JustCo (Australia Onshore) Pty Ltd v CPB Contractors Pty Limited (No 2)
[2022] VCC 136
•18 February 2022
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-20-02184
| JustCo (Australia Onshore) Pty Ltd (ACN 629 427 774) | Plaintiff |
| v | |
| CPB Contractors Pty Limited (ACN 000 893 667) | Defendant |
---
JUDGE: | Her Honour Judge Brimer | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers (plaintiff’s submissions dated 9 December 2021, defendant’s submissions dated 14 December 2021, plaintiff’s reply submissions dated 16 December 2021) | |
DATE OF RULING: | 18 February 2022 | |
CASE MAY BE CITED AS: | JustCo (Australia Onshore) Pty Ltd v CPB Contractors Pty Limited (No 2) | |
MEDIUM NEUTRAL CITATION: | [2022] VCC 136 | |
RULING
---
Subject:CONTRACTUAL INTEREST AND LEGAL COSTS
Catchwords: Membership agreement – licence agreement – co-working office space provider – consortium tendering for government project – contractual interpretation – interest on outstanding fees pursuant to agreement – whether two sets of contractual rights can operate simultaneously – ambiguity with respect to applicable interest rate – legal costs – default position of costs on a standard basis – no Calderbank or offer of compromise relied upon – contractual right to indemnity costs – whether clause evinces plainly and unambiguously expressed intention – reference to “all costs and expenses incurred” and “including all legal costs of a solicitor”
Legislation Cited: County Court Act 1958 (Vic) s 50; National Credit Code s 32A; Penalty Interest Rates Act 1983 (Vic) s 2; Supreme Court Act 1986 (Vic) s 60(1)
Cases Cited:Bank of Baroda v Panessar [1987] Ch 335; Bendigo and Adelaide Bank Limited v Grahame (No 2) (Costs Ruling) [2020] VSC 223; Chen and Xu v Kevin McNamara & Son Pty Ltd [2012] VSCA 229; Heaps v Addison Wesley Longman Australia Pty Ltd [2000] NSWSC 542; JustCo (Australia Onshore) Pty Ltd v CPB Contractors Pty Limited [2021] VCC 1870; Kyabram Property Investments Pty Ltd v Murray [2005] NSWCA 87; Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 3) [2010] NSWSC 1139; Manassen Holdings Pty Ltd v Commercial & General Corporations Pty Ltd (No 2) [2019] SASC 183; Perpetual Trustees Australia Ltd v Schmidt (No 3) [2010] VSC 261; Platinum United II Pty Ltd v Secured Mortgage Management Ltd (in liq) [2011] QCA 229; Raffoul v Fresh 2 U Pty Ltd [2013] VSC 374; Reading Entertainment Australia Pty Ltd v Burstone Victoria Pty Ltd (No 2) [2005] VSC 137; Russo v Buck and Ors (No 2) [2007] SASC 157; Shepparton Projects Pty Ltd v Cave Investments Pty Ltd (No 2) [2011] VSC 384; Taree Pty Ltd v Bob Jane Corp Pty Ltd [2008] VSC 228; Whild v GE Mortgage Solutions Ltd (No 2) [2012] VSC 322
Ruling: Contractual interest at a rate of 2% per month and costs on the standard basis
---
APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S Freire | Chris Goddard Solicitors |
| For the Defendant | Dr K Weston-Scheuber | Corrs Chambers Westgarth |
HER HONOUR:
Introduction
1In JustCo (Australia Onshore) Pty Ltd v CPB Contractors Pty Limited [2021] VCC 1870, I found for JustCo in the sum of $963.03562, together with interest on that sum.
2I invited the parties to prepare draft orders to give effect to my reasons, including a proposed order that CPB pay JustCo’s costs of the proceeding (including reserved costs) on the standard basis, subject to any matters the parties bring to my attention on the question of costs.
3The parties are agreed as to the appropriate form of orders, save for the rate at which interest accrues from 15 May 2020[1] and the basis of the costs order.
[1] The date of the commencement of the proceeding.
4Having regard to the parties’ written submissions and the authorities referred to in those submissions, it is my view that JustCo is entitled to interest at a rate of 2% per month on outstanding Fees pursuant to the Membership Agreement dated 3 October 2019 (the Agreement), from 15 May 2020 until the judgment sum is paid. Costs ought to be assessed on the standard basis.
Interest
Issue
5Clause 6(e)(ii) of the Agreement provides:
“(Late Payment) If any Fees remain unpaid for more than ten (10) days beyond their due date, provided [JustCo] has notified the Member in writing of this default and allowed [CPB] a further two (2) days to pay, [JustCo] may (without limiting its rights or remedies)…
charge interest at an interest at the Interest Rate on those outstanding Fees from the date the invoice became overdue.” (sic)
6Clause 1 states:
“”Interest Rate” means interest at the lesser of 2% per month or the maximum interest rate permitted by applicable law.”
JustCo’s submissions
7JustCo submits that it has a right to contractual interest on outstanding Fees from the date of the commencement of the proceedings.
8The conditions for triggering JustCo’s entitlement to contractual interest are satisfied.[2] JustCo specially pleaded its entitlement to contractual interest.[3]
[2] See JustCo’s Submission on Interest and Costs dated 9 December 2021, [10].
[3] See Statement of Claim dated 15 May 2020, paragraph 12 and paragraph B of the prayer for relief.
9The concept of “the maximum interest rate permitted by applicable law” is not defined, and the context in which the phrase appears affords limited assistance as to identification. As such, there is no applicable law which sets a maximum interest rate and the default interest rate of 2% per month applies.
10In the alternative, JustCo submits that “the maximum interest rate permitted by applicable law” is 48% per annum pursuant to section 32A of the National Credit Code. In such case, 2% per month is the lesser of the two interest rates.
11Furthermore, an award of contractual interest post-15 May 2020 would be coherent with the Court's acceptance of JustCo's claim for interest accrued on outstanding Fees for March and April 2020, calculated at the rate of 2% per month from the date that the relevant invoice became overdue.
CPB’s submissions
12CPB’s primary submission is that clause 6(e) is not expressed to apply in relation to Fees claimed by way of damages following termination by JustCo pursuant to clause 12(a). Instead, JustCo’s entitlements are set out exhaustively in clause 13(c) of the Agreement, which states:
“In the event the Agreement is terminated pursuant to clause 13(a), the Member will be liable to pay the Company:
(i)the Fees for the remainder of the Service Term, or any Further Term, in full within fourteen (14) days from the date of the Company's written notice;
(ii)in the event the Allocated Office Space has been customized at the request of the Member, all costs for restoration of the Allocated Office Space to the state prior to such customization; and
(iii) any loss and damages in accordance with this Agreement.”
13Clause 13(a) directs the parties to clause 12(a):
“If this agreement is terminated under clause 12(a)…”
14And clause 12(a) provides:
“[JustCo] may immediately terminate this Agreement by written notice and apply the Security Deposit where:
(i)the Fees and/or any other charges payable by [CPB] under this Agreement is in arrears and remains unpaid…”
15Interest[4] is not referred to in clause 13(c). Furthermore, interest is not defined as “loss and damages”[5] elsewhere in the Agreement. As such, interest can only be claimed at a time prior to termination when the requirements of clause 6 are otherwise satisfied.
[4] And legal costs.
[5] Referenced in clause 13(c)(iii) of the Agreement.
16CPB’s alternative submission is that “the maximum interest rate permitted by applicable law” is 10% per annum, which is less than 2% per month.
17By virtue of section 50 of the County Court Act 1958 (Vic), section 60(1) of the Supreme Court Act 1986 (Vic) applies to the present circumstances and provides:
“The Court, on application in any proceeding for the recovery of debt or damages, must, unless good cause is shown to the contrary, give damages in the nature of interest at such rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 as it thinks fit from the commencement of the proceeding to the date of the judgment over and above the debt or damages awarded.”
