Superior Packaging Pty Ltd v Christoforou

[2012] VCC 12

IN THE COUNTY COURT OF VICTORIA Revised
(Not) Restricted

AT MELBOURNE

COMMERCIAL LIST
GENERAL DIVISION

Case No. CI-11-01185

SUPERIOR PACKAGING PTY LTD	Plaintiff
v.
THEMI CHRISTOFOROU	Defendant

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JUDGE:	His Honour Judge Anderson
WHERE HELD:	Melbourne
DATE OF HEARING:	30 January 2012
DATE OF JUDGMENT:	30 January 2012 (revised 2 February 2012)
CASE MAY BE CITED AS:	Superior Packaging Pty Ltd v. Christoforou
MEDIUM NEUTRAL CITATION:	[2012] VCC 12

REASONS FOR JUDGMENT

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Catchwords:             Practice and Procedure – Costs – Offers of compromise – Reasonableness of their non acceptance – Plaintiff’s lack of success in the proceeding and abandonment of claims – Futility of the trial.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr C R Northrop	G S M Lawyers
For the Defendant	Mr J Goussis	W M B Lawyers

HIS HONOUR:

1I delivered judgment in this matter on 21 December 2011 after a trial lasting four days. I must now decide the issue of costs between the parties.

2In the proceeding, the plaintiff sought to enforce a restraint of trade clause and sought consequential relief, including an account of profits and damages as a consequence of the alleged breach of the restraint of trade clause. A separate claim was made for approximately $39,000 on the basis that an adjustment should have been made to the purchase price because of the defendant’s indebtedness to the Australian Taxation Office.

3At the trial, the plaintiff did not proceed with claims for an account of profits or for damages. The plaintiff failed in its claim for a permanent injunction arising from the alleged breach of the restraint agreement and although it obtained judgment against the defendant for the sum of $25,666.07 in respect of the Australian Taxation Office debt, it effectively recovered that sum on behalf of the Deputy Commissioner of Taxation.

4The plaintiff submits that it should be entitled to party/party costs to the date of the offer of compromise made by it on 29 November 2011 and, thereafter, on an indemnity basis. The offer of compromise was that the proceeding should be dismissed with no order as to costs. The plaintiff asserts that in the circumstances, where judgment should be entered for the plaintiff for the amount due to the Deputy Commissioner of Taxation, the plaintiff has recovered more than the offer it made by its letter in November 2011.

5The defendant submits that he should recover indemnity costs, relying upon an offer of compromise, the plaintiff’s lack of success in the proceeding and special circumstances which would justify costs on an indemnity basis. The special circumstances relied upon are the failure by the plaintiff to pursue claims made in the statement of claim, including an order for the taking of accounts and an order for damages in respect of the breach of the restraint clause. Alternatively, the defendant says that he has been wholly successful in the proceeding and should recover party/party costs.

6The defendant also relies upon an offer of compromise made by letter dated 5 December 2011, whereby it offered to accept an order that the plaintiff’s claim be dismissed provided the plaintiff paid 65 per cent of the sum of $30,000, asserted to be the costs the defendant had incurred to that date. The letter stated that if this offer were not accepted, the defendant would rely upon the letter in an application for indemnity costs or, alternatively, solicitor/client costs from the date of the letter.

7In my view, it is not accurate to say that the defendant was wholly successful in the proceeding because an order has been made in favour of the plaintiff, albeit for the benefit of the Deputy Commissioner of Taxation, requiring the payment of moneys by the defendant to the Deputy Commissioner of Taxation. In relation to the conduct of the proceeding, the defendant at all times conceded that there was a restraint of trade clause that he had entered into with the plaintiff to protect the interests of the vendor following the sale of the business. The defendant disagreed as to the terms agreed. In many respects, the evidence of the defendant and his witnesses was unsatisfactory. What is apparent is that, notwithstanding the defendant’s failure to plead that the agreement was an unreasonable restraint of trade, essentially the discretionary factors which led the Court to refuse the injunctive relief sought by the plaintiff were not based upon an acceptance of evidence by the defendant and his witnesses as to what was agreed. The evidence established that even in respect of the period the defendant asserted the restraint was to operate, he had deliberately breached the terms of the restraint agreement.

