Hagerty v Hills Central Pty Ltd (No 2)

THE COURT: By judgment delivered on 11 September 2018, this Court allowed the appeal by Mr and Ms Hagerty, set aside the judgment and orders made at first instance, removed caveats which had been lodged by the respondent, and ordered the respondent to pay the appellants’ costs at first instance and on appeal: Hagerty v Hills Central Pty Ltd [2018] NSWCA 200. The sole issue on appeal, and in the substantial judgment at first instance, was whether the respondent Hills Central had validly exercised an option to purchase land granted to it by the deceased parents of the appellants. Subsequent to the hearing at which it was held at first instance that Hills Central had validly exercised that option, there was a second hearing, arising out of a separate interlocutory dispute concerning the working out of the order for specific performance which the respondent had obtained: Hills Central Pty Limited v Anthony Gerard Hagerty & Catherine Elizabeth Hagerty t/a the Executors of the Estate of the late Gladys Delores Hagerty (No 2) [2018] NSWSC 1109. Hills Central was successful at that second hearing, and no separate challenge was made to that success on appeal, as was noted at [19]. The absence of argument led to further reference being made to this issue at [65]:

Within the 14 days specified by the Uniform Civil Procedure Rules, Hills Central applied for a variation of the order as to costs, seeking that the costs at first instance of its motion filed on 28 June 2018 and amended on 4 July 2018 either be paid by the appellants, or else there be no order as to costs. That application was made on three bases:

In response, the appellants submitted that no such order should be made because the hearing relating to the working out of orders for specific performance was only necessary because of a judgment which has now been set aside, and because of the failure by the respondent to seek relief as to the correct date for completion of the contract. They also denied that their conduct had been unreasonable.

Although it is true that Hills Central’s notice of motion was brought about by its success on the substantial question of construction at first instance, which has now been set aside on appeal, it does not follow that those costs should be governed by the same exercise of discretion as governs the costs of the hearing from which the appeal was allowed. All of the costs which are the subject of Hills Central’s motion were incurred after the judgment in Hills Central’s favour from which an appeal was brought, and relate to a discrete issue. Hills Central’s success on that issue was not challenged on appeal. Further, the appellants do not in their submissions seek to cast doubt upon the correctness of the second decision by the primary judge.

Further, had Mr and Ms Hagerty proceeded more expeditiously, there would have been no occasion for that motion. When, relatively belatedly, after filing a notice of intention to appeal, Mr and Ms Hagerty filed a notice of appeal on 6 July 2018, this Court was able to give a hearing date some 7 weeks thereafter, with judgment 11 days thereafter. Of course, a party is entitled, if it files a notice of intention to appeal, to file a notice of appeal within three months from the material date. But in a case such as this, which proceeded relatively expeditiously, where the appellants had been ordered to convey the property to Hills Central, and had neither sought a stay nor had filed an appeal after more than a month had elapsed from the judgment against them, there is force in Hills Central’s submission that the appellants’ delay contributed to the incurring of costs. That said, it is not necessary to express a view as to whether the appellants’ conduct in relation to the second hearing was unreasonable, and we do not do so.

For those reasons, Hills Central’s notice of motion filed on 28 June 2018 and amended on 4 July 2018 constitutes a separate event, warranting a separate order for costs. The matters relied upon by the appellants are insufficient to displace the usual rule in UCPR r 42.1. The order should be varied as sought by Hills Central.

That is not the only notice of motion as to costs which has been filed. On 2 October 2018, the appellants filed a notice of motion seeking a special order as to costs based on Calderbank letters dated 7 March, 28 June, 8 August and 30 August 2018. The offers were, in substance, to sell the land to Hills Central at prices of $12,000,000 (first offer), $6,127,500 (second offer), $4,205,760 (third offer) and $3,500,000 (fourth offer). All those offers were rejected by the respondent. It will be recalled that pursuant to the option, which Hills Central was found at first instance validly to have exercised, the option price was $1,961,520. The appellants contended that, notwithstanding that each of their offers was substantially more than the option price, each nonetheless represented a genuine compromise, for two reasons. In the case of the second, third and fourth offers, all represented a discount on a market valuation of the property which the appellants had obtained, which valued the property at $6,450,000, and was attached to the second offer. They also submitted that even the first offer, which proposed the sale of the property at $12,000,000 was a genuine offer of compromise, and its rejection was unreasonable because “acceptance of the offer would have meant the respondent acquired the property, a result that it did not achieve as a result of the judgment in the Court of Appeal”.

The appellants’ motion must be dismissed. First, although the notice of motion does not seek an order extending the time within which to apply, the appellants’ written submissions correctly recognised that it was filed out of time. Their solicitor’s affidavit in support stated:

The fact that one party has applied to vary an order as to costs, within the 14 days prescribed by r 36.16, does not entitle another party to make a late application to vary the order differently, so as to obtain a more favourable outcome for itself. In this respect, the rules are very clear. Rule 36.16 provides as follows:

As this Court said in Deputy Commissioner of Taxation v Meredith (No 2) (2008) 75 NSWLR 462; [2008] NSWCA 133 at [15]:

This Court’s order was made and entered on 11 September 2018, when the orders were entered in JusticeLink: UCPR r 36.11. The 14 days therefore commenced on the following day, 12 September 2008 (UCPR r 1.11(2)) and concluded on 25 September 2018.

The Court’s judgment included a note on the coversheet (like all other Court judgments):

Further, paragraph [65] reproduced above reinforced the need to apply within the 14 days prescribed in r 36.16.

The power to set aside or vary a judgment or order which has not been entered is extended in subrules 36.16(3A), 36.16(3B) and 36.16(3C), but only in circumstances where a notice of motion has been filed within 14 days after the judgment was entered. In particular, subrule 36.16(3C) makes it plain that the 14 day limitation may not be extended pursuant to r 1.12. Subrules (2) and (3) are inapplicable.

As Hills Central submitted, this is a case where the appellants took a forensic decision on the last day of the 14 day period not to apply to vary the order. The fact that there is no prejudice to Hills Central is no answer to the proposition that the orders sought by the appellants are precluded by the rules, because of the appellants’ deliberate delay.

The implication from the solicitor’s affidavit is that by the end of the 14th day, he had not appreciated that Hills Central had filed a notice of motion. However, it would have been open to the solicitor to contact either his counterpart or the Court to see if a notice of motion had been filed. The possibility of Hills Central making such an application was, after all, expressly acknowledged in [65] of this Court’s judgment.

Secondly, and against the possibility that a different view might be taken of this Court’s powers, something should be said as to the merits of the appellants’ application. For it is easy to see why there was no great enthusiasm on the part of the appellants to prosecute their application for a special costs order. It is, with respect, misconceived.

The litigation was not about pecuniary relief. Hills Central sought specific relief in equity. The question was whether Hills Central had validly exercised an option to acquire the land; if so, Hills Central sought orders in the nature of specific performance holding the appellants to the bargain struck by their parents. The outcome of the litigation was binary: either Hills Central had an enforceable right to acquire the land for $1,961,520 or it did not.

Putting the matter another way, this was not a case where Hills Central sought an order that it buy the appellants’ land either at the option price or else at market value, such that it could be said that the second, third and fourth offers represented a compromise. The only issue was whether Hills Central had a right to acquire the land for $1,961,520. An offer to sell the land for $3.5 million or $4,205,760 might reflect a compromise taking a broader view of the parties’ commercial interests. But it was not a genuine compromise of the limited issues in the litigation. Further, on no view could it be considered unreasonable for Hills Central not to have accepted any of the appellants’ offers, all of which were more than $1,500,000 over the option price.

On the parties’ notices of motion as to costs, Hills Central has been wholly successful, and the appellants have been wholly unsuccessful. The costs of those motions should follow the event.

Accordingly, the Court makes the following orders: