Hume Plasterboard Pty Limited v Brilliant Interiors Pty Limited (No 2)

HIS HONOUR: The factual background to the claim is set out in the principal judgment (Hume Plasterboard Pty Limited v Brilliant Interiors Pty Limited [2019] NSWSC 679). The effect of the decision was that Hume Plasterboard Pty Limited (Hume) failed to establish that the third defendant (Ms Sun) was liable under a guarantee signed by her on 30 May 2016.

On 13 May 2019, Ms Sun served a proposed amended cross-claim on Hume. This was one business day clear of the date set down for hearing. When the matter commenced on 15 May 2019, Ms Sun sought to rely upon the amended cross-claim. This was opposed by Hume. Leave was granted to Ms Sun to rely upon the amended pleading.

This judgment relates to an application by Hume that Ms Sun pay the costs thrown away by the late amendment of her cross-claim.

Hume submitted that Ms Sun made no mention of amending her cross-claim at the directions hearing on Friday, 10 May 2019. It did, however, accept that Ms Sun’s outline of submissions was served on it on 9 May 2019 and that reference was made in that outline to Garcia v National Australia Bank Ltd [1998] HCA 48; 194 CLR 395 (Garcia). Hume noted, however, that in that outline no reference was made to any change in position as to the nature of Ms Sun’s relationship with the second defendant (Mr Suntsov). Hume submitted that this only occurred when three further affidavits were served by Ms Sun on 13 May 2019.

Hume submitted that the amended cross-claim raised for the first time Ms Sun’s reliance upon the general law. Hume also submitted that new factual allegations were made which included that Mr Suntsov had assisted Ms Sun with her financial affairs and that they had been in an intimate relationship. In an earlier affidavit, Ms Sun had asserted that she and Mr Suntsov were just “normal friends”.

Hume submitted that the service of the amended cross-claim and the inconsistency in Ms Sun’s affidavits as to the nature of her relationship with Mr Suntsov caused it to issue notices to produce and subpoenas to clarify the nature of the relationship. Hume submitted that as a result it had unnecessarily expended time and money in obtaining documents which would not have been needed had Ms Sun been frank as to the nature of her relationship with Mr Suntsov in her first affidavit.

By reference to Chahwan v Euphoric Pty Limited (2009) 73 ACSR 252 at [43] Hume enunciated the relevant legal principle as follows:

Hume submitted that it ought to have its costs thrown away by the filing of the amended cross-claim because Ms Sun could have relied upon Garcia and been honest about her relationship with Mr Suntsov when she first filed her cross-claim. Hume submitted that the application to amend the cross-claim and allege new facts was brought very late and put it to the expense of making inquiries, which in due course were found to be unnecessary.

An initial problem faced by Hume is that it does not identify in its written submissions the inquiries or documents which it needlessly sought and which became unnecessary when the amended cross-claim and the further affidavits were served. Significantly, not one notice to produce or subpoena is identified as having been issued in circumstances where the documents provided were not required to be deployed by Hume as a result of the filing of the amended cross-claim. No evidence of any actual costs thrown away has been adduced.

Strictly speaking, it is not correct to say that Ms Sun did not rely upon Garcia in her original cross-claim. She specifically relied upon s 20 of the Australian Consumer Law which in turn picks up the common law. It follows, therefore, that no new factual issues were raised by the amended cross-claim except the fact that Ms Sun was in an intimate relationship with Mr Suntsov.

There is another difficulty confronting Hume. As is set out at [174] of the principal judgment it was not the reality of the nature of the relationship between Ms Sun and Mr Suntsov which was important. Rather, it was Hume’s understanding that they were married which was relevant to whether Garcia applied. Accordingly, any inquiries which were designed to identify the true nature of the relationship between Ms Sun and Mr Suntsov were seeking irrelevant material. Ms Sun should not be required to bear the costs of such an inquiry if such an inquiry was in fact made.

It is also not without significance that the revelation that Ms Sun was in an intimate relationship with Mr Suntsov was not the subject of challenge. How it is said that this fact caused costs to be thrown away is not addressed or explained other than by the use of broad statements which did not address any particular piece of evidence.

It follows from the above that I am not persuaded that the ordinary costs rules should not apply.

The orders which I propose are: