FEDERAL COURT OF AUSTRALIA

WA Property Holdings Pty Ltd v Colliers International (WA) Pty Ltd [2016] FCA 1089

ORDERS

THE COURT ORDERS THAT:

1.    The applicant pay the second respondent’s costs of the action, including all reserved costs and the application for costs, such costs to be taxed:

(a)    on a party and party basis up to and including 19 August 2013; and

(b)    from 20 August 2013 on an indemnity basis.

2.    The second respondent have liberty to apply for non-party costs orders in the event that the applicant does not satisfy the costs orders referred to in order 1.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

GILMOUR J:

Introduction

1    In 2007, the applicant (Holdings) purchased a commercial property situated at 146 Kurnall Road, Welshpool (Property) from the first respondent (Hampton).

2    The first respondent engaged the second respondent (Colliers) to market and sell the Property.

3    At the time the applicant purchased the Property, it was contaminated as a result of leakage from underground fuel tanks and its use for a number of years as a transport depot, including the undertaking of the servicing and repair of motor vehicles.

4    Holdings pursued claims against Hampton in these proceedings:

1.    alleging contravention of section 52 of the Trade Practices Act 1974 (Cth) (TPA), namely, its silence, in all of the circumstances, in not disclosing the contamination of the Property to the applicant, being misleading or deceptive; and

2.    seeking recovery of the reasonable costs of remediation under sections 25(1) and 56 of the Contaminated Sites Act 2003 (WA), Hampton being "the person responsible for the remediation".

5    Holdings and Hampton entered into a Deed of Settlement and Release in February 2015 which included terms that Hampton pay to Holdings 70% of the remediation costs for the contamination of the Property and 70% of Holdings taxed legal costs up to and including 12 December 2014.

6    By on or about 30 June 2015, those parties had negotiated the terms of consent orders dismissing Holdings’ action against Hampton as well as the provision by Hampton and Holdings of undertakings to the second respondent and the Court in consequence thereof.

7    Holdings also pursued claims against Colliers in these proceedings alleging:

1.    contravention of section 52 of the TPA, namely, its silence, in all of the circumstances, in not disclosing the contamination of the Property to Holdings, being misleading or deceptive;

2.    representations made by it, in July 2007 (prior to settlement of the sale contract), to the applicant, in a valuation report, in relation to the value of the Property and a visual site inspection of the Property, carried out by Colliers, not revealing any obvious pollution or contamination; and

3.    Colliers providing to the applicant, in the valuation report, negligent advice, in failing to advise that the Property was contaminated, or potentially contaminated and the effect of that upon the value of the Property.

8    By consent, pursuant to Federal Court Rules 2011 (Cth) (Rules) 26.12(2)(b), the Court ordered, on 11 April 2016, that Holdings have leave to file a notice of discontinuance in respect of the whole of the proceeding against Colliers

9    Holdings seek an order under r 26.12(7) of the Rules that there be no order as to costs upon this discontinuance.

Discontinuance and costs: principles

10    Rule 26.12(7) provides that:

Unless the terms of a consent or an order of the Court provide otherwise, a party who files a notice of discontinuance under sub-rule (2) is liable to pay the costs of each other party to the proceeding in relation to the claim, or part of the claim, that is discontinued.

11    McKerracher J held in Travaglini v Raccuia [2012] FCA 620 at [36] that:

In my view, there is now under the Rules a prima facie entitlement on the part of the party not discontinuing to costs. It can of course be disturbed. Even in respect of the former O 62 r 26(1) of the pre-2011 Rules that approach was not unknown: see for example Ahmed v Minister for Immigration & Multicultural Affairs [2000] FCA 1436 in which Emmett J held that where the discontinuing applicant failed to satisfy the Court that another order should be made, the respondent was to be awarded its costs. I would adopt that approach to the present situation. In addition, Lehane J held in Bell v Macquarie Bank Ltd [2000] FCA 1521 where the applicant discontinued albeit without leave that the applicant was prima facie liable to pay the other party's costs because of the operation of O 22 r 3 and O 62 r 26 of the pre-2011 Rules saying that (at [5]):

the ordinary result of the applicants' discontinuance would be that they would be required to pay the respondents' costs of the proceeding. The question is whether the applicants have established that, in the particular circumstances of this case, there is any particular matter which should, as a matter of discretion, displace that ordinary consequence.

12    Barker J made statements to the same effect in Croft v Evertop Investments Pty Ltd [2014] FCA 1098, where his Honour found at [144]:

The power to award costs upon the discontinuance of WAD 308 is different from the broad power of the Court to award costs (usually) to the successful party at the conclusion of a trial of an action. Under R 26.12(7) the party discontinuing will be liable for the costs of the other party in the proceeding, unless the Court otherwise orders. The Court in that regard has discretion, to be exercised judicially, as to whether or not the circumstances surrounding the discontinuance suggest that the liability of the discontinuing party to pay the costs of the proceeding of the other party should in any respect be altered. There is, in effect, a presumption that the notionally successful party, being the one who has the benefit of the discontinuance, should have their costs. The Court may, however, form a different conclusion depending on the circumstances surrounding the discontinuance.

13    As noted by Foster J in El-Debel v Secretary, Department of Immigration and Border Protection [2014] FCA 474 at [17], rule 26.12(7):

reflects a more general policy of the law to the effect that a party should always be permitted to discontinue its proceedings but, in the modern setting, should usually have to pay the costs of the other parties occasioned by the bringing of the proceedings and their subsequent abandonment … the Court should give effect to this general policy when making costs orders unless there is some good reason for declining to do so.

14    As Finn J observed in O'Neill v Mann [2000] FCA 1680 at [13], "[t]he conduct of the parties in the matter and the reasons for the discontinuance can bear heavily on the exercise of the discretion as to costs".

15    As a general proposition this is correct, although Mann was decided under the former rules of this Court and which by r 26.12(2) made no provision, as Finn J observed at [12], for the costs consequences where discontinuance was granted by leave of the Court.

16    The judgment of McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 143 ALR 1 at 3 – 4, upon which Holdings relies, likewise is of limited assistance. It was concerned with Order 71 r 39 of the High Court Rules 1952 (Cth), which are in terms quite different to r 26.12(2) in this Court. It is, at least, authority for the proposition that in considering the exercise of discretion upon the question of costs where litigation was settled or its further prosecution became futile, regard may be had to whether the parties have acted reasonably in commencing and defending the proceedings, although the court should not conduct a hypothetical trial: see also ASIC v Kyriackou [2008] FCA 1860 at [10].

17    Nonetheless, where there has been no hearing on the merits the Court is necessarily deprived of the factor that usually determines whether and how it will make a costs order.

18    Indeed as Stone J noted in Smith v Airservices Australia (2005) 146 FCR 37 at [44]:

Where a claim for relief is discontinued the respondent to that claim is thereby deprived of an opportunity to vindicate its position despite, generally, having incurred costs in preparing to do so. Although the reasons for discontinuance may vary considerably, it is likely to be in the interests of justice that in those circumstances the respondent to the claim should have those costs met by the discontinuing party.

19    The onus therefore is upon Holdings to establish that Colliers' prima facie entitlement ought to be disturbed.

Was commencement of action against Colliers reasonable?

20    I accept, for present purposes, that the Property was contaminated at the time the applicant purchased it. That Colliers did not admit this fact does not assist Holdings. Proof of contamination was but one of a number of material facts required to be established.

21    Again, for present purposes, I accept that the terms of the Deed of Settlement and Release, entered into by Holdings and Hampton, amount to an acknowledgment by Hampton that it may well not have been successful in its defence to the proceedings.

22    Holdings submits that Colliers admitted in the course of the proceedings that it appreciated that the Property was contaminated or that there was a very serious risk that the Property was contaminated (even if it did not know the precise extent of such contamination) and that such contamination, or risk of contamination, would be important to potential purchasers and the marketability of the Property.

23    This appreciation it submits arises from the following:

(a)    Colliers prepared a marketing submission for Hampton in relation to the sale of the Property. In paragraph 2.5 of the marketing submission, under the heading "MARKET DEMAND", Colliers said that there would be huge demand for the Property and that it would sell for a record price, but, in a table detailing strengths and weaknesses and opportunities and threats, that one of the "threats" to that was "[p]otential contamination associated with underground petrol storage tanks". Thus, at the very least, Colliers knew that there were underground petrol storage tanks and that there was potential contamination as a result;

