Montague Mining Pty Ltd v Gore

[1999] FCA 1804

FEDERAL COURT OF AUSTRALIA

Montague Mining Pty Ltd v Gore [1999] FCA 1804

PRACTICE AND PROCEDURE – Variation of orders announced but not formally entered – Assessment of damages involved an incorrect assumption concerning saleability of shares – Merely mechanical correction required – Whether correction ought to be made – Costs – Offer made by respondents prior to hearing on liability, acceptance of which would have given applicant a better financial outcome than in the result – Offer not subsequently renewed despite finding on applicant’s favour on liability – Respondents took position that applicant had sustained no damage and declined to negotiate – Costs order in applicant’s favour limited to costs incurred before refusal of offer - No costs order in favour of respondents.

MONTAGUE MINING PTY LIMITED v PETER L GORE, MICHAEL J MORROW, GEOFFREY N HARLEY, JEREMY C CHARLSTON, PAUL H CORBIERE, MICHAEL O KLUG, JOHN D ELLIOTT, DAVID G COMINOS, ROSS G PERRETT, DARRYL D MCDONOUGH, TIMOTHY D FERRIER, CHRISTOPHER T COYNE, ROGER I BURNELL, RANDAL J DENNINGS, ALAN H MAGUIRE, ARCHIBALD FLETCHER, LLOYD S NASH, BRIAN C NOBLE, SIMON W LAND, DALE S BRACKIN, PAUL C CALLAGHAN, SALLY A PITKIN, BRIAN J CONRICK, KAREN M TRAINER, RUTH A COPELIN, ROGER V BYRNE, MARK W WALLER, JOHN D POWELL, ANDREW W SMITH, JENNIFER A MCVEIGH, ANNE MILNER and DARREN B FOOKS trading as CLAYTON UTZ and SPINIFEX GOLD NL

NG563 of 1997

WILCOX J

SYDNEY
22 DECEMBER 1999

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG563 of 1997

BETWEEN:

MONTAGUE MINING PTY LIMITED
Applicant

AND:

PETER L GORE, MICHAEL J MORROW, GEOFFREY N HARLEY, JEREMY C CHARLSTON, PAUL H CORBIERE, MICHAEL O KLUG, JOHN D ELLIOTT, DAVID G COMINOS, ROSS G PERRETT, DARRYL D MCDONOUGH, TIMOTHY D FERRIER, CHRISTOPHER T COYNE, ROGER I BURNELL, RANDAL J DENNINGS, ALAN H MAGUIRE, ARCHIBALD FLETCHER, LLOYD S NASH, BRIAN C NOBLE, SIMON W LAND, DALE S BRACKIN, PAUL C CALLAGHAN, SALLY A PITKIN, BRIAN J CONRICK, KAREN M TRAINER, RUTH A COPELIN, ROGER V BYRNE, MARK W WALLER, JOHN D POWELL, ANDREW W SMITH, JENNIFER A MCVEIGH, ANNE MILNER and DARREN B FOOKS trading as CLAYTON UTZ
First Respondents

SPINIFEX GOLD NL
Second Respondent

JUDGE:

WILCOX J

DATE OF ORDER:

22 DECEMBER 1999

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.Order 1 made on 5 November 1999 be amended by substituting for the words and figures “five hundred and sixty one thousand four hundred and sixty dollars ($561,460)” the words and figures “six hundred and sixteen thousand two hundred dollars ($616,200)”; and

2.Order 2 made on 5 November 1995 be amended by deleting all the words following the word “applicant” and substituting the words “incurred up to and including 20 August 1998”.

3.The suspension of orders 1 and 2 made on 5 November 1999 be vacated.

Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG563 of 1997

BETWEEN:

MONTAGUE MINING PTY LIMITED
Applicant

AND:

PETER L GORE, MICHAEL J MORROW, GEOFFREY N HARLEY, JEREMY C CHARLSTON, PAUL H CORBIERE, MICHAEL O KLUG, JOHN D ELLIOTT, DAVID G COMINOS, ROSS G PERRETT, DARRYL D MCDONOUGH, TIMOTHY D FERRIER, CHRISTOPHER T COYNE, ROGER I BURNELL, RANDAL J DENNINGS, ALAN H MAGUIRE, ARCHIBALD FLETCHER, LLOYD S NASH, BRIAN C NOBLE, SIMON W LAND, DALE S BRACKIN, PAUL C CALLAGHAN, SALLY A PITKIN, BRIAN J CONRICK, KAREN M TRAINER, RUTH A COPELIN, ROGER V BYRNE, MARK W WALLER, JOHN D POWELL, ANDREW W SMITH, JENNIFER A MCVEIGH, ANNE MILNER and DARREN B FOOKS trading as CLAYTON UTZ
First Respondents

SPINIFEX GOLD NL
Second Respondent

JUDGE:

WILCOX J

DATE:

22 DECEMBER 1999

PLACE:

SYDNEY

SUPPLEMENTARY REASONS FOR JUDGMENT

1. WILCOX J:  On 5 November 1999 I handed down Reasons for Judgment relating to damages.  I made orders as follows:

   “1.Judgment be entered in favour of the applicant, Montague Mining Pty Limited, against the first respondents, Peter L Gore and others trading as Clayton Utz, in the sum of five hundred and sixty one thousand four hundred and sixty dollars ($561,460).

   2.The first respondents pay the costs of the applicant, including the costs incurred by it in connection with the hearing regarding liability in respect of which reasons were published on 23 October 1998.”

2. Immediately upon the announcement of these orders, Mr David Pritchard, counsel for the first respondents, asked me to vacate the order concerning costs.  He informed me that, prior to the hearing on liability, the applicant had declined an offer by his clients to settle the claim against them for a sum of money exceeding the amount of the judgment I had ordered to be entered.  Consequently, in his contention, the applicant ought not recover the costs incurred by it after the date of the offer, but, rather, should pay the first respondents’ costs.

3. It quickly appeared there was a dispute between the parties about the course of their settlement negotiations.  It seemed to me the dispute could only be resolved by evidence, including production of relevant documents.  So I suspended the operation of order 2 and granted leave to the first respondents to apply by Notice of Motion for revocation of that order.

4. On 11 November 1999 the solicitors for the first respondents filed a Notice of Motion seeking the following orders:

   “1.That the order made by Wilcox J on 5 November 1999 that the first respondent pay the applicant’s costs, including in relation to the 1998 hearing on liability issues, be discharged with effect from 5 November 1999.

   2.In relation to the costs of the proceedings, including the costs incurred in connection with the hearing regarding liability in respect of which reasons were published on 23 October 1998:

   (a)that the first respondent pay the costs of the applicant on a party/party basis up to 14 August 1998; and

   (b)that the applicant pay the costs of the first respondent on a party/party basis after 14 August 1998;

   (c)that the applicant pay the first respondent’s costs of this motion.

   3.Such further or other orders as the court thinks fit.”

   The Notice of Motion was fixed for hearing on 23 November 1999.

5. The Notice of Motion was supported by two affidavits of Brian David Bartley, the first respondents’ solicitor.  Mr Bartley annexed to one of these affidavits a letter dated 14 August 1998 to the applicant’s solicitors in which the first respondents offered to settle the claim made against them for the sum of $600,000 plus costs.  The offer was to be open for acceptance until 10am on 24 August 1998 (the first day of the trial on liability) when it would lapse.  The affidavit also included a reply by the applicant’s solicitors, on 20 August 1998, rejecting the offer.

6. The applicant’s solicitor, Vera Culkoff, filed an affidavit in reponse to Mr Bartley’s first affidavit.  This affidavit contained further information about the settlement negotiations.

7. Although I was not aware of it at the time, on 10 November 1999 Ms Culkoff filed a second Notice of Motion, also made returnable on 23 November, dealing with a different matter.  This Notice of Motion sought a variation of order 1 made by me on 5 November 1999 by substituting for the amount of the judgment stated in that order the sum of $610,273.

8. When the motions came before the Court on 23 November, counsel for the applicant, Mr Andrew Bell, drew my attention to his client’s motion.  He told me I had made an incorrect assumption in the course of calculating the damages to which the applicant was entitled.  In para 82 of my reasons, I had indicated that the appropriate figure for damages, “before allowing for the value of the 250,000 Spinifex shares promised on 8 January 1997”, was $500,000.  I had then deducted from that figure an amount of $62,500 “representing the value of 250,000 Spinifex shares at 25 cents”.  To the resultant sum of $437,500, I added interest of $123,958 and rounded off the total at $561,460, the judgment sum.  Mr Bell told me the 250,000 shares had been classified by the Australian Stock Exchange as vendor’s shares; accordingly, Montague was not able to sell them in January 1997 as I had assumed.  He said the shares were not able to be sold until 23 June 1999, at which date they were worth only about 10 cents each; consequently, the deduction of $62,500 was excessive.  Moreover, the delay in realisation affected the interest calculation. 

9. I inquired from Mr Pritchard whether his clients accepted the accuracy of the information just stated by Mr Bell.  Mr Pritchard replied he had no instructions about it but said I should not re-open the assessment of damages; the situation regarding disposal of the Spinifex shares ought to have been disclosed at an earlier point of time.  Mr Pritchard said that, if I did reopen the calculation of damages, I ought to set aside the whole assessment and disqualify myself from further involvement in the case, on the ground that I now knew the amount of the settlement offer made by his client.

10. I was surprised at the information given to me by Mr Bell.  During the course of his evidence, the applicant’s expert valuer, Mr Lawrence, had made a passing reference to the status of the Spinifex shares.  His reference indicated an understanding that the shares were not classified as vendor’s shares and could have been sold at any time.  Nobody corrected the impression conveyed by Mr Lawrence’s words and I proceeded on the basis that what he had said was correct.

11. While I agreed with Mr Pritchard that the status of the Spinifex shares ought to have been clarified during the hearing, and I felt critical of the fact that the applicant’s representatives had neglected to do this, I indicated I would not accept the submission that the error (if it was one) ought to remain uncorrected.  I pointed out that questions whether the shares were vendor’s shares, and, if so, their value at the end of the escrow period, were questions of fact about which there could not be real dispute.  I also pointed out that the formal order had not yet been entered and it was not suggested anybody had changed their position on the basis of my announced order.  Despite my opinion about the handling of the matter by the applicant’s legal representatives, I said, it would be unfair to refuse to correct an obvious error, especially as the correction would be a merely mechanical matter once the facts were checked.  As to the submission that I should regard my knowledge of the offer as a disqualification from any further involvement in the case, I pointed out that even the adjustment for which Mr Bell contended would still leave his client in the position that, after interest was taken into account, it would have been better off if it had accepted the offer; so the issue regarding costs remained unaltered.

12. I thought it proper to give the first respondents an opportunity to check the statements made by Mr Bell.  With this in mind I made the following directions:

    (a)Within two days the applicant is to discover any further documents regarding the 250,000 Spinifex shares; and

    (b)the respondent is to let my associate know by 3 December 1999 if either of the following propositions remain in contention:

    (i)         the shares were vendor’s shares escrowed until 23 June 1999; and

    (ii)        at 23 June 1999 the market price of the shares was ten cents.

    In order to hold the position, I suspended, until further order, the operation of order 1 announced on 5 November 1999.

13. The solicitors for the first respondents did not notify my associate that either of the two stipulated matters were still in contention, but neither did they acknowledge their correctness.  Accordingly, in order to clarify the position,  I listed the matter again on 14 December 1999.  On that occasion, Mr Bartley, represented the first respondents.  He said his clients did not make any concession but did not dispute the evidence on these matters filed by the applicant’s solicitors.  His clients maintained the position put to me by Mr Pritchard on 23 November.

14. The affidavit of Ms Culkoff had annexed to it two relevant documents.  The first document was a letter to Ms Culkoff dated 23 July 1998 from the Company Secretary of Spinifex confirming advice from the Australian Stock Exchange “that the 250,000 shares in Spinifex Gold NL held by Montague Mining Pty Ltd will be subject to ASX escrow conditions until 23 June 1999”.  The ASX letter was itself put into evidence.  The second document was a fax from State One Equities Pty Ltd confirming the sale, over the period 23 to 29 July 1999, of the 250,000 Spinifex shares for $24,462.35.  As it appears from other evidence that the price of Spinifex shares was fairly stable between 23 June and 29 July, it is convenient to adopt this figure as the realisable value of the shares.

