Technology Swiss Pty Ltd v Famous Pacific Shipping (Vic) Pty Ltd (No 2)
[2019] VCC 1826
•13 November 2019
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-18-02646
| Technology Swiss Pty Ltd and Ecology S.R.L | Plaintiffs |
| v | |
| Famous Pacific Shipping (Vic) Pty Ltd | Defendant |
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JUDGE: | His Honour Judge Woodward | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | On the papers – final submissions 24 October 2019 | |
DATE OF JUDGMENT: | 13 November 2019 | |
CASE MAY BE CITED AS: | Technology Swiss Pty Ltd v Famous Pacific Shipping (Vic) Pty Ltd (No 2) | |
MEDIUM NEUTRAL CITATION: | [2019] VCC 1826 | |
REASONS FOR JUDGMENT
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Subject: COSTS AND INTEREST
Catchwords: Currency of judgment – offer of compromise – calculation of interest
Cases Cited:Orica Australia Pty Ltd v Limit (No 2) Ltd [2011] VSC 65; Vlasons Shipping Inc v Neuchatel Swiss General Insurance Co Ltd (No2) [1998] VSC 135; Oddy v Fry (unreported Supreme Court of Victoria, McDonald J, 16 June 1997); Johnson Tiles Pty Ltd and Ors v Esso Australia Pty Ltd and Ors (No. 3) 2003 VSC 244; Minister for Energy, Environment and Climate Change v Morton [2017] VSC 774
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr J Castelan with Mr N Wallwork | Litton Legal |
| For the Defendants | Mr M N C Harvey with Mr W Thomas | Thomas Miller Law Pty Ltd (CBL Business Lawyers, Victorian agents) |
HIS HONOUR:
Background and issues
1 I delivered judgment in this proceeding on 30 September 2019, finding the defendant (“FPS”) liable to the first plaintiff (“Tech Swiss”) for damage to 14 fog cannons transported by FPS from Corowa in NSW to a purchaser in Bangkok, Thailand. The transport was undertaken pursuant to a contract (“freight contract”) between FPS and Tech Swiss comprised of emails exchanged between the parties in around September and October 2014 and FPS’s standard terms and conditions of contract (“FPS Standard Terms”). I summarised my findings (in part) as follows:
· on their proper construction, the FPS Standard Terms operate to limit Tech Swiss’s claim to the invoice value of the 14 fog cannons, plus freight and insurance;
· subject to hearing further from the parties on some minor aspects of the sums claimed, the quantum of Tech Swiss’s loss and damage so limited is in the order of $755,000.
2 In my reasons for judgment I observed that the particulars to paragraph 7 of Tech Swiss’s reply in the proceeding dated 23 July 2019, would suggest that the sum claimed by Tech Swiss as damages is the invoice value of the fog cannons and associated equipment of €480,400 (being AU$738,615.40) plus the cost of freight of AU$16,526.94. This would result in a judgment in favour of Tech Swiss in the total sum of $755,141. However, I also observed that Tech Swiss appears to claim as part of the freight allowable under clause 14.4 a further $7,780.09, relying on copy invoices from “Pioneer Air Cargo Co. Ltd” dated 26 and 30 January 2015 (“Pioneer invoices”), relating to freight handling, customs clearance and storage charges at the port of Bangkok. As far as I could tell, these charges were not the subject of further elaboration or argument in the course of submissions.
3 Nor was I able to locate in the written or oral submissions on behalf of FPS a clear statement of its attitude to the sums claimed by Tech Swiss under paragraph 7 of its reply, with or without the additional sum referred to in Tech Swiss’s written submissions. It was also not clear to me whether the parties wished to be heard on the question of when the sum in Euros claimed by Tech Swiss should be converted into Australian dollars and at what rate, nor on the question of interest. And, finally, I noted that there may have been offers exchanged between the parties impacting on the appropriate order for costs, which it seemed to me would otherwise be that FPS pay Tech Swiss’s costs of the proceeding on the standard basis, in default of agreement.
4 I therefore invited the parties to consult with a view to agreeing the orders that should be made as a result of my findings above and, failing agreement, to submit further short written submissions on any outstanding issues concerning those orders, which I would thereafter determine on the papers. As things transpired, the unresolved aspects of the sums claimed were not as minor as I had anticipated and the parties were unable to reach agreement on any of them. The questions that remain to be resolved are:
· When should the invoice value of €480,400 be converted into Australian dollars?
