursuant to Pt 36 UCPR.

2. [84]

   Neither of the submissions of the first group or the second group of defendants indicates at least an express or clear way consent to a variation of order 5.

3. [85]

   The Court may set aside or vary an order if a notice of motion for the setting aside or a variation of the order is filed within 14 days after the order is entered and the Court may determine the matter and (if appropriate) set aside or vary the order pursuant to r 36.16(1) UCPR, as if the order had not been entered: r 36.16(3A).

4. [86]

   Further within 14 days after an order is entered, the Court may of its own motion set aside or vary the order as if the judgment or order had not been entered: r 36.16(3)(b).

5. [87]

   DC2 in its motion relied upon r 36.16(3) and/or (3A) and/or (3B) UCPR.

6. [88]

   The Court in addition to its powers under rule 36.16(1) may set aside or vary an order except so far as it determines any claim for relief or dismisses proceedings.

7. [89]

   DC2 in fact filed notice of motion at 3:40 PM on 29 August 2022. The notice of motion was filed within the time permitted, noting the order had been entered on 25 August 2022.

8. [90]

   No submission was put to me that DC2 were precluded from filing any notice of motion. It is not clear to me why it might be necessary for the Court to grant leave in order for DC2 to file the notice of motion.

9. [91]

   However because of the framing of the issue and to the extent that there is any contest about it, I give leave, if necessary nunc pro tunc, for DC2 to file the notice of motion.

Issue 8 (DC2’s claim to vary entered orders)

1. [92]

   Issue 8 essentially raises the question as to whether Order 5 that I made on 25 August 2022 should be varied to delete the words "and the Third Cross-Defendant (Wayne Danckert)" on the basis that DC2 asserts it was an unintended error.

2. [93]

   The affidavit of Anthony Riordan addresses the question.

3. [94]

   In their submissions of 29 August 2022 the second group defendants accept that what is said to be Mr Danckert's consent to Order 5 was an error. However the second group states that the order should not be set aside as they (the second group) sought the order and “it was appropriately made”.

4. [95]

   Mr Allen in submissions dated 2 September 2022 states that the issue does not involve Ms Western.

5. [96]

   By an email dated 29 August 2022 Mr Maccallum on the part of SBS agreed to amend the costs order so that Mr Danckert (personally) does not have any direct liability to SBS with respect to the main proceedings.

6. [97]

   It appears the reason that the second group defendants say that the order was "appropriately made" is not because there was consent. Rather it is because they say that the case is one of those instances in which the costs order should be made based upon the provisions of s 98 Civil Procedure Act 2005 (NSW) (CPA) and the principles in Knight v FP Special Assets Ltd (1992) 174 CLR 178; [1992] HCA 28 (Knight).

7. [98]

   I have for the reasons outlined below, declined to make a third-party cost order pursuant to s 98 and upon the principles based in Knight.

8. [99]

   The direction for the parties to bring in short minutes of order is a direction when made by the Court for the parties to consider the reasons for judgment and to appropriately and fairly propose orders for the Court's consideration having regard to the findings made on the litigated issues.

9. [100]

   Mr Danckert was not party to the main claim.

10. [101]

    Whilst I acknowledge that a number of the parties have sought that I make particular costs orders that Mr Danckert be responsible for the costs of DC2, prima facie the position is that as Mr Danckert was not a party to the main claim there was no occasion for him to be per se responsible for the costs of DC2.

11. [102]

    As I noted at the directions listing on 26 August 2022, the only reason I made Order 5 in the terms that I did including reference to Mr Danckert was that I had understood, based on the terms of the short minutes of order that had been marked up by Mr Riordan, that there was consent for that order to be made. I would not have made that order without consent per se. The question as to whether any particular order should be made that Mr Danckert bear some responsibility for the costs of DC2 is a separate issue.

12. [103]

    I note there are a number of powers of the Court to set aside judgments or orders that have been made.

13. [104]

    The powers include a power, on sufficient cause being shown, to set aside an order of the Court if the order was made irregularly, illegally or against good faith: r 36.15(1) UCPR.

14. [105]

    There is indication that irregularity does not extend to errors attributable to forensic decisions of the parties: e.g. Dimitrovski v Australian Executor Trustees Ltd [2013] NSWSC 337 at [3]. However there is no suggestion that any forensic decision was made here. Rather it was an inadvertent mistake.

15. [106]

    The Court in an appropriate case might not enter a judgment where a solicitor has made a mistake: e.g. Lewis v Combell Constructions Pty Ltd (1989) 18 NSWLR 528.

16. [107]

    Cases of inadvertent mistake, particularly in circumstances where there is no dispute that a mistake has occurred, are quintessentially an occasion for parties and legal representatives to reflect upon their duties to the Court to assist the Court to further the overriding purpose of facilitating a just, quick and cheap resolution of the real issues in the proceedings, and to that effect to participate in the processes of the Court directed to that objective: s 56(1), (3), (4) CPA; Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd (2013) 250 CLR 303; [2013] HCA 46 at [64].

17. [108]

    Whilst there is power to vary the order pursuant to r 36.16(3A) UCPR (see above) it seems to me the more apt power is that under r 36.15(1) UCPR.

18. [109]

    I consider that in the circumstances of this case an inadvertent mistake which caused me to consider that there had been consent to an order falls comfortably within the concept of the order being "irregularly" made.

19. [110]

    In the circumstances I propose to set aside the order by reason of the inadvertent mistake.

Issue 1 (first group’s claim for indemnity costs)

1. [111]

   There is no issue that DC2 ought to pay the first group’s costs consequent upon the dismissal of the main claim.

2. [112]

   Two issues arise. First, whether the costs should be paid on the indemnity basis and second whether Mr Danckert should pay those costs?

3. [113]

   In relation to the first issue indemnity costs are sought on various bases. It is at this point where the position of the first group exhibited a number of inconsistencies.

4. [114]

   As noted above, I was informed by Mr Corsaro SC on the part of the first group on 26 August 2022 that “The only ground that we would seek to put is whether or not it was reasonable not to accept an offer of compromise”: T3.

5. [115]

   Contrary to that position, Mr Allen’s written submissions on 2 September 2022 were that indemnity costs are sought on two bases:

   1. (1)

      That there was service of the NAF, which was disputed and it is asserted were subsequently proved. It is said that that circumstance gives rise to an entitlement to costs: r 42.8 UCPR.

   2. (2)

      That properly advised DC2 ought not to have propounded agreed hearing issues 1 and 2 (in the proceedings) upon which the resolution of agreed hearing issues 4, 5 and 6 were based.

