Zenith 500 Pty Ltd v Stavrakis and Alexopoulos (No. 2)
[2016] VCC 1626
•10 November 2016
| IN THE COUNTY COURT OF VICTORIA | Revised Not Restricted Suitable for publication |
AT MELBOURNE
COMMERCIAL DIVISION
GENERAL CASES LIST
Case No. CI-14-04649
| ZENITH 500 PTY LTD (as trustee for THE ADAMIDIS FAMILY TRUST) | Plaintiff |
| v. | |
| CONSTANTINE STAVRAKIS and HELEN ALEXOPOULOS | Defendants |
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JUDGE: | His Honour Judge Anderson | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 4 and 7 November 2016 (written submissions) | |
DATE OF JUDGMENT: | 10 November 2016 | |
CASE MAY BE CITED AS: | Zenith 500 Pty Ltd v. Stavrakis and Alexopoulos (No. 2) | |
MEDIUM NEUTRAL CITATION: | [2016] VCC 1626 | |
REASONS FOR JUDGMENT
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Catchwords: Practice and procedure – Interest – Contribution by co-guarantors – Equitable compensation – “Sum certain” recovered – “Demand of payment” made – Whether “good cause is shown to contrary” – Section 58 Supreme Court Act 1958.
Practice and procedure – Costs - Calderbank offer – Whether rejection of offer “unreasonable” – Conduct of defendants during the proceeding – Whether order for indemnity costs appropriate.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms N. Papaleo of Counsel | Maurice Blackburn |
| For the Defendants | Mr J. Tsalanidis and Mr M. Gurvich of Counsel | Katz Lawyers |
HIS HONOUR:
1Reasons for decision were delivered on 26 October 2016 indicating that judgment would be entered for the plaintiff against each of the defendants in the sum of $342,715.59. The parties have now agreed that the judgment sum should be $311,249.52 and have delivered written submissions on the outstanding issues of interest and costs. The parties request that the Court determines these issues without hearing further from the parties.
2The plaintiff seeks:
a.interest from the date of a letter dated 19 December 2013 from its solicitors to the defendants’ solicitors;
b.indemnity costs from the date of the expiry of an offer made on 3 September 2015.
Interest
3Interest is sought from the date of a written demand for payment contained in the letter dated 19 December 2013, pursuant to section 58 of the Supreme Court Act 1958 (“the Act”).
4Section 58(1) of the Act reads as follows:
“If in a proceeding a debt or sum certain is recovered, the Court must on application, unless good cause is shown to the contrary, allow interest to the creditor on the debt or sum at a rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 or, in respect of any bill of exchange or promissory note, at 2% per annum more than that rate from the time when the debt or sum was payable (if payable by virtue of some written instrument and at a date or time certain) or, if payable otherwise, then from the time when demand of payment was made”.
5The letter dated 19 December 2013 asserted that, “the total amount paid by [Mrs Adamidis] and Zenith pursuant to their guarantees was $1,740,708.72 (see Schedule attached) each guarantor’s share is one fifth of that sum being $348,141.74”. The letter sought that the defendants pay the total sum of $696,283.49 no later than 15 January 2014, in default of which, legal proceedings would be expected to issue.
6I accept plaintiff’s counsel Ms Papaleo’s submissions that:
a.the plaintiff’s claim was for equitable compensation;
b.the claim arose when the plaintiff satisfied the guarantee and was entitled to seek contribution from the other guarantors;
c.the claim was therefore for a “sum certain”;
d.interest would ordinarily be payable on the judgment “from the time when demand of payment was made”, pursuant to section 58 of the Act;
e.alternatively, a right to interest in equity exists independently of the statute, if the interests of justice so demand.
