Klages (WA) Pty Ltd v Walker (No.2)

[2007] FMCA 2138

FEDERAL MAGISTRATES COURT OF AUSTRALIA

KLAGES (WA) PTY LTD & ORS v WALKER & ANOR (No.2) [2007] FMCA 2138

TRADE PRACTICES – Misleading and deceptive conduct – damages.

COSTS – Indemnity costs.

Federal Court Rules (Cth), o.38, r.5
Federal Magistrates Act 1999 (Cth), s.76(3)(c)
Federal Magistrates Court Rules(2001) (Cth), r.26.01
Trade Practices Act 1974 (Cth), s.52

Bhagat v Global Custodians Limited [2002] FCA 223
Fountain Selective Meats Sales Pty Ltd v International Produce Merchants Pty Ltd & Ors (1988) 81 ALR 397
Genovese v BGC Construction Pty Ltd (No. 2) [2007] FMCA 601
Huck v Robson [2002] 3 All ER 263; [2002] EWCA Civ 398
Klages (WA) Pty Limited & Ors v Walker & Ors [2007] FMCA 2100
Sampson & Anor v McInness [2007] FMCA 1656
Spalla v St George Motor Finance [2006] FCA 1537
Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported, Federal Court, 3 May 1999)

First Applicant: KLAGES (WA) PTY LIMITED

Second Applicant: ADAM KLAGES

Third Applicant: SCHAFER HOLDINGS PTY LTD

Fourth Applicant: CHRISTOPHER JOHN MOODY AS TRUSTEE FOR THE MOODY FAMILY TRUST

First Respondent: DUNCAN ALLISTER WALKER

Second Respondent: SHERINGHAM WA PTY LTD AS TRUSTEE FOR THE WALKER FAMILY TRUST

File number: PEG 260 of 2005

Judgment of: Lucev FM

Hearing date: 20 December 2007

Date of last submission: 20 December 2007

Delivered at: Perth

Delivered on: 20 December 2007

REPRESENTATION

Counsel for the Applicants: Mr D C Robinson

Solicitors for the Applicants: Williams & Hughes

First Respondent: Mr D A Walker in person

Second Respondent: No appearance

ORDERS

1. The respondents pay to the first applicant, by way of damages, pursuant to section 82 of the Trade Practices Act 1974 (Cth), the sum of $53,139.51.

2. The respondents pay to the first applicant, by way of interest on the damages, pursuant to section 76(3) of the Federal Magistrates Act 1999 (Cth), $17,058.27, calculated to 10 December 2007.

3. The respondents pay to the first applicant, by way of interest on the judgment, pursuant to section 77(2) of the Federal Magistrates Act 1999 (Cth), $20.19 per day from 11 December 2007 until payment.

4. The respondents pay the first applicant’s costs, including any reserved costs, to be taxed, if not agreed, by a Registrar of this Court and paid on an indemnity basis up to 10 December 2007 and thereafter on a party-party basis. 

5. The respondents pay to the second applicant, by way of damages, pursuant to section 82 of the Trade Practices Act 1974 (Cth), the sum of $75,000.

6. The respondents pay to the second applicant, by way of interest on the judgment, pursuant to section 77(2) of the Federal Magistrates Act 1999 (Cth), $21.58 per day from 11 December 2007 until payment.

7. The respondents pay the second applicant’s costs, including any reserved costs, to be taxed, if not agreed, by a Registrar of this Court.

8. The respondents pay to the third applicant, by way of damages, pursuant to section 82 of the Trade Practices Act 1974 (Cth), the sum of $10,100.

9. The respondents pay to the third applicant, by way of interest on the damages, pursuant to section 76(3) of the Federal Magistrates Act 1999 (Cth), $3,143.98 calculated to 10 December 2007.

10. The respondents pay to the third applicant, by way of interest on the judgment, pursuant to section 77(2) of the Federal Magistrates Act 1999 (Cth), $3.81 per day from 11 December 2007 until payment.

11. The respondents pay to the third applicant’s costs, including any reserved costs, to be taxed, if not agreed, by a Registrar of this Court, and paid on an indemnity basis up to 10 December 2007 and thereafter on a party-party basis.

12. The respondents pay to the fourth applicant, by way of damages, pursuant to section 82 of the Trade Practices Act 1974 (Cth), the sum of $18,939.

13. The respondents pay to the fourth applicant, by way of interest on the damages, pursuant to section 76(3) of the Federal Magistrates Act 1999 (Cth), $6,251.81 calculated to 10 December 2007.

14. The respondents pay to the fourth applicant, by way of interest on the judgment, pursuant to section 77(2) of the Federal Magistrates Act 1999 (Cth), $7.69 per day from 11 December 2007 until payment.

