Growthbuilt Pty Ltd v Modern Touch Marble and Granite Pty Ltd (No 2)

[2021] NSWSC 952

Supreme Court

New South Wales

Medium Neutral Citation:

Growthbuilt Pty Ltd v Modern Touch Marble & Granite Pty Ltd (No 2) [2021] NSWSC 952

Hearing dates:

On the papers

Date of orders:

02 August 2021

Decision date:

02 August 2021

Jurisdiction:

Equity - Technology and Construction List

Before:

Henry J

Decision:

See [51]

Catchwords:

COSTS – party/party – bases of quantification – application for indemnity costs – where Calderbank offer made to three defendants requiring payment of settlement sum on joint and several basis – where claim against third defendant withdrawn at hearing – whether reasonable for first and second defendants to not accept offer – indemnity costs in relation to the first and second defendants refused – Bullock and Sanderson orders in relation to third defendant refused

Legislation Cited:

Civil Procedure Act 2005 (NSW), ss 56, 98

Uniform Civil Procedure Rules (2005) NSW, rr 42.1, 42.15A(1)

Cases Cited:

Amadio Pty Ltd v Henderson (1998) 81 FCR 149

Bassett v Cameron (No 2) [2021] NSWSC 419

Calderbank v Calderbank [1975] 3 All ER 333

Council of the City of Liverpool v Turano (No 2) [2009] NSWCA 176

Dominello v Dominello; Dominello v Nominal Defendant (No 2) [2009] NSWCA 257

Gould v Vaggelas (1985) 157 CLR 215; [1985] HCA 85

Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298

Henderson v Amadio Pty Ltd [1996] FCA 184

Houghton v Arms (2006) 225 CLR 553; [2006] HCA 59

Johnson’s Tyne Foundry Pty Ltd v Shire of Maffra (1948) 77 CLR 544; [1948] HCA 46

Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344

R v Hendrickson & Knutson (1911) 13 CLR 473; [1911] HCA 56

Roads and Traffic Authority of NSW v Dederer (2007) 234 CLR 330; [2007] HCA 42

Sahade v Bischoff (No 2) [2016] NSWCA 45

Sandersonv Blyth Theatre Company [1903] 2 KB 533

Stevedoring Industry Finance Committee v Gibson [2000] NSWCA 179

Sved v Council of the Municipality of Woollahra (1998) NSW Conv R 55-842

Vieira v O’Shea (No 2) [2012] NSWCA 121

Wieland v Texxcon Pty Ltd (2014) 313 ALR 724; [2014] VSCA 199

Texts Cited:

Nil

Category:

Costs

Parties:

Growthbuilt Pty Ltd (Plaintiff / Cross-Defendant) Modern Touch Marble & Granite Pty Ltd (First Defendant / Cross-Claimant)
Johnne Khouri (Second Defendant)
Elizabeth Khouri (Third Defendant)

Representation:

Counsel:
T Breakspear with M Keene (Plaintiff / Cross-Defendant)
R Notley with N Simone (Defendants / Cross-Claimant)

Solicitors:
BCP Lawyers & Consultants (Plaintiff / Cross-Defendant)
Paramonte Legal (Defendants / Cross-Claimant)

File Number(s):

2017/115956

Publication restriction:

Nil

Judgment

1. In these proceedings, I found that the plaintiff, Growthbuilt Pty Ltd (Growthbuilt), is entitled to judgment in the amount of $1,126,119.79 against the first defendant, Modern Touch Marble & Granite Pty Ltd (Modern), and is entitled to judgment against the second defendant, Mr Johnne Khouri, in the amount of $886,395.60: Growthbuilt Pty Ltd v Modern Touch Marble & Granite Pty Ltd [2021] NSWSC 290 (Judgment). These reasons deal with the orders to be made in the proceedings, including as to costs, and assume familiarity with the Judgment.

2. The parties agreed that the calculation of interest and the question of costs should be dealt with after delivery of the Judgment. The Court has received and considered the written submissions of the parties and an affidavit of Marty Perry sworn on 26 April 2021 on which Growthbuilt relies.

