Finishing Services Pty Ltd v Lactos Fresh Pty Ltd

[2007] FCAFC 15

FEDERAL COURT OF AUSTRALIA

Finishing Services Pty Ltd v Lactos Fresh Pty Ltd [2007] FCAFC 15

FINISHING SERVICES PTY LTD (ACN 070 167 207) v LACTOS FRESH PTY LTD (ACN 088 647 278)  AND COLLIERS INTERNATIONAL (VIC) PTY LTD (ACN 005 032 940)
VID 342 OF 2006

KIEFEL, SUNDBERG AND EDMONDS JJ
22 FEBRUARY 2007
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 342 OF 2006

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

FINISHING SERVICES PTY LTD (ACN 070 167 207)
Appellant/First Respondent by Cross-Appeal

AND:

LACTOS FRESH PTY LTD (ACN 088 647 278)
First Respondent/Cross Appellant

COLLIERS INTERNATIONAL (VIC) PTY LTD
(ACN 005 032 940)
Second Respondent/Second Respondent by Cross-Appeal

JUDGES:	KIEFEL, SUNDBERG AND EDMONDS JJ
DATE OF ORDER:	22 FEBRUARY 2007
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1.The order numbered 5 made by this Court on 7 December 2006 will be varied by adding the words “, the second respondent’s costs to be taxed on an indemnity basis on and from 6 June 2006”.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 342 OF 2006

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

FINISHING SERVICES PTY LTD (ACN 070 167 207)
Appellant/First Respondent by Cross-Appeal

AND:

LACTOS FRESH PTY LTD (ACN 088 647 278)
First Respondent/Cross Appellant

COLLIERS INTERNATIONAL (VIC) PTY LTD
(ACN 005 032 940)
Second Respondent/Second Respondent by Cross-Appeal

JUDGES:	KIEFEL, SUNDBERG AND EDMONDS JJ
DATE:	22 FEBRUARY 2007
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

THE COURT:

1. On 7 December 2006 this Court dismissed the cross-appeal by Lactos Fresh against Colliers Victoria and ordered Lactos Fresh to pay costs.  Colliers Victoria now seeks an order that its costs be taxed on an indemnity basis as and from 22 May 2006.  The basis for its application is a letter of offer it wrote to Lactos Fresh on that date “without prejudice save as to costs”, a “Calderbank letter”.  It offered to pay its own costs of the cross-appeal if Lactos Fresh withdrew its cross-appeal.  It gave until 6 June 2006 for the offer to be accepted.  Lactos Fresh did not do so.   The appeal and cross-appeal were heard on 30 October 2006.

2. In the cross-appeal it was alleged that Colliers Victoria, property agents for Finishing Services, had been negligent in their advice to their principal as to the increased rental Lactos Fresh should pay.  Lactos Fresh alleged that it had suffered loss as a result of the notice given by Finishing Services claiming a substantially increased rental.  It was accepted by the Court that Lactos Fresh could bring such a claim as a third party.  The basis for the Court’s dismissal of the cross-claim is conveniently summarised in the submissions of Colliers Victoria:

   (a)Lactos Fresh failed to establish that the statements of Colliers Victoria were causative of its loss;

   (b)the giving of notice containing the advice could not be said to have caused or have materially contributed to Lactos Fresh paying a higher rental than it might otherwise have done;

   (c)the loss that Lactos Fresh suffered was caused by itself by failing to invoke the dispute process;

   (d)it was difficult to see how Mr Allen [the person who sent the notice of Finishing Services] was misled or deceived since he had his own views about the rental figures and the value of the property and reliance by him was not proven.

3. In the letter of 22 May 2006 Colliers Victoria sought to persuade Lactos Fresh that its advices to Mr Allen could not have caused Lactos Fresh’s loss, because it had no control over the use which he made of their assessment.  Further, as Lactos Fresh had a right under the lease to have the rental increase reviewed by an independent party, Colliers Victoria could not be held responsible for its failure to exercise it. 

4. The basis for this application is an imprudent refusal of an offer to compromise, one of the circumstances recognised in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 for invoking the exercise of the discretion to award indemnity costs. It is necessary however to consider all the circumstances in determining whether it was unreasonable for the party to refuse the offer: see Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602 at [17].

5. Lactos Fresh submits that there is nothing special or unusual in this case and that more is required than to show that Colliers Victoria was successful.  The latter contention may be correct, but the submission overlooks the fact that Colliers Victoria pointed out to Lactos Fresh what his Honour the primary Judge found to be the “insurmountable hurdle” in its case, namely that it was, in truth, its failure to exercise its contractual rights which caused the loss it complained of.  This Court agreed with his Honour’s view.  The point was plain.  Even without the Calderbank letter it could be said that the appeal was doomed to failure and was unreasonably persisted in.

6. In these circumstances the order numbered 5 made by this Court on 7 December 2006 will be varied by adding the words “, the second respondent’s costs to be taxed on an indemnity basis on and from 6 June 2006”.

I certify that the preceding six (6) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Kiefel, Sundberg and Edmonds.

Associate:

Dated:        22 February 2007

Solicitor for the First Respondent:	Corrs Chambers Westgarth
Solicitor for the Second Respondent:	DLA Phillips Fox
On written submissions filed 22 December 2006 and 15 December 2006
Date of Judgment:	22 February 2007