Bluescope Distribution Pty Ltd v Beerens (No 3)
[2011] VCC 352
•7 April 2011
IN THE COUNTY COURT OF VICTORIA
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: | 23 March 2011 |
| DATE OF JUDGMENT: | 7 April 2011 |
| CASE MAY BE CITED AS: | Bluescope Distribution Pty Ltd v Beerens (No 3) |
| MEDIUM NEUTRAL CITATION: | [2011] VCC 352 |
REASONS FOR JUDGMENT
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Catchwords: COSTS – Offer to settle – Notice to admit
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr T R Messer and Mr K J | Turks Legal |
| Naish | ||
| For the Defendant | Mr M D Wyles SC and Ms | Foster Nicholson Legal |
| R L Kaye | ||
| HIS HONOUR: |
1 The remaining issue in this proceeding concerns costs.
2 Bluescope Distribution Pty Ltd applied for the costs of the proceeding on an indemnity basis.
3 Mr Beerens argued that he should not be ordered to pay Bluescope’s costs, or at least indemnity costs, for two reasons. First, he had made an offer of settlement at a very early stage, and Bluescope failed to achieve a better result. Second, Mr Beerens served a Notice to Admit facts and documents prior to the trial, and Bluescope disputed all but one of the matters in that Notice. Mr Beerens contended that most of the matters set out in the Notice to Admit were proved at trial. Therefore, Bluescope should be ordered to pay his costs.
4 I will first deal with Bluescope’s submissions.
Bluescope’s Submissions on Costs
5 BlueScope relied on the following provisions of the Guarantee and Indemnity signed by Mr Beerens on 30 October 2007:
“The Guarantor must fully indemnify the Supplier for all expenses and legal costs that the Supplier incurs in enforcing this Guarantee.” (clause 13)
6 Bluescope also referred to the opening clause of the Guarantee and Indemnity which was in the following terms:
“To indemnify and keep the Supplier and any related body corporate indemnified from and against any claim, action, loss, damage, liability, costs, expense, outgoing or payment suffered, paid or incurred by the Supplier or such related body corporate in relation to the non payment or non recovery of the Guaranteed Moneys.”
7 Bluescope relied on the English Court of Appeal decision in Gomba Holdings (UK) Ltd v Minories Finance Ltd (No 2).[1] In that case, the guarantee referred to payment of all costs, charges and expenses “on a full indemnity basis”. The English Court of Appeal held that the bank was entitled to recover their actual costs, charges and expenses of the litigation as a contractual right, but was not entitled to costs that had not been reasonably incurred, or were unreasonable in amount. The Court stated:
“Where there is a contractual right to the costs, the discretion should
ordinarily be exercised so as to reflect that contractual right.”[2]
[1] [1993] Ch 171
[2] (supra) at 194
8 This decision was referred to with apparent approval by the Supreme Court of Victoria in St George Bank Ltd v Irani.[3]
[3] [2008] VSC 98, affirmed on appeal (2008) 22 VR 135
9 The authorities were discussed in detail by Vickery J in Taree Pty Ltd v Bob Jane Corporation Pty Ltd[4]. His Honour’s reasoning leads to the conclusion that the indemnity contained in clause 13 and the opening words of the Guarantee and Indemnity are sufficiently wide to cover at least some of the legal costs incurred in this proceeding. The question remains what do the phrase “all expenses and legal costs” in clause 13 and the words “costs, expense” in the opening words of the Guarantee and Indemnity mean?
[4] [2008] VSC 22810 Authorities suggest that the Court retains its discretion in respect of costs, but that when a contractual provision is relied on it must be “plainly and unambiguously expressed.”[5] The authorities on this issue are discussed in Abigroup Limited v Sandtara Pty Ltd[6] and Leda Holdings Pty Ltd v Oraka Pty Ltd.[7] In the Abigroup Case the New South Wales Court of Appeal construed the phrase “all costs and expenses” as including costs on a solicitor/client basis. I consider that this is the correct construction of the relevant words in clause 13 and the words “costs, expenses” in the opening words of the Guarantee and Indemnity relied on by Bluescope. I adopt it.
