Gouros & Ors v Order of AHEPA NSW Incorporated; Order of AHEPA NSW Incorporated v Gouros & Ors

By a Third Further Amended Summons (“3FAS”) and Second Further Amended Statement of Claim (“2FASC”) each dated 26 September 2023 filed in proceedings 2021/300669 (“Gouros proceedings”), the Plaintiffs (“Gouros parties”) sought a range of relief against the First and Third to Tenth Defendants (“Defendants”). They pressed a narrower range of relief at the hearing, as a result of the resolution of several issues between the parties. The issues which remained to be determined, by the time I delivered judgment on 31 October 2023 ([2023] NSWSC 1281), were questions as to eligibility for membership (and financial membership) in Order of AHEPA NSW Inc (“AHEPA NSW”); an issue as to composition of the Committee of Management of AHEPA NSW; an issue as to the “chapters of the unincorporated association” which are permitted to nominate a member for membership of the Committee of Management of AHEPA NSW; and whether an order sought by the Gouros parties under s 175 of the Corporations Act 2001 (Cth) should be made. I declined to grant the relief sought by the Gouros parties in respect of those issues and, to that extent, AHEPA NSW was successful in its defence of the Gouros proceedings.

I expressed a preliminary view as to costs in my primary judgment where I observed (at [154]) that:

I there directed the parties to bring in orders that gave effect to the judgment, including as to costs, within 14 days and, in the event of any disagreement between them, their respective short minutes of order and short submissions as to the differences between them. The Gouros parties did not comply with my order that they submit short minutes of order but made submissions supported by an affidavit dated 14 November 2023 of their solicitor, Mr Rappaport, and a lengthy exhibit. Part of that affidavit and submissions was directed to the costs of separate proceedings brought by AHEPA NSW against the Gouros parties (“AHEPA NSW proceedings”), which I address below. I then allowed the parties an opportunity to make submissions and lead evidence in reply.

The applicable principles as to an order for costs are well-established. Section 98 of the Civil Procedure Act 2005 (NSW) confers a discretionary power to determine costs on the Court and requires that that discretion be exercised judicially: Ballam & Ors v Ferro & Anor (No 2) [2022] NSWSC 1358 at [54]. Rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) in turn provides that:

A successful party has a “reasonable expectation” of being awarded costs against an unsuccessful party, unless there is good reason for that presumption to be displaced: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [22], [134]. In Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121], Hodgson JA (with whom Mason P agreed) observed that:

In Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 at [7]–[14], McColl JA summarised the applicable principles as follows:

Mr Pritchard and Mr Klineberg, who made costs submissions for the Gouros parties in the Gouros proceedings, rightly recognise that the general rule under UCPR r 42.1, which applies to a hearing determined on the merits, is that the Court is to order that costs follow “the event” unless it appears to the Court that some other order should be made as to the whole or any part of the costs; however, the Court has “a broad discretion, to be exercised according to the purpose of compensating, at least in part, the costs reasonably incurred by a successful party in establishing its rights, subject to the need to accord fairness to each party in the particular circumstances of the case”: Galati v Deans (No 2) [2023] NSWCA 252 at [6]-[9].

Where proceedings are dismissed prior to any hearing on the merits, the Court will generally not “determine the outcome of a hypothetical trial” to determine the question of costs: Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201. In Re The Minister for Immigration and Ethic Affairs of the Commonwealth of Australia; Ex Parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 (“Lai Qin”), McHugh J observed (at 624) that:

A qualification to that approach was noted in One.Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548; (2000) 171 ALR 227; [2000] FCA 270 at [6]-[8], where a party, after litigating for some time, effectively surrenders to the other party, and that qualification was quoted with approval by the Court of Appeal in Nadilo v Eagleton [2021] NSWCA 232 at [9]. In Re HCafe Chatswood Pty Ltd [2018] NSWSC 362 at [7], I also observed, in respect of Lai Qin, that:

The Court of Appeal has also pointed, in Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 at [1], to the risk that litigation will “feed on itself”, including in respect of claims for costs and that concern was emphasised by Leeming JA in Re Sunnyside Bettoni Pty Ltd (No 2) [2020] NSWSC 1886 at [13]ff; see also Re Lorebray Pty Ltd [2021] NSWSC 1712 at [5]-[6], from which I have drawn this summary.

In the Gouros proceedings, the Gouros parties rely on the affidavit dated 14 November 2023 of their solicitor, Mr Rappoport, who addresses the rescission of the Agreement for Lease and Licence (“AFL”) for the former Bexley Bowling Club by Bayside Council and contends that he (and, implicitly, the Gouros parties) first became aware of that matter in July 2023, not long after it occurred. He refers to a conversation as to that matter and its impact in the proceedings with the Defendants’ solicitor in early August 2023 and to subsequent developments in a challenge to that rescission brought by AHEPA NSW in the Land and Environment Court and in these proceedings.

