Albert St Group Pty Ltd v Universal Real Estate Vic North Pty Ltd

This Federal Court decision is about costs after part of a multi-party case was resolved, not about whether the underlying consumer law allegations were true. The applicant had added its former solicitors as a third respondent, then later reached a commercial resolution with that party and sought dismissal of the claim against it with no order as to costs between them.

The second respondent argued that it had incurred wasted costs because the third respondent was joined late and then released. Bennett J rejected that argument. The Court held there was no coherent basis to criticise the timing of the joinder, no proper basis to infer capitulation from the settlement, and no evidence of unreasonable conduct sufficient to justify a special costs order.

The proceeding began on 7 August 2024. Albert St Group Pty Ltd sued Universal Real Estate Vic North Pty Ltd and Anurag Chawla. Broadly, the case concerned alleged misleading and deceptive conduct by a real estate agent in relation to the sale of a former gold mining site in Sebastopol, a suburb of Ballarat in Victoria.

At the outset, the applicant did not sue Frank J Horvat & Co Pty, although that firm was mentioned in the factual narrative. That changed at a case management hearing on 26 May 2025, when the applicant sought leave for the matter to continue by pleadings and also sought leave to join the firm as a third respondent. The second respondent did not oppose the joinder at that time, but it did ask for costs thrown away by reason of the joinder. Those costs were reserved.

On 10 June 2025, the applicant filed a statement of claim that included negligence and breach of retainer claims against the third respondent, which had advised the applicant on the relevant transaction. The case then developed on the basis that the third respondent was part of the proceeding. The second respondent filed a defence naming the third respondent as a concurrent wrongdoer in the apportionable claim. All parties filed and served lay evidence affidavits, and the second respondent's own affidavit dealt with matters relating to the third respondent at various points. A mediation was held on 3 December 2025 and all parties, including the third respondent, attended.

In January 2026, the applicant and the third respondent sought orders dismissing the proceeding against the third respondent, with no order as to costs between them. That did not end the third respondent's relevance to the broader case, because the second respondent maintained a proportionate liability claim against it. Even so, the second respondent argued that it should recover costs of work it said had been wasted because of the late joinder and later release of the third respondent. It also sought the reserved costs of the 26 May 2025 hearing.

The legal question was not whether the applicant should have won against the third respondent on the merits. The Court instead had to decide whether the second respondent should receive a costs order because the applicant had joined the third respondent part-way through the case and later discontinued against it.

The second respondent advanced three main arguments. First, it said the joinder was late, inefficient and unreasonable because the relevant facts were known from the outset. Second, it said the dismissal of the claim against the third respondent with no order as to costs showed that the applicant had capitulated, and that all affected parties should therefore be indemnified. Third, it relied on the overarching purpose provisions in ss 37M and 37N of the Federal Court of Australia Act 1976 (Cth), arguing that the applicant's conduct had caused unnecessary expense and inefficiency. The Court also considered s 43, which gives the Court a broad discretion to make costs orders, including in relation to part of a proceeding.

Bennett J refused the second respondent's costs application. The Court ordered that the proceeding against the third respondent be dismissed, that there be no order as to costs associated with the joinder and dismissal of the proceeding involving the third respondent, and that the second respondent pay the costs of the costs application itself.

On the complaint about late joinder, the Court said there was no coherent basis to conclude that the timing of the joinder materially altered the costs landscape for the second respondent. A key point was that the joinder occurred before the matter proceeded by way of pleadings. The Court also noted that this was not a case of joining an entirely wrong entity or person. The second respondent's own position was effectively that the third respondent should have been sued earlier, not that it should never have been joined at all.

On the capitulation argument, the Court rejected the idea that a compromise between the applicant and the third respondent should be treated as surrender. The evidence showed only that there had been a commercial conclusion to that part of the case. The Court referred to authority explaining that, where parties settle, courts generally should not conduct a hypothetical action to determine who would have won and therefore who should pay costs. That approach supports settlement and avoids expensive satellite disputes about claims the parties have chosen to compromise.

The Court said that, in the circumstances of this case, the mere compromise of the proceeding did not amount to capitulation, particularly where the argument depended only on an inference from the form of the proposed orders and there was no evidence of the underlying compromise. The Court also refused the second respondent's claim for the reserved costs of the 26 May 2025 hearing, because the second respondent had not objected to joinder at that hearing and still did not provide a coherent reason why the joinder order should not have been made then.

Finally, the Court rejected the broader submission that the applicant had acted so unreasonably as to justify an adverse costs order under the overarching purpose framework. Bennett J held that none of the evidence supported that conclusion. The judge described the second respondent's approach to identifying costs as strained at best, saying it sought to isolate piecemeal aspects of the proceeding that might not have been incurred but for the joinder and then use the later settlement to characterise the applicant's conduct as unreasonable. In the absence of evidence suggesting impropriety or unreasonableness, that was not enough.

For business owners, the first practical point is that costs fights are separate disputes with their own evidentiary burden. It is not enough to say that another party's procedural choices made the case more expensive. You need to show why the conduct was unreasonable and how it caused identifiable costs that should fairly be shifted. General statements that work would have been cheaper or quicker are unlikely to carry much weight on their own.

The second point is that settlement is not treated as an admission of weakness. Businesses often assume that if a claimant drops one respondent, the remaining respondents can point to that as proof the claim was flawed from the start. This decision shows that assumption can be wrong. Courts are cautious about drawing adverse inferences from settlement because doing so would discourage commercial resolution.

The third point is that timing matters, but context matters more. A later joinder will not automatically be criticised, especially if the case is still at an early procedural stage. Here, the joinder occurred before pleadings. The Court also paid attention to the fact that the second respondent had not objected when joinder was sought. If your business thinks another party should not be joined, or that joinder will materially prejudice you, that concern should usually be raised clearly at the time.

The fourth point is that multi-party litigation can continue to involve a party even after one claim against that party is resolved. In this case, the second respondent maintained a proportionate liability claim against the third respondent. That is a reminder that the procedural role of a party may not disappear simply because one claimant has settled with it.

This case also shows the importance of the procedural record. The Court looked closely at what had actually happened: when the third respondent was joined, whether the second respondent objected, what was pleaded afterwards, what evidence was filed, and what happened at mediation. Those details mattered more than broad assertions that costs had been wasted.

If your business may later seek a costs order, keep a clear record of the steps you say were caused by another party's conduct. Identify the work, explain why it became unnecessary, and connect that to a legal basis for a costs order. If you are opposing such an application, the same record can help show that the step complained of was procedurally proper, commercially sensible, or still relevant to the ongoing case.

The judgment was delivered on 6 May 2026 by Bennett J in the Federal Court of Australia. It is a costs ruling in an ongoing broader proceeding. The Court's reasons address the dismissal of the proceeding against the third respondent and the second respondent's application for costs arising from that development.

The ruling should be read as authority on costs discretion, settlement, joinder and the limits of drawing inferences from a commercial compromise. It is not a final merits ruling on the underlying allegations concerning the property transaction.

The Court referred to s 43 of the Federal Court of Australia Act 1976 (Cth) as the source of the broad costs discretion, including the power to make costs orders in relation to part of a proceeding. It also referred to ss 37M and 37N, including s 37N(4), as part of the overarching purpose framework relevant to litigation conduct and costs.

The reasons also relied on established authority that, where a matter settles without a hearing on the merits, courts generally should not conduct a hypothetical action to determine who would have succeeded. That principle was central to the rejection of the second respondent's capitulation argument.