David Jones Ltd (ACN 000 074 573) v BI (Contracting) P/L (ACN 007 602 977) (No 2) - [2018] SADC 40

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
DAVID JONES LTD (ACN 000 074 573) v BI (CONTRACTING) P/L (ACN 007 602 977) (No 2)
[2018] SADC 40
Judgment of His Honour Judge Gilchrist
4 May 2018
INTEREST
The plaintiff succeeded in an action for contribution and seeks an order for costs on an indemnity basis in light of offers it made to settle the matter prior to judgment - Principles governing costs considered - Held that the defendant’s failure to accept the offer was not so unreasonable as to call for an order for indemnity costs. The plaintiff is entitled to costs on a party/party basis.
The defendant contends that in connection with interest the plaintiff was guilty of gross delay in the prosecution of the claim for recovery and that this can and should be taken into account in determining the interest payable - Held that the defendant’s assertion about delay has been made out and the amount of interest should be reduced.
Multicon Engineering P/L v Federal Airports Corp (1996) 138 ALR 425; Davies & Nicol as Joint & Several Liquidators of Harris Scarfe Ltd v Chicago Boot Co Pty Ltd (No 2) [2011] SASC 197; Jefford v Gee [1970] 2 QB 130; Birkett v Hayes [1982] 1 WLR 816 , considered.