3. There is no dispute regarding Growthbuilt’s claim for and calculations of pre-judgment interest. The disputes relate to the costs orders to be made in relation to Growthbuilt’s claims against Modern and Mr Khouri, Modern’s cross-claim and Growthbuilt’s claim against the third defendant, Ms Elizabeth Khouri, which was withdrawn at the hearing.

4. Growthbuilt seeks an order that Modern and Mr Khouri pay its costs on the ordinary basis up to and including 7 May 2019 and on an indemnity basis thereafter, relying on a Calderbank offer dated 7 May 2019. It submits that the failure by Modern and Mr Khouri to accept the Calderbank offer was unreasonable in the circumstances of this case.

5. Modern and Mr Khouri do not oppose an order that they pay Growthbuilt’s costs of its claim on an ordinary basis but say that an indemnity costs order is not appropriate as they did not unreasonably reject the Calderbank offer. Modern also seeks an order that Growthbuilt pay the costs of Modern’s cross-claim, contending that the Judgment recognised the sum of all tax invoices which Modern claimed in the proceedings.

6. Ms Khouri also seeks an order that Growthbuilt pay her costs on an ordinary basis for the reason that the claim against her was abandoned at the hearing. Growthbuilt says that no order as to costs should be made in relation to Ms Khouri or, alternatively, that a Sanderson or Bullock order should be made.

Growthbuilt’s claim for indemnity costs

7. Growthbuilt’s claim for indemnity costs from 8 May 2019 is based on a Calderbank offer contained in a letter sent to the defendants’ solicitor dated 7 May 2019 (Offer).

8. The Offer was in the following terms:

… the Plaintiff hereby offers to settle the Proceedings on the following terms:

(i) The Defendants will (on a joint and several basis) pay the Plaintiff the sum of $225,000 (Settlement Sum), this amount being inclusive of costs, within 28 days following the date of acceptance of this offer; and

(ii) Upon the payment of the Settlement Sum by the Defendants, the Proceedings, including the Claim and the Cross Claim, are to be dismissed with no order as to costs, and the parties will sign and file with the Court consent orders to that effect.

9. The Offer was expressed to be open for acceptance for 28 days and made in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333 and other Australian authorities. The letter stated that, if the Offer was not accepted, Growthbuilt would rely on it in support of an indemnity costs order. The letter also explained why Growthbuilt alleged that the defendants were liable by reference to the legal principles relating to liquidated damages and the prevention principle, further detailed the claims under the guarantee and asserted that the cross-claims made for non-payment of invoices could not succeed.

10. There was no response to the Offer by any of the defendants.

11. The relevant principles in relation to the exercise of the Court’s discretion to award costs under s 98 of the Civil Procedure Act 2005 (NSW) are well known. While the general rule is that costs follow the event and are to be assessed on the ordinary basis, the making of an informal offer of settlement by way of a Calderbank letter may warrant an indemnity costs order in certain circumstances: see, for example, Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344.

12. The principles relevant to a Calderbank offer were recently summarised by Ward CJ in Eq in Bassett v Cameron (No 2) [2021] NSWSC 419 at [22]–[26], which I respectfully adopt and will not set out in full here. Relevantly, the principles recognise that:

1. in circumstances where it transpires that the final result in the proceeding is less favourable to the offeree, the rejection of a Calderbank offer enlivens the discretion to award indemnity costs but does not create a prima facie right to such an order;

2. to warrant the making of a special costs order, the offer must amount to a genuine offer of compromise which was unreasonable for the unsuccessful party not to accept; and

3. the party seeking to rely on the making of the offer has the onus of demonstrating that it was unreasonable for the unsuccessful party to reject the offer.

13. The factors to be taken into account when considering whether the rejection or non-acceptance of the Offer was unreasonable include the stage of the proceeding at which the Offer was received, the time allowed to the offeree to consider the Offer, the extent of the compromise offered, the offeree’s prospects of success assessed as at the date of the Offer, the clarity with which the terms of the Offer were expressed, and whether the offer foreshadowed an application for indemnity costs in the event of its rejection: Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298 (Hazeldene’s Chicken Farm) at [25] (Warren CJ, Maxwell P and Harper AJA).

14. Growthbuilt submits that the Court should find that the failure by Modern and Mr Khouri to accept the Offer was unreasonable, relying on the following factors identified in Hazeldene’s Chicken Farm as they apply to the circumstances of this case: the Offer was made 18 months prior to the hearing when the majority of evidence had been filed; the Offer was open for acceptance for a reasonable period, namely 28 days; the Offer contained sufficient compromise as it sought settlement by way of payment of $225,000 compared to the $1,126,119.79 plus interest ultimately awarded by the Court; Modern could have reasonably foreseen its prospects of success at the time of the Offer because Growthbuilt’s primary claim was based on contractual construction and the application of existing authorities raising legal issues rather than factual questions; the Offer was cogently expressed and identified to Modern the fragility of its arguments; and the Offer clearly foreshadowed an application for indemnity costs in the event of its rejection.

15. Modern and Mr Khouri do not take issue with the factors relied on by Growthbuilt. However, they submit that they cannot be found to have unreasonably rejected the Offer as it was directed to all three defendants and required them to be jointly and severally liable to pay $225,000 to Growthbuilt and the letter contended that Ms Khouri was liable under the alleged guarantee. The defendants submit that the Offer was incapable of being accepted by them without Ms Khouri’s consent. They say that Ms Khouri did not instruct her solicitor to accept the Offer and it was not unreasonable for her to take that course.

16. In reply, Growthbuilt submits that the making of a Calderbank offer on a joint basis does not conclusively operate against an indemnity costs order sought by the offeror, relying on Henderson v Amadio Pty Ltd [1996] FCA 184 (Henderson). It argues that the Court’s discretion to award costs is sufficiently broad to permit appropriate consideration and weight being given to ‘conditional offers’ that require all parties to accept a Calderbank letter. Growthbuilt emphasises that the focus is on the reasonableness of the offer and the conduct of the other party in refusing it, having regard to all the circumstances.

17. Growthbuilt submits that Modern and Mr Khouri’s failure to respond to the Calderbank letter cannot be reasonable where there is no evidence or submission to explain their conduct, particularly where Ms Khouri was Modern’s employee and Mr Khouri’s sister. It points to the lack of evidence supporting the suggestion that the joint nature of the Offer influenced the decision to fail to respond to the Offer or that Modern and Mr Khouri regarded the Offer as being incapable of being accepted by them without Ms Khouri.

18. In Henderson, Heerey J considered a Calderbank offer made to a number of respondents that was conditional on the offer being accepted by all. In his reasons, his Honour noted that the parties did not refer to any authority on the question of whether a Calderbank offer could be made to a number of defendants on such terms and said he could see no reason in principle why such an offer could not be made. His Honour concluded that the offer was reasonable in the circumstances of that case even though the applicant failed against some respondents but not against others and there was no joint and several liability between the respondents. He held that, objectively speaking, it should have appeared to have been a particularly attractive offer to the unsuccessful parties as they were facing a potential damages liability of some $14 million. His Honour also reasoned that it was open to a respondent who wished to accept the offer to serve on the other respondents a Calderbank letter setting out a reasonable basis for contribution and stating that they wished to accept the proposal. Indemnity costs were ordered to be paid by the unsuccessful respondents but Heerey J did not award the applicants their costs in relation to the successful respondent. His Honour’s finding that the joint offer was reasonable and the decision to make an indemnity costs order were not disturbed by the Full Federal Court in Amadio Pty Ltd v Henderson (1998) 81 FCR 149 at 265E–266A.

19. In Wieland v Texxcon Pty Ltd (2014) 313 ALR 724; [2014] VSCA 199, the Victorian Court of Appeal considered the issue of costs in the context of a joint Calderbank offer. In that case, the Court of Appeal overturned the decision of the trial judge who, by reference to the approach in Henderson, considered that the joint nature of the offer did not preclude the making of an indemnity costs order against the offerees. The Court of Appeal held that the Calderbank offer suffered from the “fundamental difficulty” that it was a joint and several offer by reason of the claims made against the subject defendants being separate and, contrary to the submissions made by the plaintiffs, the offer was not capable of acceptance by the defendants independently of each other: at [132]. It was also relevant that the apportioned liability of each defendant was less than the amount offered.

