A1 Quality Concrete Tanks Pty Ltd v; Civil and Allied Technical Constructions Pty Ltd (No. 3)
[2017] VCC 1455
•13 October 2017
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-10-05652
| A1 QUALITY CONCRETE TANKS PTY LTD (ACN 095 210 683) | Plaintiff |
| v | |
| CIVIL AND ALLIED TECHNICAL CONSTRUCTIONS PTY LTD (ACN 077 924 120) | Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers | |
DATE OF JUDGMENT: | 13 October 2017 | |
CASE MAY BE CITED AS: | A1 Quality Concrete Tanks Pty Ltd v | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 1455 | |
REASONS FOR JUDGMENT
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Subject: Consequential Relief
Catchwords: Interest and costs orders consequential on assessment of damages; whether interest should be awarded for a period when proceedings struck out; whether interest should be awarded at rate fixed under Penalty Interest Rates Act 1983; claim for costs on an indemnity basis; Compromise Offer not accepted; unduly lengthy assessment trial
Legislation Cited: Supreme Court Act 1986; County Court Act 1958; Penalty Interest Rates Act 1983
Cases Cited:Braeside Bearings Pty Ltd v HJ Brignell & Associates (Boronia) [1996] 1 VR 17; Williams v Volta [1982] VR 739; Victorian WorkCover Authority v Esso (2001) 207 CLR 520; Hosking v Ipex Software Services Pty Ltd (No 2) [2004] VSC 343; Hodgson v Amcor Ltd (No 9) [2012] VSC 205
Judgment: Within 14 days of this day, the parties must bring in short minutes to give effect to these reasons and the assessment of damages published on 20 September 2017
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff For the Defendant | Mr M Clarke Mr R Fenwick-Elliott | MP Lanza Lawyers McKean Park |
HIS HONOUR:
Background
1 On 20 September 2017, I published reasons assessing the plaintiff’s damages in this proceeding at $176,342.13. The plaintiff, A1 Quality Concrete Tanks Pty Ltd (“A1”), now seeks consequential orders as to interest and costs. The parties have filed written submissions setting out their contentions on these points.
Interest
2 Mr Clarke, on behalf of the plaintiff, submitted that his client should be awarded interest under s60 of the Supreme Court Act 1986 from the date of issue of the proceeding, 6 December 2010, to the date of entry of judgment.
3 According to Mr Clarke, s60 of the Supreme Court Act was applicable to proceedings in this Court by reason of s50 of the County Court Act 1958 and s33 of the Supreme Court Act. He referred to Braeside Bearings Pty Ltd v HJ Brignell & Associates (Boronia) [1996] 1 VR 17, 18 and Williams v Volta [1982] VR 739, 742. He noted that interest so calculated in accordance with the rates prescribed from time to time under s2 of the Penalty Interest Rates Act 1983 totalled $122,920.12 as at 20 September. Interest, he said, accrued at $48.31 per day thereafter. According to Mr Clarke, the authorities relative to s58 of the Supreme Court Act and its analogues elsewhere in Australia were for the most part equally applicable to s60 of the Act. He referred to Victorian WorkCover Authority v Esso (2001) 207 CLR 520, 546 per Kirby J; Hosking v Ipex Software Services Pty Ltd (No 2) [2004] VSC 343; and Hodgson v Amcor Ltd (No 9) [2012] VSC 205 [12]. These authorities, he submitted, showed the purpose of the Court’s power to award interest was to compensate the plaintiff for loss and to encourage early resolution of litigation. He submitted that since both s58 and s60 of the Supreme Court Act, upon which he relied, provided for the award of interest to a plaintiff unless good cause was shown to the contrary, there was a statutory entitlement to interest in the absence of that good cause. He referred to VWA v Esso (2001) 207 CLR 520 at [34] per Gleeson CJ, Gummow Hayne and Callinan JJ.
4 Mr Clarke said the Court:
“… should not depart from the general rule, which is that the statutory maximum penalty rate should be awarded for the whole of the period since the proceedings commenced.”
5 He referred to the Judgment of Vickery J in Hodgson v Amcor Ltd (No 9) [2012] VSC 205 [35] to [40].
6 Mr Fenwick-Elliott, on behalf of the defendant, noted the early history of the proceeding which, he said, should lead to the conclusion that no interest should be awarded to the plaintiff for the period 6 December 2010 to 21 December 2012. He noted that Judge Ginnane, as his Honour then was, made an order on 25 March 2011 providing for this proceeding to be struck out “without further notice” upon failure to comply with an order made by 3 May 2011. Judge Anderson made an order in pursuance of that striking out the proceeding on 28 September 2011. It was not until a summons was filed on 8 October 2012 that the plaintiff took action to seek to have the proceeding reinstated, which was done pursuant to an order made by Judge Ginnane, as he then was, on 17 December 2012.
