Adventure Golf Systems Australia Pty Ltd v Belgravia Health and Leisure Group Pty Ltd (No. 2)
[2017] VCC 274
•23 March 2017
| IN THE COUNTY COURT OF VICTORIA | Revised (Not) Restricted Suitable for Publication |
AT MELBOURNE
COMMERCIAL DIVISON
GENERAL LIST
Case No. CI-16-00958
| ADVENTURE GOLF SYSTEMS AUSTRALIA PTY LTD | Plaintiff |
| v. | |
| BELGRAVIA HEALTH & LEISURE GROUP PTY LTD | Defendant |
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JUDGE: | His Honour Judge Anderson | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 22 March 2017 | |
DATE OF JUDGMENT: | 23 March 2017 | |
CASE MAY BE CITED AS: | Adventure Golf Systems Australia Pty Ltd v Belgravia Health & Leisure Group Pty Ltd (No. 2) | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 274 | |
REASONS FOR DECISION
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Catchwords: Practice and procedure – Costs – Offers of compromise – Whether the plaintiff “unreasonably fail[ed] to accept the offer[s]” – Rule 26.08(4) County Court Civil Procedure Rules 2008 (Vic) – Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No. 2) [2005] VSCA 298 applied.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S. W. Stuckey of Counsel | Kinross-Smith & Co Lawyers |
| For the Defendant | Mr P. S. Noonan of Counsel | HWL Ebsworth |
HIS HONOUR:
1I delivered my reasons for judgment on 22 March 2017 in which I concluded that both the plaintiff’s claim and the defendant’s counterclaim should be dismissed. The parties then addressed the Court in relation to the issue of costs.
2Counsel for the defendant, Mr Noonan, made an application for an order pursuant to Rule 26.08(4) relying upon:
a.an offer of compromise served pursuant to Part 2 of Order 26, dated 29 June 2016 (“the first offer”);
b.alternatively, an offer of compromise served pursuant to Part 2 of Order 26, dated 17 February 2017 (“the second offer”).
3The effect of the offers varies according to whether either or both the first and second offer have application. If an offer has operation, the plaintiff will receive its costs shortly after the date of the offer and the defendant will be entitled to indemnity costs thereafter.
4Counsel for the plaintiff, Mr Stuckey, opposed those orders and submitted that the plaintiff should be paid the costs of the claim in the defendant’s counterclaim seeking damages resulting from the plaintiff’s alleged failure to carry out regular remodelling works to the Dingley facility (“remodelling claim”). Otherwise, Mr Stuckey submitted, there should be no order for costs on the claim or counterclaim.
5The first offer was “to compromise this proceeding by the defendant paying the plaintiff $5,000 inclusive of costs”.
6The second offer was “to compromise this proceeding (including the counterclaim) by the defendant paying to the plaintiff $40,000 inclusive of costs”.
7Both offers comply with the requirements of the Rules. Both offers were “inclusive of costs”. This was permitted by Rule 26.02(4)(a). The second offer was “on terms that [took] into account any other claim made in the proceeding between the parties”, including the counterclaim. This was permitted by Rule 26.02(2).
8Rule 26.08(4) requires the Court to be satisfied that:
a.the plaintiff “unreasonably fails to accept the offer”; and
b.“the claim to which the offer relates is dismissed or judgment on the claim is entered in favour of the defendant”.
9Each offer satisfied the second of these requirements as the plaintiff’s claim is to be dismissed with judgment in the defendant’s favour. The counterclaim is also to be dismissed which means that, effectively, its impact can be ignored and, the references in Rule 26.02(2) to the “claim” to which the “offer of compromise [is] in respect of”, and in Rule 26.08(4) to “the claim to which the offer relates”, can be taken to refer to the plaintiff’s claim.
10The first issue for determination is whether, in relation to each of the offers, “the plaintiff unreasonably fail[ed] to accept the offer”. The principles enunciated by the Court of Appeal in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No. 2) [2005] VSCA 298 (“Hazeldene”), in that case in relation to a “Calderbank offer”, are equally applicable to the words “unreasonably fails to accept the offer” in Rule 26.08(4).
11It was accepted that it is for the offeror to establish that there has been an unreasonable failure to accept the offer. In this regard, it is appropriate to highlight the differences between Rule 26.08(3) and Rule 26.08(4).
12Rule 26.08(3) provides for the costs consequences where “the plaintiff obtains a judgment on the claim to which the offer [made by the defendant] relates not more favourable to the plaintiff than the terms of the offer”. The Rule would appear to have no application in the present case as the plaintiff has not obtained a “judgment on the claim to which the offer relates”.
13However, if that had been the case, the defendant offeror would be entitled to its costs on a standard basis (as compared with an indemnity basis under Rule 26.08(4)), but without the need to satisfy the Court that the plaintiff had unreasonably failed to accept the offer.
14The Court of Appeal reaffirmed at paragraphs 21 and 22 of Hazeldene “the policy rationale underlying the availability of special orders for costs where offers of compromise are rejected”, although it referred to “other competing objectives of equal importance”, including that “potential litigants should not be discouraged from bringing their disputes to the Courts” and that it was “such considerations which underlie the general rule that an order for special costs should only be made in special circumstances”.
15At paragraph 24, the Court of Appeal said that “deciding whether conduct is ‘reasonable’ or ‘unreasonable’ will always involve matters of judgment and impression”. The Court of Appeal, without intending to “give an exhaustive list”, stated at paragraph 25 that, “a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:
a. the stage of the proceeding at which the offer was received;
b. the time allowed to the offeree to consider the offer;
c. the extent of the compromise offered;
d. the offeree’s prospects of success, assessed as at the date of the offer;
e. the clarity with which the terms of the offer were expressed;
f.whether the offer foreshadowed an application for an [order for] indemnity costs in the event of the offeree’s rejecting it”.
16The Court of Appeal made it clear at paragraphs 26 to 29 that the offeror did not have to:
a.set out “the basis for the offeror’s contention that the offeree should accept the compromise”;
b.“establish misconduct by the offeree [or] lack of merit in the way a party has conducted its case”;
c.“show that the offeree acted with ‘wilful disregard of known facts or clearly established law’, or that it acted with ‘high-handed presumption’”.
17Of the six suggested matters to which a court should have regard, an offer of compromise made under the Rules:
a.provides a default period of 14 days for acceptance of an offer, if no other period is specified (Rule 26.03(4)(a));
b.specifically provides for the costs consequences (including a claim for indemnity costs under Rule 26.08(4)) of failing to accept an offer where a claim is dismissed.
18In relation to the first offer made in the present case:
a.the first offer was made almost 4 months after the proceeding was issued on 4 March 2016. By this stage, a defence had been filed and the plaintiff has provided limited further and better particulars of its claim in response to a request. The counterclaim was not filed until 20 October 2016. The plaintiff’s affidavit of documents was sworn on 15 July 2016. It is likely that at least some preparatory work had been done by the plaintiff as part of the discovery process;
b.in the circumstances, it is likely that the plaintiff’s costs up to the date of offer, even on a standard basis, rather than what its solicitors would charge the plaintiff, would have been greater than $5,000. In these circumstances, the plaintiff would have recovered nothing of its claim;
c.in paragraph 7 of the statement of claim attached to the writ, the plaintiff alleged that the parties “owed each other fiduciary obligations” which were specified. In paragraph 15, the plaintiff alleged that the “fiduciary duties owed to the plaintiff” had been breached by the defendant “having taken the opportunity to remain in occupation pending Parks Victoria’s negotiation of a new Management Agreement solely for its own benefit and to the exclusion of the plaintiff”. Both paragraphs were simply denied in the defence;
d.the request made by the defendant for further particulars of the statement of claim on 20 May 2016, was limited to seeking “the usual details of the assertion that ‘under the Agreement the plaintiff and the defendant owed each other fiduciary obligations’ on the terms alleged”. The further particulars provided were as follows:
“The obligations arise by operation of the principles of equity in light of the obligations assumed by the parties under the agreement and the vulnerabilities that they were exposed to by their reliance upon the other party. The “usual details” you seek are that the Agreement is structured to provide that each party brings separate skills and performs separate services relating to the conduct of the Spring Park Golf Facility in return for which they agreed to share the revenue received by your client”.
19I do not consider that the defendant has established that the plaintiff unreasonably failed to accept the first offer, for the following reasons:
a.the offer was made at a relatively early stage of the proceeding. The defendant, by the denials in its defence and the request for particulars of the statement of claim would not, at that stage, have indicated to the plaintiff that there was a serious challenge to the basis of its claim;
b.in the circumstances, a contribution towards the plaintiff’s costs was not such an offer that the plaintiff should be considered to have unreasonably refused.
20In relation to the second offer:
a.the offer was made just over 2 weeks before the trial of the proceeding was due to commence. Whilst most of the interlocutory steps had been completed, the issue of the defendant’s remodelling claim required further steps, including the delivery of further and better particulars of the plaintiff/defendant by counterclaim’s defence to this claim (completed on 20 February and 2 March 2017) and the filing of an answering expert’s report (dated 28 February 2017, in response to the defendant/plaintiff by counterclaim’s expert report dated 13 February 2017);
b.Mr Noonan conceded that, as at the date of the second offer, the amount offered of $40,000 would not have covered the plaintiff’s costs of the proceeding. In my view, it is unlikely that the offered sum would have covered either:
i.the costs, to that date, of the plaintiff pursuing its claim, or;
ii.the separate costs of the plaintiff defending the counterclaim;
c.of the issues in the case, it is likely that by the time of the second offer, the parties would have been fully conversant with the plaintiff’s claim based on a breach of fiduciary obligations and the defendant’s counterclaim seeking the recovery of payments made by mistake. The “mistake” claim had been ventilated in a hearing before His Honour Judge Cosgrave on 17 October 2016 in which the trial listed for 26 October 2016 was vacated and the defendant was given leave to file and serve an amended defence and counterclaim;
d.the further counterclaim by the defendant for the remodelling claim was, in my view, inadequately pleaded by the defendant. The defendant’s expert report, served shortly before the second offer, did not remedy the situation. Mr Noonan, however, blamed the defendant’s inability to pursue the remodelling claim on the plaintiff’s responses to the defendant’s request for particulars of the plaintiff’s defence to counterclaim and the plaintiff’s withdrawal from this position on the first day of the trial. I shall return to this issue below. I do not accept Mr Noonan’s submission.
21I do not consider that the defendant has established that the plaintiff unreasonably failed to accept the second offer, for the following reasons:
a.whilst the plaintiff has had many months to review its claim, it was essentially based on the application of legal principles to largely undisputed facts. The legal principles were complex and not of simple application. The defendant’s conduct of the proceeding to date of the second offer would probably not have affected the plaintiff’s view of its case;
b.the counterclaim consisted of two claims, the mistake claim and the remodelling claim. The mistake claim was dismissed and the remodelling claim was abandoned. The defendant called no evidence in support of the mistake claim, apart from the evidence of Ms Slattery, and offered little explanation for this course. It was the defendant’s choice, but it meant that the mistake claim was unlikely to suceed;
c.much of the evidence at the trial, by the plaintiff’s witnesses and the defendant’s sole witness related to the counterclaim;
d.in these circumstances, I do not accept that the offer of a contribution of only part of the plaintiff’s costs of pursuing its claim and defending the counterclaim, was an offer that was unreasonably refused by the plaintiff.
22In order to consider the plaintiff’s claim for its costs of defending the remodelling claim, and in order to properly consider whether the plaintiff’s or the defendant’s conduct was responsible for the defendant abandoning the remodelling claim at trial, it is necessary to examine the history of that claim.
23The amended defence and counterclaim dated 20 October 2016 made the following allegations:
“21. [Clause 12 of the Dingley Agreement provided that] the plaintiff would:
(i)undertake major maintenance and facility upgrades at its costs and under its supervision: including
(ii)remodel an average of not less than one hole per year commencing no later than the third year of the Agreement…
22.In breach of the Agreement the plaintiff did not remodel an average of not less than one hole per year commencing in the third year of the Agreement.
PARTICULARS
The plaintiff has only remodelled one (1) hole (namely hole 10) since the commencement of the Agreement.
23.By reason of the plaintiff’s breach of the Agreement, the defendant has suffered loss and damage.
PARTICULARS
The defendant’s loss and damage is the cost of remodelling 12 holes. Further particulars will be provided prior to trial”.
24The plaintiff’s defence to counterclaim dated 20 October 2016, admitted the relevant terms of the agreement. In relation to paragraph 22, the plaintiff, in paragraph 4, denied the allegations and said further that it “remodelled numerous holes with the knowledge and consent of the defendant”. The plaintiff gave extensive particulars, providing details of work carried out to 10 holes (holes 1, 4, 6, 8, 9, 12, 14, 16, 17 and 19) on the “outside creek course”, to the clubhouse and to 8 holes (holes 4, 5, 6, 9, 14, 15, 16, 18 and 19) on the “inside chasm course”.
25Examples of the detail provided is as follows:
a.Outside creek course – “Hole 1. Realignment and stabilising of wall to bank of green to improve player enjoyment”;
b.Clubhouse – “A new ball run feature was installed on clubhouse bench to provide entertainment for patrons arriving and leaving the facility”;
c.Inside chasm course – “Hole 4. Bridge over creek created to allow more options from the tee shot”.
26On 20 February 2017, the plaintiff’s solicitors advised the defendant’s solicitors that, “Following an inspection of the Dingley Adventure Golf Course by our clients, we are instructed to advise that the particulars to paragraph 4 of the plaintiff’s defence and counterclaim are revised as follows…”. The “revised” particulars were essentially an amplification of the detail previously included in the defence to counterclaim. It appears that hole 6 in the pleading was referred to as hole 8 in the revised particulars.
27On 24 February 2017, the defendant requested the plaintiff to “provide, by Wednesday 1 March 2017, the approximate date (month and year) that each of the works described in your client’s amended particulars dated 20 February 2017 is said to have taken place”.
28On 2 March 2017, the plaintiff’s solicitors responded to the defendant’s solicitors request dated 24 February 2017. The letter gave “approximate dates” which had been “worked out from minutes of meetings/diary entries” for the following holes outside creek course holes 6, 12, 16 and 19, and inside chasm course holes 5, 9, 15, 16 and 18. The earliest date was “post February 2003” and the latest was “December 2007”. There was also reference to an unidentified hole revised in April/May 2003.
29In his opening address at the commencement of the trial on 6 March 2017, Mr Noonan said that the only witness he proposed to call on the “remodelling claim” was the expert Mr Chamberlain. Mr Noonan said later in his opening that the defendant relied upon the letter dated 2 March 2017 as an admission that “there’s no allegation any remodelling has taken place in the last eight years of the contract”.
30Mr Stuckey immediately (off the transcript) corrected Mr Noonan who then said, “I’m just going on particulars we’re provided, we obviously asked it for a particular reason and that is that we have different witnesses who were there at different times…If I’m now being told…that actually they’re going to allege that work took place…in the last eight years, I may have to call other witnesses”.
31Mr Stuckey indicated that his client had “to the best of our ability given particulars of when those works had taken place. Some of them we can’t say with any degree of precision when the work took place, because it wasn’t a particular issue”. Mr Stuckey said that the plaintiff’s three directors would “in different combinations be giving evidence – different individuals had involvement with different holes”.
32At 2.15pm on 6 March 2017, Mr Stuckey told the Court that he had provided to Mr Noonan “the plaintiff’s best effort at the remainder of the holes”. Mr Stuckey then continued with his examination in chief of Mr Webb, and took him through extensive evidence of his involvement in the “changes to the holes between 1999 and 2015”.
33Towards the end of the first day of the trial, Mr Stuckey called Mr Ulph to give evidence. Mr Ulph gave some general evidence about “discussions about changes to be made to holes within the facility” and the steps taken to identify “likely candidate holes” for redevelopment.
34At the commencement of the second day of the trial, Mr Stuckey informed the Court that Mr Noonan had advised him “that the defendant will not be pursuing the claim in respect of the alleged failure to remodel the requisite number of holes”.
35Mr Chamberlain’s expert witness report filed by the defendant is dated 12 February 2017. The letter of instructions to Mr Chamberlain from the defendant’s solicitors dated 23 December 2016, include the following paragraphs:
“2.5 Belgravia alleges that, in breach of clause 12 of the 2000 Agreement, AGSA:
(a) had not remodelled an average of not less than one hole per year; and
(b) in fact, has only remodelled a total of four holes, being holes 5, 10, 16 and 19 for the relevant period.
2.6Put another way, Belgravia claims AGSA has only remodelled 4 of the 12 holes it was contractually required to remodel under clause 12 of the 2000 Agreement.
2.7AGSA claims that it has remodelled numerous holes with the knowledge and consent of Belgravia. The holes AGSA claims it has remodelled, along with the description of work allegedly conducted is set out in paragraph 4 of AGSA’s Defence to Counterclaim dated 3 November 2016.
3.EXPERT REPORT
3.1We request you provide us with an opinion in writing (Expert Report) answering the following questions:
(a)in your opinion, what constitutes remodelling of a hole on a mini-golf course?
(b)in your opinion, if Belgravia was to now remodel eight holes in the Adventure Golf Course, which holes should it remodel and why?
(c)in your opinion, what remodelling works should be carried out for each of the eight holes you have identified in 3.1(b) above?
(d)in your opinion, how much will the remodelling work you have identified in 3.1(c) above cost? Please ensure that your Expert Report clearly sets out a breakdown of the:
(i)cost of the remodelling work for each of the eight holes; and
(ii)total cost of the remodelling work for the eight holes.
3.2Your Expert Report should only address the specific questions outlined in paragraph 3.1 above. Your Expert Report should not comment on or analyse any other matter including but not limited to:
(a)whether the works described in paragraph 4 of AGSA’s Defence to Counterclaim dated 3 November 2016:
(i) were actually conducted; or
(ii)constitute a remodelling of those holes; or
(b)(to the extent it is not covered by 3.2(a) above) whether holes 5, 10, 16 and 19 were remodelled; or
(c)AGSA’s liability to remodel the holes under the 2000 Agreement (or otherwise)”.
36Mr Chamberlain was given copies of the pleadings. However, no further material was apparently provided to Mr Chamberlain as to the work actually carried out by the plaintiff since 2000 including the specific matters raised by the plaintiff in its defence to counterclaim. It is also unclear what the basis was for the statement in the defendant’s solicitors’ letter of instruction that, “in fact [the plaintiff] has only remodelled a total of four holes, being holes 5, 10, 16 and 19 for the relevant period”. The counterclaim refers to hole 10 as the “only remodelled” hole.
37In the circumstances, it would have appeared at that time that the defendant proposed to pursue its remodelling claim in a very constrained way, if indeed it intended to pursue it at all.
38In his submissions on the plaintiff’s application for the costs of the remodelling claim, Mr Noonan said that the plaintiff had “changed its position…halfway through the first day” of the trial. Until that time, the “only claim on foot” related to work in relation to a few holes. The defendant was unable to pursue the remodelling claim because once the position was known, it was too late for the defendant to find the relevant witnesses from the periods concerned.
39I do not accept that submission. It was not supported by evidence and is not, in my view, the likely inference from the history of the defendant’s pursuit of this claim. I consider, therefore, that whether or not the defendant may have pursued the claim at trial that, the defendant was likely to have known that the remodelling claim had little chance of success.
40Notwithstanding this conclusion, I consider that the most appropriate determination in relation to the issue of the costs of the remodelling claim and of the proceeding generally is for me to make no order as to costs.
41Further, even if I had formed the view that either of the defendant’s first or second offers had been rejected “unreasonably” by the plaintiff, it would nevertheless be appropriate to “otherwise order”, pursuant to Rule 26.08(4), and to make no order as to the costs of the proceeding.
42The reasons for this determination are as follows:
a.as Mr Noonan said, apart from the defendant’s offers of compromise, the result of the trial of the claim and counterclaim was effectively a “nil-all draw”;
b.the plaintiff commenced the proceeding and the issue of whether a fiduciary duty arose had been raised in the plaintiff’s solicitors’ letter dated 26 October 2015 to which the defendant responded on 29 October 2015. The issue was essentially determined by a consideration of the terms of the Dingley Agreement and the not insubstantial matters of context which were relevant to whether a relevant fiduciary duty existed in addition to the contractual obligations. There was, however, a serious matter of controversy between the parties;
c.the issue of mistake also raised significant disputes of fact and law. The matter was first raised in the defendant’s letter dated 3 October 2005. A partial resolution of the water charges issue occurred when the defendant’s offer dated 30 November 2006 was accepted by the plaintiff’s solicitors’ letter dated 10 September 2007. Some deductions were made for rental increases and water charges in calculating the net green fees paid to the plaintiff between October 2005 and February 2008. However, the defendant declined to call any witnesses apart from Ms Slattery who might have clarified the reason for nothing happening after February 2008;
d.the remodelling claim was abandoned by the defendant in the circumstances I have detailed. The plaintiff was put to additional expense, including the preparation of the expert report of Mr McGain dated 28 February 2017. The plaintiff’s response on 2 March 2017 to the defendant’s request for the dates of the works the plaintiff alleged it had carried out was inadequate, as was demonstrated by its ability to provide more comprehensive dates by 2.15pm on the first day of the trial. However, I am not persuaded that the plaintiff’s unhelpful response on 2 March and the clarification during opening addresses on 6 March was the principal reason for the defendant not pursuing the remodelling claim;
e.once the remodelling claim was abandoned, the trial concluded efficiently and expeditiously;
f.I would be reluctant, unless there were compelling reasons to do so, to require the parties to litigate any further issues arising from their dispute. In my view,
the most appropriate result in respect of costs, is for each party to bear their own.
43The orders I make are:
1.Judgment for the defendant against the plaintiff that the plaintiff’s claim be dismissed.
2.Judgment for the plaintiff against the defendant that the defendant’s counterclaim be dismissed.
3.There be no order as to costs of the proceeding, including the claim and counterclaim.
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Certificate
I certify that these 12 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 23 March 2017.
Dated: 23 March 2017.
Carla Cianfaglione
Associate to His Honour Judge Anderson
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