20. In Sahade v Bischoff (No 2) [2016] NSWCA 45, Gleeson JA, with whom Basten JA and Beech-Jones J agreed, held that a joint offer of compromise made to the appellants/cross-respondents could not be relied on by the offerors for an indemnity costs order as it was not capable of acceptance by only one of the offerees. His Honour observed that the appellants’ claims involved separate causes of action and that one of the appellants did not have any interest in the cross-summons so far as it related to the costs order against the other: at [20] and [22]. After finding that r 42.15A(1) of the Uniform Civil Procedure Rules (2005) NSW (UCPR) could not apply in such circumstances, his Honour went on to state at [23]:

This reasoning also applies if the offer of compromise is treated as a Calderbank offer. The inquiry as to whether it was unreasonable for the unsuccessful offeree to have rejected a Calderbank offer assumes that the offer was capable of acceptance by the offeree: see Vieira v O’Shea (No 2) [2012] NSWCA 121 at [10] and the authorities there cited. Here, the joint offer was not an offer “capable of acceptance” by either appellant. In Rafferty v Time 2000 West Pty Ltd [2010] FCA 873; 87 IPR 593, Besanko J concluded that it was not appropriate to make an order for indemnity costs based on offers of compromise relying upon the principles in Calderbank where a joint offer is made to independent parties and it was not open to one party to accept the offer unless the other also accepted: at [21] and [33].

21. In this case, insofar as the Offer related to Growthbuilt’s claims against Modern and Mr Khouri, the Offer was clearly a generous one. It represented a significant compromise of Growthbuilt’s claims against each of those defendants and, based on the Hazeldene’s Chicken Farm factors and the matters referred to at [14], the terms of the Offer as it related to them were, in my view, otherwise reasonable. However, the position is different in respect of Ms Khouri. Growthbuilt’s claim against Ms Khouri was only for $80,000 and Growthbuilt had no success against her, having withdrawn the claim at the hearing.

22. The other issue with Growthbuilt’s claim for indemnity costs is that the Offer was, by its terms, not capable of acceptance by Modern and Mr Khouri independently of Ms Khouri. The Offer made by Growthbuilt was a joint offer made to the three defendants. It was clearly expressed as requiring a payment to be made on a joint and several basis and, thus, was conditional on all the defendants accepting the Offer. This was despite the cause of action advanced against Ms Khouri being several and relating to different sub-contracts to those, for example, in respect of which Mr Khouri was sued. While the defendants were represented by the same set of solicitors and not independent of each other, Ms Khouri had no direct interest in many of the claims made in the proceedings and it was clearly not unreasonable of her not to have accepted the Offer.

23. Without Ms Khouri’s consent and acceptance, an agreement by Modern and Mr Khouri to pay Growthbuilt $225,000 in response to the Offer would not have constituted acceptance of the Offer but would have amounted to a counter-offer which may or may not have addressed Ms Khouri’s position and left open the basis on which the whole of the proceedings were to be resolved: Vieira v O’Shea (No 2) [2012] NSWCA 121 at [12] and [13]. I accept that there is no evidence from Ms Khouri or the other defendants explaining the basis on which they did not respond the Offer. However, that does not deal with the issue that, by its terms, the Offer made was not capable of acceptance by Modern and Mr Khouri independently of Ms Khouri and, when regard is had to Ms Khouri’s position, overall, it was not unreasonable for the Offer not to have been accepted by all three defendants jointly and severally.

24. For these reasons, and while more finely balanced than some of the other cases to which I have referred, in my view, the defendants’ submissions should be accepted. It follows that I refuse Growthbuilt’s application for an indemnity costs order and will order that its costs be paid by Modern and Mr Khouri on an ordinary basis.

Ms Khouri’s costs

25. In relation to her costs, Ms Khouri submits that, as she was completely successful in her defence, she should be entitled to a costs order in her favour, relying on the general rule that costs follow the event unless it appears to the Court that some other costs order should be made: UCPR, r 42.1. In particular, she argues that the claim against her was weak and rightly abandoned.

26. Growthbuilt’s primary submission is that no order as to costs should be made in relation to the claim against Ms Khouri notwithstanding that the claim was withdrawn on the second day of the hearing. In the alternative, Growthbuilt contends that, if the Court were to make a costs order in connection with Ms Khouri, a Sanderson order (or Bullock order) should be made against Modern as her employer and/or Mr Khouri as the guarantor of the subcontract in relation to which Ms Khouri was sued.

27. Growthbuilt points to the following matters in support of its primary submission that there should be no order as to costs: the issues relating to the claim made against Ms Khouri were confined to one subcontract and raised a question of construction of the guarantee clause; the claim that Ms Khouri was jointly and severally liable under the guarantee provisions with Modern was made on a reasonable basis based on her execution of the Mosman subcontract; the claim against Ms Khouri did not expand on the other issues in dispute in the proceedings; Ms Khouri shared common solicitors with Modern and Mr Khouri and, as an employee of Modern Touch, she was likely to be indemnified by Modern; Ms Khouri’s evidence, to the extent that it related to the guarantee claim only, was very limited; and Growthbuilt acted reasonably by withdrawing the claim at trial and ensuring that it absorbed no time during the hearing.

28. It may be that Ms Khouri’s costs are not significant as the claim against her was confined, the evidence was limited and she shared solicitors with Modern and Mr Khouri. However, this does not answer why she should not have the benefit of an order to recover the costs that were properly incurred on her behalf in defending the claim until it was withdrawn at the hearing. The Court is also not in a position to speculate as to whether Ms Khouri was indemnified by Modern in the absence of evidence from the parties about that matter.

25. In relation to Growthbuilt’s alternative position, the Court may make a Sanderson or Bullock order against an unsuccessful defendant to pay the costs of a successful defendant. A Sanderson order requires an unsuccessful defendant to pay, directly, the costs of a successful defendant, whereas a Bullock order requires the unsuccessful defendant to indemnify the plaintiff for the costs of the successful defendant.

26. The principles governing the making of a Sanderson or Bullock order are essentially the same: Roads and Traffic Authority of NSW v Dederer (2007) 234 CLR 330; [2007] HCA 42 at [180]. The underlying consideration is that of fairness: Council of the City of Liverpool v Turano (No 2) [2009] NSWCA 176 (Liverpool Council v Turano (No 2)) at [14].

27. In exercising the discretion to make a Sanderson or Bullock order, the Court will generally consider whether it was reasonable for the plaintiff to have brought the proceedings against the successful defendant and whether there is conduct on the part of the unsuccessful defendant in relation to the plaintiff’s claim against it which would make it fair to impose liability on it for the costs of the successful defendant: Liverpool Council v Turano (No 2) at [15], citing Gould v Vaggelas (1985) 157 CLR 215 (Gould v Vaggelas) at 230 (Gibbs CJ), 247 (Wilson J, Murphy J agreeing), 260 (Brennan J); [1985] HCA 85 and Stevedoring Industry Finance Committee v Gibson [2000] NSWCA 179 at [128].

28. Growthbuilt submits that a Sanderson or Bullock order is appropriate in this case because the litigation arose out of acts performed by Ms Khouri in the course of her employment by Modern. It says that this is consistent with the policy of the law which creates an implied right to an indemnity in respect of liabilities innocently incurred in the performance of duties of another, citing R v Hendrickson & Knutson (1911) 13 CLR 473 at 480–1, 484 and 488; [1911] HCA 56 and Houghton v Arms (2006) 225 CLR 553; [2006] HCA 59.

29. Growthbuilt also submits that Ms Khouri was only joined as a back stop for Modern’s liability and a second back stop for Mr Khouri’s liability. In circumstances where both Modern and Mr Khouri pressed their defences and refused to settle, it submits that it was more than reasonable for it to maintain its claim against Ms Khouri.

