DCZ Early Learning Pty Ltd v Semper Mortgage Management Pty Ltd [2024] QSC 140

SUPREME COURT OF QUEENSLAND CITATION: DCZ Early Learning Pty Ltd v Semper Mortgage Management Pty Ltd [2024] QSC 140 PARTIES: DCZ EARLY LEARNING PTY LTD ACN 673 187 696 (first applicant) AND CHRISTOPHER ZENONOS (second applicant) AND COLEEN JUNE ZENONOS (third applicant) AND DANIEL FIORE CUDA (fourth applicant) AND HEIDI MAY REIDSMITH (fifth applicant) v SEMPER MORTGAGE MANAGEMENT PTY LTD ACN 666 837 707 (respondent) FILE NO: BS 16315/23 DIVISION: Trial PROCEEDING: Originating Application ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 28 June 2024 DELIVERED AT: Brisbane HEARING DATE: Heard on the papers JUDGE: Freeburn J ORDER: 1. The applicants pay the respondent $150,260 for its counterclaim, and $7,255 for interest. 2. In proceeding 16315 of 2023, the applicants pay the respondent’s costs of the proceeding excluding the costs of the application/argument for indemnity costs. 3. In proceeding 2 of 2024, the respondents (in that proceeding) pay the costs of the applicants (in that proceeding) on an indemnity basis. CATCHWORDS: PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – INDEMNITY COSTS – where the respondent seeks costs on an indemnity basis on the -- 1 of 5 -- 2 applicants’ unsuccessful application – where the respondent alleges offers of compromise were made – where the alleged offers were in substance, demands for fees payable under a loan agreement – where, separately, the respondent was required to commence separate proceedings to enforce caveats, due to the applicants issuing a notice under the Land Title Act 1994 – whether the respondent is entitled to costs on an indemnity basis in both proceedings Uniform Civil Procedure Rules 1999 r 362, r 681 Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801, cited COUNSEL: C C Upton for the applicant J Wang for the respondent SOLICITORS: AJ & Co Lawyers for the applicant Solomons Legal for the respondent REASONS [1] On 7 June 2024 I dismissed the application1 brought by the applicants, DCZ. The parties have subsequently made written submissions regarding costs and interest. [2] The respondent, Semper, the successful party, seeks the costs of both sets of proceedings on an indemnity basis for two reasons: (a) DCZ’s rejection of Semper’s offer to resolve the dispute on 23 December 2023 was unreasonable in the circumstances; (b) The application in the associated proceeding, no 2 of 2024 was only required because DCZ gave notice to Semper pursuant to s 126(2) of the Land Title Act 1994, and that proceeding was therefore unnecessary. [3] The applicant submits that the appropriate costs order is that the applicant pay the respondent’s costs on the standard basis. [4] The respondent also seeks interest on its successful counterclaim. Indemnity Costs [5] The usual order is that the successful party is awarded costs on a standard basis.2 It follows that the court ought not usually make an order for costs on some other basis, such as on an indemnity basis. The tests for the exercise of such a discretion to order indemnity costs have been variously stated including that there is some special or unusual feature in the case to justify the court departing from the usual practice.3 One 1 DCZ Early Learning Pty Ltd v Semper Mortgage Management Pty Ltd [2024] QSC 120. This is the application in proceeding 16315/23. For present purposes that is the principal proceeding and the other proceeding, 2 of 2024, will be referred to separately. 2 Uniform Civil Procedure Rules 1999 rule 681. 3 See Colgate Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 232-233. -- 2 of 5 -- 3 of the categories of case in which the discretion may be exercised is where there is an imprudent refusal of an offer to compromise.4 [6] Here DCZ communicated that it did not wish to proceed with the loan from Semper on 20 December 2023. Semper then issued a demand for $366,260. That sum included a component of $216,000 for interest in advance. On any view, the claim for that component was an adventurous one. The loan did not proceed and so, if DCZ paid that component, it would be paying Semper interest for a loan that had not be advanced. [7] On the following day DCZ refused to comply with that demand. Instead, it demanded that, by 4:00pm that day, Semper confirm that it would both withdraw its demands, remove the caveats registered over DCZ’s properties, and remove the PPSR registration. If that confirmation was not received that day, then DCZ threatened that it would apply for a declaration that clauses 8 and 9 were void and for removal of the caveats and PPSR registration. [8] A day later, on 22 December 2023, DCZ made good on its threat. It filed and served the Originating Application in this proceeding seeking a declaration that clauses 8 and 9 were unfair, and removal of the PPSR registration. [9] On the same day, DCZ’s solicitors sent Semper’s solicitors a notice pursuant to s 126(2)(a) of the Land Title Act 1994. By that letter DCZ gave notice requiring Semper to commence court proceedings to establish the interest it claimed under the caveats over the Fig Tree Pocket and Belmont properties. [10] DCZ had a perfect right to give such a notice. However, having commenced proceedings itself that day, it is surprising that DCZ required the interest under the caveats to be litigated in a second proceeding. After all, the caveats were lodged pursuant to the Indicative Letter – the source of all of the disputes. The fracturing of the disputes into two separate proceedings was pointless. DCZ’s choice, plainly, was to hit Semper with ‘both barrels’. [11] As it happened, Semper’s lawyers had some difficulty and