[5] (supra) at paragraph [39][6] [2002] NSWCA 45[7] [1999] FCA 44411 The second factor emphasised in Taree v Bob Jane Corporation was that if a party intends to claim costs on other than a party and party basis it should do so in the pleadings. In this case the claim for indemnity costs was first made in the Amended Statement of Claim filed on 5 March 2010. I consider that any order for solicitor/client costs should only apply from that date.
Mr Beerens’ Offer of Settlement
12 BlueScope accepted that the principles relating to the effect of an offer of compromise still applied where indemnity costs were provided for in a guarantee.
13 Mr Beerens’ offer of settlement was contained in his solicitors’ letter of 20 November 2008. It stated that Mr Beerens:
“shall procure GB Manufacturing to enter into a binding agreement with your client to purchase the stock referred to in your invoice no. 97896767 on a COD basis, as demand requires it in the normal course of the business of GB Manufacturing (but the entire stock to be purchased no later than 365 days after entering into the Settlement Agreement) at the following prices.”
14 There then followed prices for particular quantities and grades of steel. The total amount of that offer was $291,454.08 for the steel manufactured, but not delivered.
15 Mr Beerens argued that this figure was greater than the amount of damages awarded to Bluescope in respect of steel manufactured, but not delivered. Those damages amounted to $226,554.53, plus $45,655.39 interest, a total of $272,209.92.
16 Mr Beerens’ offer also stated that he would pay $131,007.08 in respect of steel delivered in instalments every 30 days, the first payments 30 days after the execution of the settlement agreement, the balance of $1,007.08 payable with the last instalment of $10,000. This payment regime would have lasted for 13 months. A guarantee for these payments would be given by GB Manufacturing Pty Ltd.
17 It was to be a requirement of the proposed Settlement Offer that Bluescope withdraw the caveat on Mr Beerens’ residence. The final clause of the proposed Settlement Agreement stated:
“In the event that our client breaches the Settlement Agreement the parties shall revert to their positions prior to the Settlement Agreement and your client shall be entitled to retain any goods delivered to it under the Settlement Agreement and GB Manufacturing shall be entitled to retain any goods delivered to it under the Settlement Agreement. Your client shall be entitled to re-lodge its caveat, subject to my client reserving its rights that it asserted prior to entering into the Settlement Agreement.”
18 Mr Beerens argued that this offer was better than the final judgment obtained by Bluescope, as the Court could not order GB Manufacturing to provide a guarantee. Even though the sums to be paid under the Settlement Offer were to be paid in instalments, the total amount paid would still have been received earlier, than a judgment sum paid after the completion of litigation.
19 Mr Beerens argued that Bluescope should be ordered to pay his costs from the date of the offer onwards, including all the costs of the trial. Reliance was placed on the Court of Appeal decision in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2)[8] and the test of whether the rejection of the offer was “unreasonable in the circumstances”.
[8] (2005) 13 VR 435
20 Factors relied on by Mr Beerens that were said to be relevant to the determination of that question were that the offer was made very early, and that the Court, in accordance with the policy objectives of the Civil Procedure Act 2010, ought to encourage the making of pre-litigation offers of settlement. It was no bar to the reliance on the Offer of Settlement that it was made prior to the commencement of litigation, or that it was not stated that if rejected, Mr Beerens would make an application for costs: Roads Corporation v Love.[9]
[9] [2010] VSC 154 at paragraph 57-58
21 Bluescope accepted that the Court could take into account the offer of settlement, but argued that it did not take the form of a Calderbank offer. Mr Beerens did not offer to buy the goods not delivered himself, but to procure GB Manufacturing to purchase them. Mr Beerens did not guarantee the performance by GB Manufacturing of the obligations that it would assume. Mr Beerens, however, required the immediate removal of the caveat over the title of his property. The obligations which Mr Beerens undertook, and which if breached would give Bluescope the right to relodge the caveat, would be either a failure to procure the entry of GB Manufacturing into the sale agreement or, to pay for the delivered stock on the 13 months’ terms.
22 Bluescope also argued that in the period between the entry into the Settlement Agreement and any breach, the house over which the caveat was lodged, might have been sold, or borrowings made against it. A caveat could not be relodged in respect of the same interest under the Transfer of Land Act 1958 s.91(4). [10] Mr Beerens, in reply, raised the possibility of granting a further security to provide Bluescope with a new caveatable interest.