6. [116]

   Whilst it is a little unclear, I am inclined to deal with the matter on the footing that indemnity costs are sought on the following grounds, namely indemnity costs consequent upon:

   1. (1)

      the Offer of Compromise;

   2. (2)

      the NAF; and

   3. (3)

      application of s 98(1)(c) and general law principles.

7. [117]

   I addressed the principles regarding costs in In the matter of Black Tie Holdings Pty Ltd (No 2) [2022] NSWSC 856 (Black Tie Holdings Pty Ltd (No 2)). In Black Tie Holdings Pty Ltd (No 2) I stated at [44]–[49], [51],[53]:

8. [118]

   Although the first group’s submissions did not refer to the particular provisions of Pt 42 UCPR in relation to costs, it is necessary to consider those provisions.

9. [119]

   The UCPR provides a regime by which offers of compromise may be served, in which case there is what is described under the rules as an entitlement in a party who has obtained a favourable outcome, having regard to the terms of the offer, to have costs assessed on an indemnity basis, unless the Court orders otherwise.

10. [120]

    Here, the relevant provisions are those of r 42.15A which deals with the situation in which an Offer of Compromise is made in accordance with the rules by a defendant and not accepted by a plaintiff and when the defendant obtains judgment on the claim which is no less favourable than the terms of the offer.

11. [121]

    Rule 42.15A(2) provides follows:

12. [122]

    The position in relation to an offer which comes with the terms of the rule, is that costs are payable on an indemnity basis from the day following the day the offer was made: r 42.15A(2)(b).

13. [123]

    The power to order otherwise is evident from the terms of subrule (2).

14. [124]

    I note that neither of the Offers of Compromise made express provision for the payment of costs. It is relevant to understand what the position would have been in that case if the offers had been accepted by DC2 on the one hand and by the second group on the other hand.

15. [125]

    In such a case (where an offer proposes a judgment in favour of the defendant in respect of the claim including a dismissal of a summons or a statement of claim), the defendant (or cross-defendant) is entitled to an order against the plaintiff (or cross-claimant) for the defendant's (or cross-defendant’s) costs in respect of the claim, assessed on the ordinary basis up to the time when the offer was made: r42.13A(1) and (3).

16. [126]

    It has been said that the question for determination regarding the effect of what is said to be an Offer of Compromise involves a two-stage process.

17. [127]

    The process is explained by Hallen J in Meres v Meres (No 2) [2017] NSWSC 523 at [43]-[44]:

18. [128]

    For an offer to be regarded as an Offer of Compromise it must contain a real element of ‘compromise’: see e.g. Leichardt Municipal Council v Green [2004] NSWSC 341 at [31]–[37].

19. [129]

    The question whether any particular offer involves the required element of compromise depends upon the totality of the circumstances and involves an impressionistic assessment: Shellharbour City Council v Johnson (No 2) (2006) 67 NSWLR 308; [2006] NSWCA 114 at [20]–[23].

20. [130]

    It has been said that a defendant's offer that involves dismissal of a claim and payment of the defendant's costs will typically lack the necessary element of compromise unless the claim is particularly lacking in merit: see Shorten v David Hurst Constructions Pty Ltd [2008] NSWSC 609 at [6]; Regency Media Pty Ltd v AVV Australia Pty Ltd [2009] NSWCA 368 at [31].

21. [131]

    The power to order "otherwise" must be for proper reasons: Leach v Nominal Defendant (QBE Insurance (Australia) Ltd) (No 2) [2014] NSWCA 391 at [47] adopting the comments of Hely J in Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No 2) [2004] FCA 1437; (2004) 212 ALR 281 at [17].

22. [132]

    The mere fact that it is reasonable for a litigant to take the view that he or she did in rejecting the offer is not enough to displace the rule. However that does not mean that reasonableness of the rejection is an irrelevant consideration: Leach at [48].

23. [133]

    The first group further submitted that in the event that the offer did not constitute an Offer of Compromise for the purposes of r 20.26 UCPR that the offer was relied upon for the purposes of a Calderbank offer.

24. [134]

    A settlement offer which encourages a reasonable settlement of the claim and where the offeree has obtained an outcome significantly less favourable consequent upon the hearing to the outcome offered prehearing may, in appropriate circumstances, give rise to an order for indemnity costs: e.g. Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425.

25. [135]

    I referred to the principles regarding Calderbank offers in Black Tie Holdings Pty Ltd (No 2) at [54]-[56]:

26. [136]

    The first group submit that the Offer of Compromise pursuant to r 20.26 UCPR creates a presumption of an indemnity costs order.

27. [137]

    On the face of the Offer of Compromise I accept that it satisfies the formal requirements required by r 20.26 UCPR.

28. [138]

    The more problematic question in my view is whether the offer involved a real element of compromise: see e.g. Leichardt Municipal Council v Green [2004] NSWSC 341 at [31]–[37].

29. [139]

    Whilst I found against DC2 in relation to its claims the path to that conclusion was not straightforward.

30. [140]

    The complexity of the litigation is discernable from the terms of my reasons for judgment. This was not the sort of claim that would self-evidently have been regarded as being particularly lacking in merit.

31. [141]

    In my opinion the Offer of Compromise did not contain a sufficient real element of "compromise" to constitute an offer for the purposes of the rules.

32. [142]

    However if I be incorrect in that view, and it is necessary for me to consider whether an "otherwise order" ought be made, I am persuaded that it is appropriate, in the interests of justice, that the "default position" ought not to apply.

33. [143]

    At least one reason for that is that this was multi-party litigation.

34. [144]

    There were ten vendors and having regard to the provisions of the Option Deeds all of the ten contracts were interdependent upon one another.

35. [145]

    Accordingly DC2 when faced with an Offer of Compromise served by only one (or two) of the ten vendors was placed in an invidious position in circumstances where it seems (or I have not been informed that) that none of the other vendors served such an offer.

36. [146]

    In circumstances in which all the contracts were interdependent, it does not seem to me to be unreasonable for DC2 to have rejected the offer, particularly as the offer did not give it any significant benefit at all (even if, contrary to my finding, it technically satisfied the definition of a "compromise").

37. [147]

    To have accepted the offer effectively meant that it would in a practical sense have had to capitulate in relation to the other claims or at the very least attempted to negotiate some satisfactory position regarding the other claims.

38. [148]

    Whilst I do not generally put beyond the ingenuity of multiple vendors and a developer to reach some sort of commercial arrangement, as the block was sold as a whole and all the contracts were interdependent, development of the block without one or two of the unit owners would not be possible.

39. [149]

    The first group in support of the claim for costs emphasise the fact that I found that DC2 was unable to settle the contracts the subject of the dispute.

40. [150]

    This is not quite correct.

41. [151]

    Whilst I found that DC2 was not ready willing and able to complete the contracts in accordance with their terms on 27 July 2021, I also found that if the contracts were not validly terminated, arguably DC2 had demonstrated at the time of the hearing it arguably was in a position to perform the contracts.

42. [152]

    Further, in support of the reasonableness of the offer the first group indicated that the offer was made in the context in which the first group had considered all DC2's evidence and the offer was of benefit to DC2 by enabling it to mitigate its losses and provide a deed of settlement and releases.

43. [153]

    However, the terms of the Offer of Compromise does not actually refer to releases. The reference in the covering letter to attending to preparation of relevant documentation including a deed of settlement and releases could not in its terms convey something different from what was contained in the terms of the Offer of Compromise. In any event, the terms of any such releases were not identified.

44. [154]

    DC2 submitted that it should only pay the costs of the first group of the main proceedings on an indemnity basis if there was an effective Offer of Compromise or Calderbank offer grounding an order for indemnity costs.

45. [155]

    In the circumstances of this case, it does not seem to me that even if the Offer of Compromise were to be regarded as a Calderbank offer that any different outcome ought to prevail. The offer provided in the scheme of things very little compromise and placed DC2 in an invidious position regarding its claim against the other defendants.

46. [156]

    The first group say that as a result of that the disputed propositions it was required to adduce further evidence in the form of expert evidence to establish both facts. It said that I found in the principal judgment both propositions proved.

47. [157]

    Rule 42.8 UCPR addresses costs in respect of notices to admit facts. Subrule (1) contains definitions.

48. [158]

    Subrules (2) and (3) are in the following terms:

49. [159]

    There is commentary to the effect that the rule appears to create an automatic entitlement to costs in favour of the party who proves the disputed facts. It is said that notwithstanding such automatic entitlement the successful party prudently should seek a specific costs order for cost assessment purposes because the assessment of costs is triggered by reference to costs payable to an order of the court: s 74 Legal Profession Uniform Law Application Act 2014 (NSW): see Ritchie’s Uniform Civil Procedure NSW at [42.8.5] ‘Entitlement to Costs’.

50. [160]

    In relation to costs pursuant to the NAF Mr Allen submitted that the pertinent issues of the hearing were agreed hearing issues 1-6, being in summary (see [56] principal judgment):

    1. (1)

       Were the second notices to complete invalid by reason of their terms (issue 1)?

    2. (2)

       Were the vendors not ready and willing and able to complete on the specified completion date (issue 2)?

    3. (3)

       Did the vendors waive the essentiality of time or elect to affirm the contracts (issue 3)?

    4. (4)

       Were the notices of termination invalid by reason of the matters in issues 1-3 (issue 4)?

    5. (5)

       Were the contracts validly terminated (issue 5)?

    6. (6)

       Has DC2 ever been or now ready, willing and able to complete the contracts (issue 6)?

51. [161]

    Mr Allen referred to my findings on the agreed hearing issues at [593]-[817] in the principal judgment.

52. [162]

    In particular Mr Allen:

    1. (1)

       referred to his submission regarding the evidence of Mr Danckert which I recorded at [619].

    2. (2)

       submits that Mr Danckert knew the import of the notices to complete when he read them and that the inference is readily available that he knew that import when the litigation was commenced and, properly advised, putting aside “the other minor complaints” issue 1 ought not to have been an issue at all;

    3. (3)

       says that agreed hearing issue 1 took up a lot of time as evidenced in what is recorded in the principal judgment at [307]-[338] and [593]-[635];

    4. (4)

       submits that the complaint regarding service was untenable because Mr Boxsell had said that he would accept service;

    5. (5)

       says agreed hearing issue 2 was premised on DC2 not joining the PEXA workspace on or before 29 July 2021 and there was finding at [648] that only in the afternoon of 30 July 2021 did Mr Boxsell add the incoming proprietor;

    6. (6)

       submits if the admission had been made Ms Western would not have had to deal with the issues surrounding PEXA or at least not deal with the issues in such detail (such as leading expert evidence);

    7. (7)

       submits if agreed hearing issues 1 and 2 had not been run this would have left DC2 to run agreed hearing issue 3 which was not presented coherently but in any event resolved easily;

    8. (8)

       says that agreed hearing issues 4 and 5 were determined by agreed hearing issues 1-3; and

    9. (9)

       submits ultimately on a “broad-brush approach” if only agreed hearing issue 3 (whether the vendors waived the essentiality of time or elected to affirm the contracts) the matter would have involved “at least 50% less time and effort”; and

    10. (10)

        says agreed hearing issue 6 required time and evidence to determine, when properly advised, the concession ought to have been made that DC2 was not ready to complete, “Instead, the Court had to deal with the surreal evidence of Mr Dan[c]kert that DC2 was ready and willing: see [777]”.

53. [163]

    Based on the above Mr Allen submits that there ought to be an order for indemnity costs from 17 May 2022 being the date of the non-admission of the facts “which would have gone a long way to reducing the scope of the hearing in particular issues 1 and 2”.

54. [164]

    Whilst it is true that I did ultimately find both propositions I determine to make an "otherwise" order in respect of the matter.

55. [165]

    The first requested fact to be admitted in my view clearly was framed in terms of a conclusory statement on what in essence was an ultimate issue in the proceedings. Consideration of whether DC2 was ready, willing and able to "settle the Terrigal properties" was a complex question involving consideration of many facts and pieces of evidence and informed by principles of law and construction of documents.

56. [166]

    At least on the facts of this case, I consider that it was an exercise in supreme optimism for the first group to consider that such an ultimate issue "fact" would be admitted.

57. [167]

    The issue sought to be admitted was a very real issue in the proceedings, and notwithstanding my ultimate findings in the matter, in my view it is generally not appropriate for practitioners to request that such (multifaceted) ultimate issues be admitted in the form of a Notice to Admit Facts. Practitioners ought to reflect upon utility of seeking admission of ‘facts’ on what are essentially ultimate issues.

58. [168]

    In relation to the second fact sought to be admitted, namely that DC2 did not accept the vendors’ invitation into the ten separate workspaces on PEXA on or before 27 July 2021, it seems to me that that was a fact which was more straightforward and could properly have been the subject of a Notice to Admit Facts.

59. [169]

    Thus, in relation to that second fact, I decline to order otherwise. Accordingly the effect of that determination is that DC2 as the disputing party ought to pay whatever costs there are incurred in relation to the disputation of that fact on the indemnity basis by force of the provisions of r 42.8(2).

60. [170]

    However, I should make it clear that to the extent that the affidavit of Francisco Gutierrez asserts that it was necessary to adduce expert evidence to establish that fact either, I reject that proposition.

61. [171]

    The first group did lead evidence from Ms Oakes in the nature of expert evidence regarding the duration of PEXA. However, expert evidence was not required in my opinion to establish that DC2 had failed to accept the PEXA invitation to the relevant workspaces.

62. [172]

    Without intending to be prescriptive my expectation is that very few costs would have been incurred in establishing the proposition that the invitation was not accepted. The evidence from Ms Western in this regard in her affidavit sufficed. On 25 June 2021 Mr Boxsell was sent an invitation to enter the PEXA workspace: CB 2583.952; T35. It had not been accepted up to 30 July 2021: CB 182[74].

63. [173]

    In making the above comments I should make it clear that I am not in any way finding or suggesting that the evidence of Ms Oakes on other issues was not appropriate evidence to be led. The evidence was of great assistance to me and to the extent that it was adduced in respect of other matters my expectation is that it ought likely be recoverable under the cost orders apart from the NAF issue.

64. [174]

    I do not in any way suggest or preclude Ms Oakes’ evidence from being recoverable upon assessment (which is ultimately a matter for the assessor or agreement of the parties) under the costs orders in respect of matters apart from the second fact in the NAF.

65. [175]

    The initial submissions (22 August 2022) on behalf of the first group invited the Court to impose costs orders on the indemnity basis in the claims instituted against the first group on the main claim and Ms Western on the cross-claim.

66. [176]

    It was submitted that an award of indemnity costs is compensatory, not punitive and relevantly presupposes some unreasonable action including relevant misconduct in connection with the conduct of the proceedings citing inter alia Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11.

67. [177]

    It was contended that the following principles were relevant in relation to an award of indemnity costs against DC2. Namely indemnity costs may be awarded where:

    1. (1)

       a party has maintained proceedings which it ought to have known had no real prospects of success: citing Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 31 ALR 397 at 401;

    2. (2)

       a party has abandoned claims: citing LanelIi v Hancock t/as Hancocks Solicitors [2012] NSWSC 417; Lahoud v Lahoud [2006] NSWSC 126 at [44]-[69] (untenable claim); though noting mere abandonment of itself may not be sufficient: see Ghougassian v Fairfax Community Newspaper Pty Ltd [2015] NSWCA 307 at [52]; and

    3. (3)

       a party obtained a judgment no better than a prior settlement offer by the other party: citing Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425; Leighton Contractors Pty Ltd v CE Heath Underwriting & Agency Services (1995) 8 ANZ Ins Cas 61-231; (1994) 12 BCL 415 per Hunter J and UCPR r 42.14 and 42.15.

68. [178]

    It was contended that the combination of “these factors” support an award of indemnity costs against DC2.

69. [179]

    The submissions noted that the Court had found against DC2’s claim for specific performance and in the alternative damages. It was further noted that the fact that the plaintiff abandoned claims “gives credence to the success” of the first group and that “the Court need not go further than the findings made in respect of the Plaintiff’s claim as outlined above in order to measure success”.

70. [180]

    The first group also submitted that DC2 “in the moments which [preceded] the commencement of these proceedings lodged caveats over the respective properties owned by the vendors, premised upon the claim it brought in this Court [and] (t)he existence of the caveat (sic) precluded the vendors from conducting any dealings in respect of their properties”.

71. [181]

    I have already dealt with the Offer of Compromise.

72. [182]

    Whilst it is true that DC2 did abandon some claims, the running of the case by DC2 did not in my view involve inappropriate conduct (such as misleading the Court or maintaining proceedings known to have no real prospects of success). Nor did DC2 engage in conduct which caused unreasonable delay and expense in the proceedings.

73. [183]

    I decline to award costs on an indemnity basis under s 98(1)(c) CPA and the general law.

Personal/third party costs order issue

1. [184]

   Under Issue 1, the first group seeks a personal costs order against Mr Danckert in relation to the issues on the main claim in reliance upon s 98(1)(b) CPA.

2. [185]

   Under Issue 4 the second group in substance seek personal costs order against Mr Danckert in relation to any costs liability they have to other parties on the cross-claim.

3. [186]

   However, it seems evident from the materials and submissions of the second group that they also seek seeks a personal costs order against Mr Danckert in relation to the issues on the main claim, despite the fact that the outstanding order issues did not clearly identify this as such.

4. [187]

   For this reason I will deal with the claim for personal costs order under this separate heading ‘Personal/third party costs order issue’.

5. [188]

   Both the first group and second group referred to the decision of the High Court in Knight regarding the making of third party costs orders

6. [189]

   Mason CJ and Deane J (at 193) held that circumstances that may warrant the making of a costs order against a third party include:

7. [190]

   The power to make costs orders against non-parties is generally to be exercised only in exceptional circumstances and sparingly: FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340 at [210]-[214]; May v Christodoulou (2011) 80 NSWLR 462; [2011] NSWCA 75 at [107]-[116].

8. [191]

   Although not referred to in the submissions of the first group, there are two observations of Dawson J in Knight which albeit obiter dicta have some relevance here.

9. [192]

   First, Dawson J observed that an order for security for costs is ordinarily the appropriate remedy where an individual (in Knight a receiver and manager) conducts litigation through a company which will be unable to pay the costs of the defendant if the defendant is successful in his defence: Dawson J at 204–205 citing Sent v Jet Corp of Australia Pty Ltd (1984) 2 FCR 201 at 214–215.

10. [193]

    Secondly, applications for security for costs should ordinarily be made promptly before significant expense is incurred: Dawson J at 205 referring to Devenish v Jewel Food Stores Pty Ltd (1990) 64 ALJR 533 at 534 per Mason CJ.

11. [194]

    Further, McHugh J observed that as a matter of policy, provision for security for costs is a better remedy for protecting persons involved in litigation with insolvent companies than ordering an individual (in Knight a receiver) to pay the cost of litigation after verdict: at 217.

12. [195]

    In FPM Constructions v Council of the City of Blue Mountains Basten JA, with whom Beazley JA agreed, noted that the criteria in Knight should not ultimately be treated as separate and independent factors: at [214].

13. [196]

    In relation to the principle established in Knight Basten JA stated the following at [210]:

14. [197]

    In FPM Constructions Basten JA (with whom Beazley JA agreed), found:

    1. (1)

       that it could not be said that FPM Constructions was a merely nominal party, or that the relevant individual (Mr Yasbek) was the "real party" to the proceedings, despite the fact that the primary judge had found that Mr Yasbek was the driving force behind FPM Constructions and was its representative for the purposes of the litigation: [206]; and

    2. (2)

       there was no finding by the primary judge that FPM Constructions was insolvent nor that it was entirely without resources: [211].

15. [198]

    The notion of exceptionality is something outside the ordinary run of cases where parties pursue claims for their own benefit at their own expense: PM Works Pty Ltd v Management Services Australia Pty Ltd [2018] NSWCA 168 at [39] following the McColl JA in Yu v Cao (2015) 91 NSWLR 190; [2015] NSWCA 276 at [136]–[156]; see also the helpful summary of case law by Rees J in In the matter of Wetherill Park Holdings Pty Ltd (No 2) [2021] NSWSC 1397 at [5]-[12].

16. [199]

    There is commentary to the effect that a moving party should give early warning of an intention to seek an order for costs against a non-party: see Ritchie’s Uniform Civil Procedure Rules NSW at [s 98.25.1], “Notice and procedure” citing inter alia Vestris v Cashman (1998) 72 SASR 449 at 458.

17. [200]

    The first group submitted that in order for such an order to be made the applicant must satisfy the Court that the case falls within a general category of case where a non-party costs order might be appropriately made and that the interests of justice require that such an order be made.

18. [201]

    It was further submitted that the High Court identified three criteria of cases in such a category being (a) the party to the litigation is an insolvent person or man of straw; (b) the non-party has played an active part in the conduct of the litigation, and (c) the non-party has an interest in the subject of the litigation.

19. [202]

    The first group submitted that DC2 was established as a special purpose vehicle for Mr Danckert for the transactions, it having been incorporated shortly prior to the entry of the contracts for sale of land, that Mr Danckert was the sole director and shareholder of DC2 with no evidence that any other persons were associated with it and DC2 has a share structure of 100 shares issued to Mr Danckert for a nominal sum of $100.

20. [203]

    In particular it was submitted that the Court by reference to the decision in Knight could be satisfied of the following:

21. [204]

    The subsequent submissions on behalf of the first group conceded that it is insufficient to point to the fact that Mr Danckert is the sole director and shareholder of DC2 and the person who will naturally benefit from its success because it is his special purpose vehicle for the purchase: PM Works at [36].

22. [205]

    Other ‘exceptional’ further factors relied upon by the first group are as follows:

    1. (1)

       that Mr Danckert funded the litigation or put DC2 in funds;

    2. (2)

       Mr Danckert's personal interests must have informed him that as the relevant agent of DC2 how to conduct the proceedings. In this respect unreasonable decisions were made to run matters which ought not to have been run. To the extent that it was unreasonable the fault lies at the feet of Mr Danckert;

    3. (3)

       the case was premised on DC2 having at least 20% of the purchase price in its hands as its own funds; and

    4. (4)

       Mr Danckert caused monies which DC2 had in its account at the time of the trial ($1,013,000: CB 809) for the purposes of being applied to the purchase to be removed from the account after the hearing by the time of the listing on 26 August 2022, without revealing where the money was paid, leading to the inference that Mr Danckert made “the decision to dissipate the money so that it is not available to pay costs” and “prefer[ring] [h]is personal interest to that of DC2 and its creditors, including the defendants”.

23. [206]

    The ‘exceptional’ factors relied upon by the second group are as follows:

24. [207]

    DC2 submitted that indemnity costs should only be awarded in the event that there was an effective Offer of Compromise or Calderbank offer.

25. [208]

    DC2 opposed any personal costs order against Mr Danckert. DC2 submitted that Mr Danckert was not a party to the main claim and was only a party to the second group's cross-claim. Further the first group did not seek relief against DC2 nor Mr Danckert. DC2 further submitted that Mr Danckert was not ever put on notice of such an application being likely to be made.

26. [209]

    DC2 submitted that there was no evidence to establish the DC2 is insolvent or a "man of straw" and pointed to the deposit of (a total amount) of $385,000 into an account controlled by HFW as security for the defendants’ costs and by being able to procure the funds necessary to complete the purchase of the property, if it had been successful.

27. [210]

    DC2 referred to May v Christodoulou per Handley JA at [94] noting that it is not appropriate to make a costs order under s 98(1) CPA where the director has done no more than represent the company in the proceedings without other factors such as wilfully refusing to comply with directions.

28. [211]

    The fact that there are no other persons associated with DC2 is said by DC2 to be irrelevant citing Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd [2004] QSC 47 at [13].

29. [212]

    I am not persuaded that an order should be made against Mr Danckert to pay the costs of the first group and or the second group.

30. [213]

    The first group did not seek relief against either DC2 nor Mr Danckert.

31. [214]

    It did seek and obtain an agreement for security for costs.

32. [215]

    The agreements for security for costs secured by each of the first group and the second group against DC2 are relevantly in the terms I have set out above.

33. [216]

    It seems to me that it is correct to say that there is no strict evidence that DC2 is insolvent.

34. [217]

    I do not think it can be said that DC2 was a merely nominal party in the proceedings nor that Mr Danckert was the "real party" to the proceedings.

35. [218]

    There is force in the submission that no notice of the fact that such a personal costs order would be sought was made until after delivery of judgment in the proceedings. Whilst that is not a decisive factor against the application, it is a relevant consideration.

36. [219]

    More particularly, each of the first group and second group having negotiated an agreement with DC2 for the provision of security, had secured an agreed amount in respect of costs.

37. [220]

    So far as I have been made aware neither the first group nor the second group sought at any stage respectively after 27 January 2022 and 7 February 2022 to negotiate with DC2 for the provision of further security or to apply to the Court for an order for any further security.

38. [221]

    If they had done so, they had the means referred to by Dawson J in Knight (security for costs) a conventional way of seeking to protect themselves against the eventuality that DC2 might not after the hearing and judgment have funds to meet or satisfy any costs order.

39. [222]

    Had they made any such application, it potentially could have been coupled with an application to stay the proceedings on the main claim pending the provision of satisfactory security.

40. [223]

    Ultimately, I am not persuaded that a personal costs order against Mr Danckert ought to be made as sought.

Issue 3 (costs orders on the balance of the claims of the cross-claims)

1. [224]

   Ms Western claims that the second group ought to pay her costs of the cross-claim against her.

2. [225]

   The initial submissions on behalf of Ms Western in relation to the issue noted that the claims included claims against Ms Western in her personal capacity.

3. [226]

   Mr Allen’s subsequent submissions say that a costs order ought to be made in reliance upon the provisions of r 42.1 that costs follow the event and further say that “the cross-claim was an event”.

4. [227]

   Mr Allen's submissions elaborated on the claim for indemnity costs by reference to a number of other considerations.

5. [228]

   He says that the issues on the cross-claim required time and effort to defend and were not without complexity, such as Ms Western’s [alleged] liability in contract, tort, misleading and deceptive conduct and in equity when she was the agent of SBS. It was further claimed that the time of the trial was extended by the issues raised in the cross-claim from 4 to 6 days: Mr Gutierrez’s affidavit at [24].

6. [229]

   Mr Allen submitted that the extent that the cross claim was a reaction to DC2’s claims and motivated by a decision to “allocate risk”, the costs of the cross-claim fall upon the second group.

