Hype Investments Pty Ltd v Funk Coffee & Food Pty Ltd (No 3) - [2020] SADC 1

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
HYPE INVESTMENTS PTY LTD & ANOR v FUNK COFFEE & FOOD PTY LTD & ORS (No 3)
[2020] SADC 1
Judgment of His Honour Judge Tilmouth
17 January 2020
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - JUDGMENTS AND ORDERS - INTEREST ON JUDGMENTS
Discussion of the appropriate rate and method of calculating interest on awards for economic loss.
Trade Practices Act 1974 (Cth) s 82; Misrepresentation Act 1972 (SA) s 7; Hype Investments Pty Ltd and Sebastiano v Funk Coffee and Food Pty Ltd and Ors [2019] SADC 98; District Court Act 1991 (SA) s 37, s 39, s 39(3); District Court Supplementary Rules 2014 (SA) r 208, referred to.
MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657; Grincelis v House (2000) 201 CLR 321; Northern Territory v Mr A Griffiths (decd) and Lorraine Jones obh of Ngaliwurru and Nungali Peoples (2019) 364 ALR 208; Maidment v Davis (2000) 77 SASR 167, applied.
Osborne v Kelly (1993) 61 SASR 308; Gibbett v Forwood Products Pty Ltd (No 2) [2001] FCA 434, distinguished.

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - GENERAL RULE: COSTS FOLLOW EVENT - GENERAL PRINCIPLES AND EXERCISE OF DISCRETION
Discussion of the incidence of costs in circumstances where a claim succeeds against four of five defendants.
District Court Civil Rules 2006 (SA) r 264(1), r 264(2), referred to.
Wheeler v Page and Harris (1982) 31 SASR 1; MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657; Latoudis v Casey (1990) 170 CLR 534, applied.

HYPE INVESTMENTS PTY LTD & ANOR v FUNK COFFEE & FOOD PTY LTD & ORS (No 3)
[2020] SADC 1
The remaining issues

This action for damages returns to the Court for the third and final time in order to assess interest, make orders for costs and to enter final judgment.
The background to these proceedings is detailed in a judgment delivered on 19 July 2019. Four of five defendants were found liable for actions in misleading and deceptive conduct relating to Franchise Agreements, contrary to s 82 of the Trade Practices Act 1974 (Cth) and misrepresentation contrary to s 7 of the Misrepresentation Act 1972 (SA): Hype Investments Pty Ltd and Sebastiano v Funk Coffee and Food Pty Ltd and Ors.[1]
[1] [2019] SADC 98 hereafter the ‘primary judgment’.
In a second judgment delivered on 8 November 2019, the Court proposed orders without entering judgment in favour of Hype Investments against the First, Second, Third and Fourth Defendants jointly and severally as follows: Hype Investments Pty Ltd & Anor v Funk Coffee & Food Pty Ltd & Ors (No 2):[2]
[2] [2019] SADC 156 at [106] hereafter the ‘damages judgment’.
1In the sum of $230,000 for the difference between the value of the franchise business and the sum paid for it.
2In the sum of $66,029.89 for transaction costs and consequential losses.
3Declaring the Franchise Agreements unenforceable pursuant to s 87(2)(ba) of the Trade Practices Act, or alternatively under s 37 of the District Court Act 1991 (SA).
4Dismiss the cross-claims.
5Dismiss the action against the Fifth defendant, Mrs Damaskos.
6An award of damages in favour of Mr Sebastiano personally in the sum of $76,341.
7Order requiring the First to Fourth defendants to indemnify him for such sum or sums as may be assessed by the Australian Taxation Office on that award, pursuant to s 87(2)(ba) of the Trade Practices Act.
With this brief summary of the underlying proceedings, it is now possible to turn attention to interest and costs issues.
Questions of interest
Legal principles
The plaintiffs seek various orders in relation to the proposed judgment summarised above, founded on the principle that a separate award of compensation is appropriate for being kept out of the money for which they would otherwise have the use and benefit of: MBP (SA) Pty Ltd v Gogic,[3] Grincelis v House,[4] as a separate award over and above the compensatory award: Northern Territory v Mr A Griffiths (decd) and Lorraine Jones obh of Ngaliwurru and Nungali Peoples.[5] So far as relevant s 39, of the District Court Act 1991 (SA) provides:
[3] (1991) 171 CLR 657, 663, 666.
[4] (2000) 201 CLR 321, [16].
[5] (2019) 364 ALR 208, [150]; [2019] HCA 7.
39—Pre-judgment interest
(1)Unless good reason is shown to the contrary, the Court will, on the application of a party in whose favour a monetary judgment has been, or is to be, given include in the judgment an award of interest in accordance with this section.
(2)The interest—
(a)     will be calculated at a rate fixed by the Court; and
(b)     will be calculated in respect of a period fixed by the Court (which must, however, in the case of a judgment given on a liquidated claim, be the period running from when the liability to pay the amount of the claim fell due to the date of judgment unless the Court otherwise determines); and
(c)     is, in accordance with the Court's determination, payable in respect of the whole or part of the amount for which judgment is given.
