Mayart Pty Ltd v Knight

[2019] VCC 1543

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
 Suitable for Publication

GENERAL LIST

Case No. CI-18-04868

Mayart Pty Ltd & Ors	Plaintiffs
v
Philippa Christine Knight & Ors	Defendants

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JUDGE:	Judge Woodward
WHERE HELD:	Melbourne
DATE OF HEARING:	On the papers
DATE OF RULING:	30 September 2019
CASE MAY BE CITED AS:	Mayart Pty Ltd v Knight
MEDIUM NEUTRAL CITATION:	[2019] VCC 1543

REASONS FOR RULING
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Subject:  COSTS

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Dr M Wolff	Noble Lawyers
For the First Defendant	No appearance
For the Second Defendant	Mr M Black	Willerby’s Solicitors
For the Third Defendant	No appearance

HIS HONOUR:

1       By a ruling dated 30 August 2019, I gave summary judgment for the second defendant in this proceeding (“my earlier ruling”).  This ruling should be read in conjunction with my earlier ruling.  In particular, terms used in this ruling have the meanings given in my earlier ruling.  In foreshadowing the orders I proposed to make, I stated in my earlier ruling that, subject to any matters either party wishes to raise on the question of costs, I would order that the plaintiffs pay RVA’s costs of and incidental to the proceeding, to be taxed on the standard basis in default of agreement.  Both parties have each since filed a further affidavit and written submissions on the question of costs.

2       In its submissions, RVA relies on a letter dated 4 March 2019 by which it offered to settle the proceeding on, essentially, a “walk away and bear own costs” basis (“the Offer”).  It notes that the affidavit of Mr Coppard sworn on 4 September 2019 in support of its submissions shows that RVA had incurred legal costs of “well in excess of $10,000”.  It further notes that the Offer “set out many of the factual problems with the case pleaded by the Plaintiffs” and foreshadowed an application for indemnity costs, relying on the principles in Calderbank v Calderbank [1975] All ER 333. RVA submits that the plaintiffs’ rejection of the Offer was unreasonable and summarises the principles to be applied when determining this question, including as set out by the Court of Appeal in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 at [25].

3       In their submissions, the plaintiffs repeat the relevant passage from Hazeldene and also observe that Chint Australasia Pty Ltd v Cosmoluce Pty Ltd [2008] NSWSC 768 is authority for the well-established proposition that if a party does not have the necessary evidence to assess a Calderbank offer, it would be reasonable for that party to wait until it had seen such evidence before agreeing to compromise the case.  In submitting that it was not unreasonable for the plaintiffs not to accept the offer, the plaintiffs rely (in substance) on the following matters:

·    the 14 days allowed for the plaintiffs to consider the Offer was unreasonable in light of the fact that the matter was at such an early stage;

·    the Offer was not a true compromise – it in effect required the plaintiffs to capitulate without having the opportunity to have their claims examined before a judicial authority;

·    at the time of the Offer, discovery was still pending and the plaintiffs did not otherwise have sufficient evidence at the time of the Offer to enable them to assess the offer;

·    in particular, Mr Knight is opposed to the plaintiffs in the proceeding and his affidavit sworn on 20 June 2019 provided to the plaintiffs for the first time the details of Mr Knight’s communications with Mr Sheppard of RVA leading up to 20 August 2014;

·    Mr Daley deposed that, until receipt of Mr Knight’s affidavit, “I had relied on his representations in August 2014 that he had acted with the consent of Rex Sheppard, but only on receipt of his affidavit and Mr Sheppard’s affidavit did I obtain all the information I now possess”;

·    the Offer is silent on those most important matters whereas it could have simply stated that “such allegations are untrue and we will provide affidavit evidence to that effect”; and

·    in the circumstances, and in the absence of any relevant material from the other defendants, the plaintiffs could not reasonably complete an assessment of their prospects of success by 18 March 2019.

4       After some initial hesitation, particularly in relation to the timing of the receipt of the affidavit of Mr Knight, I have determined that none of these matters (either individually or in combination) are sufficient to justify the plaintiffs’ rejection of the Offer.  Put another way, taking into account all relevant considerations, I am satisfied that the plaintiffs’ rejection of the Offer was unreasonable.  My reasons for rejecting the plaintiffs’ submission (in no particular order) are as set out below.

5       It is true that the Offer was made at an early stage in the proceeding.  However, as RVA has submitted, the plaintiffs had fully pleaded their claims and RVA had filed its defence.  The plaintiffs had also provided further and better particulars of its claim in response to RVA’s request.  The Offer was made as a precursor to a threatened application for summary judgment, and was thus necessarily (and appropriately) sent soon after pleadings had closed.  This is also, in my view, a sufficient justification for not giving the plaintiffs longer than the typical 14 days to accept the offer.  Further, as my earlier reasons explain, the key issues in the proceeding as between the plaintiffs and RVA turned on an informal conversation in August 2014, so it was unlikely that discovery would contribute materially to a better understanding of the strength of the claim.

