Harry One Pty Ltd & Anor v Pentridge Village Pty Ltd (No 2)
[2009] VSC 58
•27 February 2009
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 8804 of 2001
| HARRY ONE PTY LTD and LUCIANO ONE PTY LTD | Plaintiffs |
| v | |
| PENTRIDGE VILLAGE PTY LTD | Defendant |
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JUDGE: | Mandie J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 3 February 2009 | |
DATE OF JUDGMENT: | 27 February 2009 | |
CASE MAY BE CITED AS: | Harry One Pty Ltd v Pentridge Village Pty Ltd (No 2) | |
MEDIUM NEUTRAL CITATION: | [2009] VSC 58 | |
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PRACTICE AND PROCEDURE – interest pursuant to s.58 Supreme Court Act 1986 – when debt or sum is “certain” – appropriate rate of interest – relevance of Calderbank offer to interest and costs – costs where plaintiff failed on claim and defendant partially successful on counterclaim.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr G Parncutt | ComLaw |
| For the Defendant | Mr R Garratt QC | Herbert Geer & Rundle |
HIS HONOUR:
In the reasons for judgment herein,[1] it was held that the plaintiffs were liable to pay to the defendant, pursuant to cl.24.3 of the Heads of Agreement a sum of money as their share of rates, taxes and other outgoings and that amount has now been calculated by the parties as the sum of $223,296.43. Accordingly, as the plaintiffs’ claim failed, there will be judgment for the defendant on the plaintiffs’ claim and judgment for the defendant on the counterclaim for the sum of $223,296.43.
[1]Harry One Pty Ltd v Pentridge Village Pty Ltd [2008] VSC 479.
Having now heard the parties’ submissions, it is necessary to decide the question of interest and costs. I record that there were lengthy written submissions provided by the parties and that these were supplemented by detailed oral submissions. I have considered all of the matters raised both in writing and orally and taken them into account. I do not find it necessary to specifically mention every point raised.
The defendant submitted that interest should be allowed from the date of payment of each outgoing at the relevant maximum interest rates provided from time to time under the Supreme Court Act 1986. The plaintiffs submitted that such interest as might be allowed should be calculated from a later date. A number of dates were canvassed in argument. One date mentioned was the date fixed by the Heads of Agreement for payment, namely, within 14 days of registration of the plan of subdivision, so that the last date for payment would have been 19 April 2002. The plaintiffs submitted that the appropriate date was when the debt was rendered certain which was said to be on 18 April 2008. Another date mentioned was the date of a letter of demand from the defendant’s solicitors (2 May 2002) but only as to the amount therein claimed, which was a lesser amount than that now established.
Section 58 of the Supreme Court Act 1986 provides:
“(1) If in a proceeding a debt or sum certain is recovered, the Court must on application, unless good cause is shown to the contrary, allow interest to the creditor on the debt or sum at a rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983…from the time when the debt or sum was payable (if payable by virtue of some written instrument and at a date or time certain) or, if payable otherwise, then from the time when demand of payment was made.
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(3) A debt or sum payable or a date or time is to be taken to be certain if it has become certain.”
The debt or sum was payable under a written instrument and the date or time of payment was made certain by that instrument. A relevant question is whether the debt or sum had been made certain by 19 April 2002.
The defendant produced a schedule (marked “D”) which was not challenged and which showed the dates of payment by the defendant of the various outgoings involved. Most of the amounts were paid, and thus known, prior to 19 April 2002. However the sum of $877.50 was paid to Yarra Valley Water on 26 June 2002 (of which the plaintiffs’ share was $204.28) and the sum of $519,866.65 was paid to the State Revenue Office on 17 May 2002 (of which the plaintiffs’ share was $121,024.96).
There is no direct evidence that the amounts of these two payments were known by 19 April 2002 but this seems extremely likely to be so. I therefore proceed on the assumption[2] that the relevant outgoings had been made entirely certain by 19 April 2002. The appropriate percentage share of the plaintiffs was able to be calculated as at that date and I therefore conclude that the debt or sum was made certain as at that date and that any interest should be calculated from that date.
[2]If that assumption is incorrect, the amount involved would not be substantial and I have, as will be seen, discounted the total interest payable at the maximum rate, in any event.
The plaintiffs submitted that, had the defendant not raised its claim for drainage costs in 2005, the whole proceeding would have been heard and determined at some time that year. Therefore the plaintiffs submitted that the period for the allowance of any interest should terminate at that time. I reject that submission. The plaintiffs had a contractual obligation to pay their share of the outgoings, their defence to that claim failed and they were bound and able at any time after registration of the plan of subdivision to pay out this liability had they been prepared to recognise it.
