Elesanar Constructions P/L v State of Qld [No 2] [2007] QCA 264

SUPREME COURT OF QUEENSLAND CITATION: Elesanar Constructions P/L v State of Qld [No 2] [2007] QCA 264 PARTIES: ELESANAR CONSTRUCTIONS PTY LTD ACN 000 804 384 (plaintiff/appellant) v STATE OF QUEENSLAND (defendant/respondent) FILE NO/S: Appeal No 503 of 2007 SC No 895 of 2006 DIVISION: Court of Appeal PROCEEDING: General Civil Appeal ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 17 August 2007 DELIVERED AT: Brisbane HEARING DATE: 21 May 2007 JUDGES: McMurdo P, Holmes JA and Fryberg J Separate reasons for judgment of each member of the Court, each concurring as to the orders made ORDER: 1. Set aside para 4 of the order of Muir J made on 21 December 2006 and in lieu thereof order that the applicant pay the respondent’s costs of the application up to and including 21 December 2006 to be assessed 2. Order that the respondent pay the appellant’s costs of and incidental to the appeal to be assessed CATCHWORDS: Appeal and new trial – Appeal – Practice and procedure – Queensland – Powers of Court – Costs – Respondent submitted each party bear own costs – No reasonable grounds established to depart from usual course of costs COUNSEL: No counsel for the appellant N Ferrett for the respondent SOLICITORS: Andrew P Abaza for the appellant Crown Solicitor for the respondent -- 1 of 4 -- 2 [1] McMURDO P: I agree with the further orders proposed by Fryberg J and with his Honour's reasons. [2] HOLMES JA: I agree with the costs orders proposed by Fryberg J, for the reasons he gives. [3] FRYBERG J: When the appeal was allowed in this matter on 22 June, the parties were allowed seven days to make submissions as to costs. They have done so. The successful appellant submits that costs should follow the event. The respondent submits that each party should bear its own costs. [4] The respondent submits that the usual course should not be followed in respect of the costs at first instance because the appellant did not refer the judge to the surrounding circumstances affecting the construction of the contract (being those set out in para [21] of my reasons for judgment); because those circumstances were neither pleaded nor drawn to the attention of the respondent in any other way; and because the respondent was consequently not confronted before the hearing with the likelihood of failure on the application and thus was not able to make a decision not to proceed. [5] As to the costs of the appeal, the respondent relies on a letter written on 3 April 2007 (nine days before the appeal book was due to be filed) to the solicitor for the appellant: “Having reviewed your submissions on the appeal, I am of the view that the appeal has some prospect of success. That prospect of success arises purely from your client's reliance for the first time on appeal on the letter of 21 November 2001. The letter, while technically in evidence at first instance, formed no part of the argument presented on behalf of your client. Whilst I am of the view that there is a strong argument that your client should not now be allowed to rely on an argument which was available to it below but which it failed to pursue, I realised that there is some risk that the Court of Appeal will nonetheless entertain the point. If your client was to succeed on that basis then there would likely be cost consequences as a price for such success. In particular, I think it unlikely that your client would succeed in obtaining the costs of the appeal. On that basis my client offers to consent to orders on the appeal in the following form: 1. Appeal allowed. 2. Orders of Muir J of 21 December 2006 set aside. 3. No order as to costs. My client will rely on this letter in any argument as to costs.” The appellant did not accept that offer and it was withdrawn on 11 May 2007. -- 2 of 4 -- 3 [6] The respondent also submits that its work in preparing for the appeal was unnecessarily increased because the notice of appeal was prolix to the point of oppressiveness. Costs at first instance [7] Any failure by the appellant to refer the judge at first instance to the surrounding circumstances could not have affected the costs at first instance; although it might be relevant to the costs of the appeal. [8] By para 5 of the statement of claim, the appellant pleaded that the respondent let the land to it by the lease “with options for renewal as provided in clause 4 thereof”. The respondent pleaded specifically to other parts of para 5, denied so much of para 5 as was inconsistent with its specific pleading and did not plead to the quoted part of the paragraph. But for later parts of the defence, that might have been a deemed admission of the existence of more than one option. By paras 12 and 13 of the statement of claim the appellant pleaded two renewals of the lease. In response the respondent pleaded that on its proper construction, the right to renewal “was to a lease on terms identical to the lease save for clause 4, that is, upon renewal of the lease at the expiry of the first term, the subsequent lease would not include a further right of renewal.” It did not plead any surrounding circumstances in support of that construction. In reply the appellant pleaded that cl 4 on its proper construction included the right to further extend the term of the lease. Like the respondent, it did not plead any surrounding circumstances in support. [9] In that situation it hardly lies in the respondent's mouth to complain about the absence of reference in the pleading to the surrounding circumstances. Moreover none of the circumstances was controversial. The proper use to be made of surrounding circumstances in the construction of contracts is well known from the decisions of the High Court referred to in the reasons for judgment. And the respondent did not even seek particulars of the reply. [10] The respondent chose to bring its application at first instance on the pleadings as they stood. It is now shown that it should have been unsuccessful. It should pay the costs of the application. Costs of the appeal [11] In my reasons for judgment in the appeal I wrote: “[41] As to the construction point, counsel for Elesanar in oral argument referred to the circumstances under which the contract of sale and the lease were made. He referred to the acquisition of the land for a railway and the fact that the context was against the background possibility that the land would be acquired by the Crown if not sold. He referred to evidence of other litigation between the State and a company associated with Elesanar, which bore upon questions of when the land would be required. He referred to -- 3 of 4 -- 4 evidence of an announcement by the Premier about when the railway was to be constructed. He submitted that the imminence of the railway was very much a factor in the minds of the parties at the time the contract was made. He also referred to the reasons for judgment in proceedings between the related company and the State in the Planning and Environment Court which he submitted was relevant to the intention of the State at the time the contract was made. He submitted that these things should be taken into account ‘as being a part of the matrix of surrounding circumstances’. [42] In my judgment it ought to have been quite clear that Elesanar was making submissions on the basis of extrinsic evidence. There is no inconsistency between the case now advanced and that advanced below.” I noted that the case advanced on appeal was rather more elaborate than that raised at first instance. That is not a reason to depart from the usual order as to costs on the appeal. [12] The offer to settle the appeal was made after the outlines of argument had been filed and was subsequently withdrawn. It contained only an offer to set aside the orders below, not to substitute the declaration which the appellant succeeded in obtaining for that made at first instance. It did not offer to pay the appellant's costs up to the date of the letter of offer. It does not warrant departing from the usual order. [13] The notice of appeal was excessively discursive and pedantic, but it was not in my judgment oppressive. Its form was not challenged before or at the hearing of the appeal. It does not warrant departing from the usual order. Order [14] The orders as to costs should be: 1. Set aside para 4 of the order of Muir J made on 21 December 2006 and in lieu thereof order that the applicant pay the respondent’s costs of the application up to and including 21 December 2006 to be assessed; and 2. Order that the respondent pay the appellant’s costs of and incidental to the appeal to be assessed. -- 4 of 4 --