C P Aquaculture (India) Pvt Ltd v Aqua Star Pty Ltd (No 2)

[2023] VCC 2297

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

GENERAL LIST

Case No. CI-21-01973

C P AQUACULTURE (INDIA) PVT LTD	Plaintiff
v
AQUA STAR PTY LTD (ACN 074 614 538)	Defendant

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JUDGE:	HIS HONOUR JUDGE MACNAMARA
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers from correspondence dated 5-7 December 2023
DATE OF JUDGMENT:	11 December 2023
CASE MAY BE CITED AS:	C P Aquaculture (India) Pvt Ltd v Aqua Star Pty Ltd (No 2)
MEDIUM NEUTRAL CITATION:	[2023] VCC 2297

REASONS FOR JUDGMENT
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Subject:COSTS

Catchwords:              Claim by plaintiff for monies owed for goods sold and delivered – Defence and counterclaim alleging defects in quality – offer of compromise – application for plaintiff’s costs to be assessed on a full indemnity basis following failure to accept plaintiff’s offer of compromise – application on the part of defendant for certain costs to be awarded in its favour based on plaintiff’s refusal to admit genuineness of document

Legislation Cited:      Goods Act 1958 (Vic); County Court Civil Procedure Rules 2018 (Vic)

Cases Cited:Thorne v Doug Wade Consultants Pty Ltd [1985] VR 433; C P Aquaculture (India) Pvt Ltd v Aqua Star Pty Ltd [2023] VCC 2134

Judgment:                  As per judgment given this day

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	On the papers
For the Defendant	On the papers

HIS HONOUR:

Background

1On 22 November 2023, I published reasons in this proceeding determining the plaintiff’s claim in its favour and dismissing the counterclaim ([2023] VCC 2134). I directed the parties to bring in short Minutes to give effect to my reasons and reserved costs.

2The parties have submitted their proposed forms of judgment and their contentions as to costs.

3The general proposition that costs follow the event is not in dispute nor is the quantum of the judgment to be entered on the plaintiff’s claim (subject to an up-to-date calculation of interest).  There is, however, dispute as to the appropriate costs’ order to be made.

Plaintiff’s contentions

4In reliance on an affidavit sworn 29 November 2023 by CP Aquaculture (India) Pvt Ltd’s (“CP India”) solicitor, Mr Lucarelli, CP India contends that it should have its costs “up to and including 11.00am on 27 February 2023” on the standard basis and “thereafter, on an indemnity basis”.

5This contention is based upon the service on 22 February 2023 by email of an Offer of Compromise expressed to be made under Order 26 of the Court’s Rules, offering to compromise the proceeding on payment of US$2,350,000, inclusive of costs and interest with Aqua Star’s counterclaims being dismissed.

6CP India relies, it would seem, on the presumption created by Rule 26.08(2) of the Court’s Rules that its costs after the unaccepted Offer of Compromise be taxed on an indemnity basis on the footing that it ultimately obtained “a judgment on [its] claim … no less favourable to [it] than the terms of the offer”.

Defendant’s contentions

7By written contentions over the signature of its senior counsel, Mr Clarke KC, Aqua Star contended first, that there should be no uplift in the scale of the costs for which it will be liable to CP India on the footing that, in accordance with the discretion granted to the court under Rule 26.08, it should “otherwise order” on the basis that the Offer of Compromise contained little or no element of compromise and that CP India had been guilty of “disqualifying conduct” (Defendant’s Costs Submissions, [4]).

8Mr Clarke KC said the contention that the result obtained at trial was “no less favourable” to CP India, as its Offer of Compromise depended upon the proposition in Mr Lucarelli’s affidavit, that solicitor/client costs of $384,905.43 incurred prior to trial would be recoverable upon a standard basis taxation as to 50 per cent at least.  He said:

“This was a simple claim from the defendant’s perspective.  The statement of claim was short, simple and remained unamended. It is likely costs would be $50,000 on a standard basis in the County Court, not $384,905.43.” (Defendant’s Costs Submissions, [6](a)(i))

9The “disqualifying conduct” of which Mr Clarke KC complained was dealt with in my principal determination at [168]-[174], where I noted and disposed of a contention that test results purporting to have been derived shortly after the delivery of the relevant shipments of prawn product were recent inventions invented shortly prior to a summons for summary judgment upon the plaintiff’s claim. I rejected that contention. 

10Mr Clarke KC said:

“The objection to admissibility took considerable time and also led to considerable costs to be incurred [sic]. [Aqua Star] was compelled to pay for the owner of his Chinese customer to fly out from China to give evidence to that the reports were business records. It was the subject of a notice to admit dated 18 May 2023.” (Defendant’s Costs Submissions, [6](c)(iii))

11An affidavit from Chong Hao Toh of Aqua Star’s solicitor’s firm stated that “On or about 19 May 2023” his firm served Notices to Admit documents and facts which included these matters.  He said that the solicitors for CP India “responded refusing the Notices to Admit” on or about 1 June 2023 (at [5] and [6]).