7The defendants submit that there is “good cause” why interest should not be ordered from the date of the demand, for the following reasons:
a.the plaintiff did not issue the proceeding until 23 September 2014, more than 9 months after the demand;
b.the statement of claim attached to the writ did not seek a money sum, but simply, “A sum equivalent to one-fifth of the total sum contributed by Zenith towards the satisfaction of the Second Facility”.
c.the plaintiff had not advised the defendants of its intention to settle with Westpac and to seek contribution, and Westpac had not pursued recovery from the defendants for Baron’s debt.
8By reason of these matters, it was submitted that interest should only run from the date of the writ (pursuant to section 60 of the Act), or alternatively from the expiry of the demand in the letter of demand (15 January 2014) or the date in a later letter (8 August 2014), which was more proximate to the issue of the proceeding.
9In my view, the delay in the issue of the proceeding for just over 8 months from the expiry of the offer is not a matter of much moment, particularly as a second letter of demand, giving the defendants a further opportunity to respond, was sent to them on 25 July 2014.
10The statement of claim attached to the writ essentially sought declaratory relief. The reason for not seeking a money sum was expressed in the amended statement of claim filed 17 April 2015 to be because those particulars were “presently unknown”.
11The letter dated 19 December 2013 contained a schedule setting out that the amounts, “contributed as a consequence of the default of the Baron Facilities” from the sale of Geelong, Fitzroy and Parkville properties, totalled $1,740,708.72.
12At the trial, Ms Papaleo as part of her written “outline of opening submissions”, produced a schedule recalculating the total sum paid by Zenith in respect of the sale of the three security properties as $1,713,577.95, or $342,715.59 for each of the 5 guarantors.
13Those figures were apparently derived from the affidavit of the Westpac bank officer, Greg McKillop sworn 1 August 2016. After judgment was delivered on 26 October 2016, defendants’ counsel Mr Gurvich informed the Court that “there were some discrepancies between what was submitted by Ms Papaleo ultimately, and what the evidence was in Mr McKillop’s affidavit”. The parties sought time to discuss what the appropriate judgment sum should be. No information has been provided to the Court as to how the agreed sum of $311,249.52 was calculated.
14The Court of Appeal in AJ Lucas Drilling Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd [2009] VSCA 310 (“Lucas Drilling”) considered the meaning of the words “demand of payment” in section 58 of the Act. The statements made or approved by the Court of Appeal included that:
a.a demand of payment “need not be in any particular form”;
b.a demand need not “specify the exact sum due”;
c.a demand must contain “a distinct demand of payment”;
d.“the word ‘demand’ need not be used”;
e.a demand may be “clothed in the language of politeness”;
f.“the nature of the language is immaterial”;
g.the demand “must be of a preemptory character and unconditional”;
h.the “constitution of a demand may vary according to the circumstances of the particular case”.
15In the appeal before it, the Court of Appeal considered that the letter relied upon as a “demand of payment” for the purposes of section 58, “was not a demand; rather it noted a number of matters concerning the termination [of an agreement], promised to provide information and sought to open a discussion between the parties”.
16In Victorian WorkCover Authority v Esso Australia Limited (2001) 207 CLR 520 Kirby J at 546, stated that section 58, as well as sections 59 and 60 of the Act, have “the beneficial purpose of providing…for the award of interest to compensate parties who have been obliged to take ‘proceedings’ to recover a money sum and who in the meantime have been kept out of moneys which they could otherwise have used or upon which they could otherwise have earned interest”.
17The Court of Appeal in Lucas Drilling said at paragraph 171 that, according to Justice Kirby’s reasoning, “section 58 of the Supreme Court Act should not be given a narrow meaning. Section 58 has the same beneficial purpose as section 60 and should be given a similarly broad application”.
18Adopting this approach in the present case, I consider that the letter dated 19 December 2013 was a sufficient demand of payment and the discrepancy between the amount claimed in the letter and the sum the parties have agreed judgment should be entered for, is not a sufficient reason for denying the plaintiff interest on the judgment sum. Interest will be allowed from 15 January 2014, the date upon which the plaintiff required payment. I do not consider that the absence of earlier notice of the claim for contribution or Westpac’s attitude towards recovery from the defendants should affect this conclusion.
