- Notable Unreported Decision
- Appeal Pending
SUPREME COURT OF QUEENSLAND
MSD Securities Pty Ltd & ors v MFB Properties (NQ) Pty Ltd & ors (No 4)  QSC 284
MSD SECURITIES PTY LTD AS TRUSTEE FOR THE BRUNSWICK STREET TRUST
ACN 160 362 345
PK’S RESORT PTY LTD
MARK LEONARD SEABROOK
MFB PROPERTIES (NQ) PTY LTD
THE JUNGLE VILLAGE PTY LTD
ASHLEE JANE PIPER
MARK FREDERICK DAVID BIANCOTTI
SC No 13256 of 2016
28 November 2017
On the papers.
The orders of the Court are
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – JUDGMENTS AND ORDERS – CORRECTION UNDER SLIP RULE – COSTS ORDER – where the substantive orders made in a previous proceeding were set aside in the present proceeding, but the costs order was not disturbed – whether it is appropriate to disturb the costs order in the previous proceeding
Uniform Civil Procedure Rules 1999 (Qld), r 388, r 667, r 668
Caboolture Park Shopping Centre Pty Ltde (in liq) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224, cited
MSD Securities Pty Ltd v MFB Properties (NQ) Pty Ltd  QSC 261, cited
MSD Securities Pty Ltd v MFB Properties (NQ) Pty Ltd (No 2)  QSC 168, cited
Queensland Pork Pty Ltd v Lott  QCA 271, cited
Dowd & Company for the applicants
Preston Law for the respondents
- On 18 August 2017, I published my reasons for judgment in this proceeding: see MSD Securities Pty Ltd v MFB Properties (NQ) Pty Ltd (No 2)  QSC 168. These reasons are to be read against the background of the facts found in that judgment. I will use the terms defined in that judgment.
- I heard the parties on the question of costs, and set a timetable for the delivery of written submissions on that question. On a later occasion I gave leave for the parties to make supplementary submissions on costs.
- I received and have considered the following submissions:
- applicants’ submissions dated 1 September 2017;
- respondents’ submissions dated 6 September 2017;
- applicants’ reply submissions dated 20 September 2017;
- applicants’ supplementary submissions dated 28 September 2017; and
- respondents’ supplementary submissions dated 5 October 2017.
- The parties are ad idem in relation to the order for costs which should be made in relation to the present proceeding, in light of the result obtained before me. Costs should follow the event.
- Accordingly, the order I will make as to costs is as follows:
The respondents should pay the applicants’ costs of and incidental to proceeding 13256 of 2016, including reserved costs, if any, to be assessed on the standard basis.
- The controversy lies in a further order which the applicants submit I should make, namely that I should vacate a costs order made in a previous proceeding (see at  below) with a view to making a different costs order in lieu thereof.
- The order sought by the applicants is:
Order 6 of the judgment of Flanagan J dated 28 November 2016 is vacated and it is ordered that:
the applicants pay the respondents' costs of and incidental to proceeding 2575 of 2016, including reserved costs, if any, assessed on the standard basis, to 21 September 2016; and
the respondents pay the applicants' costs of and incidental to the proceeding 2575 of 2016, including reserved costs, if any, assessed on the standard basis, from 21 September 2016.
- The respondents resist my making that order, essentially on the basis that it is a substantive exercise of jurisdiction on the originating application, in respect of which I have already made my decision and, accordingly, I am functus officio.
- In order for the competing arguments to be understood, it is necessary to set out some of the factual background.
- In October 2016, Flanagan J conducted a trial of proceeding 2575 of 2016. That proceeding concerned a dispute between the present applicants (the purchasers) and the present respondents (the vendors) in relation to a suite of contracts by which, for a consideration of $4 million, the purchasers sought to acquire land and an associated resort business in North Queensland. The land was more particularly described as lots 1, 2, 3 and 4 on SP219085. The resort business was conducted on lot 4.
- Both the purchasers and the vendors sought specific performance of the relevant contracts. The dispute concerned the amount which the purchasers should be required to pay to the vendors upon completion. The reasons for judgment of Flanagan J published on 15 November 2016 resolved that dispute. Flanagan J then heard the parties as to further orders, directions and costs. The final orders made by Flanagan J were made on 28 November 2016.
- The effect of orders 2, 3 and 4 made on that day was as follows:
The Court declared that so far as the relevant contracts had not already been performed, they ought to be specifically performed and carried into execution and the Court ordered and adjudged accordingly.
In performance and execution of the contracts, the purchasers were required to pay to the vendors on or before 19 December 2016, the amount of $1,988,412.82 calculated in the manner set out in a table in the judgment.
In exchange for the payment, the vendors were required to deliver up to the purchasers:
such transfer or transfers under the Land Title Act 1994 (Qld) as were necessary to transfer title in lots 1, 2, 3 and 4 to the purchasers under and in accordance with the relevant contracts, capable of immediate registration after stamping;
releases in respect of three separate and specified mortgages in respect of lots 2, 3 and 4; and
a release of a specified statutory charge in respect of lots 1, 2 and 4.
- Order 6 was in these terms:
The [purchasers] pay the [vendors’] costs of and incidental to [proceeding 2575 of 2016] including reserved costs, if any, assessed on the standard basis if not agreed.
- On 19 December 2016, the purchasers commenced proceeding 13256 of 2016 by originating application. That application was later amended on 17 February 2017.
- By their originating application (both originally and as amended), the purchasers sought orders the effect of which would be to release them from their obligations to complete the purchase as required by the orders of Flanagan J. They also sought consequential orders for repayment of the part payments already made and for associated adjustments and allowances.
- Amongst other things, the purchasers sought orders pursuant to rr 667(2)(f) and 668 of the Uniform Civil Procedure Rules 1999 (Qld), setting aside orders 2, 3, 4 and 6 of the orders made by Flanagan J on 28 November 2016. Thus, the fourth order sought by the originating application (both originally and as amended) was in these terms:
An order that in lieu of [orders 2, 3, 4 and 6 of the orders made by Flanagan J on 28 November 2016], the Court do order that the [vendors] pay the [purchasers] costs of [proceeding 2575 of 2016].
- In other words, from the outset it was part of the substantive relief which the purchasers sought in proceeding 13256 of 2016 that the Court make an order which would reverse the effect of the costs order which Flanagan J had made in proceeding 2575 of 2016.
- I conducted the trial of proceeding 13256 of 2016. I found in favour of the purchasers on the merits of the question of whether they should be obliged to complete as required by the orders made by Flanagan J, and set aside orders 2, 3 and 4 of the orders made by Flanagan J. However, I did not deal with the claim that I should set aside the costs order which Flanagan J had made and make some other order in lieu of that order.
- I should explain why.
- The purchasers had, in their written submissions at the trial, contended that the costs order made by Flanagan J should be reversed, consistently with the amended originating application, in this manner (emphasis added):
- In light of the above, the Court should make the following findings:
- that, upon its variation on 31 July 2014 the Main Contract became an "instalment contract" within the meaning of s. 73 of the Act;
- that the Second Mortgage was a mortgage within the meaning of s. 73 of the Act;
- that there had been no consent to the Second Mortgage by the First Applicant within the terms of s. 73 of the Act;
- by a notice given on 13 December 2016, the First Applicant rescinded the Main Contract;
- as a consequence of the rescission of the Main Contract the parties' obligations pursuant to Business Contract and the Residential Contract were discharged and at an end;
- had the facts of the Second Mortgage been disclosed to the First Applicant prior to the hearing before Flanagan J, the Applicants would not have continued with the proceeding;
- in the above circumstances, the Court would have dismissed the earlier proceeding and ordered that the Respondents pay the Applicants' costs of and incidental to the earlier proceeding.
60. Orders should be made in the terms sought in the Amended Originating Application.
- The vendors’ written submissions did not deal with the question of what should happen in relation to the costs orders made by Flanagan J if I was against the vendors on the merits of the question whether the specific performance orders should be set aside.
- The topic was not addressed during oral submissions.
- However during oral submissions I asked Senior Counsel for the purchasers whether they had formulated a draft order identifying the orders they sought: see the transcript of the hearing on 7 March 2017 at p 53 at lines 5 to 13. Annexure A to these reasons is a copy of the document which was provided to me.
- The orders identified in Annexure A were then subject of specific supplementary written submissions which I gave the vendors leave to make after the close of oral submissions.
- After receiving Annexure A, I did not go back to the plaintiffs’ written submissions to determine whether there was any further substantive relief sought beyond that identified in Annexure A. I treated Annexure A as identifying and confining the orders which the purchasers sought: see my previous judgment at  et seq. I added to the orders sought by Annexure A an order which vacated orders 2 to 4 made by Flanagan J because I formed the view I could not make an order inconsistent with the specific performance orders by Flanagan J without doing so.
Do I have jurisdiction to consider the merits of making the order now sought?
- The purchasers submit that they did not intend, by providing me with Annexure A during the trial, to abandon their claim for substantive relief in relation to the costs order made by Flanagan J. They submit that it is still open for me to consider and to rule upon that part of their originating application which sought to set aside order 6 made by Flanagan J. They submit that I have jurisdiction to do that either:
- because doing so should be regarded as making orders of the nature of a supplemental order, the court having jurisdiction to make supplemental orders after judgment is entered where circumstances make it necessary so to do: see Caboolture Park Shopping Centre Pty Ltde (in liq) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224 per Lee, Hill and Cooper JJ at -; or
- under the slip rule, namely r 388 of the Uniform Civil Procedure Rules.
- On the other hand, the vendors say, as I have noted, that I am functus officio and the present circumstances are not an occasion for the exercise of the slip rule.
- I agree that unless this is an occasion for the operation of the slip rule, then I am functus officio. I reject the purchasers’ submissions that making the orders they seek would be to make supplemental orders in exercise of the orders I have already made. There is nothing which has arisen after I made the orders on 18 August 2017 which would justify making the orders now sought. The orders sought are not supplementary in any relevant sense.
- It seems to me that there are only two possible explanations for what occurred. Either:
- I made a mistake by regarding the purchasers’ conduct in providing me with Annexure A as intending to communicate to me that their case was confined to the substantive relief identified in Annexure A; or
- by omitting from Annexure A orders dealing with vacating the orders made by Flanagan J, counsel for the purchasers mistakenly conveyed the impression that the purchasers did not still seek the relief they had sought in relation order 6.
- Whether the error was mine, or counsel’s, the result was that the orders which I made did not deal with one aspect of the substantive relief sought by the purchasers, and that occurred because of a plain misunderstanding of what the position was. I have no doubt that if the error had been drawn to my attention before making final orders, I would have postponed making those orders until I addressed the claim in relation to order 6. It is appropriate to regard this as an occasion for the exercise of the slip rule and to consider the merits of the purchasers’ claim to substantive relief in respect of order 6, the slip rule jurisdiction not being limited to clerical errors: cf Queensland Pork Pty Ltd v Lott  QCA 271 at .
What order should be made?
- My judgment concluded that the specific performance orders made by Flanagan J ought to be vacated because, after his Honour’s judgment was made, the purchasers became aware that on 21 September 2016 the vendors had mortgaged lot 1 without their consent, thereby giving them a right to avoid the contracts pursuant to s 73 of the Property Law Act 1974 (Qld), and they had exercised that right.
- For reasons which I expressed in my previous judgment (see at - and ):
- I accepted evidence adduced by the purchasers that they would have taken immediate steps to bring all the contracts to an end if they had become aware of the mortgage of lot 1 in September 2016; and
- I found that the purchasers did not know at any time before the judgment of Flanagan J of the facts which gave them a right to avoid the judgment.
- It is on this basis that the purchasers say that the costs order made by Flanagan J should be altered, at least to alter the incidence of costs incurred after 21 September 2016. The proposition is that, but for the fact that they did not know they had a right to avoid the contracts because of the lot 1 mortgage, they would have exercised that right and brought the contracts to an end. The costs order made by Flanagan J would never have been made.
- For their part the vendors oppose any interference with the costs order made by Flanagan J. Their argument may be summarised in this way:
- Although the purchasers may not have known they had a right to avoid pursuant to s 73 because of the 21 September 2016 mortgage in relation to lot 1, they did know of circumstances which afforded them a right to avoid because of the June 2015 mortgage which was given in respect of lot 2.
- Rather than exercising the right of avoidance that was available to them, the purchasers chose to assume the risk of prosecution of their claim for specific performance through to the trial before Flanagan J, and to judgment therein.
- Although the costs involved in so doing, can, in hindsight, be seen to have been unnecessary to the ultimate outcome reflected in my judgment of 18 August 2017, having chosen to so proceed to an unsuccessful hearing on different issues, the purchasers should be answerable for the costs occasioned by their unsuccessful agitation of those issues.
- Accordingly, the purchasers show no grounds for interference with the costs order made by Flanagan J and should remain bound to it.
- I do not think that the vendors’ argument pays sufficient weight to the consequences of the finding I made in my previous judgment at , namely that I should accept the unchallenged evidence of the purchasers’ Mr Brucesmith that if he had become aware of the lot 1 mortgage he would have brought all of the contracts to an end. Once that finding is made, it cannot be correct to leave in place the costs order made by Flanagan J because the purchasers would not have continued to prosecute the case before Flanagan J to the loss they did (with attendant costs consequences).
- The purchasers have by their proposed order recognised that they must carry the costs burden of the proceeding before Flanagan J up to 21 September 2016, which was the earliest time they, ex hypothesi, would have brought the proceeding to an end. On that hypothesis, they should not have to pay their opponents’ costs of the proceeding thereafter. That would justify replacing order 6 made by Flanagan J with an order that the purchasers pay the vendors’ costs of and incidental to proceeding 2575 of 2016, including reserved costs, if any, assessed on the standard basis, to 21 September 2016 but that there be no order as to costs after that date.
- On the other hand, the purchasers’ proposal that I should require the vendors to pay the costs of the proceeding before Flanagan J after 21 September 2016 reflects something more than the hypothesis that the purchasers would have brought the contracts to an end. It reflects the notion that, having done so:
- the litigation would have continued to a conclusion (on different issues) which resulted in a costs order in the purchasers’ favour in respect of costs after 21 September 2016; and
- the costs order which they now propose (covering the incidence of costs in the proceeding which was actually fought) would reflect a fair analogue of the hypothetical costs order.
- The purchasers’ argument does not set out (nor does the evidence before me justify the inference of) a counter-factual which would support that conclusion. I am not persuaded that it would be fair to alter the incidence of the costs order made by Flanagan J in that way. The better course is to relieve the purchasers of the burden of having to pay the vendors’ costs after 21 September 2016, but not to take the further step of imposing on the vendors the burden of having to pay the purchasers’ costs after that date.
- Accordingly, the order which I will make is as follows:
Order 6 of the judgment of Flanagan J dated 28 November 2016 is vacated and it is ordered that:
- the applicants pay the respondents' costs of and incidental to proceeding 2575 of 2016, including reserved costs, if any, assessed on the standard basis, to 21 September 2016; and
- there be no order as to costs after that date.
MSD Securities Pty Ltd v MFB Properties (NQ) Pty Ltd  QSC 261.
- Published Case Name:
MSD Securities Pty Ltd & Ors v MFB Properties (NQ) Pty Ltd & Ors (No 4)
- Shortened Case Name:
MSD Securities Pty Ltd v MFB Properties (NQ) Pty Ltd (No 4)
 QSC 284
28 Nov 2017
- White Star Case:
|Event||Citation or File||Date||Notes|
|Primary Judgment|| QSC 261  2 Qd R 279||15 Nov 2016||Flanagan J.|
|Primary Judgment|| QSC 168  2 Qd R 51||18 Aug 2017||Originating application to release defendants from the obligations ordered by Flanagan J in  QSC 261: Bond J.|
|Primary Judgment|| QSC 282||28 Nov 2017||Amended form of orders from  QSC 168: Bond J.|
|Primary Judgment|| QSC 284||28 Nov 2017||Costs Judgment from  QSC 168: Bond J.|
|Notice of Appeal Filed||File Number: 9085/17||06 Sep 2017||Appeal from  QSC 168.|