P-Value v Vicland Group (No 2)
[2016] VSC 318
•27 May 2016
| IN THE SUPREME COURT OF VICTORIA AT MELBOURNE | Not Restricted |
COMMERCIAL COURT
S CI 2013 2593
| P-VALUE PTY LTD (ACN 134 544 451) | Plaintiff |
| v | |
| VICLAND PROPERTY GROUP NO 1 PTY LTD (ACN 120 079 227), MARK MARKI MARKII PTY LTD (ACN 120 089 465), WILLIAM DEREK McNEE, RODNEY MORLEY PERSICHETTI PTY LTD (ACN 108 660 751), RICHARD THOMAS, WELLARA HOLDINGS PTY LTD (ACN 127 799 928) and FRED NUCARA | Defendants |
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JUDGE: | Digby J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 27 May 2016 |
DATE OF JUDGMENT: | 27 May 2016 |
CASE MAY BE CITED AS: | P-Value v Vicland Group & Ors (No 2) |
MEDIUM NEUTRAL CITATION: | [2016] VSC 318 |
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COSTS AND INTEREST – Final Order – Applications for costs and interest in the nature of damages pursuant to s 60 of the Supreme Court Act 1986 (Vic) – Asserted right to rely on late filed Notices of Contribution – Delay – Operation of Parts IV and IVAA of the Wrongs Act 1958 (Vic)
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr N Evans | Scammel Black Mileo |
| For the First Defendant | No appearance | LSF Legal |
| For the Second Defendant | No appearance | |
| For the Third Defendant | Mr I Waller QC with Mr P Noonan | Jeremy Johnson & Associates |
| For the Fourth & Fifth Defendants | No appearance | DLA Piper Australia |
| For the Sixth Defendant | Mr T Scotter | Barry Nilsson Lawyers |
| For the Seventh Defendant | Mr M Gronow | Tribeca Legal |
HIS HONOUR:
The hearing fixed today in this matter was arranged to permit the parties to absorb the revised reasons for Judgment[1] (the Judgment) and make submissions as to the form of final orders in this matter including in relation to interest and costs.
[1][2016] VSC 100.
As a result the plaintiff and the third, sixth and seventh defendants have filed written submissions in relation to those matters and supplemented their written submissions by oral argument today. Each party also filed their suggested form of final orders.
In summary, the plaintiff seeks judgment in the sum of $2,786,421.55 plus damages in the nature of interest pursuant to s 60 of the Supreme Court Act 1986 (Supreme Court Act) in the sum of $863,981.53. The plaintiff seeks judgment in those terms against the first defendant, the third defendant, the sixth defendant, and the seventh defendant, together with costs on a standard basis, including all reserve costs.
The third defendant accepts calculation of the judgment sum for the plaintiff's loss and damage in accord with the Judgment. The third defendant does not take issue with the costs orders sought by the plaintiff, and the third defendant, joined by all active defendants, seeks an order which allows 30 days for the payment of the judgment sum. The plaintiff also accedes to a stay of 30 days.
The third defendant argues in relation to interest that in this matter good cause exists to refrain from ordering interest pursuant to s 60 of the Supreme Court Act on the penalty interest rate basis sought by the plaintiff. The third defendant cites Justice Gillard's statements in Johnson Tiles & Ors v Esso Australia Pty Ltd & Ors[2] and also relies on Clarke v Foodland Stores Pty Ltd[3] in support of his argument, that to apply interest at the penalty interest rates here would be inappropriately punitive and would not accord with a more fitting compensation which it says would be afforded to the plaintiff if the sum of interest ordered was based on the commercial rate paid by the plaintiff. The interest sum argued for by the third defendant is in the amount of $389,003.92. This figure is the calculation of interest actually incurred by the plaintiff, as particularised and agreed (as a calculation only as between the plaintiff and the third defendant). I pause to note that although the agreement in relation to that calculation of interest incurred by the plaintiff is an agreement only as between the plaintiff and the third defendant, no other active party has taken issue with the calculation.
[2][2003] VSC 27.
[3][1993] 2 VR 382.
The third defendant submits that the application of the plaintiff's interest claim in the sum of $863,981.53 would represent a large windfall gain, or a gift to the plaintiff. The third defendant submits that he cannot be criticised for delaying these proceedings and that this case is an instance where the relevant interest should relate purely to the financial costs to the plaintiff which as a project specific incorporated investment vehicle does not seek to establish that it would have otherwise applied the extra funds expended on the purchase of the property in Chapel Street, Prahran which are now the subject of the principal awards of damages in this matter.
