Alpine Holdings Pty Ltd v Warwick Entertainment Centre Pty Ltd
[2003] WASC 53 (S)
•24 MARCH 2003
ALPINE HOLDINGS PTY LTD & ORS -v- WARWICK ENTERTAINMENT CENTRE PTY LTD & ORS [2003] WASC 53 (S)
| Link to Appeal : | [2005] WASCA 174 |
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2003] WASC 53 (S) | |
| Case No: | CIV:1208/1998 | 4-8 & 11-14 NOVEMBER 2002, 27 MAY, 11 & 23 JUNE 2003 | |
| Coram: | ROBERTS-SMITH J | 24/03/03 | |
| 14/07/03 | |||
| 33 | Judgment Part: | 1 of 1 | |
| Result: | Judgment for plaintiffs, Damages assessed, First and second defendants' counterclaim dismissed, Plaintiffs' application for indemnity costs refused, Defendants to pay plaintiffs' costs on party/party basis, First and second defendants' application for stay of execution refused, Partial stay granted in respect of third and fourth defendants | ||
| A | |||
| PDF Version |
| Parties: | ALPINE HOLDINGS PTY LTD (ACN 009 471 907) EGON KONIG SHELLEY KONIG WARWICK ENTERTAINMENT CENTRE PTY LTD (ACN 054 246 918) WESTGEM HOLDINGS PTY LTD (ACN 050 218 954) ROBERT STEELE BRIAN McCUBBING |
Catchwords: | Damages Assessment Trade practices Loss and damage due to misleading or deceptive conduct Practice and procedure Costs Indemnity costs "Calderbank" letter of offer of compromise and offer of compromise pursuant to O 24A rejected Plaintiffs obtaining better result by judgment Whether indemnity costs payable on basis of rejection of "Calderbank" and O 24A offer Principles to be applied Practice and procedure Judgments and orders Power to recall reasons before judgment pronounced Application to re-open Discretion Principles Practice and procedure Judgments and orders Stay of execution pending appeal Principles |
Legislation: | Rules of the Supreme Court (WA), O 24A, O 66 Supreme Court Act 1936 (WA), s 37 |
Case References: | Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685 Alpine Holdings & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53 Calderbank v Calderbank [1975] 3 All ER 333 Cutts v Head [1984] Ch 290 Dobb v Hacket (1993) 10 WAR 532 Federal Commissioner of Taxation v Myer Emporium Ltd (1986) 160 CLR 220 Fortron Automotive Treatment Pty Ltd v Eurotine Holdings Pty Ltd & Ors [2001] WASCA 384 Gates v The City Mutual Life Assurance Society Limited (1986) 160 CLR 1 Henville v Walker (2001) 206 CLR 459 Hoad v Nationwide News Pty Ltd & Ors (1997) 37 IPR 407 Huntsman Chemical Co Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242 I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 76 ALJR 1461 John S Hayes & Associates Pty Ltd v Kimberley Clark Australia Pty Ltd (1994) 52 FCR 201 Linotype-Hell Finance Ltd v Baker (Practice Note) [1992] 4 All ER 887 Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 Malliaros v Moralis [1991] 2 VR 501 Marks v GIO Australia Holdings Limited (1998) 196 CLR 494 McBride v Sandland (No 2) (1918) 25 CLR 369 Monaco v Arnedo Pty Ltd, unreported; FCt SCt of WA; Library No 940481; 6 September 1994 Monk v Bartram [1891] 1 QB 346 Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 Pavich v Bobra Nominees Pty Ltd [1988] ATPR (Digest) 46-039 Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 77 ALJR 768 Re Middle Harbour Investments Ltd (in liq), unreported; CCA of NSW; 15 December 1976 State Bank of Victoria v Parry [1989] WAR 240 State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 The Annot Lyle (1886) 11 PD 114 Wallace v Baulkham Hills Smash Repairs Pty Ltd (No 2), unreported; SCt of NSW; 21 August 1995 Wilson v Church (2) (1879) 12 Ch D 454 AutoDesk v Dyason (1993) 176 CLR 3000 Baillieu Knight Frank v Ted Manny Real Estate (1992) 30 NSWLR 359 Cox and Coxon Ltd v Leipsit [1999] 2 NZLR 15 Duvall v Godfrey Virtue & Co, unreported; SCt of WA; Library No 970510; 24 September 1997 Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 Metwally v University of Wollongong (1985) 60 ALR 68 Norman v Norman (1992) 6 WAR 372 Pirrotta v Citibank Ltd (1998) 72 SASR 259 Sanko Steamship Co Limited & Anor v Sumitomo Australia Limited, unreported; FCA; 7 February 1996 Smith v NSW Bar Association (1992) 176 CLR 256 Thiess Contractors Pty Ltd v Placer (Granny Smith) Pty Ltd [2000] WASCA 102 Toteff v Antonas (1952) 87 CLR 647 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
DECISION : 14 JULY 2003 FILE NO/S : CIV 1208 of 1998 BETWEEN : ALPINE HOLDINGS PTY LTD (ACN 009 471 907)
- First Plaintiff
EGON KONIG
Second Plaintiff
SHELLEY KONIG
Third Plaintiff
AND
WARWICK ENTERTAINMENT CENTRE PTY LTD (ACN 054 246 918)
First Defendant
WESTGEM HOLDINGS PTY LTD (ACN 050 218 954)
Second Defendant
ROBERT STEELE
Third Defendant
(Page 2)
- BRIAN McCUBBING
Fourth Defendant
(BY ORIGINAL ACTION)
WARWICK ENTERTAINMENT CENTRE PTY LTD (ACN 054 246 918)
Plaintiff
AND
ALPINE HOLDINGS PTY LTD (ACN 009 471 907)
First Defendant
EGON KONIG
SHELLEY KONIG
Second Defendants
(BY COUNTERCLAIM)
Catchwords:
Damages - Assessment - Trade practices - Loss and damage due to misleading or deceptive conduct
Practice and procedure - Costs - Indemnity costs - "Calderbank" letter of offer of compromise and offer of compromise pursuant to O 24A rejected - Plaintiffs obtaining better result by judgment - Whether indemnity costs payable on basis of rejection of "Calderbank" and O 24A offer - Principles to be applied
Practice and procedure - Judgments and orders - Power to recall reasons before judgment pronounced - Application to re-open - Discretion - Principles
Practice and procedure - Judgments and orders - Stay of execution pending appeal - Principles
(Page 3)
Legislation:
Rules of the Supreme Court (WA), O 24A, O 66
Supreme Court Act 1936 (WA), s 37
Result:
Judgment for plaintiffs
Damages assessed
First and second defendants' counterclaim dismissed
Plaintiffs' application for indemnity costs refused
Defendants to pay plaintiffs' costs on party/party basis
First and second defendants' application for stay of execution refused
Partial stay granted in respect of third and fourth defendants
Category: A
Representation:
Original Action
Counsel:
First Plaintiff : Mr N W McKerracher QC & Mr R M J Lombardi
Second Plaintiff : Mr N W McKerracher QC & Mr R M J Lombardi
Third Plaintiff : Mr N W McKerracher QC & Mr R M J Lombardi
First Defendant : Mr N D C Dillon
Second Defendant : Mr N D C Dillon
Third Defendant : In person
Fourth Defendant : In person
Solicitors:
First Plaintiff : Feinauer & Associates
Second Plaintiff : Feinauer & Associates
Third Plaintiff : Feinauer & Associates
First Defendant : Williams & Hughes
Second Defendant : Williams & Hughes
Third Defendant : In person
Fourth Defendant : In person
(Page 4)
Counterclaim
Counsel:
Plaintiff : Mr N D C Dillon
First Defendant : Mr N W McKerracher QC & Mr R M J Lombardi
Second Defendants : Mr N W McKerracher QC & Mr R M J Lombardi
Solicitors:
Plaintiff : Williams & Hughes
First Defendant : Feinauer & Associates
Second Defendants : Feinauer & Associates
Case(s) referred to in judgment(s):
Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685
Alpine Holdings & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53
Calderbank v Calderbank [1975] 3 All ER 333
Cutts v Head [1984] Ch 290
Dobb v Hacket (1993) 10 WAR 532
Federal Commissioner of Taxation v Myer Emporium Ltd (1986) 160 CLR 220
Fortron Automotive Treatment Pty Ltd v Eurotine Holdings Pty Ltd & Ors [2001] WASCA 384
Gates v The City Mutual Life Assurance Society Limited (1986) 160 CLR 1
Henville v Walker (2001) 206 CLR 459
Hoad v Nationwide News Pty Ltd & Ors (1997) 37 IPR 407
Huntsman Chemical Co Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242
I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 76 ALJR 1461
