Pomeroy Pacific Pty Ltd v Melstone Wellington Pty Ltd (No 2)

[2017] VCC 1806

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

EXPEDITED LIST

Case No. CI-17-01945

Pomeroy Pacific Pty Ltd	Plaintiff
v
Melstone Wellington Pty Ltd and Melstone Capital Pty Ltd	Defendants

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JUDGE:	His Honour Judge Woodward
WHERE HELD:	Melbourne
HOW MADE:	On the papers
DATE OF RULING:	7 December 2017
CASE MAY BE CITED AS:	Pomeroy Pacific Pty Ltd v Melstone Wellington Pty Ltd (No 2)
MEDIUM NEUTRAL CITATION:	[2017] VCC 1806

RULING ON COSTS
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HIS HONOUR:

1 In the substantive proceeding, I gave judgment for Pomeroy against Melstone Wellington in the total sum of $69,218 plus interest at the rate fixed for the time being under s2 of the Penalty Interest Rates Act 1983 (Vic) on and from 25 May 2017. I dismissed the claim against Melstone Capital. I noted in my reasons that although costs would normally follow the event, the concessions made by the Melstone parties in their submissions suggested that there may be a basis for departing from the usual order for costs in this case.

2       I therefore invited the parties to seek to agree on the form of final orders and on costs or, failing agreement, to file and serve written submissions.  The parties were unable to reach agreement, and they each filed written submissions dated 29 November 2017.

Pomeroy’s offer of compromise

3       Pomeroy has submitted that I should order costs against Melstone Wellington on the standard basis; and from 11am on 30 October 2017 on an indemnity basis if Pomeroy’s costs of the proceeding exceed $39,458.69.  In supporting its claim for indemnity costs, Pomeroy relies upon an offer of compromise delivered on 26 October 2017 pursuant to which it offered to accept an “all in” figure of $120,000 in full and final settlement of the proceeding.  Pomeroy submits that it is likely, upon assessment, that Pomeroy’s costs will exceed the amount allowed by the offer and that the offer will therefore “bite”.

4       The Melstone parties argue that no order should be made on the offer of compromise for three reasons.  First, the offer purported to impose liability for payment of the settlement sum on both Melstone parties, in circumstances where there was no basis in fact or law to impose any obligation on Melstone Capital.  They note that the offer was not capable of acceptance by Melstone Wellington alone, and any purported acceptance by Melstone Wellington alone would have constituted a counter-offer.

5       Second, the Melstone parties submit that because the offer of compromise imposed liability jointly and severally on the Melstone parties, Pomeroy did not obtain judgment “no less favourable to the plaintiff than the terms of the offer” (r26.08(2)).  Finally, they argue that it was not unreasonable for the Melstone parties to reject the offer as it was made and expired before expiry of the time allowed for the Melstone parties to consider and respond to the amended pleading.

6       I agree with the Melstone parties that the form of the offer of compromise was such that it could only be accepted by both Melstone Wellington and Melstone Capital in effect assuming liability to pay the settlement sum.  The Melstone parties have correctly stated that the effect of my reasons in the substantive proceeding was that there is no basis in fact or law to impose any obligation on Melstone Capital.  I therefore agree with the Melstone parties that no order should be made on the offer of compromise, at least for the first two reasons they give.  The position may have been different if instead of referring only to “the defendants”, the offer of compromise had expressly allowed for payment of the settlement sum by “either or both of the defendants”. 

7       I also see some force in the third and final reason given by the Melstone parties.  I accept that there is authority for the proposition that the principles set out by the Court of Appeal in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 concerning Calderbank offers, are equally applicable to the question of determining whether a party’s rejection of an offer of compromise is unreasonable (Smith v Jovanoska (No 2) [2013] VSC 714 at [11] to [13] and Hambleton v State Trustees Ltd [2016] VSC 215 at [22]).

8       In my view, Pomeroy’s late amendment to the pleadings did materially alter the complexion of the proceeding, particularly through the addition of the claim for the termination fee.  That fee ultimately accounted for more than half of the judgment sum.  In my view, it was not unreasonable for the Melstone parties to reject the offer of compromise by allowing the offer to expire while they absorbed the implications of the foreshadowed amendments to Pomeroy’s statement of claim.

Pleading amendments

9       The Melstone parties have set out in their submissions the circumstances of Pomeroy’s late amendment to its statement of claim.  They submit that, but for the late joining of claims which were immediately admitted by the Melstone parties, Pomeroy succeeded for less than 50% of the Magistrates’ Court jurisdiction.  They argue that Pomeroy should not be rewarded for amending its case three weeks before trial where the additional claims were known to Pomeroy, where there had been no prior demand to alert the Melstone parties to liability for these claims and the claims were conceded by the Melstone parties at the first reasonable opportunity.

10      While I agree that Pomeroy should not be rewarded for amending its case at a late stage in the proceeding, nor do I consider it should be penalised.  It is almost inevitable that in the process of trial preparation, parties and their legal advisers will look more critically at all aspects of their case.  A party will often make a forensic decision at that stage to adjust or refine their claims, often with the result that the issues in the proceeding are narrowed.  As a general rule, this review and refinement should not be discouraged.  Although the amendments in this case added claims, they are unlikely to have taken the Melstone parties by surprise and nor did they materially increase the burden on either party in the proceeding.

11      On the whole, the parties showed a commendable degree of cooperation in the conduct of this proceeding.  Appropriate concessions were made on both sides, resulting in the proceeding being heard and determined much more efficiently than might otherwise have been the case.  In my view, the matters complained of by the Melstone parties are of insufficient weight to justify a costs penalty.

Melstone parties’ Calderbank offer

12      Pomeroy’s submissions refer to a Calderbank offer made by the Melstone parties to Pomeroy at about 9pm on 16 November 2017.  The submissions identify four reasons why it was not unreasonable for Pomeroy to refuse to accept the offer.  The Melstone parties’ submissions make no reference to the Calderbank offer and I assume, therefore, that they do not rely on the offer on the question of costs.  Had they done so, I would have accepted Pomeroy’s submission that it was not unreasonable for it to refuse the offer for at least the first three of the reasons they identify.

Costs of Melstone Capital

13      Pomeroy submits that there should be no order as to Melstone Capital’s costs.  It argues that while Pomeroy failed against Melstone Capital, the Melstone parties were commonly represented, and they have common directors. A single defence was filed and the defence was conducted jointly at all times. They say there is no suggestion that any party incurred any additional cost by reason of the joinder of the second defendant to the proceeding.

14      The Melstone parties submit that, as the plaintiff was wholly unsuccessful against Melstone Capital and on all matters at trial; and as a result of the timely admissions by the Melstone parties and a limited quantum ultimately awarded, the court ought to award costs pursuant to r63A.04 - on an issues or part of proceeding basis.  They submit further that Pomeroy:

“…should not be awarded costs on a standard basis where some of its work was directed to issues on which it wholly failed: i.e. the agency, the notice period and the contractual interest claim.  As noted in Marshall [v Berndt (No 2) (Ruling as to Costs) [2011] VCC 1421 at [39]-[41]], there is no need to make an arithmetical assessment.”

15      Applications to apportion costs according to success or failure of one party should be approached with great caution (Hughes v Western Australian Cricket Association (Inc) [1986] ATPR 40-748 at 48,136). However, in my view, this is an appropriate case to do so. Pomeroy’s agency argument was unsupported both in fact and at law, and resulted in the unnecessary joinder of a second defendant in the proceeding. It was also an entirely discrete part of Pomeroy’s case. In my view, the weakness of the agency argument, the dismissal of the proceeding against Melstone Capital and the other matters raised by the Melstone parties in their submissions summarised above, justify a 25% reduction in Pomeroy’s costs.

Certification for counsel

16      Pomeroy has submitted that I should certify for counsel at an amount above the County Court scale.  In my view, neither the complexity of the issues in the proceeding nor the burden of the conduct of the trial warrant such a certification. However, I am willing to accede to Pomeroy’s alternative submission that I certify for counsel at the maximum permitted by the County Court scale, being $449 per hour and $4,491 per day (ex GST).

Order

17      For the reasons above, the orders will be as follows:

1       There be judgment for the plaintiff against the first defendant in the sum of $76,139.80, together with interest of $4,528.48.

2       The plaintiff’s claim against the second defendant is dismissed, with no order as to costs.

3       The first defendant pay 75% of the plaintiff’s costs of the proceeding on the standard basis, in default of agreement.

4       Certify the fee for the plaintiff’s counsel at $449 per hour and $4,491 per day (ex GST), to a total sum to be assessed in default of agreement.

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Certificate

I certify that these 6 pages are a true copy of the ruling of His Honour Judge Woodward delivered on 7 December 2017.

Dated:      7 December 2017

Simon Bobko

Associate to His Honour Judge Woodward