18The current interest rate fixed under section 2 of the Penalty Interest Rates Act 1983 (Vic) is 10% per annum.
JustCo’s reply submissions
19JustCo disputes CPB’s contention that where JustCo exercises its right to terminate the Agreement pursuant to clause 12(a) (as it did in this case), JustCo's entitlements are confined to the relief set out in clause 13(c). This contention ignores the express words of clause 6 — JustCo may claim interest on late payment of Fees “without limiting its rights or remedies”.
20On a proper construction of the Agreement, JustCo’s rights under clause 6 and clause 13(c) are not mutually exclusive or incapable of operating simultaneously and harmoniously. JustCo is not required to elect between the two sets of contractual rights.
21Furthermore, it would be uncommercial and absurd for the parties to have agreed to a regime under which the defaulting Member might be better off if JustCo were to exercise the right to terminate for late payment.
Conclusion and analysis
22I find that JustCo is entitled to interest on outstanding Fees under clause 6(e)(ii) of the Agreement from 15 May 2020 until the judgment debt is paid.
23In my opinion, clause 6(e)(ii) (which enlivens JustCo’s rights in the event of late payment of Fees) and clause 13(c) (which addresses the consequences that flow from JustCo exercising its right to terminate) co-exist. Looking at the wording of the Agreement and construing it as a whole, there is nothing to support CPB’s primary submission that because JustCo terminated the Agreement pursuant to clause 12(a), its entitlements are set out exhaustively in clause 13(c).[6] I agree with JustCo’s submission that such an outcome would be commercially unsound.
[6] This finding also applies with respect to legal costs.
24Turning to CPB’s alternative submission, I reject the contention that “the maximum interest rate permitted by applicable law” in clause 1 is a reference to an interest rate of 10% per annum under section 2 of the Penalty Interest Rates Act 1983 (Vic). If the clause were construed in the manner contented for by CPB, the express rate would likely never have work to do. The Penalty Interest Rate would invariably be lower than 2% per month or 24% per annum. As such, I accept JustCo’s submission that in the circumstances, where the “maximum interest rate permitted by applicable law” is not defined, the default interest rate of 2% per month applies.
Legal costs
Issue
25Clause 6(e)(v) of the Agreement provides:
“(Late Payment) If any Fees remain unpaid for more than ten (10) days beyond their due date, provided [JustCo] has notified the Member in writing of this default and allowed [CPB] a further two (2) days to pay, [JustCo] may (without limiting its rights or remedies)…
take action to recover those outstanding Fees or other amounts owing to [JustCo] (including any interest), and all costs and expenses incurred in recovering them including all legal costs of a solicitor.”
JustCo’s submissions
26JustCo submits that on a proper construction of clause 6(e)(v), the contractual position between the parties is that CPB is to pay JustCo's costs of the proceeding on an indemnity basis. There is no disentitling conduct on JustCo’s part which should deprive it of its contractual right to indemnity.
27The conditions for triggering JustCo’s entitlement to recover costs and expenses pursuant to clause 6(e)(v), including legal costs, are satisfied.[7] JustCo specifically pleaded its entitlement to costs.[8]
[7] See JustCo’s Submission on Interest and Costs dated 9 December 2021, [16].
[8] See Statement of Claim dated 15 May 2020, paragraph 18 and paragraph D of the prayer for relief.
