Frost v Reid Smith (No 2) - [2006] SADC 129

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
FROST v REID SMITH & ORS (No 2)
[2006] SADC 129
Judgment of Her Honour Judge Shaw
3 November 2006
PROCEDURE - COSTS
Claim by plaintiffs for sums owing by the defendant pursuant to a contract for the sale of the plaintiffs’ shares in the company Samsean Pty Ltd. Plaintiffs successful in proceedings – plaintiffs seek order for costs of action on party/party basis – Defendants by counterclaim seek indemnity costs on issues raised and subsequently abandoned by plaintiffs by counterclaim – discussion of general rule that costs be ordered on party/party basis – consideration of principles concerning order for indemnity costs. In exercise of discretion no warrant for order for costs on indemnity basis.
Held – defendant ordered to pay the plaintiffs’ costs on a party/party basis. Further the plaintiffs by counterclaim to pay the costs of the defendants by counterclaim on a party/party basis.
District Court Act 1991 s.42(1); District Court Rules 101.01 and 101.02, referred to.
Sunburst Properties Pty Ltd (in Liq) v Agwater pty Ltd (No. 2) [2005] SASC 393; Shanamere Pty Ltd v Litigation Support Services Pty Ltd [2006] SASC 120; Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; Re Wilcox; Exparte Venture Industries Pty Ltd (No. 2) (1996) 72 FCR 151, considered.

PROCEDURE - MISCELLANEOUS PROCEDURAL MATTERS - DECLARATIONS - APPROPRIATE FORM OF RELIEF -- DISCRETION OF COURT
None of the parties pleaded by way of relief, orders for declaratory relief. Strictly unnecessary to plead relief. All parties however submitted that a declaration ought to be made as to the proprietary rights to certain chattels.
Held: Orders in the nature of declaratory relief made in favour of the defendant by counterclaim Gloss Australia Pty Ltd.
The plaintiffs have judgment against the defendant in the principal sum of $193,171.50 and interest in the sum of $56,800; and the claim of the plaintiffs by counterlcaim dismissed.
District Court Act 1991 s.37; District Court Rules 84.01, referred to.
Battye & Anor v Shammall [2005] 91 SASR 315; Forstaff Adelaide Pty Ltd v Hills Industries [2006] SASC 88, considered.

