EVT Development Pty Ltd v Argyle Building Services Pty Ltd (No 2)
[2023] VCC 925
•7 June 2023
| IN THE COUNTY COURT OF VICTORIA AT Melbourne COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-22-00895
| EVT DEVELOPMENT PTY LTD (ACN 600 475 072) | First Plaintiff |
| and | |
| EDISON LOU | Second Plaintiff |
| v | |
| ARGYLE BUILDING SERVICES PTY LTD (ACN 151 322 520) | First Defendant |
| and | |
| THE REGISTRAR OF TITLES | Second Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers | |
DATE OF JUDGMENT: | 7 June 2023 | |
CASE MAY BE CITED AS: | EVT Development Pty Ltd & Anor v Argyle Building Services Pty Ltd & Anor (No 2) | |
MEDIUM NEUTRAL CITATION: | [2023] VCC 925 | |
REASONS FOR JUDGMENT
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Subject:COSTS
Catchwords: Claim by building proprietor and its guarantor – counterclaim by builder – order made under first building contract – second contract found to be a “sham” – findings as to cash payments – Calderbank letter on eve of trial – offer of compromise made during trial – offers not bettered – not unreasonable for plaintiffs/defendants by counterclaim not to accept offers – Calderbank letter open for acceptance for less than 24 hours – costs awarded to defendants/plaintiffs by counterclaim on a standard basis
Cases Cited:Calderbank v Calderbank [1975] 3 All ER 333
Judgment: The plaintiffs must pay the first defendant’s costs of this proceeding to be assessed on a standard basis in default of agreement
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HIS HONOUR:
Background
1On 19 April this year, I published substantive reasons for decision [2023] VCC 586, resulting in a judgment for the first defendant, Argyle Building Services Pty Ltd (“Argyle”), on its Amended Counterclaim for monies payable to it by the first plaintiff, EVT Development Pty Ltd (“EVT”), and the second plaintiff, Mr Lou, as EVT’s guarantor.
2The evidence at trial referred to two building contracts and a number of variations. The effect of the evidence was that the second alleged contract was brought into existence for the mutual purpose shared by EVT as proprietor, and Argyle as builder, of leading National Australia Bank as EVT’s provider of mortgage finance for the building project, to believe that the project was being undertaken for a lesser sum of money than was really the case.
3The principal of Argyle, Mr Sam Salloum, agreed, in answer to a question from me, with the proposition that this second contract was a “sham”.
4Documentary evidence from EVT and its principal, Mr Lou, which I accepted, constituted contemporary admissions that EVT was committed to make cash payments to Argyle additional to the ones provided for in the second “contract”. In those circumstances, I concluded that the second contract was a “sham” within the legal meaning of that term and, as such, did not create enforceable legal obligations.
5I also accepted a contention put in closing submission by Argyle’s counsel that, aside from the “sham” issue, there was no obvious consideration for the second contract.
6I have now received submissions from the parties on the question of costs.
Contentions on behalf of EVT and Mr Lou
7In written submissions dated 22 May 2023, EVT via its solicitor, contended that in accordance with the undoubted rule that “costs follow the event”, EVT should be seen to have been generally victorious. First, they noted a victory for EVT relative to a caveat which had been lodged, or purportedly lodged, by Argyle. This caveat was ordered removed by her Honour Judge Burchell by order made 11 May 2022.
8This order seems to have been made in substitution for an earlier order made by her Honour on 5 May 2022, determining the matter in favour of EVT generally by reason of failure on Argyle’s part to comply with its obligations under the rules and under the court’s direction. Her Honour’s order made 11 May 2022 does not include any order as to costs.
9Secondly, referring to the outcome after the trial, they noted that as to the two lesser sets of issues before the court, EVT had likewise been victorious. Argyle had denied that EVT was entitled to credit for a series of payments made by EVT to what it said were Argyle’s subcontractors. Ultimately during the trial, Argyle conceded these matters in favour of EVT.
10EVT also claimed credit for a number of cash payments. This denial was, according to EVT, “consistently maintained” until the filing of Argyle’s Amended Defence and Counterclaim on 23 February 2023. That is, within a week of the commencement of trial. According to EVT, “Receipt of cash payments should never have been disputed”.
