Wilson v Daco Developments Pty Limited

Case •

[2020] NSWSC 1441

•

20 October 2020

Supreme Court


New South Wales

  • Amendment notes
Medium Neutral Citation: Wilson v Daco Developments Pty Limited [2020] NSWSC 1441
Hearing dates: 9 December 2019 and 4 March 2020
Date of orders: 20 October 2020
Decision date: 20 October 2020
Jurisdiction:Equity
Before: Slattery J
Decision:

Costs and interest not awarded to the plaintiffs. Plaintiffs ordered to pay the second defendant’s costs on the ordinary basis. Proceedings otherwise dismissed.

Catchwords:

CIVIL PROCEDURE – claim for interest under Civil Procedure Act2005, s 100 – settlement reached after mediation – two claims left open in settlement – but the settlement provided for the later payment of those claims by the defendants, upon the plaintiffs substantiating certain payments they claimed they had made to third parties on behalf of the defendants – after some time the defendants made the payments on the two claims left open in the settlement – but the plaintiffs claim the defendants delayed in making these payments – the defendants seek to explain their delay on the basis that it was caused by the plaintiffs’ own delay in substantiating their claimed payments to the third parties – whether the plaintiffs are entitled to interest upon the delayed payments on the two claims.

COSTS - whether the plaintiffs should have an order for the costs of pursuing the delayed payments on the two claims.

Legislation Cited:

Civil Procedure Act 2005, ss 73, 100
Legal Profession Act2004

Legal Profession Uniform Law Application Act 2015

Practice Note No. SC Gen 16

Cases Cited:

Big Kahuna Holdings Pty Ltd v Kitas (No 2) [2012] NSWSC 858

Electricity Generation Corp v Woodside Energy Ltd; Woodside Energy Ltd v Electricity Generation Corp (2014) 251 CLR 640Falkner v Bourke (1990) 19 NSWLR 574

Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104

Re Minister for Immigration and Ethnic affairs; Ex parte Lai Qin (1997) 186 CLR 622

Ruby v Marsh (1975) 132 CLR 642

Category:Principal judgment
Parties: First Plaintiff: Simon Maddison Wilson
Second Plaintiff: CCS Services Pty Limited
Third Plaintiff: CCS Legal Pty Limited
First Defendant: Daco Developments Pty Limited
Second Defendant: John Anthony Hogan
Representation:

Counsel:
Plaintiffs: K. Hooper
Defendants: R Gration

Solicitors:
Plaintiffs: Adrian Batterby Lawyer
Defendants: Hahm Lawyers
File Number(s): 2017/00234753
Publication restriction: No

Judgment

  1. The parties believed they settled these proceedings on 20 April 2018. That day they reached agreement at mediation which required the defendants to make various payments to the plaintiffs. But the settlement left open two of the plaintiffs’ claims (made in paragraphs [60] and [65]) of the Statement of Claim) totalling $562,019.99. As part of the settlement, the plaintiffs were required to provide material to the defendants that would substantiate certain payments that in these two claims the plaintiffs said they had made to third parties on behalf of the defendants. Upon substantiation, the defendants would pay the plaintiffs the balance of the settlement money.

  2. But the terms of the settlement are in dispute. The plaintiffs now seek a determination under Civil Procedure Act 2005, s 73 as to whether and on what terms the proceedings have been compromised. The plaintiffs complain that the defendants have delayed in paying the money due to them under this settlement and they have incurred costs in pursuing that money from the defendants. The plaintiffs seek both interest upon what they say is late payment of money due to them under the settlement and they seek their costs of recovering this money.

  3. In reply, the defendants submit that upon a proper interpretation of the settlement agreement, the plaintiffs failed in a timely way to substantiate the payments that the plaintiffs claimed they had made to the third parties. The defendants submit that properly construed the settlement agreement does not permit further claims for interest or costs but that even if it did, the Court should award neither interest nor costs to the plaintiffs.

  4. The proceedings were argued on 9 December 2019 and 4 March 2020. Ms K. Hooper of counsel instructed by Mr Adrian Batterby Lawyer appeared for the plaintiffs. Mr D. Gration of counsel instructed by Hahm Lawyers appeared for the defendants. The Court was much assisted by the careful submissions advanced on both sides of these proceedings.

  5. To interpret the settlement agreement between these parties some background is required of the dealings between the parties before the making of the settlement agreement. That background includes a little of the issues raised in the proceedings that were being resolved.

  6. Once that background is provided, these reasons set out the main contractual documents and at the same time the Court gives its own analysis of those documents. Then the Court deals with the arguments that were advanced by the parties.

A Funder, a Property Developer and a Property Deal – Background 2012 to 2018

  1. The first plaintiff, Simon Maddison Wilson, controls two companies that provide specialist services in the construction industry: CCS Services Pty Limited (“CCS Services”), the second plaintiff, and CCS Legal Pty Limited (“CCS Legal”), the third plaintiff. Mr Wilson practices as a solicitor. CCS Services provides building and construction consultancy services. CCS Legal carries on an incorporated legal practice and provides legal services that complement the services provided by CCS Services. For convenience, this group of parties is sometimes referred to in these reasons as “the Wilson parties”.

  2. The first defendant, Daco Developments Pty Limited Ltd as trustee for the Daco Family Trust (“Daco”) is the trustee of the family trust of the second defendant, Mr John Anthony Hogan. And Mr Hogan controls another company, Mid-West Excavations Pty Limited (“Mid-West”) to which the corporate plaintiffs also provided services, although it is not a defendant in these proceedings. This group of parties, excluding Mid-West, is sometimes, for convenience, referred to in these reasons as “the Daco parties”. Daco was placed into liquidation in August 2019 and action against it was stayed. But Mr Hogan remained an active party contesting the claims of the Wilson parties.

  3. Prior to 2012, Mr Wilson and CCS Legal had provided services to Daco in relation to various property development projects. In 2012, Daco purchased a property development site in the Sydney suburb of Glebe (“the site”). Daco required funding to complete the purchase of the site and to proceed with its development into townhouses. In May 2013, Mr Wilson’s partner, Ms Sofia Bryden (“Bryden”), loaned $115,000 to Mid-West, to facilitate the development of the site. And in July 2013, Daco obtained finance from St George Bank and completed the purchase of the site. Later in July 2013, the defendants or Mid-West repaid Bryden $50,000 of the $115,000 loan.

  4. Daco found itself unable to source sufficient funds to complete the townhouse development at the site. So in February 2014, by arrangement between Mr Wilson and Mr Hogan, in order to meet Daco’s ongoing financial obligations, expenses and disbursements on the project, CCS Services commenced to make payments to various third parties on behalf of Daco.

  5. By February 2014, Daco also lacked readily available liquid funds to meet its recurrent interest obligations on other loans it had obtained for its development projects. The parties referred to these other loans as “the Stacks Loan” and “the Capital One Loan”. So in March 2014, in further mutual arrangements, CCS Services commenced to meet Daco’s interest payments on the Stacks Loan and the Capital One Loan.

  6. In April 2014, CCS Legal began to make similar payments on behalf of Daco, other than for interest, to various third parties. And in February 2016 CCS Legal made interest payments on Daco’s behalf on the Capital One Loan.

  7. In April 2016, CCS Services made the last interest payment on behalf of Daco. CCS Services and CCS Legal claim they had made a total of $174,564.16 in interest payments on behalf of Daco.

  8. The plaintiffs’ claim is that their willingness to assist Daco was secured in exchange for a promise that they would be able to purchase one of the townhouses in the completed development project at the site for an attractive price of $1,250,000. Daco’s development project in Glebe was completed in mid-2016.

  9. In July 2017, CCS Services and CCS Legal made the last of their non-interest payments to third parties on behalf of Daco. The plaintiffs claim that the total of non-interest payments made by CCS Services and CCS Legal to third parties on behalf of Daco was $387,455.83.

  10. The plaintiffs sought reimbursement from the defendants for these payments said to have been made on Daco’s behalf. But the plaintiffs could not reach satisfactory arrangements for the repayment of the monies allegedly outstanding from the defendants to them. The parties’ dispute spilled over into the Local Court, where the plaintiffs commenced action against Mid-West for recovery of the loan to it.

