Babets Ltd v Crowe Nominees (Victoria) Pty Ltd

[1989] FCA 475

JUDGMENT No. ... 42.5~...6.9

NOT FOR GENERAL DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA	)
1
NEW SOUTH WALES DISTRICT REGISTRY )	NO. N G 1027 of 1988

)

GENERAL DIVISION )

BETWEEN: BABETS LIMITED

First Applicant
BABET CORPORATION LIMITED

Second Applicant

AND: CROWE NOMINEES (VICTORIA)

PTY LTD
First Respondent
BRIAN JOHN CROWE

Second Respondent

AND BETWEEN: CROWE NOMINEES (VICTORIA)

PTY LTD

Cross-Claimant

Second Cross-Respondent

AND: BABETS LIMITED

First Cross-Respondent
BABET CORPORATION LIMITED

CORAM :	WILCOX J
PLACE :	SYDNEY

DATE : 10 JULY 1989

MINUTES OF ORDER

THE COURT ORDERS THAT:

1.        The Application be dismissed.

2.        The applicants pay to the respondents their costs of the Application.

3.        On the Cross-Claim, judgment be entered in favour of the cross-claimant in the sum of two hundred and fifty-seven thousand seven hundred and eighty-five dollars ($257,785).

1. The cross-respondents pay the costs of the cross-claimant in respect of the Cross-Claim for the

balance of the purchase price, those costs to be taxed on a solicitor-client basis in the case of

Babet Corporation Limited.

5.	The cross-claimant pay the costs of the cross-respondents in respect of the cross-clalms other than for the balance of the purchase prlce.
Note:	S e t t l e m e n t  and e n t r y o f o r d e r s i s d e a l t w i t h i n Order
3 6  o f t h e Federal Court R u l e s .

NOT FOR GENERAL DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA	) )
NEW SOUTH WALES DISTRICT REGISTRY	) NO. N G 1027 of 1988
)

GENERAL DIVISION 1

BETWEEN: BABETS LIMITED

First Applicant
BABET CORPORATION LIMITED

Second Applicant

AND: CROWE NOMINEES (VICTORIA)

PTY LTD
First Respondent
BRIAN JOHN CROWE

Second Respondent

AND BETWEEN: CROWE NOMINEES (VICTORIA)

PTY LTD

Cross-Claimant

AND: BABETS LIMITED

First Cross-Respondent
BABET CORPORATION LIMITED
Second Cross-Respondent

CORAM:	WILCOX J
PLACE :	SYDNEY
DATE :	10 JULY 1989

EXTEMPORE REASONS FOR JUDGMENT

The first thing I want to say is that I offer my

congratulatlons to the parties and to their legal advisers in
compromising the clalms which have been brought. As I have
observed on more than one occasion during directions hearings
and applications for adjournment of the proceedings, the
proceedings, as constituted by the pleadings, are extremely
complex. They would undoubtedly have occupied many weeks
hearing time and involved considerable expense to the partles.
Many of the clalms were farrly small. The costs attendant
upon litigating some of those claims would have outweighed the
amounts in issue. Consequently, it is a matter of genuine
satisfaction that the parties have been able to deal with all

of those matters and reach agreement.

Unfortunately, thelr agreement has not extended to

two matters, namely, interest and costs. I have been asked to
rule on those matters. The argument upon them has occupied
some hour and 20 minutes and I do not propose to canvass
everything that has been sald. I propose to approach both
questrons in what might be regarded as a falrly "broad brush"
manner; but which I thlnk does represent a fair reflection of
the situation as I understand it.

The actual agreement between the parties involves the

payment of a total sum of $236,500 by the applicants to the
first respondent. That payment is made because a concession
is made on behalf of the applicants that the respondent, as
cross-claimant, is entitled to succeed in one of its claims,

namely, for moneys payable under the agreement which was made

between the parties for the purchase by the f ~ r s t applicant of

a business formerly conducted by the first respondent.

