Ferntree Gully Autos Pty Ltd v Werner Motoring Group Pty Ltd

[2012] VCC 1687

IN THE COUNTY COURT OF VICTORIA Revised from transcript of oral reasons
Not Restricted

AT MELBOURNE

CIVIL DIVISION
COMMERCIAL LIST
GENERAL DIVISION

Cases No. CI-11-02792

FERNTREE GULLY AUTOS PTY LTD (ACN 145 562 401)
v
WERNER MOTORING GROUP PTY LTD (ACN 106 875 709) and GAVIN JOHN WERNER	Defendant

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JUDGE:	HER HONOUR JUDGE KENNEDY
WHERE HELD:	Melbourne
DATE OF HEARING:	2 November 2012
DATE OF JUDGMENT:	2 November 2012
CASE MAY BE CITED AS:	Ferntree Gully Autos Pty Ltd v Werner Motoring Group Pty Ltd
MEDIUM NEUTRAL CITATION:	[2012] VCC 1687

REASONS FOR RULING

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APPEARANCES:	Counsel	Solicitors
For the	Mr M. McNamara	White Cleland Pty Ltd
For the Defendant	Mr J. Twigg	Vadarlis & Associates

HER HONOUR:

1       On 21 September, 2010, I delivered reasons for judgment in this proceeding and listed the matter for today for further consideration of final orders, including orders as to costs.

2       The court has subsequently received a significant amount of material.

3       Having considered this material, the parties were provided with a minute of proposed orders for discussion this morning. In the result, the sole issue for my determination has been the appropriate costs order to be made following the delivery of a Calderbank letter dated 20 April 2012 from the solicitors for the defendants, namely Vadarlis & Associates.

4       The letter of 20 April, 2012 contains, inter alia, the following:  

“…in a genuine endeavour to resolve this matter and based on the limited documentation made available, we are instructed to make the following offer to your client:

a.    Our client will pay the sum of $75,000 to your client in respect of the matters in the Amended Claim and Counterclaim within 30 days of acceptance of the offer;

b.    Our client will pay your client’s party-party costs to date on Scale;

c.    Your client be entitled to retain the 2011 and 2012 monies paid by TMCA to your client in those years, which are referable to the 2010 and 2011 years;

d.    Your client agree that any further monies received from/paid by TMCA that relate to the period our client was a Toyota Franchisee (Dealer Code 36877), that is up to close of business, 3 November 2010, is the entitlement of our client and will be paid accordingly.

e.    Parties otherwise release each other in respect to the matters that are the subject of this proceeding.

This offer is open for acceptance for fourteen (14) days of today…”

5       The two issues that have arisen for my consideration are, firstly, whether the terms contained in the offer made in that letter were more favourable to the plaintiff  than the result it has ultimately achieved; and secondly, if yes, whether the rejection of the offer by the plaintiff's representatives was unreasonable in accordance with the principles in the decision of the Court of Appeal in Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority.[1]

Whether offer more favourable

[1] (2005) 13 VR 435

6       Counsel for the defendants submitted that the offer was more favourable to the plaintiff because the result of the offer was that it included the two interest payments in (c), and also the retention of other TSA monies up to the date of the offer in (d).  This meant that the  plaintiff effectively received some $378,000 (namely the two interest payments; the TSA payments up to 20 April 2012; and the separate payment offered of $75,000).

7       Counsel for the plaintiff submitted that the offer was less favourable to it. In particular, that it would only receive  $154,815.96 (that is the sum of $75,000 plus the two interest payments of $79,815.96), with the other TSA payments to be returned to the defendants. In this way,  the judgment amount of $167,316.53 was more favourable to the plaintiff  than the offer which was constituted by an amount of only $154,815.96.

8       I accept the plaintiff's construction.

9       I accept that part (c) of the offer naturally refers to interest payments, and I accept that for the reasons that were advanced by counsel for the plaintiff. Thus, the reference to yearly monies is consistent with the way interest was paid, and the reference to amounts being paid by reference to previous years was also consistent with the amounts concerned being referable to interest.

10      In terms of part (d), the natural reading of the word “further” is that it refers to further or other monies not already specified in part (c). In so saying, I reject the defendant’s submission that "further monies" referred only to future monies. Instead, a natural reading of part (d) is that the monies being referred to include any TSA money related to a particular period, that is, up to close of business 3 November 2010. I see no warrant, in those circumstances, for reading the phrase down as counsel for the defendant purported to do.

11      Although it is not determinative, there is some confirmation of my construction by reason of the phrases used in a subsequent offer of 5 September 2012 wherein Mr Vadarlis refers to the interest payment of $79,815.96 representing the "2010 and 2011 TSA payments” and with the first defendant entitled to “any further monies…”

12      In all the circumstances then, I accept the construction put forward by the  plaintiff with the result that the judgment amount is more favourable than the offer.

If offer was more favourable to the plaintiff

13      Given my finding, above, it is unnecessary to consider the application of Hazeldene. However, in the event that I am wrong, I would not order indemnity costs on the basis of these principles. My reasons, briefly, are as follows.

14      It is true that the time allowed for the offer is sufficient, being 14 days. If the defendants’ construction was ultimately successful, there also appears to be a significant compromise being offered.

15      I do not find the stage at which the offer was made of particular assistance to either side. Further, although the letter did not clearly foreshadow that indemnity costs would be sought, the relevant cases are cited such that this factor would also be described as “neutral.”

16      There are, however, two factors in favour of the plaintiff; one significantly so.

17      Firstly, in my view, the prospects of success were not sufficiently clear at the time that the offer was made, which is the time at which I am to consider the matter pursuant to Hazeldene.[2]  

[2] Hazeldene’s Chicken Farm Pty Ltd v Victorian Workcover Authority (2005) 13 VR 435, 25(d).

18      I accept, as defence Counsel suggested, that the first defendant was under no obligation to set out substantive reasons for its claim which was based on a simple “moneys had and received claim.”  However, as it transpired at trial,  the sole issue between the parties turned on whether the rights to TSA payments remained the property of the first defendant or whether, instead,  they had been transferred to the purchaser with the sale of the business (as the purchaser contended).

19      The resolution of this issue was not clear at the time the offer was made. This is particularly so, since the Defence and Amended Counterclaim were only delivered as at the date of the offer. The nature of the defence also became much clearer only on the delivery of the Further and Better Particulars of defence and Counterclaim of 29 August, 2012.

20      The most significant matter, however, is the issue of the clarity with which the terms of the offer were expressed. Thus, if I am wrong on the construction that I have given, the offer was, at least, an ambiguous one.

21      In those circumstances, and having particular regard to this lack of clarity, I am not satisfied that it was unreasonable pursuant to the principles in Hazeldene for the  plaintiff to reject the offer.

22      As a matter of the exercise of my discretion, I therefore would not be prepared to order indemnity costs.