8Whilst it might not be accurately stated that the plaintiff has been wholly unsuccessful in the proceeding, although the plaintiff has received no benefit from the orders that the Court has proposed, I consider that the plaintiff’s offer amounts to no more than a belated decision by it that it did not wish to proceed with a problematic claim and was not prepared to concede entirely by simply withdrawing and thereby incurring an obligation to pay the defendant’s costs.

9I do not consider in the circumstances that the defendant was unreasonable in his failure to accept the offer made by the plaintiff by its letter dated 29 November 2011. Similarly, I am not satisfied that the plaintiff acted unreasonably by its failure to accept the offer made by the defendant’s solicitors letter dated 5 December 2011. There is no evidence to suggest that the sum of $30,000, the defendant’s solicitors said the defendant’s costs were at the date of the offer, was an amount calculated on any particular basis, whether on a party/party, solicitor/client or indemnity basis or as to why the percentage of 65 per cent was appropriate. Whilst one would expect the interlocutory processes of civil litigation in this Court to generate costs to a party in the order of about $30,000 shortly prior to trial and there is a general understanding that party/party costs are in the order of about 60 or 65 per cent of costs actually incurred by a party, those are matters of general understanding rather than the position which necessarily prevailed in this case.

10As I indicated in my judgment in the proceeding, this was an unusual claim and the nature of the evidence given at the trial is perhaps more understandable when one considers the negotiations that had taken place between the parties in late 2011 shortly prior to the trial. The defendant and the individual behind the plaintiff, had been friends. The agreement between them was an informal one. The evidence did not disclose the reason the parties had fallen out. The evidence of the defendant’s, and perhaps to a lesser degree, the plaintiff’s witnesses was unsatisfactory. My preliminary view was that this was a matter where the appropriate order for costs was that each party bear its own costs, largely because of the matters to which I have just referred.

11I consider, however, that greater responsibility rests upon the plaintiff who initiated the litigation and then, for whatever reasons, decided it did not wish to proceed. When the plaintiff had been unable to resolve the action, it proceeded with a four day trial. Whilst it might be thought that the appropriate course would be to allow the defendant the costs of the trial but to make no order for the pre-trial costs, I consider that the appropriate order in this case is to allow the defendant’s costs on a party/party basis for the pre-trial stages but to make no order as to the costs of the trial, including any preparation for the trial itself.

12Although I have not relied upon the offers of compromise made by the parties shortly prior to the trial in reaching that decision, I consider that this was a case where the parties and their legal advisers had obligations and responsibilities to seek to resolve the matter without the necessity of a trial which, it appears, no one wanted. In those circumstances, I consider that it would be inappropriate to allow the costs for a trial which was, essentially, a waste of time. However, the plaintiff must bear some responsibility for initiating the proceeding, failing to proceed with a significant number of its claims and succeeding in only a subsidiary claim in circumstances where it can receive no benefit from any orders made.

13In the circumstances, I will make the orders that the plaintiff’s counsel has sought in paragraphs 1-4 of the draft submitted with the addition of the words in paragraph 3 after the underlined words, “or such lesser sum as the Deputy Commissioner of Taxation is prepared to accept” and then, I will make further orders as to costs as follows:

a.The plaintiff must pay the defendant’s costs of the proceeding, excluding any costs of the trial or in preparation for the trial or subsequent thereto up to and including today, to be taxed on a party/party basis;

b.No order shall be made in respect of the parties’ costs of the trial or preparation for trial or subsequent to the trial up to and including today.

Certificate

I certify that these 4 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 30 January 2012 (and revised on 2 February 2012).

Dated: 2 February  2012

Hannah Christensen

Associate to His Honour Judge Anderson