John S Hayes & Associates Pty Ltd v Kimberley Clark Australia Pty Ltd (1994) 52 FCR 201
Linotype-Hell Finance Ltd v Baker (Practice Note) [1992] 4 All ER 887
Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721
(Page 5)
Malliaros v Moralis [1991] 2 VR 501
Marks v GIO Australia Holdings Limited (1998) 196 CLR 494
McBride v Sandland (No 2) (1918) 25 CLR 369
Monaco v Arnedo Pty Ltd, unreported; FCt SCt of WA; Library No 940481; 6 September 1994
Monk v Bartram [1891] 1 QB 346
Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425
Pavich v Bobra Nominees Pty Ltd [1988] ATPR (Digest) 46-039
Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 77 ALJR 768
Re Middle Harbour Investments Ltd (in liq), unreported; CCA of NSW; 15 December 1976
State Bank of Victoria v Parry [1989] WAR 240
State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146
The Annot Lyle (1886) 11 PD 114
Wallace v Baulkham Hills Smash Repairs Pty Ltd (No 2), unreported; SCt of NSW; 21 August 1995
Wilson v Church (2) (1879) 12 Ch D 454
Case(s) also cited:
AutoDesk v Dyason (1993) 176 CLR 3000
Baillieu Knight Frank v Ted Manny Real Estate (1992) 30 NSWLR 359
Cox and Coxon Ltd v Leipsit [1999] 2 NZLR 15
Duvall v Godfrey Virtue & Co, unreported; SCt of WA; Library No 970510; 24 September 1997
Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397
Metwally v University of Wollongong (1985) 60 ALR 68
Norman v Norman (1992) 6 WAR 372
Pirrotta v Citibank Ltd (1998) 72 SASR 259
Sanko Steamship Co Limited & Anor v Sumitomo Australia Limited, unreported; FCA; 7 February 1996
Smith v NSW Bar Association (1992) 176 CLR 256
Thiess Contractors Pty Ltd v Placer (Granny Smith) Pty Ltd [2000] WASCA 102
Toteff v Antonas (1952) 87 CLR 647
(Page 6)
1 ROBERTS-SMITH J: Reasons for decision were delivered in this matter on 24 March 2003 after a trial held on 4-8, 11-14 November 2002 (Alpine Holdings & Ors v Warwick Entertainment Centre Pty Ltd & Ors [2003] WASC 53) ("the primary reasons").
2 Having delivered my reasons I left it to the parties to bring in a minute of agreed orders, including interest components. Furthermore, I included in my assessment of damages to be awarded to the Konigs, an amount of $211,030, being the balance outstanding of a loan of $240,000 by them to Alpine Holdings. I reduced the damages payable to Alpine Holdings by the amount of the outstanding balance on the basis that it would have been repaid to the Konigs in due course. As the issue of repayment of the loan had not been specifically pleaded on behalf of the Konigs nor addressed in submissions by counsel, I gave the parties liberty to make further submissions in that regard.
3 The relevant evidentiary context and findings are set out in the primary reasons and I shall not repeat them. These reasons are to be read together with the primary reasons.
4 The plaintiffs subsequently filed further submissions dated 15 April 2003 in support of their motion for judgment. The first and second defendants (to whom where convenient henceforth I shall refer as "the Carey companies") filed an outline of submissions and minute of proposed orders on 7 May 2003. They filed a chamber summons for a stay of execution on 4 June and an amended minute of proposed orders on 10 June 2003.
5 The plaintiffs filed further submissions as to a stay of execution of judgment and costs on 16 April and amended submissions on amendment, damages, interest and cots, on 29 May 2003.
6 The parties also filed various affidavits in support of the outstanding applications and submissions.
7 The issues now before me are:
1. A request on behalf of the Carey Companies that I recall the primary reasons to "correct" what Mr Dillon argues is an erroneous approach to damages; alternatively, that I allow the Carey Companies to re-open on the issue of expectation damages and mitigation;
2. whether the loan by the Konigs to Alpine Holdings should be treated as a head of damages for the Konigs;
(Page 7)
- 3. an application by the plaintiffs to amend their pleadings to enlarge the quantum of damages claimed;
4. The terms of the orders to be made as to costs and interest;
5. An application by the Carey Companies for a stay of execution of the judgment (yet to be pronounced) pending appeal.
Recall of reasons for "correction"; leave to further cross-examine
8 It was Mr Dillon's submission that the sum of $738,510 for profit forgone by Alpine Holdings over the 15-year lease period, ought not be allowed because it would represent expectation damages which are not recoverable in the circumstances.
9 The argument, put very shortly, was that the primary reasons acknowledge (at [267] - [270]) it was common ground the appropriate measure of damages in this case is that analogous to damages in tort for misrepresentation or deceit and referred to passages from the judgments of the members of the High Court in Henville v Walker (2001) 206 CLR 459, yet then failed to take into account the findings of the majority in that case to the effect that expectation damages cannot be awarded under s 82 of the TPA. It was submitted that a party is not entitled to damages on the basis that the misrepresentation would be fulfilled, unless it be possible to apply the contractual measure of damages by finding the misrepresentation amounted to a collateral contract, which is not the case here.
10 These submissions do not accurately reflect my reasoning. It was not that damages for future profits should be awarded to Alpine Holdings because that was what had been promised, but because Alpine Holdings had lost that profit as a result of the misrepresentations. That conclusion was based on the likelihood those profits would otherwise have been made had it not been for the misrepresentations and involved an acceptance of the plaintiffs' expert evidence in that respect. The point sought to be made by reference to Henville v Walker was that the measure of damages in tort is no more than a useful guide when determining damages under s 82 TPA. At [270] of the primary reasons I specifically referred to what McHugh J had said about that in Henville v Walker.
11 As the High Court pointed out in Marks v GIO Australia Holdings Limited (1998) 196 CLR 494, once causation is established, neither the amount recoverable under s 82(1) nor the orders that might be made under
(Page 8)
- s 87 TPA are limited by analogy with breach of contract, tort or equitable remedies.
12 The same point had been made by McHugh, Hayne and Callinan JJ in Marks at [41]:
"This is not to say that no help can be had from the common law in deciding what damages may be allowed under s 82 in cases of conduct contravening s 52. Very often, the amount of the loss or damage caused by a contravention of s 52 will coincide with what would have been allowed in an action for deceit. But that is because the inquiry in both cases is to find out what damage flowed from (in the sense of being caused by) the deceit or contravention. Leaving aside the questions of remoteness of damages in assessing damages for deceit (a question that was left unresolved in Gould v Vaggelas, the damages for deceit will be the sum representing the loss suffered by the plaintiff because the plaintiff altered its position in reliance on the defendant's misrepresentation. But the analogy cannot be pressed too far. It should not be pressed to the point of concluding that the only damages that may be allowed under s 82 are those that would be allowed in an action for deceit. The question presented by s 82 is not what would be allowed in deceit, it is what loss or damage has been caused by the conduct contravening the Act." (Footnote omitted.)
13 To accept that the appropriate measure of damages is analogous to those in tort for misrepresentation or deceit is not to say they must be exactly the same. The analogy is no more than that; it is not a confining constraint.
14 I accept that even after reasons for decision have been published a Judge is permitted to change his or her mind and has the discretion to allow a party to re-open to persuade the Judge to do so (per Anderson J in Hoad v Nationwide News Pty Ltd & Ors (1997) 37 IPR 407 at 409 and the authorities there cited). Leave to re-open for this purpose will not lightly be given where the matter sought to be re-opened was fairly before the court on the first occasion (per Anderson J, ibid). In effect, counsel for the Carey companies has already had that opportunity. He has argued that I should recall my reasons and change my finding that Alpine Holdings should be awarded $738,510 as damages for profit foregone. I decline to do so. I do not consider that award would constitute "expectation damages" in the sense used by the High Court (see e.g. the
(Page 9)
- joint judgment of Mason, Wilson and Dawson JJ in Gates v The City Mutual Life Assurance Society Limited (1986) 160 CLR 1 at 11 - 12 and Gaudron J in Marks, supra, at 502 - 503).
15 Mr Dillon conceded (t 1002; 1005) the expert evidence of Morgan and Stagoll had dealt at some length with the plaintiff's claim for loss of profit and that the claim had been included in the plaintiff's particulars, but he nonetheless argued that he had not regarded it as a live issue because in his view it was a claim for expectation damages, which could not be awarded.
16 That item was clearly raised by the expert evidence called on behalf of the plaintiffs. Morgan spent considerable time on it. Stagoll, the defendants' expert, also spent considerable time on it. Counsel for the defendants had every opportunity to deal with the issue at trial.
17 Counsel submitted this case is similar to Monaco v Arnedo Pty Ltd, unreported; FCt SCt of WA; Library No 940481; 6 September 1994; BC 9402083 in that the way in which the plaintiffs' case was presented gives rise to a necessity to allow the defendants to re-open to deal with the damages issue and to call further evidence. Monaco, however, is distinguishable in that the learned Commissioner whose judgment had been set aside on appeal had decided the case on the basis of a legal proposition which no party had advanced and in respect of which he had not given anybody the opportunity to make submissions. That is simply not the position here, where the plaintiffs' case had been conducted on the basis such damages were sought and should be awarded. Nor was objection taken to Morgan's evidence in this regard. To my mind, the present case is similar to that of Placer (Granny Smith) Pty Ltd v Thiess Contractors Pty Ltd (2003) 77 ALJR 768, and see Hayne J at [32] - [34] and Callinan J at [84].
18 I come to Mr Dillon's alternative application that the Carey companies should be permitted to re-open the evidence and further cross-examine Mr Konig. Such cross-examination would be confined to the issue of mitigation of damages.
19 There are two obstacles in the way of this. The first is that the primacy of the causation principle in s 82 TPA excludes reliance upon concepts such as mitigation or contributory negligence (I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 76 ALJR 1461 - and see in particular the reference by McHugh J to the dicta of French J in Pavich v Bobra Nominees Pty Ltd [1988] ATPR (Digest) 46-039).
(Page 10)
20 The second is that the defendants had the opportunity at trial to cross-examine Mr Konig on the issue of the quantification of loss of future profit. I refuse leave for the Carey companies to re-open to further cross-examine Mr Konig with respect to mitigation of damages.
Treatment of loan
21 The first and second defendants oppose the inclusion of any component in respect of the loan balance outstanding. They contend that the finding that the balance of that loan from the Konigs to Alpine Holdings should not be included in Alpine Holding's damages (primary reasons, [321]), should stand, but that the amount should not be included in the damages awarded to the Konigs (primary reasons, [328]). The first and second defendants say that is because the sum was not pleaded as a component of the Konigs' alleged loss and that the $211,030 ought not to be awarded without an amendment to the statement of claim and that at this late stage in the proceedings, the first and second defendants would be substantially prejudiced if such an amendment were to be made. There is a further submission that there would be double compensation were the Konigs able to recover the loan balance of $211,030 as part of their loss.
22 The first submission of the plaintiffs in respect of the loan balance is that the consequence of the treatment of it in the primary reasons is neutral to the defendants. That is because the loan balance of $211,030 was deducted from the losses claimed by the first plaintiff but added to the losses awarded to the second and third plaintiffs. The net effect is that they offset each other and there is no effect on the overall damages awarded to the plaintiffs generally.
23 The plaintiffs submit the damages were at large in the pleaded case and that expert evidence afforded the parties and the court the opportunity to evaluate the extent of loss and damage sustained if the underlying facts were established. The submission is that the facts were established and the ultimate computation is a matter for the court. Finally they submit that if an amendment of the plaintiffs' pleadings or particulars is thought to be necessary to accommodate the actual losses found, then such amendment should be permitted (State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146) because there is no prejudice to the defendants.
24 It is necessary first for me to deal with a collateral submission made on behalf of the Carey companies. The submission is that because in the primary reasons I have limited the first plaintiff's recovery to the claimed loss of $548,296, that restriction would in any event have precluded
(Page 11)
- recovery of the $211,030 by the first plaintiff - that is, even if the loan balance was not deducted from the first plaintiff's damages, it would still only recover $548,296.
25 I think the short answer to this is that the loan balance was deducted from the first plaintiff's claim because it was not, on my reasoning, a loss suffered by the first plaintiff. The fact that if it had been a loss suffered by the first plaintiff, the damages awarded could still not have exceeded the amount claimed, is simply not to the point.
26 The first and second defendants submit the amount should not be allowed and an amendment should not be permitted because they conducted their case on the basis that the Konigs did not seek recovery of the balance of the loan as part of their damages and so to allow them to recover an amount equivalent to it as damages, raises a different case to that pleaded and contested. It is said that if the amount is now incorporated into the damages awarded to the Konigs, the first and second defendants would have been denied the opportunity to cross-examine the plaintiff's expert (Morgan) or obtain evidence from the first and second defendants' expert (Stagoll), as to the relationship between Alpine's balance sheet, the loss suffered on the abandonment of the fixed assets and the loan itself.
27 They argue that there was no opportunity to test the expectation that Alpine Holdings would have repaid the loan to the Konigs because such repayment was not included in the calculations of the plaintiffs' losses.
28 However, as counsel points out, the treatment given to the issue by the Konigs was to allow a 10 per cent "interest expense" in respect of the loan.
29 That is so. I note that interest expenses of $97,780 were claimed on the borrowed funds (answer 8.1 and 9.1(iii) of the Answer to Request for Further and Better Particulars of the Plaintiffs' Further Re-amended Statement of Claim).
30 Thus, while the first and second defendants are strictly correct, it is nonetheless true that the issue was raised in substance. Indeed it was the first and second defendants' position at trial that the loan to the E & S Konig Family Trust only existed because of the structures used by the plaintiffs. That much can be accepted. Beyond that, it was the first and the second defendants' case that had the Konigs' business operated as a partnership, no such loan would have existed - it would have been "partners' capital" and that in fact, the $240,000 was capital invested in
(Page 12)
- the business with an expectation of profit, not funds lent with an expectation of interest return. This position was summarised in the notes to exhibit D27 tendered by the defendants. I accept the analysis. On that basis the loss was realistically that of the Konigs, and it was the loss of the return of the outstanding balance of the loan. I am of the view that the loss is properly compensable to the Konigs and that in the circumstances the issue was sufficiently raised and live at trial. I do not consider amendment of the pleadings or particulars is necessary, but if it were, I would allow it.
31 I turn to the submission that the award of the loan balance would involve double compensation.
32 The first and second defendants submit that the original loan of $240,000 made by the Konigs to Alpine Holdings was to finance the setting up of the business including the acquisition of plant, equipment and fit-out. They then point out that the amount of $169,786 claimed by Alpine Holdings as losses incurred in operating the business incorporates a loss of $75,116 on disposal of fixed assets. However, the plant and equipment which were subsequently abandoned and which resulted in the loss of the $75,116 was purchased (given the loan was to assist in establishment costs) through the money advanced by way of the loan. If that proposition be accepted, then it is submitted the plaintiffs will be doubly compensated by the repayment of both the loss on the disposal of the fixed plant and equipment and the repayment of the outstanding loan which was used, at least in part, to acquire the fixed plant and equipment.
33 I do not accept this submission. That is because Alpine Holdings would have to have repaid the loan in due course in any event, but would have had the assets, upon which it has however suffered a loss on disposal due to the defendants' conduct.
34 I note in passing that in the plaintiffs' interest calculations, the trading losses of $169,786 have been eliminated because they are fully off-set by the loan balance of $211,030 deducted from the losses of Alpine Holdings. I consider that treatment to be correct.
35 Next it is submitted repayment of the loan would have reduced the profit earned by Alpine Holdings (and the Konigs). Thus it is said the Konigs would be doubly compensated if they (through Alpine Holdings) receive both the profit without deduction for repayment of the loan and repayment of the loan itself.
(Page 13)
36 This submission ignores the fact that the loan repayment has been deducted from Alpine Holdings' trading loss (primary reasons, [321]).
37 There is a related submission. It is that the value of the remaining unsold plant and equipment taken by the Konigs from the Beverley Hills Café should be deducted from the loan repayment. According to Morgan the value of the unsold plant and equipment removed was $42,594. I accept this submission. There would be an element of double compensation were the Konigs to recover both the balance of the loan and have the benefit of that plant and equipment. The $211,030 should be reduced to $168,436.
Plaintiff's application to amend
38 In my primary reasons I concluded (at [321]) that the total estimated trading loss for Alpine Holdings was $697,266 but as the claim was only for $548,296 that is all that should be allowed. Mr McKerracher QC submits that judgment should be given for the full amount rather than that claimed. He submitted that damages were at large in the pleaded case and that the expert evidence afforded the parties and the Court the opportunity to evaluate the extent of loss and damage if the underlying facts were established. If any amendment of the plaintiff's pleadings or particulars is necessary to accommodate the actual loss as found, it should be permitted in order to do justice (Queensland v J L Holdings Pty Ltd (supra).
39 No minute of proposed amendment was put forward.
40 The application to amend is strongly opposed by the defendants. They say not only was that not the case pleaded, but that they would be prejudiced by it particularly in respect of the plaintiffs' application for indemnity costs. It would be unfairly prejudicial for the plaintiffs to be allowed to argue on the one hand that the defendants should have accepted an offer to compromise on the basis of the quantum pleaded and at the same time be permitted to enlarge that quantum after trial.
41 In my view, in light of the plaintiffs' pleaded case and the way in which Alpine Holdings' loss was quantified by its expert at trial, the motion to amend (or, more accurately, for judgment in the full amount found rather than that claimed) should be refused.
(Page 14)
Interest
42 In relation to the forecast profit foregone over 15 years of the lease, I accept the plaintiff's submission that having held that the interest expense on the Konigs' loan is not claimable (because it was not actually incurred), it is consistent to exclude the interest expense on this loan which was taken into account in the calculation of the forecast profit over the 15 year period of the lease. Accordingly, the increase in Alpine Holdings' losses over the 15 years by $360,000 (from the $378,510 claimed, to $738,510) compensates for the interest expense claimed by the Konigs of $97,780 that was disallowed. Again, that is consistent with the approach taken in the primary reasons.
43 The first plaintiff claims interest of $146,201.20 on forecast profits of $738,510 foregone over the 15 years for the Beverley Hills Café lease. Whilst I have included the amount of $738,510 in the calculation of loss, I limited the total loss to the amount claimed, namely $548,296. In that circumstance, interest should be payable only on the amount of $548,296 actually awarded. I consider the appropriate way to approach that is to allow interest then for profit of $541,574 foregone over 11 years as calculated in the plaintiffs' outline (a total of $120,825.60) plus interest on the balance of $6,722 at the applicable rate from 30 June 1999.
44 I allowed an amount of $15,607 for the actual selling expenses of Egon's Café and Patisserie. The second and third plaintiffs claim interest on that amount. It should be allowed.
45 The second and third plaintiffs also claim interest on the $125,166.00 they characterise as estimated directors' salaries not recovered by them from Alpine Holdings during the period 23 May 1993 to 6 January 1997. That amount I allowed as wages. I would award interest on the amount claimed.
46 The second and third plaintiffs also claim interest of $74,166.92 on the loan balance of $211,030 as at 28 February 1997. I accept the first and second defendants' submissions in that regard. It was never contemplated by the first and second plaintiff that interest would be paid. I would not allow it.
Costs
47 In their written submissions dated 15 April 2003 the plaintiffs sought indemnity costs solely on the basis of a "Calderbank offer" (Calderbank v Calderbank [1975] 3 All ER 333).
(Page 15)
48 The making of the Calderbank offer was proved by the affidavit of Charmaine Tsang sworn 16 April 2003. Facsimile letters were sent by the plaintiffs' solicitors to the first and second defendants' solicitors and to the third and fourth defendants personally, on 10 October 2002. The plaintiffs' offer was to compromise the proceedings on the basis of consent orders that the defendants pay the sum of $350,000 and that the plaintiffs' action and the first defendant's counterclaim be dismissed. In the event, the outcome for the plaintiffs was better than the compromise so offered.
49 Order 24A of the Rules of the Supreme Court ("the WA Rules") contains provisions relating to offers of compromise. Order 24A r 10(4) states:
"Where an offer is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains judgment on the claim to which the offer relates no less favourable to him than the terms of the offer, then, unless the court otherwise orders, the plaintiff shall be entitled to an order against the defendant for his costs in respect of the claim from the date on which the order was made, taxed on an indemnity basis in addition to his costs incurred before that date, taxed on a party and party basis."
50 However, in the present case, O 24A does not apply to the offers of October 2002. That is because an offer to compromise made pursuant to it is required by O 24A r 1(2) to be in writing and bear a statement to the effect that the offer is made under that order. The October offer contained no such statement; they were expressed to be offers "… pursuant to the principles of Calderbank v Calderbank and Cutts v Head" (Cutts v Head [1984] Ch 290).
51 Nonetheless, offers of compromise which are not made under O 24A may still affect the Court's discretion as to costs. That has been said to be due to the need for the courts to preserve in the minds of litigants the conscious consideration that their behaviour may have placed them at risk as to costs if they refuse reasonable offers of settlement: Dobb v Hacket (1993) 10 WAR 532 at 541.
52 As the learned author of "Seaman: Civil Procedure in Western Australia"(Supreme Court) notes at 6206:
"It is the obvious intention of the sub-rule to oblige a defendant who receives an offer of compromise to give serious thought to the risk of losing the proceedings and then being ordered to pay
(Page 16)
- costs subsequent to an offer on an indemnity basis and if the result is no less favourable than the plaintiff's rejected offer then ordinarily that order should be made: Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724."
53 Equally, the author points out, the defendant must have an informed opportunity, based on material disclosed in the proceedings, to assess the chances of either side doing better than the plaintiff's offer, and if that is not so, there is good reason to refuse an order for indemnity costs. Here the offer was certainly made at a sufficiently late stage in the proceedings to enable the first and second defendant to make that assessment.
54 It may be accepted that the policy of both the common law in relation to Calderbank offers and that underlying O 24A is to encourage a party to whom a fair and reasonable offer of compromise has been made to accept it and bring the proceedings to an end, so freeing the court from the time and resources taken by proceedings which are prolonged unnecessarily: Malliaros v Moralis [1991] 2 VR 501 at 505. Both seek to encourage the saving of public and private costs and the avoidance of the inherent risks of delays of litigation by promoting early and realistic offers of compromise: Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721.
