A Class Piling & Drilling Pty Limited v Seventy Eight Promotions Pty Limited (No 5)

[2024] NSWDC 384

District Court

New South Wales

Medium Neutral Citation:	A Class Piling & Drilling Pty Limited v Seventy Eight Promotions Pty Limited (No 5) [2024] NSWDC 384
Hearing dates:	29 July 2024
Date of orders:	29 July 2024
Decision date:	29 July 2024
Jurisdiction:	Civil
Before:	Neilson DCJ
Decision:	I order the plaintiff to pay the defendant's costs from 26 May 2023 pursuant to UCPR 42.17 on the indemnity basis.
Catchwords:	COSTS – Operation of UCPR 42.35 – Where amount awarded to Plaintiff in District Court less than $40,000.
Legislation Cited:	Uniform Civil Procedure Rules
Cases Cited:	Nil.
Texts Cited:	Nil.
Category:	Procedural rulings
Parties:	Plaintiff – A Class Piling & Drilling Pty Limited Defendant – Seventy Eight Promotions Pty Limited
Representation:	Counsel: Plaintiff – Mr Young, J. Defendant – Mr Street, C. Solicitors: Plaintiff – Moray & Agnew. Defendant – HWL Ebsworth Lawyers.
File Number(s):	2023/00103136
Publication restriction:	Nil.

Judgment

1. HIS HONOUR: This is the 30th year in which I have had cause to observe from the Bench that nothing excites the zeal, the ardour and the passion of members of the legal profession more than an argument about costs. The current proceedings relate to damage to a drilling rig known as the Kelly Bar Rig, or KBR, which was damaged on 16 January 2018. The rig could return to service, I found, on 28 June 2018.

2. These proceedings were commenced by a Statement of Claim filed on 30 March 2023, close to five years later. A Defence was filed on 8 May 2023. As I stated in [2] of my primary reasons given on 24 July 2024, last Wednesday, the only question for my determination was the quantum of the damage that the defendant could recover for the damage to its KBR.

3. The plaintiff was claiming $216,344.96 in the Statement of Claim but, I pointed out, surprisingly did not claim any interest. I then pointed out that the defendant's position was that the plaintiff was not entitled to anything other than the payout it had already received from its private property insurer, namely $160,000. The plaintiff was seeking what it called its non-subrogated losses. I found for the plaintiff in the sum of $35,611.68, being damages of $26,670 plus pre-judgment interest of $8,941.68.

4. When I gave judgment, I said that I would hear the parties on costs. That I have done this morning. However, in my primary judgment, I drew attention to Uniform Civil Procedure Rules 42.35. UCPR 42.35(2) provides this:

"An order for costs may be made, but will not ordinarily be made, unless the District Court is satisfied the commencement and continuation of the proceedings in the District Court, rather than the Local Court, was warranted."

5. That rule commenced on 10 September 2010 when the jurisdictional limit of this Court was $750,000, but it is now $1.25 million. UCPR 42.35 operates where in proceedings in the District Court, a plaintiff obtains a judgment against the defendant in an amount less than $40,000, and the plaintiff would, apart from the rule, be entitled to an order for costs against the defendant. The defendant submits that by operation of UCPR 42.35, the plaintiff ought not have any costs. The defendant also submits that I would order the plaintiff to pay the defendant's costs because of an offer of compromise which it made on 26 May 2023. In the alternative, the defendant relies on offers of compromise made on 31 August 2023 and on 14 February 2024.

6. The hearing commenced on 21 February 2024. It ran over six days between 21 and 23 February, and between 27 and 29 February 2024. I was supposed to be sitting in Lismore during that period of time, but the Lismore sittings were cancelled owing to the fact that there was nothing ready to be heard in that city, but there were matters in the list which required my attention via audiovisual link and the hearing of the current proceedings was interrupted by such work. The fact the matter was listed for hearing before me on six separate days does not say anything about the length of the hearing at all.

7. The plaintiff submits that it should have its costs on the ordinary basis up until the defendant's offer of compromise made on 14 February 2024. Inter alia, the plaintiff has made this submission:

"The 25 May Offer was made at a stage of the proceedings where the Plaintiff not only did not have the benefit of the Defendant's evidence but it did not have the benefit of its own evidence so as to be able accurately to assess the true merits of the case:

''It is not in doubt that the response of the offeree must be assessed at the time it was made, and not with the benefit of hindsight resulting from a known outcome, recorded in a judgment…However, that factor should not entail a detailed investigation into the state of preparation or knowledge of the offeree as at the date of the offer. The expense and use of resources which settlement is intended to avoid include those involved in the assessment and preparation of a case.”

(Miwa Pty Ltd v v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344.)"