The third defendant submits that to order such interest as is claimed by the plaintiff, would be excessive, unjust and would punish the third defendant unjustifiably and inappropriately.
The sixth defendant also submits that the appropriate approach to interest is on the basis of the interest actually paid by the plaintiff in relation to its over payment of the purchase price for the subject property and associated costs.
The sixth defendant also adopts the seventh defendant's submissions as to why it should only pay 15 per cent of the plaintiff's costs on a standard basis.
Further, the sixth defendant submits that because the plaintiff failed in relation to its rent abatement agreement allegations against the sixth defendant and its claim of concealment of the non-payment of rent by the sixth defendant as to one of the tenants in respect of the property, it should only pay 15 per cent of the plaintiff’s costs. The sixth defendant also argues for this outcome because there was a significant part of the case as between the plaintiff and the Vendor parties (the first defendant, the second defendant and the third defendant) which occupied hearing time in which the sixth defendant was not directly involved, specifically the application made by the third defendant that I should recuse myself (heard at the outset of the hearing of the trial), the issues of estoppel and res judicata as between other parties, the third defendant’s counterclaim involving the evidence of a number of witnesses and finally because of the evidence of Mr Bath, the expert valuer, called by the third defendant, which ultimately proved to be of no assistance. The sixth defendant submits that these are all issues which did not involve it. This cost reduction submission is also, in substance, adopted by the seventh defendant.
The sixth defendant also adopts the seventh defendant's submissions that those parties are entitled to an 85 per cent contribution from the first defendant and the third defendant in respect of the judgment. That claim for contribution is a separate submission, and quite separate from the argument in support of an apportionment of costs to which I have earlier referred.
At the trial, no claim or assertion in relation to an entitlement to contribution was made by the sixth and the seventh defendants as against the first defendant, the second defendant or the third defendant. Nor was any such claim advanced by the sixth and seventh defendants in written or oral submissions at the closing of the trial or indeed, in the hearing in this proceeding in April of 2016.
However, by Notices of Contribution dated 26 May 2016, the sixth and the seventh defendants now seek to raise contribution claims against the first defendant and the third defendant.
No affidavit material has been filed by the sixth or the seventh defendants to explain the extraordinary delay associated with the service of these Notices of Contribution, including why they were not served years ago and why they were not addressed at the trial and during closing submissions. I recognise, however, that argument was put today by Mr Scotter and Mr Gronow, on behalf of the sixth and seventh defendants, to the effect that contribution claims were not available to those parties in these proceedings at an earlier point in time than now. I shall return to that contention.
The Notices of Contribution dated 26 May 2016, come now after the conclusion of a long trial and one in which contributory behaviour, of a type, was pleaded and addressed by the sixth and seventh defendants vis-à-vis the plaintiff. However, before now there has been no case raised by the sixth and seventh defendants by way of contribution, pursuant to statute or otherwise, against the first defendant or the second defendant or the third defendant.
Contrary to the submission made by Mr Gronow for the seventh defendant, which appear to be adopted by the sixth defendant, I consider that the sixth and seventh defendants require the court’s leave to rely upon the Notices of Contribution dated 26 May 2016.
The third defendant strenuously objects to the sixth and the seventh defendants being granted leave to file the late Notices of Contribution dated 26 May 2016 and resists the sixth and seventh defendants being able to raise contribution claims against him and, by analogy against the first defendant, at this very late stage in the proceeding.
The third defendant argues that although s 24AM has been found applicable, given the findings of fraud, including against the sixth and seventh defendants, the effect of ss 24AJ 24AM and the Scheme of Part IVAA of the Wrongs Act 1958 (Wrongs Act) is that the sixth and the seventh defendants remain concurrent wrongdoers and that part of the Act continues to apply. However, because fraud has been found, the sixth and seventh defendants and the third defendant are jointly and severally liable to the plaintiff, however by reason of s 24AJ of the Wrongs Act are not entitled to recover contribution under Part IV of the Wrongs Act. In this regard s 24AM provides for a special consequence when it applies in the case of a finding of fraud. The third defendant also argues that it would be contradictory of the Scheme of the Wrongs Act, if s 24AM operated in its terms but a fraudulent defendant could nevertheless claim contribution under Part IV of the Wrongs Act.
The third defendant also argues that he would be prejudiced by the sixth and seventh defendants being able to rely upon the Notices of Contribution of 26 May 2016 at this very late stage. The third defendant submits that were the sixth and seventh defendants permitted to now argue for contribution against him, the third defendant would suffer irremediable prejudice because he has lost the opportunity to appraise such contribution claims and approach this litigation, at and before trial, taking into account a claim, or potential claim for contribution by the sixth and seventh defendants.
The third defendant's prejudice, it points out, arises also as a result of him not being able to consider such issues as the desirability of an offer of compromise and to consider the conduct of its case at and before trial, including the way in which he desired to deal with evidentiary aspects of the case, and settlement strategies, all in light of the sixth and seventh defendants’ contribution claims. As to these matters, the third defendant relies on Geelong Building Society (In Liquidation) v Encel,[4] and Wieland & Ors v Texxcon Pty Ltd;[5] the latter case relating to the court's approach to binding parties to the conduct of their case.
[4]Unreported Supreme Court of Victoria Court of Appeal (Tadgell, Ormiston & Ashley JJ) 15 December 1994 at pages 607, 608 and 610.
[5](2014) 313 ALR 724.
The third defendant also relies on Aon Risk Services Australia Ltd v Australian National University[6] as providing guidance to the court in circumstances where there are very late and/or disruptive amendments sought to pleadings.
[6][2009] HCA 27.
Here I consider that the sixth and seventh defendants' Notices of Contribution to be grossly out of time by reference to the requirement of the Supreme Court (General Civil Procedure) Rules 2015[7] (the Rules) and also, very likely to be out of time under the provisions of Part IV of the Wrongs Act, including s 24(4).
[7]Rule 11.15.
Independently and cumulatively, I regard the putative Notices of Contribution to have come too late in this proceeding, for the reasons I have referred to, and to be so unsupported and unjustified by any proper or sworn explanation as to why they have not been filed and served and prosecuted years earlier in this proceeding, that I should not permit them to be filed. The sixth and the seventh defendants’ Notices of Contribution of 26 May 2016 should be rejected on these bases alone.
Further, however, for the reasons argued by the third defendant in relation to the prejudice, or likely potential prejudice to the third defendant, the sixth and the seventh defendants’ Notices of Contribution should not be permitted, because were the sixth and seventh defendants permitted to rely upon their Notices of Contribution provided only yesterday, the third defendant, and the first defendant, would likely be irreparably prejudiced because they have been deprived of the opportunity to conduct their cases, including from an evidentiary point of view, and to attempt to settle the claims against him, understanding all the relevant claims (and their ramifications) brought in the proceedings.
The sixth and seventh defendants submit that:
(a) they should be able to claim contribution against the first and the third defendants even now after the conclusion of the trial and the provision of reasons, and they should be entitled to recoup 85 per cent from those defendants. They submit that to do so would simply be to give effect to the findings which have been made and no new factual allegation or argument need be advanced;
(b) because of the finding of fraud, including against the sixth and seventh defendants, this is not a case under Part IVAA of the Wrongs Act. They submit that if fraud findings had not been made the sixth and seventh defendants could have sought to limit their liability to 15 per cent, but given the finding made, they cannot. However, the sixth and the seventh defendants also submit that they are entitled, via the contribution claims made on 26 May 2016, to get 85 per cent of what they are liable to the plaintiff for, back from the first and third defendants.
(c) up to the time of judgment in this matter, by operation of s 24AJ of the Wrongs Act, it was not open for the sixth and seventh defendants to seek contribution;
(d) under s 24AM, if a relevant defendant is found to be fraudulent, then the proportionate liability regime in Part IVAA of the Wrongs Act ceases to be of application, and the sixth and the seventh defendants right to contribution against either defendant is revived. They submit that although as against the plaintiff, s 24AM takes priority over ss 24AI and 24AJ of the Wrongs Act, on a finding of fraud s 24AM is not intended to remove the right of contribution between fraudulent defendants;
(e) in relation to the prejudice asserted by the third defendant, until the findings made in the recently provided reasons in this matter, no contribution claim could have been made against the third defendant;
(f) the seventh defendant also submits that, because it is clear enough now (given the parties’ submissions on costs) that the third defendant did not make an offer of compromise in this proceeding there is no substance to the third defendant’s argument that were the sixth and seventh defendants able to now rely on their Notices of Contribution of 26 May 2016 that would result in prejudice to the third defendant in his conduct of the proceedings to date and in particular in relation to his ability to assess matters related to settlement and making an offer of compromise in the proceedings.[8]
[8]T798, L19-27.
