Tahiri v Castricum Brothers Australia Pty Ltd (No 2)
[2015] VSC 67
•6 March 2015
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
S CI 2014 01049
BETWEN
| BEJTULLA TAHIRI | First Plaintiff |
| and | |
| REGREEN ASSET HOLDINGS AUSTRALIA PTY LTD | Second Plaintiff |
| and | |
| CASTRICUM BROTHERS AUSTRALIA PTY LTD | Defendant |
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JUDGE: | SIFRIS J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 27 February 2015 |
DATE OF JUDGMENT: | 6 March 2015 |
CASE MAY BE CITED AS: | Tahiri & Anor v Castricum Brothers Australia Pty Ltd (No 2) (Costs) |
MEDIUM NEUTRAL CITATION: | [2015] VSC 67 |
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COSTS — Whether order for indemnity costs appropriate — Claim by first plaintiff hopeless and abandoned at commencement of trial — Claim by second plaintiff unsuccessful because of late amendment by defendant — Offer of compromise — Unreasonable time within which to accept offer.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr J Selimi | Bruce McNab Solicitors |
| For the Defendant | Mr S Rubenstein | M+K Lawyers |
HIS HONOUR:
On 13 February 2015 I published my reasons for judgment.[1] I will assume familiarity with the Judgment. Defined terms in the Judgment bear the same meaning.
[1]Tahiri & Anor v Castricum Brothers Australia Pty Ltd [2015] VSC 4 (‘Judgment’).
Tahiri did not proceed with his claim for return of the deposit of $825,000 paid under the Contract of Sale (‘the Deposit Claim’). This claim was abandoned on the first day of the trial.
Regreen failed in its claim for damages for breach of the Rendering Equipment Agreement or damages for conversion of the Rendering Equipment. Regreen did not make any specific claim for $44,550, being the difference between the purchase price of $330,000 (including GST) and the amount refunded in the sum of $285,450. Regreen is entitled to the sum of $44,550 and an offer to such effect was made by Castricum Brothers during the course of the trial. I do not propose to enter judgment for this amount at this stage. It was never claimed but was a consequence of the way in which the case unfolded and was conducted.
It follows that the claims made by each of the plaintiffs (as pleaded) must be dismissed. The plaintiffs do not oppose such a course. The remaining issue is costs.
Castricum Brothers contends that costs should be awarded on an indemnity basis for three reasons.
First, the Deposit Claim was unmeritorious and bound to fail. The Contract of Sale was validly rescinded for failure to pay the balance of the purchase price and Tahiri never contended otherwise until the proceeding was commenced.[2] Of course, not surprisingly the claim was not pressed.
[2]In fact Tahiri, far from challenging the validity of the rescission notice, was grateful for the various indulgences that were given by Castricum Brothers: Judgment [8]-[14].
Secondly, Castricum Brothers contends that a pre-litigation offer made by letter dated 30 January 2014 should have been accepted. The offer remained open to close of business on Monday 3 February 2014. The offer is set out in the letter. The key terms relevant for present purposes is that the defendant offered:
(a) that the plaintiffs retain the cheque of $285,450 for reimbursement of the rendering equipment; and
(b) the plaintiffs would also receive a further amount of $500,000 inclusive of GST being a partial return of the deposit (less costs).
The offer was made before execution of the contract of sale of the Property and Rendering Equipment to Australian Meat Properties Pty Ltd (‘AMP’), and clearly, it was submitted, was directed at allowing the defendant to enter into that contract with AMP without the risk of legal proceedings with the plaintiffs. In light of the approaching settlement with AMP it was submitted that the time open for acceptance of the offer (two business days and the weekend) was reasonable. In any event the plaintiffs rejected the offer the very next day.
It was further submitted that the offer by the defendant satisfied the requirement in r 26.08.1(1) of the Supreme Court (General Civil Procedure) Rules 2005 (‘the Rules’), and accordingly must be taken into account by the Court in determining what order for costs ought be made in the proceeding. Further, under r 26.08.1(2) of the Rules, the Court may order costs on an indemnity basis from the time the offer was made, or from the commencement of the proceeding, or any other time the Court thinks fit.
It was submitted that the offer was clearly an attractive one that would have been advantageous to the plaintiffs (when compared to their present position). The plaintiffs’ failure to accept the offer should, it was submitted, be a significant factor in the Court’s decision on the question of costs. The Court should award the defendant its costs from 4 February 2014 (which would include legal costs incurred prior to the commencement of the proceeding) on a full indemnity basis. Alternatively, the Court should award the defendant its costs of the proceeding on a full indemnity basis.
Thirdly, Castricum Brothers relies on a second offer made after the mediation that took place on 5 June 2014. That offer was made jointly with AMP and was for settlement of both this proceeding and the related proceeding issued by AMP being S CI 1757 of 2014 (‘the AMP proceeding’). The AMP proceeding was subsequently dismissed on 22 August 2014 with orders that Regreen pay the standard costs of both the defendant and AMP. Again the plaintiffs did not accept the offer. Had it been accepted, the plaintiffs would be in a far better position than they currently are.