15. As I have said, Mr Bartley indicated his client did not challenge the correctness of the evidentiary material placed by the applicant before the Court.  Accordingly, I propose to proceed on the footing that it is correct.  However, I will assess interest on the basis that the Spinifex shares could have been realised by the end of June 1999, rather than the end of July.

16. With these matters in mind I rework the calculation in para 82 as follows:

Damages before deducting the value of 250,000 Spinifex shares	$500,000.00
Less proceeds of sale of Spinifex shares	$  24,462.35	$475,537.65
Plus Interest at 10% on $500,000 from 8 January 1997 to 30 June 1999 (2 years, 173 days)	$123,986.30
Interest at 10% on $475,537.65 from 30 June 1999 to 5 November 1999 (128 days)   Amount of recalculated damages	$  16,676.38	$140,662.68	$616,200.33

I propose to round this figure to $616,200 and substitute that figure for the figure of $561,460 stated in the first order made by me on 5 November 1999.

1. Although the recalculated judgment figure is greater than the settlement figure offered on 14 August 1998, it remains true that Montague would have been better off if it had accepted the offer.  The offer did not mention a date for payment of the settlement figure, but it is reasonable to assume that Montague would have been able to stipulate for payment by the end of September 1998.  If one treats the interest rate adopted in this case (10%) as a measure of the value of having money in hand, it will be immediately apparent that $600,000 received at the end of September 1998 was worth more than $616,200 received in November 1999.

2. In his written submissions on costs, Mr Bell emphasises the difficulty faced by his client, in August 1998, in determining the damages likely to be awarded if it was successful on the issue of liability.  He reminds me of the last paragraph of my judgment on liability, handed down on 23 October 1998:

   “Montague is entitled to proceed to assessment of its damages.  However, I express the hope the parties will reach agreement concerning that matter.  Without going into any detail about the subject, it seems apparent the assessment of damage will involve the reaching of conclusions about many controversial and problematic issues.  The range of potential damages seems extraordinarily wide.  In the hope it will contribute to the possibility of a compromise, I propose to direct the holding of a settlement conference before further evidence is filed.  This can be conducted by a private mediator if the parties prefer.  If they do not agree to take that course, my direction will require a settlement conference to be conducted by a Registrar of the Court.  If the conference fails, the applicant should within one month thereafter file statements of any further evidence it will adduce at the trial on damages.  The respondent should respond within a further month.”

3. I accept the decision whether or not to accept the offer made by the first respondents on 14 August 1998 may not have been easy to make.  For all that Montague knew, the mining tenements might have been extremely valuable.  I suppose it was conceivable that, if this were the case, Montague might be able to prove it.  On the other hand, liability was still in issue and subject to vigorous dispute; and even if liability was established, it might not be possible to prove any significant damage.  On an objective assessment of the situation, it must have been difficult to determine whether or not the offer was reasonable.  So I do not criticise Montague, or its advisers, for having decided to refuse the offer.

4. However, the difficulty of prediction applied to both parties.  Notwithstanding the imponderable factors, the first respondents made a firm offer.  They were prepared to expose themselves to the risk of paying more than the claim might ultimately turn out to be worth..  The offer was to be open for acceptance for 10 days, a period that was not unreasonable having regard to the imminence of the trial on liability.  As the applicant rejected this offer and ended up with an inferior financial outcome, I think it would be unjust to the first respondents to require them to pay costs incurred by the applicant after 20 August 1998.  Accordingly, I will limit the applicant’s costs order to costs incurred up to and including 20 August 1998.  I take 20 August, rather than 14 August as stated in the Notice of Motion, because it was reasonable for the applicant to take a few days to consider its reaction to the offer.

5. This leaves the question whether I should order that the applicant pay the costs incurred by the first respondents after 20 August 1998.  If the offer had remained open, or been renewed at a later time, I would have been minded to do this; it could then have been said that the first respondents incurred those costs only because of the obduracy of the applicant.

6. However, the evidence establishes the applicant was not obdurate.  Notwithstanding my decision on liability, the first respondents never renewed their offer.  It might have been expected that, if $600,000 was a fair offer while liability was in contest, at least that sum would be available by way of offer two months later, when liability had been established.  However, notwithstanding the hope expressed in the final paragraph of my judgment of 23 October, the first respondents never renewed the offer of $600,000 or made any other offer.

7. On 5 November 1998, two weeks after the judgment on liability, the solicitors for the first respondents wrote a letter to the applicant’s solicitors in which they stated, amongst other things, “we confirm also that we do not wish to conduct settlement negotiations or participate in a mediation pending resolution of the appeal”.  The proposed appeal was, of course, premature; no formal order had been made and no leave to appeal had been granted.  But it seems the first respondents’ attitude was based on a more fundamental matter.  In a letter sent to the applicant’s solicitors on 15 December 1998, the first respondents’ solicitors opined that the applicant “can demonstrate no loss (and, indeed, is better off than if it had retained an interest in the project)”.  Under those circumstances, it is not surprising that the settlement conference I had directed proved ineffectual.  Nor, perhaps, is it surprising that the first respondents remained unwilling to compromise the claim even after the Full Court pointed out the prematurity of their “appeal”, and it became obvious the case would go to trial on damages.  At least by 15 December 1998, the issue between the parties had become whether or not the applicant had sustained any damage as a result of the first respondents’ negligence. The applicant ultimately succeeded on that issue, although perhaps not as emphatically as it might have hoped.

8. Having regard to that circumstance, I think it would be unfair to order the applicant to pay the costs incurred by the first respondents since 20 August 1998.

1. While it is true that the first respondents would not have incurred any costs after 20 August 1998 if their offer had been accepted, it is also true the costs would not have been incurred, and the applicant’s own costs would not have been incurred, if a settlement had been negotiated after the judgment on liability.  There may have been a good chance of this, if the first respondents had adopted a more realistic position. 

2. In his affidavit of 18 November 1999, Mr Bartley summarised Ms Culkoff’s statement of the applicant’s position at the settlement conference on 19 January 1999.  The summary included this item:

   “The applicant’s position was stronger than when the respondent had offered $600,000 plus costs and that the applicant was looking to settle the matter somewhere between a range from $600,000.00 to $5,000,000.00.”

3. Ms Culkoff never put an offer of $600,000; her lowest formal offer was $3,000,000, although she told Mr Bartley on 19 January she would recommend a settlement for $2,000,000.  That figure was excessive.  However, having regard to Ms Culkoff’s statement about the range of settlement figures, it is unlikely this was her bottom figure.  A firm offer of $600,000 or thereabouts might have proved attractive; if not then, at least when further information was received.

4. I cannot reach any firm conclusion about these matters and I do not attempt to do so.  It is enough to say I am not satisfied it would be fair to order the applicant to pay the costs incurred by the first respondents after 20 August 1998.  I shall not do so.

5. I propose to make orders varying the orders made on 5 November 1999 by:

   (i)substituting the figure of $616,200 for $561,460 in order 1; and

   (ii)amending order 2 by deleting all the words following the word “applicant” and inserting the words “incurred up to and including 20 August 1998”.

6. I will lift the suspension of the operation the orders made on 5 November.  My intention is that, for appeal purposes, time should run only from today.  However, the judgment will bear post-judgment interest as from 5 November 1999.

7. The two Notices of Motion have been dealt with together and each party has achieved some success.  Accordingly, I will make no order in respect of the costs of the motions.

I certify that the preceding thirty–one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox.

Associate:

Dated:            22 December 1999

Counsel for the Applicant:	Mr Andrew Bell
Solicitor for the Applicant:	Maurice Blackburn Cashman
Counsel for the Respondent:	Mr David Pritchard
Solicitor for the Respondent:	Corrs Chambers Westgarth