  11. In late July 2017, the plaintiffs became concerned that Daco might sell the townhouse that had been promised to the plaintiffs in exchange for the plaintiffs’ financial accommodation. So they commenced these proceedings by summons on 1 August 2017 and obtained a grant of interim injunctive relief in the Equity Division duty list preventing the sale of the townhouse.

  12. The issues between the parties were sufficiently complex that pleadings were directed. The plaintiffs filed their Statement of Claim on 5 October 2017. The defendants’ Defence was filed on 29 November 2017. The mediation followed soon after the close of pleadings in April 2018.

  13. The pleadings in the proceedings are no longer of great relevance, other than for it to be appreciated that the issues jointed between the parties were quite wide ranging. The plaintiffs’ overall claim was for over $2 million. The claim included recovery of fees for services provided by CCS Services and CCS Legal, reimbursement of the advance made by Ms Bryden and completion of the sale of the townhouse to the plaintiffs.

  14. But the defendants raised serious issues in response. They contended for example that to the extent that CCS Legal was seeking recovery of fees for the provision of legal services, neither costs disclosure nor a cost agreement had been given or entered into in compliance with either the Legal Profession Act2004, or the Legal Profession Uniform Law Application Act 2015. And they contended that when acting as a solicitor in dealing with Daco and Mr Hogan that Mr Wilson was in a position of conflict of interest, and engaged in self-dealing in breach of his fiduciary duty to his client when engaging to acquire the townhouse from the Daco parties. These issues were disputed by Mr Wilson. The Court understands from the course of submissions that some of these matters have been referred to the Legal Services Commissioner.

  15. The late Mr Graham Berecry, a former Registrar in Equity and an experienced mediator, conducted the mediation face-to-face with the parties on 14 April 2018. But the mediation did not reach final settlement that day. As sometimes occurs where the parties have continuing confidence in the prospects of a settlement being reached, the mediator kept the mediation on foot for another six days until 20 April 2018. On that day, an exchange of correspondence took place through which the Daco parties contend that the proceedings were settled.

  16. There is no issue between the parties that their correspondence preserved the plaintiffs’ claims in paragraphs [60] and [65] of the Statement of Claim. Some familiarity with these paragraphs is necessary to understand the settlement correspondence. Paragraph [60] of the Statement of Claim dealt with the interest payments that CSS Services or CSS Legal claimed to have made on behalf of Daco. Paragraph [65] of the Statement of Claim dealt with the non-interest payments that CSS Services or CSS Legal claimed to have made on behalf of Daco.

  17. Paragraph [60] of the Statement of Claim pleaded as follows:

“From March 2014, relying on:

  1. the 4 August 2012 Agreement, or alternatively the 4 August 2012 Representation, or both; and

  2. further, or alternatively the 11 November 2012 Agreement , or the 11 November 2012 Representation, or both; and

  3. further, or alternatively the 23 January Agreement, or the 23 January 2013 Representation, or both;

  4. further, or alternatively, the 24 July 2013 Agreement, or the 24 July 2013 Representation, or both;

  5. further, or alternatively, the 12 November 2013 Agreement, or the 12 November 2013 Representation, or both;

  6. in performance of the Daco Sale Contract; and

  7. in performance of the 26 February 2014 Agreement, or alternatively in reliance on the 26 February Representation, or both

Wilson arranged for CCS Services to make a number of advance to Daco by paying the Interest Obligations on Daco’s behalf, further particulars of which are provided below (the Daco Interest Payments).

Particulars of the Daco Interest Payments

The interest payments made on the Stacks Loan and the Capital One Loan for Daco’s benefit are set out in Annexure C to this Statement of Claim by reference to:

(a)   the date of payment;

(b)   the identity of the payment made;

(c)   how the payment was made by CCS Services; and

(d)   the amount of each payment made for each interest payment.”

  1. Annexure C to the Statement of Claim gave detailed particulars of the interest payments CCS Services claimed to have made on the Stacks Loan and the Capital One Loan for Daco’s benefit. Annexure C totalled $174,564.16 which was comprised of $136,064.16 said to have been paid by CCS Services and $38,500.00 said to have been paid by CCS Legal.

  2. Paragraph [65] of the Statement of Claim pleaded as follows:

“From 26 March 2014, and in consequence of:

  1. the 4 August 2012 Agreement, or alternatively in reliance of the 4 August Representation, or both; and

  2. further, or alternatively the 11 November 2012 Agreement, or alternatively in reliance on the 11 November 2012 Representation, or both; and

  3. further, or alternatively the 23 January Agreement, or alternatively in reliance on the 23 January 2013 Representation, or both;

  4. further, or alternatively, the 24 July 2013 Agreement, or alternatively in reliance on the 24 July 2013 Representation, or both;

  5. further, or alternatively, the 12 November 2013 Agreement, or alternatively in reliance on the 12 November 2013 Representation, or both;

  6. further, or the 18 December 2013 Agreement or alternatively in reliance on the 18 December 2013 Representation; and

  7. in performance of the Daco Interest Agreement or alternatively in reliance on the Daco Interest Representation;

  8. in performance of the Further Funding Agreement, or alternatively in reliance on the Further Funding Representation:

  1. Wilson obtained the funds required to advance to Daco to enable Daco to meet Daco’s obligation to make various payments in connection with the Development, further particulars of which are provided below (the Further Funding Payments).

Particulars of the Further Funding Payments

The Further Funding Payments made are set out in Annexure D to this Statement of Claim by reference to:

(a)   the date of payment;

(b)   the identity of the payment made;

(c)   how the payment was made by CCS Services; and

(d)   the amount of each payment made in respect of Daco’s obligations.

  1. Wilson had CCS Services and CCS Legal continue to provide services to Daco for the Development, further particulars of which are provided below, and deferred invoicing Daco for payment of fees;

Particulars of Services Provided to Daco

See the particulars to paragraph 25.

  1. Wilson deferred the repayment of the Bryden Advance;

  2. Wilson and CCS Services deferred the repayment of the Valuation Fee Payment;

  3. Wilson and CCS Services continued to make Daco Interest Payments, and deferred the repayment of the Daco Interest Payments that it made.”

    1. Annexure D to the Statement of Claim gave detailed particulars of the non-interest payments that CCS Services claimed to have made on Daco’s behalf. Annexure C totalled $387,455.83 which was comprised of $360,904.30 said to have been paid by CCS Services, $8,797.53 said to have been paid by CCS Legal and $17,754 said to been paid by another entity, Carlyle Property Trust. This total was slightly different from the figure for non-interest payments set out earlier in these reasons, but the differences are not material.

    2. The settlement disposed of all the other disputes between the parties. Principal among these other disputes was the plaintiffs’ claim that Mr Hogan and Daco had represented to the plaintiffs that Daco would sell a townhouse in the development of the site to Mr Wilson for consideration of $1,250,000, for which consideration would be adjusted in various ways to take account of the dealings between the parties. The defendants resisted this claim. But part of the compromise involved the conveyance of this townhouse proceeding but at a considerably larger price.

Analysis of the Settlement Correspondence – 14 April 2018 to 2 May 2018

  1. This section sets out and analyses in context the settlement correspondence passing between parties from 14 April 2018 to 2 May 2018. The parties are agreed that they reached a settlement agreement during that period. But they disagree as to its terms. The Court’s task is to determine what the parties agreed in relation to the survival of paragraphs [60] and [65] of the Statement of Claim.

  2. The settlement agreement is a commercial agreement which should be construed in accordance with the principles that apply to the construction of such agreements: Electricity Generation Corp v Woodside Energy Ltd; Woodside Energy Ltd v Electricity Generation Corp (2014) 251 CLR 640; (2014) 306 ALR 25; [2014] HCA 7 (“Woodside”) and Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; (2015) 325 ALR 188; [2015] HCA 37 (“Wright Prospecting”).

  3. At the end of the face-to-face mediation on 14 April 2018, Mr Wilson wrote to Hahn Lawyers on a without prejudice basis recording that the mediator had left the mediation on foot to enable the parties to continue their discussions. Mr Wilson’s letter contained a conciliatory statement, that “[u]pon reflection we have recognised how difficult it would have been for your client to have repaid the various fees and loan repayments before the sale of the property”. The letter also noted Mr Hogan’s determination “to receive $1,800,000 for townhouse 3”. The letter reiterated that CCS Services and Mr Wilson for their part “have incurred loan servicing fees for amounts expended on Mr Hogan’s behalf”.

  4. Mr Wilson’s letter of 14 April 2018 then offered a settlement proposal. Not all the calculations and adjustments of the proposal relating to the Townhouse 3 purchase price of $1,800,000 are recorded here, only those relevant to the claims still in dispute are mentioned. Other rental rebates and credit adjustments were in fact mentioned in the letter.

“We make the following settlement proposal in which we have attempted to incorporate all of the parties’ reasonable demands and which may provide a better framework:

Purchase of Townhouse 3               $1,800,000

…

Disbursements and Loan repayments made

on Daco’s behalf                  $530,320

Interest on disbursements (refer spreadsheet)      $90,750

Interest on loan repayments made on Hogan’s behalf   $45,981

Less 30% discount on CCS and CCS Legal Fees      $150,000

Although we believe that the amounts against each head of claim are accurate, we will assist with their authentication.

We look forward to your reply.”

  1. The figures that Mr Wilson proposed in this correspondence became a source of some confusion. Mr Wilson claims here that he was owed the sum of $530,320. This figure was Mr Wilson's addition of the total amounts owed in Annexure C and Annexure D. In fact, the addition is wrong. The total of monies owed by adding Annexure C and Annexure D is $562,019.99. The parties realised the error later and these proceedings were conducted on the basis that the total figure was $562,019.99, not $530,320, although the incorrect figure appears in a number of pieces of subsequent correspondence.

  1. Mr Wilson’s letter of offer provoked a detailed counter-offer from Hahm Lawyers on 16 April 2018. Hahm Lawyers’ 16 April letter noted that in principle agreement had been reached on 12 April 2018 on all aspects of the claims made other than in respect of the conveyance of Townhouse 3. Hahm Lawyers stated that they understood that the parties were $200,000 apart with respect to the sale price of Townhouse 3, with Mr Hogan wanting $1.8 million and Mr Wilson offering by then to pay $1.6 million. The letter offered to split the difference on this issue and convey Townhouse 3 to Mr Wilson for $1.7 million. The letter offered for Daco to enter into a replacement (for an existing) contract with Mr Wilson for the sale of Townhouse 3 “as is”, which would be exchanged on 26 April 2018 and that the deposit of 10% payable on the exchange could be released to Daco to be applied to meet the first three points of the eight point settlement proposal, which is set out below.

  2. Hahm Lawyers then summarised their settlement offer in eight points, as follows:

“At the mediation the parties had reach in-principle agreement to the following:

  1. Mid-West Excavations Pty Ltd will pay $63,636.36 + GST ($70,000) inclusive of costs to Construction and Contact Services Pty Limited ACN 164 444 553 (‘CCS’) in full and final settlement of the claims made in Local Court proceedings 2017/256433 and any other claim that CCS has, had or might have against Mid-West Excavations.

  2. Daco Developments Pty Limited will pay $109,090.81 + GST ($120,000) to CCS Legal in respect of its claimed legal costs and Daco Developments will withdraw its pending application for costs assessment. CCS Legal will pay the costs of the costs assessor to date (if any). The payment of $120,000 to CCS Legal takes into account the amount of $41,000 that CCS Legal had already taken for legal costs of which Daco.

  3. Daco Developments Pty Limited will pay $110,909.09 + GST ($122,000) to CCS in respect of its claim in the Supreme Court proceedings for work done for Daco Developments.

  4. CCS and CCS Legal will provide to Hahm Lawyers a folder containing all of the supporting documentation, invoices, receipts and emails in respect of their claims for payments and disbursements allegedly made to third parties of $530,320, including each and every document referred to in Annexures C and D to the Statement of Claim filed in the Supreme Court. For the avoidance of doubt, the underlying documentation supporting amounts shown on bank statements as having been debited from the account must be provided. Further, our clients require copies of all original letters sent to purchasers' solicitors attaching the actual cheque directions given for the settlement of each of the five sales of the townhouses for which CCS Legal acted as the vendor's solicitors, also copies of the agency agreement with the selling agents to verify the commission payments claimed to have been made to those agents. On verification against documentation of the underlying amount and basis for it having been paid, our clients will pay 100% of the verified amounts of third party payments and disbursements. CCS and CCS Legal will credit $42,499.83 toward the verified amount of third party payments and disbursements in repayment of the rent that it received from May 2016 to February 2017 for Townhouse No. 3. If the parties cannot agree on any amount claimed' by CCS or CCS Legal for an alleged third party payment or disbursement, the parties will refer the dispute in respect of that amount(s) to an independent expert for determination and the expert will determine who should pay the expert's costs based on the respective positions taken in relation to that amount(s).

  5. If the audit and inspection of the documentation in point 4 above reveals that CCS or CCS Legal have received other payments or monies belonging to Daco Developments (such as deposits paid by purchasers of townhouses and released on settlement to CCS or CCS Legal by the selling agents) those amounts will be credited as required against any reimbursement by Daco of the verified third party payments and disbursements.

  6. CCS and CCS Legal must provide tax invoices in respect of each of the payments referred to in points 1, 2 and 3 above.

  7. The amount of $254,442.56 plus interest that is currently held in a controlled monies account by Wight & Strickland on behalf of Daco Developments will be immediately released to Daco Developments and applied towards the payments referred to in points 1, 2 and 3 above.

  8. Supreme Court and Local Court proceedings to be dismissed with each party to pay his or its own costs.”

    1. This letter is significant at several levels for the parties’ present dispute. As will be seen below, it was in substance accepted by the plaintiffs in terms that did not seek to vary the program set out in point 4. This letter therefore sets out the most comprehensive statement of what the parties agreed so far as the programme of verification of supporting documentation is concerned. The letter seeks to bridge the stand-off about the price of Townhouse 3 at the end of the mediation. It also explains the practical financial interdependence of the release of the deposit to Daco, so that it in turn could quickly satisfy its other obligations to the plaintiffs.

    2. But importantly, point 4 of the 16 April Hahm Lawyers letter describes a comprehensive program for the production by the plaintiffs to Daco for its examination of “the underlying documentation supporting amounts shown on bank statements as having been debited from the account” in respect of the claims in Annexure C and D of the Statement of Claim. The program proposed was comprehensive in the sense that it provided a mechanism which was designed to deal fully with all possible outcomes: that the Daco parties would either be satisfied, or not be satisfied, with what the supporting documentation showed. If the documentation was accepted as verifying the claim, “our clients will pay 100% of the verified amounts of third party payments and disbursements”. If the documentation was not accepted and an agreement could not be reached “the parties will refer the dispute in respect of that amount(s) to an independent expert for determination”. And the question of the costs of the expert was dealt with: “the expert will determine who should pay the expert’s costs based on the respective positions taken in relation to that amount(s).”

    3. The Court finds the analysis of the exchange of documentation outlined by Mr Gration on behalf of the Daco parties to be persuasive. He points out that Mr Wilson's first letter of 14 April 2018 expressly seeks interest on disbursements and interest on loan repayments being the equivalent of paragraphs [65] and [60] of the Statement of Claim.

    4. But this Hahm Lawyer's letter of 16 April 2018 was a counter-offer which caused Mr Wilson's offer of 14 April 2018 to lapse. It is notable that of the eight points within the 16 April 2018 letter, none of them conceded that the Daco parties should pay interest on disbursements or loan repayments. No part of this letter goes beyond a promise to pay "100% of the verified amounts of third-party payments". In this letter there is no promise to pay interest or any allowance for the payment of interest in the hands of the expert. And this letter rejects Mr Wilson’s requested claim for interest on the money that is claimed to be outstanding in Annexures C and D to the Statement of Claim.

