Vassiliadis v WAG Developments Pty Ltd (No 2)
[2016] VCC 891
•29 June 2016
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-15-02578
| CHRIS VASSILIADIS | Plaintiff |
| v | |
| WAG DEVELOPMENTS PTY LTD (ACN 103 180 436) and MELBOURNE SR (TOORAK) PTY LTD (t/as MELBOURNE SOTHEBY'S INTERNATIONAL REALTY) | First Defendant Second Defendant |
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JUDGE: | HIS HONOUR JUDGE COSGRAVE | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 24 June 2016 | |
DATE OF JUDGMENT: | 29 June 2016 | |
CASE MAY BE CITED AS: | Vassiliadis v WAG Developments Pty Ltd & Anor (No 2) | |
MEDIUM NEUTRAL CITATION: | [2016] VCC 891 | |
REASONS FOR JUDGMENT
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms A Folie | Gadens Lawyers |
| For the First Defendant | Mr D Hyde | Simon Parsons & Co |
| For the Second Defendant | Mr M Black | Ascot Solicitors Pty Ltd |
HIS HONOUR:
1 I handed down my Reasons for Judgment in this proceeding on 15 June 2016. I gave the parties an opportunity to read my judgment and agree upon the orders which would give effect to it. Because the parties could not agree, they returned to court to argue about the final orders and costs.
2 Vassiliadis claims the return of the deposit monies in the sum of $182,000. Given my judgment, that is not a controversial order. However, the dispute between the parties relates primarily to costs: Vassiliadis seeks costs on an indemnity basis, while WAG says that the usual scale should apply; Vassiliadis claims interest as usual while WAG says there should be none or interest should be paid at a lower rate than usual.
3 In support of his position, Vassiliadis relies on a Calderbank offer made before he issued proceedings.
Chronology
4 The parties exchanged letters in and after April 2015 about the property and the defendants’ performance in attending to remedial work at the property.
5 On 7 April 2015, Gadens Lawyers, on behalf of Vassiliadis, wrote to Mahoney of Ascot Solicitors, on behalf of WAG, referring to aspects of the chronology: under special condition 3.1 of the contract dated 17 December 2014, the contract was conditional upon Vassiliadis obtaining a building inspection report from Archicentre which was satisfactory to him; on 19 December 2014, Vassiliadis gave a copy of the Archicentre report to WAG – it set out some defects; by email on 23 December 2014, Vassiliadis agreed not to terminate the contract on condition that WAG remedied a number of defects by performing the Agreed Works in a proper and workmanlike manner before settlement; on 30 March 2015, Vassiliadis gave WAG a second Archicentre report which showed that a number of the Agreed Works were not rectified in a proper and workmanlike manner. As a result, Vassiliadis terminated the contract with immediate effect on the basis that WAG failed to satisfy a condition of the contract by failing to rectify the Agreed Works in a proper and workman-like manner before settlement.
6 By letter dated 8 April 2015, Ascot said that the items to be rectified had been attended to. Ascot took issue with the second Archicentre report. Ascot relied on the rescission notice served on Vassiliadis on 30 March 2015. It said that if Vassiliadis failed to settle by 13 April, the contract would be at an end and Vassiliadis would lose the deposit of $182,000.
7 On 13 April 2015, Gadens wrote a detailed letter which summarised the parties’ respective positions on the various items comprising the Agreed Works. Vassiliadis demanded the repayment of the deposit monies by 21 April, failing which he said that he might issue proceedings without further notice.
8 By letter dated 21 April 2015, Ascot said that Vassiliadis’ view that items of the Agreed Works were not remedied was misconceived – because WAG’s building expert said so. Ascot said that it would instruct the real estate agent, Robert Curtain, to release the deposit monies to WAG and offered to accept service of any proceedings which Vassiliadis sought to issue.
9 On 23 April 2015, Gadens wrote to Robert Curtain, saying that the deposit monies must not be released to WAG or Ascot without the consent of Vassiliadis. If Curtain would not release the monies to Vassiliadis, the agent should continue to hold the funds pending resolution of the dispute between Vassiliadis and WAG.
10 On 24 April 2015, Ascot wrote to Gadens saying that they did not accept Gadens’ position that Vassiliadis had terminated the contract. Nor did Ascot accept that WAG had failed to satisfy a condition of the contract prior to settlement. Ascot advised that if they did not hear from Gadens by 1 May 2015, they would be instructing Curtain to release the deposit to WAG.
Calderbank offer
11 On 19 May 2015, Gadens sent Ascot a letter “without prejudice save as to costs”. Gadens confirmed that they were in the process of issuing proceedings with a view to recovering the deposit monies as a consequence of the termination of the contract. Vassiliadis offered to settle the foreshadowed action on the basis that he receive $162,000 and WAG receive $20,000. The offer was made in full and final settlement of the dispute. The offer was open for acceptance by WAG for 7 days. The letter warned that if the offer were not accepted, then Vassiliadis would rely upon it to claim solicitor/client costs if Vassiliadis obtained a better result in the litigation.