7 According to Mr Fenwick-Elliott, A1 failed to comply with the directions as to expert reports which were made relative to the projected trial on all issues which led Judge Lacava on 15 July 2014 to split the trial between the liability and quantum. Mr Fenwick-Elliott said:
“But for that failure, that order would not have been made, and the trial which in fact commenced on 28 July 2014 would have dealt with both liability and quantum, and the judgment delivered on 14 August 2014 would have dealt with both liability and quantum … In other words, the whole of the delay between 14 August 2014 and the date of the quantum judgment – 20 September 2017 - was caused by the Plaintiff’s breaches of the order of 13 March 2014. That period also should be excluded from the interest calculation.”
8 Mr Fenwick-Elliott conceded that:
“The usual starting point for the rate of interest is the [Penalty Interest Rates Act 1983] rate, notwithstanding that that rate is greater than a compensatory rate.”
9 The consequence, he said, was:
“That the purpose of an award of interest is partly compensatory, and partly punitive, to encourage early resolution of litigation.”
10 In the present case, according to Mr Fenwick-Elliott:
“…the great majority of the delay here is not merely neutral delay, but delay caused by culpable breaches of court orders by the Plaintiff.”
11 Therefore, he submitted, it would be wrong to penalise the defendant by reason of an award of interest at a penal rate for delay caused by the plaintiff. He said:
“…whilst mere delay is not [a] good [ground] to withhold an award of interest altogether, breaches of orders by a plaintiff which cause delay is a good reason to moderate the ordinary approach.”
12 Therefore, he said, there was good cause for the calculation of interest under the Supreme Court Act 1986 to commence from the date of the reinstatement of the proceeding “and to exclude the period of delay caused by the Plaintiff’s breach of the order of 13 March 2014”. The result, on his calculation, would be that interest to 20 September would be limited to $31,265.70 even if the rates under the Penalty Interest Rates Act were applied. Alternatively, he said, a much lower rate of interest ought to be awarded:
“…an appropriate rate for the whole period might be 5 1/4%.”
Conclusions on interest
13 Section 60 of the Supreme Court Act provides as follows:
“Interest in proceedings for debt or damages
(1) The Court, on application in any proceeding for the recovery of debt or damages, must, unless good cause is shown to the contrary, give damages in the nature of interest at such rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 as it thinks fit from the commencement of the proceeding to the date of the judgment over and above the debt or damages awarded.
(2) Nothing in this section—
(a)authorises the granting of interest on interest;
(b)applies in relation to any sum on which interest is recoverable as of right by virtue of any agreement or otherwise;
(c)affects the damages recoverable for the dishonour of a negotiable instrument;
(d)authorises the allowance of any interest otherwise than by consent on any sum for which judgment is entered or given by consent;
(e)applies in relation to any sum on which interest might be awarded by virtue of section 58 or 59; or
(f)limits the operation of any enactment or rule of law which, apart from this section, provides for the award of interest.
(3) If the damages awarded by the Court or jury include or if the Court in its absolute discretion determines that the damages awarded include any amount for—
(a)compensation in respect of liabilities incurred which do not carry interest as against the person claiming interest;
(b)compensation for loss or damage to be incurred or suffered after the date of the award; or
(c)exemplary or punitive damages—
the Court must not allow interest in respect of any amount so included or in respect of so much of the award as in its opinion represents any such damages.
(4) The Court may request a jury to specify in its verdict any amount included in the verdict in respect of the matters referred to in subsection (3).”
14 The section appears to be engaged since the present is a proceeding for the recovery of damages. The parties are agreed that the terms of the section create a presumption in favour of the award of interest for the period since the commencement of the proceeding, and at the rate prescribed from time to time under the Penalty Interest Rates Act 1983. As Vickery J observed in Hodgson v Amcor Ltd (No 9) [2012] VSC 205 [40], this accords with “the settled practice” in Victoria.