8. In paragraph 8 of the defendant's submissions on costs, which are MFI 10, much was made of the alleged complexity of these proceedings. Again, it must be borne in mind that what was here involved was damage to a drilling rig. The rig was out of service between the date of damage - 16 January 2018 - and then operable again on 28 June 2018. All the expenses incurred in respect of its inoperability were incurred in 2018 and these proceedings were commenced in March 2023.

9. The case that the plaintiff had was well known to it. It can be seen by a letter from the plaintiff's solicitors to the defendant's solicitors bearing date 19 May 2021, which is contained in a bundle of correspondence which is Exhibit 6. That bundle of correspondence includes offers of compromise. That letter needs to be considered in full:

“1. We act for A Class Piling & Drilling Pty Ltd (A Class).

2. We understand hat you acted for Seventy Eight Promotions Pty Ltd (Seventy Eight) in relation to the settlement of a claim by A Class’ insurer, Sura Plant and Equipment Pty Ltd (Sura) in or around June 2020.

3. If you no longer hold instructions to act for Seventy Eight, please let us know immediately.

Background

4. We understand and are instructed that:

(a) A Class is the owner of a Komatsu PC-1206 converted drilling rig, serial number 58795 (Rig);

(b) As part of its business, A Class provides the hire of the Rig with an operator and attendant;

(c) In or around December 2017, A Class entered into an agreement with Hix Group Pty Ltd (Hix) for the hire of the Rig for drilling works located in Beresfield, NSW;

(d) On or around 16 January 2018, Seventy Eight provided float services to A Class to transport the Rig to Beresfield, NSW. During transportation of the Rig, the trailer hitch snapped and the float turned on its side, causing the Rig to roll off (the Incident).

(e) As a result of the Incident, the Rig sustained significant damage and required extensive repairs. We enclose for your reference, copies of:

(i) damage report and repair quotation prepared by Monster Rigs dated 21 January 2018; and

(ii) tax invoice issued by Monster Rigs dated 17 April 2018 in the amount of $174,000.00 (excl GST) for repair of the Rig; and

(iii) letters from A Class to its insurer dated 3 June 2018 and 2 September 2018.

(f) Notwithstanding the Monster Rigs tax invoice referred to above, we are instructed that the total external repair costs for the Rig was an amount of $123,000.00 (excl GST);

(g) Sometime after 16 January 2018, A Class was issued a tax invoice by Hix in the amount of $9,625.00 (excl GST), being the losses sustained by Hix as a result of the unavailability of the Rig on 16 January 2018. A copy of that invoice is enclosed for your reference.

(h) Repairs to the Rig were completed on or around 28 June 2018. Monster Rigs originally estimated an 8-week repair period, however repairs to the Rig took approximately 6 months due to the extensive nature of the damage.

Losses suffered by A Class as a result of the Incident

5. As a result of the Incident and the unavailability of the Rig between 16 January 2018 and 28 June 2018, A Class has suffered significant losses. These losses include:

(a) $123,000.00 (excl GST) for external repair costs to the Rig;

(b) approximately $87,749.96 for internal labour and repair costs to the Rig; and

(c) $9,625.00 (excl GST) paid to Hix pursuant to its tax invoice issued after the Incident.

6. Additionally, A Class has suffered a loss of profit during the period 16 January 2018 to 28 June 2018 when the Rig was unavailable for use as a result of the Incident. Our client has obtained the opinion of an independent forensic accounting that calculates a loss of profit of no less than $155,975.00 as a result of the Incident.

7. As you are no doubt aware, A Class claimed indemnity from Sura under the relevant insurance policy for its losses associated with the Incident.

8. Sura agreed to indemnify A Class pursuant to the terms and conditions of the policy, for a gross amount of $160,000 (being the coverage limit of the policy) comprising:

(a) $123,000.00 (excl GST) for external repair costs; and

(b) $37,000.00 for internal labour and repair costs.

(Insured Loss).

9. We understand that a settlement was reached between Sura and Seventy Eight with respect to the Insured Loss, and although confidential, that settlement was without prejudice to A Class’ right to recover its uninsured losses from Seventy Eight.

10. We are instructed that A Class now seeks to recover its losses suffered as a result of the Incident which exceeded the level of insurance coverage offered by Sura (Uninsured Losses).

Demand

11. Seventy Eight is liable to pay to A Class the Uninsured Losses.

12. The total Uninsured Losses suffered by A Class is an amount of $216,349.96 (excl GST), comprising:

(a) $50,749.96 being the balance of A Class’ internal labour and repair costs with respect to the Rig which exceeded the level of insurance coverage;

(b) $9,625.00 (excl GST) paid by A Class to Hix pursuant to its tax invoice issued after the Incident; and

(c) $155,975.00 being loss of profit suffered by A Class as a result of the Incident and the Rig being unavailable during the period 16 January 2018 and 18 June 2018.