I consider that Mr Waller QC is correct in his arguments on behalf of the third defendant as to the operation of the Wrongs Act. Therefore, if I am wrong in refusing to allow the sixth and the seventh defendants to file and rely on their Notices of Contribution dated 26 May 2016, because those claims come far too late and if permitted would be likely to cause irremediable prejudice to the third and first defendants, then in any event I consider that my findings of fraudulent conduct against the sixth and seventh defendants, which has enlivened s 24AM of the Wrongs Act, preclude any entitlement on the part of the sixth and seventh defendants to contribution against the first and third defendants under Part IV of the Wrongs Act. This is because s 24AM, when enlivened in cases of fraud, imposes joint and several liability on the wrongdoer and consistently excludes that wrongdoer from availing itself of a right to apportionment. Further, and also consistently, in such circumstances no right of contribution may be claimed by the wrongdoer.
This is because although a finding of fraud enlivening s 24AM has been made in respect of the sixth and seventh defendants, rendering them jointly and severally liable to the plaintiff, the operation of s 24AM of the Wrongs Act does not take the defendants outside the regime of Part IVAA of the Wrongs Act.
Notwithstanding that s 24AM is applicable, and is expressly applicable despite the operation of ss 24AI and 24AJ, the fraudulent defendant is nevertheless a concurrent wrongdoer who has to be found liable for the damages in relation to an apportionable claim.
Both ss 24AM and 24AJ apply to a defendant the subject of a judgment or a finding of liability in relation to an apportionable claim. Both sections require a finding of liability or judgment as a concurrent wrongdoer under Part IVAA of the Wrongs Act. Section 24AM makes this clear by stipulating that an applicable defendant is one who is found liable for damages in relation to an apportionable claim. Section 24AH defines a concurrent wrongdoer as one of a number of persons whose acts or omissions has independently or jointly caused loss or damage that is subject of a relevant claim.
Accordingly, Part IVAA of the Wrongs Act applied at all material times to the sixth and seventh defendants and as a result of the operation of s 24AM, and Part IVAA of the Wrongs Act, including s 24AJ, the sixth and seventh defendants are not, in the circumstances which obtain, entitled to claim contribution under Part IV of the Wrongs Act.
Further, although ultimately it transpired that findings of fraud were made against the sixth and seventh defendants in this proceeding and the plaintiff pursued the application of s 24AM of the Wrongs Act in this proceeding, it was open to the sixth and seventh defendants to file and serve Notices of Contribution on the first and the third defendants and thereby claim contribution from very early in the proceedings in accordance with Order 11.15 of the Rules.
Finally, I consider that the Notices of Contribution, are very likely to be out of time under Part IV of the Wrongs Act as well as out of time under the Rules of this Court. In addition these contribution claims are forlorn given my findings of fraud against the sixth and seventh defendants, the consequences of such findings which I have explained in the Judgment and above in relation to the operation of s 24AM and Part IV of the Wrongs Act. In short those consequences are that the sixth and the seventh defendants (in addition to the third defendant) stand jointly and severally liable to the plaintiff and are disentitled to appointment or contribution as between other defendants. These factors add further justification for rejecting the sixth and seventh defendants late contribution claims.
As to legal costs, the seventh defendant accepts that a costs order will be made against it in favour of the plaintiff, and also accepts the standard basis of calculating such a costs order as being appropriate. The seventh defendant, however argues that given the findings in the Judgment, in particular the apportionment findings in relation to the first, second and third defendants, that the sixth and seventh defendants should be ordered to pay 15 per cent only of the plaintiff's costs and the Vendor defendants 85 per cent. The seventh defendant adds that a substantial proportion of the trial was occupied with those issues to which I earlier referred. In those respects, the seventh defendant adopts what is submitted by the sixth defendant.
Interest
I consider that in the exercise of my broad discretion in relation to interest, I should order that the defendants pay interest in the nature of damages pursuant to s 60 of the Supreme Court Act in the sum of $389,003.92.
I consider this amount of interest to be the most appropriate because, in this particular case, that sum most fittingly compensates the plaintiff. This is because the plaintiff is a special purpose corporate vehicle which purchased a commercial property, as it turned out for an excessive sum, and has recovered damages awarded in respect of its over payment for that property, the borrowing costs of which overpayment are identifiable. It is those commercial costs, calculated in the sum of $389,003.92, of which the plaintiff has been deprived.
Further, there has been no suggestion that the plaintiff would, in any specific way, have applied the sum of the overpayment for the property which represents its principal damage to any other money-making venture investment or profitable allocation.
Further, there has been no delay by any party in the conduct of the proceeding which is relevant to the claimed entitlement to interest.
I do not consider that the fact that in this case there were Vendors and a related party, the third defendant, which received the overpayment for the property, constitutes a factor which should to any degree displace the considerations to which I have earlier referred, which I consider render it just and fair to award interest informed by the plaintiff's commercial costs. Furthermore, there is no evidence that the sixth and seventh defendants benefited from the Vendor’s receipt of the purchase price, other than in relation to the very much smaller amounts of commissions. Nor any evidence as to the extent to which McNee benefited personally from the sale.
Finally, I consider that here the prospective risk to the defendants of exposure to an order to pay a penalty rate of interest on any award of damages to the plaintiff, would in itself have been likely to provide very material encouragement to the defendants to realistically assess their position in the proceeding and to seek to compromise the plaintiff's claim.
Costs
As to legal costs, I consider that the findings of wrongdoing that are reflected in the Judgment and, in particular, the findings I have made in respect of the third and the sixth and seventh defendants, provide a strong basis to order that the plaintiff's costs be recoverable against the sixth and seventh defendants, as well as the other active defendants.
I have found that the first defendant, (and in passing although it now no longer is a registered company, the second defendant) and McNee, Beller and Nucara are jointly and severally liable to the plaintiff. I consider that such joint and several findings themselves justify an order that each active defendant also be liable for the plaintiff’s costs.
My finding and observations about the apportionment of liability in the reasons for Judgment are expressly predicated on my primary findings of wrongdoing by McNee and Nucara, who were acting as the representatives of the first defendant, the second defendant and the sixth defendant respectively. My findings on apportionment were expressly explained as being made in case I was incorrect in my view that findings of fraud and the application of s 24AM of the Wrongs Act rendered the fraudulent defendants jointly and severally liable and unable to claim apportionment. I held in the Judgment that McNee, Nucara and Beller are disentitled to, and precluded from, an apportionment under the Wrongs Act, or otherwise.
I also accept the plaintiff and the third defendants' submission that given my reasons for Judgment, and for the reasons that I identify above, it would be incongruous to order the apportionment of costs, including an apportionment in relation to the sixth and seventh defendants, in the way those parties seek in their current applications.
I also reject the sixth and seventh defendants' arguments that there were sufficiently significant aspects of the case, and in particular aspects of the case at trial, in respect of which they were not engaged, such as to justify an apportionment of costs on the basis of a relative hearing time at trial on which the plaintiff was unsuccessful or which did not directly relate to the sixth and seventh defendants.
In my view, evaluated holistically and taking into account how the issues at trial were developed and were addressed, and the interrelatedness of the issues[9] including as a result of the pleaded apportionment claims, the specific cost related topics identified by the sixth and seventh defendants were interrelated with other issues and were not of such magnitude, and did not occupy such significant periods of discrete time or effort at trial, or on my best assessment in the interlocutory stages of this proceeding, as to justify a cost apportionment on the issue by issue basis sought by the sixth and seventh defendants.
[9][2016] VSC 100, [533].
Accordingly, I uphold the plaintiff's arguments and the orders it seeks in respect of costs.
I shall order that:
1. There be judgment for the plaintiff against the first defendant in the sum of $2,786,421.55 plus damages in the nature of interest pursuant to s 60 of the Supreme Court Act 1986 in the sum of $389,003.92 a total of $3,175,425.47.
2. There be judgment for the plaintiff against the third defendant in the sum of $2,786,421.55 plus damages in the nature of interest pursuant to s 60 of the Supreme Court Act 1986 in the sum of $389,003.92 a total of $3,175,425.47.
3. There be judgment for the plaintiff against the sixth defendant in the sum of $2,786,421.55 plus damages in the nature of interest pursuant to s 60 of the Supreme Court Act 1986 in the sum of $389,003.92 a total of $3,175,425.47.
4. There be judgment for the plaintiff against the seventh defendant in the sum of $2,786,421.55 plus damages in the nature of interest pursuant to s 60 of the Supreme Court Act 1986 in the sum of $389,003.92 a total of $3,175,425.47.
5. The first, third, sixth and seventh defendants pay the plaintiff’s costs of the proceeding, including any reserved costs, including the costs of and associated with the hearing on 27 May 2016, on a standard basis.
6. Enforcement of the judgment as against the first, third, sixth and seventh defendants is stayed for 30 days.
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