CPC Energy Pty Ltd v Bellevarde Constructions Pty Ltd & Anor

[2007] NSWSC 1455

CITATION:	CPC Energy Pty Ltd v Bellevarde Constructions Pty Ltd & Anor [2007] NSWSC 1455
HEARING DATE(S):	12/12/07
JUDGMENT DATE :	14 December 2007
JURISDICTION:	Equity Division Technology and Construction List
JUDGMENT OF:	Einstein J
DECISION:	Defendants to pay plaintiff's costs
CATCHWORDS:	Costs
LEGISLATION CITED:	Civil Procedure Act 2005 (NSW)
PARTIES:	CPC Energy Pty Ltd (Plaintiff) Bellevarde Constructions Pty Ltd (First Defendant) John Francis Fielding (Second Defendant)
FILE NUMBER(S):	SC 55062/05
COUNSEL:	Mr R Parsons (Plaintiff) Mr I Bailey SC, Mr R Marshall (Defendants)
SOLICITORS:	Summit Law (Plaintiff) Dibbs Abbott Stillman (Defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
TECHNOLOGY AND CONSTRUCTION LIST

Einstein J

Friday 14 December 2007

55062/05 CPC Energy Pty Ltd v Bellevarde Constructions Pty Ltd & Anor

JUDGMENT

The matters before the Court

1 The reserved judgment was delivered on 5 December 2007. The essential matter for determination which has been argued has related to the proper order for costs.

2 This was an unusual reference out. However notwithstanding the unusual parameters, the principled approach to costs dictates that subject to questions of indemnity costs, costs should follow the ultimate event.

3 The plaintiff’s offers of compromise and Calderbank letters were as follows:

(i) CPC’s offer of compromise made 19 December 2006;

(ii) CPC’s offer of compromise made 28 March 2007;

(iii) CPC’s Calderbank offer made by letter dated 22 November 2006;

(iv) CPC’s Calderbank offer made by letter dated 10 April 2006.

4 One of the more unusual parameters concerns the difficulties which the plaintiff experienced in not being able to know the extent of the overcharges based on actual cost and, for that reason, having required to frame its offers of compromise and its Calderbank letters without the customary certainty of knowledge. Quantifying CPC’s claim involved obtaining and analysing the documents of the first defendant, Bellevarde, and its related company, Cutcross. This was necessary in order to ascertain what had actually been paid to, and in respect of the providers of labour on the job, both employees and sub-contractors. The referees’ report (at [70]) makes quite plain what was the extent to which the plaintiff was prejudiced by the failure to disclose the material books and records needed by it to act on an informed basis in framing its offers of compromise or Calderbank letters. These are matters which are taken into account in relation to the proceedings which of course involved extremely serious claims of fraud.

5 Ultimately and in the circumstances, but with the benefit of the hindsight which a reading of the referees’ findings permit, I am satisfied that a close reading of the above offers of compromise as well as Calderbank letters, demonstrates that CPC ultimately achieved an outcome more favourable to it than had been proposed in each of those offers. There is no other basis upon which the Court can proceed than to assume that the calculation which the referees found had been the actual costs of labour [that is to say the overcharges based upon actual costs being $791,000], was correct.

6 In particular the Calderbank offer made by the letter of 22 November 2006 set out a comprehensive offer for settlement which would have compromised each of the plaintiff’s ancillary claims and the defendants’ ancillary claims on a basis no less favourable to the plaintiff than the actual outcomes achieved. Further, it expressly provided for the resolution of the matter on the basis of the actual cost of labour. Payment for labour based upon the actual cost of labour is what Bellevarde contends it has achieved by its cross-claim.

[It is convenient to interpolate that the Calderbank offer made by letter dated 10 April 2006, likewise would have resolved the matter on the basis of the actual cost of labour, had the defendants accepted it.]

Costs of the cross-claim.

7 The cross-claim comprised four (4) components:

i. A claim for rectification.

ii. A claim for alleged misleading and deceptive conduct in relation to clause 14(a) of the Contract.

iii. A claim for alleged deceit in relation to clause 14(a) of the Contract.

iv. A claim for alleged misleading and deceptive conduct in relation to the depth to bedrock on the Canopy site.

8 On each of these components CPC obtained a result no less favourable to it than the offers made by CPC:-

i. in the Calderbank letter of 10 April 2006;

ii. in the Calderbank letter of 22 November 2006;

iii. by reference to the financial outcomes reflected in each of CPC’s formal offers of compromise.

9 The Calderbank letter of 22 November 2006 warrants an indemnity costs order from that date. The defendants’ failure to accept it was unreasonable.

Sundry other considerations

Ancillary claims

10 Each of the parties propounded, but did not ultimately press, certain causes of action as part of their respective cases (“ancillary claims”).

11 The plaintiff unilaterally withdrew all of its ancillary claims except for the claim for liquidated damages (“withdrawn claims”) on 30 August 2006. The claims were withdrawn prior to the plaintiff making any offer of compromise.

12 The plaintiff withdrew its claim for liquidated damages on 23 April 2007.

13 The withdrawal by the plaintiff of its claim for liquidated damages and the withdrawal by the defendants of their ancillary claims should be seen as cancelling one another out and thereby not altering the effect of the plaintiff’s offers of compromise.

14 The defendants’ ancillary claims initially comprised a claim for misleading and deceptive conduct in relation to the drafting of clause 14(a) of the parties’ contract.