DAVID JONES LTD (ACN 000 074 573) v BI (CONTRACTING) P/L (ACN 007 602 977) (No 2)
[2018] SADC 40

This is an application for costs and interest following the publication of my reasons in David Jones Ltd v BI (Contracting) P/L [2017] SADC 79.
To put the application into context I need to make some brief mention of the facts.
On 5 October 2007 David Jones settled an action taken against it in the Dust Disease Tribunal of New South Wales and judgment was entered in that Tribunal in the sum of $435,000 all inclusive.
I found that viewed objectively, a settlement of $435,000 was well within the limits of reasonable tolerance. David Jones had therefore proved the quantum of its claim against BI. I also found that David Jones was entitled to recover from BI 75% of the judgment sum paid by it to Mr Murphy.
David Jones contends that it is now entitled to costs as against BI on an indemnity basis. It further contends that it is entitled to interest in accordance with the rates prescribed by the Rules in respect of the amount to which it is entitled to recover from BI.
Costs
In seeking indemnity costs, David Jones argued that BI had the opportunity to settle this case before trial and its failure to do so warrants such an order.
In developing this submission it relied upon the following.
By letter dated 23 April 2008 David Jones informed BI of its intention to recover from it contribution to the settlement amount and informed BI that it would accept the sum of $350,000 all inclusive. This reflected about 80% of the settlement sum with Mr Murphy.
BI did not respond to the offer.
On 7 October 2010 David Jones issued proceedings in this Court against BI seeking indemnity and contribution. The action was out of time and BI opposed any application for an extension of time. An application to extend time was granted by this Court on 28 June 2012.[1]
[1] [2012] SADC 85.
In the meantime, on 11 March 2011, BI offered to settle the claim for indemnity and contribution by agreeing to bear its own costs.
Following its obtaining of the extension of time to prosecute the claim, on 4 July 2012, David Jones again offered to settle its claim for indemnity and contribution for $350,000 all inclusive. Given that by this stage David Jones was potentially entitled to interest and some costs, it argued that this offer was lower than that which had been put earlier and was approaching the amount that it subsequently was entitled to following judgment on the merits.
On 28 September 2012, David Jones filed a formal offer of settlement in the sum of $350,000 plus costs.
On 29 September 2016, David Jones offered to settle the claim for indemnity and contribution for $217,000 all inclusive. The offer was open for 14 days.
On 16 May 2017, BI again offered to settle the claim for indemnity and contribution by agreeing to bear its own costs.
Costs are in the discretion of the Court. In the ordinary course a successful party is entitled to costs on a party/party basis. But where the successful party has offered to compromise the action and ultimately betters the offer, different considerations apply. After reviewing a number of authorities, Rolfe J made the following observations on this issue in Multicon Engineering Pty Ltd v Federal Airports Corporation:
In my opinion the proper approach to take to an offer of compromise, whether made under the Rules or pursuant to a Calderbank letter, is that there should be a prima facie presumption in the event of the offer not being accepted and in the event of the recipient of the offer not receiving a result more favourable than the offer, that the party rejecting the offer should pay the costs of the other party on an indemnity basis from the date of the making of the offer. I proceed on the basis that the unreasonableness was the failure by the offeree to accept the offer, which unreasonableness is demonstrated, prima facie, by the ultimate result. This approach is consistent with the decisions to which I have referred, the policy evidenced by the Act and the Rules and the widely accepted philosophy that settlements should be encouraged.[2]
[2] (1996) 138 ALR 425 at 451.
This approach was endorsed by Sulan J in Davies & Nicol as Joint & Several Liquidators of Harris Scarfe Ltd v Chicago Boot Co Pty Ltd (No 2).[3]
[3] [2011] SASC 197 at [26].
In determining the value of the offer filed on 28 September 2012 in accordance with what Sulan J said in Davies & Nicol, consideration needs to be given to the amount of interest as calculated at the date of the offer and not as at the date of the judgment. This exercise is not straight forward because there was arguably unnecessary delay between the issue of proceedings and the prosecution of the application for an extension of time that might affect the award of interest.
As to the offer to settle, the claim in September 2016 for $217,000 all inclusive, had the offer been open ended, I would without hesitation find that BI acted unreasonably in not accepting the offer. But what complicates that offer is that it was only open for 14 days. In cases where there have been extensive negotiations and the parties are fully aware of the risks, a failure to accept an offer that is of limited duration might be regarded as unreasonable, because the party could be reasonably expected to respond to the offer promptly. In this case, however, the offer effectively came from nowhere. As such, I do not consider that BI can be criticised for not having accepted the offer within the time specified.
Given what I will be saying about the entitlement to interest, I do not think that BI can be said to have acted unreasonably in connection with its non-acceptance of the later offers made. Although in hindsight it would have been prudent for BI to have accepted David Jones’ offers of settlement, I would not regard its failure to do so as so unreasonable as to call for an order for indemnity costs. David Jones is entitled to costs from BI on a party/party basis.
Interest
The authorities make it clear that if one party or the other has been guilty of gross delay, this can be taken into account in determining the amount of interest payable on an award.[4]
[4] Jefford v Gee [1970] 2 QB 130 at 151.
In determining whether the delay is gross, a realistic approach is called for. Most litigation is attended to by delay and ideally could be conducted with greater urgency. If the issue was approached by reference to models of best practice, most claims for interest would be defeated. Although he wrote this over thirty years ago, the remarks of Lord Justice Eveleigh in Birkett v Hayes remain apposite. He said:
In awarding interest the judge is exercising a discretion. In the great majority of cases the plaintiff could have proceeded with greater dispatch; and yet it may well be wrong to deprive him of interest particularly as the defendant will have had the use of the money. I therefore think that we should approach the matter upon the basis that the court will arrive at a final figure which will be fair, generally speaking, to both parties.[5]
[5] [1982] 1 WLR 816 at 824.
That said, there comes a point where the delay is so great that it would be inappropriate not to take it into account. As Lord Justice Watkins said in the same case in connection with what he described as “unjustifiable delay”:
It is, in my view, wrong that interest should run during a time which can properly be called unjustifiable delay after the date of the writ. During that time the plaintiff will have been kept out of the sum awarded to him by his own fault. The fact that the defendants have had the use of the sum during that time is no good reason for excusing that fault and allowing interest to run during that time. [6]
[6] Ibid 825.
Following the initial settlement as between David Jones and Mr Murphy, this case took the best part of ten years to get to trial. It was not an especially complicated case. The fact that this case took nearly seven years to get to trial after contribution proceedings were issued is inexcusable. There was, to my mind, unjustifiable delay on the part of David Jones. Taking a broad axe, I would not award interest beyond 30 June 2014.
I leave it to David Jones to present minutes reflecting the calculations in accordance with these reasons.