Sululola v Mbachilin (No 2)
[2020] VCC 591
•26 February 2020
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-18-05511
| ALADE ABIODUN SULULOLA | Plaintiff |
| v | |
| GODWIN MBACHILIN | Defendant |
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JUDGE: | HIS HONOUR JUDGE MACNAMARA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 26 February 2020 | |
DATE OF JUDGMENT: | 26 February 2020 | |
CASE MAY BE CITED AS: | Sululola v Mbachilin (No 2) | |
MEDIUM NEUTRAL CITATION: | [2020] VCC 591 | |
REASONS FOR JUDGMENT
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Subject: Form of final orders; Application for indemnity costs
Catchwords: Specific Performance; price payable to plaintiff for units to be transferred to be set off against costs payable by defendant; proper rate of interest payable on price of units; price of units and costs co-ordinate obligations; undertaking by plaintiff to prepare bill of costs for assessment and promptly prosecute assessment application if costs not agreed.
Cases Cited: Goldsbrough, Mort & Co Ltd v John Thomas Quinn (1910) 10 CLR 674
Judgment: Order for specific performance of settlement agreement; Indemnity costs order.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms Wilson | DCA Lawyers |
| For the Defendant | Ms Yao | AJH Legal Group |
HIS HONOUR:
1 Late last year, I published reasons determining this proceeding which included a counterclaim brought by the defendant, Dr Mbachilin, against the plaintiff, Dr Sululola, and his trustee company, Repheka Pty Ltd. I did not, at that stage, pronounce final orders and reserved costs. Now, I have heard argument as to what orders should be made to give effect to my reasons and also to deal with the question of costs.
2 The first question which arises is, given my determination that in the circumstances the plaintiff was entitled to specific performance of a settlement agreement upon his reimbursement to the defendant on outlays made by the plaintiff, it is necessary to determine the quantum of those outlays. The parties were at odds on that question and my reasons did not finally determine it.
3 What ultimately remained in dispute was whether, in the circumstances, the defendant was entitled to a refund for certain outlays totalling $11,371.71. According to the plaintiff, he made a refund of 50 per cent of that amount upon the assumption that the defendant had incurred half of that amount.
4 The defendant’s contention is that this refund was appropriately made and he did, in truth, incur the outlay which the plaintiff supposed that he had. The only evidence which could be pointed to in favour of the defendant having incurred that outlay was the refund itself and the email which came from the plaintiff admitting that such an outlay had been made.
5 In the absence of any evidence affirmatively establishing that the defendant in fact made the outlay of $11,371.71, I accept the plaintiff’s now position that he was in error in supposing that the defendant had made that outlay.
6 Accordingly, the quantum payable by the plaintiff as part of the specific performance which, in accordance with the published reasons I will be ordering, will be the sum of $100,609.33.
7 The next question for determination is costs.
8 Ms Yao of counsel, who appeared on behalf of the defendant, concedes that the principle of costs following the event would have it that her client must be held liable for the costs of the proceeding on the standard basis.
9 Ms Wilson on behalf of the plaintiff, however, contends that in the events that have occurred the award of costs should be made on the indemnity scale. She points to two considerations. The first is that in October last year there was an offer to settle the proceeding expressed in terms of Order 26 of the Court’s Rules. The amount offered in effect `all in’ was $120,000.
10 Ms Wilson contends that since her client has obtained an outcome no less favourable than the offer, with the offer not having been accepted, he is entitled to costs on the full indemnity basis. She says that even when allowance is made for the fact that there will be interest payable upon the price to be paid by the plaintiff, the $120,000 was still a more favourable outcome for the defendant than the one which has in fact occurred as a result of my determination.
11 Ms Wilson’s calculation of interest at the rate of 4.75 per cent calculated, as my reasons indicated it should be, from 26 March 2017, totalled an amount of $11,371.71 which, when added to the $100,000 figure, still comes in at less than the amount of the offer.
12 Ms Wilson says that the interest should be set at 4.75 per cent on the ground that in accordance with authority in the Federal Court of Australia, a proper commercial rate is obtained by adding 4 per cent to a base rate, which Ms Wilson contends should be the 0.75 per cent rate currently set by the Reserve Bank of Australia.
13 Ms Yao on behalf of the defendant, however, suggests that insofar as my reasons indicated that there should be an award of interest at a commercial rate, the rate should either be 6 per cent or preferably 8 per cent. She said that 6 per cent was the rate which the defendant by counterclaim, Repheka Pty Ltd, was shown to be paying on a mortgage loan account with its bank. She said that 8 per cent was a more realistic rate given that, in the event any borrowings which the plaintiff might have undertaken, or an entity associated with him might have undertaken, would necessarily have been unsecured.
14 If the rate is set at 6 per cent, then the interest which would accrue from 26 March to the date that the offer would have become effective, namely 10 October last year, is $15,364.29. If the rate were fixed at 8 per cent, it would stand at $20,485.71.
15 The result then is that the judgment could be regarded as more favourable than the offer if interest at the rate of 8 per cent were provided for and included in the equation.
16 I will put those matters to one side for a moment so as to mention some other issues that were raised relative to the question of whether an award of indemnity costs should be made.
17 The plaintiff said that such an award should be made because there had been dereliction on the part of the defendant in making discovery. In particular, there were certain documents relative to the defendant’s dealings with another medical centre and his employment there which were produced only on the last day of trial and during the defendant’s cross-examination, and which Ms Wilson said ought to have been produced earlier, and such documents had, for some undisclosed period of time, previously been in the possession of the defendant’s solicitors.
18 On behalf of the defendant, Ms Yao said that her client should be entitled to an award of costs in his favour for costs thrown away by reason of a late amendment to the Statement of Claim and to issues of discovery. Default in discovery on behalf of the plaintiff had resulted, she said, and this was deposed to in an affidavit of one of her instructors, Mr Ryan, in the necessity for the defendant’s solicitors to issue a number of subpoenas to third parties.
19 On the defendant’s claim for costs as to these particular matters, I turn first to the amendment to the Statement of Claim. The amendment was made by consent and pertained solely to the prayer for relief. It added an alternative form of specific performance. The Statement of Claim in its unamended form sought specific performance of an agreement to retransfer units in a unit trust, the trustee of which is the second defendant by way of counterclaim. Specific performance was to be ordered according to that unamended prayer for relief based upon payment by the plaintiff to the defendant of a sum certain.
20 The alternative prayer sought specific performance based on the refund by the plaintiff of certain outlays incurred by the defendant relative to an abortive venture between the two of them without nominating a particular sum, leaving it to a finding by the court as to the precise amount. In fact, it is that form of relief by way of specific performance which I ultimately granted.
21 It is not obvious to me that the making of this amendment entailed any costs thrown away. It was not necessary, by reason only, of that amendment for pleadings down the line to be repleaded in any way, though in fact they were for other reasons.
22 As to the issues of discovery, the fact that the documents which were sought and not obtained from the plaintiff were ultimately forthcoming from third parties, in itself does not demonstrate that the plaintiff was delinquent in not discovering them. As a matter of logic, the fact that someone else might have a document does not mean that a party to the proceeding has them.
23 As to some of the documents, namely profit and loss accounts, Ms Wilson has told me on behalf of the plaintiff that, at the time of service of the subpoenas, such accounts had not been made up. They were made up subsequent to the subpoena, but the fact of their non-existence at the time the subpoena was served, demonstrates that they could not have been the subject of an obligation to discover on the part of anyone. I am not persuaded that these matters do in fact give an entitlement to the defendant to an award of costs.
24 There were further matters more generally agitated relative to disputation over further and better particulars and to the preparation of the court books. Defendant’s solicitor, Mr Ryan, swore a lengthy affidavit raising what was said to be defaults by the plaintiff in this regard.
