Perpetual Ltd v Myer Pty Ltd (No 2)
[2018] VSC 57
•16 February 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
COMMERCIAL LIST
S CI 2016 00483
| PERPETUAL LIMITED (ACN 000 431 827) (AND OTHERS ACCORDING TO THE SCHEDULE) | Plaintiffs |
| v | |
| MYER PTY LTD (ACN 004 143 239) | Defendant |
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JUDGE: | CROFT J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 7 & 9 February 2018 (Written submissions) |
DATE OF JUDGMENT: | 16 February 2018 |
CASE MAY BE CITED AS: | Perpetual Ltd v Myer Pty Ltd (No 2) |
MEDIUM NEUTRAL CITATION: | [2018] VSC 57 |
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PRACTICE AND PROCEDURE – Costs – Apportionment of costs – Applicable principles – Ritter v Godfrey [1920] 2 KB 47; Oshlack v Richmond River Council (1998) 193 CLR 72; Chen v Chan [2009] VSCA 233.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr C.M. Scerri QC with Mr R.M. Peters | Gadens Lawyers |
| For the Defendant | Mr I.G. Waller QC with Mr P.S. Noonan | Clayton-Utz |
HIS HONOUR:
Introduction
This proceeding raises as the central issue whether there is a mistake in the formula for the calculation of variable outgoings payable under a lease between the Plaintiffs (“Perpetual”) as landlords and responsible entity, and Myer Pty Ltd (“Myer”) as tenant under a lease executed on 4 September 2001 (“the Lease”) of its department store at the Chadstone Shopping Centre. The term of the Lease is 30 years commencing on 23 November 1998; together with one option for a further term of 15 years.
Following the trial of this matter in late November and early December 2017, reasons for judgment in favour of Myer were published on 29 January 2018.[1] The question of costs was reserved. It was agreed that the parties would provide written submissions in relation to the question of costs and that this issue would be resolved by the Court on the papers. Written submissions were provided by the parties as agreed and, on the basis of those submissions, the issue of costs is the subject of these further reasons. For the sake of convenience and clarity, the same terminology and abbreviations appearing in the reasons published on 29 January 2018 are applicable in the reasons which follow; save that Perpetual is, in these reasons, described as the Plaintiffs in the previous reasons.[2]
[1]Perpetual Ltd v Myer Pty Ltd [2018] VSC 2.
[2]See Perpetual Ltd v Myer Pty Ltd [2018] VSC 2, [3].
Myer succeeded in defending the claims made by Perpetual that the provisions of the Lease should, as a matter of construction, be read in the manner for which it contended with respect to the calculation of variable outgoings. Myer also succeeded in defending the claim by Perpetual that, in the event that the Court did not construe the terms of the Lease in its favour with respect to the calculation of variable outgoings, the Lease should be rectified in favour of Perpetual’s position in this respect. In the course of defending these claims made by Perpetual, Myer also raised four substantive defences, namely:
(a) a limitation defence to the claim based upon construction of the Lease;
(b) an acquiescence defence to the rectification claim;
(c) a laches defence to the rectification claim; and
(d) an account stated defence to both the construction-based claim and the rectification claim.
Also referred to as “Myer’s defences” or “secondary defences” depending on the context.
Although, as a result of finding against Perpetual with respect to its claims, it was not strictly necessary to deal with Myer’s defences, it was, in my view, desirable that some view be expressed with respect to the issues raised by those defences.[3]
[3]Perpetual Ltd v Myer Pty Ltd [2018] VSC 2, [126].
Myer, as the successful party, now seeks 100 per cent of its costs on a standard basis. Perpetual resists this claim on the basis that Myer was unsuccessful in all of the defences which it raised and that, consequently, there should be a reduction of 25 per cent in Myer’s prima facie entitlement to 100 per cent of its costs of the proceeding.
Applicable principles
It is common ground that, prima facie, Myer is entitled to 100 per cent of its costs.[4] The principles concerning costs and their apportionment as articulated by the Court of Appeal in Chen v Chan[5] are also common ground; including the first principle that stated: [6]
Absent disqualifying conduct, the successful party should receive its costs even where it has not succeeded on all heads of claim.
[4]Plaintiff’s Submissions on Costs (7 February 2018), [1]; Defendant’s Submissions Concerning Costs (9 February 2018), [1].
[5][2009] VSCA 233, [10] (“Chen v Chan”).
[6]Plaintiff’s Submissions on Costs (7 February 2018), [1]; Defendant’s Submissions Concerning Costs (9 February 2018), [1].
It is not necessary to repeat in full the articulation of principles appearing in Chen v Chan, though it is instructive in the present circumstances to set out the first three as stated by the Court of Appeal:[7]
[7]Chen v Chan [2009] VSCA 233, [10].
10.... The principles relevant to these questions can be summarised as follows:
(1)The general rule is that costs should follow the event. Absent disqualifying conduct, the successful party should recover its costs even where it has not succeeded on all heads of claim.[8]
(2)The Rules of Court[9] permit significant flexibility in determining questions of costs. In particular, the Court is entitled to examine the realities of the case and will attempt to do ‘substantial justice’ as between the parties on matters of costs.[10]
(3)Where there is a multiplicity of issues and mixed success has been enjoyed by the parties,[11] a Court may take a pragmatic approach in framing the order for costs, taking into consideration the success (or lack of success) of the parties on an issues basis. Generally, if such an order is made, it is reflected in the successful party being awarded a proportion of its costs but not the full amount.[12]
…
[8]Ritter v Godfrey [1920] 2 KB 47; Oshlack v Richmond River Council (1998) 193 CLR 72 at 97–8 [124].
[9]Supreme Court (General Civil Procedure) Rules 2005 (Vic) r 63.04 at first instance and r 64.24 on appeal.
[10]Spotless Group Limited v Premier Building and Consulting Pty Ltd and Northern Suburban Properties Pty Ltd [2008] VSCA 115, [14].
[11]McFadzean v Construction Mining and Energy Union (2007) 20 VR 250 at 291–2 [157]–[8].
[12]Spotless Group Limited v Premier Building and Consulting Pty Ltd and Northern Suburban Properties Pty Ltd [2008] VSCA 115, [15]; Hughes v Western Australian Cricket Association Inc (1986) 8 ATPR 40–48, 136; Pricom Pty Ltd v Sgarioto (Unreported, Supreme Court of Victoria, Eames J, 24 April 1995), McFadzean v Construction Mining and Energy Union (2007) 20 VR 250 at 289–90 [152].
The fundamental underpinning of these particular principles appears concisely stated in the judgment of McHugh J in Oshlack v Richmond River Council:[13]
67.The expression the “usual order as to costs” embodies the important principle that, subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy and operates whether the successful party is the plaintiff or the defendant. Costs are not awarded to punish an unsuccessful party. The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation.
[Footnotes omitted]
[13](1998) 193 CLR 72 at 97 [67]; and see Ritter v Godfrey [1920] 2 KB 47 at 60, 66.
Application of principles
Perpetual contends that Myer’s entitlement to costs should reflect its failure in relation to Myer’s defences. On this basis, Perpetual submits that the appropriate order concerning costs is that it pay only 75 per cent of Myer’s costs to be taxed on a standard basis. In support of this position, Perpetual advances four matters.
The first matter, as submitted by Perpetual, is that Myer’s defences raised clearly severable issues. This is, it is said, evidenced by the fact that the parties’ submissions and the Court’s Reasons, deal with each defence separately. Secondly, it is said that discovery solely relating to the acquiescence of laches defences was required and contested. In this respect, Perpetual makes reference to:
(a) the correspondence between July and October 2017,[14] some of which, particularly, Myer’s solicitors’ letter dated 7 July 2017, identified the seven further categories of documents which Myer wanted discovery (and which Perpetual says were largely discovered); and
(b) Myer’s application for discovery relating to the acquiescence and laches defences, which was resolved and resulted in the Orders made on 20 October 2017.
[14]See Affidavit of Peter Sise (affirmed 13 October 2017).
Thirdly, Perpetual submits that there was extensive cross-examination of Mr Beer[15] and Mr Brown[16] directed towards the acquiescence defence. Fourthly, and finally, Perpetual says that the submissions of both parties concerning Myer’s defences were focused yet lengthy, which reflects the serious consequences of those defences for the parties and the time which the parties dedicated to them. These matters, Perpetual submits, should “as a matter of impression and evaluation”, as suggested in Chen v Chan,[17] lead the Court to the position on costs for which it advocates.
[15]See transcript 107-118.
[16]See transcript 155-180.
[17][2009] VSCA 233, [10(5)].
Myer, on the other hand, contends that on the basis of the applicable principles, Perpetual must identify “disqualifying conduct” that deprives Myer of its entitlement to 100 per cent of its costs. For the reasons which follow, I do not find any conduct on the part of Myer in these proceedings which could be described as “disqualifying conduct” in any relevant sense. Moreover, the conduct of Myer in defending its position in these proceedings must be considered in the context of the nature of these proceedings. It is to this aspect that I now turn.
Myer’s primary defence, as defendant in these proceedings, and on which it wholly succeeded, was that Perpetual’s construction and rectification claims were untenable. Myer only raised the secondary defences of acquiescence, laches, account stated and statute of limitations in response to the unsuccessful claim brought by Perpetual. Thus it is, in my view, axiomatic, that had the claim never been brought by Perpetual, Myer would never have incurred the costs of its defences.
There is, as Myer submits, an important and well-recognised distinction between a partially successful plaintiff and a partially successful defendant. Thus, in Australian Conservation Foundation v Forestry Commission, Burchett J said:[18]
A party against whom an unsustainable claim is prosecuted is not to be forced, at his peril in respect of costs, to abandon every defence he is not sure of maintaining, and oppose to his adversary only the barrier of one hopeful argument: he is entitled to raise his earthworks at every reasonable point along the path of assault. At the same time, if he multiplies issues unreasonably, he may suffer in costs. Ultimately, the question is one of discretion and judgment.
[Myer’s emphasis]
[18](1988) 81 ALR 166 at 169.
This statement by Burchett J has been referred to with approval, including by Basten JA, in Griffith v Australian Broadcasting Corporation (No 2).[19] Also, in this appeal, Hodgson JA (with whom the other members of the Court agreed) said:[20]
[19][2011] NSWCA 145, [38]. Also quoted in Sze Tu v Lowe (No 2) [2015] NSWCA 91, [42].
[20]Griffith v Australian Broadcasting Corporation (No 2) [2011] NSWCA 145, [19]; quoted with approval in Sze Tu v Lowe (No 2) [2015] NSWCA 91, [41].
… the application of these principles may not be exactly the same for successful defendants as for successful plaintiffs. In the former case, the defendant has been caused to incur costs in defending a claim which the decision in the case has wholly rejected, and has thus determined should not have brought about the incurring of any costs at all. In those circumstances, it may be considered appropriate that the defendant have costs associated with reasonable defences, even if they ultimately proved to be unsuccessful and severable. In the latter case, the plaintiff has chosen to bring the whole proceedings and thereby to incur costs and cause costs to be incurred which otherwise would not have been incurred … .
Similarly, in Sydney Ferries v Morton (No 2),[21] the New South Wales Court of Appeal ordered the unsuccessful appellant to pay the costs of the appeal in full,[22] even though it succeeded on five of the six issues in the appeal.[23] In that case, Campbell JA observed:[24]
A factor of major importance is that the only reason why any party incurred costs concerning the appeal was the Appellant initiated the appeal proceedings.
[21][2010] NSWCA 238.
[22]Sydney Ferries v Morton (No 2) [2010] NSWCA 238, [1], [2], [6], [7], [8], [17] and [19].
[23]Sydney Ferries v Morton (No 2) [2010] NSWCA 238, [13]-[15].
[24]Sydney Ferries v Morton (No 2) [2010] NSWCA 238, [18].
Accordingly, I accept the position that, as contended by Myer, it is not enough for Perpetual merely to establish that Myer raised unsuccessful secondary defences in response to the unsuccessful claim. Rather, Myer was entitled to raise defences which it did raise, without penalty on costs. The question is, therefore, whether, by raising the secondary defences, Myer multiplied issues unreasonably or otherwise acted in such a way that might constitute “disqualifying conduct”. As observed by Myer, Perpetual has never suggested that it was unreasonable for Myer to raise the defences which it did raise. I accept, as submitted by Myer, there could be no such suggestion; and I say this for the following three reasons.
First, there was a clear basis for each of the defences raised by Myer. Secondly, having regard to the seriousness of the claims brought by Perpetual, Myer was clearly justified in raising the defences which it raised. Justice Burchett’s words do, I accept, capture the position in that Myer was “… entitled to raise [its] earthworks at every reasonable point along the path of assault” and not to oppose with “only … one hopeful argument”.[25] The claim against Myer was a substantial one, with the quantum of the claim up to the financial year 2016 of $19,144,732.61 plus interest and costs. The loss going forward cannot be precisely determined, but, I accept, it certainly would be in the realm of an additional $28 million to $63 million, depending on whether the 15 year option is exercised.[26] Thirdly, one of the central and, I accept, extraordinary, features of the proceeding was that Perpetual applied the terms of the Lease without demur for almost 20 years before alleging any mistake and, further, delayed over three years in bringing the mistake to Myer’s attention. This feature was common to the claims by Perpetual and the defences by Myer. Whilst it was held, ultimately, that the delay on the part of Perpetual was not, in itself, fatal to its case, it could not be said sensibly that it was “unreasonable” for Myer to raise a properly based limitation of actions defence, or similar and properly based equitable defences in such a case. As I have indicated previously, Perpetual makes no such suggestion.
[25]Australian Conservation Foundation v Forestry Commission (1988) 81 ALR 166 at 169.
[26]The amount claimed for financial year 2016 was approximately $2.356 million (see Annexure D of the Further Amended Statement of Claim). If this is multiplied by 12 due to the 12 years from financial year 2017 to financial year 2028, the result is $28,272 million. If it is multiplied by 27 due to the 27 years from financial year 2017 to financial year 2043, the result is $63.558 million. These figures are conservative as they do not assume any inflation.
For the preceding reasons it cannot, in my view, be said that there has been any “disqualifying conduct” on the part of Myer in these proceedings.
As indicated previously, Perpetual also raises some other matters or considerations in support of its submissions that Myer’s costs entitlement should be reduced. These matters are with respect to what are said to be severable issues, discovery issues and cross-examination and submissions of the parties. For the reasons which follow, I am of the opinion that none of these matters provide any basis for reducing Myer’s otherwise, prima facie, costs entitlement.
Perpetual says that the secondary defences “raised clearly severable issues”.[27] As the authorities to which reference has been made indicate, the mere raising of an unsuccessful defence, even if severable, is not, in itself, enough to warrant a departure from the prima facie costs position. In any event, the issues raised by the Myer defences were not, in my view, “clearly severable”. The mere fact that, as asserted by Perpetual, “the parties’ submissions and the Court’s reasons, dealt with each defence separately”[28] does not establish this position. Rather, the fact that the parties’ submissions and the Court’s reasons used separate headings and sections for the purpose of advancing and considering the Myer defences is simply a matter of clarity and drafting, and does not demonstrate substantively that they “raised clearly severable issues”. In this respect, I also accept Myer’s submission that Perpetual’s superficial observation in this respect overlooks a central feature of the proceeding, namely, the extraordinary amount of time during which Perpetual applied the Lease without demur.
[27]Plaintiff’s Submissions on Costs (7 February 2018), [5].
[28]Plaintiff’s Submissions on Costs (7 February 2018), [5].
Indeed, the application of the Lease without demur for almost 20 years was a central element of Myer’s defences and was also clearly relevant to the primary claim advanced by Perpetual, including, in particular, the rectification case. Clearly, the allegation by Perpetual of a common intention was undermined by the parties having applied the Lease without objection for almost 20 years. In this respect, it was held that “[t]he conduct of the parties in applying the relevant provisions of the Lease without demur is, in all the circumstances, indicative of a common intention to be bound by the terms of the Lease as executed”.[29] As Hodgson JA observed in Griffith v Australian Broadcasting Corporation (No 2), an issue which would be of relevance to and would tend to assist another contention, is not severable.[30]
[29]Perpetual Ltd v Myer Pty Ltd [2018] VSC 2, [125].
[30][2011] NSWCA 145, [25]–[26].
Perpetual also says that Myer’s costs should be reduced because “discovery solely relating to the acquiescence and laches defences was required and contested”.[31] It is, however, as Myer submits, incorrect to say that the discovery related “solely” to acquiescence and laches. Myer’s submissions for that application show that it also sought discovery on the basis that the documents were relevant to the Plaintiff’s pleading of s 27(c) of the Limitation of Actions Act 1958 in its Reply[32] and the surrounding circumstances to which the Court may have regard when granting the equitable remedy of rectification.[33] Moreover, I accept that the “mix” of issues raised with respect to discovery is indicative of and consistent with issues raised in Myer’s pleadings, by way of defence generally and defences specifically, being not severable issues in any presently relevant sense.
[31]Plaintiff’s Submissions on Costs (7 February 2018), [6].
[32]See paragraph 26 of the Perpetual Reply.
[33]Defendant’s Submissions on Interlocutory Matters (13 October 2017), [12] and [13].
Perpetual also says that there was “extensive cross-examination of Mr Beer and Mr Brown directed towards the acquiescence defence”[34] and “the submissions of both parties concerning Myer’s defences were focused yet lengthy”.[35] As Myer contends, this does not advance Perpetual’s argument that the defences raised by Myer were “clearly severable”. It simply indicates that time was devoted to these defences, a matter which is not disputed.
[34]Plaintiff’s Submissions on Costs (7 February 2018), [7].
[35]Plaintiff’s Submissions on Costs (7 February 2018), [8].
Conclusion
For the preceding reasons, I accept that Myer should be entitled to 100 per cent of its costs as—
(1) Perpetual has not identified anything that could reasonably be said to be “disqualifying conduct” on Myer’s part;
(2) the defences raised by Myer were only raised in response to, and as a consequence of, Perpetual’s bringing a wholly unsuccessful claim;
(3) it was entirely reasonable for Myer to raise the defences which it raised;
(4) the defences raised by Myer did not raise issues that were “clearly severable”; and
(5) even if there were “clearly severable issues”, Myer should still receive 100 per cent of its costs having regard to the matters to which reference is made in sub-paragraphs (1), (2) and (3).
The parties are to bring in orders accordingly.
SCHEDULE OF PARTIES
PERPETUAL LIMITED (ACN 000 431 827) First Plaintiff
BRIDGEHEAD PTY LTD (ACN 006 082 515) Second Plaintiff
VICINITY FUNDS RE LIMITED (ACN 084 098 180) Third Plaintiff
- AND -
MYER PTY LTD (ACN 004 143 239) Defendant
0
6
0