(3)The Court may, without proceeding to calculate interest under subsection (2), award a lump sum instead of interest.
…
This section vests an unfettered discretion as to the rate of interest fixed by the Court: Maidment v Davis.[6] No ‘good reason’ is apparent to justify departure from awarding interest. In addition, rule 208 of the District Court Supplementary Rules 2014 (SA) effective from 1 October 2014, provides the calculation of interest under s 39 of the District Court Act ‘is a matter for determination by the judge … in each case’. DCSR 208 further provides as ‘a guide only’, for the indicative calculation of interest based on the Reserve Bank of Australia, plus 4 per cent. The Court retains the supplementary power provided for in s 39(3) of the District Court Act to calculate interest by way of a lump sum. This provision no doubt facilitates the making of lump sum awards when calculations become too complex, or when the effort (and cost) of detailed calculations become disproportionate to the sum involved.
[6] (2000) 77 SASR 167, [110].
Interest on damages assessed at $230,000 and $66,029.89
Table 1 to the written submissions of the plaintiffs received by the Court on 19 November 2019, calculates interest for the period between 1 July 2009 and 30 November 2019 based on the Reserve Bank of Australia rate plus 4 per cent at $160,281.25 with respect to the award of $230,000. These calculations tended towards $12,650 per six-month period from the beginning of 2017. Table 2 calculates interest on the separate award of $56,029.89 on the same basis at $39,045.83.[7] These calculations trended towards $3,081.64 for each six-months by the beginning of 2017. The 1^st of July represents the date on which the initial franchise and licence agreements came into effect, whereas the 19^th of November represents a nominal projected date for the entry of final judgment.
[7] It is accepted that there was a typographical error in point 2 of paragraph [106] in the damages judgment in that the sum specified therein of $66,029.89, should be $56,029.89, so that sum is corrected accordingly by consent under the ‘Slip Rule’ DCCRM 242(2)(a).
The defendants claim these calculations ‘would see the plaintiffs materially overcompensated’ by reason of their failure to take more prompt action than they did. As a consequence, the defendants arbitrarily suggest the flat rate of 4 per cent, which on their calculations result in interest awards respectively of $119,176.51 and $22,647.13. The defendants proffer an equally arbitrary calculation limited to the date on which the District Court Supplementary Rules came into effect, of $147,749.20 for both primary awards of damages.
The originating summons was issued on 23 June 2015. The causes of action crystallised on the entry into the underlying franchise agreements. The defendants terminated the arrangement on 18 September 2015.[8] Since the court held the plaintiffs were effectively ‘locked into’ those arrangements, no question of delay arises.[9] Of course there are cases in which an award of interest becomes amendable to reduction on account of delay, but this is not one of them: Osborne v Kelly,[10] Gibbett v Forwood Products Pty Ltd (No 2).[11]Still further, the reasons for supposed ‘delay’ in bringing the proceedings was not explored at any stage of the proceedings by the defendants.
[8] Damages judgment [98], [100]; Primary Judgment [2].
[9] Damages judgment [54], [78].
[10] (1993) 61 SASR 308, 311.
[11] [2001] FCA 434, [6]-[7].
In the combined circumstances, and given that approximately a further two months are involved since the plaintiffs made their calculations, rather than proceed with precise calculations, it is proposed to order lump sum interest on the respective awards in rounded sums of $163,000 and $39,700 respectively, for the period from 1 July 2009 to the date of judgment.
Interest for the second plaintiff Mr Sebastiano
The damages judgment proposed judgment in Mr Sebastiano’s favour, for what were labelled during the course of the trial as ‘lost wages’ of $76,341.00.[12] It is accepted by the plaintiffs in their written submissions that allowance must be made for the fact that these losses were sustained progressively over the period of six years between 1 July 2009 and 30 June 2015. These calculations of interest are halved in accordance with the decision of the Full Court in Wheeler v Page and Harris,[13] and of the High Court in MBP (SA) Pty Ltd v Gogic,[14] to reflect that consideration.
[12] Damages judgment, [66], [74]-[75], [95], [106(2)].
[13] (1982) 31 SASR 1.
[14] (1991) 171 CLR 657, 661-663.
By Table 3 of their written submissions, the plaintiffs calculate interest at $36,071.12, once again to 30 November 2019. Those calculations came to $4,198.76 for each six-month period by the beginning of 2017. By parity of reasoning as to the alleged delay, the defendants seek an adjustment with respect to this award. On their calculations, an award of $29,530.11 is the appropriate sum. For the reasons advanced above, that submission is rejected. Here again, it is proposed to proceed by way of a rounded lump sum award of $37,000 for the same reasons as outlined above.