15. The respondents pay the fourth applicant’s costs, including any reserved costs, to be taxed, if not agreed, by a Registrar of this Court, and paid on an indemnity basis up to 10 December 2007 and thereafter on a party-party basis.

16. The Court declares that the loan agreement, dated 19 May 2003, between the second respondent and fourth applicant is void ab initio.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PERTH

PEG 260 of 2005

KLAGES (WA) PTY LIMITED

First Applicant

ADAM KLAGES

Second Applicant

SCHAFER HOLDINGS PTY LTD

Third Applicant

CHRISTOPHER JOHN MOOD AS TRUSTEE FOR THE MOODY FAMILY TRUST

Fourth Applicant

And

DUNCAN ALLISTER WALKER

First Respondent

SHERINGHAM WA PTY LTS AS TRUSTEE FOR THE WALKER FAMILY TRUST

Second Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

Introduction

1. In reasons for judgment handed down on 10 December 2007[1] this Court found for the applicants on all points in relation to claims under the Trade Practices Act 1974 (Cth).[2]  The Court ordered that both parties use their best endeavours to reach agreement on minutes of proposed orders with respect to damages and costs.[3]  No agreement was reached and therefore the Court must determine final orders, in particular, as to damages and costs.

   [1] Klages (WA) Pty Limited & Ors v Walker & Ors [2007] FMCA 2100 (“Klages (No 1)”).

   [2] “Trade Practices Act”; Klages No 1 at para. 50 per Lucev FM.

   [3] Klages No 1 at para. 51 per Lucev FM.

Damages

1. With respect to damages for the first, third and fourth applicants the Court observed in Klages No 1 that:

   “There does not appear to be any dispute about the quantum of loss suffered by the first, third and fourth applicants, that loss being in accordance with the schedule of damages filed with the Court by the applicants on 22 November 2006.”[4]

   [4] Klages No 1 at para. 44 per Lucev FM.

2. In those circumstances the damages of the first, third and fourth applicants are assessed as follows: 

   a)the first applicant - $53,139.51;

   b)the third applicant - $10,100; and

   c)the fourth applicant - $18,939. 

3. The Court also observes that the quantum of damages is in accordance with the evidence which was simply not challenged as to quantum at hearing. 

4. The second applicant’s damages are to be assessed on the basis of the evidence at hearing upon which the Court found that the second applicant suffered loss of a one half share of the beneficial interest as a tenant in common in an investment property, the total loss on that investment property being $150,000.[5]  The second applicant’s share is therefore $75,000 representing his damages.

   [5] Klages No 1 at para. 46 per Lucev FM.

5. The applicants in their minute of proposed order have calculated interest. The applicants are entitled to interest under r.26.01 of the Federal Magistrates Court Rules 2001 (Cth) and o.38 r.5 of the Federal Court Rules (Cth) and to pre-judgment interest calculated at 10.5% a year. As counsel for the applicants confirmed during submissions this morning interest has been calculated at a lesser rate, and in the present circumstances the Court is content that that lower rate be adopted, it being able to do so by reason of s.76(3)(c) of the Federal Magistrates Act 1999 (Cth).

6. The Court is therefore satisfied that there ought to be orders made as per the applicants’ minute of proposed orders 1 to 3, 5 to 7, 8 to 10 and 12 to 14, save that:

   a)in order 3 the daily sum for interest ought to be amended to read $20.19; 

   b)in order 6 the daily sum for interest ought to be amended to read $21.58;

   c)in order 10 the daily sum for interest ought to be amended to read $3.81; and

   d)in order 14 the daily sum for interest ought to be amended to read $7.69. 

Declaration

1. With respect to the loan agreement of 19 May 2003 it follows from the Court’s Reasons for Judgment in Klages No 1[6] that there ought to be a declaration in terms of the “proposed order” 16 of the minute of proposed orders.

   [6] Klages No 1 at para. 48 per Lucev FM.

Indemnity Costs

1. The Court turns now to the issue of indemnity costs.  For reasons that are set out in Genovese v BGC Construction Pty Ltd No. 2[7] there is no doubt that this Court has power to order indemnity costs.  The nature of the determination required when considering whether to award indemnity costs is also set out in Genovese No. 2.[8]

   [7] [2007] FMCA 601 at paras. 38-46 per Lucev FM (“Genovese No. 2”); applied in Sampson & Anor v McInness [2007] FMCA 1656 at para. 39 per Simpson FM.

   [8] Genovese No. 2 at paras. 47-48 per Lucev FM.

2. In relation to the application of the factors identified in Genovese No. 2 to this case, the first issue, bearing in mind that the respondents “were essentially one”[9]  is whether the respondents should have known that there was no prospect of success in the case.[10]

   [9] Klages No 1 at para. 40 per Lucev FM (see also para. 36).

   [10] Fountain Selective Meats Sales Pty Ltd v International Produce Merchants Pty Ltd & Ors (1988) 81 ALR 397 at 401; Tetijo Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported, Federal Court, 3 May 1999) at 8 per French J.

3. This is not a case of should have known, this is a case of did know.  The first respondent emailed a colleague on 7 March 2004 in which email he acknowledged that unless he could prove the representations that had been made by the respondents to be true, “I do not seem to have much of a case”.[11]

   [11] Klages No.1 at para. 15 per Lucev FM; Affidavit of Dominique Pascal Herman Engelter, sworn 19 December 2007, Annexure DPHE 12 (“Mr Engelter’s Affidavit”).

4. The first respondent asserts again today, as he did at the original hearing, that that was an email sent on behalf of the second respondent.  For the reasons set out in the original judgment[12] the Court concludes that it was an email sent on behalf of the respondents, including the first respondent, and the Court notes in particular that it is a personal email and that the email is in the first person singular.  Notwithstanding that email the respondents pressed on to full hearing two years and nine months later, not accepting nor making any monetary offer of settlement.  Pressing on in those circumstances caused to be incurred all of the expense of:

   a)further negotiations between the parties;

   b)hearing preparation for the applicants; and

   c)the hearing itself, which went over three days. 

   [12] Klages No.1 at paras. 36 and 40 per Lucev FM.

5. That does provide a basis on which the Court might exercise the discretion to award indemnity costs.

6. It can also be said that the respondents exacerbated the situation by:

   a)failing to call those upon whom the first respondent said that he relied for information and making representations, and the Court notes that they were not subpoenaed when they could have been; and

   b)the failure of the second respondent to defend or appear and to allow the case to run onto hearing without defending or appearing at all.

7. The next factor for consideration is whether the first respondent, as, latterly, a self‑represented litigant, ought escape the consequences of indemnity costs.  The short answer to that is no.  That is because the first respondent was represented by solicitors until 23 October 2006 and only became self‑represented with effect from that date, less than two months before the hearing.  Although the first respondent did refuse an offer of settlement after that date,[13] it is fair to say that by that time the die was cast, and the matter had indeed been set down for hearing.[14] 

   [13] Mr Engelter’s Affidavit, Annexure DPHE19.

   [14] See order 13 of the orders made by the Court on 25 September 2006. 

8. In any event the fact that a person is a self‑represented litigant is not of itself sufficient to escape indemnity cost orders in an appropriate case.[15] 

   [15] Genovese No. 2; Bhagat v Global Custodians Limited [2002] FCA 223 at para. 57; Spalla v St George Motor Finance [2006] FCA 1537 at para. 21 per Kenny J.

9. The final factor that is relevant to these proceedings is whether the respondents imprudently refused an offer of compromise.  In that regard it is relevant to note that the judgment sums for the first, third and fourth applicant, as sought in the minute of proposed order, total $83,732.34 and now also seek pre‑judgment interest of $26,454.06, totalling $110,186.40, which sum does not, of course, include post‑judgment interest.

10. It is relevant to note that over time various solicitors acting for the first, third and fourth applicants made various offers to settle.  So, for example, offers to settle were made:

    a)combining the 12 February and 15 April 2004 offers, for a sum of $83,689.39 exclusive of GST; and

    b)on 26 July 2004 for a sum of $59,117.00 exclusive of GST.[16]  

    [16] Mr Engelter’s  Affidavit at para. 13. 

11. It is further relevant to note that:

    a)on 21 March 2006 an offer was made by the applicants to settle the proceedings for $110,000, inclusive of costs; and

    b)that as late as 24 August 2006 an offer by the applicants to settle for $80,000, inclusive of interest and costs, was made.[17]

    [17] Mr Engelter’s Affidavit at paras.  19 & 20. 

12. All the offers were rejected or not responded to. 

13. Given that as early as 7 March 2004, the respondents considered, they did “not seem to have much of a case”[18] it is manifest that the rejection and failure to respond was ill‑advised or imprudent.  It is highlighted by the fact that in July 2004, more than four months after the concession that there was not much of a case,  the matter could have been settled for approximately half of the sum now awarded to the first, third and fourth applicants.  And, that as late as August 2006, it could have still have been settled for $80,000 inclusive of interest and costs. 

    [18] Mr Engelter’s Affidavit at para. 2.