The successful cross-claimant seeks interest on that

amount pursuant to s.51A(l)(a) of the Federal Court of
Australia Act 1976. That section requires, in the case to
which it has application, that unless good cause is shown to
the contrary the Court shall "order that there be included in
the sum for which judgment is given interest at such rate as
the Court or the Judge ... thinks fit on the whole or any part
of the money for the whole or any part of the period between
the date when the cause of action arose and the date as of

which judgment is entered; ...".

In the present case, the balance of purchase money

was to be paid on 31 July 1988, being the 30th day after the

anniversary of the takeover of the bus~ness on 1 July 1987.

~t that time no payment was made because the first applicant
claimed that, instead of it owing money to the flrst
respondent, in fact the first respondent owed money to it, the

first applicant. The basis of that clalm was the earnings
said to have been received during the perlod of operation of
the business by the first applicant. The first respondent
denled this and maintained that it was entitled to the balance
of purchase money provlded by the agreement, namely, $480,000.

The amount which has been agreed in the settlement is in between these two extreme positions. With the benefit of

hindsight, it seems to be quite clear that each party

initially took a position whlch could not be justifled.

I have been asked to stigmatise the posltion of the

first applicant as a position taken in bad faith. But I am
not prepared to reach any such conclusion without having heard
any of the evidence, and in particular, any cross-examination
of the people responsible for making that assessment. I have

to take the claims as being genuinely made and pressed.

The sale agreement between the parties provldes for

the possibility of a disagreement as to the amount which is

payable. Clause 5 provldes for the arbitration of any

dlspute. In fact, the matter was not referred to arbitration,
the reason apparently being that shortly before the relevant
date the present proceedings had been commenced, in whrch the
applicants alleged a contravention of s.52 of the Trade
Practices Act 1974; a claim which is now abandoned under the
compromise which has been reached. For that reason, I think
sensibly, the parties decided that the questlon of the balance
of purchase money should be resolved in this Court in the then
pendlng proceedings, rather than that there be a separate
arbitration.

However, the arbltratron clause has some relevance,

at least in the submission made by counsel for the applicants,
because clause 5(a) provldes that, if a dispute arlses, the
purchaser's or the vendor's obligation to make payment to the
other shall be postponed untll seven days after notification
of the resolution of such dispute by the arbitrator. The
contention made on behalf of the applicants is that, in
effect, the parties have agreed to substitute a determination
by the Court for determlnatlon by the arbitrator, therefore
the obligation to make payment does not arise until judgment
is entered, and consequently it is inappropriate that there be
any award of interest. In other words, this is said to be
sufficient good reason wlthln the meaning of s.51A of the

Federal Court of Australia Act.

On behalf of the respondents, the submission is put

that in fact the matter never was referred to arbitration;
that there was a default, even though there was a postponement
of the actual payment, and that interest should be awarded to
reflect the fact that the purchaser has had the beneflt of the
money in the meantime.

I see the force in both these submlsslons. But I think that the proper way to exercrse the broad dlscretlon given by s.51A is to look at the matter on the basls of what

fairness requires in all of the circumstances. Had there been
no proceeding pendlng in thls Court, it seems to me to be
extremely likely that the matter would have gone to
arbitration, as envisaged by the agreement. Had that
happened, there necessarily would have been a delay of some

months in a determination by an arbitrator.

It is impossible to be preclse about such a question

but it is obvious that the matter would have turned upon a
detalled analysis of the accounts of the business, an exerclse
which has taken place in recent times with a hlgh intensity of
labour, and has been a formidable task. I think that it 1s
extremely unlikely that an artibrator would have made an award
before the end of 1988, and consequently the obligation to
make payment would not have arisen untll that date. It
follows that interest would not have begun to run until such

time.

