Scandi International Pty Ltd v Larkfield Industrial Estate Pty Ltd (No 2)
[2018] VCC 628
•9 May 2018
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised (Not) Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-16-02981
| SCANDI INTERNATIONAL PTY LTD and ANOR | Plaintiffs |
| v | |
| LARKFIELD INDUSTRIAL ESTATE PTY LTD | Defendant |
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JUDGE: | HIS HONOUR JUDGE ANDERSON | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9 May 2018 | |
DATE OF JUDGMENT: | 9 May 2018 | |
CASE MAY BE CITED AS: | Scandi International Pty Ltd & Anor v Larkfield Industrial Estate Pty Ltd (No 2) | |
MEDIUM NEUTRAL CITATION: | [2018] VCC 628 | |
REASONS FOR JUDGMENT
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Catchwords: Practice and procedure – Costs – Claim and counterclaim – Multiple parties and issues – “Calderbank” offers of compromise.
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APPEARANCES: | Counsel | Solicitors |
| For the plaintiffs and for the first, second & fourth defendants by counterclaim | Mr L Watts | Simon Nixon & Associates |
| For the defendant and for the plaintiff by counterclaim | Mr M A J McKillop | HWL Ebsworth Lawyers |
For the third defendant by Mr J Guss (in person)
counterclaim
HIS HONOUR:
1 Judgment was delivered in this matter on 4 May 2018. The parties were invited to make submissions on the form of orders proposed and any other issues arising from the judgment, including on the question of the costs of the proceeding. The parties filed and exchanged written submissions on 8 May and made oral submissions on 9 May 2018.
2 Larkfield’s counsel, Mr McKillop, submitted that:
a. Larkfield had been successful both in defending the plaintiffs’ claim and prosecuting its counterclaim and should therefore be paid its costs of the proceeding by the plaintiffs and by all of the defendants to counterclaim;
b. Larkfield should be paid costs on an indemnity basis from the date of the Calderbank offer contained in a letter dated 26 April 2017 or, alternatively, the offer contained in a letter dated 3 November 2017.
3 Scandi, CLF Hong Kong and LHV’s counsel, Mr Watts, submitted that:
a. no order for costs should be made against LHV as no findings were made against it;
b. Scandi and CLF Hong Kong should only “pay 50% of Larkfield’s costs on a standard basis” having regard to Larkfield’s mix of success and lack of success on the many discrete issues raised by the proceeding and the “separate hearing time and separate consideration of [those] issues”.
4 Mr Guss submitted that Larkfield should pay his “costs of the proceeding on a standard basis including reserved costs” as he had “succeeded in his defence to the second amended counterclaim” in respect of the claims against him.
Position of Mr Guss
5 Larkfield succeeded on the plaintiffs’ claim as the plaintiffs did not establish that they were entitled to the goods in storage. If the plaintiffs had succeeded in obtaining an order to regain possession of the goods, they would still have had to pay the outstanding storage charges. The alternative claims based on misleading and deceptive conduct and unconscionable conduct only had relevance if the plaintiffs had otherwise succeeded on their claim.
6 In the judgment, the plaintiffs’ claim required detailed examination of:
a. Mr Guss’ relationship with the other “Casualife” entities and his personal involvement in their business activities, including the transactions which, it was alleged, reflected the purchase and importation of the goods stored at the Larkfield facility;
b. the transactional documents which it was said evidenced the purchase and importation of the stored goods;
c. the dealings between Mr Guss and Larkfield from late September 2013 until mid-2016 when Larkfield took steps to exercise its rights under the uncollected goods legislation.
7 In my view, an examination of those matters justified the dismissal of the plaintiffs’ claim and the orders proposed in relation to the counterclaim, including that the order be made against all the defendants to the counterclaim, including Mr Guss and LHV.
8 Mr Guss breached his warranty of authority by executing a document naming as the tenant a company which had for many years been in liquidation. For a number of years he was the point of contact with Larkfield in relation to the storage of goods at its facility. Mr Guss proposed Scandi as a replacement tenant. He used LHV as a vehicle for the payment of rental, including for substantial periods when that company was deregistered. He otherwise made no mention of LHV to Larkfield until after the proceeding was commenced.
9 Mr Guss acted, at times, as agent, consultant, solicitor and advocate for each of the other three defendants to counterclaim. He was principally involved in the discovery of documents. In his evidence, he refused to provide coherent or credible answers about his involvement in these companies. Mr Guss professed ignorance of relevant requirements of the Corporations Act2001 (Cth) and said it had not been necessary for him to follow the provisions of the Business Names Legislation.
10 Mr Guss was the central figure in this case. He arranged for the storage of goods, masking the true identity of the entity for whom he was acting. When the rental payments fell into arrears, he and the entities with which he was associated sought to recover the stored goods without paying what, at that stage, were modest arrears of rental. The orders which I propose to make simply reflect the failure of a strategy apparently devised by Mr Guss to avoid the responsibilities he undertook. Accordingly, he must have judgment against him and must share liability for the costs of the proceeding.
Position of LHV
11 The position of LHV is similar. The orders on the counterclaim should include LHV because of the assertions made on its behalf that part of the stored goods placed in the Larkfield facility had been owned by LHV at the relevant time.
