Bluescope Distribution Pty Ltd v Beerens (No 2)
[2011] VCC 220
•23 March 2011
| IN THE COUNTY COURT OF VICTORIA | Revised |
Not Restricted
AT MELBOURNE
CIVIL DIVISION
COMMERCIAL
GENERAL DIVISION
Case No. CI-09-01729
| BLUESCOPE DISTRIBUTION PTY LTD | Plaintiff |
| (ACN 096 380 068) | |
| v | |
| THOMAS BEERENS | Defendant |
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| JUDGE: | HIS HONOUR JUDGE GINNANE |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 27 January 2011 and 11 February 2011 |
| DATE: | 23 March 2011 |
| CASE MAY BE CITED AS: | Bluescope Distribution Pty Ltd v Beerens (No 2) |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 220 |
REASONS FOR JUDGMENT
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Catchwords: GUARANTEE AND INDEMNITY – calculation of judgment sum – credit for goods returned to manufacturer – mitigation of damages – whether price offered to purchase goods included GST – interest – compound interest.
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr K J Naish | Turks Legal |
| For the Defendant | Mr M Wyles SC (on 27 January 2011) | Foster Nicholson Legal |
| and Ms R Kaye | ||
| HIS HONOUR: |
1 I delivered judgment in this proceeding on 20 December 2010. The amount of the judgment sum in accordance with that judgment and the question of interest remained to be determined. The parties requested that I defer determination of these issues until submissions were made in the New Year. I heard argument about these issues on 27 January 2011 and subsequently, received written submissions. On 11 February 2011, I heard further argument.
2 I will consider the remaining issues separately in respect of the two categories of goods identified at trial – first, the goods that were delivered by Bluescope Pty Ltd (“Bluescope”) to Griffiths & Beerens Pty Ltd; and, secondly, the goods that were ordered, but not delivered.
Delivered Goods
3 Mr Beerens accepted that on the basis of my judgment, the sum of $131,007.08 was payable for the delivered goods. However, the parties disputed how the interest, payable by Mr Beerens on that sum, should be calculated.
Interest Payable on the Delivered Goods – the Parties’ Submissions
4 Bluescope put its claim for interest in a number of ways: First, it relied on clause 6.4 of the Conditions of Sale and claimed compound interest calculated daily; in the alternative, simple interest; in the further alternative, under s.58 of the Supreme Court Act 1958; and again, in the further alternative, under s.60 of the Supreme Court Act 1958.
5 Clause 6.4 of the Conditions of Sale states:
“The Purchaser must pay the Supplier on demand default interest at the rate prescribed from time to time in the Penalty Interest Rates Act 1983 (Vic) on all overdue amounts owed by the Purchaser to the Supplier which interest will be calculated daily and will be payable together with the overdue amount. All payments made by the Purchaser will be first applied to the accrued interest.”
6 Section 58(1) of the Supreme Court Act provides that:
“If in a proceeding a debt or sum certain is recovered, the Court must on application, unless good cause is shown to the contrary, allow interest to the creditor on the debt or sum at a rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act or, in respect of any bill of exchange or promissory note, at 2% per annum more than that rate from the time when the debt or sum was payable (if payable by virtue of some written instrument and at a date or time certain) or, if payable otherwise, then from the time when demand of payment was made.”
Section 60(1) provides that:
“The Court, on application in any proceeding for the recovery of debt or damages, must, unless good cause is shown to the contrary, give damages in the nature of interest at such rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 as it thinks fit from the commencement of the proceeding to the date of the judgment over and above the debt or damages awarded.”
7 Bluescope argued that the judgment sum was due under a Guarantee and an Indemnity, and that by their terms, Mr Beerens was liable to pay interest that fell due under clause 6.4. The terms of the Guarantee and Indemnity are set out in the earlier judgement. Pursuant to the Conditions of Sale as varied, the debts, which formed the basis of the judgment sum, were payable sixty-one days after the end of the month in which the invoice was sent.[1] Mr Beerens was a principal debtor. The Indemnity was a separate and independent obligation to the Guarantee. The fact that the insolvency of Griffiths & Beerens had made further demands upon it pointless did not diminish Mr Beerens’ liability. He knew the terms of the Guarantee and Indemnity.
[1] The Invoices under the heading “Terms of Payment” stated “30 Days Nett from EOM”, but by email of 31 July 2007 Bluescope extended the payment terms to 60 days – CB 313.
8 Bluescope argued that demands for the payment of interest had been made of both the company and Mr Beerens. By letter dated 9 October 2008 to Mr Beerens, Bluescope’s solicitors demanded payment of the sum of $486,621.52, including “interest on goods invoice pursuant to the terms and conditions” in the sum of $1,142.02. By invoice dated 13 October 2008, Bluescope demanded from Griffiths & Beerens the sum of $355,614.44 in respect of the goods not delivered. This invoice included the sum of $1,142.02 for interest.[2] Alternatively, it argued that a demand for the payment of interest was made in the pleadings, and during the trial, and most recently during the hearing on 27 January 2011. Once a demand for interest was made, it was payable from the date when the debt was payable under the invoice.
[2] Court Book (“CB”) documents 61 and 247
9 Section 58 of the Supreme Court Act operated in the alternative to clause 6.4, and so far as it first method of operation was concerned, without the need for a demand. There was a time certain for payment of the monies due under each invoice fixed by the Conditions of Sale as varied, being sixty-one days from the end of the month in which the invoice was issued.
10 So far as the second means of claiming interest under s 58 was concerned, from the time of a demand, no particular form of demand was required,[3] nor did it have to specify the exact sum due, so long as it contained a distinct demand for payment of interest.
[3] AJ Lucas Drilling Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2009] VSCA 310
11 Bluescope relied on s.60 as a further alternative basis for its entitlement to interest on the judgment.
12 Mr Beerens argued that compound interest was not payable because clause 6.4 did not so provide, nor was it claimed under the Writ or the Prayer for Relief in the pleading.
13 Mr Beerens argued that as guarantor, he did not owe a debt, but only had a liability to indemnify and he disputed that the judgment sum was due under an indemnity. He argued that interest should only be calculated from the date the Writ was filed on 24 April 2009.
14 Further, Mr Beerens argued that there had been no demand that attracted the operation of Clause 6.4 or s.58. For a valid demand for payment to be made of a guarantor, the demand must include the amount owing with sufficient specificity to enable it to be comprehended.[4]
[4] Bunbury Foods Pty Ltd v National Australia Bank (1984) 153 CLR 491 at 504 and Donnelly v National Australia Bank (unreported, Supreme Court of Western Australia, 19 May 1992) per Rowland and Ipp JJ, at p.11
15 Mr Beerens also agued that judgment for the sum of $131,007.08 was for recovery of an amount of damages, not a debt, and therefore, for this additional reason, s.58 did not apply. This was because a creditor, making a claim against a guarantor in respect of the obligations of a company that had been placed into liquidation, was relegated to a claim in damages. The only means of recovering the amounts owing for delivered goods from Griffiths & Beerens was by proving in its winding up as unsecured creditor.[5]
Conclusion about the Interest Payable on the Judgment Sum for the Delivered Goods[5] O’Donovan, ‘The Modern Contract of Guarantee’ (4th ed) at p.517
16 There is nothing in clause 6.4 to indicate that compound interest was payable. The statement of Tadgell J in David Leahey (Aust) Pty Ltd v McPherson’s Ltd[6] is of assistance:
“The general rule is that compound interest will not be allowed except where there is an agreement, express or implied, to pay it or where the debtor has employed the money in trade and has presumably earned it, or unless its allowance is in accordance with a usage of a particular trade or business: Halsbury’s Laws of England, 4th ed, para 107. It is unnecessary to decide whether an award of compound interest under s 58 could ever properly be made. It is difficult, however, to suppose that the section, in conferring a prima facie right to interest, and in referring to the rates fixed under the Penalty Interest Rates Act, and that Act itself, are not both concerned with interest calculated on a simple and not on a compound basis. Even if compound interest could be awarded under s 58 I should not be prepared to award it unless the necessity to do so in order to achieve a just result were demonstrated.”
[6] [1991] 2 VR 367at 383
17 The words of clause 6.4 do not support the conclusion that compound interest is payable. The words: “which interest will be calculated daily” do not suggest this conclusion. There is no reference to the interest being compounded, or an indirect reference to that intention, by the use of words such as interest will be “capitalised”, or be “added to the principal sum” on a daily or other basis. The clause refers to the calculation of interest on all overdue amounts. Those words should be read as referring to the amounts due pursuant to the invoices.
18 Each of the invoices that form the basis of the claim in respect of delivered goods was issued under the Conditions of Sale. These documents formed a written instrument and the amounts due were payable at a time certain for the purposes of s.58 of the Supreme Court Act. The invoices were payable sixty- one days after the month in which the invoice was sent. Therefore, interest was payable from that time. Interest calculated on that basis is set out in Costs, Exhibit B.
19 As stated, s.58 contains a second circumstance in which interest is payable – following a demand. The letter of demand sent to Mr Beerens on 9 October 2008 was a demand that satisfied the requirements of s.58 of the Supreme Court Act. A demand need not be in any particular form, or specify the exact sum due, so long as it constitutes a distinct demand of payment.[7] In AJ Lucas Drilling Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd,[8] the Court of Appeal stated:
“Lucas correctly submits that to satisfy s 58 the demand does not have to be for some specific dollar amount or for (in the words of the statute) ‘a debt or sum certain’. It is sufficient if the plaintiff recovers a debt or sum certain and there has been a demand for payment.”
