Longmuir & Anor v Konstantopoulos (No.2) [2014] FCCA 1261

Significance

This decision of the Federal Circuit Court of Australia provides an example of the circumstances in which a court is willing to make an award of indemnity costs.

Facts

This case addressed the question of costs arising out of Longmuir & Anor v Konstantopoulos [2014] FCCA 162.

Konstantopoulos (respondent) was the owner of a property in Bentleigh East. Longmuir and Fletcher (applicants) purchased the land from the respondent in June 2011. The contract for sale included a representation by the respondent that no building permit had been issued for the property in the past seven years. This statement was false as in 2005 the respondent had obtained a building permit for the construction of two bedrooms and a garage on the property. The works were completed in early 2011 and consisted of three bedrooms. In August 2011, after the sale, the local council wrote to the applicants demanding that they take remedial action to ensure the compliance of the works with the 2005 building permit. The applicants expended approximately $22,000 to obtain an amendment to the building permit. Having done so, they brought an action under the Competition and Consumer Law 2010 (Cth) and later a successful application for summary judgment. The applicants were awarded the full amount of approximately $22,000.

The applicants sought costs on an indemnity (or 'solicitor and client') basis on the grounds that the respondent had no arguable defence to the applicant's claim (and had conceded this to be the case), had failed to compromise the matter on offers made by the respondent and had failed to take genuine steps to resolve the dispute.

Decision

Riethmuller J ordered indemnity costs in favour of the applicants. Having explained the rationale for the rarity of such an award, his Honour held that:

  • the conduct of the respondent in making the representation she did was 'reckless, if not dishonest'; and
  • the respondent did not comply with discovery orders, and only raised jurisdictional arguments on the day of the summary judgment application, each time forcing the applicants to incur further costs;
  • it is difficult to see that the defence to the claim had any connection to a genuine dispute between the parties, rather than being an attempt to thwart the applicants from obtaining their entitlements.

In making the indemnity costs award, his Honour attributed additional importance to the fact that the respondent had twice refused an offer of settlement made prior to the commencement of proceedings.