· Does the cost of freight payable under the FPS Standard Terms include the $7,780.09 based on the Pioneer invoices?
· What rate of interest should be applied and should it be calculated from the date of demand or commencement of proceedings?
· Is Tech Swiss entitled to an order for indemnity costs from (and including) 14 July 2019, the day after service of its second offer of compromise?
5 My answers to these questions below translate to orders that FPS pay Tech Swiss the sum of $755,142.34, plus interest pursuant to s60 of the Supreme Court Act 1986 (Vic) (“SCA”) on and from 7 June 2018, at the rate set for the time being by s2 of the Penalty Interest Rates Act 1983 (Vic) (“PIR Act”) of $108,616.36, and costs of the proceeding (excluding costs already subject to order) on the standard basis until 13 July 2019 and on an indemnity basis thereafter. I will give the parties a brief time to check my calculations, and will then make formal orders to this effect.
What is the date for currency conversion?
6 Tech Swiss submits that the exchange rate that ought to be applied is the rate as at the date of judgment. It notes that it has an outstanding liability due to the second defendant (“Ecology”) in Euros with respect to the fog cannons. If the exchange rate from an earlier date were to be used, “Ecology could end up making a significant loss and this would undermine the purpose of the judgment”. According to Tech Swiss, the exchange rate as listed on the Reserve Bank of Australia website for 9 October 2019 was 0.6145 Euro per AU$, and this would result in a judgment in respect of the invoice value of the fog cannons of $781,773.80.
7 FPS argues that at all times prior to trial, Tech Swiss claimed the sum of AU$738,615.40 as the invoice value of the fog cannons: “This was the case in every version of its statement of claim, as well as in its reply to FPS’s defence to the further amended statement of claim”. (Although I note that in paragraph 7 of its reply dated 23 July 2019, Tech Swiss in fact particularised the invoice value of the Fog Cannons as “€480,000, being AUD $738,615.40”). FPS asserts that Tech Swiss first suggested that it may have claimed a sum expressed in Euros in its opening submissions and first expressly stated that it sought an award of damages in Euros in its final submissions.
8 Against that background and relying on the decision of Pagone J in Orica Australia Pty Ltd v Limit (No 2) Ltd (“Orica”)[1] FPS submits that Tech Swiss carries the burden of proving that its loss was suffered in Euros if it sought judgment in that currency. FPS says it was entitled to be put on notice of any claim that Tech Swiss’s loss was suffered in a currency other than that pleaded and it has also not had the opportunity to test any evidence that may have been relevant to that issue.
[1][2011] VSC 65 at [24]-[26]
9 Tech Swiss submits in reply that FPS was well aware that Tech Swiss’s claim with respect to the invoice value of the Fog Cannons was for €480,400, citing the relevant invoices, an early demand letter, counsel’s opening and “evidence from Matteo Passoni that the losses were suffered in Euro”. In its brief reply submissions, FPS adds that no authority supports the proposition that the judgment is in Euros at the date of judgment, and to support this proposition, Tech Swiss “must engage with Pagone J’s judgment in Orica Australia Ltd v Limit (No 2) Ltd”.
10 It is not strictly correct that there is no authority that supports a judgment for a foreign currency sum being converted to Australian dollars as at the date of judgment. For example, in Vlasons Shipping Inc v Neuchatel Swiss General Insurance Co Ltd (No2),[2] Byrne J held that “it is open to the court to give judgment in the foreign currency converted to Australian dollars as at the date of judgment where the plaintiff so elects”. However, in that case (and in the authorities cited by Byrne J to support his finding), there was no doubt that the currency of account and payment was in US$, and the issue was whether the plaintiff could elect to have that US$ debt converted to AU$ as at the date of judgment. It did not disturb the principle governing the anterior question of whether the claim is in fact a foreign currency claim.
