Citi-Con v Punton's Shoes (No 2)
[2020] VCC 966
•6 July 2020
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised (Not) Restricted Suitable for Publication |
Case No. CI-20-00020
| Citi-Con (Vic) Pty Ltd (ACN 143 889 678) | Plaintiff |
| v | |
| Punton’s Shoes Pty Ltd (ACN 004 133 751) | Defendant |
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JUDGE: | HER HONOUR JUDGE MARKS | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers | |
DATE OF JUDGMENT: | 6 July 2020 | |
CASE MAY BE CITED AS: | Citi-Con v Punton’s Shoes (No 2) | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 966 | |
REASONS FOR RULING
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PRACTICE AND PROCEDURE – COSTS – offer of compromise by defendant - application for indemnity costs by successful defendant – Rule 26.08(4) of County Court Civil Procedure Rules 2018 (Vic.) – Milfoil Pty Ltd v Commonwealth Bank of Australia (No 2) [2019] VSC 734 – whether offer unreasonably not accepted – turns on own facts
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APPEARANCES: | Counsel | Solicitors |
| For the plaintiff | Ms C Jones | Eidelweisz Lawyers |
| For the defendant | Mr A R Morrison | Holman Fenwick Willan |
HER HONOUR:
Introduction
On 9 June 2020, I delivered reasons for judgment in this proceeding: Citi-Con v Punton’s Shoes [2020] VCC 804 (the principal judgment). I found that the payment claim relied on by the plaintiff in its application for judgment pursuant to s 16(2)(a)(i) of the Building and Construction Industry Security of Payment Act 2002 (Vic) was invalid, because it did not have a valid reference date.
These reasons deal with the costs of the proceeding. They assume an understanding of matters detailed in the principal judgment.
The plaintiff and defendant each filed written submissions as to costs. An affidavit was filed by the defendant, sworn by Alexander McKellar on 16 June 2020.
The parties agree that the defendant is entitled to be paid its costs as it was successful. The issue is whether they should be paid on the standard basis or whether some part should be paid on an indemnity basis.
The defendant seeks part of its costs of the proceeding on an indemnity basis because it says the plaintiff did not accept an offer of compromise the defendant made to it to settle the proceeding.
The plaintiff opposes the order for indemnity costs.
The plaintiff says that it should pay the whole of the defendant’s costs of the proceeding on the standard basis because it was not unreasonable for it, in the circumstances, not to accept the offer.
I agree that this is the appropriate order.
For the reasons that follow, I will not order the plaintiff pay indemnity costs.
On 3 February 2020, the defendant served an offer of compromise on the plaintiff proposing settling on the basis.
·the proceeding be dismissed; and
·there be no order as to costs.
The defendant says it should have indemnity costs from two business days after the offer was made, because the offer unreasonably was not accepted and the plaintiff’s claim was dismissed. It relies on Rule 26.08(4) of the County Court Civil Procedure Rules 2018 (Vic) which provides:
(4) Where an offer of compromise is made by a defendant and the plaintiff
unreasonably fails to accept the offer and the claim to which the offer
relates is dismissed or judgment on the claim is entered in favour of the
defendant, then unless the Court otherwise orders-
a. the defendant shall be entitled to an order against the plaintiff for the defendant's costs in respect of the claim until 11:00am on the second business day after the offer was made, taxed on the ordinarily applicable basis; and
b. the defendant shall be entitled to an order against the plaintiff in respect of the defendant's costs after the time referred to in paragraph (a) taxed on an indemnity basis.
The onus is on the defendant to establish that the plaintiff unreasonably failed to accept its offer having regard to the applicable circumstances at the time of the offer.
In Milfoil Pty Ltd v Commonwealth Bank of Australia (No 2) [2019] VSC 734 Lyons J summarised relevant principles relating to r 26.08:
[25] As to the law, it is clear that the onus is on the CBA to establish that
Milfoil unreasonably failed to accept its offer having regard to the
applicable circumstances at the time of the offer. The question of
whether an offer was unreasonably rejected under r 26.08(4) is a
matter of judgment and impression, requiring consideration of the
applicable circumstances at the time of the offer. In considering
whether a failure to accept an offer of compromise under r 26.08(4) was
unreasonable, factors relevant to assessing reasonableness in relation
to Calderbank offers are applicable. Matters ordinarily relevant to that
question include the stage of the proceeding at which the offer was
received, the extent of the compromise offered, the offeree’s
prospects of success assessed at the date of the offer and the clarity
with which the terms of the offer were expressed.
[26] Further, the onus is on Milfoil to show why the Court should ‘otherwise
order’ under r 26.08(4).
[27] In my view, there are two issues which arise for r 26.08(4) to apply.
First, has the CBA established that Milfoil unreasonably failed to
accept the offer having regard to the applicable circumstances at the
time of the offer? Second, has Milfoil established that the Court should
‘otherwise order’?
[Citations omitted]
I consider that it was not unreasonable for the offer to be rejected due to the stage of the proceeding when the offer was made, the extent of the compromise offered, and the plaintiff’s prospects of success assessed at the date of the offer.
The plaintiff commenced this proceeding on 7 January 2020. The defendant filed a notice of appearance on 20 January 2020. On 29 January, the defendant served a letter (referred to below). It served the offer a few days later, on 3 February 2020. Three and a half weeks later, on 28 February 2020, the defendant filed its affidavit in opposition to the application. Clearly, the defendant’s offer was made before the defendant had filed any material in the proceeding or incurred any significant costs in the proceeding.
The offer was for the proceeding to be dismissed with no order as to costs. No offer was made to pay any money. It was effectively an offer to capitulate.
At the time of the offer, the plaintiff had not seen the defendant’s affidavits, and the offer expired before they were filed.
The plaintiff argues: -
Further, the defendant made no real attempt to justify the terms of the Offer by reference to the circumstances of the case – namely, there was no reliance by the defendant on the findings that led to judgment in its favour on the basis that there was no available reference date.
But by its letter of 29 January, just a few days before the offer, the defendant invited the plaintiff to withdraw the proceeding, stating, amongst other things: -
No valid reference date
It is established law and an express requirement of the Act that a payment claim must be made "on and from" a valid reference date.
The claim cannot have been made in relation to a valid reference date as none existed. Accordingly the claim cannot be made under the Act.
This point had also been made in the payment schedule filed earlier in response to the October payment claim.
I consider that the plaintiff was aware that the lack of a valid reference date would be raised by way of defence despite the offer of compromise not referring to it.
However, at the time of the offer it was arguable that there was a valid reference date for the payment claim, on the basis of the plaintiff’s attempt to unilaterally withdrawal its earlier payment claim. Although this argument was unsuccessful ultimately (see principal judgment [38] – [59]), the plaintiff was entitled to assess the offer on the basis that the plaintiff’s claim had reasonable prospects of success.
I will make the following orders in relation to costs:
1.Subject to order 2, the plaintiff pay the defendant’s costs of the plaintiff’s summons on originating motion on the standard basis, to be assessed by the Costs Court in default of agreement.
2.The defendant pay the plaintiff’s costs of the submissions filed in relation to costs.
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Certificate
I certify that these 5 pages are a true copy of the reasons for ruling of her Honour Judge Marks, delivered on 6 July 2020, revised 30 July 2020.
Dated: 30 July 2020
Zeinab Ali
Associate to Her Honour Judge Marks
30 July 2020
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