13. A Class has also incurred expert and legal costs in relation to this matter to date, totalling over $31,000.00 (excl GST) and calculated as follows:

(a) professional fees in the amount of $16,382.00 (excl GST); and

(b) expert fees in the amount of $15,356.05 (excl GST).

14. We are instructed that A Class also demands payment of these costs incurred to date.

15. Accordingly, A Class demands payment from Seventy Eight in the amount of $247,349.96 in full and clear funds, comprising:

(a) $216,349.96 for the Uninsured Losses; and

(b) $31,000.00 (excl GST) for costs incurred to date.

16. Payment to A Class may be made to the following nominated bank account:

Account name:   A Class Piling & Drilling

BSB        XXX XXX [redacted]

Account number:   XXXX XXXX [redacted]

17. In the event that payment is not received within 28 days of the date of this letter (i.e. by Wednesday, 16 June 2021), we will seek our client’s instructions to commence recovery proceedings against Seventy Eight without further notice to you.

18. We trust that action will not be necessary and we look forward to receipt of payment on or before Wednesday, 16 June 2021.

19. Please contact Patrick Kaluski or Isabella Rebellato of our office should you wish to discuss the contents of this letter or the matter generally.”

10. Annexed to that letter is a quotation given by Monster Rigs to the property damage insurer putting forward a number of alternatives, one of which was eventually accepted. Furthermore, there is further correspondence from Monster Rigs Pty Ltd addressed to the plaintiff and letters from the plaintiff itself, as well as a copy of the perpetual year planner used in the year 2018, which was a whiteboard, of which much was discussed in the substantive hearing.

11. It is patently clear that at the time of that letter, the plaintiff had qualified an expert to assess the loss of profit. The matter was really not complex. What made it appear to be complex were conflicts in the evidence which needed to be determined by a judicial officer. This Court hears appeals from the Local Court in civil as well as criminal matters. One thing I know very well from hearing appeals from the Local Court is that much of its civil jurisdiction results from damage to property, mainly various types and classes of motor vehicle. The KBR was yet another variant of a motor vehicle.

12. The Local Court has developed an expertise in dealing with cases of property damage. Liability was not in issue. True, the defendant raised an argument as to how the value of the loss was to be determined, and that I addressed commencing at [16] of my reasons. However, the principle is succinctly stated in [20] of my reasons, which is this:

"I cannot accede to this [the defence] contention. To use terminology used by Harman LJJ in Darbishire v Warran (supra), relying upon JQE Hall Ltd v Barclay [1937] 3 All ER 620, there was no 'market' available for KBRs, or, to use terminology from Palmer on Bailment (supra), KBRs were not goods commonly available."

13. Accordingly, I had to consider the cost of the repairs to the KBR and the loss of profit resulting from its disablement. Determining the loss of profits was determining a contest between two experts, but there is nothing unusual about any such contest. The Local Court is quite used to dealing with such contests when it comes to damage to a piece of property. If anything, complexity arose in this matter because of the delay between the making of the claim back on 19 May 2021 or earlier, and the commencement of proceedings on 30 March 2023.

14. It is patently clear to me that at all material times, the plaintiff itself was aware of what its evidence was and the plaintiff itself was in a position to consider the validity of that evidence. The fact that the defendant might put some further holes in that evidence was a matter which ought to have been considered by those advising the plaintiff when the various offers of compromise were made.

15. For example, one of the claims agitated was a claim not merely for the loss of profits, but for work said to have been done on the KBR by two employees of the plaintiff. I then pointed out, commencing at [23] of my reasons, that the plaintiff could not claim both a loss of profits and for the wages that it paid to its employees when they were performing the work on the KBR. That was drawn to the plaintiff's attention in the covering letter to the offer of compromise made on 25 May 2023. That letter contains this:

"The loss of profits claim double counts the claim for internal labour costs. Both measures value labour of the same period. Only one measure of labour should be included in the claimed loss."

I have reached the view that there is nothing which warrants, in the current case, a failure to apply UCPR 42.35.

16. The offer of compromise made by the defendant on 25 May 2023 was certainly more favourable to the plaintiff than the judgment which it eventually obtained. The offer was that there be judgment for the plaintiff in the sum of $45,000 plus a provision that the plaintiff's costs as agreed or assessed be paid up to the time the offer was made. The offer was available for 28 days. The offer of 31 August 2023 was for $40,000 on the same basis, and the offer on 14 February 2024, shortly before the hearing commenced, was for $75,000 on the same basis.

17. The defendant strove to settle the matter, but did so unsuccessfully. In my view, the defendant is entitled to the order for costs which it seeks. For those reasons, I order the plaintiff to pay the defendant's costs from 26 May 2023 pursuant to UCPR 42.17 on the indemnity basis.

18. HIS HONOUR: Any other orders sought?

19. YOUNG: No, your Honour.

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Decision last updated: 28 August 2024