Brown & Brown v Unique Building Pty Ltd (NO. 2)

[2009] SADC 18

DISTRICT COURT OF SOUTH AUSTRALIA

(Civil)

BROWN & BROWN v UNIQUE BUILDING PTY LTD (NO. 2)

[2009] SADC 18

Reasons for Decision of Her Honour Judge McIntyre

6 March 2009

PROCEDURE - COSTS

Plaintiffs seek costs on a solicitor/client basis from 21 March 2008 relying on offer filed under Rule 187 of the District Court Civil Rules 2006 - Consideration of DCR 187(3)(c) and whether plaintiffs' offer complied with rules - Held: Offer compliant with rules - Plaintiffs entitled to costs.

PROCEDURE - JUDGMENTS AND ORDERS

Plaintiffs seek that one judgment be entered on the basis of  the amount awarded to the plaintiffs on the claim less the amount ordered on the counterclaim - Consideration of discretion under DCR224(2) - Separate judgments to be entered in the circumstances of this matter.

INTEREST

Consideration of plaintiffs' entitlement to interest in view of time taken to issue proceedings.  Interest awarded to plaintiffs on claim from 11 November 2002 to date of judgment and to defendant on counterclaim from 21 February 2003 to date of judgment.

District Court Civil Rules 2006 Rule 187, Rule 224(2), referred to.
Gertig v Davies & Anor (2003) 85 SASR 226; Metro Meat v Warlick (1992) 167 LSJS 455; Forlyle Pty Ltd v Tiver & Anor [2007] SASC 464; Waller v Flinders Medical Centre (No 4) (2004) 225 LSJS 421, considered.

BROWN & BROWN v UNIQUE BUILDING PTY LTD (NO. 2)
[2009] SADC 18

1. On 19 February 2009 I delivered Reasons for Judgment in this matter together with proposed orders.  I heard from the parties as to the form of the orders, interest and costs on 25 February 2009.

   Correction

2. First I correct some arithmetical errors in the Reasons for Judgment delivered on 19 February 2009.  In paragraph 146 the contract cost to complete should have been $505,617.04 and not $505,517.04.  The additional cost to complete occurring in paragraphs 146 and 149 should therefore have been $109,223.96 rather than $109,323.96 as presently appears.  The proposed judgment sum for the plaintiffs in paragraph 151 of the Reasons should therefore be $241,828.96 in lieu of $241,928.96.

   Form of Orders

3. I invited the parties to comment on the form of orders.  The plaintiffs seek one judgment being the amount awarded to the plaintiffs less the amount awarded to the defendant on its counter-claim.  The defendant resists this.

4. I was referred to the decision in Gertig v Davies & Anor[1] which recognises that whilst a set off operates procedurally there is a substantive aspect to the entitlement to a set off and to the ordering of a set off.  It does not however assist me with determining whether it is more appropriate to enter a judgment on each of the claim and the counter-claim or a balance judgment in this matter. 

   [1] (2003) 85 SASR 226

5. The Court has discretion whether to enter a balance judgment or not.[2]  There would be a lack of certainty as to the quantum of a balance judgment due to the different dates of assessment of damages and the interest calculations.  It is my view that the more appropriate course of action in the circumstances of this matter is to enter separate judgments on the plaintiffs’ claim and on the defendant’s counter claim. 

   [2] Rule 224 (2)

   Interest

6. The plaintiffs’ damages on the claim are assessed as at 11 November 2002 and the defendant’s counter claim is awarded as at 21 February 2003.  I invited submissions on the question of interest.

7. Section 39 of the District Court Act 1991 governs the award of pre-judgement interest. Section 39(1) relevantly states:

   Unless good reason is shown to the contrary, the Court will, on the application of a party in whose favour a monetary judgment has been, or is to be, given include in the judgment an award of interest in accordance with this section.

8. There was no dispute as to the defendant’s entitlement to interest for the whole period of approximately 6 years.  The defendant however argued that there was delay on the part of the plaintiffs in issuing the within proceedings of approximately 2 years and that interested should not run in that period. 

9. Proceedings were issued in November 2006.  The defendant concedes that the parties were utilising the dispute resolution procedures in the contract from November 2002 through to 2003 but argues that there was no reason why the plaintiffs could not have issued proceedings from November 2003 at the latest.  The plaintiffs contend that proceedings were issued within time and that the parties were engaged in active attempts to resolve the matter prior to the issue of the proceedings.  It is said that the delay is not unexplained.  There is no “inexplicable tardiness”.[3]  I accept this and I award the plaintiffs interest from 11 November 2002 to date - a period of approximately 6 years and 4 months. 

   [3] Metro Meat v Warlick  (1992) 167 LSJS 455

10. Coming to an appropriate commercial interest rate is a difficult task.  Reasonable people will differ on what will be a commercial rate at any given time.  I have considered the submissions made on this topic, and I consider that 6.5% is an appropriate rate of interest.

11. The final result then is that there will be an award of interest for the plaintiffs on the judgment sum of $241,828.96 commencing from 11 November 2002 to the date of final judgment, 6 March 2009, a period of approximately six years and four months, at 6.5%.  I award interest to the plaintiffs in the sum of $99,000.

12. There will further be an award of interest for the defendant on the judgement sum of $18,863 commencing from 21 February 2003 to the date of final judgment, 6 March 2009, a period of approximately six years, at 6.5%.  I award interest to the defendant in the sum of $7,500.

    Costs

13. The plaintiffs have been successful in their action.  In the ordinary course of events they are entitled to party/party costs to be taxed or agreed.[4]  The plaintiffs seek solicitor/client costs from 21 March 2008 on the basis that they filed an offer to consent to judgment under Rule 187 and the orders I propose exceed that offer.

    [4] Forlyle Pty Ltd v Tiver& Anor [2007] SASC 464

14. The plaintiffs’ offer reads as follows:

    That the defendant pay to the plaintiffs the amount of $200,000 plus costs to be agreed or taxed. 

15. The defendant concedes that the plaintiffs are entitled to party/party costs but resists an order for solicitor/client costs contending that the offer of settlement did not comply with the provisions of Rule 187.  Specifically, the defendant argues that Rule 187(3)(c) requires the offer to state whether it relates to costs and if so, the amount of the offer so far as it relates to costs.  It is said that the plaintiffs’ offer in this matter relates to costs but does not state the amount of the offer; rather it is an uncertain amount.  The defendant further says that the notice does not comply with Rule 187(3)(d) in that it does not state whether the defendant could accept the offer of $200,000 without also accepting the offer as to costs.  I do not agree.

16. First, properly understood, the plaintiffs’ offer did not contain an offer on costs.  The offer did no more than indicate that the plaintiffs were prepared to compromise their principal claim for $200,000.  The plaintiffs also indicated that they were prepared to negotiate costs but, failing agreement, would tax their costs.  This is no different to the position if the plaintiffs had simply offered to accept the sum of $200,000 for the principal claim but had made no mention of costs.  If the defendant had accepted the offer then the question of costs would remain to be determined in the usual course.  Namely they would have been agreed or taxed. 

17. Second, interpretation of the rules must be approached with commonsense.  The purpose of the rules is to facilitate settlement by encouraging parties to make and consider appropriate offers.  This offer was clearly expressed.  There was no uncertainty about it. The defendant could assess whether the offer was reasonable.  It could make a considered decision whether to accept the offer or not. 

18. This is different to an offer of a fixed amount inclusive of costs where it is not possible for a defendant to properly assess the substantive offer because of uncertainty as to the amount of the costs.  It had been held under the previous rules that such offers were not effective.[5]  It is my view that the new rule codifies that position.  In other words, if the offer of $200,000 was expressed to be inclusive of costs, it was incumbent on the plaintiffs to specify the amount of costs to enable the defendant to assess the reasonableness of the substantive offer. 

    [5] Waller v. Flinders Medical Centre (No 4) (2004) 225 LSJS 421

19. In view of my findings on Rule 187(3)(c), it follows that Rule 187(3)(d) has no part to play in relation to the plaintiffs’ offer. 

    Orders

    1.That there be judgment for the plaintiffs on the claim in the sum of $340,828.96 inclusive of interest.

    2.That there be judgment for the defendant on the counter claim in the sum of $26,363.00 inclusive of interest.

    3.That the plaintiffs have their costs of this action on a party/party basis up to 21 March 2008 and thereafter on a solicitor/client   basis to be agreed or taxed.

    4.I extend the time for the filing of a Notice of Appeal insofar as it may be necessary for a period of 21 days from today.