JJ Armstrong Pty Ltd v Hope St Student Accommodation Pty Ltd (No 2)
[2017] VCC 1317
•15 September 2017
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
Case No. CI-15-04510
| J.J ARMSTRONG PTY LTD | Plaintiff |
| v | |
| HOPE ST STUDENT ACCOMMODATION PTY LTD | Defendant |
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JUDGE: | HIS HONOUR JUDGE WOODWARD | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers | |
DATE OF RULING: | 15 September 2017 | |
CASE MAY BE CITED AS: | JJ Armstrong Pty Ltd v Hope St Student Accommodation Pty Ltd (No 2) | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 1317 | |
REASONS FOR RULING
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Subject:COSTS
Legislation Cited: s23 Civil Procedure Act 2010 (Vic); s2 Penalty Interest Rates Act 1983 (Vic)
Cases Cited:JJ Armstrong Pty Ltd v Hope St Student Accommodation Pty Ltd [2017] VCC 1247; Chen v Chan [2009] VSCA 233; BHP Billiton Iron Ore Pty Ltd v National Competition Council (No 2) [2007] FCA 557; Firebird Global Master Fund II Ltd v Republic of Nauru [No 2] [2015] HCA 53
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HIS HONOUR:
1 I delivered reasons for judgment in this proceeding on 8 September 2017 (“Reasons”). Terms used in this Ruling have the meanings given in those Reasons. As is apparent from the summary of issues early in those reasons,[1] the proceeding required consideration of six main questions, some of which involved reasonably substantial subsidiary questions. On each of those questions, Hope St was either wholly or substantially successful. It was for this reason, that I concluded my reasons as follows:
“On the question of costs more generally, Hope St has essentially succeeded on both of its claims for delay damages and for defects damages, albeit for sums assessed to be lower than the sums claimed (and, in the case of the defects damages, considerably lower). On the other hand, those sums in total are more than sufficient to account for the retention amount claimed by JJ Armstrong. Thus if costs were to follow the event, I would be inclined to order that JJ Armstrong pay Hope St’s costs on the standard basis, in default of agreement.”[2]
[1]JJ Armstrong Pty Ltd v Hope St Student Accommodation Pty Ltd [2017] VCC 1247, commencing at [5]
[2]JJ Armstrong Pty Ltd v Hope St Student Accommodation Pty Ltd [2017] VCC 1247, commencing at [297]
2 I set out my tentative view as to the form that final orders should take and stated that I would hear further from the parties on final orders. The parties were invited by email to seek to agree final orders or, if they were unable to agree, to file and serve written submissions. I have since received written submissions on behalf of both parties.
3 Despite my tentative indication, JJ Armstrong has boldly submitted that it is the successful party, essentially on the basis that it “was awarded 100% of its claim”. I reject the submission. It has echoes of the flawed position taken by JJ Armstrong in the substantive proceeding to the effect that the FCC issued by PBA should be afforded some special overarching significance, notwithstanding that it was common ground that the FCC had been validly disputed in accordance with the Contract.
4 It was never in dispute that an allowance would need to be made in any judgment for the retention amount. The only reason it had not been paid, was that Hope St had validly disputed the FCC and, as part of that dispute, was claiming that sums owed to it by JJ Armstrong for both delay and defective and incomplete work, exceeded the retention amount. Hope St’s claim in this regard has been vindicated. In those circumstances, having an agreed retention amount deducted from the damages awarded on Hope St’s counterclaim, is not “success”.
5 Turning to whether the success achieved by Hope St in the proceeding is sufficient to justify an order for costs in its favour on the standard basis, I accept that the result in money terms achieved by Hope St was a very small percentage of its original claim. However, almost two-thirds of the reduction in the amount of Hope St’s original claim is accounted for by its decision at the start of day three of the trial to abandon its claim for liquidated damages. In doing so, it conceded that the rate for liquidated damages at item 30 of Schedule 1 to the Contract was likely to be held to be a penalty.
6 In relation to this concession, JJ Armstrong has submitted that Hope St had maintained its liquidated damages claim from 22 October 2016 until the third day of trial and that the late amendment of its claim to only claim general damages added “additional complex legal arguments and caused delays to the hearing of at least two days”.
7 In my view, Hope St should not be penalised for its approach to the liquidated damages issue, for three reasons. First, the rate of liquidated damages was an express term of the Contract freely entered into by both parties. While there was some controversy concerning how the rate for liquidated damages was arrived at, it is tolerably clear that Hope St played little or no part in determining the rate.[3] In those circumstances, I consider that it was not unreasonable for Hope St to bring and maintain a claim for liquidated damages based on the contracted rate.