    5. Mr Wilson replied the same day. His reply came very close to acceptance of the offer from Hahm lawyers. But he required clarification on three matters, “three reasonable provisos”, clarification which was ultimately given. Mr Wilson’s letter of 16 April 2018 in reply stated:

“We refer to your letter dated 16 April 2018. Due to the lack of time, this reply is necessarily truncated.

The terms proposed by your client are acceptable with only three reasonable provisos.

  1. The money that Mr Wilson will use to pay the Deposit on 26 April 2018 will be the fee payments comprising Items 1, 2 and 3. If your client delays the payment of Items 1, 2 and 3, then the date of exchange of 26 April 2018, will need to be extended to accommodate that act of prevention.

  2. Similarly because a substantial portion of the monies to settle the purchase of the townhouse will comprise monies repaid against Item 4, those amounts must be settled and paid to Wilson no later than 18 May 2018. To the extent that the monies due to be repaid under Item 4 have not been repaid to Wilson by that date, the date for settlement will have to be extended.

  3. With regard to the rental rebate: Mr Wilson should be credited with the rent rebate of $5,000 that he paid to your client's then tenants, which was required because of your client's delay in addressing the complaints of those tenants.

We would expect that the payments under Items 1, 2, 3 and 4 are likely to be made in a timely manner say so that the first two provisos should have no operation. We consider the issue of the $5,000 rebate to be a matter of fairness. Our client should only rebate the rentals that he received.

Yours faithfully”

  1. The second matter for clarification emphasised that in the interdependence of the parties’ proposed financial obligations extended to Mr Wilson receiving reimbursement pursuant to the operation of the mechanism in point 4 to help fund his purchase of Townhouse 3.

  2. Mr Wilson’s letter in turn provoked a second letter from Hahm Lawyers on the same day. It is not necessary to reproduce most of the Hahm Lawyers second letter of 16 April. Much of the letter is seeking to clarify that monies held in controlled monies accounts was covered by the agreement, the timing of the application of the deposit and whether Mr Wilson had to contribute more towards deposit monies. Hahm Lawyers then covered the subject of the timing of the Townhouse 3 conveyance in relation to the examination of the “supporting documents”:

“In point 2 of your counter-proposal you state that a ‘substantial portion of the monies to settle the purchase of the townhouse will comprise monies repaid against Item 4’. That is understood and the only obstacle to that occurring is the timely provision of the supporting documents that we have been requesting for more than a year. The folder of documents that you brought to the mediation and that we inspected could (and should) be provided immediately. The difficulty that the failure to provide those documents to us today (as requested at the mediation) has caused is that the writer is flying overseas tomorrow morning for work and does not return to Australia until 25 April 2018. However, if those documents can be provided forthwith, arrangements can be made for them to be checked while the writer is overseas with the intention that as much as possible of the $530,320 claimed can be checked and, if verified, paid immediately out of the remaining deposit monies. The only obstacle preventing that being done by the date you have stipulated of 18 May 2018 would be further delay in provision of the required documents to enable our clients to check the claims, such as providing copies of the actual cheque directions sent to purchasers’ solicitors for settlement of the sales and providing a copy of the agency agreement showing the amount of agent’s commission payable on those sales”

  1. Hahm Lawyers’ second letter of 16 April was here flagging that the delay which had already occurred in the provision of the underlying documents by 16 April was prejudicing their ability to comply with the settlement structure being completed by 18 May, because Ms Anna Hahm was going overseas the following day, 17 April. The letter proposed a six-week settlement period after exchange of contracts on 26 April 2018 and emphasised “an urgency to get the requested documentation to us as soon as possible”.

  2. Ms Anna Hahm left Australia on 17 April on a business trip. She was due to return on 25 April, one day before the date proposed for the exchange of contracts for Townhouse 3.

  3. The next correspondence came from Mr Wilson on 20 April 2018. In its primary declaration and in its detail it accepted that the "three reasonable provisos” Mr Wilson had previously raised on 16 April had been satisfied. The letter was on CCS Legal letterhead. It opened by saying "it is welcome news that the parties have managed to resolve their broad range of issues". The more detailed terms discussed in the letter made it clear that those issues had been satisfied. The letter dealt with details of various interdependent obligations relating to the proposed conveyance, namely the release of monies in controlled monies accounts to Mr Hogan, so he could pay Mr Wilson’s fees, so Mr Wilson could in turn pay the deposit on the contract for sale. On the question supporting documentation the letter said:

“We will provide the all of the supporting documentation to verify the third party payments and disbursements by no later than Thursday, 25 April 2018. We note your client’s agreement with regard to the $5,000 off-set against the rebate for rentals received.

“We agree to the exchange of contracts for Townhouse [3] for a price of $1,700,000 on 26 April 2018, together with payment of 10% deposit with the sole proviso that the settlement cannot occur until one business day after the payment of fees by MWE and Daco Development are cleared funds, enabling Mr Wilson to provide a bank cheque for $1,700,000 at exchange.

With regard to third party payments and disbursements, those monies will be required to settle the purchase. Our client understands that your client is possibly unable to repay those monies before settlement of Townhouse and our client is willing to co-operate in those circumstances. Our client will need to be advised of at least the undisputed amount 3 weeks before settlement in order to finalise the amount of finance.

We propose that your client advises our client of the quantum of the undisputed amount and of any disputed amounts within 10 business days of our provision of the supporting documentation.

We hope that this has addressed the issues raised in your correspondence. It would be prudent to sign a Heads of Agreement, which we offer to prepare.”

  1. The offer to prepare and sign heads of agreement is not taken up in part because it was overtaken by events including the exchange of contracts. This letter represents acceptance of the terms as finally specified by Hahm Lawyers. That both sides saw it that way can hardly be doubted. As foreshadowed in the 20 April 2018 letter, exchange of contracts for Townhouse 3 for $1,700,000 took place on 26 April 2018. Importantly there was no variation to the schema for dealing with the supporting documentation set out in point 4 of the Hahm Lawyers’ 16 April letter.

  2. The exchange of contracts for Townhouse 3 occurred on 26 April. On the day of the settlement and in advance of settlement Ms Hahm emailed the solicitor for the plaintiffs to clarify aspects of the exchange in the following terms:

“Dear Peter,

After our discussion earlier today, I think the parties now understand the process we have proposed for exchange of contracts this afternoon for Townhouse No. 3. Thank you.

We haven’t confirmed in writing (at least recently) the broader aspects of the overall settlement. For the avoidance of doubt, could you please confirm by reply to this email ahead of exchange of contracts later today that the following is agreed:

On exchange of contracts for Townhouse No. 3 for a purchase price of $1.7 million, with a deposit of $170,000, the previously discussed mechanism will be followed to release the whole of the controlled monies account to Mr Wilson's interests in part payment of the agreed settlement amount of $312,000 in respect of CCS and CCS Legal's fees claimed against Daco and Mid-West Excavations. The balance of the $312,000 settlement amount will be paid by Daco out of the $170K deposit it receives on exchange, such that a cheque for only $115,941.31 is required from Mr Wilson in payment of the deposit.

As soon as practicable (and certainly ahead of the review in the Downing Centre Local Court on 8 May 2018), CCS will prepare a Notice of Discontinuance of the whole of proceedings 2017/256433 by consent, with no order as to costs with the intention that each party bears its own costs of those proceedings. Mid-West Excavations will sign the Notice of Discontinuance as promptly as possible so that it can be filed by CCS to avoid the need (and cost) for the parties to attend Court on 8 May 2018.

As soon as practicable (and certainly ahead of the directions hearing in the Supreme Court on 2 May 2018), CCS will prepare a Notice of Discontinuance of part of proceedings 2017/234753, namely the whole of those proceedings except for the claims in respect of the 'Daco Interest Payments' defined in paragraph 60 and the 'Further Funding Payments' defined in paragraph 65 of the Statement of Claim, with no order as to costs with the intention that each party bears its own costs of the whole of those proceedings up to and including 2 May 2018. At the directions hearing on 2 May 2018, the parties will consent to the Notice of Discontinuance being filed in court and will ask the Court to stand the balance of the proceedings over to Wednesday, 13 June 2018 for further directions. On 13 June 2018, if the 'Daco Interest Payments' and 'Further Funding Payments' claims have been resolved to the parties' mutual satisfaction (ie. the amounts have been agreed and paid), the remaining balance of proceedings 2017/234753 will be discontinued by consent with no order as to costs with the intention that each party bears its own costs of the proceedings. If there are any unresolved aspects of the 'Daco Interest Payments' and 'Further Funding Payments' claims, those claims can continue to be pursued by CCS and CCS Legal in the proceedings if they wish.