12 In a “without prejudice” letter dated 25 May 2015, WAG rejected the settlement offer. The letter contained a reasonably lengthy recitation of the background facts and also examined aspects of the inspection reports which the parties had exchanged. WAG claimed that by reason of Vassiliadis’ breach of the contract, WAG had suffered various forms of loss and damage: failure to obtain the deposit of $182,000; failure to obtain the balance of the settlement funds; the cost of making the property ready for vacant possession; ongoing holding costs, including interest; ongoing land tax obligations. WAG claimed that the items other than the deposit monies exceeded $60,000. WAG also indicated that if it were required to resell the property, the current estimate of loss on resale was over $200,000. WAG concluded the letter by offering three potential settlement options, each of which was open for acceptance until 1 June 2015.
13 Vassiliadis claims that he achieved a better outcome in the judgment than the Calderbank offer he made to WAG. He said that the court should make a special costs order in his favour by awarding him indemnity costs due to the rejection of the Calderbank offer by WAG.
Legal Principles
14 The Court of Appeal examined Calderbank offers in the leading case of Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2).[1] In a unanimous judgment, the court noted that a factor relevant to an award of indemnity costs was the imprudent refusal of an offer of compromise.[2] The court rejected the view that there was a presumption that a party who rejected a Calderbank offer and then received a less favourable result in the litigation should pay the offeror’s costs on an indemnity basis.[3]
[1][2005] 13 VR 435
[2]Ibid at [18]
[3]Ibid at [18]-[19]
15 The court said that the critical question was whether the rejection of the offer was unreasonable in the circumstances.[4] A court’s discretion in relation to costs was to be exercised judicially, taking into account all relevant considerations and ignoring irrelevant considerations. A court dealing with a Calderbank offer should ordinarily have regard to at least the following factors:
[4]Ibid at [23]
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree’s prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed;
(f) whether the offer foreshadowed an application for an indemnity costs order in the event of the offerees rejecting it.[5]
[5]Ibid at [25]
Consideration of Factors
16 This offer was made at an early stage in the dispute between the parties, namely, before the proceedings actually began. Vassiliadis argued that in this context, the early making of the offer was not a problem because the parties had corresponded in detail about the issue of the agreed works. Vassiliadis had supplied the two Archicentre reports and WAG had retained their own building expert for an independent assessment of the remediation work. Thus, said Vassiliadis, the parties were well-informed about, and had addressed in detail, the issues in dispute between them, primarily the performance of the Agreed Works.
17 While I acknowledge that there is substance in the purchaser’s submissions, that is just a single factor which is to be taken into account. Moreover, with the offer having been made at such an early time, it meant that the offeree could not necessarily consider the whole of the context including all the legal and factual matters which might affect it.
18 Vassiliadis allowed 7 days for the offer to be accepted. WAG’s response was detailed and, on the face of it, the period allowed seems to have been adequate. Certainly, WAG did not ask for more time to consider the offer or say that it had been hurried in making a decision. When it made its counter offer, WAG allowed a period of 7 days for Vassiliadis to accept one of the options which it proffered.
19 Although no explicit complaint was made, it seems to me that 14 days is the more usual period allowed for the consideration of offers and is consistent with the time permitted for the consideration of offers of compromise. To a degree, the deadlines specified by the parties reflected, in my view, a concern to try and bring negotiations to a head quickly before proceedings were actually issued.
20 Vassiliadis claims that the compromise offer in the Calderbank letter was genuine and significant and represented a true compromise of the purchaser’s prospects of success. As I understood WAG’s submissions, it did not suggest otherwise.
21 I am satisfied that the terms of the offer were expressed in clear terms and there was nothing uncertain or unclear about what would happen in the event that the offeree accepted the offer.
22 I am also satisfied that Vassiliadis’ offer foreshadowed in a sufficiently clear way that an application for a special costs order would follow if he did better at trial and WAG had rejected his offer.
23 The remaining factor is the assessment, as at the date of offer, of the offeree’s prospects of success. As acknowledged above, there had been correspondence between the parties about the merits of the dispute and each had retained building experts in relation to the issue of the Agreed Works. The second Archicentre report was produced in late March 2015 and Saul Rozenbes produced his report for WAG in April that year. Although there had certainly been some time for analysis and investigation, I am not satisfied that, at the time of the Calderbank offer, WAG should have been in a position to necessarily make an appropriate assessment of its prospects of success.
24 At the time, the situation was reasonably fluid. There was interaction between the parties, a number of tenants had been living at the property over the holidays, and maintenance people were attending to various issues arising at the property, including at least parts of the agreed works. Overall, I do not consider that WAG’s failure to accept the Calderbank offer should be characterised as so unreasonable that it should result in an order for indemnity costs against that party.