14. The first respondent says today that he had no intent to deceive. Intention is not an element of a section 52 misleading and deceptive conduct claim under the Trade Practices Act.  It might be relative to a question of indemnity costs.  It might have been relevant in this case but for the fact that on 2 August 2003 the solicitors then acting for the third applicant advised the second respondent, in a letter addressed to the attention of the first respondent, that the intention behind the conduct is irrelevant.[19] The Court also notes that pre‑hearing the applicants quite properly, through their solicitors, indicated to the respondents that they would seek indemnity costs in the event that they were successful and put the respondents on notice.[20]

    [19] Mr  Engelter’s Affidavit Annexure DPHE7.

    [20] Huck v Robson [2002] 3 All ER 263 at 274 per Jonathan Parker LJ; [2002] EWCA Civ 398 at para. 56 per Jonathan Parker LJ.

15. For those reasons the Court considers that the first, third and fourth applicants are entitled to indemnity costs up to the date of judgment on 10 December 2007 and the Court will order that proposed orders 4, 11 and 15 of the minute of proposed orders be amended to reflect an entitlement to indemnity costs to date of judgment on 10 December 2007.  The question of indemnity costs for the second applicant was, in the Court’s view, quite not properly pressed at the hearing today.  In those circumstances proposed order 7 of the minute of proposed orders will be amended to exclude reference to indemnity costs. 

16. With respect to the costs of today the applicants largely having succeeded with respect to the arguments on damages and costs today, the respondents should pay the first, second, third and fourth applicants’ costs of today.  Orders 4, 11 and 15 of the minutes of proposed order will be amended to provide that after 10 December 2007, costs will be on a party-party basis.  Order 7 of the minutes of proposed orders does not require further amendment. 

17. In those circumstances the Court makes orders as follows:

    (1)The respondents pay to the first applicant, by way of damages, pursuant to section 82 of the Trade Practices Act 1974(Cth) the sum of $53,139.51. 

    (2)The respondents pay to the first applicant, by way of interest on the damages, pursuant to section 76(3) of the Federal Magistrates Act 1999 (Cth), $17,058.27, calculated to 10 December 2007.

    (3)The respondents pay to the first applicant, by way of interest on the judgment, pursuant to section 77(2) of the Federal Magistrates Act 1999 (Cth), $20.19 per day from 11 December 2007 until payment.

    (4)The respondents pay the first applicant’s costs, including any reserve costs, to be taxed, if not agreed, by a Registrar of this Court and paid on an indemnity basis up to 10 December 2007 and thereafter on a party-party basis. 

    (5)The respondents pay to the second applicant, by way of damages, pursuant to section 82 of the Trade Practices Act 1974(Cth), the sum of $75,000.

    (6)The respondents pay to the second applicant, by way of interest on the judgment, pursuant to section 77(2) of the Federal Magistrates Act 1999 (Cth), $21.58 per day from 11 December 2007 until payment.

    (7)The respondents pay the second applicant’s costs, including any reserve costs, to be taxed, if not agreed, by a Registrar of this Court.

    (8)The respondents pay to the third applicant, by way of damages, pursuant to section 82 of the Trade Practices Act 1974(Cth), the sum of $10,100.

    (9)The respondents pay to the third applicant, by way of interest on the damages, pursuant to section 76(3) of the Federal Magistrates Act 1999 (Cth), $3,143.98 calculated 10 December 2007.

    (10)The respondents pay to the third applicant, by way of interest on the judgment, pursuant to section 77(2) of the Federal Magistrates Act 1999 (Cth), $3.81 per day from 11 December 2007 until payment.

    (11)The respondents pay to the third applicant’s costs, including any reserved costs, to be taxed, if not agreed by a Registrar of this Court, and paid on an indemnity basis up to 10 December 2007 and thereafter on a party-party basis.

    (12)The respondents pay to the fourth applicant, by way of damages, pursuant to section 82 of the Trade Practices Act 1974(Cth) the sum of $18,939.

    (13)The respondents pay to the fourth applicant, by way of interest on the damages, pursuant to section 76(2) of the Federal Magistrates Act 1999 (Cth), $6,251.81 calculated to 10 December 2007.

    (14)The respondents pay to the fourth applicant, by way of interest on the judgment, pursuant to section 77(2) of the Federal Magistrates Act 1999 (Cth), $7.69 per day from 11 December 2007 until payment.

    (15)The respondents pay the fourth applicant’s costs, including any reserve costs, to be taxed, if not agreed by a Registrar of this Court, and paid on an indemnity basis up to 10 December 2007 and thereafter on a party-party basis.

    (16)The Court declares that the loan agreement, dated 19 May 2003, between the second respondent and fourth applicant is declared void ab initio.

I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Lucev FM

Associate:  M Hewitt

Date:    20 December 2007