19Interest on $311,249.52 from 15 January 2014 to 10 November 2016 pursuant to the Penalty Interest Rates Act 1983 is $89,263.15.
20Accordingly I propose to enter judgment for the plaintiff against each defendant that each defendant pay to the plaintiff the sum of $311,249.52 together with interest pursuant to statute of $89,263.15, total of each judgment $400,512.67.
Costs
21The plaintiff made an offer to settle the proceeding in a letter sent by email, dated 3 September 2015, from its solicitors to the defendants’ solicitors. The letter is in the form of a “Calderbank” offer and offers to accept from each defendant “the sum of $250,000 (inclusive of compensation, interest and costs) in full and final settlement of all claims brought by the plaintiff in this proceeding against the [relevant] defendant”.
22The offer remained “open for acceptance” until 4pm on Thursday 10 September 2015 and noted that, “It should not be assumed that these offers, or any offers in the range of these offers, will remain available for acceptance after this date, and after the plaintiff is put to the significant expense of preparing for the trial commencing 8 December 2015. In the event that our client achieves more than the above figures against each of your clients at trial it will rely on these offers on the question of costs on an indemnity basis from the date of the expiry of these offers”.
23The writ had been issued about 12 months earlier, on 23 September 2014. The defendant had, on 14 November 2014, filed a holding defence. However, on 2 June 2015 the defendants filed an amended defence to the amended statement of claim dated 17 April 2015. The amended defence was settled by both counsel who appeared for the defendants at trial. The pleading fully pleaded and particularised the matters the defendants were to rely upon at trial.
24In addition, a summary judgment application by the plaintiff had been “dismissed without adjudication on the merits” on 31 March 2015, after substantial affidavits by both defendants had been filed. Earlier trial dates on 22 July 2015, 15 September 2015 and 8 December 2015 were vacated. The summary judgment application was adjourned on one occasion after the attendance of counsel. At least two further substantial interlocutory applications also required the attendance of the counsel who later appeared at the trial.
25At the stage when the offer was made, the matter was fixed for trial to commence on 8 December 2015. There are, in my view, two principal considerations in determining whether the defendants’ rejection of the offer was “unreasonable in the circumstances”:
a.whether the defendants were in a position to assess the strength of the plaintiff’s claim and their defence to it;
b.the seven day period for acceptance of the offer.
26The defendants submit that in September 2015:
a.the plaintiff had not adequately quantified its claim so that the defendants might properly consider their position;
b.the defendants had good reason to believe, on the basis of the matters raised in their defence, that they would have good prospects of their defence succeeding.
27The letter of demand dated 19 December 2015 quantified the total payout by the plaintiff at $1,740,708.72 and claimed $248,141.74 as the contribution of the five guarantors. The total payout was calculated as the proceeds from the sale of three properties, allocated by Westpac to the Baron debt after other mortgage liabilities were first paid out.
28This was information which the plaintiff needed to obtain from Westpac. It was clarified at the start of the trial when Ms Papaleo distributed a calculation of the total payout at $1,713,577.95. This figure was not disputed by the defendants during the trial and the Court only became aware that there was an argument in relation to the figure on the date the reasons for decision were handed down.
29It is clear from Ms Papaleo’s calculations that they included potentially contentious items. For example, the “costs of sale” relating to the realisation of the three properties were apportioned, apparently on the basis of the amount the “sum applied to facility” bore to the “sale price”.
30The offer was to accept from each defendant the sum of $250,000, which sum was inclusive of interest and costs. By that stage, the proceeding had been on foot for about 12 months and the summary judgment application had been determined, two trial dates had been vacated and substantial pleadings had been exchanged.