[10] See R & L Bell Pty Ltd v Casboult (2003) 6 VR 271
23 In respect of the discretionary factors identified in Hazeldene Chicken Farm Case, Bluescope argued that the offer was made before any of the issues on which Mr Beerens succeeded at trial had been raised. The letter gave four days for acceptance of the offer, which was insufficient. There was no substance in the offer. Mr Beerens’ prospects of success at the date of the offer were poor. The terms of the offer were unclear. There was no mention of a foreshadowed application for indemnity costs. The value of the offer should be discounted by the GST that was payable on it.
Conclusion
24 In accordance with the decision in the Hazeldene’s Chicken Farm Case, the appropriate test is whether the rejection of the offer was unreasonable in the circumstances.
25 I do not consider that the rejection of the offer was unreasonable. It has to be kept steadily in mind that Bluescope was suing Mr Beerens under a guarantee and indemnity and seeking a judgment against him. The offer did not provide a promise by Mr Beerens to pay money in respect of the goods ordered, but not delivered. It offered payment by instalments and a guarantee by a third party and required the removal of a caveat lodged over the title of Mr and Mrs Beerens’ property.
26 The amounts offered were to be paid over a period of up to one year in the case of the undelivered steel and thirteen months in the case of the debt due for the delivered steel.
27 An important consideration is the extent of the compromise offered. The judgment made in this proceeding makes Mr Beerens liable for the total amount of debt and damages found to be recoverable under the Guarantee and Indemnity, whereas under the Settlement Offer he would not have been. In addition, Bluescope was required to surrender the right to lodge a caveat over the title to the Beerens’ property.
28 Finally, it is to be noted that the total sum, including interest, awarded under the judgment in this proceeding exceeds the total monetary amount of the offer, which was said to be $422, 461.16.
29 I therefore consider that making of the Settlement Offer does not justify an alteration to the conclusion I would otherwise reach in respect of costs.
Notice to Admit
30 On 26 July 2010, Mr Beerens served a Notice to Admit on Bluescope. A copy of it, but not its annexures) is attached to these Reasons. On 6 August 2010, Bluescope served a Notice of Dispute stating that:
“The plaintiff disputes the following facts specified in the Defendant’s
notice dated 26 July 2010.
1. All facts contained therein, with the exception of the facts alleged in
Paragraph 5 (a).
The plaintiff disputes the authenticity of the following document
mentioned in the Defendant’s notice dated 26 July 2010.
1.The document referred to therein being a purported copy of The Reasons for Decision of His Honour Associate Justice Efthim, and not the orders of His Honour alleged comprise the alleged Annexure A.”
31 Mr Beerens argued that most of the matters alleged in Bluescope’s Notice to Admit were proved at trial and not seriously disputed by Bluescope and as such, it should pay his costs, on an indemnity basis, of proving those facts. If the Notice to Admit had been dealt with responsibly and bona fide, then the duration of the trial would have been reduced from six days to one-and-a-half days. The maximum amount of costs that should be awarded to Bluescope should be the costs of one to one- and- a- half days of trial. Bluescope should be ordered to pay Mr Beerens’ costs of three –and- a- half to four days of the trial.
32 Bluescope argued that it had acted reasonably in not agreeing to each of the matters that were disputed.
Relevant Principles
33 Rule 63A.18 of the County Court Civil Procedure Rules 2008 states:
“Non-admission of fact or document
Where a party serves a notice—
(a)
under Rule 35.03(2) disputing a fact, and afterwards that fact is proved in the proceeding;
(b)
under Rule 35.05(2) disputing the authenticity of a document, and afterwards the authenticity of that document is proved in the proceeding—
that party shall pay the costs of proof, unless the Court otherwise orders.”