30. I accept that it may not have been unreasonable for Growthbuilt to have brought the guarantee claim against Ms Khouri in relation to the Mosman subcontract. On the face of that subcontract, it appears that Ms Khouri signed as a guarantor. Joining Ms Khouri to the proceedings could be said to have avoided the possibility of a multiplicity of actions and there was a commonality of issues between the guarantee claim advanced against Ms Khouri under the Mosman subcontract and the guarantee claims made against Mr Khouri under the Surry Hills, Mosman and Putney subcontracts.

31. That said, this was not a case where there was any prospect of Growthbuilt succeeding against Ms Khouri and not succeeding against Modern in relation to the liquidated damages and completion costs claims arising under the Mosman subcontract. There is also a question as to whether it was reasonable for Growthbuilt to have maintained the claim against Ms Khouri after receiving her October 2018 affidavit in which she gave evidence that she signed the Mosman subcontract in her capacity as a witness only. Growthbuilt waited for two years before withdrawing its claim at the hearing. The abandonment of its claim against Ms Khouri also supports an inference that Growthbuilt recognised there were no reasonable grounds for maintaining the claim at all.

32. Further, and irrespective of whether it was reasonable for Growthbuilt to have joined Ms Khouri initially, I find nothing in the conduct of Modern or Mr Khouri that makes it a proper exercise of my discretion that those defendants should pay Ms Khouri’s costs by way of a Sanderson or Bullock order in this case.

33. While the conduct of the unsuccessful defendant that warrants the making of such orders does not extend to a requirement that they engage in misconduct, the conduct must go beyond a denial of liability: Dominello v Dominello; Dominello v Nominal Defendant (No 2) [2009] NSWCA 257 (Dominello) at [19], citing Gould v Vaggelas at [6]. This may include conduct involving a positive assertion, express or implied, that the relevant defendant is not liable because the other is: Dominello at [20]–[25] and the cases cited therein. As was observed in Dominello at [21], many of the cases in which Sanderson or Bullock orders are awarded involve alternative claims where the plaintiff could succeed against only one of the defendants but had to sue both, citing Sandersonv Blyth Theatre Company [1903] 2 KB 533 and Johnson’s Tyne Foundry Pty Ltd v Shire of Maffra (1948) 77 CLR 544; [1948] HCA 46.

34. In this case, the defendants’ List Response pleaded nothing more than a bare denial of the guarantee clause. Growthbuilt’s claim against Ms Khouri was not an alternative claim but, as was submitted, a “back stop” claim presumably brought because of some concern to ensure recovery against Modern. Unlike in Sved v Council of the Municipality of Woollahra (1998) NSW Conv R 55-842, a case referred to in Growthbuilt’s submissions, there is no evidence that Modern suggested to Growthbuilt that it should look to Ms Khouri for recompense or that Modern’s liability was limited in some way that required the joinder of Ms Khouri to fill any gap. There was no other conduct on the part of Modern or Mr Khouri that involved some assertion or suggestion that they were not liable but Ms Khouri was.

35. The question is where liability for Ms Khouri’s costs should fall. In my view, Growthbuilt has not demonstrated that it is fair or appropriate to order that the costs should fall otherwise that on it, as the party who brought the claim and withdrew it late in the day during the hearing.

36. For these reasons, I am satisfied that the Court should exercise its discretion and order Growthbuilt to pay Ms Khouri’s costs of the proceedings.

Modern’s cross-claim

41. Modern submits that Growthbuilt should pay its costs of the cross-claim on the ordinary basis because it was completely successful in respect of that claim. It refers to its “award” of $543,282.14 for the cross-claim, being the sum of all tax invoices it claimed in the proceedings, and submits that costs should follow the event pursuant to r 42.1 of the UCPR.

42. Growthbuilt takes issue with Modern’s characterisation of the result of the cross-claim as being completely successful. It submits that the cross-claim was of no commercial consequence in the proceedings because every dollar recovered by Modern increased the amount which Growthbuilt was entitled to recover on its completion costs claim. It submits that because of an agreement reached during the trial, the sums due to Growthbuilt were identical whether the cross-claim was valued at 100% or 0%.