28JustCo relies on two cases:
(a) The relevant clause in Bank of Baroda v Panessar[9] referred to “all costs” as does clause 6(e)(v). Walton J said:
“… it seems to me that it is not possible for a person in the position of the bank to exclude the discretion of the court, but one nevertheless starts from the position that the contractual position between the parties is that the costs will be paid on an indemnity basis. I cannot think that the words "all costs" mean anything other than that. So one starts from the position that that is the contractual position but not, as I venture to think, binding on the court.”[10]
(b) The relevant clause in Manassen Holdings Pty Ltd v Commercial & General Corporations Pty Ltd (No 2)[11] used the words “incurred”[12] and “all” legal costs as does clause 6(e)(v).[13] The defendant was held to be contractually required to pay indemnity costs.
[9] [1987] Ch 335.
[10] At 355 (emphasis added).
[11] [2019] SASC 183.
[12] At 87]. Doyle J noted the word “incurred’ was “more consistent with the amount in fact expended rather
than an amount determined by reference to a court-imposed scale”.
[13] At [87]. Doyle J noted the reference to “all” legal costs was “not expressly confined in any way”.
CPB’s submissions
29I rejected CPB’s primary submission that clause 13(c), rather than clause 6(e), sets out JustCo’s entitlements in the event of termination. I will summarise CPB’s alternative submission.
30CPB submits that it is not plain and unambiguous from the terms of clause 6(e)(v) that costs are to be paid on a “special basis”. Clause 6(e)(v) does not evince a clear intention of the parties for indemnity costs to be awarded in the event of litigation. As such, the present circumstances do not give rise to sufficient justification to displace the general principle on costs.
31CPB submits that for a party to be entitled to costs on other than the standard basis, the following kind of language in the relevant clause is required:
(a) “on a full indemnity basis”;[14]
(b) “all legal fees on an indemnity basis”;[15]
(c) “legal fees, costs and expenses… on an indemnity basis”;[16]
(d) “shall indemnify and keep indemnified [the relevant entity] against any … cost or expense (including legal costs on a solicitor and own client basis)”;[17]
(e) “indemnified against all loss, damage, costs and expenses suffered… (including, without limitation, any legal costs and disbursements on a solicitor and own client basis)”;[18]
(f) “on a solicitors and own client basis”;[19]
(g) “‘costs’ shall include solicitor and own client’s costs as well as party and party costs”;[20] and
(h) “all reasonable legal and other costs, charges and expenses (including all legal and other costs charges and expenses as between solicitor and own client)”.[21]
[14] Bendigo and Adelaide Bank Ltd v Grahame (No 2) (Costs Ruling) [2020] VSC 223, [26], Raffoul v Fresh
2 U Pty Ltd [2013] VSC 374, [2] and Reading Entertainment Australia Pty Ltd v Burstone Victoria Pty Ltd (No 2) [2005] VSC 137, [20].
[15] Platinum United II Pty Ltd v Secured Mortgage Management Ltd (in liq) [2011] QCA 229, [6].
[16] Taree Pty Ltd v Bob Jane Corp Pty Ltd [2008] VSC 228, [33] (clause 13.7). The court
exercised its discretion to award costs on a party/party basis on the basis of the conflict between the bases for costs expressed in two provisions: at [37], [59].
[17] Russo v Buck and Ors (No 2) [2007] SASC 157, [18].
[18] Taree Pty Ltd v Bob Jane Corp Pty Ltd [2008] VSC 228, [34] (clause 19.1(b)(ii)). See note above.
[19] Macquarie International Health Clinic Pty Ltd v Sydney South West Area Health Service (No 3) [2010]
NSWSC 1139, [11].
[20] Kyabram Property Investments Pty Ltd v Murray [2005] NSWCA 87, [9]. The court exercised its
discretion for other reasons to award costs on a party/party basis: at [17].
[21] Reading Entertainment Australia Pty Ltd v Burstone Victoria Pty Ltd (No 2) [2005] VSC 137, [20].
32CPB referred to two further cases:
(a) In Chen and Xu v Kevin McNamara & Son Pty Ltd (Chen),[22] the Court of Appeal did not award indemnity costs pursuant to a clause which entitled the builder to “any costs and fees” that it incurred in enforcing or further securing its rights.[23]
(b) In Heaps v Addison Wesley Longman Australia Pty Ltd,[24] Master Macready held that a clause referring to “all legal and other costs charges and expenses” did not change the normal party and party basis for awarding costs.[25]
[22] [2012] VSCA 229.