[3]JJ Armstrong Pty Ltd v Hope St Student Accommodation Pty Ltd [2017] VCC 1247, commencing at [13]-[17]
8 Secondly, it is inevitable that in the intense process of trial preparation and the trial itself, parties and their legal advisers will look more critically at all aspects of their case. A party will often make a forensic decision at that time that a claim or allegation reasonably made when pleadings were drawn, is unlikely to succeed and should therefore be abandoned. Indeed, doing so is consistent with a party’s overarching obligation to narrow the issues in dispute under s23 of the Civil Procedure Act 2010 (Vic) and should be encouraged. The risk of an adverse costs order will have the opposite effect. In my view, such an order should therefore be imposed sparingly, such as where the abandoned claim lacked merit and imposed a significant evidentiary burden on the parties. This was not such a claim.
9 Thirdly, in examining the effect on the trial of Hope St’s decision to abandon the liquidated damages claim, the focus should not be on costs associated with the general damages claim advanced in its place (on which Hope St succeeded). Those costs would have been incurred regardless of when the claim was first advanced. Rather, the relevant question is whether time was wasted at trial in evidence or submissions directed solely to the liquidated damages claim, before it was abandoned. I am satisfied that this did not occur, or at least not to any material extent.
10 On the damages for defects and incomplete work, again JJ Armstrong has correctly identified that the amount recovered by Hope St was significantly less than the amount claimed. However, Hope St did recover an amount in respect of 23 of the 24 items it claimed, resulting in a total recovery of $58,459. Thus its entitlement to recovery on the vast majority of the items it claimed was vindicated, and the total amount recovered was many times the $11,417 allowed by Mr Brown in the FCC.
11 In my view, this proceeding falls comfortably into the category of case where the general rule that costs should follow the event should apply. Hope St is the successful party and should recover its costs, even though it has not succeeded on all of its claims.[4] I accept Hope St’s submission that applications to apportion costs according to success or failure of one party should be approached with great caution.[5]
[4]Chen v Chan [2009] VSCA 233 at [110]
[5]Citing Hughes v Western Australian Cricket Association (Inc) [1986] ATPR 40-748 at 48,136, cited in BHP Billiton Iron Ore Pty Ltd v National Competition Council (No 2) [2007] FCA 557.
12 There were a multiplicity of issues in this case, including issues raised for the first time in final submissions. Attempts to narrow the issues early in the trial through the vehicle of a “summary of issues” document, were largely unsuccessful. Some issues that occupied numerous pages of written submissions and reasons for judgment, where arguably of little (if any) merit. Thus, there is considerable scope in this proceeding for undertaking a detailed issue-by-issue dissection of the case, for the purposes of allocating costs on different bases and in different amounts, based on the merits of particular claims and the level of success of those claims.
13 But even if such an approach were justified in the circumstances of this case (which, in my view, it is not), I am satisfied that it is unlikely to yield a materially different outcome. Thus, it seems to me that this is the very kind of case the High Court had in mind when it stated in Firebird Global Master Fund II Ltd v Republic of Nauru [No 2][6] that there are “good reasons not to encourage applications regarding costs on an issue-by-issue basis, involving apportionments based on degrees of difficulty of issues, time taken to argue them and the like”.
[6][2015] HCA 53
14 Having considered the submissions of both parties and for the reasons above, I therefore propose to make orders consistently with those tentatively proposed by me in my Reasons, except for the addition of an order dealing expressly with the retention sum and for appropriate certification for senior counsel. As to the latter, I am prepared to certify for senior counsel in respect of appearances as sought by Hope St, but will leave consideration of the appropriateness of the period of attendances for preparation and drafting to the Costs Court.
15 The orders will be as follows:
1. There be judgment for the defendant against the plaintiff in the sum of $53,031.65 (Judgment Sum).
2. The plaintiff pay the defendant interest on the Judgment Sum at the rate prescribed from time to time under s2 of the Penalty Interest Rates Act 1983 (Vic), on and from 9 June 2016.
3. The retention money held by the defendant pursuant to the Major Works Contract between the plaintiff and defendant dated 10 May 2012 in the sum of $91,579.35 be paid to, and retained by, the defendant.
4. The plaintiff pay the defendant’s costs of the proceeding (including reserved costs) to be taxed on the standard basis in default of agreement.
5. Certify for Senior Counsel as follows:
(a) appearance at the final hearing for 10 days at $5,500.00 per day;
(b) preparation and drafting of closing submissions at $5,500.00 per day, for such period as the Costs Court determines;
(c) preparation for the hearing at $5,500.00 per day, for such period as the Costs Court determines;
(d) appearance at the directions hearing on 1 June 2016 for half a day at $4,400.00 per day;
(e) appearance at the mediation on 26 February 2016 for 1 day at $4,400.00 per day;
(f) drafting reply to defence to counterclaim at $4,400 per day, for such period as the Costs Court determines; and
(g) drafting of defence and counterclaim at $4,400.00 per day, for such period as the Costs Court determines.
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Certificate
I certify that these 8 pages are a true copy of the reasons for Ruling of His Honour Judge Woodward delivered on 15 September 2017.
Dated: 15 September 2017
Simon Bobko
Associate to His Honour Judge Woodward
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