43. Growthbuilt also submits that it acted consistently with s 56 of the Civil Procedure Act 2005 (NSW) in identifying that the cross-claim was not a real issue in dispute and should, therefore, not be subjected to the prejudice of a costs order because the cross-claim was valued at 100% where this made no difference to the value of its entitlement to judgment.

44. While the general rule is that costs follow the event, I do not consider that principle to be an obvious guide as to how the costs relating to Modern’s cross-claim should be assessed. Modern’s cross-claim against Growthbuilt sought to recover amounts in respect of the balance of unpaid invoices issued to Growthbuilt for works carried out under the subcontracts.

45. As events transpired, Modern’s cross-claim was the subject of agreement between the parties, which meant that there was no contest at the hearing about the issues raised by it. The findings of the Court were based on unchallenged evidence and a calculation of the final judgment sums that incorporated the agreement of the parties on quantum, based on the calculations set out in MFI-1 and MFI-4: see Judgment at [6], [8], [11], [126]–[132].

46. Further, and as Growthbuilt submitted, in circumstances where termination of the subcontracts was admitted, Modern’s cross-claim did not ultimately impact the final judgment sums as every dollar on the cross-claim that was agreed increased Growthbuilt’s claim for completion costs in relation to the subcontracts. In that context, I do not accept Modern’s characterisation that it obtained an award of damages pursuant to its cross-claim.

47. In my view, this is a case where the Court should consider the impact of the cross-claim and the overall result. The final outcome was that Growthbuilt recovered a judgment against Modern in its favour and the cross-claim invoice sums that were agreed did not have any real effect on quantum. In those circumstances, and in the exercise of the Court's discretion, I decline Modern’s application for a costs order in its favour in relation to the cross-claim.

Pre-judgment interest

48. Modern and Mr Khouri agree with Growthbuilt’s pre-judgment interest calculations that are set out in the affidavit of Mr Perry. The calculations are based on a claim for pre-judgment interest from and including 31 August 2016, being the day following the date of termination of the subcontracts, to 26 April 2021. They are made in accordance with the applicable NSW Court pre-judgment interest rates during that period and a daily rate of interest based on an interest rate of 4.1% continues to apply.

49. In summary, when interest as calculated by Mr Perry is applied and updated to the date of the orders, Growthbuilt is entitled to:

1. judgment against Modern in the amount of $1,410,001.29, as at 2 August 2021, comprising the judgment sum of $1,126,119.79, pre-judgment interest to 26 April 2021 of $271,484.93, and pre-judgment interest from 27 April 2021 to 2 August 2021 amounting to $12,396.57 based on a daily rate of interest of $126.4956 for each calendar day during that period; and

2. judgment against Modern in the amount of $1,109,845.47 as at 2 August 2021, comprising the judgment sum of $886,395.60, pre-judgment interest to 26 April 2021 of $213,692.23, and pre-judgment interest from 27 April 2021 to 2 August 2021 amounting to $9,757.64 based on a daily rate of interest of $99.5677 for each calendar day during that period.

50. In their written submissions, Modern and Mr Khouri raised a concern that the wording of the orders proposed in Growthbuilt’s submissions did not clarify that the amount awarded against Modern includes the whole of the judgment against Mr Khouri. I have made orders that deal with that concern.

Orders

51. For these reasons, I make the following orders:

1. Judgment be entered in favour of the Plaintiff against the First Defendant in the sum of $1,410,001.29 inclusive of interest up to 2 August 2021.

2. Judgment be entered in favour of the Plaintiff against the Second Defendant in the sum of $1,109,845.47 inclusive of interest up to 2 August 2021.

3. The Court notes that the judgment awarded against the First Defendant includes the amount of the judgment awarded against the Second Defendant.

4. Subject to Order 6, the First and Second Defendants pay the Plaintiff’s costs of the proceedings on the ordinary basis as agreed or assessed.

5. Dismiss the proceedings against the Third Defendant.

6. The Plaintiff pay the Third Defendant’s costs of the proceedings on the ordinary basis as agreed or assessed.

*******

Decision last updated: 02 August 2021