7. [230]

   In respect of the Offer of Compromise the applicable rules are those which apply to a defendant as a cross-claim.

8. [231]

   In my opinion much of the same considerations that arise in respect of the first group’s Offer of Compromise arise in relation to Ms Western's Offer of Compromise.

9. [232]

   There is a serious question as to whether the offer contained any element of compromise. It seems to me that it did not.

10. [233]

    However in the event that I am incorrect about that, I would make an ‘otherwise order’. The characterisation of the offer as alternatively a Calderbank offer in the event that it did not amount to an Offer of Compromise under the UCPR in my opinion does not warrant any different outcome.

11. [234]

    Ms Western submits that in pursuit of defending the cross-claim against her she inter alia; responded to allegations which were serious and not trivial in nature; asserted and maintained her opposition to the claims; filed a defence; submitted evidence to refute the allegations propounded; responded to correspondence concerning the cross-claim; participated in the proceedings as a cross-defendants; attended to various Court events and listings; was required to attend for the purposes of cross examination and was required to prepare and cross examine the cross claimants.

12. [235]

    Whilst the above matters are at least technically correct, they are not out of the ordinary for a cross-defendant. It is essentially no more than what a cross-defendant ordinarily does in meeting a claim.

13. [236]

    Ms Western submits that the claims against her in SBS for breach of fiduciary duty and other duties were predicated on the basis that she acted for DC2 and noted that those claims had been abandoned (issues 12–17). In this regard she refers to my reasons for judgment at [953]–[954].

14. [237]

    Issues 12 to 17 of the agreed hearing issues were issues arising out of other claims by DC2 against Ms Western and SBS rather than specifically issues raised on the cross-claim.

15. [238]

    Further Ms Western says that some of the claims made by the cross claimants were indifferent to DC2's claims (referring to the claims based on alleged misleading and deceptive conduct).

16. [239]

    The second group submits that not only was it reasonable for the cross claimants not to accept Ms Western's offer, but the evidence and the Court's findings would lead the Court to comfortably conclude that had DC2 succeeded against the second group it is likely that they would have succeeded against Ms Western referring to [458]-[476] of the principal judgment.

17. [240]

    Those paragraphs refer to my findings in relation to Ms Western’s evidence. As part of those findings. I determined that it was clear from Ms Western's evidence that she was aware of the "relevant ownership knowledge" as at 24 September 2020: [468]-[471].

18. [241]

    I determined that in light of my findings it was not necessary to embark upon consideration of the duty of care owed by Ms Western to the other vendors: [305]. However, I noted that a conveyancer is an agent and in light of the provisions regarding trust funds in the Conveyancers Licensing Act 2003 (NSW) will have certain statutory duties and also prima facie fiduciary obligations: [306].

19. [242]

    In this regard I pause to note that apart from the provisions of the Conveyancers Licensing Act 2003 (NSW) there are provisions in the Conveyancers Licensing Regulation 2021 (NSW) which bear upon fiduciary obligations and duties.

20. [243]

    For example, schedule 2 sets out rules of conduct, and provides that:

    1. (1)

       a licensee must act honestly, fairly and professionally with all parties in a transaction and not misinform or otherwise mislead or deceive parties in negotiations or a transaction: rule 2;

    2. (2)

       a licensee must exercise reasonable skill, care and diligence: rule 3; and

    3. (3)

       a licensee must comply with the fiduciary obligations arising from the licensee's activities as a conveyancer: rule 4.

21. [244]

    The second group submits that the fact that they did no better against Ms Western than as offered in the Offer of Compromise had nothing to do with the strength of the case or the weakness of the cross-claim, but rather the fact that DC2 failed in respect of its claims.

22. [245]

    This is evident from the principal judgment. There was no necessity for me to address the issues arising in respect of the cross-claim against Ms Western.

23. [246]

    Where proceedings are discontinued prior to any hearing on the merits, the Court in dealing with applications for costs does not “try a hypothetical action between the parties” to determine the question of costs: Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201; Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624; [1997] HCA 6; Metro Chatswood Pty Ltd v CRI Chatswood Pty Ltd [2007] NSWSC 1120 at [35]. There are many reasons for that including the fact that usually it will be impracticable to assess the eventual prospects of success in the action.

24. [247]

    The situation here is slightly different to that. Here there has not been any discontinuance. There has in fact been a complete hearing. Sometimes that can occur even in relation to a discontinuance where leave is given, perhaps on terms, to discontinue after hearing commences,

25. [248]

    However, as is the case with a discontinuance, here there is a least one similarity namely that there has been no finding or assessment of the eventual prospects of success of the respective claims which were unnecessary to determine.

26. [249]

    The way the hearing proceeded the parties did not suggest that I should necessarily determine all the issues. In fact the terms of the agreed hearing issues indicated that in relation to the sets of issues arising out of the cross-claims against SBS and Ms Western, the parties agreed that those sets of agreed hearing issues (issues 21-31) and (issues 32-33) were only relevant if DC2 succeeded on its main claim.

27. [250]

    In the principal judgment in indicating that the parties should bring in short minutes of order I expressly indicated that they should alert me to any claims that they say still need to be determined: [17]. No party has indicated that there is anything further for me to determine.

28. [251]

    It seems to me that it is artificial for me to attempt to second-guess at this point the prospects of success of the secondary claims in the agreed hearing issues.

29. [252]

    In situations like this, one approach is to consider whether the cross claimants acted reasonably in commencing the proceedings and whether the cross defendant(s) acted reasonably in defending them.

30. [253]

    The issues on the cross-claim against Ms Western were agreed hearing issues 32 and 33. The agreed statement of issues expressly noted that the claims were only relevant in the event that DC2 succeeded and there was a notation that given the way the evidence unfolded, the cross claimants no longer alleged that there was a retainer as between DC2 and Ms Western.

31. [254]

    Whilst it is a little difficult to positively assess the reasonableness of the respective actions in commencing and defending parts of the cross-claim, my sense of the matter is that there was nothing of particular moment in the proceedings which suggested to me that either party were acting unreasonably in pressing or defending the aspects of the cross-claim which ultimately I did not need to determine. Rather, each of the relevant parties seemed to me to act reasonably.

32. [255]

    In the above circumstances in my opinion and having regard to the overall justice of the case I determine that there should be no order as to the costs on the cross-claim insofar as it arises against Ms Western to the intent that each of Ms Western and the cross claimants should bear their own costs of the cross-claim.

33. [256]

    This issue essentially relates to issues 35 to 43 of the agreed hearing issues.

34. [257]

    I noted in the principal judgment that in light of the findings that I had made certain claims by, in particular, the second group against DC2 and Mr Danckert fell away. Specifically this includes the claims in respect of agreed hearing issues 35 – 43.

