The Owners – Strata Plan 89041 v Galyan Pty Ltd (No 2)

I delivered judgment in this matter on 28 May 2019: The Owners – Strata Plan 89041 v Galyan Pty Ltd [2019] NSWSC 619.

I shall use the same abbreviations here as in that judgment.

I decided that the Builder should pay the Owners Corporation’s costs of the proceedings.

My decision was based on the Heads of Agreement made by the parties on 12 September 2017, and varied on or about 9 February 2018; and in particular cl 19, which provided follows:

The matter “stated” by Hammerschlag J on 12 September 2017 was:

I determined that the Builder had not established that it was unreasonable for the Owners Corporation to refuse to allow the Builder back on site to carry out remedial work and, accordingly, the Builder should pay the Owners Corporation’s costs.

Further issues now arise because of other provisions in the Heads of Agreement.

By cl 2 of the Heads of Agreement, the parties agreed:

The parties agreed to vary the Heads of Agreement by a document called “Variation to Heads of Agreement” signed by counsel for the parties on or about 9 February 2018 (the “Variation Agreement”).

Relevantly to cl 2 of the Heads of Agreement, the parties agreed in the Variation Agreement:

In cl 5 of the Heads of Agreement the parties also agreed:

By the Variation Agreement, cl 5 was varied as follows:

The question of costs was dealt with at cll 4, 18 and 19 of the Heads of Agreement. The Variation Agreement recorded, in terms, that there was to be “no change” to any of those paragraphs.

Clause 4 read:

Clause 18 provided:

The third clause dealing with costs was cl 19 which I have set out at [4] above.

The first question concerns cl 18 of the Heads of Agreement.

The question is whether that clause constitutes an agreement by the Builder forthwith to pay any costs orders made in favour of the Owners Corporation including costs orders made after the date of the Heads of Agreement.

This is not how I read cl 18. Clause 18 deals with 2 matters. The first is costs “wasted by reason of concessions” evidently made by the Builder as to the operation of ss 18BA and 18E of the Home Building Act 1989 (NSW).

The balance of cl 18 deals with costs orders “already made” against the Builder “or costs orders made in favour of” the Owners Corporation.

When read as a whole, I think it is clear that cl 18 is directed to costs arising from events that had occurred prior to the date of the Heads of Agreement; the “concessions” made by the Builder and costs orders “already made”.

In my opinion, the second limb of cl 18 records the parties’ agreement about costs orders “already made” both against the Builder and in favour of the Owners Corporation. The paragraph should be read as if the words “already” appeared after the words “or costs orders” and before the words “made in favour of Plaintiff”.

The second question is more difficult.

Clause 4 of the Heads of Agreement provides that the “costs of” Ms Grey and Mr Quaglia “are to be shared equally between the parties” whereas cl 19 provides that “on determination of this matter on the question of costs…the only matter to be determined” was that enunciated by Hammerschlag J on 12 September 2017 when his Honour said what I have set out at [5] above.

Although cl 19 does not say so in terms, its form and place as the last clause in the Heads of Agreement shows that it is concerned with the final determination of costs between the parties and that it should be read as if the word “final” was included between the words “on” and “determination”.

Mr Jedrzejczyk, for the Owners Corporation, submitted that, in effect, cl 4 should be construed as the parties’ agreement to pay the costs of Ms Grey and Mr Quaglia on an interim basis pending final determination of the proceedings.

Thus Mr Jedrzejczyk submitted:

Mr Jedrzejczyk also referred to matters put to Hammerschlag J by Mr Corsaro SC on behalf of the Owners Corporation on 12 September 2017 as “matters of context”. I do not think I can take into account what Mr Corsaro said. That would amount to allowing evidence of the parties’ subjective intentions on the question of construction of their written agreement.

However, overall, I am persuaded that Mr Jedrzejczyk’s submissions are correct and that cl 4 of the Heads of Agreement should be read as being subject to cl 19. Clause 4 thus represents the parties’ agreement as to how Ms Grey’s and Mr Quaglia’s costs were to be paid in the first instance and was subject to the final determination of costs in accordance with cl 19.

In my opinion, the better view of the parties’ agreement is that they intended that the question of who ultimately should bear the costs of the proceedings, including the costs of Ms Grey and Mr Quaglia, and the parties’ costs arising from the references to Ms Grey and Mr Quaglia, should be determined on the basis that the parties set out in cl 19.

A third question of construction arose which, in view of the conclusions I have reached, is not necessary to determine.

That issue is whether “the costs of 2 and 5” in cl 4 were intended by the parties to mean only costs of Ms Grey and Mr Quaglia, or to include costs and disbursements incurred by the parties in their dealings with Ms Grey and Mr Quaglia.

In my opinion, the words used by the parties, especially the reference to “sharing equally” the costs concerned, showed that their intention was that cl 4 only govern the costs of Ms Grey and Mr Quaglia.

The final issue between the parties was whether the costs of the Owners Corporation should be “payable forthwith” or within a reasonable time of the assessment of those costs. I propose to order that the costs be paid within 28 days of service of a Certificate of Assessment.

There was no dispute that the Owners Corporation should have interest on its costs.

For those reasons I make the following orders: