Lewtheo Nominees Pty Ltd v MGI Meyrick Webster Pty Ltd
[2003] VSC 434
•26 September 2003
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
No. 6250 of 2003
| LEWTHEO NOMINEES PTY LTD (ACN 005 651 409)AND TASK TECHNOLOGY PTY LTD (ACN 004 572 614) | Plaintiffs |
| v | |
| MGI MEYRICK WEBSTER PTY LTD (ACN 083 156 469) | Defendant |
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JUDGE: | HABERSBERGER J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 26 SEPTEMBER 2003 | |
DATE OF JUDGMENT: | 26 SEPTEMBER 2003 | |
CASE MAY BE CITED AS: | LEWTHEO NOMINEES PTY LTD v MGI MEYRICK WEBSTER PTY LTD | |
MEDIUM NEUTRAL CITATION: | [2003] VSC 434 | |
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Practice and Procedure – Costs – Offer of compromise by defendant accepted by plaintiffs – Amount recovered not exceeding one-half of the County Court jurisdiction – Rule 63.24 of the Supreme Court Rules – Whether Court should otherwise order – No special circumstances.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr D. Farrands | Slater & Gordon |
| For the Defendant | Mr G. Ahern | Foster Hart Lawyers |
HIS HONOUR:
This is an application by the plaintiffs, in effect, for the court to make an order that r.63.24 does not apply. That is, the plaintiffs seek to avoid the costs consequence of accepting an offer of compromise for an amount not exceeding one-half of the County Court jurisdiction.
The statement of claim included claims by each plaintiff for an amount said to be owing by the defendant to each plaintiff, arising out of an agreement, called the separation agreement, which was an agreement entered into by parties to an accounting partnership. The statement of claim sought payment to the first plaintiff of two sums, totalling $128,084 and two sums by the second plaintiff, totalling approximately $200,000. The second plaintiff also sought an order for the delivery up on oath of certain records in the custody or control of the defendant. Those records related to the affairs of the second plaintiff.
The defendant successfully applied to have the matter admitted into the commercial list, and shortly after pleadings had been delivered an offer of compromise was served and accepted by the plaintiffs.
The other interlocutory step that I should mention was that the defendant successfully sought security for costs from the plaintiffs, and it was agreed that security by way of bank guarantee in the sum of $25,000 for each plaintiff be provided.
The amount of the offer of compromise was the sum of $13,000 to the first plaintiff and $42,000 to the second plaintiff. Needless to say, the total of those amounts, and I consider that is the appropriate way to approach this matter, is less than one half of the jurisdiction of the County Court, and the defendant has therefore maintained that r.63.24 applies. The parties accepted that the appropriate test for the Court to otherwise order is that special circumstances had to be shown.
Mr Farrands of counsel, who appeared for the plaintiffs, submitted that there were four different ways in which the court should find that there were special circumstances. I will leave the first of those grounds till the last. The second ground relied on by Mr Farrands was that this was a complex matter such that it was appropriate that it be brought in the Supreme Court rather than the County Court.
Mr Ahern of counsel, who appeared for the defendant, submitted that there was nothing extraordinarily complex about a separation agreement of a partnership under which certain provisions were made, and that there was no reason why this could not have been dealt with in the ordinary way by the County Court. Mr Farrands explained that if the matter had proceeded to trial there would have been a dispute about which was the appropriate financial year for future software income to be taken into account.
No doubt that could possibly be described as a complex accounting issue, but probably there would have been expert evidence called on both sides. Therefore, it seems to me that there is no reason to suggest that a County Court judge could not have dealt with that sort of issue. Basically this was a contractual dispute. I am therefore not persuaded that the complexity of the dispute would warrant the description of special circumstances.
The next matter relied on by Mr Farrands was that the defendant had sought to have this matter admitted into the commercial list, and reference was made to the affidavit of Alan James Foster in support of that application, where he had deposed that this was a matter that would best be dealt with within the commercial list. If I can adopt Mr Ahern's submission in response to this, the plaintiff chooses the court. The plaintiff chose the Supreme Court and it was then open to the defendant to seek to bring that matter within whatever part of the Supreme Court is best adapted to deal with it.
To make application to have the matter heard in the commercial list or managed in the commercial list in no way, in my view, means that there is any acceptance that the Supreme Court is the appropriate court or any waiver of the defendant's rights, should it eventually turn out to be the case, to argue that the amount that the plaintiff eventually receives means that r.63.24 applies.
The other aspect of conduct by the defendant that the plaintiff relied on was that the defendant had sought security for costs. Again it seems to me that, having been brought to the Supreme Court, the defendant was entitled to protect itself by making application for security for costs, and the only basis on which those costs can be assessed in that application, if it is successful, is that they be assessed on the Supreme Court scale.
There is no opportunity in such an application for the defendant to say that the matter should be in the County Court rather than the Supreme Court. The plaintiffs had made their choice and the defendant was entitled to protect itself by obtaining security for costs assessed on the Supreme Court scale.
That then leaves me with the more difficult issue of whether, by virtue of the relationship between the parties and the anticipated claim and counter claim, the plaintiff was left with no alternative but to bring these proceedings in the Supreme Court.
Mr Farrands submitted that the plaintiff's claim of some $328,000 could have been met by a set-off or counter claim by the defendant of some $271,000. He suggested that the difference between those amounts was more or less the figure on which the parties eventually settled. Mr Farrands made the point that, even if the plaintiffs anticipated that there might be some set off or counter-claim so that the net amount might be the amount for which they eventually recovered judgment, they still had to bring the proceeding in the Supreme Court. The only way they could bring that claim in the County Court was to sue for $200,000 and abandon the excess, thus exposing themselves to the risk that the defendant might pay the $200,000 and then sue for its claim of $271,000.
Mr Ahern submitted that one had to look at what had actually happened. The defendant had not sought to plead a set-off or counter-claim. He submitted that the question that arose was, what was the net amount, if any, that was due under the separation agreement to the plaintiffs and that, the offers of compromise having been accepted, there would be no outstanding claim by the defendant under that agreement.
Mr Ahern referred me to some correspondence between the parties, which I think is of great assistance in considering this issue. By a letter dated 18 March 2003, the plaintiffs' solicitors wrote to the defendant, making the claim for amounts said to be owed to their clients, taking into account possible set-offs in favour of the defendant and eventually making a demand for payment of the sum of $67,413.
Notwithstanding that letter, when the proceedings were issued, the claim made by the plaintiffs was, as I have said, for $328,084 and in a letter dated 16 June 2003, from the plaintiffs' solicitors to the defendant's then solicitors, again there was recognition of some set‑off or counter-claim of some $20,000, with the result that the letter asserted that the net position between the parties under the separation agreement was that Mr Lew and the associated entities were owed $306,660.50. In other words, in the letter that accompanied service of the writ, there was recognition of a counter-claim of some $20,000. But it was still being asserted that the sum of over $306,000 was owed by the plaintiffs.
It therefore seems to me that the plaintiffs cannot now seek to say to me, on this application, that they anticipated that perhaps the defendants might counter‑claim or seek to set-off the sum of $271,000, on which basis, it would seem, they have decided to take the offer of compromise.
The rule in question is concerned with the amount recovered, not with the amount initially sought, and as the letter accompanying the writ shows the plaintiffs' position on that date, even taking into account the issues raised by Mr Farrands, was that there was a sum of over $300,000 owed. That is not the final position adopted by the plaintiffs and they have accepted the offers of compromise in the sum of $55,000, which is, as I have said, obviously less than one half of the County Court jurisdiction.
It therefore seems to me that this slightly complicated factual situation does not warrant the description of special circumstances such as to justify the Court making an order that r.63.24 should not apply.
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