AC Hall Airconditioning Contracting Pty Ltd v Victorian Education Foundation Ltd
[2012] VCC 1810
•23 November 2012 (revised)
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Revised |
COMMERCIAL LIST
BUILDING CASES DIVISION
Case No. CI-10-02331
| AC HALL AIRCONDITIONING CONTRACTING PTY LTD | Plaintiff |
| (ACN 091 308 637) | |
| v | |
| VICTORIAN EDUCATION FOUNDATION LTD (ACN 126 965 044) | Defendant |
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JUDGE: | HIS HONOUR JUDGE GINNANE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 10 September 2012 | |
DATE OF JUDGMENT: | 23 November 2012 (revised) | |
CASE MAY BE CITED AS: | AC Hall Airconditioning Contracting Pty Ltd v Victorian Education Foundation Ltd | |
MEDIUM NEUTRAL CITATION: | [2012] VCC 1810 | |
REASONS FOR JUDGMENT
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BUILDING CONTRACT – consent judgment – calculation of interest – costs - offers of compromise County Court Civil Procedure Rules O 26
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Foster | Moores Legal |
| For the Defendant | Mr A Ritchie | Lachlan Partners Legal |
HIS HONOUR:
1 There are two issues for determination following the parties’ resolution of the proceedings and the making of consent orders on 20 August 2012. Those consent orders were:
(a) judgment for the plaintiff in the sum of $131,430.22;
(b) interest on the judgment sum to be determined;
(c) costs to be determined;
(d) the operation of order one is stayed until the determination of the issues of interest and costs referred to in Orders 2 and 3.
2 On 10 September 2012, the parties argued the issues of interest and costs and I reserved my judgment.
3 While commencing to prepare the judgment, it was apparent that the procedure of arguing interest and costs at the same time did not follow the course prescribed by the Rules[1]. The Court retained a discretion to continue to hear and determine the issues. I listed the matter for mention on 15 September 2012 to determine what course the parties wished me to adopt. Ultimately, at that mention, both parties consented to me continuing to hear and determine the outstanding issues. That seemed to me to be the appropriate course, not least because both parties, in effect, had requested the Court to hear argument concerning interest and costs at the same time. In addition, neither counsel suggested that any decision on interest might affect a decision as to costs or the operation of the offers of compromise that had been made.
[1]Rule 26.05
4 The plaintiff, in connection with the outstanding issues, filed affidavits by Mr A Hall, its managing director, and Mr A McKellar, its solicitor. The defendant filed an affidavit by Mr B Farrugia, its solicitor. Mr Farrugia and Mr A Zotos, chairman of the defendant, gave evidence in response to Mr McKellar’s affidavit about the conduct of the litigation.
Interest
5 The first issue concerns interest. The matter in dispute is whether interest should be awarded from the date of a demand, on 15 September 2010, under s58 of the Supreme Court Act 1986, or from 1 June 2010, being the date of the issue of the proceedings under s60 of the Supreme Court Act.
6 The plaintiff’s claim, as amended, was for the sum of $280,500 for work done pursuant to a Construction Works Agreement made with the defendant; alternatively, for damages for breach of contract. The defendant admitted that the plaintiff had carried out air conditioning works under a contract made on 10 December 2009 and was entitled to be paid on a quantum meruit for this work. It also claimed a set off for breaches by the plaintiff of its contract to be calculated on a quantum meruit.
7 Ultimately, the judgment sum to which the parties consented on 20 August 2012 was the amount reached in a Joint Expert Report prepared by the parties’ experts which appears to have been calculated on a quantum meruit basis.
8 The plaintiff alleged that it had made demands for the amounts owed, and referred in particular to an email of 15 April 2010 sent to the defendant, in which it demanded, within seven days, payment of three invoices totalling $297,000. The plaintiff submitted that there was no technicality in the way in which a demand needed to be made.
9 The defendant submitted that judgment should only be allowed from the date of the writ, and then only until 8 July 2010, which was the date when it made an offer of compromise. It argued that none of the demands were on the same footing as the judgment ultimately given in favour of the plaintiff, and that they claimed considerably more. The demands were premised on the footing that there was a fixed price contract for the air conditioning, so the defendant argued, but now, in consenting to judgment, the plaintiff had adopted the quantum meruit method of calculation contained in the Joint Expert Report.
10 I do consider that the key issue is whether a claim for a quantum meruit, which is ultimately what the plaintiff recovered, is for a “debt or sum certain” within the meaning of s58. I consider that that proposition is arguable. However, in both Peet Ltd v Richmond (No 2)[2] and Brenner v First Artists’ Management Pty Ltd,[3] the Supreme Court applied s60 in awarding interest in respect of a quantum meruit and I propose to follow that course. Subject to the determination of other arguments that I will consider, that results in interest running from 1 June 2010. I should state that if I had thought that s58 was otherwise applicable, I would not have considered that the case fell outside s58. This is because the demand relied on by the plaintiff related to a larger sum than was ultimately recovered, or related to a demand made on a different basis than the parties ultimately relied on in agreeing to the consent orders.
[2][2011] VSCA 343
[3][1993] 2 VR 221
11 The defendant put forward four reasons as to why the plaintiff should not receive interest after 8 July 2010, the first being the failure of the plaintiff to accept the defendant’s offer of compromise.
12 Secondly was the plaintiff’s insistence on pressing a misconceived claim, ultimately abandoned at trial, that it was entitled to be paid a total of $280,500 under a fixed price contract. Mr Farrugia, the defendant’s solicitor, in his affidavit, stated:
“On 20 August 2012, AC Hall consented to a judgment in its favour of $132,430.22 (the amount assessed by the Joint Experts as payable by VEF to AC Hall on a quantum meruit.) In doing so it abandoned its claim that VEF owed it $280,500 and accepted that its only legitimate claim was to be paid on a quantum meruit. “
13 The defendant submitted that the plaintiff’s abandonment of its $280,500 debt claim wholly vindicated the decision taken by VEF on the summary judgment application and in the proceeding generally. The plaintiff disputed that it had accepted that its only legitimate claim was on a quantum meruit basis. However, ultimately it appeared that the Joint Expert assessed the sum owing on a quantum meruit.
14 The next matter relied on by the defendant was that the plaintiff had run a time-consuming and ultimately futile application for summary judgment under the Building and Construction Industry Security of Payment Act 2002 seeking judgment in a larger sum than was ultimately recovered. However, I consider that that can be dealt with separately when I deal with particular costs of the proceeding.
15 Fourthly, the defendant submitted that the plaintiff had delayed the proceedings by changing experts and failing to make discovery. Its solicitor stated that if the trial had been reached on 26 October 2011, which was the day originally fixed, the quantity surveyor engaged by the defendant would have provided a quantum meruit of assessment without the benefit of full discovery from AC Hall. He stated that the further 122 pages of discovered documents that were provided to the defendant on 30 May were critical to the assessment of the amount owed on a quantum meruit in the Joint Expert Report.
16 The defendant submitted that these factors constituted good cause to the contrary under s60, so that interest should only be awarded to 8 July 2010. However, for reasons given below, I do not consider that the offer of 8 July 2010 was a valid offer of compromise. Nor do I consider, because it was an ‘all in’ offer, that it can be assessed as a Calderbank offer, because it is impossible to determine whether the plaintiff has achieved a more favourable outcome than was offered.
17 The plaintiff’s solicitor stated in his affidavit that the further discovered documents only became relevant to the proceeding by reason of the defendant’s amendment of its Defence to include allegations of an entitlement to a set off and in light of the defendant’s Expert Report filed on 31 August 2011.
18 The purpose of an award of statutory interest is to compensate a plaintiff for being kept out of its money and deprived of its use. However, the Court does have a discretion to determine the period in which interest will run and that discretion is to be exercised by applying the requirement that “good cause to the contrary” be shown.
19 I have considered the chronology and history of the litigation set out in, particularly, the respective solicitors’ affidavits. The solicitor for the defendant refers to a number of alleged deficiencies in the way in which the plaintiff has conducted the proceeding. These include the issue of discovery, to which I have previously referred. It also includes the plaintiff’s delay in filing expert reports and statements, and a change in expert witnesses. It also refers to the need for an extension in time in filing experts’ reports. The Court’s attention is drawn to the fact that expert reports were originally filed some 15 days before the first trial date.
20 The solicitor for the plaintiff states that there were numerous instances of non-compliance with deadlines by both parties. He states that, in respect of experts’ statements, that the parties agreed on an appropriate course for the exchange of expert reports in 2011, and the orders made then reflected that agreement.
21 In assessing the claims of deficiencies in the way the proceeding progressed, an important factor is that the trial could not be reached when first listed in October 2011. That fact obviously led to further delays and, probably, the parties considering what further evidence might be provided in the way of expert evidence and otherwise.
22 I do not see anything in the chronology of the litigation, or in the evidence called, that justifies or establishes good cause to the contrary for the purposes of s60. I have taken into account the oral evidence that was given by Mr Farrugia and Mr Zotos on 10 September 2012. For instance, Mr Zotos’ evidence was to the effect that the defendant had never avoided its obligation to pay the amount that it considered owing, and referred to the offer made in July 2010. Delay can sometimes be a basis for establishing good cause to the contrary, particularly where it is clearly attributable to the actions of one party. However, I do not consider that it has been established in this case that it provides a basis for concluding that the interest should not run from the date of the issue of the proceedings.
23 Accordingly, I will order that the plaintiff is entitled to interest from the date of commencement of proceedings, which was 1 June 2010.
Costs
24 The next issue is the question of costs and that, as argued before me, is to be determined by the effect of the various offers of compromise.
25 The defendant made an offer of compromise on 8 July 2010, which was expressed to be in accordance with Order 26 of the Rules, for $165,000 inclusive of GST in full and final settlement of its claim to be paid in three monthly instalments of $55,000 commencing on the 15th day of each month following the date of acceptance of this Offer. Such an ‘all in’ offer is not an offer of compromise in accordance with the Rule: see Aquatec-Maxon Pty Ltd v Barwon Regional Water Authority (No 8).[4] It purports to be an offer in full and final settlement of the claim. The covering letter did not provide any advice as to the details of the offer. As previously stated, I do not consider that it could be considered a Calderbank offer because it was impossible to know what the costs that would have been payable at the time were. Much of the defendant’s argument was that having made an offer of $165,000, it should not have to accept an offer less than that made by the plaintiff because it would then be liable for the costs of the claim and should be, rather, entitled to the protection of the offer. No authority was referred to for this proposition, and I do not accept it. Successive offers of compromise can be made by both sides under the Rules.
[4][2007] VSC 363
26 The plaintiff’s first offer of compromise was dated 29 November 2010. It was for an offer of $165,000 inclusive of GST in full and final settlement of the defendant’s claim. That offer suffers from the same defects that apply to the defendant’s offer of 8 July 2010, and I consider that that offer by the plaintiff was not a valid offer of compromise.
27 The plaintiff’s second offer was made on 12 October 2011 and was expressed as offering payment of the sum of $145,000 inclusive of any GST and interest, plus the costs of the proceedings on County Count Scale D. The reference to costs does not prevent this from being an offer of compromise: see Enerka Apex Belting Pty Ltd v Vickers Systems Pty Ltd (No 2).[5] See also Simonovski v Bendigo Bank (No 2).[6]
[5][2002] VSC 409
[6][2003] VSC 139
28 I do not consider that the fact that on 1 September 2011 the County Court adopted a unified Scale of Costs prevents the reasoning in those two authorities establishing that the offer made on 12 October 2011 was a valid offer of compromise. In my opinion, the offer made on 12 October 2011 was more favourable to the defendant than the judgment sum, and the plaintiff is therefore entitled to costs in accordance with the rules that govern the offers of compromise.
29 It is therefore unnecessary to consider the plaintiff’s third offer of 22 November 2011. However, my view would be that it is not valid offer. It left the settlement of costs to consideration by the Court in due course. That adds a level of uncertainty to the offer beyond the terms of the second offer which I have regarded as valid. It left the parties to argue to the Court that some of the costs not be paid by the defendant to the plaintiff. In any event, I have considered that the offer of 12 October 2011 is valid.
30 There were other orders that costs of particular parts of the proceeding be reserved and in the case of the unsuccessful summary judgment application, made costs in the cause. Usually, when such an order is made, the party that succeeds in the litigation obtains those costs. However, I consider that in this case, an exception should be made for the summary judgment costs. The plaintiff sought summary judgment for a sum of some $280,000 based on the terms of the contract. The defendant successfully resisted that application. In those circumstances, despite the order that was made, I consider that the appropriate order in respect of that application is that there be no order as to those costs and that they be excluded from the order for costs that the plaintiff is otherwise entitled to.
31 The other orders that have been made reserving particular costs will have their normal operation in accordance with the Rules, which means that the plaintiff is entitled to those costs.
32 The Court was also asked to continue the stay of judgment until the assessment of costs. However, I was provided with no reason to justify a stay of that judgment. Such an order is not the ordinary course and there is no material before me justifying such an order.
33 The result of my reasons is that interest in favour of the plaintiff on the judgment sum should commence on 1 June 2010 and, secondly, with the exception of any other orders for costs that have been specifically made, which are not affected by my reasons, the plaintiff is entitled to the costs of the proceeding on a party-party basis to the date of the offer of compromise, 12 October 2011, and thereafter on the basis sought by the plaintiff, on a solicitor-client basis.
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