Clover Communications Pty Ltd v Southern Wire Pty Ltd (No 2)

[2023] SASC 15

Supreme Court of South Australia

(Magistrates Appeal: Civil)

CLOVER COMMUNICATIONS PTY LTD v SOUTHERN WIRE PTY LTD (No 2)

[2023] SASC 15

Judgment of the Honourable Chief Justice Kourakis 

3 February 2023

MAGISTRATES - APPEAL AND REVIEW - SOUTH AUSTRALIA - APPEAL TO SUPREME COURT

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - INTEREST ON COSTS

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS - INFORMAL OFFERS AND CALDERBANK LETTERS - UNREASONABLE REFUSAL OF OFFER

The appellant brought an action in the Magistrates Court for damages it suffered by reason of the supply by the respondent of defective fencing wire. The Magistrate dismissed the appellant's claim. The appellant appealed the Magistrate's decision to this Court.

On 19 August 2022 the Court delivered judgment allowing the appeal and awarding damages in the sum of $78,000. The parties were invited to make submissions on the questions of interest and costs.

The appellant seeks an award of pre-judgment interest and its costs in the Magistrates Court and on appeal. The appellant submits that it is entitled to costs on an indemnity basis following the respondent's rejection of the appellant's offer to settle the action.

Held:

1.      The appellant is awarded pre-judgment interest on a lump sum basis in the amount of $7,100.

2.      The respondent pay the appellant's costs of the Magistrates Court proceeding, and this appeal, on a party-party basis.

CLOVER COMMUNICATIONS PTY LTD v SOUTHERN WIRE PTY LTD (No 2)
[2023] SASC 15

Civil 

1. KOURAKIS CJ:     This is an application for pre‑judgment interest and costs by the appellant, Clover Communications Pty Ltd (Clover), in respect of a civil action in the Magistrates Court and an appeal to this Court.  Clover’s claim was for the damages it suffered by reason of the supply by the respondent, Southern Wire Pty Ltd (Southern Wire), of defective fencing wire erected on Clover’s farm on Kangaroo Island.

2. I assessed the damages to compensate for the defective fence on the basis of a quote for replacement fencing dated 20 October 2020.  I discounted the quoted cost of replacement by 50 per cent because the fence had been in service for some years and it was not necessary to replace it immediately.  Clover would, therefore, have the use of the sum awarded by way of damages until such time.

3. Clover seeks, and Southern Wire opposes, an award for pre-judgment interest.  On the face of it, because the judgment sum is payable before any cost is incurred by Clover, an award of pre‑judgment interest from the time of issue of the proceeding may overcompensate Clover. 

4. However, Clover contends that this impression is without foundation.  It submits that if judgment had been given even shortly after the purchase of the fencing but, with the foresight of the likely remaining useful life of the fence, the assessment of damages would have proceeded in a similar way, albeit on a lower replacement cost.  It submits that this qualification would be sufficiently addressed by adopting a lower interest rate.  Clover also relies on the fact that if the fence is replaced in several years’ time, the cost of replacement may be higher than the quote on which damages were assessed.

5. I do not accept Clover’s contentions.  Its submissions do not take into account the fact that had damages been assessed shortly after purchase, and when therefore the remaining life of the fence would have been longer, a higher discount rate would have been applied.  Justice will be done as between the parties if pre-judgment interest is awarded from shortly after the quote for replacement of the fencing, say November 2020, until judgment on 19 August 2022.  For that period, allowing interest on the judgment sum of $78,000 of 5 per cent, I would fix an amount of $7,100 as a lump sum.

6. I turn to the application for costs.  Clover offered to accept $75,000 in settlement of its action by a letter sent 10 days before the trial in the Magistrates Court.  The offer was not filed in court.  Very little pre-judgment interest would have been awarded if the Magistrate had given the judgment ultimately ordered in this Court.  The judgment sum would, therefore, not have exceeded the offer by very much.

7. Importantly, the primary issue in the claim was liability.  Taking the damages to be as I have found them, the offer did not factor in very much by way of risk on the question of liability.  Clover’s case relied on scientific evidence, the implications of which were not obvious. 

8. It is accepted by the parties that the relevant question is whether it was unreasonable for Southern Wire to reject the offer.  Having regard to the complexity of the case on liability, and the limited extent to which the judgment sum exceeded the offer, I am not satisfied that Southern Wire unreasonably refused the offer despite its prompt rejection.

   Conclusion

9. I award pre-judgment interest in the sum of $7,100.  I order that Southern Wire pays Clover’s costs of the Magistrates Court proceeding, and this appeal, on a party-party basis.