(b)    Colliers prepared for potential purchasers a document titled "Property Information Report". In paragraph 3.5 of the Property Information Report, under the heading "Site Details", Colliers said that the Property “ha[d] very strong development potential" and provided certain information in respect thereto. Colliers made no mention of what it knew to be a "threat" to the marketability of the Property and its development potential, namely, the existence of underground petrol storage tanks and the potential contamination as a result. Colliers knew that "[a] visual site inspection [of the Property would] not [reveal] any obvious pollution" or any "actual or potential contamination issues affecting the subject [P]roperty";

(c)    by email dated 14 December 2006, Wayne Chorley, Director, Industrial Sales & Leasing, of Colliers, inquired of Paul Mullins, of Hampton, whether it would warrant that the Property was free from any contamination, as many buyers had asked about that; and

(d)    Paul Mullins said in his witness statement that Hampton’s senior management decided not to give such warranty, because it would have made no sense to do so, given the potential for contamination that existed.

24    Holdings makes the following further assertions to the effect that Colliers knew of the contamination:

(a)    In its disclaimer in the Property Information Report, Colliers, in effect, invited potential purchasers to obtain individual advice from it. Holdings engaged Colliers to report on the market value of the Property for mortgage security purposes;

(b)    Despite its knowledge of underground petrol storage tanks, and the potential contamination associated with them, the refusal of Hampton to provide a warranty that the Property was free from any contamination, and the material impact which contamination would have on the value of the Property;

(c)    Colliers said in the report that "[a] visual site inspection has not revealed any obvious pollution or contamination" and "[t]herefore, this valuation is made on the assumption that there are no actual or potential contamination issues affecting the subject Property"; and

(d)    Colliers did an analysis similar to the one it had done in its marketing submission to Hampton, but omitted, on this occasion, to mention the "threat" posed by the underground petrol storage tanks and the potential contamination associated with them.

25    Holdings also refers to evidence of Mr Morrone of Holdings and Mr Farris of Ron Farris Real Estate Pty Ltd, each of whom had visually inspected the Property but saw no evidence of fuel bowsers. Mr Morrone, it seems, had seen nothing on the Property to alert him to any potential contamination.

26    The ‘evidence’ relied upon by Holdings does not, on its face, establish that Colliers, at any material time, appreciated that the Property was contaminated. It does disclose that early in its involvement it raised, in a general sense, a potential threat to the valuation of the Property which was potential contamination associated with underground petrol storage tanks.

27    However, as against that early general observation, Colliers in its defence specifically pleaded that it had been informed by Hampton that the Property was ‘fairly clear’ of contamination. This plea was supported by documentary evidence including a witness statement dated 10 April 2014 with an attached email.

28    It is not appropriate for me to resolve that factual issue nor can I make the assumption of knowledge against Colliers for which Holdings contends. However, Holdings must be taken to have appreciated that this asserted fact was put in issue by Colliers and that there was evidence, which if accepted, would resolve that issue against Holdings.

29    Holdings then submits that on settlement with Hampton it was thought that the remaining issues between Holdings and Colliers might be disposed of in a brief and cost effective trial without the necessity for expert evidence since the existence of the contamination of the Property at the time of the sale of the Property did not appear to be in issue.

30    However, it submits that Colliers unreasonably maintained its non-admission to the allegations of the contamination of the Property.

31    Accordingly, Holdings submits that as a result of the settlement between it and Hampton and the inability to curtail the duration or cost of a trial between it and Colliers, it was no longer sensible, or in the interests of the parties or the Court, to pursue the balance of the proceeding against Colliers. This is mere assertion and ignores the reality that Holdings were required to prove not only the fact of contamination of the Property but that Colliers knew or should have known of it at material times. It seems to me that it faced considerable difficulty in establishing either in light of the evidence filed by Colliers to which I have referred.

Reasonableness of the conduct of the parties after the commencement of the proceeding

32    Holdings acknowledge some delay, on its part in mid-2015, when the proceeding between it and Hampton was finally settled, and conferral in relation to expert evidence in December 2015.

33    However, it submits that Colliers persisted in a non-admission of the following matters, which should have been admitted:

1.    the Property was, or there was a real risk that the Property may be, contaminated;

2.    there were fuel bowsers situated on the Property and they had been there for a number of years;

3.    there were underground fuel tanks situated on the Property and they had been there for a number of years;

4.    the first respondent used the fuel bowsers in the course of its business conducted at the Property;

5.    the first respondent refilled the fuel tanks from time to time and stored fuel in, and drew fuel from, the fuel tanks;

6.    the Property was used by the first respondent as a transport depot, including undertaking servicing of, and repair work on, vehicles; and

7.    the Property had been used by previous owners of the Property as a transport depot in the same way as the first respondent had used it.

34    I do not accept these submissions. These were all matters outside the knowledge of Colliers and which in any event, in my view, would not have required much in the way of proof.

35    I am more inclined to the view that Holdings throughout most of the duration of these proceedings very much appreciated the difficulties it confronted in establishing relevant knowledge of contamination on the part of Colliers.

Further relevant facts

36    I will now refer to other contextual matters relied upon by Colliers in support of its contentions that Holdings has not discharged its onus of proof concerning costs. I accept that these matters have the effect for which Colliers contends. Indeed, I find that they actually demonstrate, together with my earlier finding as to Holdings appreciation of the difficulties in proving its case against Colliers, that Holdings conduct in presenting its claim against Colliers has been unreasonable. This further conclusion will be relevant to the question of whether indemnity costs should be ordered.

37    Holdings were legally represented in connection with this dispute over six years ago in November 2009. Holdings' then solicitors wrote to Colliers stating that if Holdings had been informed of the presence of the underground fuel tanks 'it would have not have offered to buy the Property alternatively would not have offered to buy it for $6.7 million'.

38    The letter of demand makes no reference to any valuation report prepared by Colliers, let alone mention of any alleged reliance on a valuation report in Holdings' decision to purchase the Property.

39    In September 2012, both Hampton and Colliers had sought further information from Holdings. Six months later, when Holdings issued these proceedings, the requested information had still not been provided.

40    Holdings served Colliers with its Originating Application, Statement of Claim and Genuine Steps Statement on 28 February 2013, three years after the letter of demand referred to above. As is apparent from [12] and [22] of the Genuine Steps Statement, Holdings issued the proceedings urgently, not because of an assessment of their intrinsic merit, but to prevent the expiration of a limitation period. That is, proceedings were commenced before the necessary genuine steps had been completed.

41    Among other things, Holdings' Statement of Claim alleged that:

1.    Holdings 'acted in reliance on the silence of [Colliers], in the circumstances, and was induced thereby, to enter into the contract, enter into the financing arrangements with a bank and undertake preparatory work for the development of the Property by way of subdivision';

2.    Colliers made the Valuation Representations 'on or about 27 June [2007]' and Holdings 'acted in reliance on the Valuation Representations, in the circumstances, and was induced thereby, to enter into the contract, enter into the financing arrangements with a bank and undertake preparatory work for the development of the Property by way of subdivision'; and

3.    Holdings 'acted on the faith of the Valuation Representations and the absence of advice from [Colliers] that the Property was contaminated or that there was a real risk that it was contaminated or that any of the other Contamination Matters existed, and was induced thereby, to enter into the Contract, enter into and/or proceed with financing arrangements with a bank in order to fund the purchase of the Property under the contract and its proposed subdivision and undertake preparatory subdivision work'.

42    Colliers filed its Notice of Appearance on 14 March 2013 and sought particulars of Holdings' Statement of Claim.

43    In the course of correspondence relating to the provision of particulars, Colliers' solicitors noted on 12 April 2013:

“This litigation was commenced against the background of an asserted expiration of a 6 year limitation period, in circumstances where our client has been awaiting details of your client's claim since about September last year [2012]. For the reasons articulated at the [first] directions hearing, my client requires the particulars ordered to make informed decisions as to forensic matters. For example, as I advised the Court at the [first] directions hearing, it is not apparent to me why your client's claim is said by your client to be a 'no transaction' case, in circumstances where it on sold the Property, having (as I understand it) remediated it.”

44    Holdings' particulars were not filed until 3 May 2013 and did not adequately identify the asserted loss and damage.

45    On 28 May 2013, Holdings served Colliers with its further and better particulars, which particularised Holdings' loss and damage in the sum of $1,937,453.98 including $350,000 in respect of remediation costs.

46    Colliers filed its defence on 16 August 2013, specifically pleading that:

(a)    The sale contract was in fact entered into on or about 6 March 2007 (later amended to 28 February 2007);

(b)    Colliers had been informed by Hampton that the Property was "fairly clear" of contamination;

(c)    St George Bank made a facility offer to Holdings on or about 20 June 2007;

(d)    Holdings engaged Colliers on or about 26 June 2007 to determine the market value of the Property;

(e)    Colliers delivered copies of the Valuation Report to Holdings 'not before 9 July 2007'; and

(f)    If (which is denied) Colliers has any liability to Holdings as result of the contamination status of the Property, the claim against Colliers is an apportionable claim, with Hampton being a concurrent wrongdoer, and any damages awarded against Colliers ought to be limited accordingly.