[23] At [3]. The Court of Appeal stated at [20]: “The clause does not specify that the Owner shall ‘indemnify’
the Builder. It does not refer to ‘indemnity costs’, ‘solicitor/client costs’ or ‘special costs’. It contains no
language which might signify that the costs contemplated were solicitor/client or indemnity costs.”
[24] [2000] NSWSC 542.
[25] At [4].
Legal principles
33The legal principles governing whether the court will, in the exercise of its discretion as to costs, give effect to an express contractual provision were set out by Sloss J in Bendigo and Adelaide Bank Limited v Grahame (No 2) (Costs Ruling).[26] Put shortly, the issue of whether to award costs to a party on other than the usual standard basis is a matter within the discretion of the Court.[27] However, the terms of any agreement as to costs will inform the Court's discretion as to the basis of taxation of costs.[28]
[26] [2020] VSC 223.
[27] At [9]–[18].
[28] Perpetual Trustees Australia Ltd v Schmidt (No 3) [2010] VSC 261, [38]–[41]; see also Whild v GE
Mortgage Solutions Ltd (No 2) [2012] VSC 322, [5] and Shepparton Projects Pty Ltd v Cave Investments Pty Ltd (No 2) [2011] VSC 384, [25].
34The Court will ordinarily exercise its discretion to order that the costs of any litigation be paid other than on the standard basis, namely the indemnity basis, if the contract evinces a “plainly and unambiguously expressed” intention on the part of the parties to that effect.[29]
[29] Kyabram Property Investments Pty Ltd v Murray [2005] NSWCA 87, [12]–[14]; Reading Entertainment
Australia Pty Ltd v Burstone Victoria Pty Ltd (No 2) [2005] VSC 137, [23], [25]; Taree Pty Ltd v Bob Jane Corp Pty Ltd [2008] VSC 228, [43]–[44].
35As Justice Redlich stated in Chen:
“An agreement to pay costs will be construed as an agreement to pay costs on a party and party basis, unless it is plain from its terms that costs are to be paid on a "special basis." Where the terms plainly and unambiguously provide for costs to be assessed on some special basis, the court will take such a provision into account but it is not bound to give effect to any extracurial contract as to costs. An agreement to pay costs on a "special" basis is only a factor informing the exercise of the court's discretion, but not requiring the exercise of that discretion in a particular way. Generally however, where the parties have unmistakeably agreed to the making of a special costs order, such a term will be given effect to unless there is some other discretionary consideration that militates against the making of such an order.”[30]
[30] Chen and Xu v Kevin McNamara & Son Pty Ltd [2012] VSCA 229, [8].
Conclusion and analysis
36While JustCo’s argument has force, I am not satisfied that the words of clause 6(e)(v) evince a “plainly and unambiguously expressed” intention on the part of the parties for costs of any litigation to be paid other than on the standard basis. Accordingly, I exercise my discretion to award costs on the standard basis.
Orders
37For the reasons set out above, I make the following orders:
(a) There be judgment for the plaintiff against the defendant in the amount of $963,035.62, together with interest pursuant to clause 6(e)(ii) of the Membership Agreement totalling $354,045.03 for the period 15 May 2020 to 25 November 2021 and accruing therefrom until the judgment sum is paid.
(b) The counterclaim is dismissed.
(c) The defendant pay the plaintiff’s costs to be assessed by the Victorian Costs Court on the County Court scale on the standard basis in default of agreement.
- - -
Certificate
I certify that these 37 paragraphs are a true copy of the ruling of Her Honour Judge Brimer delivered on 18 February 2022.
Dated: 18 February 2022
Taylah Stretton
Associate to Her Honour Judge Brimer
0
15
0