Sturesteps v A G McGrath
[2010] NSWSC 903
•3 June 2010
CITATION: Sturesteps v A G McGrath & ors [2010] NSWSC 903 HEARING DATE(S): 3 June 2010 JURISDICTION: Equity Division JUDGMENT OF: Brereton J EX TEMPORE JUDGMENT DATE: 3 June 2010 DECISION: Motion for leave to amend defence be dismissed with costs. Indemnity costs order refused. CATCHWORDS: CORPORATIONS – Winding up – Winding up in insolvency – (CTH) Corporations Act 2001 s 556 – calculation of employee leave entitlements for the purposes of (CTH) Corporations Act 2001 s 556 – whether the rule in Clayton’s case applies to accrual of annual leave – PROCEDURE – Costs – Departing from the general rule – whether costs should be ordered on an indemnity basis LEGISLATION CITED: (VIC) Long Service Leave Act 1992 s 57 CATEGORY: Consequential orders CASES CITED: Calderbank v Calderbank [1975] All ER 333
Devaynes v Noble (Clayton’s Case) (1816) 35 ER 781
Sturesteps v A G McGrath & Ors [2010] NSW 169PARTIES: 2006/258096
George Osvald Sturesteps (plaintiff)
Anthony Gregory McGrath (first defendant)
Christopher John Honey (second defendant)
HIH Casualty & General Insurance Ltd (in Liq) (third defendant)
2003/82973
HIH Overseas Holdings Ltd (in Liq) (plaintiff)
Beryl Donna Sturesteps (defendant)FILE NUMBER(S): SC 2006/258096; 2003/082973 COUNSEL: 2006/258096
BW Rayment QC w A Metcalfe (plaintiff)
ST White SC w RM Foreman (defendants)SOLICITORS: 2006/258096
Benjamin & Khoury (plaintiff)
Blake Dawson (defendants)
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
BRERETON J
Thursday, 3 June 2010
2003/082973 HIH Overseas Holdings Ltd (in liq) v Beryl Donna Sturesteps
2006/258096 George Osvald Sturesteps v A G McGrath & ors; In the Matter of HIH Casualty & General Insurance Ltd
JUDGMENT (ex tempore)
1 HIS HONOUR: I published reasons for judgment in these proceedings on 19 February 2010 at the conclusion of a five-day hearing which had taken place that week [see Sturesteps v A G McGrath & Ors [2010] NSW 169]. I directed that the parties bring in short minutes to give effect to those reasons for judgment. That was duly done. Last week, on 27 May, I gave reasons resolving a number of issues of principle in dispute which arose out of proposed short minutes [see Sturesteps v A G McGrath & Ors [2010] NSWSC 896].
2 That left for determination today several remaining matters. The first was in the Beryl Sturesteps proceedings, that is to say proceedings 1847 of 2003, now 2003/00082973, in which Mrs Sturesteps obtained leave to file a motion, which was to be heard today, seeking leave to amend her defence to raise a limitation defence. Directions were made for the exchange of evidence and submissions. At the commencement of the hearing today, counsel for Mrs Sturesteps announced that that application would not be pressed. Accordingly, I order that the motion filed on 21 May 2010 be dismissed with costs.
3 The next issue relates to the principal proceedings, that is Mr Sturesteps' proceedings against HIH and its liquidators. There remained for resolution in those proceedings issues pertaining to annual leave and long service leave.
4 It is convenient to deal first with the question of long service leave. The calculations of the parties differed, in that Mr Sturesteps claimed an accrual of long service leave in respect of the period after he had completed thirty years service until his eventual termination some 117 weeks later, whereas the defendant's calculations did not make provision in respect of that period. It seems clear from (VIC) Long Service Leave Act 1992, s 57, that he is entitled to long service leave in respect of that period, equivalent one-sixtieth of the time served. Ultimately, the issue was not pressed on behalf of the defendants.
5 Accordingly, as I understand it, the parties are now agreed that the appropriate calculation for long service leave is $372,433, and the short minutes should reflect that amount in respect of long service leave. I do not understand there to be any remaining dispute as to the apportionment of that amount between non priority days and other days.
6 So far as annual leave is concerned, the first issue pertained to the total calculation of the number of days and those for which credit was to be given. Ultimately, both parties accepted that upon termination Mr Sturesteps had an entitlement to 188 days annual leave, which at his then prevailing rate of pay and with a 17.5 percent loading produced a sum of $588,727.