34 In Nolan v Nolan (No 2),[11] the Court noted that the award of costs under Rule 63.18 was discretionary, and stated by reference to earlier authority that the question was “whether the party was acting reasonably in the circumstances”.[12]
[11] [2003] VSC 136
[12] applying MT Associates Pty Ltd v Aqua-Max Pty Ltd (No 3) [2000] VSC 163
35 In Meadow Gem Pty Ltd v ANZ Executors & Trustees[13] Byrne J, accepting that the Court had a discretion, held that prima facie, the disputing party must pay the costs of proof of a fact where a notice to admit has been given. Absent some special factor, each party –
“… runs the risk that, if the plaintiff or the party giving the Notice to Admit
succeeds, a costs burden must be accepted.”[14]
[13] unreported VSC, Byrne J, 11 June 1996, BC9602422
[14] (supra) at p5
36 The debate between the parties was about whether Mr Beerens had proved the matters raised in the Notice to Admit and what the consequences of a failure to prove a fact were for costs. That requires a consideration of each of the relevant paragraphs of the Notice to Admit.
37 Bluescope also argued that it was not unreasonable to take the position it did in relation to the issues which Mr Beerens proved at trial. For instance, in respect of the conversation relating to the entry into the Guarantee and Indemnity. While the Court preferred the evidence of Mr Beerens and Mr Gwynne, there was no finding that Mr Persaud deliberately misled the Court. In any event, evidence was required of the context in which the Guarantee and Indemnity was executed.
38 I will deal with each of the paragraphs in turn.
Paragraph 1
39 This paragraph sets out matters relating to the “ordinary course of dealing between the Plaintiff and the Company at all relevant times”.
40 Mr Beerens argued that the Court had accepted, in paragraphs 15-16 of the principal judgment, that a pattern of trade existed between Griffiths & Beerens and Bluescope in terms that closely reflected paragraphs 1(a) to 1(c) of the Notice to Admit.
41 Bluescope disputed this and argued that the matters set out in paragraph 1 were not proved at trial, no written quotation was made by Bluescope and none accepted by Griffiths & Beerens.
42 The fact stated in paragraph 1 was not proved at trial. The ordinary course of dealing extended beyond those facts to encompass the process whereby the steel was held by Bluescope and delivered as required in the manner described in paragraph 16. I did not find that the price list was a quotation.
Paragraph 2
43 The parties contested whether in paragraph 16 of the principal judgment I had accepted that Bluescope provided to Griffiths & Beerens “trading terms of greater than sixty days”. My finding in that paragraph was as to the pattern of trade that existed, rather than any acceptance by Bluescope of that pattern. I do not consider that the fact stated was proved at trial.
Paragraph 3
44 Paragraph 3 of the Notice to Admit, as amended, set out the details for a proposed Payment Plan sent from Mr Kennedy of Griffiths & Beerens to Mr Day of Bluescope on 27 July 2007.
45 Mr Beerens relied on the fact that I had referred to this Plan in paragraph 83 of the principal judgement. Bluescope argued that the payment plan “also provided that Griffiths & Beerens provide a signed copy of the SSG Account Application and T & Cs”.
46 I do consider that the fact was proved at trial. However I consider that I should otherwise order with respect to any costs attributable to proving this fact. It was necessary to refer to it in the oral evidence of the witnesses who provided the narrative of material events. That evidence was brief and occupied little time at the trial.
Paragraph 4
47 This paragraph concerned the allegation that from 6 August 2007, Bluescope traded with Griffiths & Beerens on the basis of the Payment Plan.
48 Mr Beerens relied on the finding at paragraph 121 of the principal judgement that the “payments had been made as required by the payment plan”. He argued that no issue was taken with that fact, but that Bluescope focused upon the entitlement to terminate the trading relationship under the Conditions of Sale, on the presentation of an application to wind up Griffiths & Beerens.
49 Bluescope denied that any agreement was reached under the Payment Plan and that it also included the Conditions of Sale, which were not referred to in paragraph 4 of the Notice to Admit. It had relied on clause 6.6 of those Conditions to refuse supply of further goods on credit. It also argued that the Payment Plan was altered on 30 October 2007.
50 I accept that submission. The fact alleged in paragraph 4 was not proved at trial. The trading terms included the Conditions of Sale as well as the Payment Plan.
Paragraph 5(b)
51 Mr Beerens argued that I had accepted in paragraph 98 of the principal judgement that Bluescope had unilaterally changed its terms of trade with Griffiths & Beerens to strictly cash on delivery terms and that that fact should have been admitted.
52 Bluescope’s argued that it was entitled to dispute this fact, because it could be taken as requiring an agreement that it had no authority to vary the terms in that manner, whereas it contended that a breach of Clause 6.6 of the Conditions of Sale had occurred.
53 The use of the term “unilaterally” renders the fact stated in paragraph 5 (b) ambiguous. It was proved at trial that Griffiths & Beerens introduced a cash on delivery requirement. It did that because it claimed that the previous terms had been breached and that the agreement to provide goods on credit had ended. I do not consider that Mr Beerens proved the fact alleged in paragraph 5 (b).
Paragraph 5(c)
54 Mr Beerens sought admission of the fact that, in or about October 2007, Griffiths & Beerens was not in default of its obligations under the Payment Plan or the COD Terms.
55 Bluescope contended that Griffiths & Beerens was in default of clause 6.6 of the Conditions of Sale because it was presumed to be insolvent following its failure to contest the statutory demand and the making of the winding-up application on 2 October 2007.
56 Griffiths & Beerens had committed an act entitling Bluescope to invoke the terms of clause 6.6 of the Conditions of Sale. I therefore find that the fact alleged was not proved at trial.
Paragraph 5(d)
57 I did make findings of fact consistent with the terms of paragraph 5(d) of the Notice to Admit. The fact was therefore proved at trial. However, I consider that evidence about the conversation referred to in that sub-paragraph would need to have been led as part of the narrative of the proceeding, that was provided by the evidence of chief of witnesses, including Mr Beerens and Mr Persaud. Save for one matter I otherwise order under Rule 63A.18. in respect of the costs of proving the fact stated in paragraph 5 (d).
58 If the fact stated in paragraph 5 (d) had been admitted by Bluescope, it would have been unnecessary for Mr Beerens to have called Mr Gwynne, as a witness. His evidence in chief occupied a short period of time. I therefore consider that the ordinary operation of Rule 63A.18 should apply to Mr Gwynne’s evidence. Bluescope should have to pay the costs attributable to that evidence, which based on an assessment of the length of time it occupied, I fix at 15 per cent of the costs of the hearing on 31 August 2010. Save for those costs, I otherwise order in respect of the facts set out in paragraph 5 (d) of the Notice to Admit.
Paragraph 6
59 The dispute in this instance was whether in the principal judgement I found that the Supreme Court had dismissed the winding up petition on the ground that it was an abuse of process. Upon a re-reading of paragraph 98 of the principal judgement and the Associate Justice’s judgment, Bluescope’s submission is correct. Therefore the fact stated in paragraph 6 of the Notice to Admit, which was ultimately based on a reading of the terms of the Associate Justice’s judgment, was not proved at trial. The particular winding - up petition did not lead to a winding-up order because the Court noted that Griffiths & Beerens had paid the debt due and there was no supporting creditor.
Paragraph 7
60 This paragraph stated that on 24 and 30 October 2008 GB Manufacturing offered to acquire from Bluescope some or all of the manufactured goods.
61 An email from GB Manufacturing of 24 October 2008 did ask for an invoice for particular steel that it wished to have delivered. However the communication of 30 October 2008 did not constitute an offer to acquire, but rather displayed an intention to enter into negotiations. It expressed a “strong interest” in acquiring some or all of the materials and a desire to meet and negotiate a “possible arrangement”.
62 A reading of the emails together, leads to the conclusion that the fact stated
in paragraph 7 was not proved at trial.
Paragraph 8
63 This paragraph states that “on 30 October 2008, the Plaintiff refused to sell the Manufactured Goods to GBM, notwithstanding GBM’s willingness to acquire some or all of those goods”.
64 It was proved that Bluescope refused to sell the manufactured goods to GB Manufacturing. However, little time was taken in proving that fact and I consider it appropriate to otherwise order under Rule 63A.18.
Paragraph 9
65 This paragraph refers to tables attached to the Notice to Admit. At trial Mr Beerens tendered an amended version of them. I did not find it necessary to consider the accuracy of the figures in the tables. Bluescope did not dispute the figures contained in them to any degree.
66 However, I do not consider that the contents of the tables were proved at trial. They presented a version of the figures, which on Bluescope’s case were not relevant, even if arithmetically correct. They were not ultimately figures that I acted on. They referred to quoted prices, which I did not accept as quoted prices. If I had considered that the tables were proved at trial, I would have otherwise ordered in respect of the costs of proving them under Rule 63A.18 because of the maters to which I have referred in the last three sentences.
Document Attached to the Notice
67 Finally, in respect of the document attached, Bluescope is correct in that it contained reasons and not orders and therefore technically it was entitled to not admit the relevant fact stated in the Notice to Admit. The fact was not proved at trial.
Summary
68 The facts contained in paragraphs 3 and 4 of the Notice to Admit were proved at trial.
69 However, save in respect of the evidence of Mr Gwynne, I do not consider that any additional costs of any identifiable substance have been incurred as a result of the non-admission of matters contained in those paragraphs. I therefore do not consider that Bluescope should have to bear Mr Beerens’ costs of proving them and I otherwise order within the meaning of Rule 63A.18 in respect of the costs of proving the facts stated in those paragraphs.
70 The trial involved a number of intertwined issues, which required evidence as to the dealings between Bluescope and Griffiths & Beerens. I do not consider that an admission of the facts, that I have found were proved at trial would have shortened the length of the trial, by any significant degree. I do not accept that the trial could have been truncated to the degree contended by Mr Beerens.
71 Save for the matter of the costs of Mr Gwynne’s evidence, I therefore do not accept that the Notice to Admit affects the determination of costs in the proceeding.
Amendment of Pleadings
72 I accept Mr Beerens’ submission that Bluescope should have to pay his costs occasioned by the amendment to its Statement of Claim on 5 March 2010 see Rule 63A. 17.
Conclusion
73 In the exercise of the discretion as to costs, and with two exceptions, I order that the defendant pay the plaintiff’s costs of the proceeding on a party and party basis until 5 March 2010, and thereafter on a solicitor/client basis. The first exception is the costs of the amendment of the statement of claim in respect of which the plaintiff must pay the defendant’s costs occasioned by that amendment. The second exception is 15 percent of the costs of the proceeding on 31 August 2010, which percentage the plaintiff must pay to the defendant on a party and party basis on Scale D.
74 I will order as follows:
(a) there be judgment for the plaintiff against the defendant in the following
sums(i) $164,358. 07, inclusive of interest in the sum of $33,350.99;
(ii) damages in the sum of $226,554.53, plus interest in the sum of
$45,655.39, totalling $272,209.92.
(b) subject to paragraph (c) hereof, the defendant pay the plaintiff’s costs of the proceeding on a party and party basis to be taxed on Scale D in default of agreement until 5 March 2010 and thereafter on a solicitor-client basis to be taxed on Scale D in default of agreement. I otherwise order under Rule 63A.18 in respect of the costs of proving the facts stated in paragraphs 3 and 4 of the defendant’s Notice to Admit dated 26 July 2010.
(c) The plaintiff pay the defendant’s costs occasioned by the amendment to the Statement of Claim of 5 March 2010 and 15 per cent of the costs of the hearing on 31 August 2010 on a party and party basis to be taxed on Scale D in default of agreement.
(d) I grant certificates as follows. Certificates for two counsel. For senior counsel’s brief fee at $3300 per day for six days of trial, two half days, being 27 January 2011 and 23 March 2011 at $1650 each and for three days of conferences and preparation at $3300 per day. For junior counsel’s brief fee at $2200 per day for six days of trial, two half days, being 27 January 2011 and 23 March 2011 at $1100 each and three days of conferences and preparation at $2200 per day.
(e) In respect of the calculation of 15 percent of the defendant’s costs of 31 August 2010, which I have ordered the plaintiff to pay the defendant, I certify for two counsel and for senior counsel’s brief fee for the day at $6600 and junior counsel’s brief fee for the day of $1800.
(d) I certify for brief to hear judgment.
(d) I certify for transcript and for the reasonable costs of preparation of the Court Book with two copies at Scale and any further copies at a commercial rate as agreed or as fixed by the Costs Court.
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