47    Bennett + Co wrote to Lawton Gillon on 19 August 2013 notifying Holdings pursuant to section 87CE of the TPA and section 5AKA of the Civil Liability Act 2002 (WA) that Holdings ought to join all parties responsible for the alleged contamination.

48    Bennett + Co also wrote to Lawton Gillon (on a without prejudice basis save as to costs) on 19 August 2013 (19 August 2013 Letter), specifically putting Holdings on notice that:

…if it continues the litigation and Colliers is successful in its defence of the litigation then, it intends to refer the Court to this letter on the question of the reasonableness of [Holdings'] conduct and, in support of [an] application for special costs orders, including orders that Holdings pay Colliers' costs on an indemnity basis by reason of its unreasonable conduct in continuing to prosecute the litigation.

This is an important letter, concerning the issue of whether costs ought to be on an indemnity basis.

49    This letter noted that there was no reasonable basis upon which Holdings could maintain its assertion that it relied on the Valuation Report, and that Holdings would face considerable obstacles asserting it had suffered loss and damage in reliance on the Valuation Report or the Property Information Report.

50    By paragraph 9 of the 19 August 2013 Letter, Colliers put Holdings on notice that:

at the very best, Holdings' claim is limited to reasonable remediation costs ([particularised]…in the sum of $350,000). It is equally clear that no act or omission on the part of Colliers caused or contributed to the contamination of the Property and that any such contamination was caused or contributed to by acts or omissions of the occupiers of the Property…

51    Given Holdings' lengthy delay in commencing proceedings and particularising its claim, Colliers took steps to ensure third parties preserved relevant documents.

52    On 19 November 2013 the parties were ordered by consent to file and serve witness statements, with Holdings' witness statements due to be filed by 17 December 2013.

53    This was attended by further delay, with Mr Morrone's witness statement filed and served on 15 January 2014, and Mr Phillip Farris' witness statement filed and served on 14 February 2014.

54    Mr Morrone gives evidence in his witness statement that:

1.    a 'first contract' for the purchase of the Property was executed in or about March 2007;

2.    he was in receipt of a valuation by Egan National Valuers dated 11 June 2007 which valued the Property at $6,700,000 exclusive of GST;

3.    a 'second contract' was executed on or about 2 July 2007;

4.    Colliers' valuation statement is dated 9 July 2007 (that is, after the sale contract was executed) and valued the Property on an 'as is' basis at $7,650,000 exclusive of GST and on an 'as if complete' basis at $10,080,000; and

5.    rather than induce Holdings to purchase the Property, Colliers' Valuation Report 'gave [Mr Morrone] great comfort that [he] had caused [Holdings] to enter into the first contract and the second contract' and, had the Valuation Report referred to the contamination or risk of contamination, he 'wouldn't have caused [Holdings] to proceed to settlement'.

55    This last assertion, self-evidently, was a significantly different one to that originally made by Morrone and upon which these proceedings had been instituted.

56    Holdings served Colliers with a Minute of Proposed Amended Statement of Claim on 6 February 2014 attempting to deal with these issues.

57    The delay in the filing of Holdings' witness statements resulted in the adjournment of a mediation listed for 6 March 2014.

58    Colliers filed and served its witness statements on 9 and 11 April 2014. Mr Wayne Chorley's witness statement dated 11 April 2014 attached an email substantiating Colliers' defence that it was informed by Hampton that the Property was 'fairly clear' of contamination, whilst Mr John Del Dosso gave evidence in his witness statement dated 9 April 2014 that the Valuation Report was delivered to Holdings on 9 July 2007.

59    Colliers amended its defence on 22 August 2014 on the basis of matters set out in the parties' witness statements.

60    Between 21 August 2014 and 10 September 2014 Colliers wrote to several third parties requesting documents.

61    In October 2014 Colliers issued subpoenas to various third parties and wrote further regarding the production of relevant documents.

62    On 20 November 2014, orders were made requiring, among other things, that Holdings file and serve any expert report by 31 March 2015. No expert report was ever filed, despite queries from Colliers.