25 The plaintiff’s solicitor, Mr A de Corral (of DCA Lawyers), also swore a lengthy affidavit which was produced for the first time this morning, which, in the event, I have not gone to in any detail. In my view, the proper view as to these matters is that they were part of the typical cut and thrust and disputation engaged in by parties bringing a proceeding to a commercial trial. In a sense, all these matters have come out “in the wash”.
26 If they were of such significance as to merit attention now, they would have been the subject of applications generating costs orders as part of the interlocutory fight. Since they were not, and no extant costs orders relate to them, I think it is proper for me to regard those as matters which, in effect, have all come out “in the wash”.
27 I return, therefore, to the question as to whether there should be an award of indemnity costs, given that I have not been persuaded that these issues of discovery are a proper basis to make that determination. The determination ultimately rests upon a view as to whether the result achieved by the plaintiff is more favourable to him, or less favourable to the defendant, than the offer which was made and which, according to its terms, would have been performed by a payment of $120,000 on 10 October last. As previously observed, the view one takes on this point depends crucially upon the interest rate which is determined to be payable.
28 Accepting as I do that a 4 per cent surcharge is an appropriate approach to adopt, as the Federal Court of Australia has apparently said, it seems to me that the rate set by the Reserve Bank of Australia, namely 0.75 per cent, may be an inappropriately low base. This represents the cheapest wholesale rate for funds. It is not a retail rate at all.
29 Accordingly, I think the figure of 6 per cent, which is a market rate in the sense that, according to Ms Yao, it was the rate payable on its borrowings by the second defendant to counterclaim, is a more realistic rate. Therefore, an award of interest at the rate of 6 per cent should be made. Calculations show that even providing for interest at that rate as at 10 October last year, the date on which the plaintiff’s offer would have been liable to be performed if accepted, yields a result which would have been more favourable to the defendant than the one which has ultimately been achieved.
30 Accordingly, in my view, it is appropriate that there be an award of indemnity costs in favour of the plaintiff as and from 10 October 2019.
31 I turn, finally, to the contention on behalf of the plaintiff that his obligation to make the payment of $100,609.33 should be offset against his entitlement to costs to which I have just referred.
32 Ms Wilson on behalf of the plaintiff contended that there should be an order that the two be set off. She referred to a decision of the High Court of Australia in Goldsbrough, Mort & Co Ltd v John Thomas Quinn (1910) 10 CLR 674. In that case, the Court reversed a decision of the Chief Judge in Equity in the Supreme Court of New South Wales refusing specific performance of a contract for the sale of land. The final orders of the Court are recorded at page 701 of the Commonwealth Law Reports in the following terms:
“Appeal allowed with costs. Costs of trial and of the appeal to be set off against the purchase money.”
33 The appropriateness and the reasons for making the order of set off are not canvassed in the reported judgments given by the members of the court, namely Griffith CJ and O’Connor and Isaacs JJ.
34 Ms Yao correctly observes that, put in that general form, there is a potential for injustice to the defendant. The first thing to note is that since the $100,609.33 will be the price for the units to be transferred, the payment of that sum (plus interest) and the transfer of the units are coordinate obligations. That is, the one does not happen without the other.
35 As explained earlier, and as mentioned in the reasons, the plaintiff will be obliged to make an interest payment. That interest will continue to accrue until the principal sum of $100,609.33 is paid. If the regime of set off that is advocated by the plaintiff is adopted, that amount plus interest will not be payable until the costs have been assessed or agreed. The continued accrual of interest and the deferral of any obligation to transfer the units mitigates the apparent injustice to the defendant in making orders in those terms. Further, however, I believe that justice requires that a regime be established as far as possible to avoid matters dragging on. The defendant needs to know where he stands and when this transaction is to be brought to a close.
36 I am told that counsel for the plaintiff can undertake to the court on behalf of her client to have a bill in assessable form completed in four weeks and then submitted to the Costs Court for assessment. I understand that the undertaking would go further and entail a promise for that assessment to be properly prosecuted before the Costs Court.
37 In the result, therefore, the specific performance would not occur until the costs have been assessed or agreed between the parties and interest would continue to accrue until that date. In my view, orders should be made in those terms.
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