The plaintiffs initially submitted that they could show “good cause to the contrary” within the meaning of s.58 of the Supreme Court Act because they had made a Calderbank offer to the defendant, by letter dated 24 August 2007, of $350,000 “all-in” in settlement of the proceeding including the counterclaim. Thus, they submitted, interest should not run after the date of that offer. However, the letter containing the Calderbank offer was headed “Without Prejudice Save As to Costs” and stated that if the defendant did not accept the offer and an outcome less favourable ensued that “we will produce this letter on the question of costs.” In my opinion, the letter cannot therefore be considered in relation to the question of interest.[3] Counsel for the plaintiffs, in the course of argument, conceded that this was probably correct.
[3]Similarly, a payment into court cannot be considered in relation to the question of interest – see Williams v Volta [1982] VR 739 referred to in Clarke v Foodland Stores Pty Ltd [1993] 2 VR 382, 392.
The plaintiffs submitted that the Court, in its discretion, should not allow interest at the maximum rate. The rate suggested was 5.5% per annum being the interest rate offered by the Commonwealth Bank of Australia, as at 22 December 2008, on term deposits of the relevant amount for three months. The suggested interest rate reflects the well known fact that interest rates had fallen considerably by 22 December 2008 and that rate is hardly appropriate for the entire period in question. The purpose of the statutory power to allow interest is to compensate the party for being kept out of its money, although not because it has lost the opportunity to invest it, but because it has thereby been deprived of its use; the purpose of the power is not to penalise the debtor although there is perhaps an element of penalty involved in the rate of interest.[4]
[4]See Clark v Foodland Stores Pty Ltd [1993] 2 VR 382, 396-397.
In this case, I can see no reason to substantially depart from the maximum rate prescribed. The plaintiffs said that interest at the maximum rate for the period 19 April 2002 to 24 November 2008 was $171,178.54. However I think that the period for calculation of interest does not terminate until either the date of the hearing as to costs and interest (3 February 2009) or the date when the order is made. Nevertheless I think that it is appropriate, in all the circumstances, to fix the amount of interest in the sum of $170,000 which represents a modest discount in favour of the plaintiffs.
I now turn to the question of costs.
In my opinion, the plaintiffs cannot successfully rely upon the Calderbank offer (which, as I have said, was an all-in offer of $350,000) once it is established that the amount of the present judgment (including interest) exceeds the amount offered (as it does). In any event, I am not satisfied that the defendant’s refusal of the offer was unreasonable and I note, in particular, that the plaintiffs failed to demonstrate that the amount offered, in August 2007, exceeded the amount of the debt, plus interest at that time (not to mention costs from August 2002[5] to that time).
[5]See para 15 below.
The plaintiffs submitted in substance that the Court should take into account the relative success and failure of the parties in relation to the distinct claims made at trial. The defendant had failed on its claim for drainage costs and that claim had taken up a considerable part of the trial and involved a substantial part of the documentation contained in the court book. The defendant had substantially succeeded on its claim for payment of outgoings. The plaintiffs had failed on their claim in relation to the sewerage and water credits. The plaintiffs also referred to a number of other features of the litigation and of the defendant’s conduct thereof that should be taken into account. While accepting that, as a general rule, costs should follow the event, the plaintiffs submitted that the defendant had been only “50% successful” and the Court should, in its discretion, order the plaintiffs to pay only 50% of the defendant’s costs of claim and counterclaim. The defendant submitted that it should have all of its costs, alternatively, at worst, 95% thereof.
As I indicated in the course of argument, it seems to me that the defendant is not entitled to any order for costs on or prior to 15 August 2002 when the claim for outgoings, that was ultimately the only successful claim, was first introduced. Senior counsel for the defendant accepted that position. In the peculiar circumstances of this case, none of the issues raised between the parties prior to 15 August 2002 fell for determination at trial and the merits of those issues have not been determined. Accordingly, costs incurred by the parties prior to that date should lie where they fall.
As far as costs after 15 August 2002 are concerned, the defendant is entitled to its costs but I consider that there should be a proportionate reduction both to reflect its failure on the drainage costs claim and the delays caused by the late introduction of that claim. On the other hand, it should also be taken into account that the plaintiffs failed on their only monetary claim. The defendant should have 90% of its costs after 15 August 2002.
For the foregoing reasons, the orders will be as follows:
1 Judgment for the defendant on the plaintiffs’ claim.
2Judgment for the defendant on the counterclaim against the plaintiffs for the sum of $223,296.43 plus interest pursuant to statute in the sum of $170,000.
3 Order that each party bear its own costs of claim and counterclaim (including any reserved costs) incurred prior to 16 August 2002.
4Order that the plaintiffs pay 90% of the defendant’s costs of this proceeding, claim and counterclaim (including reserved costs), incurred on and after 16 August 2002, to be taxed as between party and party.
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