31By then, it is likely that significant legal costs would have been expended by all parties. Statutory interest on the sum of $200,000 for 12 months from the issue of the writ would be about $20,000. From the expiry of the demand in December 2013, interest would have been another $13,000 or thereabouts. In the circumstances, it is likely that the offer represented about 50% of the claim made in the letter of demand, and a substantial deduction from the judgment sum of $311,249.52 plus interest.
32It is not clear how the defendants justify their submission that the defendants “believed they had good prospects of success in this case at the date of the offer”. At the trial, although many matters of defence were open, no defence was finally pursued on behalf of Mr Stavrakis and the defences relied upon by Ms Alexopoulos were limited.
33In the reasons for judgment, I undertook an examination of the pleadings and affidavit material that had been filed and relied about by Ms Alexopoulos early in 2015, prior to the offer. The contrast between those matters and the evidence of Ms Alexopulos at the trial was significant. It is difficult to see how the defendants, or their lawyers, would have had confidence in their prospects at trial, unless there is a valid explanation for the change in the version of events given by Ms Alexopoulos in her oral evidence.
34Ordinarily, 28 days would not be an unreasonable time to give another party to respond to an offer of compromise. That is the time prescribed for offers made under the Rules of Court. However, the reasonableness of the period must depend on the circumstances of each case. Here, 7 days was allowed. During that time, “no response” was received to the offer.
35In my view, it is relevant to consider the following matters:
a.the offer was clear and unambiguous;
b.it offered a significant compromise of the plaintiff’s claim, as it then was and as was later established;
c.the parties had through the preparation of pleadings and the material filed in the summary judgment application clearly became aware of the issues of law and evidence that were being litigated;
d.the parties had established and, over some months, maintained entrenched positions;
e.the period of seven days was sufficient for the lawyers to advise their clients and for the defendants to give instructions either to accept or reject the offer.
36In the circumstances, I am satisfied that the rejection of the offer, by the defendants’ solicitors failure to respond, was “unreasonable” and, as a consequence, the plaintiff should receive costs on an indemnity basis on and after 11 September 2015.
37Ms Papaleo also relied upon “the defendants’ unreasonable conduct of the proceeding” as warranting “an award of indemnity costs”. Counsel referred to:
a.the disputing of “the vast majority of the facts and documents set out” in the notice to admit served on the defendants on 6 October 2015, which subsequently needed to be proved (or be the subject of admissions) at trial;
b.claims made in the amended defence dated 2 June 2015, and incorporated in the amended defence and counterclaim dated 27 June 2016, were abandoned after the first day of trial. This had involved expenditure by the plaintiff of costs relating to:
i.an interlocutory hearing concerning the issue of subpoenas on behalf of the defendants;
ii.the inclusion of 3 further volumes of documents, added to the Court Book by the defendants;
iii.extensive further pre-trial preparation by the plaintiff’s lawyers.
38I consider that there is substance in the submissions made by plaintiff’s counsel. However, all these matters occurred subsequent to September 2015 and the plaintiff will receive indemnity costs in respect of the additional work occasioned by the conduct of the defendants after that date.
Proposed orders
39The orders of the Court will be:
1.Judgment for the plaintiff against the first defendant that the first defendant pay to the plaintiff the sum of $311,249.52 together with interest from 15 January 2014 to 10 November 2016 of $89,263.15, total judgment $400,512.67.
2.Judgment for the plaintiff against the second defendant that the second defendant pay to the plaintiff the sum of $311,249.52 together with interest from 15 January 2014 to 10 November 2016 of $89,263.15, total judgment $400,512.67.
3.The first and second defendants must pay the plaintiff’s costs of the proceeding including all reserved costs, to be assessed by the Costs Court on a standard basis up to and including 10 September 2015 and thereafter on an indemnity basis, in default of agreement.
4.Stay execution on the judgment in paragraphs 1 and 2 until 4pm on 8 December 2016.
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Certificate
I certify that these 8 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 10 November 2016.
Dated: 10 November 2016
Mi-Lin Chen Yi Mei
Associate to His Honour Judge Anderson
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