55 The plaintiffs submit that they should have costs from or about the date of the offer on an indemnity basis as the consequence of the defendants' rejection of it (Multicon Engineering Pty Ltd v Federal Airports Corporation (1996) 138 ALR 425 per Rolfe J at 451 and see Fortron Automotive Treatment Pty Ltd v Eurotine Holdings Pty Ltd & Ors [2001] WASCA 384).
56 The first and second defendants pointed out that the plaintiffs were seeking an order for indemnity costs solely on the basis that the defendants did not accept the Calderbank offer, but say that is only one matter which is to be taken into account by the court in the exercise of its discretion as to costs. The defendants submit that the common thread through the authorities is that the court will award indemnity costs only where the defendant can be seen to have acted unreasonably and the mere fact that the plaintiffs' Calderbank offer was significantly (even beyond the case contested for by the plaintiffs) more favourable to the defendants than the final judgment, does not establish the latter acted unreasonably in not accepting it.
(Page 17)
57 Particular considerations advanced in support of the proposition that the defendants were entirely justified in rejecting the offer include that the case turned effectively on the disputed oral evidence of the Konigs, Steele and McCubbing; that the first and second defendants were represented separately to Steele and McCubbing and presented separate cases; that if the evidence of Steele and McCubbing had been accepted the plaintiffs' action would have failed; that the plaintiffs in opening, effectively conceded that if their action failed the first defendant would be entitled to judgment on the counterclaim (that being for an amount in excess of $600,000) and that although the court ultimately favoured the evidence of the Konigs over that of Steele and McCubbing, the evidence of the latter was found to have been given honestly and to the best of their ability but was simply not as accurate a recollection of the events as the Konigs.
58 Shortly put, it was contended that based on the likely evidence of Steele and McCubbing as foreshadowed through their pleadings and witness statements, the first and second defendants were likely to be successful and the only way the evidentiary dispute between them and the plaintiffs would be resolved was by being tested in the trial process. The first and second defendants relied particularly in that regard on the decision of Hill J in John S Hayes & Associates Pty Ltd v Kimberley Clark Australia Pty Ltd (1994) 52 FCR 201 at 206.
59 Put shortly, the defendants' submission is that notwithstanding the rejection of the Calderbank offer, they have not acted unreasonably in proceeding to trial and there is accordingly no occasion for an order for indemnity costs.
60 Care must be taken in drawing statements of principle from the authorities. That is because many of them turn on particular statutory provisions.
61 Many of the authorities were most helpfully examined by Rolfe J in Multicon Engineering, supra. The application for indemnity costs in that case was made pursuant to s 76(1) of the Supreme Court Act 1970 (NSW) and Pt 52 r 28A of the Supreme Court Rules (NSW) ("the NSW Rules"). That rule was in similar terms to O 24A r 10 of the WA Rules. As his Honour pointed out (433), the justification for an entitlement to indemnity costs under the NSW Rules was nothing more than the making of a successful offer pursuant to the Rules "… unless the court otherwise orders". The obligation was therefore on the party against whom the order was sought to satisfy the court that such an order should not be
(Page 18)
- made, the presumption being that the making of the successful order prima facie entitled the party to indemnity costs.
62 Rolfe J further noted that the effect of the New South Wales rule was to displace certain accepted principles in relation to the award of costs. In the absence of such circumstances, the general principle is that the successful party is entitled to an order that the unsuccessful party pay its costs on a party and party basis. His Honour went on to say that on the other hand, in the absence of an offer of compromise, a court would generally order indemnity costs only where there was some "misconduct" in the bringing or prosecuting of the proceedings. Ordinarily the presumption is that costs will be paid on a party and party basis unless the party seeking costs on the more favourable basis can satisfy the court it is entitled to such an order.
63 In Maitland Hospital v Fisher (No 2), supra, the New South Wales Court of Appeal said (at 724):
"The obvious purpose of providing Pt 52, r 17 is to facilitate the proper compromise of litigation. This has been attempted by the twin measures of a 'carrot' and 'stick'. Relevantly, the 'carrot' is the promise of indemnity costs to a plaintiff in the event that the defendant is found unreasonably to have refused an offer of compromise. The 'stick' is the threat of the penalty of the imposition of an indemnity costs order against a defendant in such circumstances. It is the obvious intention of the rule to oblige a defendant, which has received an offer of compromise, to give serious thought to the risk which it may run of losing the proceedings and then being ordered to pay costs on an indemnity basis.
The objects of the rule include:
(1) to encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff's real claim which can be placed before its opponent without risk that its 'bottom line' will be revealed to the court;
(2) to save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found,
(Page 19)
- reasonable) offer of compromise made by a plaintiff to a defendant; and
- (3) to indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred. This is deemed appropriate because, from the time of rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances, that party should ordinarily bear the costs of litigation."
64 In Multicon, having referred to the foregoing passage from Maitland Hospital, Rolfe J quoted the following passage from the judgment of Young in Wallace v Baulkham Hills Smash Repairs Pty Ltd (No 2), unreported; SCt of NSW; 21 August 1995:
"… there is a general policy to encourage settlement and that general policy is far better served if the general message gets through to litigants and the profession that it is more likely than not that where there has been a Calderbank letter, and where there is a falling short by more than a minimal degree of the offer that is made in the Calderbank letter, that litigants should expect that after time has expired for complying with the Calderbank letter the costs will be on an indemnity basis. If some sort of general policy like that does not underlie this type of litigation then settlements will be discouraged and there will be more and more hearings and all sorts of orders would have to be made which again takes up more time and costs everybody more money."
65 Rolfe J seemed reluctant to accept there is such a general policy but preferred to regard it as more correct to say that normally a Calderbank letter would be given effect according to its terms and thus fulfil the functions of an offer of compromise. However, his Honour went on to say that all the authorities supported the view that when an offer of compromise is made, in whichever form, in circumstances in which there can be no doubt that if the offeree does not accept it, then if the offer is not bettered and provided the offer reflects a compromise, a court would commence its consideration of an application for indemnity costs from the position that such an order should be made unless the offeree can persuade the court that it should not be - recognising that the ultimate
(Page 20)
- decision will always depend on a consideration of the facts and circumstances of the particular case. With respect, that approach seems to me to accord with authority, principle and the objectives of the proper administration of justice.
66 I respectfully agree with the conclusion of Rolfe J in Multicon that the emphasis in the New South Wales decisions to which he there referred in which indemnity costs orders had been made, is that where an offer of compromise has been made there is a disposition, at least, to order indemnity costs. Further, that those decisions do not show a requirement that in addition to the result not matching the offer of compromise, there must be some misconduct of the party against whom the order is sought. But I reiterate that those decisions, as that in Multicon itself, concern the application of a statutory rule in similar terms to O 24A of the WA Rules. The position at common law is arguably not necessarily the same.
67 In Huntsman Chemical Co Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242 the New South Wales Court of Appeal was dealing with a case in which an application for indemnity costs had been made in circumstances where shortly before an appeal was called on for hearing, the appellant notified the respondent that it would not be proceeding with the appeal. The respondent then sought costs on an indemnity basis. The majority of the Court of Appeal held that indemnity costs should not be awarded, amongst other reasons, because there had been a failure to warn the appellant that its prospects of success were bleak and that if the appeal was pursued costs would be sought on that basis.
68 In agreeing with that conclusion, Mahoney JA said [250] - [251]:
"Until recent times, costs would not, I think, have been ordered on an indemnity basis in circumstances such as the present. Costs upon an indemnity basis were ordered only in restricted circumstances: see generally Degmam Pty Ltd (in liq) v Wright (No 2) [1983] 2 NSWLR 354; EMI Records Ltd v Ian Cameron Wallace Ltd [1983] Ch 59 at 64. However, there has been, in my opinion, a change in the practice of this and, I believe, other courts in this regard. Costs on an indemnity basis are becoming more frequently available; …
It is, I believe, right that such a change be made. The costs customarily awarded did not achieve what, I think are the main purposes for which costs are in principle given.