15 Some of the matters urged by Mr Fenwick-Elliott do constitute good grounds for refraining from awarding interest for the entire period since the commencement of the proceeding. It is a very stern measure for the Court to strike out a proceeding for a plaintiff’s failure to comply with procedural directions. The Judges who made the orders having this effect were no doubt satisfied that this very strong action was justified. I see no reason to differ from them. The fact that the plaintiff has been so dilatory, at least at the outset, in bringing forward this proceeding constitutes, therefore, a good ground for not awarding the plaintiff interest on its judgment prior to the date from which it took action to have its proceeding reinstated. Effective action by the plaintiff in this regard began on 8 October 2012 when it filed a summons for directions seeking reinstatement. This should be the commencement date for the award of interest under s60.
16 I am not persuaded, however, that there should be a further exclusion from the period for which interest is awarded based upon the plaintiff’s breach of the order for the filing of expert reports. It is a very substantial over-simplification to say that, had the plaintiff complied with that order, the judgment published on 14 August 2014 could have entailed an assessment of damages as well. The trial on damages assessment, it must be recalled, occupied no fewer than 15 days and a large part of the period between 14 August 2014 and 20 September 2017 was taken up with the delays caused by the defendant’s fruitless appeal against the liability finding made in August 2014.
17 It might be thought that with a determination of liability against the defendant, despite a stout defence, which determination was maintained on appeal, the defendant might have at least made some settlement offer rather than send the matter to the 15 day quantum trial. No evidence of such a settlement offer has been placed before me. Accordingly, I proceed upon the basis that the defendant maintained a denial of liability for even a cent of damages up to the delivery of the quantum judgment. My determination would indicate that this denial of liability for any damages was unjustified. The clear policy of s60 of the Supreme Court Act and the Penalty Interest Rates Act is to deter this sort of conduct by defendants. In my view, there is no reason to exclude any other portion of the period since the commencement of the proceeding from the calculation of interest under s60.
18 It follows that I also reject any contention that the rate of interest should be less than the statutory rate under the Penalty Interest Rates Act. In the words of Vickery J, I propose applying the settled practice in Victoria in awarding interest at that rate for the period from 8 October 2012 onwards.
Costs
19 Mr Clarke, on behalf of the plaintiff, referred to an Offer of Compromise served pursuant to Order 26 of the Court Rules on 8 August 2013 offering to settle the proceeding for a payment to A1 of $150,000 by CATCON, together with “scale legal costs”. He said that offer was not accepted. According to Mr Clarke, the relevant rule in force at the time of the service of the Offer of Compromise, Rule 26.08(2)(b), as it stood until 1 September 2013, provided that where, as here, the plaintiff, A1, had obtained a judgment “no less favourable” to it than the terms of the offer, the plaintiff was entitled to an order “for his costs in respect of the claim up to and including the day the offer was served taxed on a party and party basis and for his costs thereafter taxed on an indemnity basis”. Mr Clarke submitted that, in any event, costs on an indemnity basis should be awarded on and from August 2013 “on the grounds that the defendant made a number of allegations, such as serious allegations of ‘sham transacting’”, which led to the unnecessary prolongation of the case.
20 Mr Clarke said these matters included allegations of “sham transacting, dishonesty and illegality”, which claims or defences were unsuccessful. He said CATCON had also sought to raise matters “which were the subject of issue estoppel” deriving from the determination in the liability trial. He said that it had filed an expert report by Mr Lampard containing opinions which went beyond his expertise and making assertions as to mitigation, “necessitating the plaintiff calling an expert accountant and providing a detailed statement to refute the opinions proffered”. Mr Clarke said a witness statement by Mr Stanmeyre of CATCON was served, which was inadmissible. He complained of the filing of an expert engineering report “from an engineer who was not called”, and filing and serving an expert accounting report “from an accountant who was not called”. Finally, according to Mr Clarke, CATCON had sought “to amend the claim [scil Defence] to raise a serious claim of illegality and dishonesty, which was disallowed based on Anshun estoppel”.
21 Mr Clarke submitted that the court “should attempt to give effect to the spirit of the Rule”. He referred to Henderson v Simon Engineering (Aust) Pty Ltd [1988] VR 867, 871-2 per Murphy J, and Malliaros v Moralis [1991] 2 VR 501, 504-5 per McGarvie J. In the “spirit” of these statements, he submitted that the court should certify counsel’s fees of $4,400, inclusive of GST, and certify payment of solicitor’s fees in accordance with a Costs Agreement exhibited to an affidavit of his instructor, Mr Lanza, sworn 27 September 2017 and marked MPL-1 and MPL-2. Likewise, he said that fees to WT Partnership Quantity Surveyors should be certified in the amounts and rates provided for in the Agreement MPL-3, exhibited to Mr Lanza’s affidavit. Finally, he submitted that interest paid under the Litigation Funding Agreement, Exhibit MPL-9 to Mr Lanza’s affidavit, should be ordered to be paid by the defendant.