Would you please confirm by reply to this email as soon as possible that the above points are agreed.

Kind regards

Anna Hahm”

  1. Point 3 of this email throws light upon the terms of a Notice of Discontinuance which was filed in the Supreme Court on 2 May. Hahm Lawyers proposed that there be “no order as to costs with the intention that each party bears its own costs of the whole of those proceedings up to and including 2 May 2018”. This was quite consistent with point 8 of the Hahm Lawyers letter of 16 April, which expressed much the same cost allocation except it was in more complete terms.

  2. In drafting this letter Hahm Lawyers plainly faced the logical difficulty of reconciling point 8 of the Hahm Lawyers letter of 16 April, with the fact that parts of the Statement of Claim were now being left on foot. It was not possible for there to be complete agreement for each party to bear their own costs whilst paragraphs [60] and [65] of the Statement of Claim would be left in play. So Hahm Lawyers proposed the most logical course: that the Notice of Discontinuance could only perform the terms of the agreement made on 20 April to the extent that Court documents were to show that the proceedings were being dismissed.

  3. The Wilson parties submit that when the Notice of Discontinuance was filed in this form it reflected the fact the parties had agreed to leave costs at large after 2 May 2018. That argument is correct at least in one respect: , that because part of the proceedings were being left on foot, the Court’s jurisdiction to make costs orders in respect of the balance of the proceeding still existed.

  4. But in the Court’s view, the correspondence does not at all look like the parties were abandoning the agreement that they had made in point 8 of the letter of 20 April: that the overall result to be achieved by the agreement was to be that each party would bear its own costs. Had the parties contemplated that they were taking on the risk of further litigation between themselves about costs, one would have expected this important change to the consensus of 20 April to have been addressed more directly. In the Court’s view, that 20 April consensus still existed but it could only be performed after the date of partial discontinuance on 2 May.

  1. But Mr Wilson did not confirm his reply by email before the exchange of contracts that same afternoon. Though it had been discussed at the exchange of contracts that Mr Wilson would sign and provide the Notice of Discontinuance drafted in accordance with Ms Hahm’s email of 26 April and that Mr Wilson would be providing the supporting documentation in a folder by 30 April. The next morning Ms Hahm emailed Mr Wilson’s solicitor:

“Dear Peter,

We refer to the above matter and to its exchange of contracts for sale of townhouse 3 yesterday at 4.35pm at Epping. Jasmine and Sam provided an undertaking that a s 66W certificate would be forwarded yesterday evening but we have yet to receive the s66 W certificate. Would you please ask your client to forward the s66W certificate first thing this morning. I also note Sam and Jasmine agreed for the residential tenancies agreement to form part of the contract of sale. This will be sent to you or Jasmine as soon as to hand.

We also confirm Sam's verbal agreement and acknowledgment to the email below and the three points which we look forward to receiving a notice of discontinuance for our execution in the Local Court matter shortly.

With regards the third party payment lever arch folder, we confirm Sam's promise and advice that CCS Legal and Jasmine shall deliver to our office or PO Box by Monday 30 April 2018. Please advise ahead of time if you shall be attending our office as I will be in court in Parramatta from 9.30-4pm.

If the writer has been misinformed or been advised incorrectly of any issues raised in this email, please advise our office immediately.

Kind regards

Anna Hahm”

  1. Ms Hahm appeared also to appreciate on 27 April that there was no written confirmation of agreement to the three points in her 26 April email. So she confirmed that in an email early in the afternoon of 27 April:

“Mr Wilson had confirmed yesterday at exchange that he agreed with the three points. We have received the notice of discontinuance for the local court hearing but requires amendment as noted in paragraph 4 below and we also request you forward to us today for consideration and signature ahead of the respective directions hearings the following documents:

Notice of Discontinuance of Supreme Court proceedings 2017/234753, discontinuing the whole of those proceedings except the claims in respect of the 'Daco Interest Payments' defined in paragraph 60 and the 'Further Funding Payments' defined in paragraph 65 of the Statement of Claim, with no order as to costs with the intention that each party bears its own costs of the whole of those proceedings up to and including 2 May 2018.

Short Minutes of Order by consent for Supreme Court proceedings 2017/234753:

1. The parties have leave to file in Court a Notice of Discontinuance in respect of part of the proceedings on the terms stated in the Notice.

2. Balance of the proceedings stood over for further directions on 13 June 2018.

The injunction granted in Order 7 made by Slattery J on 1 August 2017 and then varied by his Honour on 3 August 2017 is dissolved.

Liberty to restore the matter to the list on 3 days' notice by email to the Equity Registrar.

  1. Notice of Discontinuance of Local Court proceedings 2017/256433. discontinuing the whole of those proceedings with no order as to costs with the intention that each party bears its own costs of those proceedings.

  2. …”

  1. A Notice of Discontinuance, signed by the solicitors for the parties and conforming with these exchanges of correspondence was filed in Court on 2 May 2018. The Notice of Discontinuance which was signed by solicitors for both parties states:

  1. The Plaintiff discontinues the whole of these proceedings, except the claims in respect of the ‘Daco Interest Payments’ defined in paragraph 60 and the ‘Further Funding Payments’ defined in paragraph 65 of the Statement of Claim.

  2. The plaintiff does not represent any our person.

  3. Each active party consents to the discontinuance.

…

Terms of Discontinuance

Consent to the proceedings being discontinued is given on the following terms:

  1. No order as to costs with the intention that each party bears his or its own costs of the whole of the proceedings up and including 2 May 2018”.

    1. Once again, in the Court’s view, the terms recorded in this Notice of Discontinuance do not reflect a new agreement dissolving their existing consensus that the proceedings will be concluded on the basis of each party bearing and his or its own costs.

    2. The Wilson parties submit that the Notice of Discontinuance should be seen as varying what had previously been agreed and to leave the incidence of costs after 2 May at large. The plaintiffs’ claim is for costs incurred on and from 3 May 2018, the day following the filing in Court of the Notice of Discontinuance.

    3. But that argument imports the wisdom of hindsight into this situation. It is safe to infer that on 2 May 2018 neither party expected this dispute to go on as long as it has. By 20 April they had a sound agreed mechanism to deal with all the possibilities of a dispute about the supporting documentation. They had no reason to believe that their existing 20 April consensus needed to be disturbed and nothing in this correspondence indicates that they wanted to disturb that consensus.

    4. The claims in paragraphs [60] and [65] of the Statement of Claim total $562,019.99. The defendants subsequently paid the whole of that $562,019.99 except for a sum of $730. The amount of $730 is the total of two items claimed in Annexure D of the Statement of Claim, being the Annexure referred to paragraph [65] of the Statement of Claim. The plaintiffs withdrew their claims for those two items on 12 October 2018. The balance outstanding after the withdrawal of the claims for $730 was $561,289.99. But the course of those payments and the delay making them has led to the plaintiff’s current claim for interest.

The Course of Payments – June 2018 to June 2019

  1. In their written submissions, the plaintiffs submit that the defendants have credited or paid $566,926.83 to the plaintiffs on account of the $561,289.99 as follows:

Date

Amount

7 June 2018

$146,336.16

2 November 2018

$200,000.00

7 November 2018

$120,590.67

7 June 2019

$100,000.00

Total

$566,926.83

  1. It is not necessary to reconcile the slight numerical discrepancy in the payments against the payment obligations in these proceedings. The plaintiffs now claim interest under Civil Procedure Act2005, s 100 and costs. Both claims relate to the period after the settlement, commencing on 20 April 2018. The plaintiffs claim for interest is $16,383.54, calculated as follows:

Principal

Period

Days

Rate

Amount

$561,289.99

21 April 2018 to 5 June 2018

46

5.50%

$3,890.58

$414,953.83

6 June 2018 to 1 November 2018

149

5.50%

$9,316.56

$214,953.83

2 to 6 November 2018

5

5.50%

$161.95

$94,363.16

7 November 2018 to 6 June 2019

212

5.50%

$3,014.45

Total

$16,383.54

  1. The calculations of interest are based upon the rates prescribed by Supreme Court Practice Note No. SC Gen 16. The principal outstanding from time to time is net balance calculated after the deduction of the various payments of principal recorded above: $414,953.83 (being $561,289.99 less $146,336.16), $214,953.83 (being $414,953.83 less $200,000.00) and $94,363.16 (being $214,953.83 less $120,590.67).