7 However, in this respect there was an issue as to apportionment of that amount between non priority days, and other days. For the defendants, it was submitted that the whole was attributable to non priority days because Mr Sturesteps had accrued ninety-eight days annual leave as at 1992, took about ten days annual leave per year, when taking annual leave was using the earliest accrued leave (that is, leave accrued as long ago as 1982), and by 18 April 2001 had used all the leave accrued before 24 April 1989 when he became a director of the third defendant, so that his only remaining annual leave entitlements were attributable to the period after he became a director (except for eleven days accrued in respect of the period after 12 September 2000 when he resigned as a director).
8 For Mr Sturesteps, it is submitted that annual leave as it accrues forms a pool from which the employee draws each time he takes leave at the rate of pay applicable when the leave is taken, and that there is no presumption that upon taking leave the employee is taking that which accrued earliest.
9 So far as the researches of counsel have ascertained, there is no authority indicating whether the rule in Devaynes v Noble (Clayton’s Case) (1816) 35 ER 781 or some similar rule applies to the accrual and taking of annual leave. It is however well established that the policy underlying annual leave is that employees should have a break from work on a regular basis, approximately annually, if not more frequently. Normally, legislative and industrial instruments have encouraged the actual and prompt taking of annual leave as opposed to its long-term accrual, although there has been some relaxation of the rigours of that approach in more recent times. But leave is an entitlement which is credited to an employee on a progressive basis as time passes, and is debited against that employee's leave account each time an employee takes leave.
10 It seems to me that there is no reason why the policy reflected in cases such as Clayton's Case should not apply in those circumstances, namely, that the first amounts credited are also the first amounts debited. On that basis, in my view the defendant's submissions are correct, and the plaintiff is entitled to priority for the 11 days annual leave accrued in respect of the period after 12 September 2000, but the remainder of his annual leave entitlement is attributable to non priority days while he was a director between 24 April 1989 and 12 September 2000.
11 The final issue now requiring determination relates to Mrs Sturesteps’ proceedings, and concerns the costs of those proceedings.
12 HIH Overseas, as the plaintiff in those proceedings, seeks an order that its costs from 12 July 2004 be assessed on the indemnity basis. That application is made on the basis of a Calderbank offer of that date – expressed to be without prejudice save as to costs, and expressly referring to Calderbankv Calderbank [1975] All ER 333 and the intention to rely on the offer in support of an order for indemnity costs – by which the solicitors for HIH Overseas offered to accept payment of $US200,000 in full and final settlement of the proceedings with each party to bear their own costs, mutual releases and a discontinuance. As I have concluded that the plaintiff in those proceedings is entitled to judgment for the sum of $US200,000 and interest, which at the applicable rate will result in the total judgment being the sum of $570,000 or thereabouts, and costs, that offer contained a very significant element of compromise. There is no doubt that it is a relevant and highly relevant consideration on the question of costs although, that being in the form of a Calderbank letter as distinct from a formal offer of compromise under the rules, it enlivens a discretion rather than requiring prima facie that there be an indemnity costs order.
13 Against the proposition that there should be an indemnity costs order, it is urged first that Mr Sturesteps always offered to have the loan brought to account and deducted from his entitlements. That appears to be so, although in the proceedings Mrs Sturesteps raised a number of defences to the effect that the loan was not repayable at all. Notwithstanding that, had the Beryl Sturesteps proceedings stood alone as a separate piece of litigation, there would have been a very strong case for an indemnity costs order based on the offer.
14 But they did not stand alone as a separate piece of litigation. They were heard together with and overlapped Mr Sturesteps’ proceedings. In Mr Sturesteps’ proceedings, I was asked to make an indemnity costs order principally on the basis that, although there was legitimate dispute as to significant aspects of Mr Sturesteps' claim, at least part of it – most particularly the long service leave claim – was never genuinely or could not genuinely have been in dispute. Although there was force in that argument, because of the overall context of the proceedings and the legitimacy of the dispute as to other aspects of his claim, I declined to make an indemnity costs order.
15 Although it is true that the Beryl Sturesteps proceedings were brought against her alone, it was well arguable, and indeed has not been resolved and did not need to be resolved, that the loan was a loan to Mr Sturesteps and Mrs Sturesteps jointly: the fact that Mr Sturesteps was not sued did not preclude HIH Overseas from recovering against Mrs Sturesteps.
16 In any event, it cannot be doubted that the capacity, willingness and readiness of Mrs Sturesteps to repay would likely have been much enhanced had the sums which I have found to be due to Mr Sturesteps promptly been paid to him. In that way I think there was such a significant overlap of the issues and the underlying merits of the dispute on each side that it would be wrong to identify the Beryl Sturesteps' proceedings as a separate component attracting an indemnity costs order, just as it would have been wrong to identify the claim for statutory entitlements, in particular the long service leave, in that way.
17 I will not make an indemnity costs order in respect of the Beryl Sturesteps proceedings.