The Defendants in turn rely on the affidavit dated 23 November 2023 of their solicitor, Mr Tzovaras, in reply, as to the question of costs. Mr Tzovaras there provides a lengthy account of the background to the rescission of the AFL by Bayside Council, after it refused the development application lodged by AHEPA NSW for alterations and additions to the former Bexley Bowling Club. Mr Tzovaras refers to AHEPA NSW’s appeal to the Land and Environment Court in respect of the refusal of that development application, and to correspondence between AHEPA NSW and Bayside Council debating various matters. He also addresses the subsequent discontinuance of the proceedings in the Land and Environment Court by AHEPA NSW; the possible commencement of proceedings in this Court against the Council for a claim for breach of contract; and the subsequent decision of AHEPA NSW not to proceed with that claim, for several reasons.

The Gouros parties submit that there should be no order as to costs in the Gouros proceedings. They submit that that approach provides a practical, realistic and appropriate outcome, by comparison with a hypothetical position in which, they submit, various costs orders would be made for various periods. They submit that, if I do not accept their primary submission that there should be no order as to costs in respect of the Gouros proceedings, I should make the several costs orders set out in their submissions for various periods, namely:

I accept the Gouros parties’ submission that the Court should make no order as to costs up until 28 June 2023, where many of the matters then in issue have now been displaced and were not determined by the Court. I have not neglected the fact that work would likely have been done by the Defendants in that period which related to the issues which the Gouros parties pressed at the hearing, as to which the Gouros parties were unsuccessful and the Defendants were successful. However, neither the Gouros parties nor the Defendants contended that I should make a costs order on an issue by issue basis, likely because they recognise that the difficulty in distinguishing which evidence related to particular issues would have the result that any assessment of those costs could not be done in a cost-effective way. I should not take that approach where the parties did not contend for it and have not had procedural fairness in respect of it.

In respect of the period from 29 June 2023 to 26 September 2023, it seems to me that there is no basis for the costs order proposed by the Gouros parties, where the position in respect of the AFL was one of several matters that then remained in issue in the proceedings and there is no reason to give primacy to that issue over other issues in determining the costs of that period.

The Gouros parties also submit that, on 28 June 2023, Bayside Council rescinded the AFL and they claim that AHEPA NSW did not then advise the Gouros parties of that recission, which AHEPA NSW had initially challenged by an application brought in the Land and Environment Court and then proposed to challenge in this Court. There is a factual dispute, which I need not determine, as to the correctness of that submission, and I have noted above that the Gouros parties accept they know of this matter by July 2023. This issue does not seem to me to be material to the question of costs where the validity of the rescission of the AFL remained in dispute as between AHEPA NSW and the Council, until AHEPA NSW determined not to bring its foreshadowed challenge to that rescission in this Court in the course of the hearing of these proceedings in September 2023. The rescission of the AFL by Bayside Council did not finally determine any issue until AHEPA NSW resolved not to pursue its challenge to that rescission in the course of this hearing. I recognise that the issues in these proceedings were narrowed when the management committee of AHEPA NSW determined not to pursue the foreshadowed proceedings to challenge the rescission of the AFL in this Court, after the hearing of these proceedings had commenced. That supports the view, foreshadowed in my primary judgment, that there should be no order as to the costs of the proceedings up to and including 20 September 2023, but does not support extending that position to the remaining issues in the proceedings which the Gouros parties unsuccessfully pressed after that date.

The Gouros parties also submit that, if the Court determines that there should be no order as to costs up to a particular date, the correct date should be 26 September 2023 when, by consent, the Court granted leave to the Gouros parties to file their Third Further Amended Summons and Second Further Amended Statement of Claim, rather than 20 September 2023. I do not accept that submission, where the hearing day on 22 September 2023 was directed to the parties’ openings as to the matters that remained in issue and their legal representatives’ work on the previous day would likely have been directed to those matters; that hearing day also addressed the substantial difficulties in respect of the then formulation of the Gouros parties’ claims; and the costs of that hearing day are properly treated as having the same character as those of later hearing days on 26 September and 3 October 2023. There is no basis for an order that the Gouros parties pay only half of the Defendants’ costs in that period, where the Gouros parties failed to obtain any of the relief which they then sought.

I have also had regard to the Gouros parties’ submissions as to why the Court declined to make the declarations sought by them as to eligibility for membership of AHEPA NSW, but little seems to me to turn on the basis that those declarations were not made, where the fact is that they were not made and the Gouros parties were unsuccessful on that and the other issues which they had pressed after 20 September 2023. The Gouros parties could have chosen, at the start of this period, not to press the remaining issues and they would then not have faced an adverse costs order in respect of the proceedings after that date. The fact that they unsuccessfully pressed those issues is a sufficient basis for the order as to costs to be made against them after 20 September 2023 until the conclusion of the hearing on 3 October 2023.

There is also no basis for ordering that the Defendants pay the Gouros parties’ costs of issues in respect of the form of orders, where the Gouros parties have not succeeded in obtaining the orders for which they contend.

The Defendants conversely submit that the Gouros parties should pay half of the Defendants’ costs in the Gouros proceedings incurred prior to 20 September 2023 on the ordinary basis as agreed or assessed. I do not accept that submission, because there has been no determination of many of the matters in issue in that period on their merits and no exception to the principle in Lai Qin is established. There is no basis for me to assume that work done by the Defendants in respect of the matters that were pressed at the hearing comprised half of the work done by them prior to 20 September, and I have noted above that neither the Gouros parties nor the Defendants sought an order for costs made on an issue by issue basis.

The Defendants also support their claim to an order for costs prior to 20 September 2023 on the basis that the Third to Tenth Defendants were joined in the proceedings in respect of those issues which were addressed from 20 September 2023 onwards. I do not accept that that matter, even if correct, supports the relief sought by the Defendants, where all of the Defendants were represented by the same Counsel and the same solicitors and advanced the same submissions and it would not be practically possible to differentiate any costs incurred by the Third to Tenth Defendants from costs incurred by AHEPA NSW in respect of the conduct of the proceedings generally.

The Defendants also submit that they incurred significant costs prior to 20 September 2023 that were attributable, at least in part, to issues which remained in dispute after 20 September 2023. I accept that that is likely the case; however, the Gouros parties also incurred significant costs prior to that date, which were likely incurred in respect of matters as to which the Defendants may have failed, had those matters not been resolved between the parties as at 20 September 2023 and, as I noted above, no party seeks an order for costs on an issue by issue basis. That matter supports the finding that there should be no order as to costs prior to that date, where there is no more reason for thinking that the Defendants should be entitled to a proportion of their costs prior to that date, still less to the particular proportion which they claim, than for thinking that the Gouros parties should be entitled to a proportion of their costs prior to that date. The Defendants also refer to the history of the proceedings prior to 20 September 2023, but those matters do not advance the position for which they contend in respect of costs.

The Defendants also submit that, consistent with the approach foreshadowed in the primary judgment, the Gouros parties should pay their costs of the proceedings after 20 September 2023 on the ordinary basis as agreed or as assessed, on the basis that the Defendants were the successful parties in respect of the remaining issues in the Gouros proceedings from that date, as the Gouros parties did not establish an entitlement to the relief they sought. It seems to me that that is the proper order, for the period to and inclusive of the last day of the hearing on 3 October 2023, for the reasons set out in expressing my tentative view in the primary judgment and in addressing the Gouros parties’ submissions above.

In reply, Mr Rizk, who made submissions for the Defendants in the Gouros proceedings, repeated the Defendants’ submission that they should be entitled to their costs of the Gouros proceedings. He also responded to the Gouros parties’ submission that the Defendants should pay the Gouros parties’ costs for the period 29 June 2023 to 26 September 2023 and submitted that the Gouros parties’ submissions proceed on a false premise, where they were made aware of Council’s rescission of the AFL no later than early July 2023, and then maintained the proceedings despite their knowledge of that matter. He also points to other matters that may have prompted a decision by the Gouros parties to continue and subsequently amend the proceedings. He submits that, for several reasons, these matters did not give rise to any wasted costs incurred by the Gouros parties. It is not necessary to determine any dispute as to these matters to determine the question of costs of the Gouros proceedings, beyond the conclusions that I have reached above.

For these reasons, there should be no order as to costs of the Gouros proceedings up to and including 20 September 2023, and the Plaintiffs must pay the First and Third to Tenth Defendants’ costs after that date to 3 October 2023 inclusive, as agreed or as assessed. There should be no order as to the costs of the submissions as to orders and costs in these proceedings, as to which the parties have had a mixed result.

In paragraph 155 of my primary judgment, I expressed the preliminary view that:

The Defendants press for a restraint on the Gouros parties in respect of the commencement and conduct of overlapping proceedings until the costs of these proceedings are paid, of the kind foreshadowed in the principal judgment. They submit there is a real and not significant risk that at least AHEPA NSW, if not the several incorporated chapters which were joined as the Third to Tenth Defendants, will be exposed to further litigation in respect of similar issues, when they have not recovered their costs of these proceedings, and that would be unfairly burdensome to a community based and not-for-profit organisation.

The Gouros parties respond that the Court would make no order as to costs against them and therefore the question of an order of this kind does not arise. I do not accept that submission, where I have found that the Court should make an order against the Gouros parties for part of the costs of the proceedings, as set out above. The Gouros parties also submit that, although the Court has an inherent jurisdiction to make an order of this kind, it should not be made for several reasons. In further submissions in reply in respect of the Gouros proceedings, the Gouros parties respond to aspects of AHEPA NSW’s submissions as to whether an order should be made restricting the Gouros parties’ commencement of further proceedings until the costs of these proceedings are paid.

I accept the Gouros parties’ submission that this order is not necessary, on the narrow ground that UCPR r 12.10, which addresses the commencement of proceedings for the same cause or the same relief, sufficiently addresses the risk of the commencement of overlapping proceedings while the costs of these proceedings have not been paid. It is not necessary to deal with the parties’ other submissions as to this matter.

On 22 September 2023, I made the following orders in the AHEPA NSW proceedings:

As I noted above, the Gouros parties’ primary position, which I accept, is that there should also be no order of costs in the AHEPA NSW proceedings, although they appear to link that primary position with their position that there should be no order as to costs of the Gouros proceedings, which I have not accepted. Their alternate position, linked with their alternate position in the Gouros proceedings, is that AHEPA NSW should pay their costs of the AHEPA NSW proceedings. I am not persuaded that position should be accepted. The consent position reached in the AHEPA NSW proceedings was connected with the narrowing of issues in the Gouros proceedings, and I do not accept the Gouros parties’ submission that the dismissal of the AHEPA NSW proceedings is properly characterised as a “capitulation” for the purposes of the principles noted in Lai Qin.

In its submissions as to costs in respect of the AHEPA NSW proceedings, AHEPA NSW resists the alternate order as to costs sought by the Gouros parties in these proceedings. Mr Rizk, who also made submissions as to costs for AHEPA NSW in the AHEPA NSW proceedings, submits that there should be no order as to costs of the AHEPA NSW proceedings where those proceedings have terminated without a hearing; the Court should not seek to resolve the issue of costs by undertaking a hypothetical trial; and it is not apparent that one or other party would have succeeded at a contested hearing and both parties acted reasonably in commencing and defending the AHEPA NSW proceedings until they were resolved by the orders made by consent: Chapman v Luminis [2003] FCAFC 162; Re HCafe Chatswood Pty Ltd [2018] NSWSC 362. I accept that submission.

Mr Rizk also refers to the matters in issue in those proceedings, which related to conduct of the Gouros parties in dealings with Bayside Council, which AHEPA NSW contended was misleading or deceptive. Mr Rizk notes that the proceedings raised the question whether the Gouros parties were authorised to make representations on behalf of AHEPA NSW or its committee of management to third parties. Mr Rizk points out that the proceedings raised questions as to the identity of members of AHEPA NSW and its committee of management (“First Matter”) and whether the particular representations made were misleading or deceptive and warranted injunctive relief (“Second Matter”). Mr Rizk recognises that there was an overlap in the determination of the First Matter with the issues raised in the Gouros proceedings and, for that reason, the AHEPA NSW proceedings and the Gouros proceedings were to be heard together. Mr Rizk also refers to the developments which reduced the utility of determination of the Second Matter, including the Bayside Council’s rescission of the AFL; AHEPA NSW’s discontinuance of the proceedings in the Land and Environment Court challenging that rescission; and the decision of its committee of management not to further challenge the rescission of the AFL in this Court. Mr Rizk submits and I accept that, once the utility of determination of the Second Matter was displaced by events, and where the issues arising in respect of the First Matter were already raised in the Gouros proceedings, there would have been no utility in also contesting those matter in the AHEPA NSW proceedings. Mr Rizk submits, and I also accept, that the consent dismissal of the AHEPA NSW proceedings did not amount to a capitulation by AHEPA NSW, as distinct from a recognition of the lack of utility in continued prosecution of the AHEPA NSW proceedings, where the First Matter was in issue in the Gouros proceedings and the Second Matter was of little or no continuing relevance.

For the reasons noted above in dealing with the parties’ submissions, there should be no order as to costs of the AHEPA NSW proceedings. There should also be no order as to the costs of the submissions as to orders and costs in these proceedings, as to which the parties have had a mixed result.

For these reasons, I make the following orders: