Abigroup v Peninsula (No 2)

[2001] NSWSC 1016

Reported Decision: [2001] NSWSC 1016
[2001] ACL Rep 325 NSW 414
[2001] ACL Rep 65 NSW 9

New South Wales

Supreme Court

CITATION:	Abigroup v Peninsula (No 2) [2001] NSWSC 1016
CURRENT JURISDICTION:	Equity Division Construction List
FILE NUMBER(S):	SC 55034/99
HEARING DATE(S):	26/10/01
JUDGMENT DATE:	13 November 2001
PARTIES :	Abigroup Contractors Pty Limited - Plaintiff Peninsula Balmain Pty Limited - Defendant
JUDGMENT OF:	Barrett J

COUNSEL :	Mr B.W. Walker SC/Mr I.D. Faulkner - Plaintiff Mr F.M. Douglas QC/Mr M.G. Rudge SC/Mr M. Christie - Defendant
SOLICITORS:	Clayton Utz - Plaintiff Deacons - Defendant
CATCHWORDS:	CONTRACTS - building contracts - position of superintendent - whether superintendent is as a matter of law an agent of the proprietor - PROCEDURE - re-opening of decision before entry of orders - applicable principles discussed - not appropriate to re-open - appeal, if warranted, is proper course - PROCEDURE - interest on judgment - date from which interest should run - PROCEDURE - costs - where party succeeds on basis pleaded late - costs awarded only from date successful basis pleaded - offer of compromise made and rejected before successful basis pleaded should not be taken into account
LEGISLATION CITED:	Trade Practices Act 1974
CASES CITED:	Cullen v Trappell (1980) 146 CLR 1 Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300 Haines v Bendall (1991) 172 CLR 60 Brodie v Singleton Shire Council (2001) 75 ALJR 992 Henville v Walker (2001) 75 ALJR 1410 Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20, on appeal (2001) 37 ACSR 672 Fowdh v Fowdh (unreported, NSWCA, 4 November 1999) Trimis v Mina [1999] NSWCA 140 Leadenhall Australia Ltd v Peptech Ltd [2001] NSWCA 272 Semrani v Manoun [2001] NSWCA 337 R v Nitin Giri (No 2) [2001] NSWCCA 234 NRMA Ltd v Morgan (No 3) [1999] NSWSC 768 Hughes Bros Pty Ltd v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney [1999] NSWSC 1051 Grogan v Thiess Contractors Pty Ltd [2000] NSWSC 1101 Owners Strata Plan No 13218 v Woollahra Municipal Council [2001] NSWSC 158 Bennett v Jones [1977] 2 NSWLR 355 John Fairfax & Sons Ltd v Kelly (1987) 8 NSWLR 131 Falkner v Bourke (1990) 19 NSWLR 574 McWilliams Wines Pty Ltd v Liaweena (1993) 23 NSWLR 190 Metropolitan Meat Industry Board v Williams (1991) 24 NSWLR 54 Tickell v Trifleska Pty Ltd (1990) 25 NSWLR 353 Riddle v McPherson (1995) 37 NSWLR 338 Council of the City of Sydney v Woodward (2001) 17(1) BCL 42 Home Owners Insurance Pty Ltd v Job (1983) 2 ANZ Ins Cas 60-635 Chambers v Goldthorp Restell [1901] 1 QB 624 Gray Ltd v Earl Cathcart (1922) 38 TLR 562 R.B. Burden Ltd v Swansea Corporation [1957] 1 WLR 1167 Compagnie Noga D'Importation et D'Exportation SA v Abacha [2001] 3 All ER 513 Sutcliffe v Thackrah [1974] AC 727 Cookson v Knowles [1979] AC 556 London Borough of Merton v Leach (1985) 32 BLR 68
DECISION:	Refer paragraph 45

16

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CONSTRUCTION LIST

BARRETT J

TUESDAY, 13 NOVEMBER 2001

55034/99 – ABIGROUP CONTRACTORS PTY LIMITED v PENINSULA BALMAIN PTY LIMITED (NO 2)

JUDGMENT

HIS HONOUR:

1. In reasons for judgment published on 3 September 2001 ([2001] NSWSC 752), I concluded that it was appropriate for the Court to make orders in these proceedings as follows:

1. Pursuant to Part 72 rule 13(1), the report of Mr T.M. McDougall dated 19 February 2001, together with the supplementary report dated 27 February 2001, delivered to the Court be adopted, varied by disallowing the variation VPR 32.

2. Pursuant to s.87 of the Trade Practices Act 1974, the defendant pay compensation to the plaintiff.

2. I then said (at paras 119 and 120):

“119. The amount of the compensation to which the plaintiff is entitled is prima facie the quantum meruit sum referred to in the referee’s report (i.e, $2,874,817), but there is a question whether this should be adjusted by the sum of $9,113 involved in VPR 32 which should not have been allowed. There should also be interest in accordance with Schedule J to the Supreme Court Rules.
120. I direct that the parties bring in submissions on the date from which interest should be computed, the final quantification of compensation and interest on the basis I have described and on the question of costs.”

3. Written submissions were afterwards received from both parties. Upon reading them, I had my Associate write to counsel inviting the parties to forward such submissions in reply as they wished. Submissions in reply were received from both parties. I then heard further argument on 26 October 2001.

4. The submissions received from Peninsula and virtually all of the argument in court on 26 October concentrated on two questions: first, whether the possible adjustment to the quantum meruit sum of $2,874,817 foreshadowed in para 119 of the earlier judgment might extend to an adjustment of $3,123,282 in favour of Peninsula on account of liquidated damages under the contract, leaving a balance due to Peninsula; and, second, whether matters unrelated to those on which I had sought submissions might warrant reconsideration by me of the decision of 3 September 2001. This canvassing of my conclusions was, of course, not something I had sought when I directed submissions to be made, but since Peninsula has seen fit to raise matters of concern to it, I shall deal with them now.

The first of the unrelated matters

5. One question raised in the Peninsula submissions was whether I had received and considered an earlier submission that “a superintendent as a matter of law is an agent of the proprietor notwithstanding that in the administration of the contract he has to act in a fair and professional manner”. In order that there may be no doubt on this, I now state that the answer is “yes” – and that I would have thought that the judgment of 3 September made it fairly clear in its paras 80 to 87 that this was so. In view of Peninsula’s direct question, however, it is desirable that I spell out the conclusion to which I came.

6. The notion that the superintendent under a building contract “is as a matter of law” an agent of the proprietor comes from the following passage in the sixth edition (1995) of Keating on Building Contracts:

“An architect acting under the ordinary building contract is the employer’s agent throughout notwithstanding that in the administration of the contract he has to act in a fair and professional manner.”

7. A footnote refers to Sutcliffe v Thackrah [1974] AC 727. Peninsula points to observations of Lord Morris of Borth-y-Gest at p.750 as the particular part of that case to which the footnote seeks to draw attention. I must say, however, that the most I can glean from that case on this subject is that, if a proprietor retains an architect in such a way and on such terms as to give rise to a duty on the architect’s part to look after the proprietor’s interests, the architect’s duty to act fairly in exercising certifying and like functions under the contract is, generally speaking, a part of and therefore does not conflict with his duty to the proprietor. There is nothing, to my mind, to suggest that an agency relationship arises “as a matter of law”. It is all a matter of contract. There is not, in this field, any species of implied agency of the kind which once gave rise to a rebuttable presumption (albeit a presumption of fact, not law) that a wife living with her husband had the husband’s authority to pledge his credit for necessaries: Miss Gray Ltd v Earl Cathcart (1922) 38 TLR 562. The relationship between proprietor and architect or superintendent gives rise to no such presumption and is not of its intrinsic nature one of principal and agent.

8. The status or position of the architect or superintendent in the context of a particular building contract derives in part from the content of that contract and in part from any separate terms of engagement between them. In many cases, there will be an agency, just as there frequently is in the case of employer and employee. This is made clear by Vinelott J in London Borough of Merton v Leach (1985) 32 BLR 68. Indeed, an agency relationship will be commonplace and some general expectation may be produced by the commonplace. But it cannot be said that the content of the expectation is elevated to “a matter of law”.

9. The important point, for present purposes, is that, in what might be termed the commonplace situation, the duties owed by the superintendent to the proprietor do not derive from an express written agency agreement by which the superintendent is constituted the proprietor’s agent “in all matters related to the design and construction”, including performance of the superintendent function itself. That is not part of any general expectation and is at odds with the commonplace: see Chambers v Goldthorp Restell [1901] 1 QB 624 at 634 per A.L. Smith MR and at 638 per Collins LJ and R.B. Burden Ltd v Swansea Corporation [1957] 1 WLR 1167 at 1172 per Lord Radcliffe. It is that factor which has particular significance for paras 86 to 100 of the 3 September judgment and emphasises the central importance of the basis on which proprietor and contractor contract (para 86).

The second of the unrelated matters

10. The second matter urged upon me by Peninsula which is unrelated to the direction concerning further submissions is a perceived need to reconsider aspects of the judgment of 3 September 2001 in the light of subsequent decisions of courts whose decisions are binding on me, namely, the High Court and the Court of Appeal. The decisions in question are Henville v Walker (2001) 75 ALJR 1410 (6 September 2001), Leadenhall Australia Ltd v Peptech Ltd [2001] NSWCA 272 (24 September 2001) and Semrani v Manoun [2001] NSWCA 337 (4 October 2001).

11. There may be occasions on which a court of first instance should re-open and revise a decision in which orders have not been perfected. As I was reminded by Mr Douglas QC who appeared for Peninsula when the submissions were addressed on 26 October, the High Court has identified such a power in relation to its own decisions: see Autodesk Inc v Dyason (No 2) (1993) 176 CLR 300. But as has been said many times – including by the Court of Criminal Appeal in the recent case of R v Nitin Giri (No 2) [2001] NSWCCA 234 (25 June 2001) – the power of a court to re-open and revise its own decision is one which is to be used sparingly and by reference to established criteria in cases obviously requiring correction.

12. Of those established criteria, as stated by Heydon JA in Nitin Giri, only one could be relevant here, namely, that the judgment in question proceeded on some misapprehension of the relevant law, being, in a context such as the present, a misapprehension exposed by one or more of the subsequent decisions of courts whose decisions are binding. An obvious example of the operation of that criterion may be found in the effect exerted upon Owners Strata Plan No 13218 v Woollahra Municipal Council [2001] NSWSC 158 (15 March 2001) by Brodie v Singleton Shire Council (2001) 75 ALJR 992 (31 May 2001) in which the High Court decided that its own decision of 1936 on which the trial judge had understandably based his decision should no longer be followed. Had the High Court’s decision become available before the trial judge’s orders had been entered, it may well have been appropriate for him to re-open the matter.

13. Nothing of that nature arises from the subsequent High Court and Court of Appeal decisions to which the Peninsula submissions refer. I have found nothing in those cases which causes me to think that the judgment of 3 September 2001 is obviously infected by some vice of incorrect legal reasoning or affected by some faulty application of legal principle. Henville v Walker concerned damages under s.82 of the Trade Practices Act, whereas the judgment of 3 September concluded that there is an entitlement to compensation under s.87. Leadenhall Australia Ltd v Peptech Ltd concerned the question whether the trial judge had been correct in treating the dispute before him as a “different contract” case rather than a “no contract” case, whereas I took the view that the case before me was appropriately treated as a “no contract” case. Semrani v Manoun was drawn to my attention because of its statements as to the significance or otherwise of intention to deceive and intentional refraining from communication in cases where silence is said to amount to conduct within s.52.

14. It may be that the subsequent decisions highlight shades of emphasis which it might have been useful to have had at one’s fingertips when considering the matters the subject of the 3 September judgment. But none, to my mind, is the source of any major shift in legal principle or any apprehension that that judgment has miscarried on a question of law in such a way as to require or justify some form of rectification by the trial judge.

15. The reason the power to re-open a judgment must be used sparingly and only in cases obviously requiring correction is, in large measure, a practical one. It was put thus by Rix LJ in Compagnie Noga D’Importation et D’Exportation SA v Abacha [2001] 3 All ER 513:

“There are of course cases where an error of law may be too clear for argument. The best test of that is perhaps – but not necessarily – where the judge himself identifies the error which concerns him. In such a case, it is better that the error is corrected without imposing on the parties the need for an appeal. But no parallel to Noga’s application has been cited to me. It is in my judgment wrong for a judge to be treated to an exposition such as would be presented to a court of appeal. If in such circumstances a judge should be tempted to open up reconsideration of his judgment, an appeal would not be avoided, it would be made inevitable. Every case would become subject to an unending process of reconsideration, followed by appeal, both on the issue of reconsideration and on the merits.”

16. Peninsula has not made any formal application that I re-open my decision of 3 September and, for my own part, I see no reason to do so. If it is affected by appealable error, the proper course is for the dissatisfied party to resort to the available avenue of appeal in the ordinary way, rather than for me to embark upon what might well become “an unending process of reconsideration”.

Quantification of compensation

17. I turn now to the first of the matters in relation to which I directed on 3 September that submissions be made, namely, the question of quantification of the compensation to be awarded pursuant to s.87.

18. It is, in retrospect, unfortunate that I used the words “prima facie” in para 119 of the judgment of 3 September. Those words were intended to convey no more than that the quantum meruit sum of $2,874,817 referred to in the referee’s report is the applicable measure of compensation, subject only to the question whether there should be a single adjustment by reason of my decision that the referee should have disallowed VPR 32. Instead, Peninsula apparently saw the words “prima facie” as involving some wider and more general arena of possible revision and as inviting submissions at large on the appropriateness of the quantum meruit sum of $2,874,817 referred to in the referee’s report. It seems to be that approach to the message perceived as being conveyed by “prima facie” which caused Peninsula in its written submissions to say that the liquidated damages sum of $3,123,382 should be allowed against the $2,874,817 “prima facie” payable to Abigroup.

19. If imprecision of language on my part has led Peninsula into the path it has thus followed, it is a matter for regret. But by following that path Peninsula has, it seems to me, chosen to overlook the basis of my decision. Having adopted the referee’s report in its entirety (except for the relatively minuscule matter involving VPR 32) and having, in particular, endorsed the referee’s finding as to contravention of s.52 of the Trade Practices Act by Peninsula, I have endorsed the following outcome stated by the referee at page 9 of the report:

“If the Abigroup contention is found to be correct (that the failure of Peninsula to disclose the agency agreement with EAPG justifies, on some basis, the setting aside of the contract), none of the foregoing applies, and Abigroup would be entitled to an award of $2,874,817 on a quantum meruit basis for its reasonable costs, subject to the possible effect of the decision in Trimis v Mina ” [emphasis added].

20. I found that the Abigroup contention based on s.52 was correct. I also found that no qualification arose from Trimis v Mina [1999] NSWCA 140. The appropriate approach to the question of compensation in accordance with the referee’s report was therefore to proceed as if the contract had been rescinded on the basis of misrepresentation on Peninsula’s part so that, with the contract thus assumed to be no longer operative, the situation was one of quantum meruit rather than damages for breach of contract. That finding caused the part of the referee’s findings emphasised in the above extract (beginning “none of the foregoing applies …”) to operate so as to confer on Abigroup an entitlement to the sum of $2,874,817 to the exclusion of all entitlements (in each direction) forming part of “the foregoing” rendered no longer applicable, subject only to the question I raised as to the effect on the quantum meruit amount of the disallowance of VPR 32.

21. A clear by-product of my endorsement of the part of the referee’s report quoted above, coupled with endorsement of the quantum meruit approach as the correct one for the purposes of s.87 compensation, was to remove the contract from consideration as a potential source of damages for breach. A quantum meruit is, of its nature, a net figure which takes account of the overall worth of work done, after allowance for any and all negative elements properly to be laid at the feet of the contractor to whom the quantum meruit is awarded. Indeed, my understanding of the section of the referee’s report on pages 274 to 277 in which the figure of $2,874,817 was reached is that it proceeded in exactly that way. There was a substantial negative adjustment for delay costs in Abigroup’s performance of the work. It follows that I see no basis on which the offset of $3,123,282 for liquidated damages for which Peninsula contends should be allowed.

22. That leaves the question of what to do with the relatively insignificant sum of $9,113 involved in disallowance of VPR 32. Both Abigroup and Peninsula submitted that the VPR 32 sum should be deducted from the quantum meruit entitlement of $2,874,817 – although Abigroup’s submission was clearly stated to be prompted by a desire not to argue over a relatively trivial amount. It seems to me, however, that consistency with the referee’s approach (which I have endorsed by adopting the report) demands that half of the monetary value of VPR 32 should be deducted from the referee’s quantum meruit sum. I shall explain why.

23. The referee’s methodology for determining the quantum meruit sum was to adopt the mean between the contract amount figure and the actual cost figure: see page 276 of the report. The monetary value of VPR 32 was incorrectly added to the contract amount figure. Therefore, the monetary value of VPR 32 should be deducted from the contract amount figure. The mean of the corrected contract figure and the actual contract figure will then be the correct mean figure, which is the correct quantum meruit sum. The arithmetic is as follows.

1. $2,358,866 (contract amount figure) less $9,113 (VPR 32) equals $2,350,753 (corrected contract amount figure);

2. $3,389,768 (actual cost figure) plus $2,350,753 (corrected contract amount figure) equals $5,740,521;

3. $5,740,521 divided by 2 equals $2,870,260.50 (corrected mean figure).

24. The same result is achieved by deducting from the referee’s mean figure half of the monetary value of VPR 32; in other words, $2,874,817 less $4,556.50 equals $2,870,260.50. That should be regarded as the adjusted quantum meruit sum for which judgment will be given.

Interest

25. I now consider the second matter on which I directed that submissions be made, being the starting date for the computation of interest on the sum just mentioned. The date from which interest on the judgment sum is to run is discretionary under s.94(1) of the Supreme Court Act 1970. However, as Diplock LJ stated in Cookson v Knowles [1979] AC 556 in relation to the similar English provision, the discretion should be exercised “in a selective and discriminating manner, not arbitrarily or idiosyncratically – for otherwise the rights of parties to litigation would become dependent upon judicial whim”. In general, the discretion should be exercised in favour of a successful party so that party may be properly compensated: Falkner v Bourke (1990) 19 NSWLR 574; Home Owners Insurance Pty Ltd v Job (1983) 2 ANZ Ins Cas 60-635; Bennett v Jones [1977] 2 NSWLR 355. To put this another way, the award of interest is “an essential element in the achievement of true compensation”: Haines v Bendall (1991) 172 CLR 60 per Mason CJ, Dawson, Toohey and Gaudron JJ.

26. Typically, interest is calculated from the date the cause of action accrues. In this case, however, the relevant work was performed over a period from early March 1998 to 1 December 1999 when the services of Abigroup were terminated by Peninsula.

27. Mason and Carter in their text Restitution Law in Australia put forward the traditional proposition (at [2722]):

“A claim for reasonable remuneration for work done will generally arise when the work is done and accepted, because it is at that point of time that the defendant has received a benefit in circumstances giving rise to an obligation to make restitution.”

28. This proposition was approved by Heydon JA, with whom Priestley and Meagher JJA agreed, in Council of the City of Sydney v Woodward (2001) 17(1) BCL 42. In that case, the Court of Appeal upheld the trial judge’s decision that interest should run on a quantum meruit sum from the time at which the performance of the relevant work ended, that being the point at which the quantum meruit entitlement afterwards disclosed by the court’s judgment could best be said to have arisen.

29. Neither Abigroup nor Peninsula adopted that approach in its submissions on interest. Each submitted that the appropriate commencement date is the “mid-point” between the conduct at the commencement of the relevant cause of action and the conduct at the conclusion of the relevant cause of action. As the parties disagree over the interpretation of the 3 September judgment in the way I have already described, they also disagree over what is the relevant cause of action and what is the mid-point date.

30. The date put forward by Peninsula is based on its interpretation of the 3 September judgment. The date proposed by Peninsula is 3 September 1999. This is determined by taking the mid-point between 5 June 1999 (being the date found by the Referee as the date for practical completion by Abigroup) and 1 December 1999 (being the date Peninsula terminated the employment of Abigroup). But the date of practical completion as found by the referee is not relevant to the compensation of Abigroup under s.87 of the Trade Practices Act by way of the quantum meruit sum. Therefore the mid-point date suggested by Peninsula cannot be accepted.

31. Abigroup submits that interest should be calculated from 15 January 1999. Abigroup has determined this date by finding the mid-point, in terms of time, between the commencement of work by Abigroup at the beginning of March 1998 (page 1 of the referee’s report) and Abigroup’s exclusion from the site on 1 December 1999 (page 2 of the referee’s report). The mid-point date put forward by Abigroup assumes a start date of 8 March 1998.

32. If a mid-point methodology is to be applied, the Abigroup submission should in essence be adopted. However it remains to be determined whether the mid-point approach should be preferred over that emerging from Council of the City of Sydney v Woodward (above).

33. The mid-point approach is supported by cases in relation to the quantification of interest on damages for victims of motor vehicle accidents (Riddle v McPherson (1995) 37 NSWLR 338 at 343), defamation (John Fairfax & Sons Ltd v Kelly (1987) 8 NSWLR 131), and personal injury (Cullen v Trappell (1980) 146 CLR 1; Metropolitan Meat Industry Board v Williams (1991) 24 NSWLR 54). In these tort cases, however, the mid-point is the date between the time when the cause of action arises and the date of judgment. It is by no means clear to me that the date of contract termination and exclusion from the site seen in Abigroup’s submission as being the later end of the relevant time span is properly regarded as the equivalent of the date of judgment in the tort situation.

34. After the contract was terminated and work ceased on 1 December 1999, the situation became, in the referee’s words, a case about “who owes who, and how much”. Those events marked a point of crystallisation of rights to be discovered and vindicated in legal proceedings. In light of the fact that, on the approach taken by the referee and endorsed by the court, the result was an award of compensation to Abigroup calculated on a quantum meruit basis, it is appropriate that the approach to interest taken in the quantum meruit situation in Council of the City of Sydney v Woodward should be adopted here.

35. Abigroup will therefore be awarded interest on the sum of $2,870,260.50 referred to at paragraph 20 above from 1 December 1999 to the date of judgment, such interest being computed at the rate prescribed by Schedule J to the Supreme Court Rules.

Costs

36. Finally, there is the matter of costs. Again, I have received comprehensive submissions from both parties in response to the direction in para 120 of the 3 September judgment. Three matters have been ventilated in relation to costs. Two of them involve potential grounds for departing from the general rule under Part 52A rule 11 that costs should follow the event. The third raises a question whether indemnity costs should be awarded in respect of the period after rejection of an offer of compromise.

37. Peninsula makes the point that the ground on which Abigroup was ultimately successful was not pleaded until the proceedings were well advanced, having first arisen in the Second Amended Summons of 26 May 2000. Abigroup in turn says that it injected the s.52 component into its case at the first practicable opportunity. Even accepting that to be so, I do see considerable merit in Peninsula’s contention that it should not be required to bear, under some indiscriminate application of the principle that costs follow the event, costs attributable to elements which arose before the case in which Abigroup was eventually successful was even articulated: those elements are, in a real sense, not part of the relevant “event”.

38. Peninsula also says that each party enjoyed a measure of success on the multitude of separate aspects litigated, even though, according to the referee’s approach quoted at para 19 above (which the Court endorsed), success by Abigroup on the s.52 issue eclipsed Peninsula’s success on other issues. Because Abigroup achieved “bottom line” success, it is, to my mind, entitled to a costs order and the question in relation to this part of the submissions (and leaving to one side for the moment the first issue about the time the s.52 case was introduced) becomes whether there is some basis on which that order should be for less than the whole of Abigroup’s costs: see, for example, NRMA Ltd v Morgan (No 3) [1999] NSWSC 768 per Giles J; Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20 per Young J and, on appeal, (2001) 37 ACSR 672 per Spigelman CJ, Priestley JA and Fitzgerald JA.

39. Each party has placed before me a quantification of the parties’ respective “successes”. Abigroup has done so by way of isolation of subjects of contention and the outcome on each (ie, which party’s contention on the particular subject prevailed before the referee); while Peninsula’s similar analysis pays attention to the monetary value of the contentions in respect of which the respective successes and failures occurred. The analyses have been prepared in considerable detail in relation to more than 140 individual items, apart altogether from claims for extensions of time. The different approaches produce very different results.

40. There are several statements in the cases which lead one to think that it is not necessary, and perhaps unwise, to attempt to be too technical and exacting in seeking to measure success on different issues, even where there is some obvious way of differentiating and isolating those issues. But it is by no means clear that the Court should embark upon the task of apportionment. Indeed, in Waters v P C Henderson (Australia) Pty Ltd (unreported, NSWCA, 6 July 1994), Mahoney JA said that it would have been contrary to the trend of decision in relation to the exercise of discretion as to costs for the trial judge to have attempted to determine which issues were won by particular parties, to what extent they were won and what was the amount of time spent on each of the issues so as to apportion the costs. In the present case, I think it is sufficient for the time and effort pre-dating the initiation of the s.52 case on 26 May 2000 to be separated out and for the “event”, for the purposes of Part 52A rule 11, to be the time and effort after that date.