Interest on the Judgment
25 The other issue which arose between the parties was the payment of interest. Vassiliadis sought the usual order for interest in respect of the outstanding monies. WAG argued that because the funds were being held by a stakeholder, this was an unusual situation and, accordingly, if any interest were to be paid to Vassiliadis, the court should exercise its undisputed power to award interest at a lower rate.
26 If WAG had concerns about not earning money on the deposit funds, it could have approached the other party and the estate agent, with the consent of the parties, and could have invested the money in some form of interest bearing deposit. Whilst undoubtedly the agent was holding the monies as stakeholder, I do not consider that this fact should prevent Vassiliadis from obtaining an order for interest in the usual terms. He properly terminated the contract and was entitled to receive the deposit monies rather earlier than he is now receiving them.
Position of the second defendant
27 The second defendant, Melbourne Sotheby’s International Realty, sought an order for costs against WAG. During the interlocutory stages of the litigation, the plaintiff by letter dated 5 June 2015 advised the agent’s solicitors that if the agent were prepared to undertake to abide by any order which the court might make regarding the disposal of funds in its trust account, or in accordance with any direction it might receive signed by both Vassiliadis and WAG, there would be no need for the agent to take any step in the proceeding and it would thereby avoid incurring any further legal costs. This remained Vassiliadis’ approach.
28 By letter dated 18 June 2015, Simon Parsons & Co, as solicitor for the agent, advised Gadens that their client was prepared to undertake to hold the funds pending settlement between the parties or court order as to the disposition of the funds.
29 Also on 18 June 2015, Simon Parsons & Co sent a letter to Ascot Solicitors enclosing a copy of the letter of the same date sent to Gadens.
30 On 30 June 2015, Gadens wrote to Ascot Solicitors advising that, given the agent was prepared to undertake to hold the deposit money pending settlement or court order, Vassiliadis considered it sensible that he and WAG to agree that the agent had no need to take any further step in the proceedings.
31 On 27 July 2015, Ascot Solicitors advised Gadens and Simon Parsons & Co of their agreement that it was sensible for the agent to continue holding the deposit moneys and confirming there was no need for the agent to take any further action until the dispute between Vassiliadis and WAG was resolved.
32 On 11 March 2016, Simon Parsons & Co wrote to Gadens and Ascot Solicitors stating that the agent continued to agree to abide by any order of the court regarding the deposit funds held in the trust account. In the circumstances, they asked whether it was necessary for the agent to take part and/or be represented in the imminent trial.
33 By letter dated 21 March 2016 to Simon Parsons & Co and Ascot Solicitors, Gadens said it was unnecessary for the agent to incur any further costs in the proceeding so long as the agent agreed to abide by any order of the court or direction from the two primary litigants in respect of the deposit. If the agent maintained its previous position, then it was unnecessary that it attend and be represented at the trial.
34 By letter dated 31 March 2016, Simon Parsons & Co expressed its surprise that WAG now required the agent to attend the hearing. This was inconsistent with WAG’s previous advice that the agent was only included in the proceeding because it held the deposit moneys. The letter went on to make comment about documents in the agent’s possession including documents passing between the agent and its legal representatives which WAG apparently sought.
35 In a letter to Gadens and Ascot Solicitors dated 31 March 2016, Simon Parsons & Co sent proposed minutes of consent order which excused the agent from attending the trial which was scheduled to run for three days commencing on 5 April 2016. The orders also proposed that neither Vassiliadis nor WAG would seek orders against the agent other than orders relating to the deposit moneys.
36 On 1 April 2016, Ascot Solicitors advised Simon Parson & Co that it did not consent to the proposed orders and would not sign them. By comparison, on 4 April 2016, Gadens advised Simon Parsons & Co that so long as the agent agreed to abide by any order of the court or direction from the parties regarding the deposit, it was unnecessary for the agent to attend the trial or be represented.
37 The outcome of this correspondence was that the agent attended at the trial and was represented by counsel. It did this because it was required by WAG. For much of the hearing, counsel was excused from attendance but he did appear at the opening and closing submissions and when Curtain gave evidence.
38 Given the general discretion which the court has in relation to costs, I consider it appropriate to accede to the agent’s request for costs and that those costs be paid by WAG. It seems to me that, but for WAG’s attitude, there would have been no need for the agent to attend the hearing. It had already agreed to abide by any order the court made with respect to the deposit moneys. Any appearance by the agent would have been limited either to argue costs, or if the vendor had been successful, some ancillary order or orders flowing from that outcome.
Conclusion
39 In the circumstances, I make the following orders:
(i) a declaration that the plaintiff is entitled to return of the deposit monies in the amount of $182,000;
(ii) the second defendant return to the plaintiff the deposit monies in the amount of $182,000;
(iii) the first defendant pay to the plaintiff interest in the amount of $18,980.55;
(iv) the first defendant pay the plaintiff’s costs of and incidental to the proceeding, including reserved costs, such costs to be taxed on a standard basis in default of agreement.
(v) the first defendant pay the second defendant’s costs of and incidental to the proceeding, including reserved costs, such costs to be taxed on a standard basis in default of agreement.
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