12Mr Clarke KC referred to the decision of the Full Court of the Supreme Court of Victoria in Thorne v Doug Wade Consultants Pty Ltd [1985] VR 433, 498 where Kaye and Marks JJ applied what they regarded as a well-established principle that where a successful party makes allegations of fraudulent misrepresentation, which are not made out, the costs of such issue ought not to be awarded to that party even if it is generally successful in the proceeding.

13Mr Clarke KC also relied on Rules 35.06 and 63A.18, which provided for a party declining to admit a fact or the authenticity of a document which is ultimately proven at trial to be liable for the costs of such proof.  Mr Clarke KC continued “The costs should be taxed on an indemnity basis given the unfounded allegation of fraud.” (Defendant’s Costs Submissions, [6](c)(iv))

Conclusions

14There should be an uplift of scale in favour of CP India to the full indemnity rate based on its service of the Offer of Compromise.  The compromise offered was “all in”, which necessarily entailed a consideration of the costs entitlement obtained by CP India at trial.  I accept Mr Lucarelli’s opinion that at least half of the costs rendered as between solicitor and own client by his firm to CP India would likely be recoverable on a standard basis on a costs assessment. 

15The complications and protraction of CP India’s pursuit of its claim derived not from any complexity in its Statement of Claim, which was a “plain vanilla” claim for monies due for goods sold and delivered.  All the complications derived from Aqua Star’s Defence and Counterclaim, at least to the extent of the face value of CP India’s claim, this “counterclaim” is properly characterised as a true defence.  (Section 59(1) of the Goods Act 1958) The larger costs, therefore, are properly characterised as CP India’s costs of mounting its claim.

16Mr Clarke KC also asserted that there was a mixed outcome in my determination. He noted that I determined in Aqua Star’s favour the issue of the US$1 per kilogram discount, and concluded that conditions or warranties implied under s19 of the Goods Act formed part of the relevant contract.  He noted there was also success on a set-off of $58,000, which was conceded but not dealt with in the Reasons for Judgment.  Further, he said his client had succeeded on the issue of admissibility of the Chinese reports.

17Aqua Star’s success relative to the Chinese reports will be dealt with by reference to Mr Clarke KC’s contentions based on Rules 35.06 and 63A.18. The $58,000 set‑off was never in dispute and generated no additional costs at trial. The issue of the s19 condition/warranty did not affect the substantive outcome of the proceeding, nor did it consume much time or generate much additional cost.

18Acknowledging that a mixed outcome can have the effect of modifying the simple application of the “costs follow the event” principle in a particular case, the outcome here was not, in the relevant sense, “mixed”.  It was an almost complete victory for the plaintiff.  There is no ground for modifying its costs entitlement on this score.

19As to “disqualifying conduct”, the refusal of CP India to admit the genuineness of the Chinese reports should, in my view, be catered for by the regime under Rule 63A.18, and Aqua Star should have its costs of proof on those matters.

20My rejection of the contention that the reports were a recent invention depended upon an application of the burden of proof rather than a conclusion that there had been a clear proof, in positive terms, that the allegation of recent invention was without foundation.  In those circumstances, I am not persuaded that the award of indemnity costs to Aqua Star on this point would be justified.  In reply submissions, the solicitors for CP India said “The plaintiff did not submit that the Court should find that the Guolian test reports were a fabrication…The plaintiff sought merely that the defendant sufficiently prove that the test reports were business records…”.  They referred to closing submissions paragraphs 250-254.  At [146] of my principal determination, I said “Mr Moon cross-examined Mr Chen with a view to suggesting that these reports did not originate on the dates they purportedly bore but were recent inventions to assist Aqua Star in resisting CP (India’s) claim.” (Transcript 1024-1026)  Whatever might have been said or not said in closing submissions, I did not understand anything to be said which withdrew the suggestion made in that line of cross-examination.  Accordingly, insofar as CP India might be suggesting that it did not allege recent invention of the report, that contention must be rejected.  I rejected the contention that the Guolian’s/Guangdong reports were somehow bogus.  I did not accept that they were reliable.  The manner in which plaintiff’s counsel sought to deal with the whole issue of those reports was, in my view, unsatisfactory, with an attempt reagitate their admissibility in closing submissions after they had been admitted in the course of the evidence heard at trial.  CP India’s solicitors say that I accepted the reports as business records based on the drawing of inferences rather than based on Mr Chen’s evidence.  All in all, the refusal by CP India to admit the genuineness of the reports generated extensive additional costs and protracted the trial.  It will be for the Costs Court to determine precisely what measure of costs ought properly to be allocated to this issue and in favour of Aqua Star.

21For reasons already explained, I accept that the outcome obtained by CP India was no less favourable than its Offer of Compromise.

22Judgment will be given accordingly.