Ray Mullins and Sons Pty Ltd v Skycorp Investments Pty Ltd [No 2]
[2006] WASC 241 (S)
RAY MULLINS & SONS PTY LTD -v- SKYCORP INVESTMENTS PTY LTD [No 2] [2006] WASC 241 (S)
| Link to Appeal : | [2011] WASCA 49 |
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2006] WASC 241 (S) | |
| Case No: | CIV:2288/2003 | 21 - 23 AUGUST 2006, 8 MAY 2008 & 23 APRIL 2009 | |
| Coram: | TEMPLEMAN J | 30/10/06 | |
| 25/05/09 | |||
| 10 | Judgment Part: | 1 of 1 | |
| Result: | Plaintiff have costs of action to first day of trial Plaintiff have half the costs of getting up for trial Defendant have costs of the trial | ||
| B | |||
| PDF Version |
| Parties: | RAY MULLINS & SONS PTY LTD (ACN 009 177 324) SKYCORP INVESTMENTS PTY LTD (ACN 078 121 534) |
Catchwords: | Costs Trial and judgment of action Action constituted by claim for overpaid rent and by dispute over construction of lease Defendant's discovery and expert reports provided too late to limit issues before trial Plaintiff consequently amends pleadings at start of trial Trial proceeds the construction issues only Defendant substantially successful in judgment Whether O 24A offer falls in favour of defendant Whether costs follow event Whether rate of interest different to Supreme Court rate |
Legislation: | Nil |
Case References: | BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266 Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Co (1882) 11 QBD 55 Duncan & Weller Pty Ltd v Mendelson [1989] VR 386 Grbavac v Hart [1997] 1 VR 154 Ray Mullins & Sons Pty Ltd v Skycorp Investments Pty Ltd [2005] WASC 142 Ray Mullins & Sons Pty Ltd v Skycorp Investments Pty Ltd [2006] WASC 241 Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
DECISION : 25 MAY 2009 FILE NO/S : CIV 2288 of 2003 BETWEEN : RAY MULLINS & SONS PTY LTD (ACN 009 177 324)
- Plaintiff
AND
SKYCORP INVESTMENTS PTY LTD (ACN 078 121 534)
Defendant
Catchwords:
Costs - Trial and judgment of action - Action constituted by claim for overpaid rent and by dispute over construction of lease - Defendant's discovery and expert reports provided too late to limit issues before trial - Plaintiff consequently amends pleadings at start of trial - Trial proceeds the construction issues only - Defendant substantially successful in judgment - Whether O 24A offer falls in favour of defendant - Whether costs follow event - Whether rate of interest different to Supreme Court rate
(Page 2)
Legislation:
Nil
Result:
Plaintiff have costs of action to first day of trial
Plaintiff have half the costs of getting up for trial
Defendant have costs of the trial
Category: B
Representation:
Counsel:
Plaintiff : Mr A Metaxas
Defendant : Mr P G Clifford
Solicitors:
Plaintiff : Arthur Metaxas & Co
Defendant : Lawton Gillon
Case(s) referred to in judgment(s):
BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266
Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Co (1882) 11 QBD 55
Duncan & Weller Pty Ltd v Mendelson [1989] VR 386
Grbavac v Hart [1997] 1 VR 154
Ray Mullins & Sons Pty Ltd v Skycorp Investments Pty Ltd [2005] WASC 142
Ray Mullins & Sons Pty Ltd v Skycorp Investments Pty Ltd [2006] WASC 241
Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596
(Page 3)
1 TEMPLEMAN J: On 31 October 2006, I delivered judgment in a dispute between tenant and landlord as to the true construction of the lease, and its effect on the calculation of rent and the tenant's contribution to variable outgoings payable under the lease: Ray Mullins & Sons Pty Ltd v Skycorp Investments Pty Ltd [2006] WASC 241.
2 In the action, the plaintiff tenant claimed to have overpaid the defendant landlord by an amount of $263,247.69, down to 30 June 2005 in respect of rent and variable outgoings. However, as I said in my reasons:
Although this is, essentially, a money claim, I have not been asked to calculate the amounts which should have been paid by the plaintiff to the defendant in respect of rent and contributions to variable outgoings. I have been asked only to make findings as to the areas occupied by the plaintiff and the various tenants referred to above, and the relevant periods of occupation. On the basis of those findings, the financial calculations will be performed by the parties and their representatives [175].
3 The parties have now performed the relevant calculations and agreed the amounts payable under the lease. However, the parties do not regard this process as involving a compromise of the action. Rather, they are agreed that it has been an arithmetic exercise. That being so, the parties contend - and I accept - that my judgment should not be regarded as interlocutory, but as a final judgment about the issues it resolved.
4 If the action had been compromised, following an interlocutory judgment, it would probably have been inappropriate for any order to be made about the costs: see Seaman, Civil Procedure - Western Australia [66.10.14]. However, on the basis that the judgment was final, each party claims to have been successful and seeks orders for costs against the other.
5 In essence, the plaintiff seeks its costs because the final outcome has been a substantial repayment (or crediting) of amounts of rent and variable outgoings paid previously.
6 The defendant takes a narrower view. It contends that because it was successful in relation to 14 out of the 15 discrete issues resolved at trial, it should have the costs of the action. The defendant relies also on an offer made under O 24A of the Rules of the Supreme Court 1971 (WA).
7 In my view, there is some merit in both contentions.
(Page 4)
8 The plaintiff's original claim, as endorsed on the writ filed on 27 October 2003, was that it had overpaid rent and variable outgoings because the area of the demised premises was less than that asserted by the defendant. The proportion of variable outgoings was calculated by a formula which included the floor area of the demised premises as the numerator and the floor area of the building as the denominator. The floor area of the building is defined in the lease to be the aggregate floor area of the lettable parts. These are the parts of the building designated by the defendant as intended for letting.
9 At that stage, the plaintiff did not allege that the defendant was basing its variable outgoings calculation on incorrect building areas: only that the area of the demised premises was incorrect.
10 By letter dated 27 November 2003, written 'without prejudice except as to costs', the defendant's solicitors wrote to the plaintiff's solicitors setting out an offer made by the defendant to settle the action.
11 By letter dated 11 December, the plaintiff's solicitors informed the defendant's solicitors that the offer was not acceptable, for a number of reasons. These included the fact that the plaintiff disputed the floor area of the building.
12 In their letter, the plaintiff's solicitors requested that discovery be given. However, the defendant did not give discovery until 4 March 2004.
13 On 22 March, the plaintiff's solicitors wrote to the defendant's solicitors in relation to ongoing negotiations. The plaintiff's solicitors said:
It is impossible for my client to know what is the correct percentage of variable outgoings which it is liable to pay unless it knows the floor area of the building. My client does not know the floor area of the building and your client gives no discovery of documents relating to that topic notwithstanding that it is the lessee of the building from the Minister of Transport.
Your client's failure to give discovery of the documents which would give my client some information as to the floor area of the building is consistent with a pattern of conduct on your client's behalf where it has sought at every opportunity to frustrate my client being fully informed as to all relevant facts to enable my client to make an informed judgment as to its rights and obligations.
(Page 5)
14 On 21 May, the plaintiff applied for further and better discovery. It sought, inter alia, documents relating to the floor area of the building. At that stage, this was not an issue on the pleadings. Nor could it have been, because the plaintiff had no knowledge of the floor area of the building and had no right of access which would have enabled it to have a survey carried out. However, on the application of the Peruvian Guano test, documents in the defendant's possession relating to the floor area of the building were clearly discoverable: Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Co (1882) 11 QBD 55, 63.
15 No doubt for that reason, the case management registrar ordered the defendant to give discovery of:
1.1 reports to the defendant from any surveyors engaged by the defendant for the purpose of surveying the building ('Building') of which the premises leased to the plaintiff ('Premises') form part of any parts of the Building since 1 December 1997;
…
1.5 documents recording the basis for apportionment of variable outgoings in respect of the Building since 1 December 1997;
1.6 plans for the Building.