  2. The payments that the Daco parties made generally followed their examination of documents supplied from time to time by the Wilson parties up to November 2018. But then remained something of a stand-off in relation to the last $100,000 that were said to be outstanding.

  3. It is common ground that the Wilson parties provided a folder of documents to Daco on 2 May 2018. Daco complains that it has never been explained why it took from 14 April to 2 May to copy this folder of documents. Be that as it may, Mr Wilson provided the folder of documents on the basis that it contained all the documentation that was required to substantiate the claims. But Daco fairly quickly took the position that the documents supplied in the folder were not adequate, raising the issue in letters of 30 May and 5 June 2018 and then in subsequent correspondence.

  4. The Wilson parties disputed that the documents supplied were inadequate. As the Court pointed out to the parties in the course of submissions, this Court does not have in evidence the underlying documents that were supplied during this period and is in no position to directly determine the adequacy of the documents supplied. But there is strong indirect evidence that Daco had genuine problems with the adequacy documents supplied, which the Wilson parties recognised and to which they responded.

  5. The proceedings were of course still on foot as to paragraphs [60] and [65] of the Statement of Claim and this remaining aspect of the proceedings continued to be listed in the Equity Registrars list. The only purpose of the listing was to manage the resolution of these remaining issues.

  6. The Court record speaks for itself. In the second half of 2018 there were repeated adjournments of the proceedings to allow the Wilson parties to provide documents in response to Daco's requests. The proceedings were listed on and adjourned from the following dates in 2018: 13 June, 25 July, 12 September, 16 October, 29 October and 26 November.

  7. Sufficient care was taken on some of those occasions for the Court to record (no doubt at the request of Daco) the reasons for the adjournment. It is instructive to examine some of those reasons, as recorded. On 25 July 2018 the Court noted on its file the following:

“Note the parties agreement that: Plaintiffs are to provide to the Defendants by 24 August 2018 the documents that were requested in the Defendants’ solicitor’s letter of 30 May 2018, together with any other documents that are reasonably required by the Defendants to enable the Defendants to verify the amounts claimed by the Plaintiffs in Annexures C and D to the Statement of Claim”.

  1. This records a consensus that the Wilson parties would provide Daco and Mr Hogan the documents formally requested by their solicitors’ letter on 30 May. It is difficult to understand why the Wilson parties would have agreed on 25 July 2018 to provide documents that they now say Daco already had and therefore amounted to an unreasonable request. If the documents requested were not part of a legitimate request, that is a point that could and should have been taken by 25 July 2018.

  2. But the Wilson parties did not provide the documents by 24 August 2018. So four more directions hearings were held up to November 2018, in all of which the common assumption being made was that the Wilson parties were required to produce the documents in answer to Daco's legitimate request for them. The Court record notes the following on the following dates. On 12 September 2018: the documents required were not produced until 11 September 2018. On 16 October 2018: the Wilson parties are to provide further requested documents by 19 October. On 29 October: noted by consent the Wilson parties will provide additional documents concerning Item 55 claimed in Annexure D of the Statement of Claim. On 26 October and November 2018: noted that Annexure D documents were produced on 22 November.

  3. Daco says it was satisfied that the documents it had requested were finally produced by 22 November 2018. Daco's case is that the Wilson parties’ failure to produce adequate documentation before 22 November 2018, to enable verification of the claims made in the Annexures C and D, was the cause of any delay in ultimate payment to the plaintiffs.

  4. The Court has first reviewed the correspondence up to November 2018. Wight & Strickland solicitors were acting for the plaintiffs during this period. A letter from Wight & Strickland on 11 September 2018 takes issue with a number of the outstanding requests for documents and claims that some of them had already been provided or were in the Daco parties’ own files. There are other disputes about whether documents even existed. Some documents were supplied. But most of the debate in this correspondence does not seem to the Court to indicate an unreasonable approach on the part of the Daco parties to the extent that it can be discerned from the correspondence.

  5. By 1 October 2018, Hahm Lawyers clearly communicated to the Wilson parties that, after their analysis of the supporting documentation supplied, that the Daco parties accepted $461,289.99 of the Wilson parties’ claims but rejected an amount of $100,730. Shortly afterwards, the plaintiffs dropped their claim for $730, leaving the balance of $100,000 in issue. The plaintiffs’ accept that all but $100,000 was paid to them by 7 November 2018. Given the timing and quantity of the supplied supporting documentation and the need to check what was supplied, it could hardly be said that the admission and payment of this $461,289.99 was unreasonably delayed by the Daco parties.

  6. It is to be remembered when looking at this correspondence that under the agreement that was made, Daco was entitled to ask for copies of the documentation supporting the plaintiffs’ claims. The contract made on 20 April 2018 does not assume that Daco is going to expend its own resources in searching out from scratch and analysing its own documents to find out whether there was validity in the Wilson parties claim. It was logical for the Wilson parties to advance all the material that they contended justified reimbursement by Daco.

  7. The Wilson parties argued that the requests for documentation were unreasonable in part because Daco already had the documents. But the contract required the Wilson parties to provide "all supporting documentation, invoices, receipts and emails in respect of their claims for payments and disbursements allegedly made to third parties". The coverage of that obligation may well include documentation, some of which was already in the possession of Daco. But the point of the parties agreeing to this contractual term was that the Wilson parties who wanted the reimbursement would have to undertake the burden of organising and presenting the supporting materials to make a persuasive case that the reimbursement was warranted. This reflects the common-sense reality that in a long-running project such as this, even though Daco may well have had a lot of the documents, it was a considerable advantage to Daco to be able to see how the Wilson parties made their case through the connections and proof in the documentation they supplied, so that Daco could then more readily compare the material so supplied with what was already in its own files.

  8. After October/November 2018, there was only $100,000 in dispute. But the conduct of the Daco parties in analysing the material supplied and authorising the payment of as much is $461,289.99, rather throws doubt on the idea that the dispute about the remaining $100,000 was just a delaying tactic.

  9. But again, looking at the correspondence between November 2018 and June 2019, it can be seen that right from the beginning the Daco parties did clearly articulate their concerns about this aspect of the Wilson parties’ claim, which related to Item 55 in Annexure D to the Statement of Claim. Hahm Lawyers’ letter of 1 October 2018 explained on this subject that:

“The progress payment claim 13 to RJ Group of $100,000 your client allegedly made on 15 October 2015 is rejected because our client has paid this amount on 17 July 2015. We enclose a copy letter from Arab bank dated 20 July 2015 confirming this payment.

This was detailed in the quantity surveyor’s report dated 9 July 2015, which your office only forwarded to our office on 11 September 2018.

We note that your client was aware or should have been aware of the payment of $101,706 made on 20 July 2015 from the construction loan through Arab Bank.”

  1. The issue went backwards and forwards for the next seven months. It is not necessary to detail all the correspondence. But when this correspondence is examined, it does not appear, although the Wilson parties had detailed arguments to the contrary, that the Daco parties could not articulate in a timely way a logical basis for maintaining their rejection of this claim.

The Issue Comes to a Head: June 2019

  1. The issue of the disputed $100,000 at Item 55 of Annexure D was not resolved. It is not disputed that Mr Hogan was by early June 2019 suffering a serious illness. On 7 June 2019, Hahm Lawyers wrote to the Wilson parties proposing that these proceedings be brought to a conclusion by the filing of short minutes of order that required each party to bear his and its own costs of the proceedings. The letter reflected instructions from Mr Hogan to bring the disputes to an end on a “without admissions” basis so he could focus on his treatment and health. The letter said on the subject of payment:

“Accordingly, without admission that your client’s claim is correct our client has instructed us to pay the amount at Item 55 of Annexure D to the statement of claim, being $100,000 [that] your clients claim was paid to RJ Group, in full and final settlement of your clients claim.”