35. [258]

    The second group sought an order that DC2 and Mr Danckert pay their costs of the cross claim against DC2 on the main claim and DC2 and Mr Danckert on the cross claim.

36. [259]

    DC2 for its part asserts that was unnecessary for me to determine the claims in respect of agreed hearing issues 35 to 43 and in those circumstances there should be no order DC2 pay any costs of the cross-claimants regarding the balance of the claims in the cross-claim.

37. [260]

    Ultimately I was not required to make determinations in respect of issues 35 to 43 of the agreed hearing issues.

38. [261]

    I find having regard to the overall justice of the case that there should be no order as to the costs of the claims on the cross claim against DC2 as the fourth cross-defendant to the intent that each of the second group and DC2 ought bear their own costs of those claims.

Issue 4 (whether DC2 and Mr Danckert should indemnify the cross claimants for their costs liability to Ms Western and SBS?)

1. [262]

   The submissions of the second group dated 19 August 2022 addressed the issue of whether DC2 and Mr Danckert should indemnify the cross claimants for their costs liability to Ms Western and SBS.

2. [263]

   The second group indicated that the question of such liability turns ultimately on whether those costs ought fairly to be borne by the plaintiff.

3. [264]

   That, in turn, it said depends on a number of factors including whether the proceedings were the catalyst for the cross-claim, whether it was reasonable for the defendants to have joined the cross-defendants, and whether the cross-claim raised issues private to the parties to it: citing DIF III – Global Co-Investment Fund LP v Babcock & Brown International Pty Limited (No 2) [2019] NSWSC 1578 per Ball J at [10]; see GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 688, (2003) 201 ALR 555 at [72]-[75] per Finn J, said to be cited with approval by Hodgson JA in Furber v Stacey [2005] NSWCA 242 at [32]: second group’s submissions 19 August 2022.

4. [265]

   DC2 perceived the submission to be a request for a “Sanderson or Bullock type order” which it opposed.

5. [266]

   The first group also opposed Sanderson or Bullock orders, submitting that “There is no objection to an order that [DC2] indemnify the cross-claimants for the costs payable to Ms Western. The objection is to [the] risk of the costs not being paid by [DC2] being allocated to Ms Western”: submissions 19 August 2022 at [48].

6. [267]

   A ‘Bullock order’ is conventionally understood as being an order that an unsuccessful defendant be ordered to pay a plaintiff the amount of the plaintiff’s costs liability to other (successful) defendants: Bullock v London General Omnibus Co [1907] 1 KB 264.

7. [268]

   A ‘Sanderson order’ is conventionally understood as being an order that unsuccessful defendant be ordered to pay directly to successful co-defendants the amount of their costs: Sanderson v Blyth Theatre Co [1903] 2 KB 533; see generally G E Dal Pont, Law of Costs (5th ed, 2021, LexisNexis) at [11.12].

8. [269]

   In light of my findings there is no liability of the cross claimants to Ms Western and SBS in respect of the cross-claim and accordingly there is no occasion to determine that DC2 and Mr Danckert indemnify the cross claimants in respect of such costs.

9. [270]

   In any event, there is some force in the submission of DC2 that the cross claimants made a multitude of claims against Ms Weston and SBS that were not and could not be sensibly claimed against DC2 and Mr Danckert, identifying a number of those claims including paragraphs [27], [28]-[32], [32A]-[32C], [33-[38], [47]-[50] and [51]-[56].

10. [271]

    DC2 submitted that there was no “substantial connection” or “dependence” between the above claims and the discrete claim regarding repayment of the commission. That submission also, at least from the cost perspective, has some force. However as I have noted, in light of my findings there is no need for me to determine that.

Issue 5 (release of sums held by way of security for costs)

1. [272]

   Issue 5 is whether I should order that there be released to the first group sums held by way of security for costs given by DC2 of $100,000 in favour of the cross claimants.

2. [273]

   The second group (relevantly being the cross claimants) oppose such an order: submissions 29 August 2022.

3. [274]

   However, the first group by their submissions dated 2 September 2022 did not press such an order in these terms, and it is unnecessary for me to address it.

Issue 6 (alternative claims)

1. [275]

   Issue 6 describes orders which are sought by the first group (6(a)) and by Ms Western (6(b)) referable to the agreements for security for costs.

2. [276]

   The suggestion in agreed order issue 6(a) is that the sum of $175,000 in the controlled monies account should be held “on trust” for the first group defendants.

3. [277]

   However, ultimately the first group by submissions dated 2 September 2022 did not press an order in terms of issue 6(a).

4. [278]

   It noted that it was not pressed "because of DC2's opposition to the word 'trust' in the proposed order."

5. [279]

   The submission noted that in any event it is acknowledged (by the first group) that the contract as to security for costs governs the continuing rights and obligations of DC2 and the first group, who say that the monies are impressed with a trust by the terms of the contract.

6. [280]

   I pause to note that a label affixed by the parties to an arrangement is not determinative of the proper classification of the arrangement: see e.g. BSA Advanced Property Solutions (Fire) Pty Ltd v Ventia Australia Pty Ltd [2022] NSWCA 82 at [76]-[79] per Ward P, Leeming, White, Brereton JJA and Basten AJA.

7. [281]

   There is no occasion for me in light of the fact that the order is not pressed to make any determination in respect of issue 6(a).

8. [282]

   Even if there were occasion for me to make any such determination, it is far from obvious to me that it would have been appropriate for me to do so.

9. [283]

   The parties had negotiated a contractual position for security for costs. No legal basis was put forward in any of the first group submissions to justify why the Court should impose a trust over monies held pursuant to agreed contractual terms.

10. [284]

    Further, on the listing before me on 26 August 2022, Mr Corsaro SC identified the concern regarding a trust as being in a context of the possibility of DC2 being put into liquidation: T10.

11. [285]

    I note that there is no particular evidence before me addressing the possibility of DC2 being put into liquidation or evidence about any other creditors. Even if there were proof of some risk of liquidation, that fact of itself would make me hesitant in making any order imposing a trust without understanding far more clearly the impact any such order might have upon the rights of other potential creditors.

12. [286]

    In relation to issue 6(b) this issue is framed in terms of an order sought essentially by Ms Western in respect of any costs payable by the cross claimants to her in respect of the cross-claim.

13. [287]

    Mr Allen submits that there is much to be said for the order because it secures a sum of money available to meet the costs of the cross-claim without the need to take other measures for enforcement. He says that the order ought be made on the basis that Ms Western undertakes to have her costs assessed with reasonable expedition.

14. [288]

    In light of my findings that there be no order as to the costs of Ms Western in respect of the cross-claim there is no occasion for me to address issue 6(b).