[7] A J Lucas Drilling Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd (supra) at [179]
[8] at [183]-[184]
20 However, some of the amounts for which Bluescope invoiced Griffiths & Beerens were only payable after 9 October 2008, being the date of the letter sent to Mr Beerens. In those circumstances, it is appropriate to award interest under the first method provided for in s.58, i.e. from the date that the amounts were payable under the terms of the invoices. This is the method adopted in Costs, Exhibit B.
21 For similar reasons, I do not consider it appropriate to award interest under Clause 6.4 of the Conditions of Sale. As stated, as some of the debts fell due after the letter of 9 October 2008 and interest should only be awarded from the date certain, when the amounts claimed in the invoices were due. For the sake of completeness, although I do not award interest under clause 6.4, I add this about its operation. It requires a demand for the payment of default interest. The letter of 9 October 2008 to Mr Beerens did demand the payment of interest under the Conditions of Sale. I do not consider that there is a requirement in clause 6.4 that the demand specify the precise sum of interest owing. It is sufficient that it can be read as a demand for the payment of interest.[9] The demand was not invalidated because it overstated the amount owing.[10] It would have been no answer to Mr Beerens’ liability for interest awarded under clause 6.4 that he was not bound by the Conditions of Sale, because the terms of the Guarantee and Indemnity are sufficiently wide to include the liability for interest under that sub- clause.
[9] West Australian Construction Industry Redundancy Fund Ltd v Ortin [2002] WASC 185
[10] Bunbury Foods Pty Ltd v National Bank Ltd (supra) at 504
22 I do not accept Mr Beerens’ argument that the judgment sum was not for a debt but for damages. The liability of Griffiths & Beerens was for a debt for goods sold and delivered, whether or not it could be pursued as a claim for damages.
Goods Not Delivered
23 In the earlier judgment, I decided that from the sum of $312,897.32 argued to be owing by Bluescope, there should be deducted the sum of $16,392.37 for 3.12 tonnes of steel not ordered by Griffiths & Beerens, the sum of $1,142.02 for interest and $958.19 for costs, and the amount of $75,000 offered by GB Manufacturing. I also stated that the deduction made by Bluescope for the scrap value of the remaining steel of $28,025.46, should be included in the sum it was entitled to recover. I noted that some of the remaining stock had been sold, including steel sold back to Bisalloy of $45,316.00, and that that amount had to be deducted from the amount claimed. I stated that the sum of $16,392.37 for 3.12 tonnes of steel, which had not been ordered and not delivered, could not be claimed by Bluescope.
24 I will next consider further the appropriate outcome in respect of the 3.12 tonnes of steel that Griffiths & Beerens did not order, as this issue was the subject of further argument.
The Bisalloy Refund – the 3.12 tonnes
25 Bluescope argues that the sum that it received from Bisalloy Steel of $45,316.00 for 18.73 tonnes of returned steel included the 3.12 tonnes that I have found was not ordered by Griffiths & Beerens. If Mr Beerens is not liable to pay that sum, he should not receive the benefit of the part of the $45,316.00 to which the 3.12 tonnes relates, but only 83.34 per cent of that sum, less GST.
26 In more detail, the argument was as follows. I found that Griffiths & Beerens only ordered 15.61 tonnes of steel, being 83.34 per cent of the amount of steel for which Bluescope charged Griffiths & Beerens. Bluescope returned 18.73 tonnes of steel to Bisalloy and received a credit of $45,316.92. Griffiths & Beerens is therefore only required to credit the money equivalent of 83.34 per cent of the steel that Bluescope returned to Bisalloy, net of GST.[11]
[11] See CB 61 and 64, cf Transcript (“T”) 392
27 Mr Beerens argued that there was no evidence that there had been any double counting and that it had not been shown how the judgment amount claimed by Bluescope was calculated. The Court should not depart from the findings that had already been made. Nor should Bluescope be entitled to depart from the figure of $312,897.33, which was the sum that it had claimed from the commencement of the proceeding.[12]
Conclusion in respect of the 3.12 tonnes
[12] See T 34, L 16
28 Bluescope’s position is more understandable if a document that it tendered on 27 January 2011 is set out. It contained a reworking of the manner in which Bluescope calculated its damages, and was as follows:
Claim in the Amended Statement of Claim (includes GST) $391,175.88
Less GST 39,117.59 Less loss mitigated prior to trial:
Goods sold to GB Manufacturing Pty Ltd (excl GST) 1,877.22 Goods sold to GB Manufacturing Pty Ltd (excl GST) 2,618.40 83.34% of credit from goods returned to Bisalloy (excl GST) 34,333.75
Less $75,000 (less GST) for failure to mitigate 68,181.82 Less amount for 10*2485*8000 Bisalloy not ordered (approx 3.1212 ton @ $5,252.00) 16,393.37 Less amount invoiced for interest 1,142.02 Less amount invoiced for costs 958.19 Claim after Reasons for Judgment $226,554.53 29 This method of calculating Bluescope’s damages gives effect to the findings that I made. It allows an appropriate amount of the credit received by Bluescope from Bisalloy for steel returned and ensures that Mr Beerens is not liable for goods that were not ordered by Griffiths & Beerens. I am persuaded to adopt it.
30 There was evidence that the 18.73 tonnes of steel were returned to Bisalloy and that the 3.12 tonnes, which Griffiths & Beerens had not ordered, formed part of the 12 sheets or 18.73 tonnes of steel, referred to in the document identified as Court Book 61.[13] Although Mr Beerens did not concede the point, I accept this evidence.
[13] Listed as the 12 sheets as part of the Invoice at CB 61 – see Mr A Azzolini T125-126
31 Although this point about the credit of $45,363.00 was not raised at trial, the “practical requirements of justice”[14] necessitate that I take it into account in determining the judgment sum awarded.
[14] Fletcher Constructions Australia Ltd v Lines MacFarlane & Marshall Pty Ltd (2001) 4 VR 28, at page 47, paragraph 49
32 I accept that Bluescope should only have to deduct 83.34 per cent of the $45,316.92 net of GST. This amounts to $34,333.75.
Did the Mitigation Amount Offered Include GST?
33 In my judgment, I found that Bluescope had failed to mitigate its damages by not accepting an offer from GB Manufacturing to purchase the remaining undelivered goods for $75,000.
34 Mr Beerens argued that the whole of the $75,000 should be deducted from the damages otherwise payable to Bluescope. This was because the offer may have carried with it an agreement to pay GST as an addition, or Mr Beerens may have so agreed, if requested, or following negotiations.
35 Bluescope argued that Mr Beerens bore the onus of proving that there had been a failure to mitigate and there was a deficiency in proof of whether the $75,000 included a component for GST.
Conclusion
36 I accept Bluescope’s argument on this issue. Mr Beerens has not discharged the onus of establishing that GB Manufacturing would have been prepared to pay $75,000, plus GST, for the remaining steel.
37 As a result, I will decrease the damages otherwise payable by Mr Beerens to Bluescope by the amount of $75,000, less GST of $6,818.18, leaving $68,181.82.
Interest in respect of the Damages Awarded for the Undelivered Goods
38 Bluescope sought interest under s.60 of the Supreme Court Act on the damages awarded in respect of the undelivered goods. It submitted that the expression in s.60 “debt or damages” was a composite expression, which should not be given a narrow meaning. The general provisions of s.60 are intended to have a broad application.[15] The mere fact that the original pleading did not, in terms, make a damages claim, was not a good reason to deny the claim for interest. The substance of the claim was not altered. Interest was claimed at the outset.
[15] cf Victorian WorkCover Authority v Esso Australia Ltd (2001) 207 CLR 520 at [31]-[32] applied in A J Lucas Drilling Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd (supra) at [171].
39 Mr Beerens submitted that interest should only run from 5 March 2010 when amendments were made to the pleading to claim damages, and should only be calculated pursuant to s.60 and not on a compound basis.
Conclusion
40 Section 60 of the Supreme Court Act should be given a broad application. Simple interest on the damages awarded for goods not delivered is payable from the commencement of the proceeding, despite the change in the way the claim was put: see Braeside Bearing Pty Ltd v HJ Brignell & Associates.[16] No good cause to the contrary within the meaning of s.60 was shown.
[16] [1996] 1 VR 17
Conclusion as to Judgment Sum Owing
(a)
In respect of the goods delivered, Mr Beerens is liable to pay Bluescope the sum of $131,007.08;
(b)
In respect of the goods not delivered, Mr Beerens is liable to pay Bluescope damages in the sum of $226,554.53.
Conclusions as to Interest Payable by Mr Beerens
(a)
Interest is payable on the sum of $131,007.08 calculated as simple interest at the rates set under the Penalty Interest Rates Act from the dates when the various components of the sum were due as set out in Costs, Exhibit B, until today, under s.58 of the Supreme Court Act;
(b)
Interest is payable on the damages of $226,554.53 from the commencement of proceedings on 24 April 2009 until today, at the rates set under the Penalty Interest Rate Act.
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