  1. It is not a dispute that the $100,000 was paid into the plaintiffs’ bank account.

  2. On 13 June 2019, the present solicitor for the Wilson parties, Mr Adrian Batterby replied, stating that the short minutes of order “are not agreed”. Later that same party, Mr Batterby set out the plaintiffs’ position as follows:

"The Plaintiff’s position is:

  1. The $100,000 payment is accepted in relation to the claim for Item 55 of Annexure D to the Statement of Claim. It is not accepted in full and final settlement of all claims.

  2. The Plaintiffs press their claims for interest on the amounts claimed in Annexures C and D to the Statement of Claim with the exception of the claims for the 2 items which were withdrawn, namely items 53 and 54 of Annexure D totalling $730.

  3. The Plaintiffs claim costs for the period since the filing of the Notice of Discontinuance of part of the proceedings.”

    1. This came as something of a surprise to Daco. So Hahm Lawyers sought to bring the issue to a head on behalf of Daco in a letter dated 14 June 2019. In this letter, Hahm Lawyers advanced on behalf of Daco much the same argument that was advanced in this hearing and which the Court has accepted: that the settlement terms require that on completion of the verification process that the Supreme Court proceedings were to be "dismissed with each party to pay his or its own costs". Hahm Lawyers contended on 14 June 2019 that, in accordance with that binding agreement, the plaintiff should consent to a dismissal of the rest of the proceedings without any order as to costs. Hahm Lawyers provided short minutes of order for to this effect for signature.

    2. The Hahm Lawyers letter of 14 June 2019 also warned that in the event that the Wilson parties continued to refuse to discontinue the proceedings on this basis that they would apply for indemnity costs. The text of this paragraph is important for the resolution of a subsidiary dispute between the parties about indemnity costs and it was as follows:

“In the event your clients continue to refuse to discontinue the proceedings in accordance with point 9 of the settlement agreement and our clients are forced to file a motion seeking a determination under s 73 of the Civil Procedure Act 2005 (NSW) as to the terms of the settlement, we are instructed to seek an order that your clients pay the costs of the motion on an indemnity basis and reserve the right to rely on this letter in support of that application.”

  1. The matter did not resolve. It was relisted before the Registrar in Equity with a view to be determined by the Court. The Registrar took the practical course of not requiring the parties to file a further motion but noted that there was a dispute between the parties to be resolved under Civil Procedure Act, s 73.

  1. On 5 August 2019, Daco's members resolved the company be wound up and that a liquidator be appointed. Hahm Lawyers was notified of this on 7 August 2019. The Wilson parties’ claim against Daco were then stayed by operation of law. But the proceedings continued between the Wilson parties and Mr Hogan, as second defendant.

The Plaintiffs’ Claim for Interest

  1. The plaintiffs submit the following matters should be taken into account in support of their claim for interest. The plaintiffs claimed interest up to and including 13 April 2018 in the mediation. The plaintiffs’ claims in paragraphs [60] and [65] of the Statement of Claim were not settled on 20 April 2018. All that was agreed was a procedure for resolution of those claims. The plaintiffs did not execute any release in respect of any claim for interest accruing after 13 April 2018, being the date up to which interest was claimed in the mediation.

  2. The plaintiffs further submit that objectively construed the settlement agreement does not contain a term depriving them of an entitlement to claim interest accruing after 13 April 2018 on the unpaid amounts claimed in paragraphs 60 and 65 of the Statement of Claim.

  3. The plaintiffs call in aid the principle stated to apply in the exercise of the discretion to award interest is that stated by Barwick CJ in Ruby v Marsh (1975) 132 CLR 642; (1975) 6 ALR 385; [1975] HCA 32, namely:

  1. The purpose of giving courts the power to award interest on damages is …twofold, and neither aspect of the purpose should be lost sight of. In the first place, the successful plaintiff …whose claim in the writ has been justified to the extent of the verdict returned, ought in justice to be placed in the position in which he would have been had the amount of the verdict been paid to him at the date of the commencement of the action. In the second place, the power to award interest on the verdict from the date of the writ is to provide a discouragement to defendants… from delaying settlement of the claim or an early conclusion of proceedings so as to have over a longer period of time the profitable use of the money which ultimately the defendant agrees or is called upon by judgment to pay. Each of these reasons, incidentally…calls for the judge to award a rate of interest related to the market place subject to the limit allowed by the legislature. There can be no basis for the award of some nominal rate of interest, unless of course there is good cause for so doing in the special circumstances of the particular case” [Emphasis added by the plaintiffs]”.

    1. The circumstances in which a claim for interest can be refused are rare: Falkner v Bourke (1990) 19 NSWLR 574, at 576. Because the award of interest is compensatory, a lack of diligence by a plaintiff in pursuing its claim, which is not in any event conceded, ordinarily does not provide a proper basis for refusing or limiting an award of interest. The plaintiffs refer to the statement of Justice McCallum, as she then was, in Big Kahuna Holdings Pty Ltd v Kitas (No 2) [2012] NSWSC 858 at [23] that “it would appear that the weight of authority in this State is against punishing a plaintiff by suspending the obligation to pay interest during a period of a plaintiff’s delay” .

    2. The plaintiffs submit that the application of these factors to the circumstances of this case warrants the award to them of the interest they claim. They submit that they have been deprived of the use of a substantial sum of money. The plaintiffs acknowledge limited delay on their part in providing to the defendants details of their claim following the settlement. But they submit that any such delay was insignificant when compared to the several years for which the defendants had the benefit of the money and failed to repay it to the plaintiffs.

    3. The plaintiffs submit that just because the defendants ultimately agreed to pay the amount claimed, and judgment was therefore not entered against them for the amount they paid, does not diminish the validly of the plaintiffs’ claim for interest on the sum outstanding. The plaintiffs acknowledge that the award of interest is discretionary.

    4. But in the Court’s view, interest should not be awarded to the plaintiffs here. The plaintiffs’ argument is correct that the Court has jurisdiction under Civil Procedure Act, s 100 to award interest. This jurisdiction exists because the parties kept part of the proceedings alive. And it should be accepted, as the plaintiffs submit, that the award of interest is compensatory and that a plaintiff is not ordinarily disentitled from claiming interest, because the delay in receipt of the money claimed was the plaintiff’s own fault.

    5. It is trite law that the Court’s awarding of interest is discretionary. And here the parties’ agreement 20 April 2018 should be taken as deliberately excluding claims for interest. This is to be inferred from several matters. The 20 April 2018 agreement makes no mention of accommodating claims for interest. Both parties well knew that the plaintiffs’ initial 14 April 2018 claim to include interest was rejected by the defendants’ counter-offer of 16 April 2018. The parties’ own agreement is a weighty consideration in the exercise of the Court’s discretion.

    6. Another factor weighing against the award of interest under Civil Procedure Act, s 100 is that the parties’ agreement of 20 April 2018 was designed to avoid that outcome. By point 4 of the defendants’ counter-offer of 16 April 2018, the parties put in place a mechanism of expert determination to resolve remaining disputes, a mechanism that that did not involve the exercise of the Court’s powers. Construing the contract objectively, the parties did not mutually envisage that they would be resolving their disputes in circumstances where the Court’s power to award interest would be engaged.

    7. And yet another factor weighing against the award of interest under Civil Procedure Act, s 100 is that in the scheme of the disputes between the parties the amount of forgone interest is very small.

The Plaintiffs’ Claim for Costs

  1. The plaintiffs submit that it is appropriate to order the second defendant, Mr Hogan to pay their costs from 3 May 2018. The plaintiffs make their case in the following logical steps.

  2. At no stage did the defendants dispute that money had been paid by the plaintiffs on behalf of the Daco. The defendants merely failed to admit the amount that the plaintiffs had claimed. Mr Hogan capitulated and admitted the whole of the amount claimed, except for some three items totalling $100,730. There was no compromise reached as to the items admitted. The plaintiffs then quickly abandoned their claim for two of the three remaining items in dispute items, which totalled $730, leaving a non-admission of one unpaid item in the amount of $100,000.