Position of Scandi and CLF Hong Kong
12 It is conceded that their claim wholly failed. The counterclaim has succeeded on the primary relief claimed by Larkfield. The alternative claims only had relevance if the plaintiffs had otherwise succeeded on their claims for the return of the stored goods without being required to pay the storage charges.
13 The analysis in the plaintiffs’ submissions of the time spent at trial on particular issues is artificial. I have detailed earlier the primary issues in the case. The plaintiffs were unsuccessful in relation to these issues. The plaintiffs must pay the costs of the proceeding, without deduction.
Calderbank offers
14 I do not consider that it was unreasonable for the plaintiffs, Mr Guss and LHV to reject the offers of compromise, for the following reasons:
a. the judgment does not require the payment of a money sum. The “relevant charge” has been quantified and must be paid if the plaintiffs or LHV wish to avoid a sale of the goods under the uncollected goods legislation or, if a sale occurs, the proposed sum which must be deducted if the sale of the goods realises a sufficient sum. The offer might only be justified as an “all-in” figure including costs. The first offer of $175,000 cannot be justified. The rejection of the offer was not unreasonable. The sum of $84,500 referred to in the third offer was held as security, although $7,000 of this sum was not paid as security for costs. The two tranches totalling $77,500 paid in as security for Larkfield’s costs to the date of the trial would suggest, however, that the defendants to counterclaim had unreasonably rejected the offer to pay $84,500;
b. the offers, however, include a number of ancillary covenants, including confidentiality of the terms and the prohibition against making criticisms or similar “comments”, even inferentially, about another party. A confidentiality clause might be regarded as a reasonable incidence of a commercial offer. The non-disparagement provision was, in the terms proposed, not a reasonable incidence of the offer. There is no apparent reason why Larkfield could not have protected itself by confining its compromise offers to the terms of the principal relief it sought by its counterclaim;
c. the third offer was addressed to four parties without differentiation. Mr Guss had been joined in the action as a defendant to counterclaim on 29 August 2016. LHV was not joined until the second amended counterclaim was filed on 10 October 2017. In these circumstances, the rejection of the offer by the four parties was not unreasonable.
Orders
15 Accordingly, I propose to make the following orders:
1. Judgment for the defendant on the plaintiffs’ claim that the plaintiffs’ claim be dismissed.
2. Judgment for the plaintiff by counterclaim against the defendants by counterclaim as follows:
(a) pursuant to section 70 of the Australian Consumer Law and Fair Trading Act 2012 (Vic) (“the Act”), the plaintiff by counterclaim is authorised to sell by public auction, to be conducted by 31 July 2018, the outdoor furniture formerly stored by it in Shed 43A at 400 Somerville Road, West Footscray unless the relevant charge stated in paragraph 2(b) hereof is paid to the plaintiff by counterclaim on or before 31 May 2018;
(b) a declaration pursuant to section 70(2)(c) of the Act that the relevant charge payable to the plaintiff by counterclaim is the sum of $157,582.35, calculated as follows:
(i) $21,794.64, total unpaid rent pursuant to the occupancy agreement;
(ii) $115,435.07, storage of the stored furniture from 1 October 2015 to 21 November 2017;
(iii) 20,969.04, storage of the stored furniture from 22 November 2017 until 9 May 2018;
(c) The plaintiff by counterclaim is permitted to dispose of any goods not sold at the public auction referred to in paragraph 2(a) hereof.
(d) The plaintiff by counterclaim is to apply the proceeds of the sale referred to in paragraph 2(a) hereof, as follows:
(i) firstly, against the costs of conducting the sale;
(ii) secondly, against the costs of disposing of any unsold goods;
(iii) thirdly in payment of the relevant charge referred to in paragraph 2(b) hereof;
(iv) fourthly, into the trust account of the solicitors for the plaintiff by counterclaim to be applied against the costs of the Defendant and Plaintiff by Counterclaim payable pursuant to order 4.
3. The affidavit of Robert Maurice Edward Ades sworn 24 November 2017 is to be sealed in an envelope marked, “Not to be opened except upon order of this Court or the Supreme Court of Victoria”.
4. The plaintiffs, the first and second defendants by counterclaim, and the third and fourth defendants by counterclaim must pay the defendants/plaintiffs by counterclaim’s costs of the proceeding including the counterclaim and all reserved costs, to be assessed by the Costs Court on a standard basis in default of agreement. The costs liability of the third defendant is limited to Larkfield’s costs incurred after 29 August 2016 and the costs liability of the fourth defendant is limited to Larkfield’s costs incurred after 10 October 2017.
5. The monies paid into Court by the plaintiffs totalling $84,500, including the sum of $7,000 paid as security for costs incurred by Larkfield in the auction of the stored furniture restrained by interlocutory injunction and the two tranches of $45,000 and $32,500 paid as security for the defendant’s costs of the proceeding, shall be paid out to the defendant’s solicitors in satisfaction of the order for costs referred to in paragraph 4 hereof.
6. In calculating the amount owing to the defendant for costs, the sum of $5,480.36 shall be allowed as a deduction by the defendant, this being the sum the parties have agreed was paid to Larkfield as a security deposit under the occupancy agreement on about 1 October 2013.
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Certificate
I certify that these 6 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 9 May 2018.
Dated: 9 May 2018.
Zeinab Ali
Associate to His Honour Judge Anderson
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