FROST v REID SMITH & ORS (No 2)
[2006] SADC 129

On 27 June 2006, I delivered my reasons with respect to the terms of the contract between the plaintiffs and the defendant, and then adjourned the matter for further submissions as to quantum, interest, costs and the form of relief to be granted in consequence of the findings expressed in my reasons.
In paragraph 45 of my reasons I set out the terms of the contract which I concluded governed the contractual relations between the plaintiffs and the defendant.
The express terms of the contract obliged the defendant, inter alia, to pay to the plaintiffs:
(a) The sum of $100,000 on or before 1 May 2001.
This sum was paid by the defendant.
(b)The sum of $104,000 being 104 payments of $1,000 each, per week commencing on 4 February 2001.
As to each of these payments $500 was to be paid in cash, while the remaining $500 payment was to be contributed by the defendant to the credit of the plaintiffs in Gloss Australia Pty Ltd. The total sum paid or credited to the plaintiff by the defendant is the sum of $86,828.50, thus leaving a balance owing to the plaintiffs of $17,171.50.
(c)The sum of $176,000 being the total of four payments of $44,000 payable on 4 February 2003, 4 February 2004, 4 February 2005 and 4 February 2006. This sum remains unpaid.
The defendant submitted that as I had found that the purchase price of the shares was $412,000; it followed that the total of the constituent parts could not exceed $412,000. The defendant referred in particular to the value of $25,000 ascribed to a motor vehicle transferred to the plaintiffs, and the sum of $118,000 being the value of certain Hako Multi-Clean Ultraviolet floor cleaning machines to be transferred from Samsean Pty Ltd to Gloss Australia Pty Ltd.
There was some confusion as to the way in which the transfer of that equipment to Gloss Australia Pty Ltd ought be accounted for. The defendant submitted that I should find that either the full sum of $118,000 or alternatively $59,000 being one half the value of the equipment should be credited to the plaintiffs such that the sum owing by the defendant to the plaintiffs be reduced by one or other amount.
I do not accept that submission. As I have concluded in my previous Reasons the arrangements between Samsean Pty Ltd and Gloss Australia Pty Ltd are separate from the terms of the contract between the plaintiffs and the defendant. In my opinion the transfer of the equipment by Samsean Pty Ltd was a separate arrangement and was not to be included in the purchase price of the shares. I distinguish it from the sum of $104,000 referred to above and which the plaintiffs agreed could be paid as to 50% to Gloss Australia Pty Ltd in part payment of the shares in Samsean Pty Ltd.
I find therefore that the quantum of the plaintiffs’ claim is the sum of $193,171.50 which is the total of the respective sums of $17,171.50 and $176,000 referred to herein.
In paragraphs 213 and 237 of my previous reasons, I concluded that the liquidated sum, which I now find to be the sum of $193,171.50, fell due on 26 November 2002.
The counterclaim by the plaintiffs by counterclaim, is dismissed.
Interest
In Maidment v Davis [2000] SASC 191 at ]127] the Full Court of the Supreme Court reaffirmed that the rate at which the court may award pre-judgment interest pursuant to s.39 of the District Court Act is unfettered.
The defendant submitted that the Court ought to award interest by reference to the rates set out in the Third Schedule to the 1987 Rules of the Supreme Court. That Schedule provides for a rate of 6% per annum relevantly to 1 August 2004 and 6.5% thereafter.
The plaintiffs submitted that interest should be awarded at a commercial rate which by affidavit approximated 8% per annum, reflecting the fact that the plaintiffs had been kept out of a liquidated sum due to them under the terms of a contract. In Maidment’s case the Court referred to the “award of pre-judgment interest [as being] compensatory, that is to compensate a party for being kept out of his or her money and not to punish defendants from delaying settlement of claims”. In my opinion, this is the quintessential case of a party being kept out of its money pursuant to the terms of the contract.
In the exercise of my discretion, and having regard to the contractual arrangement between the plaintiffs and the defendant, interest should be awarded at a commercial rate. I do not understand the defendant to dispute that insofar as I determined in accordance with the principles expressed in Maidment’s case that a commercial rate should be applied to compensate the plaintiffs for being kept out of a liquidated sum, that such a rate is 8% per annum.
Fixing such a rate of 8% per annum since 26 November 2002 on a broad axe approach results in an award of interest of $56,780.
Accordingly the plaintiffs are entitled to judgment in the sum of $249,951.50 inclusive of interest.
Declaratory Relief
In paragraph 13 of the previous reasons I referred, in error, to Samsean Pty Ltd and Gloss Australia Pty Ltd as not being parties to the action. Of course Samsean Pty Ltd is a plaintiff by counterclaim and Gloss Australia Pty Ltd is a defendant by counterclaim.
In so referring to them in my previous reasons, I had considered whether it was appropriate for declaratory relief to be granted as between them, when I was in fact asked to consider whether the only parties to a suggested contract were the plaintiffs and the defendant. Further, no party, including Samsean Pty Ltd and Gloss Australia Pty Ltd expressly claimed declaratory relief in their respective pleadings.
I have already referred to my findings that the contract was between the plaintiff and the defendants and was quite limited in its scope.
Notwithstanding this finding, all of the parties submitted that I ought make a declaration as to the proprietary rights of the parties to the Hako Multi-Clean Ultraviolet floor cleaning machines.
In Barrye v Shammall [2005] 91 SASR 315 the Full Court of the Supreme Court confirmed that it is strictly not necessary for the parties to plead relief.
See also District Court Act 1991, s.37; and District Court Rules 84.01.
In this case the grant of declaratory relief is of practical benefit to the parties, and in my opinion such relief ought to granted c.f. Forstaff Adelaide Pty Ltd v Hills Industries [2006] SASC 88.
There was some dispute between the parties as to the form of declaration. It is clear that such a declaration ought be quite specific in identifying the chattels.
As Mr Dal Cin who appeared for the defendant correctly submitted, the best way to achieve that certainty is by reference to the particular identifier code of the machines.
I agree. I propose to make the declaration in the following terms namely that:
By reason of an agreement between the plaintiff and the defendant dated 4 February 2001, Gloss Australia Pty Ltd is the legal and beneficial owner of the following equipment:
1.UV Part Number 222300, UV-22 230V, serial number U670230806.
2.UV Part Number 670691, UV 8 Power Supply, serial number U6706910813.
3. UV Hand Tool, serial number U670230806/1A.
Costs
The defendants by counterclaim seek indemnity costs in respect of the counterclaim brought against them by the plaintiffs by counterclaim in this respect. The difficulty in reaching any conclusion as to their motives is that the relationship between the parties was both imprecise and complex.
I am not satisfied in the exercise of my discretion that there is any warrant to depart from the usual order for party/party costs. Further in my opinion, those costs should be limited to the costs of the second defendant by counterclaim, Goss Australia Pty Ltd. The first defendant by counterclaim, Mr Frost, is separately entitled to an order for his costs of the action.
The plaintiffs also seek an order for the costs of the action to be taxed or agreed as a party/party basis. That order cannot be resisted by the defendant.
Accordingly, I order:
(1) that the plaintiffs have their costs of the action on a party/party basis against the defendant to be taxed or agreed.
(ii)    that the second named defendant by counterclaim, Gloss Australia Pty ltd have its costs of the action on a party/party basis against the plaintiffs by counterclaim to be taxed or agreed.
ORDERS
1.That the plaintiffs have judgment against the defendant in the sum of $249,951.50 inclusive of interest.
2.That the defendant pay the plaintiffs’ costs of the action on a party/party basis to be taxed or agreed.
3.That the counterclaim of the plaintiffs by counterclaim be dismissed.
4.That the plaintiffs by counterclaim pay the costs of the second defendant by counterclaim on a party/party basis to be taxed or agreed.
5.I declare that Gloss Australia Pty Ltd is the legal and beneficial owner of the following equipment as and from 4 February 2001, being certain Hako Multi-Clean Ultraviolet floor polishing machines, more precisely identified as:
5.1    UV Part Number 222300, UV-22 230V, serial number U670230806.
5.2UV Part Number 670691, UV 8 Power Supply, serial number U6706910813.
5.3    UV Hand Tool, serial number U670230806/1A.