41. The third point in relation to costs is that Abigroup made an offer of compromise on 28 February 2000 under which it indicated a willingness to settle on the basis of a payment of $2,500,000 to it by Peninsula (inclusive of interest) plus costs. Part 52A rule 22(4) therefore entitles Abigroup to indemnity costs from that date, unless the Court otherwise orders. This assumes that the offer was “a realistic assessment of what, in the circumstances, represented a fair and proper compromise”: Tickell v Trifleska Pty Ltd (1990) 25 NSWLR 353.

42. I have come to the conclusion that the offer of 28 February 2000 should not be regarded as an offer of compromise producing the effects envisaged by Part 52A rule 22(4). It was an offer made and rejected without reference to the potential basis of liability upon which Abigroup ultimately succeeded. The s.52 claim was not advanced until 26 May 2000. The offer and its rejection therefore did not involve an assessment by the respective parties of their prospects of success in relation to the claim on which Abigroup was ultimately successful. The object of the rule is to encourage parties to accept compromises which are reasonable, the reasonableness or otherwise in a particular instance being indicated by the subsequent outcome. Implicit in this is an assumption that the case upon which the outcome emerges so far corresponds with that to which the decision on compromise related as to make the former a true indicator of the reliability of the latter. This appears clearly from the judgment of Mahoney AP in Fowdh v Fowdh (unreported, NSWCA, 4 November 1993). The costs order in these proceedings should therefore displace the operation of Part 52A rule 22(4).

43. In view of all the matters relevant to costs which have been canvassed, the appropriate order is that Peninsula pay the costs of Abigroup in respect of the proceedings from 26 May 2000 on a party and party basis and that otherwise there should be no order as to costs.

44. Abigroup has submitted that it is entitled to interest on costs. The only basis on which it does so is that it has paid its solicitors and counsel progressively on a monthly basis and has thereby been out of pocket. The main factor which may cause the Court to award interest on costs under ss.76 and 95(4) of the Supreme Court Act is delay in the resolution of proceedings where a party has been out of pocket for an inordinate time: see McWilliams Wines Pty Ltd v Liaweena (1993) 23 NSWLR 190; Hughes Bros Pty Ltd v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney [1999] NSWSC 1051; Grogan v Thiess Contractors Pty Ltd [2000] NSWSC 1101. In those cases, the time between commencement of proceedings and judgment ranged from six and a half years to more than ten years. The present proceedings were commenced in September 1999 and, as I have said, the case upon which Abigroup was successful was not advanced by it until May 2000. The case is therefore not, to my mind, an appropriate one for interest on costs.

Orders

45. The orders of the Court are as follows:

1. That, pursuant to Part 72 rule 13(1), the report of Mr T.M. McDougall dated 19 February 2001, together with the supplementary report dated 27 February 2001, delivered to the Court be adopted, varied by disallowing the variation VPR 32.
2. That judgment be entered for the plaintiff in these proceedings against the defendant in the sum of $2,870,260.50 together with interest thereon at the rates applicable under Schedule J to the Supreme Court Rules from 1 December 1999 to the date of judgment.
3. That the Further Amended Cross Claim be dismissed .

4. That the defendant pay the costs of the plaintiff in these proceedings from and including 26 May 2000 as either agreed or assessed on a party and party basis.

5. That the defendant forthwith return to the plaintiff the following bank guarantees:

(a) bank guarantee No 123940-071-104 dated 8 June 2000 in the amount of $2,595,000;
(b) bank guarantee No 123940-071-075 in the amount of $652,000;

(c) bank guarantee No 123940-071-076 in the amount of $652,500,

as referred to in paragraph 3 of the Short Minutes of Order by Einstein J on 2 June 2000;

(d) bank guarantee No 891 in the sum of $200,000; and

(e) bank guarantee No 892 in the sum of $250,000.

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Last Modified: 11/13/2001