[2][1998] VSC 135 at [13]
11 As submitted by FPS, that principle was stated by Pagone J in Orica[3] as follows (citations omitted):
“The guiding principle concerning the currency in which judgment should be entered is that it should be the currency which best reflects the plaintiff’s loss. In the absence of the parties otherwise providing by contract, ‘the damage should be calculated in the currency in which the loss was felt’ or ‘which most truly expresses [the] loss’. This requires evidence if the matter is in dispute. Counsel for the underwriter resisted the claim for judgment in Australian currency contending that it had been open to Orica to have pleaded its entitlement to damages in Australian currency and that the underwriter would have conducted its case differently had Orica’s case been one for an entitlement to judgment in Australian currency. I accept that submission. Orica carried the burden of proving its loss and the burden of proving that its loss was suffered in Australian currency.”
[3]Australia Pty Ltd v Limit (No 2) Ltd [2011] VSC 65 at [24]-[26]
12 In my view, this is not a case where the parties provided by contract that Tech Swiss’s claim was payable in Euros. The claim is for the loss and damage suffered by Tech Swiss as a result of the damage to the fog cannons. That loss and damage is capped by the FPS Standard Terms at the invoice value and the evidence is that the invoice value as notified to FPS was denominated in Euros. There was also evidence to the effect that the loss to Tech Swiss manifested in its liability to pay Ecology for the fog cannons, despite their being written off. Further, I accept that Tech Swiss’s liability to Ecology under the invoices is or was payable in Euros.
13 But that is as far as the evidence goes. Importantly, the evidence gives no insight as to when the loss was incurred by Tech Swiss – when did Tech Swiss incur the liability to pay the invoice value to Ecology under their consignment-style arrangements, and when was it paid? In my view, that is the evidence that would substantiate “the currency in which the loss was felt” and that FPS was entitled to test in the manner discussed by Pagone J in Orica. The evidence that Tech Swiss refers to in its reply submissions does not go to that issue. Nor is it to the point that Ecology may have suffered the loss in Euros. Despite Ecology’s late joinder to the proceeding, it was ultimately not in issue that the claim was validly brought by Tech Swiss and I have found that judgment should be entered for Tech Swiss.
14 In the absence of evidence that Tech Swiss’s actual loss is other than the sum claimed by its further amended statement of claim, I am satisfied that judgment should be entered for Tech Swiss for that sum. Judgment will therefore be for the figure foreshadowed in my primary reasons, namely, AU$738,615.40 plus the cost of freight discussed below.
Is the $7,780.09 “freight” within the meaning of the FPS Standard Terms?
15 Tech Swiss argues that the cost of freight ought to include the Pioneer invoices totalling $7,780.09, for costs paid by Tech Swiss to Pioneer Air Cargo Co. Ltd to unload the Fog Cannons on 23 January 2015 and move them into bonded storage in Thailand. It submits that this part of the claim was referred to in its opening and that: “Ordinarily, costs for unloading and customs are included in the freight”. Tech Swiss’s reply submissions state in more detail why the items covered by the Pioneer invoices are properly to be regarded as contemplated within the term “freight”, but do not otherwise add substantively to its initial submissions on this issue.
16 FPS argues that this additional amount should be disregarded: “It was not pleaded in paragraph 7 of Tech Swiss’s reply, by which it particularised its claim for the invoice value of the fog cannons and freight. Nor, as noted in the Reasons, was it the subject of any further elaboration or argument in the course of submissions”. FPS points out that the Pioneer invoices do not establish that the items claimed by the invoices constitute “freight” under the FPS Standard Terms and that: “In the absence of evidence as to the nature of the amounts claimed in that invoice, it cannot be assumed that those amounts are for ‘freight’ as contemplated by that clause”.
17 I agree with FPS, for essentially the reasons stated in its primary submissions. Tech Swiss did not plead this additional sum as part of the “freight” component of its claim based on clause 14 of the FPS Standard Terms (paragraph 7 of its Reply dated 23 July 2019). I accept that some or all of the items mentioned in the Pioneer invoices might arguably fall within the expression “freight”, but there is also a respectable argument that the FPS Standard Terms intended to limit freight recovery only to those sums charged by FPS. This may indeed be why Tech Swiss limited its claim in paragraph 7 of its reply to the total of the FPS invoice. Tech Swiss’s failure to plead this figure as falling within the “freight” element of clause 14 of the FPS Standard Terms, meant that this question was not the subject of either evidence or argument at trial.