Issue 7 (claim for order to make security separately available for other costs)

1. [289]

   The question in respect of issue 7 is whether I should order that the sum of $210,000 held by HFW as security for the second group's costs should be paid out to the second group in satisfaction or part satisfaction of DC2’s costs liability to those defendants.

2. [290]

   The second group rely upon the terms of the agreement dated 7 February 2022. Mr Crossland states that they do not presently seek an order in terms of issue 7 but wish to reserve the opportunity to reapproach the court if necessary.

3. [291]

   There is an order that DC2 pay the second group's costs of the main claim and also the second group's costs of the cross-claim in respect of that part of the cross-claim seeking recovery of the deposits.

4. [292]

   The agreement regarding security as between DC2 and the second group is set out in the document dated 7 February 2022.

5. [293]

   Essentially the agreement reflected a compromise of a claim for security for costs such that in consideration of the second group defendants not prosecuting a motion for security for costs, there was agreement regarding provision of security and the terms on which the sum provided would be released.

6. [294]

   The agreement makes it clear that the sum deposited ($210,000) will be (and in fact is) held in a controlled monies account and is available to the second group defendants to satisfy any order for costs in the proceedings against DC2 as plaintiff: cl 1(c).

7. [295]

   The agreement further provides that DC2 (as plaintiff) and the second group defendants agree that in the event that a costs order against DC2 (as plaintiff) is made in the proceedings in favour of the second group defendants DC2 will consent to the release of the controlled monies up to the limits of the sum identified in the agreement being relevantly $210,000 "in satisfaction, or in partial satisfaction, of that costs order and will do so as soon as the sum of any costs are to be paid are agreed or assessed or, in the event of a gross sum costs order, as soon as that order is made".

8. [296]

   No gross sum costs order has been sought nor made.

9. [297]

   A costs order has been made in respect of the main claim.

10. [298]

    The provision for DC2 as plaintiff to consent to the release of the monies is not triggered by the costs order being made. Rather it is triggered by the sum of any costs to be paid being agreed or assessed.

11. [299]

    That has not yet occurred.

12. [300]

    Having regard to the fact that the parties themselves have agreed as to what is to happen to the security, I do not propose to make any order that has the effect of interfering with or cutting across the terms of the agreement between the parties.

13. [301]

    The agreement will simply be worked out in accordance with its terms.

14. [302]

    If consequent upon the costs order being made, the sum of costs are agreed or assessed and at that point of time DC2 does not consent to the release of the controlled monies it is a matter for the second group to determine what if any action they take as a consequence of that. However at the moment speculation about that is premature because there has been no agreement or assessment of costs.

Issue 2 (claim by Mr O'Connell for recovery of deposit sum plus interest)

1. [303]

   Mr O'Connell, in contradistinction to the vendors in the second group, did not seek to file a cross-claim against Mr Danckert seeking recovery of the commission sum of $6,750 plus interest.

2. [304]

   Mr O'Connell now seeks that relief.

3. [305]

   The Court has the power to grant relief not specifically sought in an originating process: CPA s 90; UCPR r 36.1.

4. [306]

   The submissions for Mr O’Connell placed reliance upon r 36.1 UCPR which is in the following terms:

5. [307]

   Ordinarily, the provisions of r 36.1 applies in a case where a claim has been made by an originating process, cross-claim or notice of motion. The existence of r 36.1 means that at least technically there is no need in such court process to make a claim for other relief.

6. [308]

   It is commonplace in the majority of processes that are filed with the Court to raise or at least flag the possibility of other relief being sought by use of words in a concluding paragraph in the claims for relief such as "further or other orders" or "such further or other orders as the court deems fit".

7. [309]

   Ritchie’s Uniform Civil Procedure Rules NSW states at [9.1.35]:

8. [310]

   Thus, it seems to me at least conceptually even though Mr O'Connell has not filed any process in the proceedings that the possibility exists that relief might be given to him.

9. [311]

   Mr Allen on behalf of Mr O'Connell states that in the context of a large commercial case it was not unreasonable for him not to propound a cross-claim for the small sum and that the costs of filing and prosecuting the claim were disproportionate to the sum sort. It is said that there is no unfair prejudice to Mr Danckert in the amount now being claimed. Conversely it is said that (if a claim were now made) a small claims case would be met with an estoppel argument.

10. [312]

    DC2 submits that Mr O'Connell cannot now seek recovery because he elected not to cross-claim for the relief and that he cannot rely upon r 36.1, and in any event that there is no proper basis on which the Court would allow him to succeed on a claim that has not been sought or pleaded and only raised for the first time after judgment has been delivered.

11. [313]

    Accepting for the moment, that the possibility exists that Mr O'Connell can seek such relief now and that the Court could give such relief, I decline to do so.

12. [314]

    There is no evidence from Mr O'Connell explaining his decision not to seek any such relief. For all the Court knows, it might well be the case that a considered forensic decision was made by him not to seek the relief so as not to risk costs, which in all probability would have exceeded the amount of the commission amount.

13. [315]

    To the extent that the submission on his behalf states that it was not unreasonable for him not to propound a cross-claim for a small sum as the costs of filing and prosecuting the claim were disproportionate to the sum sort, the submission clearly raises the possibility if not probability that Mr O'Connell considered the matter and elected not to make such a claim and so not expose himself to costs of an adverse finding.

Conclusion

1. [316]

   In light of my findings in relation to the issues I make the following orders:

   1. (1)

      Set aside part of Order 5 of the orders made by Meek J on 25 August 2022 by deleting the words “and the Third Cross-Defendant (Wayne Danckert)” so that the order reads “Orders that the Plaintiff pay the costs, on the ordinary basis, of the Second to Seventh and Ninth Defendants, and the Tenth Defendant of the proceedings on the second further amended statement of claim as agreed or assessed”.

   2. (2)

      Order, subject to order 3 below, that the Plaintiff pay the costs, on the ordinary basis, of the First and Eighth Defendants of the proceedings on the second further amended statement of claim as agreed or assessed.

   3. (3)

      Order that the Plaintiff pay the costs, on the indemnity basis, of the First and Eighth Defendants in respect of the costs incurred by the First and Eighth Defendants as a requesting party pursuant to r 42.8 Uniform Civil Procedure Rules 2005 (NSW) in proving the fact the plaintiff did not accept the vendors’ invitations to ten separate workspaces on PEXA on or before 27 July 2021.

   4. (4)

      Order that, subject to the Order 6 of the orders made by Meek J on 25 August 2022, there be no order as to costs on the balance of the further amended cross-claim to the intent that each party to the further amended cross-claim bear his, her or its own costs of the further amended cross-claim.