22 Mr Clarke submitted that the discretion bestowed on the court by s 78A(1) of the County Court Act 1958 was sufficiently wide to authorise these things. He noted Rule 63A.01, which defined costs to include “disbursements and reasonable costs of recording and transcript”. He noted the power bestowed on the court by Rule 63A.07 either to refer the issue of costs to assessment or taxation, or to award a gross sum instead of tax costs. He referred to the previous regime in which costs in this Court were fixed by references to Scales A, B, C or D by reference to the amount awarded. He said:
“The spirit of Order 26 is fulfilled by the making of orders certifying the hourly and daily rates, and the other matters, in the form of the Orders [which he had proposed as to these matters].”
23 Mr Fenwick-Elliott, in his submissions as to costs, referred again to the history of the proceeding and the fact that it stood struck out for over a year. Accordingly, he said, “no costs should be awarded to the plaintiff prior to 17 December 2012”. He denied the allegations as to unfair prolongation of the case, stating that the illegality defence based on “sham contracting” arose “on the facts disclosed in the plaintiff’s witness statements and disclosure”. He said Mr Lampard’s report was responsive to a report from the plaintiff’s expert, Mr Rubira. Mr Stanmeyre’s witness statements were filed, he said, “at the instigation of the plaintiff”. The expert engineer and accountant, whose statements were filed, proved unavailable due to circumstances beyond the control of the defendant.
24 Mr Fenwick-Elliott said that no special certifications as sought should be made, and the costs should be taxed in the normal way in accordance with Order 63A. The Costs Court could adjudicate upon the reasonableness of the matters for which certification was sought. He said, “The plaintiff’s cost of borrowing … is not a cost or disbursement”. If the matter were referred to assessment before the Costs Court in the normal way, Mr Fenwick-Elliott said, “The defendant [will have] a proper opportunity to consider its position and make submissions accordingly.”
Conclusions as to costs
25 The plaintiff should have the Costs Order which it seeks. Except to the extent that the court has already made adverse costs orders relative to the striking out of the proceeding initially, the costs in question are costs in the proceeding which should go to the plaintiff on a party-party basis. The policy of Order 26 and the clear terms of the Rule, whether in its present or former version, is to put a defendant who does not accept an offer, which turns out to be a better outcome than the one he obtained at trial, liable for indemnity costs from the time of the offer. That result should flow here.
26 Mr Fenwick-Elliott made the point that the versions of the Costs Agreements produced by Mr Lanza as exhibits to his affidavit were not shown to have been executed by the parties. In any event, as I understand the authorities, whilst Litigation Funding Agreements are not stigmatised these days as amounting to champerty, they are not given any special preferred status. Without expressing a final view on the subject, I am doubtful that interest payments under a Litigation Funding Agreement are properly to be characterised as costs or disbursements. In any event, I believe that is a matter best adjudicated by the Costs Court. The level of counsel’s fees for which a certificate is sought, however, seems to me to be reasonable in all the circumstances, and I propose certifying for them, but not as to the other matters which may be dealt with by the Costs Court.
27 I am fortified in the view that there should be an award of indemnity costs following CATCON’s failure to accept the offer of compromise by the following consideration. The damages assessment trial was of inordinate length. The amounts at stake, even if the plaintiff had been successful for the whole amount of its claim, could scarcely justify so long a trial. I am forced to the conclusion that this unconscionably long trial was the result of the defendant’s intransigent denial of liability for any damages at all, despite its loss in the liability trial. No doubt, the defendant was entitled to take every point which it did, though, as Mr Clarke observed, some of the points which it sought to take were properly barred by issue estoppel, such as the attempt to introduce a new pleaded illegality defence, despite an earlier illegality defence having failed at the liability trial and not featuring in its grounds of appeal to the Court of Appeal. To adapt the language of Tadgell J, as he then was, in taking the stand which it did, CATCON “allowed itself a luxury. The court ought to do what it can to ensure that [A1] is not out of pocket over it.” Australian Guarantee Corporation Limited v De Jager ([1984] VR 483, 502)
Disposition
28 Within 14 days of this day, the parties must bring in short minutes to give effect to these reasons and my assessment of damages published on 20 September 2017.
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