63    On 25 November 2014, Holdings amended its particulars of loss and damage, reducing the amount claimed in respect of remediation costs to $270,143.25. Holdings' total loss and damage as particularised amounted to $1,857,566.98.

64    In December 2014 Colliers uplifted documents returned on subpoena by Paiker & Overmeire and Douglas Partners. These documents revealed that Hampton had actual knowledge that the Property was contaminated and had withheld that knowledge from Colliers.

65    As a result of the documents obtained on subpoena, Colliers served Holdings on 7 January 2015 with its proposed second amended defence, which pleaded that the extent of Hampton's knowledge of contamination of the Property ought to be taken into account in any apportionment of liability. Colliers’ Second Amended Defence was filed on 6 February 2015 following the making of consent orders to that effect.

66    Again, despite this further evidence creating serious difficulties in its case against Colliers, Holdings still continued with that claim.

67    On 20 February 2015 Colliers was informed that Holdings had settled its claim against Hampton.

68    The Deed of Settlement and Release, which had been executed on 6 February 2015 (the same day Colliers filed its Second Amended Defence), provided for Hampton to pay to Holdings 70% of Holdings' legal costs and a settlement sum of $189,100.28, an amount equating to 70% of the amount particularised by Holdings as its loss and damage in respect to remediation costs.

69    Orders were made on 3 July 2015 dismissing Holdings' action against Hampton.

70    After a lengthy period of inactivity by Holdings, the Court, of its own motion, listed the matter for directions on 21 December 2015. On 18 December 2015 Colliers proposed comprehensive pre-trial directions, programming the matter to trial. Orders largely in terms of Colliers' minute were made by consent on 21 December 2015.

71    Colliers thereupon prepared for trial in accordance with the Court ordered timetable. Holdings failed to comply with all but one of those pre-trial directions after providing the Court with the parties' available dates for trial. Those multiple breaches of the Court orders have never been explained, even in this application.

72    On 29 March 2016 Holdings' solicitors wrote to Colliers' solicitors (without prejudice save as to costs) proposing that the proceedings be dismissed with no order as to costs (29 March 2016 Letter), the offer being open until 15 April 2016. Notably, the 29 March 2016 letter stated:

If this offer is not accepted by your client, or in any counter-offer from your client your client seeks from our client the payment of your client's costs, then our client will simply pursue this matter to trial.

73    Colliers rejected the offer on 31 March 2016, and proposed that the action be dismissed with Holdings to pay Colliers' costs. Colliers indicated it would be willing to agree its costs at $200,000.

74    Despite Holdings' stated position that it would pursue the matter to trial, on the eve of the 'health check' directions hearing fixed for 11 April 2016, Holdings advised Colliers and the Court that it sought orders for leave to discontinue its action, which leave was granted on terms.

75    I have concluded taking the matters I have referred to into account that Holdings has failed to discharge its onus that Colliers prime facie entitlement to costs should be displaced and indeed further discloses that Holdings conduct in continuing with its proceeding against Colliers was unreasonable.

Conclusion

76    Holdings in my opinion, has fallen well short of establishing that it was reasonable to commence and to continue to prosecute these proceedings against Colliers. Its pre-action demand claiming damages was based on its asserted reliance on Colliers silence as to the fact of contamination resulting in it offering to buy the Property. Plainly, on the facts, that case was unsustainable. This, at least implicitly, was accepted by Holdings, which later modified the character of its reliance to that of proceeding to settlement of its purchase of the Property.

77    Holdings knew from August 2013 onwards that Colliers denied knowledge of any contamination at any material time and indeed had pleaded the contrary and that it had been told by Hampton that the Property was ‘fairly clear’ of contamination. There was documentary evidence to support this denial. Holdings had little or nothing by way of evidence to counter this. Indeed, again as Holdings must have known, the documents Colliers uplifted upon the return of a subpoena in December 2014 revealed that Hampton had actual knowledge that the Property was contaminated and had withheld that knowledge from Colliers. Indeed it seems this documentary material may well have been instrumental in the settlement between Holdings and Hampton, an event which followed soon after the exposure of the relevant documents.

78    Holdings in those circumstances must pay Colliers costs of the proceeding. I will now consider the question whether it should do so on an indemnity basis.