incurred significant expense in filing the separate proceeding within 14 days of 22 December 2023. Part of the difficulty was that the time period spanned the court vacation. [12] On the following day, Saturday 23 December 2023, Semper’s solicitors made a revised demand. They deleted the interest in advance component and offered to settle for $150,260. That is the amount in respect of which Semper succeeded at trial. [13] The letter from Semper’s solicitors of 23 December 2023 was a very detailed response. It dealt with the merits. The letter advised that, on payment of the $150,260, the caveats and PPSR securities would be withdrawn. [14] Semper now seeks to characterise the letter of 23 December 2023 as an offer of compromise. In my view it was not an offer of compromise – either in form or substance. It was not an offer in compromise in its form – it explicitly said: “…our client demands payment of the following Total Owing into the account specified below…”. In substance it contained no element of genuine compromise. A proposal 4 Ibid at 257. -- 3 of 5 -- 4 or offer which demands nothing less than all the relief sought in the claim is not in truth an offer to settle.5 Even in “all or nothing” cases there can be concessions. Properly interpreted, both parties were making demands of each other. [15] In my view, Semper’s letter of 23 December 2023 does not contain any element of genuine compromise.6 [16] And so, I reject the submission that the letter of 23 December 2023 comprised an offer of compromise. [17] It is also doubtful that the offer – or, more accurately, the demand – was more favourable than the sum awarded. The sums are the same. The submission that an award of interest makes the offer/demand more favourable is not accurate. Interest would run from about 20 or 23 December 2023.7 That is when, according to Semper, the offer/demand should have been accepted. [18] Interest awarded for the period after an offer is disregarded because the result would be to compare apples with oranges.8 Rule 362 makes that explicit for offers under the rules. The situation is no different in principle for offers outside the rules. [19] For those reasons, this is not a case where there has been an offer of compromise and this case is not one where there has been an imprudent refusal of an offer of compromise. [20] DCZ’s submissions on costs, which were exchanged with Semper’s submissions, refer to an offer made by Semper on 11 January 2024.9 Of course, Semper do not rely on that offer. In any event, the offer was for $175,000 “all up” – i.e. inclusive of costs and interest. Offers that are “all up” offers are notoriously difficult to compare to a money judgment. Here, there is no evidence which demonstrates that the offer of $175,000 “all up” was no less favourable than the judgment. [21] For those reasons, I am not satisfied that there was, using the language of Colgate Palmolive,10 an imprudent refusal of an offer of compromise. [22] The appropriate costs order is the conventional one – that the applicants pay the respondent’s costs on the standard basis but excluding the respondent’s costs of the unsuccessful argument with respect to indemnity costs. Costs of Proceedings 2/24 [23] It is necessary to consider the costs of the separate proceedings commenced by Semper by originating application 2 of 2024. 5 Jones v Millward [2005] 1 Qd R 498. 6 See the discussion of what constitutes an offer of a genuine compromise by Dal Pont, Law of Costs, 5 th ed at [13.78]. 7 The difference between interest calculated from either 20 or 23 December 2023 is trivial. 8 The proper course is to compare the offer at the time it was made against the judgment excluding any interest awarded for the period after service of the offer. 9 DCZ’s submissions do not engage with Semper’s submissions based on an offer of compromise said to have been made on 23 December 2023. Probably that is because that letter is not recognised as a genuine offer of compromise. In any event, because of the conclusion reached, it is unnecessary to invite DCZ to make submissions on that ‘offer’. 10 (1993) 46 FCR 225. -- 4 of 5 -- 5 [24] The circumstances requiring the commencement of those proceedings have been explained. However, DCZ has not explained why they decided to give notice under s 126(2) LTA requiring Semper to commence separate proceedings to enforce the caveats. An explanation was appropriate. That is especially so in circumstances where there were already proceedings on foot – proceedings commenced by DCZ itself. There is no reason why Semper’s caveatable interests could not be prosecuted in that existing proceeding. The issues between the parties were being litigated, but DCZ chose to exclude issues relating to the caveats from their proceeding and to force Semper to commence a separate proceeding. [25] The inference which I draw in the circumstances, and in the absence of an explanation by DCZ, is that DCZ chose to put Semper to the expense and inconvenience of commencing proceedings to enforce the interest claimed by the caveats. It did so unnecessarily. Semper should have a full indemnity for those costs. Interest [26] Pursuant to s 58 of the Civil Proceedings Act 2011, the court may award interest. Generally, interest should be awarded from the time when the cause of action accrues until judgment. Here, although the amounts were payable immediately upon acceptance of the offer (8 December 2023), it is reasonable to commence interest on 20 December 2023. That was the day when DCZ decided not to proceed with the loan. [27] Using the court’s website’s calculator, - which applies the rates in Practice Direction 7 of 2023 – the interest is $7,255. -- 5 of 5 --