18 For similar reasons, I reject FPS’s very late argument in its reply submissions that the figure for freight should be limited to $2,929.94, being the only item in the FPS invoice that is identified using the word “freight”. In its primary submissions, FPS expressly accepted the total of the invoice of $16,526.94 as “cost of freight” within the meaning of clause 14 of the FPS Standard Terms, asserting that “the principal sum of the judgment should reflect the total of the amounts pleaded”. In my view, it is not open to FPS to submit a contrary position for the first time in its brief final reply submissions. The amount allowed for freight will be the pleaded sum of $16,526.94, giving a total judgment sum of $755,142.34 as proposed by FPS in its primary submissions.
What interest rate should be applied and from when?
19 The plaintiffs claim an entitlement to interest from the time when demand of payment was made pursuant to SCA s58, or alternatively from the date when proceedings were issued pursuant to SCA s60. Tech Swiss argues that both ss58 and 60 have the beneficial purpose of providing for the award of interest to compensate parties who have been obliged to institute proceedings to recover money. This is because they have been kept out of those moneys which they could otherwise have used or could have otherwise earned interest.
20 Tech Swiss submits that the claim for the invoice value of the fog cannons and freight is a claim for a “sum certain” within the meaning of SCA s58. The invoice value of the fog cannons and freight comprise debts or sums payable that have become certain within the meaning of s58(3) and were payable prior to the initiation of proceedings. As a result, interest ought to run from the time when demand of payment was made. Tech Swiss relies on three alternative demands. The first is an email dated 27 March 2015 putting FPS on notice that Tech Swiss will hold FPS liable for “all losses and damages associated with the ineffective/inadequate packing/securement of items in the containers”. The second and third are letters of demand dated 14 June and 26 July 2017, demanding (respectively) €480,400 and AU$553,167.54.
21 FPS argues that SCA s58 does not apply in this case, “as it concerns interest on a debt or sum certain recovered in a proceeding. As Tech Swiss’s claims against FPS were for damages (as confirmed by the prayer for relief in its statement of claim), the correct provision is [SCA s60]”. FPS then argues that the rate to be applied in this case should be a lower rate than the rate prescribed under the Penalty Interest Rates Act 1983 (Vic) (“PIR Act”). I will return to the rate to be applied shortly. I note that Tech Swiss argues that if I take the view that SCA s58 does not apply, under SCA s60, “interest would run from the date when proceedings were commenced, which was 7 June 2018. On that basis, interest would be $106,005.15”.
22 In my view, the sum claimed by Tech Swiss in this proceeding was not a “sum certain” within the meaning of SCA s58. I agree with FPS that, while the effect of clause 14 of the FPS Standard Terms was to set a cap on the total amount claimable, Tech Swiss’s claim was still a claim for damages. Only a process of assessment of those damages would establish whether those damages were more or less than the cap. In my view, it was not a sum that could be calculated by the application of an objective test, in the sense discussed by McDonald J in the authority relied on by Tech Swiss.[4]
[4]Oddy v Fry (unreported Supreme Court of Victoria, McDonald J, 16 June 1997), citing Lombard Australia Ltd v Smeaton [1966] VR 273 at 276
23 As to the rate to be applied, I am not persuaded in this case to depart from the application of the rate set by s2 of the PIR Act. I agree with FPS that it is well-established that an award of interest under SCA s60 is not to punish a defendant for delaying settling the plaintiff’s claim. However, as Gillard J observed in Johnson Tiles Pty Ltd and Ors v Esso Australia Pty Ltd and Ors (No. 3):[5]
[5][2003] VSC 244 at [68]-[69]
“There is a penalty component in the rate; is a penalty a form of punishment? No defending litigant in this day and age properly advised by his lawyer could be under any misapprehension about paying a penalty interest component if unsuccessful.
In Grincelis v House, [(2000) 74 ALJR 1247 and 1251] the High Court referred to the Penalty Interest Rates Act 1983 in Victoria and stated –
‘As was noted in Gogic:
‘The function of an award of interest is to compensate a plaintiff for the loss or detriment which he or she has suffered by being kept out of his or her money during the relevant period: Batchelor v Burke’
There is no doubt that this is a very important purpose of statutory provisions providing for the award of interest on the amount of a debt or damages in respect to the period between the cause of action accruing (or, in some statutory provisions, the commencement of the proceedings) and the date of judgment. It may be, however, that statutory provisions for interest serve not only that purpose, but also a purpose of encouraging early resolution of litigation.”
