E. and E. Sterling Enterprises Pty Ltd (As Trustee for the Sterling Family Superannuation Fund) v Watpac Construction (Vic) Pty Ltd (No 2)
[2013] VCC 586
•29 May 2013
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE CIVIL DIVISION | Not Restricted Suitable for Publication |
COMMERCIAL LIST
BUILDING CASES DIVISION
Case No. CI-11-02265
| E. & E. STERLING ENTERPRISES PTY LTD (AS TRUSTEE FOR THE STERLING FAMILY SUPERANNUATION FUND) | Plaintiff |
| v | |
| WATPAC CONSTRUCTION ( VIC ) PTY LTD | Defendant |
---
JUDGE: | HIS HONOUR JUDGE GINNANE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 24 May 2013 | |
DATE OF JUDGMENT: | 29 May 2013 | |
CASE MAY BE CITED AS: | E. & E. Sterling Enterprises Pty Ltd (As Trustee for The Sterling Family Superannuation Fund) v Watpac Construction (Vic) Pty Ltd (No 2) | |
MEDIUM NEUTRAL CITATION: | [2013] VCC 586 | |
REASONS FOR JUDGMENT
---
JUDGMENT SUM – interest – whether judgments should be setoff - costs – payment of judgment from adjudicated sum under the Building and Construction Industry Security of Payment Act 2002 s 48; County Court Civil Procedure Rules 0.10 r9
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Andrew | Colin Biggers & Paisley |
| For the Defendant | Mr M Stirling | Piper Alderman |
HIS HONOUR:
Entitlements of the parties
1 The first issue is to determine the amount to which each party is entitled in accordance with the judgment of 22 May 2013.
2 E & E Sterling Enterprises Pty Ltd (“Sterling Enterprises”) is entitled to the sum of $146,277.
3 Watpac Construction (Vic) Pty Ltd (“Watpac”) contended that the amount to which it was entitled was $374,604.73 and that I should not have deducted the sum of $42,142, because no amount of liquidated damages was included in the amount that Watpac claimed under the building Contract. It requested that I alter that conclusion expressed in the judgment.
4 Sterling Enterprises did not oppose that course. I accept Watpac’s submission.
5 Therefore I find that Watpac is entitled to the sum of $374,604.73.
Interest
6 The next question is: what amount of interest should be awarded? I consider that Sterling Enterprises is entitled to interest on the damages of $90,000 from the date of the commencement of proceedings as the amount claimed is for damages.
7 Both parties claimed interest under s58(1) of the Supreme Court Act 1986 arguing that they had made a demand for a debt or sum certain.
8 A demand need not be in any particular form, or specify the exact sum due, so long as it contains a distinct demand of payment: AJ Lucas Drilling Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd.[1]
[1][2009] VSCA 310 at [179]
9 I consider that Sterling Enterprises’ claim for liquidated damages of $42,142 is for a debt or a sum certain.
10 Sterling Enterprises refers to demands for payment being first made on 28 April 2010. I do not consider that any demand was made on that date. Nor do I consider that the reference in the payment schedule of 24 August 2010 was a demand for payment. It made no such demand, but was a payment schedule under s15 of the Building and Construction Industry Security of Payment Act 2002.
11 Accordingly, Sterling Enterprises is entitled to interest on the amount awarded to it from the date that it commenced the proceeding, being 20 May 2011.
12 Watpac claims interest from the date of a letter, being 4 August 2010, which it contends constitutes a demand for a debt or sum certain within s58(1). I accept that Sterling Enterprises received that letter on 10 August 2010. It is headed “B006 WESTAFLEX – WATPAC FINAL RECONCILIATION”. I do not consider that letter to be, or to contain, a demand for payment. It was, as Sterling Enterprises contends, a document tabled at a meeting which was held to try to resolve commercial issues.
13 Watpac’s entitlement to interest, therefore, commences from the date it issued its counterclaim, being 31 August 2011.
14 Sterling Enterprises contended that interest should be calculated on the sum due to Watpac, less the amount of GST. It contended that no GST would be payable on the amount awarded to Watpac, but at most on the net amount due to it and not on any damages.
15 I consider that Watpac has recovered a debt and is entitled to interest on all the components of that debt, including the GST.
Should Sterling Enterprises’ judgment be set off against Watpac’s judgment?
16 Sterling Enterprises submitted that separate judgments should be given. It also submitted that the interest accrued in the trust account be paid to the parties in proportion to the percentages they recovered. Costs orders would then be made in respect of each of the orders.
17 That account balance was $440,984.83, including interest of $39,861.22 as at 24 May 2013.
18 However, Watpac contends that the Court should award one judgment to it of the amount by which it finishes in front on a net basis, rather than giving separate judgments on the claim and on the counterclaim.
19 Watpac relied on the provisions of Rule 10.09 in support of the contention that a set-off should occur. It argued that the party that finished in front was entitled to a judgment for the net amount due to it. It referred to the decision of the Full Court in Rival Nominees Pty Ltd v Craig Davis Constructions[2] and of Warren CJ in Kane Constructions Pty Ltd v Sopov (No 2)[3]; cf the recent Western Australia Court of Appeal decision in Spiers Earthworks Pty Ltd v Landtec Projects Corp Pty Ltd (No 2).[4]
[2]Unreported, Supreme Court of Victoria, Starke ACJ, Crockett and McGarvie JJ, (26 June 1981)
[3][2005] VSC 492
[4][2012] WASCA 53
20 Sterling Enterprises referred to the decision in BMD Major Projects Pty Ltd v Victorian Urban Development Authority (No 2),[5] where Pagone J recognised that an order may be made on the final balance owing basis, where it is appropriate to do so. In that case, His Honour reduced the costs awarded to the successful party by 20%.