15 The defendants augmented their ancillary claims by the a­­mended first cross-claim to add a claim for misleading and deceptive conduct in relation to representations as to the depth of bedrock on the construction site, and again by the further amended first cross-claim to add a claim for deceit. These claims were formally withdrawn at the point of final submissions on the reference.

The effect of the rectification issue

16 The defendants withdrew the evidence they had filed and read on the question of rectification.

17 I accept that the order for rectification has had no effect on CPC obtaining a more favourable result measured against the Calderbank letters or the offers of compromise made by CPC.

18 The foundation of the cross-claim in relation to rectification was that the percentage for on-costs of 10% was included in the Contract by mistake by both contracting parties and that the inclusion of that percentage went unnoticed by the cross-claimant until after it signed the Contract.

19 It is significant that in pursuing the adjudication in relation to this matter, Bellevarde relied upon the presence of the provision of 10% for on-costs in the appendix to the contract, but propounded it as a 10% over-ride, super-added to the other costs of labour.

20 I accept that the plaintiff’s opposition to the claim for rectification was not unreasonable, given the internal contradictions in the case, as propounded by the defendants.

21 In any event the rectification point appears to have absorbed virtually no hearing time and to have had only a marginal effect on the financial outcome of the case.

22 The application of the 10% formula yielded a calculated overcharge of $782,393 which was little different from the calculated overcharge based upon the actual cost of labour in any event, namely, $791,042.

23 That is to say that on the unchallenged and uncontradicted evidence of Mr Molyneux, the difference between the overcharge calculated by application of the “10% formula” and calculated by reference to the actual cost was but marginal, a little over 1%.

Discontinuance of claims against the defendants (other than for liquidated damages)

24 These claims were encompassed by the offers to settle made by CPC by letter of 10 April 2006. That these categories of claims were not pressed was notified by letter dated 20 August 2006.

25 The defendants obtained a result no more favourable to them than the offer in that letter in respect of those claims.

26 The result was that those claims were not pressed as notified by letter dated 30 August 2006. However, that result reflected what CPC had offered by the letter of 10 April 2006.

27 CPC’s later offers were made in the context of this category of claims not being pressed.

Discontinuance of the claim for liquidated damages

28 I accept that this was likewise encompassed by the offers made by CPC in its Calderbank letter dated 10 April 2006 and in its Calderbank letter of 22 November 2006.

29 I further accept that valuing the various claims in money’s worth, even having obtained no liquidated damages, CPC has obtained a result more favourable to it than the offers of compromise dated 19 December 2006 and 28 March 2007.

Deferral of the commencement of the hearing before the Referees

30 The commencement of the hearing date was deferred on 30 April 2007.

31 The defendant thereafter used the time afforded by this deferral to:-

i. amend the cross-claim to include claims for deceit and misleading and deceptive conduct; and

ii. marshal, prepare and serve affidavit evidence on the issue of the defendants’ fraud and misleading and deceptive conduct.

Costs of the hearing before the Referees and making the Order for Reference

32 The defendants contended that but for the plaintiff’s claim for liquidated damages, the matter would never have been referred out. That claim was in due course of course withdrawn.

33 The short answer to the defendants’ contention is that the plaintiff's claim for liquidated damages was not the only building issue in the case. By the cross-claim the first defendant propounded a significant technical building issue in alleging that it suffered loss as a result of the depth of rock over the Canopy site and alleging that CPC had, by drawings prepared prior to excavation, misrepresented the depth of rock. This was pleaded to have constituted misleading and deceptive conduct. Analysis of this allegation and its consequences required building expertise in the tribunal in any event. Ms Grey was the contemplated source of such expertise.

34 Prior to the defendants abandoning that claim during the hearing of the reference, it never became appropriate to seek to terminate the appointment of Ms Grey as joint referee. The defendants have never made an application or request for this to occur.

35 I am satisfied that the costs involved in the hearing before the referees [and in relation to the making of the order for reference] should follow the event of the proceedings overall and should be paid by the defendants.

36 On the ancillary claims the plaintiff achieved a result no less favourable to it than the offer it made by letter of 22 November 2006. I accept that given that the defendants augmented their ancillary claims before abandoning them, the plaintiff has fared better than its offers on the ancillary claims.

Orders

37 Subject to submissions the following orders are likely appropriate to be made:

i. grant leave to the plaintiff to amend its pleadings to claim interest pursuant to section 100 of the Civil Procedure Act 2005 and dispense with any further requirement for the plaintiff to propound an amended pleading to this effect;

ii. on the plaintiff’s claim, judgment is to be entered for the plaintiff against each of the defendants in the amount of $791,042 together with interest pursuant to section 100 of the Civil Procedure Act 2005 up to 10 December 2007 in the amount of $271,307;

iii. on the cross-claim, order that the Appendix to the agreement dated 2 February 2003 between the plaintiff and the first defendant be rectified by substituting for the number “10” the letters and symbol “N/A”;

iv. order that the defendants pay the plaintiff’s costs of the plaintiff’s claim on the ordinary basis up to 22 November 2006 and on an indemnity basis from 23 November 2006;

v. order that on the cross-claim the cross-claimant pay the cross-defendant’s costs on a party/ party basis up to 22 November 2006 and on an indemnity basis from 23 November 2006;

vi. order staying these orders up to and including Tuesday 19 February 2008.