Indemnity costs: principles

79    The general principles concerning indemnity costs are reasonably well established: Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 232 to 235. These principles were applied in D.S. Clarke Nominees Pty Ltd v Adder Holdings Pty Ltd [2015] FCA 277 at [13] - [14].

80    The Court noted that such an order should only be made:

Where the circumstances of the case warrant the Court departing from the usual course, including where the justice of the case might require or where some special or unusual feature in the case justifies the Court in departing from the ordinary practice. The categories in which the discretion may be exercises are not closed.

81    Colliers submits that the factors of particular relevance in this case to the exercise of the discretion to award indemnity costs include:

1.    evidence of a particular misconduct that causes loss of time to the Court and the other parties;

2.    the fact the proceedings were commenced in wilful disregard of known facts or clearly established law;

3.    the making of allegations that ought never to have been made, or the undue prolongation of a case by groundless contentions; and/or

4.    an imprudent refusal of an offer to compromise.

82    I have already concluded that Holdings has failed to establish that it was reasonable of it to institute and prosecute the proceedings.

83    As Colliers submits correctly, any 'acknowledgement of likely defeat' by Hampton in respect of the contamination of the Property is irrelevant to Colliers' position. No claim was ever made against Colliers under sections 25(1) and 56 of the Contaminated Sites Act 2003 (WA).

84    The case, as originally formulated against Colliers, as I have explained was doomed from the outset. This arose apparently because Mr Morrone’s memory was originally faulty in relation to the timing of his reliance upon Colliers valuation report.

85    This disclosure contained in Mr Morrone's affidavit, filed 18 April 2016, was only made to Colliers and to the Court after Holdings abandoned the proceedings. That non-disclosure is relevant for at least two reasons.

86    First, at [5] of his 18 April 2016 affidavit, Mr Morrone says that he saw Bennett + Co's 19 August 2013 letter on or about that date, 19 August 2013. Despite Mr Morrone then realising that his memory was faulty, Holdings caused to be filed Mr Morrone's witness statement. That witness statement makes no mention whatever of Mr Morrone's revised memory concerning the timing of his entry to the contract to purchase the Property and his receipt of Colliers' valuation report.

87    The 'faulty memory' admission now made by Holdings, only after finalisation of the proceedings, was central to Holdings' reliance and causation case - both issues which were keenly contested by Colliers.

88    This belated concession of Mr Morrone's faulty memory, leads me to infer, as Colliers invites me to do, that from August 2013 Holdings knew that there was a central weakness to the case, namely, Mr Morrone's reliability as a witness.

89    I am prepared also to infer that Holdings and Mr Morrone did not earlier file a corrective witness statement, disclosing the matters referred to in his 18 April 2016 affidavit, because he appreciated the damaging, and potentially fatal impact the disclosure would have on Holdings' case, and in turn Holdings' bargaining position with Hampton and Colliers.

90    Indeed, all parties attended a delayed Court-facilitated mediation conference on 2 May 2014. Mr Morrone knew that the conference was being conducted against the background of the asserted veracity of the evidence contained in his witness statement. The faulty memory admission would have been, had it been made prior to the mediation, directly relevant to an assessment of the strength of Holdings' case because the admission negatively impacted upon the reliability of crucial aspects of Mr Morrone's evidence, and Holdings' case, particularly in connection with reliance and causation.

Colliers further submissions

91    Colliers makes the following further submissions in support of its contention that it was not reasonable on the part of Holdings to maintain its proceeding against it. I accept these submissions.

92    Holdings' claim against Colliers has always been dependent on a thorough assessment of the documentary record. Mr Morrone knew, from 19 August 2013, that Holdings had not relied on Colliers' Valuation Report. Yet Holdings persisted with the allegation. That reliance case was only abandoned in February 2014, after service of Holdings' witness statements. In its place, Holdings substituted a significantly reshaped reliance case, which case it likewise abandoned when it discontinued the proceedings.

93    As to quantum, in settling its claim against Hampton by accepting a sum relating only to the reasonable remediation costs of the Property, Holdings vindicated Colliers' position as stated on 19 August 2013, and as pleaded in Colliers' defence.

94    Despite this, to the bitter end, Holdings maintained its quantum claim against Colliers, refusing to further amend its particulars of loss and damage, maintaining that it genuinely pressed its claim for damages in excess of $1.8 million.

95    To compound matters, Holdings has failed to explain its abject failure to take any substantive step to prosecute its case against Colliers for the period of February 2015 to 11 April 2016. By 11 April 2016 it was significantly in default of the Court-ordered timetable.