11As to the finding of the “sham” contract, EVT complained that the issue of “sham” was not pleaded by either party, and Argyle’s success on this point was therefore unexpected.
12EVT conceded receipt of settlement offers of $300,000 in full and final settlement (27 February 2023), and an offer of $190,000 dated 10 March 2023. In the circumstances, it was said EVT had not acted unreasonably in failing to accept those offers because its failure on the major issue arose out of the “sham” issue.
13Balancing these considerations, according to EVT, Argyle should pay EVT’s costs until the filing of the Amended Defence and Counterclaim on 23 February 2023, and otherwise there should be no order as to costs.
Argyle’s contentions
14According to written submissions dated 1 June 2023 from its solicitors, Argyle contended that it was “the wholly successful party in the proceeding”. It said there was no money ordered to be paid by Argyle to EVT, and EVT’s claim against Argyle was dismissed.
15Argyle referred to and relied upon a Calderbank letter and an offer of compromise in accordance with Order 26 of the court’s rules. These documents were exhibited to an affidavit of Mr Marigliani of Thomson Geer, solicitors for Argyle, sworn 2 June 2023.
16The first settlement offer in the form of a Calderbank letter dated 27 February 2023 (trial commencing 1 March 2023), the letter headed “Without Prejudice, Save as to Costs” proposed settling the proceeding for $300,000 payable by EVT and Mr Lou “in full and final settlement of all claims between the parties …”.
17The letter referred to the well-known case of Calderbank v Calderbank, and the authorities in England and Australia which have followed it. The offer was open for acceptance until 5.00pm on 28 February 2022. The email covering the offer shows that it was transmitted at 6.36pm viz after normal business hours. Moreover, it was open for acceptance for less than 24 hours.
18The second document relied on was an offer of compromise under Order 26 of the court’s rules dated 10 March 2023, that is during the trial. It was expressed to be open until 5.00pm on 24 March 2023.
19As to the “payments to third-party suppliers”, according to the solicitors:
“Argyle narrowed the issues in dispute about these payments prior to trial by conceding that EVT made payments of $79,503.70 inclusive of GST to Klaus and $55,000 to Easy Living. Contrast this to EVT and Lou’s conduct. It was not until the conclusion of Lou’s evidence that he and EVT conceded that EVT did not make payments of $53,002.20 inclusive of GST and separately $6,625.30 inclusive of GST to Klaus, and $28,314 inclusive of GST to Schindler. In any case, payments made by EVT to third-party suppliers and the characterisation of those payments had no effect on the outcome of EVT and Lou’s pleaded case against Argyle.”
20As to the “cash payments”, the contention was:
“Although this Honourable Court determined that Argyle received some cash payments from EVT during the project, the cash payments, like the third-party payments, had no effect on the outcome of EVT and Lou’s pleaded case against Argyle.”
Conclusions
21The orders made disposing of this proceeding demonstrate success for Argyle. The counterclaim was successful in the amount for which judgment was given, and the claim by EVT and Mr Lou was dismissed. According to the general rule, therefore, Argyle should have its costs.
22The evidence disclosed that the parties did engage in cash payments for the purpose of misleading EVT’s financier. As I observed, this did neither side any credit. I accepted Mr Salloum’s account as to the genesis and effect of the second “contract” but rejected his evidence as to at least one cash payment which I found to have been made. Neither side, therefore, stood vindicated as a blameless victim of the wrongdoing of the other.
23As to the offers, they were both made very late. The Calderbank offer in February, as I have observed, was open for less than 24 hours. The rationale which was advanced for the appropriateness of the proposed compromise, at least to my eyes, seemed obscure. It was not the reasoning which I ultimately adopted. In my view, it was not unreasonable for EVT not to accept the offer.
24With some hesitation, I conclude that it was likewise not unreasonable in the unusual circumstances of this proceeding for EVT and Mr Lou not to accept the March offer of compromise.
25In the event, therefore, the appropriate order is that the plaintiffs should pay the costs of the first defendant/plaintiff by counterclaim to be assessed on the standard basis in default of agreement.
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