The offer was made verbally on 10 June 2014 and again by email at 10:40am on 11 June 2014. The offer remained open to 5pm on 11 June 2014. The offer is set out in the email. The key terms relevant for present purposes is that AMP and the defendant jointly offered:
(a) to pay the plaintiffs an amount of $1 million within seven days in settlement of both proceedings (this proceeding and the AMP proceeding); and
(b) each party was to bear its own costs in the proceedings.
The second offer was also made before the settlement of sale of the Property and Rendering Equipment to AMP, and was directed at allowing the defendant to settle with AMP and to avoid the risk of legal proceedings with the plaintiffs. In light of the approaching settlement with AMP on 16 July 2014 (but originally contracted for 15 July 2014) the time open for the offer was reasonable.
Like the first offer, the second offer would have been advantageous to the plaintiffs (when compared to their present position). The plaintiffs’ failure to accept the offer should, it was submitted, be a significant factor in the Court’s decision on the question of costs. In the event that the Court does not award costs on an indemnity basis by reason of the failure of the plaintiffs to accept the first offer, it should do so in light of the plaintiffs’ rejection of the second offer.
Regreen submitted that the basis on which the defendant succeeded, namely the implied term, was only raised by way of amended defence on 23 June 2014 shortly prior to the trial of both proceedings (‘the Amendment’).[3] Until the Amendment the defendant had pleaded and asserted a breach (or abandonment) of the Rendering Equipment Agreement following a failure to remove. As the Judgment points out this is a position at odds with the Amendment which was based on the implied term. The implied term point was the only issue at trial and Regreen contends that the defendant should not recover any costs associated with the abandoned defence. The Amendment did not abandon the breach or abandonment defences. This was only done at the commencement of the trial.
[3]The defendant says it first notified Regreen of the proposed amendment on 16 June 2014. The amended defence is dated 21 August 2014.
The Deposit Claim was indeed unmeritorious and bound to fail. It should never have been made. For this reason and the making of the first offer, the defendant is entitled to costs from Tahiri on an indemnity basis in relation to this claim. However, I consider that these costs should be from the commencement of the proceeding.
The Rendering Equipment claim is more difficult. Despite the Amendment, raising the implied term, which ultimately succeeded, and despite the misguided defence raising the breach or abandonment of the Rendering Equipment Agreement, the claim was always on foot. Originally the claim was for specific performance of the Rendering Equipment Agreement and damages in the alternative. Ultimately the claim failed and for the reasons set out hereunder the defendant should get its costs. However, the remaining relevant questions are the scale of and the date from which any costs order should operate.
In determining whether the plaintiffs acted reasonably in rejecting the offers, it is necessary to understand the basis of the claim and defence as pleaded.
At the time of each of the offers, two claims were made.
Any offer made in respect of the Deposit Claim should have been accepted. This much is obvious. The claim should never have been made.
In respect of the Rendering Equipment claim, Regreen was entitled to assess any offer based on the issues pleaded in the case at the time of the second offer.[4] Any risk assessment or reasonableness would depend on such issues. Until the implied term was pleaded and particularly from the time that it became the only issue (the commencement of the trial) the issues were different. Regreen was required to deal with issues associated with the alleged breach of the Rendering Equipment Agreement and the suggested abandonment thereof. These issues assumed the validity and operation of the Rendering Equipment Agreement, a position different to the issue that the defendant ultimately succeeded on.
[4]The first offer was mainly concerned with the Deposit Claim. Regreen was entitled to reject it so far as its claim was concerned.
Until the issue relating to the implied term was pleaded Regreen conducted the case and prepared for the trial on a different basis.
In all of the circumstances and in the exercise of my discretion, I am of the opinion that the defendant should get the costs of this aspect of the case on the usual standard basis from the date of the Amendment, namely 21 August 2014. Certainly, the defendant should get these costs in relation to the trial. The single issue of the implied term was identified and argued and the defendant was successful and should get its costs. However, there was nothing in the running of the trial or indeed in Regreen’s conduct after the implied term issue was pleaded, which was after expiry of the offers, that would suggest that indemnity costs are appropriate after the Amendment. Although the defendant retained the other defences from the time of the Amendment until the trial, I do not think that the defendant should be penalised.
So far as costs prior to the Amendment are concerned, I consider that the defendant should be deprived of its costs prior to the Amendment, because by the Amendment, it fundamentally changed the basis of its defence. Although the second offer was reasonable, given the issues pleaded at that stage, insufficient time was provided for the acceptance thereof. Further, although the defendant has been denied its costs prior to the Amendment, I do not propose to order any costs in favour of Regreen. Finally, this judgment is intended to deal with all previous orders where costs have been reserved. No further orders will be made in this regard.
Finally, the costs order against Regreen will be set off against the sum of $44,550 owing by the defendant to Regreen.
The orders of the Court will be as follows —
(1)The first plaintiff’s claim is dismissed.
(2)The second plaintiff’s claim is dismissed.
(3)The first plaintiff pay the defendant’s costs of the proceeding relating to the Deposit Claim on an indemnity basis.
(4)The second plaintiff pay the defendant’s costs of the proceeding relating to the Rendering Equipment Claim on the standard basis with effect from 21 August 2014.
(5)The costs to be paid by the second plaintiff be offset by the amount of $44,550 owed to it by the defendant.
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