Costs
The application by the plaintiffs for their costs of these proceedings is not disputed by the defendants, except in one respect to be dealt with shortly.[15] This concession is properly made in accordance with the general principle that costs are ‘awarded as between party and party’ pursuant to DCR 264(1) and (2) of the District Court (Civil) Rules 2006 (SA). The issue in dispute relates to the dismissal of the proceedings against the Fifth defendant, Mrs Damaskos.[16] As a consequence, the defendants seek costs diminishing the general order, so as to avoid the undesirable course of two separate taxations of costs orders: Umoona Tjutagku Health Service Aboriginal Corp. v Walsh.[17] The latter proposition can be accepted as a question of general principle.
[15] Defendants Submission on Interest and Costs, 29/11/19, para 9.
[16] Damages judgment [104]-[105].
[17] [2019] FCAFC 32, [66].
The situation is that Mrs Damaskos was properly joined as a defendant. She was a co-signatory in her capacity as Director of the Corporate defendants to the subject franchise documents. According to Mr Damaskos, she was present, or at least nearby when the pre-contractual discussions with Mr Sebastiano took place.[18] Having a background in banking, she was according to him, responsible for ‘the administrative side of things’.[19] Indeed Mr Damaskos defaulted responsibility to her at times under cross-examination for that very reason.[20] The defendants had legal representation in common.
[18] T465.11-.15, T469.31, T479.13-.14, T482.9-.10, T497.4-.5.
[19] T485.17-.20, T489.21-.22, T529.36-.38.
[20] T512.8-.16, T513.18-.27, T535.32-.34, T578.8-.9, T583.1-.2.
In this situation, it is difficult to appreciate that matters would have proceeded any differently if she were not a party. On the contrary, the objective facts were such that she was always bound to be a witness in the defence case. Hardly any time was spent during the course of the trial and in closing submissions specifically in respect of the case against her. That aspect of the action was dismissed on the very narrow basis that she was not a person proven to have intentionally participated in a contravention of the Trade Practices Act, by means of direct involvement in making false and misleading statements.[21] On this basis there is no reason to reduce the plaintiffs’ general entitlement to and expectation of receiving their entire costs of the proceedings: Latoudis v Casey.[22]
[21] Damages judgment [104] – [105].
[22] (1990) 170 CLR 534, 557, 569.
It might be added that at first sight the plaintiffs could well have sought a more favourable order for costs on account of what the court described in the primary judgment as a ‘fraught chain of pre-trial disclosure [which] shows both obfuscation and great reluctance on the part of the defendants to produce documents directly relevant to the case at all’.[23]The course of disclosure by the defendants pre-trial, was to say the least, quite misleading.[24] However, as no claim is made for an exceptional order for costs on account of the flawed discovery process, this topic need not be pursued any further.
[23] Primary judgment [58].
[24] Primary judgment [55]-[58].
Conclusion and orders
For all the above reasons, the final orders of the court are now made for the entry of judgment as follows:
There be judgment in favour of Hype Investments Pty Ltd against the First, Second, Third and Fourth defendants jointly and severally, pursuant to s 82 of the Trade Practices Act and s 7 of the Misrepresentation Act:
1In the sum of $230,000 by way of general damages.
2In the sum of $163,000 interest on the principal sum awarded in paragraph 1 above.
3In the sum of $66,029.89 for transaction costs and consequential losses.
4In the sum of $39,700 for interest on the principal sum awarded in paragraph 3 above.
5Declaring the following agreements unenforceable pursuant to s 87(2)(ba) of the Trade Practices Act, or alternatively under s 37 of the District Court Act:
.Franchise Agreement dated 1 July 2009 between Funk Franchise and Hype Investments, for an initial term of five years with a right of renewal for a further five years.[25]
[25] Exhibit P2, Tab 110.
.Sale of Business Agreement entered into between Hype Investments and Funk Coffee & Food on 23 June 2009.[26]
[26] Exhibit P2, Tab 94.
.Licence Agreement between Funk Leasing and Hype Investments for the purposes of occupancy of the premises dated 1 July 2009, to expire on 16 August 2016.[27]
. Renewed Franchise Agreement dated 4 August 2014.[28]
6Dismissing the cross-claims.
7Dismissing the action against Mrs Damaskos, with no order either in favour or against Mrs Damaskos as to costs.
8A separate award of damages is made in favour of Mr Sebastiano personally against the First, Second, Third and Fourth defendants jointly and severally for lost wages of $76,341.00 and in addition thereto of $27,000 for interest thereon.
9A further Order requiring the First to Fourth defendants to indemnify Mr Sebastiano for such sum or sums as may be assessed by the Australian Tax Office on the above awards for damages and interest pursuant to s 87(2)(ba) of the Trade Practices Act.
10The plaintiffs have their costs as agreed or taxed on a party/party basis jointly and severally against the First to Fourth defendants inclusive.
[27] Exhibit P2, Tab 112.
[28] Exhibit P2, Tab 186.
In the result, the judgment in favour of Hype Investments amounts to $498,729.89, whereas that in favour of Mr Sebastiano comes to $103,341. Judgment is entered accordingly.