(Page 21)
- …
For a long time, the costs ordered to be paid by one party to litigation to another have been less than the costs which the successful party ordinarily was required to pay to its own solicitors. In more recent times, at least in commercial litigation, the gap between the costs payable by one party to the other and the costs payable by a party to its own solicitor has, in ordinary cases, increased. The court is, I think, entitled to know that this gap, ordinarily or at least often, is substantial. This, I believe, is one of the factors which has led this court to reconsider the circumstances in which indemnity costs should be awarded.
This court is aware also that the gap between costs ordinarily awarded and the costs payable by a party to its own solicitor has been used as a factor in bargaining for commercial advantage. In referring to this, I do not confine what I say to the illegitimate use of legal proceedings, steps taken in them, or the gap between costs recovered and paid. I am concerned with the use which may legitimately be made of such matters in the commercial bargaining processes which take place between parties who are or may potentially become parties to commercial litigation. It is, I think, undesirable that such a gap be available to be so used."
69 The first and second defendants expressly relied upon the decision of Hill J in Hayes. That case concerned particularly O 62 of the Federal Court Rules 1979 which contains detailed provisions which make it clear that, unless otherwise ordered, costs will be on a party/party basis. However, as Hill J pointed out, the Federal Court Rules are not exclusive and cases arise in which the circumstances have been held to justify an order for full indemnity costs. That, it seems to me, really reflects the general position and it is the converse of a rule dictating that in certain circumstances indemnity costs are to be awarded unless the court otherwise orders.
70 The decision in Hayes and other Federal Court authorities was discussed by Rolfe J in Multicon(at 445 - 451). His Honour noted that the reasoning which led Hill J to the conclusion that the mere making of a Calderbank offer and its rejection, without more, would not ground an order for indemnity costs and that it was necessary for the party claiming to show some misconduct by the other party, was consistent with the
(Page 22)
- principle applicable if indemnity costs were being considered in the absence of an offer of compromise (447). Rolf J took the view rather, that the fact of such an offer must itself be a factor to be taken into account.
71 Rolfe J went on to explain that an examination of the case by a party and the party's legal advisers must, and can only, be undertaken in light of all the circumstances of which they are aware. The outcome of litigation will rarely be certain, but that does not remove the purpose and effect of offers of compromise, whether pursuant to rules or by means of a Calderbank letter. At 447 - 448 his Honour said:
"If a party is entitled to refuse an Offer of Compromise because the adjudication process will involve the resolution of difficult questions of fact and/or law there is no obligation on the party in very many cases to accept an Offer of Compromise prior to judgment and, conversely, a party making the Offer is not advantaged if ultimately its prognostication of the litigation proves to be correct. In my opinion this cannot be so. If it is it takes away from the utility of making an offer and, accordingly, the general philosophy of a Court, seeking where possible and once again acting judicially to promote settlement, is defeated. All of this has to be looked at in the context of the present approach to legal proceedings where procedures are being taken such as early neutral evaluation of cases and alternative dispute resolution to seek to bring about a compromise prior to the hearing. This is the climate in which the courts are now operating: Pt 7B of the Supreme Court Act 1970. Further, judges frequently suggest to parties, (and I do not suggest this is a recent occurrence), that serious consideration should be given to settlement. This is often couched in terms that ultimate factual findings will depend upon the view taken of the witnesses and their evidence and, in some cases, that the law is uncertain. It is frequently pointed out by the court that settlement will achieve certainty of result. However, it seems to me that there is little point in the court making such remarks to the parties if a party, which has adopted a procedure to try and bring about a settlement and thereby eradicate those doubts and difficulties, derives no benefit from making a sensible commercial offer, which if accepted would have concluded the litigation, because the court denies it that benefit.
The question, so it seems to me, when one is considering a case where an Offer of Compromise has been made and the party
(Page 23)
- rejecting the offer has not achieved a better result than that provided for by it, is not whether it was reasonable for the party rejecting the offer to fight on notwithstanding that the offer had been made, but whether it was reasonable for the party rejecting the offer to do so and, in that regard, I would suggest that the onus must be on the party rejecting the offer to establish in some way the reasonableness of the course it took. In my opinion that cannot be done by saying that litigation is uncertain and it was entitled, rather than accept the offer, to have the uncertainties, whether legal or factual, resolved by judicial decision. That, of course, is an entitlement any litigant has; but what must be understood is that if the litigant has received an offer, which it does not ultimately better, its desire for a judicial determination should, generally speaking, be made subject to its paying the other party's costs on an indemnity basis from the date the offer is made. It is the very uncertainly of the legal and factual issues propounded for decision, which makes settlement an appropriate course, a matter much stressed in suggesting that settlement be considered. If there is no uncertainty, if that can ever be so, there is no reason to settle. It also seems to me that the more difficult and complicated the legal and factual issues the greater must be the uncertainty and, accordingly, the greater must be the incentive to settle on a commercial basis. The greater the uncertainty the more that is being risked and the more the prospect of further litigation by way of appeals."
72 His Honour finally concluded (451) that:
"In my opinion the proper approach to take to an Offer of Compromise, whether made under the Rules or pursuant to a Calderbank letter, is that there should be a prima facie presumption in the event of the offer not being accepted and in the event of the recipient of the offer not receiving a result more favourable than the offer, that the party rejecting the offer should pay the costs of the other party on an indemnity basis from the date of the making of the offer. I proceed on the basis that the unreasonableness ... is demonstrated, prima facie, by the ultimate result. This approach is consistent with the decisions to which I have preferred, the policy evidenced by the Act and the Rules and the widely accepted philosophy that settlements should be encouraged." (Emphasis added).
(Page 24)
73 Although what his Honour there said must necessarily have been obiter insofar as it relates to a Calderbank letter, I respectfully agree with it. The logic that there should be a prima facie presumption that indemnity costs should be awarded unless the opposing party can show otherwise, for the reasons given by his Honour, is compelling. The conclusion retains the essential discretion of the court to make a different order depending upon the circumstances of the particular case. The approach is consistent with, and does not detract from, the discretion given by s 37 of the Supreme Court Act 1935 (WA) and O 66 of the WA Rules. It also gives effect to the requirements of the proper administration of justice.
74 In my view the approach adopted by Rolfe J in the passage quoted at [72] above appropriately encapsulates the principles which should be applied to an offer of compromise made by way of a Calderbank letter.
75 But following a brief procedural hearing on 27 May 2003, there was a further development. On 29 May 2003 the plaintiffs filed an amended submission on (inter alia) the issue of costs. Attached to that was a further affidavit of Charmaine Tsang sworn 29 May 2003, in which she deposed to having recently become aware of offers of compromise made to the defendants pursuant to O 24A. Copies of the relevant correspondence were annexed to her affidavit. The offer was made to the first and second defendants' solicitors by letter dated 2 March 2000, to the third defendant's then solicitors by letter dated 15 May 2000 and to the fourth defendant's then solicitors by letter dated 16 May 2000. Each was expressly said to be made pursuant to O 24A and as a Calderbank offer. The offer was that all claims between the parties would be compromised on the defendants paying to the plaintiffs a sum of $310,000 plus costs to be taxed.
76 Applying the approach articulated by Rolfe J in Multicon, to the present case, and dealing with it both as a Calderbank offer and one made under O 24A, I have come to the conclusion that the considerations advanced on behalf of the first and second defendants were legitimate and proper considerations. I would have been minded to order indemnity costs were it not that I am persuaded the position taken by the first and second defendants was reasonable, notwithstanding the actual outcome. I consider that in the circumstances the rejection of the offer has been shown to have been based on a realistic - albeit ultimately wrong - assessment of the case. For that reason I conclude the first and second defendants have demonstrated why costs should not be ordered on an indemnity basis. Although their positions are forensically different, it
(Page 25)
- seems to me essentially the same considerations apply in respect of the third and fourth defendants and I would accordingly not order them to pay indemnity costs. I am particularly mindful that some of the plaintiffs' factual assertions upon which the offer of compromise was founded were assertions which failed at trial. The order will be that the plaintiffs have their costs on a party/party basis.
77 I conclude with an observation of the New South Wales Court of Appeal in Maitland (at 725), which I consider apposite to the present case:
"The rule does no more than to oblige litigants, and those advising them, to consider realistically, upon the best information available to them, the prospects of success and the likely outcome of the litigation. Where, in the particular circumstances, the litigant or its advisers mis-judge the prospects of success or mis-calculate the outcome, their mistake may be warranted on the material which they had available. Alternatively, it may be no more than a mis-calculation in a case with large imponderables where the course they took was nonetheless perfectly reasonable. Litigation is inescapably chancy. The purpose of the rule is to put a premium on realistic assessment of cases. It is not to demand perfect foresight which is denied even to the judges. That is why a discretion is retained, under the rule, for the Court to order otherwise than as the rule provides. But the ordinary provision is expected to apply in the ordinary case. It has added a new duty to the functions of legal practitioners advising litigants. It is a duty which is both protective of the interests of litigants and of the public interest in the prompt and economical disposal of litigation. It is the duty of courts, allowing for exceptions in particular cases, to give effect to the purpose of the rule" (Emphasis added).
Stay of execution of judgment
78 The Carey companies seek a stay of execution of judgment in relation to the entire judgment given on the primary reasons or alternatively, in relation to that part which relates to the award of $738,510.00 for loss of profit referred to at [334] of the primary reasons. The application is supported by the third and fourth defendants. Although they have not filed a formal application for a stay, they are unrepresented
(Page 26)
- and I am therefore prepared to take them as having made a similar application by way of motion.
79 The grounds upon which it is said on behalf of the Carey companies there should be a stay are twofold. The first is that the prospects of a successful appeal are so strong that the judgment should not be executed until the appeal is determined. The second is that the plaintiffs, insofar as disclosed by the evidence at trial, are not parties of such substance that if any substantial judgment sum (being one of approximately $1 million) were to be paid to and then expended by them, they would have the capacity to repay the sum following a successful appeal.
80 There is, of course, no appeal presently on foot. There could not be, because judgment has not yet been given. But the defendants foreshadow that there will be an appeal.
81 This raises the question of jurisdiction. There are several possibilities, to which different considerations apply.
82 A stay of execution of judgment may be granted under O 47 r 13 of the WA Rules. Relevantly to this case, that would require the defendants to show that by reason of special circumstances it is inexpedient to enforce the judgment.
83 Order 63 r 15 gives the court power to order a stay pending appeal. That pertinently provides:
"(1) Except so far as the Full Court or a Judge may direct –
(a) an appeal shall not operate as a stay of execution or of proceedings under the decision of the court below;"
"In the exercise of the inherent jurisdiction the discretion must be exercised on grounds relevant to a stay of the enforcement proceedings, rather than on grounds which may bear upon the validity or correctness of the judgment: T C Trustees Ltd v J S Darwen (Successors) Ltd [1969] 2 QB 295 at 302, per Lord Denning MR. It follows that the 'special circumstances' referred
(Page 27)
- to in [O 47 r 13] must likewise be relevant to a stay of the enforcement proceedings."
85 I will approach the application first as an exercise of the jurisdiction given by O 47 r 13 and in the inherent jurisdiction of the court.
86 The rule itself requires the defendants to show "special circumstances". That reflects the principle the successful party is entitled to the "fruits of victory" (The Annot Lyle (1886) 11 PD 114; Monk v Bartram [1891] 1 QB 346; Federal Commissioner of Taxation v Myer Emporium Ltd (1986) 160 CLR 220 per Dawson J at 222-223).
87 It is suggested in Seaman: Civil Procedure, Western Australia, vol 1, [47.13.1] that in determining whether there are special circumstances which render it inexpedient to enforce a judgment because of a pending appeal, a court will be guided by the principles applied by the Full Court before granting a stay pending an appeal. However on the principles applicable to the latter it may be easier to satisfy the court a stay should be granted. In Alexander v Cambridge Credit Corporation Ltd (Receivers Appointed) (1985) 2 NSWLR 685 the Victorian Court of Appeal held that under the Victorian equivalent of O 63 r 15 of the WA Rules a stay may be granted where the applicant demonstrates a reason or an appropriate case to warrant the exercise of the discretion in that party's favour; it is not necessary that special or exceptional circumstances should be made out (cf Dawson J, in FCT v Myer Emporiumsupra). The court cited with approval the following passage from the judgment of Mahoney JA in Re Middle Harbour Investments Ltd (in liq), unreported; CCA of NSW; 15 December 1976:
"Where an application is made for a stay of proceedings, it is necessary that the applicant demonstrate an appropriate case. Prima facie, a successful party is entitled to the benefit of the judgment obtained by him and is entitled to commence with the presumption that the judgment is correct. These are not matters of rigid principle and a court asked to grant a stay will consider each case upon its merits, but where an applicant for a stay has not demonstrated an appropriate case but has left the situation in the state of speculation or of mere argument, weight must be given to the fact that the judgment below has been in favour of the other party."
88 The "obvious error" in the primary reasons which is said to give rise to such a strong prospect of success on appeal is the award of damages for
(Page 28)
- loss of profit – that which the defendants characterise as "expectation" damages. I have already addressed this argument above. It follows from what I have said there that I would not see this point as constituting relevant "special circumstances" nor does it go to a stay of the enforcement proceedings rather than the validity or correctness of the judgment.
89 The further ground as to the plaintiffs' financial capacity is more apposite. A realistic prospect that an appeal may be nugatory where, because of the financial circumstances of the respondent, there is no reasonable prospect of recovering monies paid to the respondent pursuant to the judgment, may constitute special circumstances (Wilson v Church (2) (1879) 12 Ch D 454, 458).
90 Counsel for the Carey companies conceded his submission that the plaintiffs' financial circumstances are such that it is unlikely they would have the capacity to raise the amount necessary to refund the judgment monies following a successful appeal by the defendant, would be rebutted if the plaintiffs put on evidence establishing such financial capacity.
91 The defendants rely upon the following evidence given at trial by Mrs Konig (at T252-253) on 6 November 2002:
"We received a letter dated 11 February 1997 from Warwick Entertainment Centre and signed by Norm Carey which terminated our lease. In a letter dated 1 March 1997 Warwick Entertainment Centre demanded the sum of $617,581.08. Since receiving this letter in March 1997 we have been in a continual legal wrangle with Westpoint and other defendants.
Our legal expenses have been an enormous strain both physically and emotionally. Egon and I work 6 or 7 days a week all year round, with no finance or opportunity for holidays. Because of the nature of our business weekends and school holidays are our busiest times. This means I have not been in a position to spend time with my sons. My eldest son has moved to Perth for his education – Sorry.
McKERRACHER, MR: There's no rush, Mrs Konig. Take your time?
---For the past 3 years I have had to impose upon my 80-year-old parents to allow him to live with them because we cannot afford other accommodation.
(Page 29)
- The concern about our escalating bank overdraft is an ever-present worry. There have been many times in the past 6 years that we would have liked to expand and improve upon our present business to increase our income but we have been financially restricted because of the need to pay legal expenses.
We have had designs for tourist accommodation to be built on our property but have not been able to afford to build. We continue to live in a 120-year-old home that needs urgent repairs and maintenance but cannot afford to do so.
We have found the last 6 years since leaving the café very draining. Even though our present business is the only financial option we have at this stage it has meant leaving close friends and immediate family so we can live in Pemberton. Also, due to the hours I need to work to pay our expenses I cannot afford to leave the business to visit my son or family in Perth other than on overnight visits and a 4-hour drive back to start work.
Towards the end of 1999 the strain of constantly having to deal with our legal action started to affect Egon's health. He was very moody and every time communication arrived from our solicitors he became very agitated. He complained of strong stomach pains and I arranged for him to see a local doctor who prescribed ulcer medication.
Until then Egon had assumed most of the responsibility of our legal action but at that time I decided to assume much more responsibility to protect his health. I took over the communications with our solicitor on a day-to-day basis and involved Egon only when necessary." (Mrs Konig, T252-253, 6 November 2002)
92 They rely also on that given by Mr Konig at T103 on 4 November 2002:
"Since taking on the café, my financial situation has not allowed me to take my family on holidays. I have not been able to visit my family in Switzerland for 10 years even though both my parents are in their eighties and several times my father's life has been in jeopardy due to ill health.
I am now continually concerned that I have had to force my bank overdraft up so high to cover legal expenses. I seem never
(Page 30)
- to have a waking or sometimes sleeping moment when my financial situation does not me concern."
93 An affidavit was filed on behalf of the Carey companies on 19 June 2003. That was of David Ross Kilpatrick, a solicitor employed by Williams and Hughes. He deposed to having conducted the searches for property in the names of the plaintiffs. The only property discovered was land at Pemberton in the name of Alpine Holdings and subject to a mortgage to the National Australia Bank ("NAB"). The mortgage is stamped to secure up to $95,000. The land is 57.302 ha.
94 Also on 19 June 2003 the plaintiffs filed an affidavit of Owen Wei-Keong Chua, a solicitor in the employ of Feinauer and associates, to which he annexed a copy of a letter from the Konigs in which they set out details of their main assets and liabilities. The assets are described as:
|
|
|
|
|
|
95 They show a liability of $590,000 to the NAB, legal fees totalling $46,679.50 since March 2003 and interest on overdraft from 24 March to 23 June 2003 of $9,724.00. Total liabilities are therefore shown as $646,403.50 against total minimum estimated assets of $1,645,000.00
96 Mr Dillon submitted on 23 June 2003 that "short of an amazing turnaround in the financial position of the Konigs", this information appeared to contradict what they had said at trial. He pointed out that as the searches conducted on behalf of the Carey companies had failed to identify any property held in the name of the plaintiffs other than one at Pemberton, presumably the other Pemberton property and the apartment at Hillarys are not held by them. If that were so, they would not be susceptible to execution by the defendants and so should not be taken into account.
(Page 31)
97 The Kilpatrick affidavit, although sworn and filed on 19 June 2003, was not seen by senior counsel for the plaintiffs until the morning of the hearing on 23 June. At the conclusion of submissions he sought leave to file and serve a further affidavit as to the properties referred to. There being no objection I gave leave.
98 On 30 June the plaintiffs filed an affidavit of Mr Konig sworn 27 June 2003.
99 According to that affidavit the Hillary's unit ("the unit") is Crown land in respect of which has been granted a 99-year lease. The lease was initially taken by Mr Konig and his brother Rolf in April 1997 as an investment. The purchase price was $225,000. There is a lease-back agreement to Hillarys Harbour Resort, giving a quarterly rental income of $2,812.50. The finance for the unit was obtained under a mortgage by the Konig brothers to the NAB. They opened a joint bank account in respect of the unit with the NAB. About May 2000 Rolf Konig decided to sell his half share in the unit to the second and third plaintiffs. That was done. The joint account was closed. The mortgage and home loan account were paid out by Alpine Holdings. The joint account was closed. Rolf Konig was paid $40,000 for his equity in the unit.
100 Mr Konig deposes that he has not attended to registration of the transfer of the unit from him and his brother to him and his wife due to what he describes as the "cost in transfer fees", which are approximately $6,000.
101 With regard to the Pemberton property, it is that described in Certificate of Title volume 2212, folio 763 in the Shire of Manjimup. Mr Konig says he has for some time been in the process of subdividing the property into one lot of 43 Acres and one of 100 acres. A letter from a licensed surveyor dated 20 June 2003 advised the Plan of Survey was then being drafted and should be ready for registration by the end of the month. According to Mr Konig, the two properties referred to in the affidavit of Wei-Keong Chua sworn 19 June 2003 are the same property as that referred to in the Kilpatrick affidavit also sworn 19 June 2003.
102 In my view the defendants have not demonstrated that the plaintiffs lack the financial capacity to repay the judgment monies should they be required to do so following a successful appeal.
103 It was not contended that the Carey companies would be financially embarrassed by having to pay on the judgment, to such an extent they would be unable to fund their foreshadowed appeal.
(Page 32)
104 That brings me to a consideration of the application under O 63 r 15 of the WA Rules.
105 It is true the discretion to stay execution pending appeal is unfettered, but it is nonetheless a judicial discretion and must be exercised according to principle and the merits of the particular case. I adopt the approach articulated in the passage from the judgment of Mahoney JA quoted in Alexander v Cambridge Credit referred to at [87] above.
106 The applicant bears the onus of showing not only that there is an arguable case for appeal but that the circumstances are appropriate for a stay to be granted. That will involve consideration of fairness to the parties, the rights of the parties and the balance of convenience.
107 I am not persuaded the circumstances are such that a stay should be granted in favour of the Carey companies. An appeal is as yet only foreshadowed. At this point only one proposed ground of appeal has been identified. Even assuming it is arguable, I do not consider it to be so strong as by itself to justify a stay. No other circumstance of any weight has been advanced on behalf of the Carey companies. Their application for a stay will be refused.
108 The position of the third and fourth defendants is entirely different. They have been unrepresented throughout the trial. The evidence shows they are in financially difficult circumstances. They could not hope to meet the whole or even a substantial part of the amount payable under the judgment. McCubbing said that execution against him would force him into bankruptcy. He could not then proceed with his appeal. Steele would clearly be in a similar position. Without a stay of execution they will be ruined financially. The ground of appeal foreshadowed is at least arguable.
109 I am satisfied that the third and fourth defendants have demonstrated special circumstances why it is expedient that a stay be granted in respect of them (Linotype-Hell Finance Ltd v Baker (Practice Note) [1992] 4 All ER 887, 888; McBride v Sandland (No 2) (1918) 25 CLR 369, 375).
110 I would grant a partial stay of execution of judgment with respect to the third and fourth defendants during the time limited for appeal and, if an appeal is instituted by them, pending determination of the appeal.
111 The orders will be as follows:
(Page 33)
- 1. The agreement for lease between the first plaintiff and the first defendant dated 4 February 1993 is and is hereby declared to have been void ab initio.
2. The lease between the first plaintiff and the first defendant dated 21 February 1994 is and is hereby declared to have been void ab initio.
3. Judgment be entered for the first, second and third plaintiffs on the following terms:
3.1 the first, second, third and fourth defendants jointly and severally pay to the first plaintiff the sum of $548,296.00 together with interest thereon pursuant to s 32 of the Supreme Court Act from 12 September 1997.
3.2 the first, second, third and fourth defendants jointly and severally pay to the second and third plaintiffs the sum of $309,209.00 together with interest on $140,773.00 of that amount pursuant to s 32 of the Supreme Court Act from 12 September 1997.
3.3 the first, second, third and fourth defendants jointly and severally pay to the second plaintiff the sum of $10,000.00;
3.4 the first, second, third and fourth defendants jointly and severally pay to the third plaintiff the sum of $10,000.00.
4. The counterclaim be dismissed as against each of the first and second plaintiffs.
5. The first, second, third and fourth defendants do jointly and severally pay the plaintiffs' costs on a party and party basis including any reserved costs of Federal Court action no WAG 122 of 1995.
6. The plaintiffs be granted certificates for two counsel and for transcript.
7. Execution on order 3 of these orders be stayed with respect to the third and fourth defendants during the time limited for appeal and, if an appeal is instituted by them, pending determination of the appeal.
0
34
2