  3. The Wilson parties submit the defendants unreasonably prolonged the recovery of the last $100,000 claimed by the plaintiffs. They did so by failing to provide an answer to the plaintiffs’ solicitor’s 4 May 2019 request to state the grounds upon which the defendants claimed that it was necessary to obtain the report of a forensic accountant in relation to the plaintiffs’ claim for that $100,000.

  4. The Wilson parties contend that the defendants eventually capitulated on 7 June 2019 in relation to the claim for $100,000, although stating they did so without admission. The plaintiffs contend that it is almost certain that their claim for that last $100,000 would have succeeded, if the matter had proceeded to a hearing.

  5. The plaintiffs submit that the evidence in relation to the claim for that last $100,000 is not of wide compass. They contended it comprises a handful of pages, so that deciding whether the plaintiffs would have succeeded is not a large task.

  6. The plaintiffs acknowledge that the award of costs is discretionary and that discretion must not be exercised arbitrarily or capriciously. The overriding consideration will always be whether there is some circumstance that justifies a costs order so as to do justice between the parties.

  7. The plaintiffs submit that where the Court can be confident that one party was almost certain to have succeeded if the matter had been fully tried, the Court may make an order for costs without holding a contested hearing on the merits.

  8. The plaintiffs acknowledge that the applicable principle is the Court will make no order as to costs where proceedings have been determined without a hearing on the merits unless it cannot be said that one party has capitulated or acted unreasonably: Re Minister for Immigration and Ethnic affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 (at 62).

  9. The Wilson parties are correct that the Court has the jurisdiction to award costs in respect of the residue of these proceedings. But in the exercise of that discretion the Court declines to award costs. This is for several reasons.

  10. Of weight against the making of an order for costs is the parties’ 20 April 2018 agreement analysed above: that there would be no order for costs involved in resolving the balance of their claims. This term was not varied or displaced by the terms of the Notice of Discontinuance of 2 May 2018. The Court should give effect to the parties’ agreement to this effect.

  11. The importance of this term to the parties was underpinned by their agreement to resolve remaining disputes by an expert process rather than through the Court. They desired to avoid enlivening the Court’s power to award costs.

  12. Another consideration against an award of costs is that the Court does not accept that the Daco parties were behaving unreasonably after 2 May 2018 to achieve delay in payment of sums genuinely due to the plaintiffs. The plaintiffs complain that the Daco parties did not provide an answer to the plaintiffs’ solicitor’s 4 May 2019 requesting to state the grounds upon which the defendants claimed that it was necessary to obtain the report of a forensic accountant in relation to the plaintiffs’ claim for that $100,000. But the Daco parties had already stated their grounds for disputing the $100,000. And obtaining a report of a forensic accountant is really not very far from the original contractual idea of resolution by an expert process. Moreover, to complain about non-response to a letter on 4 May 2019 is very late in the action.

  13. This is not a case where the Court could predict the outcome of the dispute about the $100,000. And the Hahm Lawyers’ letter of 7 June 2019 should be taken at face value. Mr Hogan was ill. He wanted to put all of this behind him. The payment of the $100,000 does not amount to an admission or a capitulation, conceding that the plaintiffs would have been successful.

The Costs of this Application

  1. The Daco parties’ construction of the contract has prevailed. It should be observed that Ms Hooper instructed by Mr Batterby have put every reasonable argument to the contrary of what the Court has concluded. But the Court has taken a view of the correspondence which is consistent with the Daco parties’ arguments.

  2. Based on the Hahm Lawyer's letter of 14 June 2019 the Daco parties (specifically Mr Hogan) now make a claim for indemnity costs against the plaintiffs. The relevant paragraph of that letter, foreshadowing a claim for indemnity costs in these circumstances, is set out earlier in these reasons. The Wilson parties resist any claim for indemnity costs.

  3. It follows from the Court’s earlier reasoning that the Court does have jurisdiction to make a costs order. But the exercise of the Court’s cost discretion should be informed by the settlement agreement made between these parties in April 2018. This agreement created a mechanism to quantify and finalise the Wilson parties’ unresolved claims for reimbursement of third-party payments allegedly made on Daco's behalf and for that to take place without either party claiming costs from the other.

  4. Two questions now arise: (1) should any costs order be made in Mr Hogan’s favour; and if so, (2) should such an order be made on an indemnity basis?

  5. Whilst the parties were following the structure of the settlement agreement made between them on 20 April 2018, the case for the Court to make any costs order is not persuasive. After all, the Court has accepted Mr Hogan’s contention that on 20 April 2018 they agreed for each party to bear his and its own costs of these proceedings and of the working through of the agreed mechanisms to implement their settlement agreement.

  6. In the Court’s view, a costs order should be made in Mr Hogan's favour. But it should be limited to the period following the breakdown of their agreed mechanisms for implementing their settlement agreement. Up until 13 June 2019 the parties both adhered more or less to the mechanism they had agreed on 20 April 2018. But the parties’ conduct departed from that mechanism from the moment that the Wilson parties, flagged through Mr Batterby’s email of 13 June 2019, that they were claiming costs and interest.

  7. That step ultimately resulted in the matter being referred to the present contested hearing. All the preparation, Court appearances, evidence and submissions on from 14 June 2019 have only been necessary because the Wilson parties refused to sign what the Court has found to be an appropriately worded Notice of Discontinuance that had been provided to them by the Hahm Lawyer's letter of 7 June 2019. What followed between these parties from 14 June 2019 up until the reserving of judgment in this matter on 4 March 2020 was occasioned by the Wilson parties’ refusal to participate in signing and filing the short minutes of order.

  8. That refusal took the parties’ dealings beyond what had been contemplated in their agreement of 20 April 2018. On the Court’s findings, all of Mr Hogan's costs from 14 June 2019 were unnecessarily incurred. The Court’s exercise its costs discretion in respect of the period from 14 June 2019 should not be constrained by the terms of the 20 April 2013 settlement agreement. Has the jurisdiction to make a costs order and should do so. The Court will order the plaintiffs to pay Mr Hogan's costs incurred from 14 June 2019.

  9. The Wilson parties should not pay the costs of the Daco parties before that date, because Mr Hogan would have borne those costs himself in any event under the terms of the 20 April 2018 agreement.

  10. But should an order for indemnity costs be made? In the Court’s view, an indemnity costs order should not be made. Mr Hogan advanced the claim for indemnity costs based on the Hahm Lawyers’ letter of 14 June 2019. But this is not a Calderbank letter. It is not headed "without prejudice except as to costs". It does not purport to rely upon Calderbank principles. But more importantly does not make an offer capable of acceptance and that once accepted would have ensured that either party could have made a claim against the other.

  11. The Hahm Lawyers letter of 14 June 2019 is more in the nature of a warning as to what claim may be made if the Wilson parties did not desist from their current course of conduct. Mr Hogan would have been be on better ground had the letter of 14 June 2019 been couched in the form of an offer which was open and capable of acceptance for a period of time.

Conclusions and Orders

  1. For these reasons the Court will make the following orders and directions:

  1. Dismiss the plaintiffs’ claim for the accrual of interest from 20 April 2018 on money due but unpaid under a settlement agreement of that date;

  2. Dismiss the plaintiffs’ claim for an order for costs in their favour from 3 May 2018 as agreed or assessed;

  3. Order the plaintiffs to pay the second defendant’s costs incurred on and after 14 June 2019 of the present application under Civil Procedure Act, s73 to enforce a settlement agreement made between the plaintiffs and the defendants on 20 April 2018; and

  4. Otherwise dismiss the proceedings.

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Amendments

20 October 2020 - Cover sheet: case citation for Lai Qin amended from (197) to (1997)


Cover sheet: appearance of counsel, D. Gration to R. Gration.

Decision last updated: 20 October 2020

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Statutory Material Cited

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Big Kahuna Holdings Pty Ltd v Kitas (No 2) [2012] NSWSC 858
Haines v Bendall [1991] HCA 15
Haines v Bendall [1991] HCA 15