24 The clear weight of authority on SCA s60 at least in this State is that there is a predisposition in favour of the rate fixed under the PIR Act, or at least that the penalty rate is “routinely awarded”. That authority is conveniently summarised in the recent decision of Garde J in Minister for Energy, Environment and Climate Change v Morton.[6] In my view, the two factors relied on by FPS as relevant to the exercise of discretion to depart from that predisposition, do not justify that departure. The first (historically low interest rates) has been notorious for many years and, to my observation, has not led to our Supreme Court moving away from routine application of the PIR Act rate. It would hardly be appropriate for me to do so for that reason alone. And the second (involvement of insurers) is commonplace, and also does not appear to have influenced other Victorian courts to reject the PIR Act rate.
[6][2017] VSC 774 at [101]-[106]
Is Tech Swiss entitled to an order for indemnity costs?
25 On 11 July 2019, the plaintiffs served an offer of compromise that provided that they would accept $600,000 plus costs. Tech Swiss asserts that: “Quite clearly, the plaintiffs have obtained a judgment on the claim which is no less favourable than the offer of compromise. Accordingly, pursuant to Order 26.08(2), the plaintiffs are entitled to an order for their costs in respect of the claim on a standard basis until 13 July 2019, and thereafter taxed on an indemnity basis”.
26 FPS resists any order for indemnity costs, primarily on the basis that Tech Swiss did not raise any argument as to the proper construction of clause 14 of the FPS Standard Terms until it served its reply on 23 July 2019, a mere two days before the offer of compromise expired. FPS asserts that this was fundamental to Tech Swiss’s success at trial. FPS also argues that the court’s discretion under r26.08 should be exercised “having regard to Tech Swiss’s disputation of facts and documents” as set out in a notice to admit served by FPS on Tech Swiss on 12 July 2019. In this regard, FPS notes as follows:
“The fact that a party who has served an offer of compromise has disputed facts and documents, which are later accepted at trial, was accepted by Kyrou J in Simply Irresistible Pty Ltd v Couper [2011] VSC 33, [19]-[21] as a circumstance warranting departure from the usual order set out in r 26.08.”
27 In response, Tech Swiss submits (as is the case) that under r26.08 of the County Court Civil Procedure Rules2018 (Vic), the payment of costs by FPS from 13 July 2019 on an indemnity basis represents the prima facie position. It notes that in Port Kembla Cole Terminal Limited v Braverus Maritime Inc,[7] it was held that the prima facie position should only be departed from for proper reasons, which in general, only arise in an exceptional case, equating to “compelling and exceptional circumstances”. Tech Swiss then asserts that “[t]here is nothing compelling or exceptional in this case”, and gives nine reasons why this is so. I agree that the prima facie position should prevail in this case. My reasons for that view (adapting certain of those advanced by Tech Swiss) are as follows:
[7](No.2) (2004) 212 ALR 281 at [17]
· There was no need for Tech Swiss to have pleaded their argument on the construction of clause 14 of the FPS Standard Terms for FPS to understand the potential implications of the provision. It is FPS’s document and FPS can be taken to have been very familiar with its terms, including clause 14.
· Further, FPS has at all relevant times been represented by highly experienced and competent counsel and instructing solicitors. I do not accept that FPS first became aware of the potential implications of clause 14.1 of its own Standard Terms on 23 July 2019, when Tech Swiss filed its reply.
· In relation to the notice to admit, Tech Swiss admitted ten out of the seventeen items referred to. Mr Marks of Tech Swiss gave evidence that he had not seen the FPS Standard Terms at the time, nor had he seen the standard Bill of Lading terms at any time before proceedings commenced. Further, the disputed issues took very little court time. In those circumstances, I am satisfied that the failure to admit the matters identified in FPS’s submission do not constitute exceptional or compelling circumstances justifying a departure from the prima facie position.
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Certificate
I certify that these 11 pages are a true copy of the Judgement of His Honour Judge Woodward delivered on 13 November 2019.
Dated: 13 November 2019
Shakti Nambiar
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