[5][2007] VSC 441
21 Sterling Enterprises submitted that it had been successful on the main issues in the case. It had established that the warehouse floor was defective and recovered damages in respect of that claim. On the counterclaim, it had been successful in defeating Watpac’s variation case and its claim for delay damages. It defeated Watpac’s fraud case. The time taken in the trial had been substantially occupied on issues on which Sterling Enterprises had succeeded. Watpac’s claims, particularly in contesting the warehouse slab issue, were “wild and extravagant”. Watpac had raised serious allegations of fraud, which had not been accepted by the Court. Each party should be awarded their costs on a party party basis.
22 Watpac had only succeeded in obtaining the balance owing to it under the contract and interest on the bank guarantee. Sterling Enterprises was put in the position of having to either pay Watpac the adjudicated amount or pay that amount into trust.
23 Watpac submitted that the Court should take into account that Sterling Enterprises had only succeeded in recovering about 10% of the amount that it claimed. It had prosecuted a great number of claims on which it failed.
24 Sterling Enterprises’ reference to “wild and exaggerated claims” is a reference to a passage in the 10th edition of Hudson’s Building and Engineering Contracts, which has been referred to in a number of cases, and which states:
“Only in the case of wildly exaggerated claims, or separate and costly issues on which the successful party has failed and which it was wholly unreasonable for him to raise, can there be, it is submitted, any justification for departing from the rule that the party ultimately successful on a final balance of claim and counterclaim should be paid his costs.”[6]
[6]Cited in Kane Constructions Pty Ltd v Sopov (No 2) [2005] VSC 492 at [64]
25 I do not consider that Watpac’s case about the warehouse floor, or the other issues on which it was unsuccessful, bring the case within the exceptional circumstances to which Hudson refers. Sterling Enterprises did not succeed in respect of the factory floor slab issue or in respect of nearly all the damages claims that it made.
26 I consider that one judgment should be awarded which constitutes the net balance between Watpac’s judgment and Sterling Enterprises’ judgment.
27 No authority concerning a building case was cited where an Australian Court has declined to set-off judgments and give one judgment for quantum and costs, in favour of the party, who finishes in front, according to the “final flow of money”.[7] I do not consider that any matter advanced in this case justifies a departure from the usual approach in building cases.
[7]Rival Nominees Pty Ltd v Craig Davis Constructions (supra) at p13 per Starke ACJ
28 However, even where making one judgment in the manner that I have described, the Court still has a discretion in respect of the payment of costs see s24 (1) of the Supreme Court Act 1986.[8]
[8]Rival Nominees Pty Ltd v Craig Constructions (supra) at p12 per Starke ACJ
29 I consider that it is appropriate to make one order for costs in favour of Watpac. However, I propose to reduce that award of costs by 25% to reflect the success that Sterling Enterprises had on the warehouse slab and liquidated damages issues and in defeating a number of Watpac’s claims. This case differs from the ordinary run of cases where setoffs are ordered because of the success that Sterling Enterprises had on significant issues. I consider a reduction of Watpac’s costs by 25% is an appropriate recognition of that success.
30 The 25% reduction in Watpac’s costs will occur whether I order that its costs be paid on an indemnity basis or on a party party basis.
31 Sterling Enterprises relied on the fact that Watpac accused it of fraud in dealing with the Superintendent. In its final submissions and on other occasions in the trial, Watpac submitted that the final certificate was procured by the fraud, alternatively misrepresentation and non-disclosure by Sterling Enterprises.[9] This allegation was based on the fact that the Superintendent had been told that the adjudicated sum had been paid, whereas it had only been paid into the solicitors’ trust account.
[9]See para 305 of Watpac’s final submissions.
32 I found in my judgment that, while the Superintendent was misinformed about the details of the payment, Watpac had not established that Sterling Enterprises had engaged in fraudulent conduct. [10]
[10][para 189]
33 The making of an allegation, known to be false, that the opposite party is guilty of fraud is a ground for ordering indemnity costs. See Ugly Tribe Co Pty Ltd v Sikola.[11]
[11][2001] VSC 189 at [7]
34 I do not consider this is a case, where it has been established that the allegation of fraud was known to be false. It is true that Watpac’s witnesses did not press the allegation in evidence. However, I consider that the circumstances in which the allegation was made do not justify an order for indemnity costs.
Payment of sums out of trust account
35 The sum that was adjudicated under the Building and Construction Industry Security of Payment Act 2002 was then made the subject of a judgment of this Court was paid into a solicitors’ interest bearing trust account to await the determination of the proceeding.
36 Section 47(3) of the Act states that:
“In any proceedings before a court or tribunal in relation to any matter arising under a construction contract, the court or tribunal –
(a) must allow for any amount paid to a party to the contract under or for the purposes of this Part in any order, determination or award it makes in those proceedings; and
(b) may make such orders as it considers appropriate for the restitution of any amount so paid, and such other orders as it considers appropriate, having regard to its decision in those proceedings.”
37 I consider that Watpac should receive the amounts required to satisfy its judgment from that account. The balance should be paid to Sterling Enterprises.
0
3
0