96    Holdings proffered an explanation for that delay, that by late March 2016 it had determined that 'it was no longer sensible, or in the interest of the parties or the Court, to pursue the balance of the proceedings against [Colliers]', is disingenuous. It does not explain either the delay, or the default in compliance with the Court's orders. To the contrary, Holdings' explanation reflects its unreasonable and improper conduct.

97    In February 2015 Holdings knew that the maximum remediation costs claimable from Colliers was 30% of $270,143.25 (ie $81,042.98) plus interest, Holdings having been compensated by Hampton for 70% of those costs.

98    If, as Holdings now says, it reached the view that the likely quantum of its claim was a maximum of 30% of the remediation costs, it acted unreasonably and inappropriately in causing the Court and Colliers to labour under the misapprehension that its claim was, as particularised, in excess of $1.8 million.

99    The inference, which I draw, is that Holdings made no attempt to amend the particulars of its claim because, amongst other things, to do so would weaken Holdings' negotiating position.

100    Eventually, as proposed in Holdings' 29 March 2016 letter, Holdings offered to settle on a 'walk away' basis.

101    I also infer, that Holdings’ stated position, that 'if this offer is not accepted…then our client will simply pursue this matter to trial', was a hollow threat, put with the aim of extracting from Colliers a settlement based on Holdings' stated, but untenable, and privately abandoned, position that Holdings would be pressing to trial on a claim for damages in excess of $1.8 million.

102    Based on an objective assessment of Holdings' evidence filed in support of this application, as well as the Court file, I also infer, as I am invited to:

1.    by at least December 2015, Holdings had no intention of taking the action to trial;

2.    Holdings decided not to disclose that fact to Colliers, because doing so would damage its prospects of extracting a settlement from Colliers;

3.    Holdings had no intention of incurring the cost and expense of complying with the 21 December 2015 trial programming orders;

4.    Holdings decided to test Colliers' stated resolve to take the matter to trial, by leaving it to Colliers to incur the cost and expense of complying with the trial programming orders.

103    I am persuaded by Colliers submissions that those conclusions should be drawn because:

1.    after February 2015 the commercial and proportionality considerations did not change. After that date there were no developments which could rationally affect Holdings' assessment as to whether or not a trial was warranted, and none is suggested;

2.    after February 2015, Holdings took no step to advance its proceedings against Colliers. In December 2015 the Court notified the parties that it had listed the matter for directions;

3.    if in the period December 2015 to April 2016 Holdings genuinely intended to prosecute the action to trial, it would have sought to comply with the 21 December 2015 trial programming orders, or at the very least explained its reasons for non-compliance, and made some effort to comply. It simply ignored the trial programming orders, and did not bother to progress a notice to admit. Holdings unexplained non-compliance is contumacious; and

4.    if Holdings genuinely wished to establish its case on quantum for more than the remediation costs, expert evidence, or further and other evidence to that which was filed and served by Holdings, would have been required. Holdings made no attempt to adduce such evidence and by 11 April 2016 were well out of time to do so.

Conclusion as to costs

104    Holdings, for the above reasons, should pay Colliers costs of the action including any reserved costs, to be taxed if not agreed.

105    I will order, by reason of Holdings' conduct as set out above, indemnity costs as from 19 August 2013, being the date that Holdings was put on notice of the significant deficiencies in its case, deficiencies which on Colliers submission I have accepted, that were immediately recognised by Mr Morrone, not disclosed frankly in his less than fulsome witness statement, but which known deficiencies, on an objective assessment, culminated in Holdings' decision to abandon its case against Colliers. This order will include the application by Holdings that there be no order as to costs which I regard as wholly unmeritorious.

Liberty to apply for non-party costs

106    Holdings' conduct, and that of its controlling mind Mr Morrone, is such that Colliers should not be held out of its costs in the event that Holdings is impecunious and cannot meet a costs order.

107    Colliers does not know whether or not Holdings is likely to be in a position to satisfy any costs order. In part, its concerns arise because it is now over six months since Holdings and Hampton agreed the quantum of Holdings' legal costs, and because of the unexplained inactivity from Holdings in the lead up to the abandonment of its case.

108    I will grant Colliers liberty to bring an application for a non-party costs order in the event Holdings is unable to meet a costs order.

Associate:

Dated:    7 September 2016