6       As to Mr Daley having sufficient evidence to consider the offer, including the affidavit of Mr Knight, this overlooks the following finding in my earlier reasons:

“And it is equally nonsensical for Mr Daley, as someone (on his own evidence) steeped in the world of real-estate developments and securities, to proceed on the basis of no more than a verbal assurance of Mr Knight about RVA’s willingness to do so.  Clearly Mr Knight had a strong personal vested interest in securing funds from Mr Daley to repay his wife’s debt.  In contrast, there was no evidence that Direct One and RVA had any sound commercial reason to compromise their securities to the extent alleged (or at all).  Nor was there any evidence that could begin to explain how someone of Mr Daley’s experience could have genuinely believed that Mr Knight (the husband and guarantor of the borrower), had authority to bind Direct One and RVA to this arrangement.  If in the circumstances described, someone with Mr Daley’s experience was in truth concerned to ensure that both Direct One and RVA were amenable to what Mr Knight was proposing, it is inconceivable that he would not have insisted on speaking to each of them directly, and probably also securing written confirmation.  The suggestion that he would have gone ahead on Mr Knight’s verbal assurance alone defies credulity.”

7       It is also relevant to note that at the time of the Offer, the plaintiffs’ particulars of the crucial August 2014 conversation were to the effect that it was a three party telephone conversation between Mr Sheppard, Mr Knight and Mr Daley, during which Mr Sheppard is alleged to have given RVA’s consent (in words spoken directly to Mr Daley) to Ms Knight selling the apartments to Mr Daley.  As noted in my earlier reasons, the plaintiffs later resiled from this version, relying instead on words allegedly spoken by Mr Sheppard to Mr Knight that were then relayed by Mr Knight to Mr Daley.  However, as at the date of the Offer, Mr Daley did not need any evidence from Mr Knight or Mr Sheppard to know that the version of the conversation being propounded at that time would not withstand scrutiny.

8       Further, and in any event, there is an important passage in the Offer that (if they did not know already) should have alerted the plaintiffs to the grave risk they faced in relying on Mr Knight for a crucial aspect of their case against RVA, and the need to urgently clarify what his evidence was about the August 2014 conversation.  That passage is as follows:

“It appears that you and/or your client have relied upon purported information provided to you by Michael [Knight].  We note that Michael Knight has been found guilty of offences as a fraudster and we suggest that you should set a very high level of testing against anything he says.  Attached is a newspaper article about Michael’s fraud offences”

I accept that the plaintiffs are opposed to Mr Knight in the proceeding.  However, I consider that it is open to me to infer from the fact that they were able to secure an affidavit from him in opposition to RVA’s application for summary judgment, that he has been willing to provide assistance when asked for it.  I so infer.

9       The passage from the Offer above is also a good illustration of the level of detail and analysis provided in the Offer.  In this regard, I reject the plaintiffs’ submission that the Offer is silent on those most important matters.  Indeed, the careful articulation in the Offer of the many flaws in the plaintiffs’ claims against RVA is unusually comprehensive and accurate (even prescient), given the early stage of the proceeding at which the Offer was sent.

10      Turning finally to the submission that the Offer was not a genuine compromise, the evidence on behalf of RVA (which I accept) was that the costs incurred by it at the time of the Offer were considerably in excess of $10,000.  And it should have been evident to the plaintiffs from the detail in RVA’s defence (including the involvement, in drafting the defence, of a counsel of some 19 years standing) and its request for particulars, that not inconsiderable costs had already been incurred by RVA at the time of the Offer.  In my view, the Offer did provide the plaintiffs with a reasonable opportunity to critically examine their poor prospects in the proceeding at an early stage and cut their losses.

11      In its submissions RVA refers to the discussion by Redlich J in Aljade and Malaysian Kuwaiti Investment Co SDN BHD v Oversea-Chinese Banking Corp Ltd [[2004] VSC 351, where his Honour said (at [30]):

“Costs may be ordered whenever it appears that an action has been commenced in circumstances where the applicant properly advised should have known it had no chance of success. Nettle JA, in Murdaca v Maisano delivering the principal judgment referred to the passage from the much cited authority of Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchant Ltd in these terms:

As Woodward J put it, it is appropriate to consider awarding solicitor/client costs or indemnity costs whenever it appears that a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts or to clearly established laws.”

12      RVA observes that the plaintiffs’ claims were held by me to be logically and commercially nonsensical, particularly given Mr Daley’s experience in real estate developments and securities.  Relying on the passage above from Aljade, RVA submits that the plaintiffs’ claims against it lacked merit, and that it was open to conclude that the proceeding (to the extent of the claims against RVA) was commenced with wilful disregard of the known facts.  I would so conclude.  Indeed, given my findings on the facts in my earlier reasons, it is hard to avoid the conclusion that the proceeding was also commenced or continued for some ulterior motive.

13      Despite this, I am not inclined to accede to RVA’s submission that the plaintiffs should be ordered to pay RVA’s costs on an indemnity basis from the commencement of the proceeding.  My order will be that the plaintiffs pay RVA’s costs of and incidental to the proceeding (including reserved costs) in default of agreement, on the standard basis up to the date for acceptance of the Offer on 18 March 2019 and on an indemnity basis thereafter.

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Certificate

I certify that these 7 pages are a true copy of the Ruling of His Honour Judge Woodward delivered on 30 September 2019.

Dated: 30 September 2019

Shakti Nambiar