It seems to me that it is reasonable to exerclse the

discretion under s.51A by approximating the posltion which

would have occurred under that envisaged situation. With thls
in mind, I think that it is appropriate to allow Interest on
the whole of the agreed amount, namely, $236,500, for a perlod
of six months. As to the rate of interest, I would perhaps

have taken a rate of 15 per cent, except that I note that in

clause 23(a) the parties envisaged payment at an interest rate

of 18 per cent in the event of any default, this b e ~ n g a

guarantee clause. I see no reason to substitute my own figure

for that which was agreed by the parties, particularly having

in mind that it cannot be s a ~ d	that 18 per cent LS
unrealistically high in a commerc~al	context at the present
time.

Accord~ngly, I think that the proper course in regard

to interest is to allow interest at 18 per cent for SLX months
on the agreed amount. This comes to $21,285, bringing the

total judgment to $257,785.

In relation to costs, the submission is made on

behalf of the appl~cants that there ought to be no order for

costs; and on behalf of the respondents that they should

recover all costs incurred, even in relation to the clalms
made in the cross-claim which are being abandoned. As w ~ t h
the matter of interest, I think that both propositions suffer

from being extreme positions. I think that it is clear that

the respondent/cross-claimant is entitled to recover the costs
relating to the balance of purchase money claimed, upon which
claim it has succeeded. It has not only succeeded in
obtaining judgment for a significant amount of money, but it
is an amount which exceeds that which was conceded at any time
prior to today. I do not think that it matters that this is a
lesser sum than the cross-claimant was itself asserting at
previous times. The fact is that it has had to come to the
Court to obtaln the amount now conceded by its opponent.

There are numerous claims made on each side of the record which have been abandoned. I have had reservations about the utility of following the usual rule and ordering that the party against whom each of those claims is made

recover the costs of resisting that claim. My impression was
that the exercise would involve a considerable amount of
effort in taxing bills of costs only for the partles to find
that the bills tended to cancel each other out, with llttle

net benefit to either party.

However, I am told by counsel for the respondents

that he and his instructing solicitor do not share this view.
They feel that there would be a signrficant balance in their
favour. I feel that I cannot follow my own impression in the
light of this indication. If that is their view, they are

entitled to have the matter tested by bills of costs in the

usual way. Consequently, the costs order should give to the

persons who have resisted abandoned claims their costs of

those claims.

In respect of the second applicant, who is a

guarantor, it is asked that the order for costs of the
cross-claim against it, which has succeeded, be upon a
solicitor-cllent basis. The argument is that clause 23(a)
includes an indemnity and that this is a cost whlch has been
incurred because of the default of the flrst applicant.

I think that this submission is good in law, and that

I should give effect to it.

The orders that I make are as follow: in relation to the Application, I order that the Applicatlon be dismissed and that the applicants pay to the respondents thelr costs of the

Applicatlon. In relatlon to the Cross-Clalm, I order that
ludgment be entered in favour of the cross-clalmant in the sum
of $257,785. I order that the cross-respondents pay the costs
of the cross-claimant in respect of the clalm for the balance
of purchase price, those costs to be taxed in the case of
Babet Corporation on a solicltor-client basis. I further
order that the cross-claimant pay to the cross-respondents the
costs incurred by the cross-respondents in respect of the
remaining claims, that 1s to say, other than balance of

purchase money, which are made in the Cross-Claim.

I certify this and the erght (8)

preceding pages to be a true copy of
the Reasons for Judgment of

his Honour Justice Wilcox.

Associate: @.l-	&
Date :	16 August 1989

Counsel for the First

Applicant/First Cross-Respondent

and Second Applicant/Second

Cross-Respondent:	M C D J Fagan
Solicitors for the Flrst
Applicant/First Cross-Respondent
and Second Applicant/Second
Cross-Respondent:	Abbott Tout Russell Kennedy
Counsel for the First
Respondent/Cross-Claimant and
Second Respondent:	MC S D Races
Solicitors for the First
Respondent/Cross-Clalmant and
Second Respondent:	Phillips Fox
Date(s) of hearing:	11 July 1989