16 On 11 November 2004, the plaintiff's solicitors wrote to the defendant's solicitors noting that plans discovered thus far, omitted some 30% of the total lettable area of the building, as well as plans of premises occupied by former tenants. However, on the basis of what the plaintiff's solicitors described as a 'best guess case', the plaintiff amended its statement of claim in February 2005, so as to plead the floor areas of the building.
17 In May 2005, the defendant had the building surveyed and amended its defence accordingly.
18 The plaintiff applied again for further discovery of documents relating to the floor area of the building. The application was partially successful. On 20 June 2005 Master Newnes (as his Honour then was) made orders for discovery of leases and licence agreements, limited to those documents or parts of such documents which relate to the floor area of the relevant premises, the total areas occupied by the tenants and licensees, reports to the defendant from any surveyors engaged by the defendant for the purpose of surveying the building since 1 December 1997, and any plans of the buildings or alterations to the building since
(Page 6)
- 1 December 1997: Ray Mullins & Sons Pty Ltd v Skycorp Investments Pty Ltd [2005] WASC 142.
19 Discovery was given in compliance with those orders on 11 August 2005.
20 The plaintiff filed a substituted statement of claim on 28 February 2006.
21 The defendant filed a substituted defence on 27 April 2006. However, further amendments were made to the pleaded floor areas shortly before and during trial so that the pleadings were not put into their final form until the trial had concluded.
22 This was of no consequence, because, as counsel for the plaintiff informed me when the trial commenced, as a result of expert reports prepared by the defendant's surveyors, which the plaintiff's solicitors had received only that day (ts 172), all but one of the floor areas previously in issue had been agreed.
23 That being so, the issues at trial arose only from questions of construction of the lease. They included an issue as to whether four specific areas were, or were not, included in the demised premises and whether other areas in the building ought to have been designated by the defendant as being intended for letting. It was necessary to determine these issues in order to enable the correct rent and variable outgoing contributions to be calculated.
24 There is no doubt that at trial, the defendant was substantially successful. If the action has been prosecuted from the outset on the pleadings as they were in their final form (and on the basis of the agreed areas) the plaintiff would have been ordered to the pay the defendant's costs. That is because 'the Court will generally order that the successful party … recover his costs': O 66 r 1(1). Or, as it is commonly put, 'costs follow the event'.
25 In the present case, the 'event' is the determination of the construction issues, not the amount of money recouped by the plaintiff. I emphasise, that this was not an issue at the trial.
26 The defendant disputes the relevance of the discovery issues to which I have referred above. However, I consider that those issues are relevant. If the defendant had given proper discovery at an early stage, and had provided to the plaintiff the surveyors' reports which were
(Page 7)
- produced only at the commencement of the trial, the plaintiff would have been at risk as to costs if it then pursued its claim.
27 However, the position was that the plaintiff had a good case for the recovery of overpaid rent and variable outgoings but was not able to clarify its position until the first day of the trial.
28 That being so, I consider that the plaintiff should be entitled to its costs of the action, excluding the costs of the trial, but including a substantial part of the costs of getting up for trial.
29 Clearly, part of the time spent in getting up must have been attributable to the dispute as to the floor areas, and part to the construction issues. I will allow the plaintiff one half of those costs.
30 If any interlocutory or pre-trial orders were made on the basis that costs would be in the cause, I consider that the defendant should pay the plaintiff's costs of such orders.
31 I therefore conclude that the appropriate order should require the defendant to pay the plaintiff's costs of the action down to, but not including, the first day of trial and one half of the plaintiff's costs of getting up for trial.
32 The plaintiff should then pay the defendant's costs of the trial.
33 In each case, the costs should be taxed if not agreed and the lesser amount set off against the greater.
34 The parties have expended considerable time and effort in calculating the amounts due in respect of rent and variable outgoings, and in respect of the argument as to costs.
35 As to the former: I consider that the arithmetic exercise performed after the outstanding construction issues had been resolved at trial, was essentially non-contentious and should not attract any order for costs.
36 As to the latter: I consider that because both parties have been partially successful in relation to their respective costs arguments, there should be no order as to costs.
(Page 8)
An O 24A offer
37 On 22 April 2004, the defendant's solicitors wrote to the plaintiff's solicitors making an offer under O 24A of the Rules of the Supreme Court 'without prejudice except as to costs'.
38 The defendant's offer, as set out in the letter, was to pay the plaintiff the sum of $156,384.71, being the amount of rent and variable outgoings the defendant calculated as having been overpaid by the plaintiff
due to the premises not being resurveyed and/or the mutual mistake of fact as to the floor area of the premises as pleaded in [the plaintiff's] statement of claim.
- There was also an offer to pay interest on the overpaid amounts and the plaintiff's costs of the action to date.
39 There is a well-established principle that an offer of compromise ought not to leave the person to whom it is addressed in any reasonable doubt as to its effect: see Seaman [24A.1.1] citing Duncan & Weller Pty Ltd v Mendelson [1989] VR 386, 401; and Grbavac v Hart [1997] 1 VR 154, 155.
40 The defendant's offer was written at a time when the plaintiff was protesting (and justifiably so) that it could not determine the correct percentage of variable outgoings unless it knew the floor area of the building. I have already referred to the letter dated 22 March 2004 from the plaintiff's solicitors to the defendant's solicitors, in which it was said:
My client does not know the floor area of the building and your client gives no discovery of documents in relation to that topic notwithstanding that it is the lessee of the building from the Minister for Transport.
- I accept the plaintiff's submission that the defendant cannot take advantage of its failure to provide proper discovery. In my view, therefore, the defendant is not entitled to avail itself of the protection afforded by O 24A.
41 The point is emphasised by the fact that by letter dated 6 May 2004, from its solicitors to the defendant's solicitors, the plaintiff made a counter-offer including a proposal that the area of the building be determined by an independent surveyor appointed by the parties or, in default of agreement, by the President of the Law Society. The surveyor's opinion as to the area of the building was to be final and binding. The offer was not accepted.
(Page 9)
Interest
42 By cl 3.4 of the lease between the parties, the plaintiff was to pay to the defendant interest at the 'Rate', on any money unpaid for seven days from the due date for payment until the actual date of payment.
43 By cl 1.1, the term 'Rate' is defined to mean the aggregate of the rate of the 2% per annum 'and the rate of interest charged from time to time by the Commonwealth'. I assume the reference to 'the Commonwealth' to be intended as a reference to the Commonwealth Bank. In its submissions, the plaintiff apparently assumes the relevant rate to be the Commonwealth Bank Overdraft Index Rate. However, it is by no means clear that this is so.
44 The point of the plaintiff's submission is that because it would have been required to pay interest on unpaid monies at a rate which is likely to have been much greater than that payable under s 32 of the Supreme Court Act 1935 (WA), it would be inequitable for the defendant to be required to pay interest on overpaid monies at that lower rate.
45 By O 36 r 20 of the Rules of the Supreme Court, in computing interest payable under s 32 of the Supreme Court Act, the rates prescribed under s 8 of the Civil Judgments Enforcement Act 2004 (WA) may be used as a guide, subject to any evidence adduced. The relevant rate is 6% per annum.
46 The plaintiff has not adduced any evidence relating to the payment of interest, other than to the provisions of the lease, referred to above. The plaintiff's contention appears to be based on some unspecified equitable ground. However, I see no basis for the intervention of equity in the present circumstances. It follows, I think, that to accede to the plaintiff's submission would result in the implication of a term into the lease despite the fact that this is not a matter which has been raised in the action.
47 In any event, the term would need to satisfy the well known criteria established by the Privy Council in BP Refinery (Westernport) Pty Ltd v Hastings Shire Council (1977) 180 CLR 266, and endorsed by the High Court in Secured Income Real Estate (Aust) Ltd v St Martins Investments Pty Ltd (1979) 144 CLR 596, 605 - 606. Such a term:
1. must be reasonable and equitable;
2. must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
(Page 10)
- 3. must be so obvious that 'it goes without saying';
4. must be capable of clear expression;
5. must not contradict any express term of the contract.
48 In my view, the second and third of the criteria set out above are not satisfied in the present case.
49 I therefore consider that the defendant should pay interest on monies overpaid by the plaintiff at the rate of 6% per annum, from the date of payment until repayment.
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