Aquavista Pty Ltd v Timevale Pty Ltd (No 2) [2016] QDC 272

DISTRICT COURT OF QUEENSLAND CITATION: Aquavista Pty Ltd v Timevale Pty Ltd (No 2) [2016] QDC 272 PARTIES: AQUAVISTA PTY LTD (ACN 069 599 775) AS TRUSTEE FOR THE WALSH FAMILY TRUST TRADING AS COASTAL AMUSEMENTS (ABN 51 719 681 695) (plaintiff) v TIMEVALE PTY LTD (ACN 003 364 985) AS TRUSTEE FOR THE ETTAMOGAH QLD UNIT TRUST TRADING AS AUSSIE WORLD (ABN 24 128 803 703) (defendant) FILE NO: 146 of 2013 DIVISION: Civil PROCEEDING: Trial ORIGINATING COURT: District Court at Maroochydore DELIVERED ON: 7 November 2016 DELIVERED AT: District Court at Maroochydore HEARING DATE: On the papers JUDGE: Long SC DCJ ORDER: The defendant is to pay the plaintiff’s costs of and incidental to the proceedings, as agreed or assessed: (a) for the period prior to 4 July 2014, on the standard basis in reference to the District Court scale of costs; and (b) for the period from 4 July 2014, on the indemnity basis, having regard to the District Court scale of costs. CATCHWORDS: COSTS – Where judgment was given for the plaintiff, for damages for breach of contract – Where the plaintiff now seeks an order, pursuant to r 681 of the Uniform Civil Procedure Rules 1999, as to the payment of its costs of the action – Where an offer to settle was made to the respondent on 4 July 2014 – -- 1 of 7 -- 2 Where the plaintiff relies upon r 360(1) of the Uniform Civil Procedure Rules 1999 – Whether the defendant has demonstrated that costs should not be recovered on an indemnity basis – Where the judgment could have been obtained, at the time this proceeding commenced, in the Magistrates Court – Whether and pursuant to r 697(2) of the Uniform Civil Procedure Rules 1999, the plaintiff has satisfied the court that the costs be assessed in reference to or with regard to the District Court scale of costs LEGISLATION: Uniform Civil Procedure Rules 1999, rr 360, 360(1), 362, 681(1), 697, 697(1) and 697(2) CASES: Aquavista Pty Ltd v Timevale Pty Ltd [2016] QDC 235 Delmenico v Brannelly [2007] QCA 74 COUNSEL: D M Favell for the plaintiff J K Meredith for the defendant SOLICITORS: Garland Waddington Solicitors for the plaintiff Griffiths Parry Lawyers for the defendant -- 2 of 7 -- 3 Introduction [1] On 27 September 2016, judgment was given for the plaintiff, in the sum of $148,653.93 (including $25,959.93 interest), upon a claim for damages for breach of contract. At that time, the issue as to costs was reserved, to be determined upon the further written submissions of the parties, which submissions were duly provided in accordance with the directions of the Court. [2] In accordance with its success, the plaintiff seeks an order pursuant to r 681(1) of the Uniform Civil Procedure Rules 1999 (“UCPR”), as to the payment of its costs of the action and that claim is not put in issue. [3] However, there are two further contentions of the plaintiff and as to the basis of such an order, which are put in issue. First and as is common ground, the plaintiff points to its unaccepted offer, made by letter dated 4 July 2014 and left open for a period of 28 days, to settle the claim, which had been commenced on 17 September 2013, upon the basis of acceptance of the payment of a sum of $120, 000, with each party bearing its own costs. Consequently, the plaintiff seeks an order pursuant to UCPR 360(1) in terms that the cost to be recovered, on and from 4 July 2014, be on the indemnity basis. Secondly and again on the common ground that the judgment obtained could, at the time this proceeding began, have been obtained in a Magistrates Court, the plaintiff seeks that this Court makes an order to avoid the primary consequence of UCPR 697, that the plaintiff’s costs be assessed and recovered as if the proceeding had been started in a Magistrates Court. Indemnity costs? [4] Together with the filing of its written submissions, the plaintiff has established the making of the offer by the inclusion of an affidavit of Terry Francis Walsh (sworn on 10 November 2016) and which exhibits a copy of the letter of offer dated 4 July 2014 and sent to the defendant by email on that date. That letter was expressly noted as “an offer to settle under Part 5 of the Uniform Civil Procedure Rules 1999” and there is no issue as to compliance with that part or the engagement of UCPR 360(1). [5] Accordingly, “the court must order the defendant to pay the plaintiff’s costs calculated on the indemnity basis, unless the defendant shows another order for costs -- 3 of 7 -- 4 is appropriate in the circumstances”. The defendant contends that another order, being an order for costs on the standard basis, is warranted by the circumstances that: (a) in the statement of claim filed on 17 September 2013, the plaintiff claimed a component for “mitigation and other costs”, in the sum of $20,993, which was mainly comprised of an amount calculated at the rate of $199 per week for storage costs and which claim was repeated in the amended pleadings, filed on 4 July 2014 and 5 December 2014; (b) this claim formed part of the assessment by the plaintiff’s accountant in her initial report, only to be excised in the revised report, dated 25 February 2014 and therefore, only five days before the trial began and after the time stipulated for acceptance of the plaintiff’s offer; and (c) at trial, it was admitted that no such costs had been incurred.1 [6] It is then contended that the defendant was misled at the time of the offer and that: “14. The plaintiff should not be rewarded for such conduct, especially in circumstances where the amount offered fortuitously just fell under the amount ordered (less interest). 15. The misrepresentation as to the storage costs did not allow the defendant to be able to make an informed decision in a significant respect whether or not to accept the plaintiff’s offer”.2 [7] Some difficulties with these contentions are that: (a) It is sufficient to engage UCPR 360(1) that the order obtained is no less favourable than the offer, irrespective of the amount of differential and here, that offer was made nearly eight months prior to trial. (b) The reference to the closeness of the offer does not recognise the degree of compromise or favourability that is apparent in the offer. Firstly, this is because the offer involved foregoing recovery of costs.3 Secondly, there are differing approaches in the submissions as to how the issue of interest is taken into account. Having regard to UCPR 362, the Court must disregard any interest or damages in the nature of interest relating to the period after the day of service of the offer. But here, the approach of both parties is to compare the amount of the 1 See the discussion in Aquavista Pty Ltd v Timevale Pty Ltd [2016] QDC 235, at [30]-[31]. 2 See defendant’s submissions on costs at [14]-[15] (with citations omitted). 3 Estimated to be approximately $15,300 at the time of the offer: see Affidavit of T F Walsh, at [3]. -- 4 of 7 -- 5 offer, being $120,000, with the award for damages, excluding any component of interest, being an amount of $122,694. Although for the plaintiff, it was contended that the offer involved a further significant concession in “waiving interest”, which is correctly identified as amounting to about $7,749.65 as at 4 July 2014. An alternative and preferable approach is to add this amount into the comparative amount of the award, with the obvious result of increase in differential and extent of favourability of the offer. (c) It is not apparent as to how the “misrepresentation as to the storage costs” relevantly denied an ability to make “an informed decision in a significant respect whether or not to accept the plaintiff’s offer”. Whilst it may be concluded that the misrepresentation did then deny the defendant the opportunity to make a fully informed decision as to the offer, the situation is unlike that in the decision of the Court of Appeal and to which the defendant refers. In Delmenico v Brannelly,4 there had been a failure of disclosure of relevant information that provided some significant support for the plaintiff’s claim and therefore, there was the denial of information that may have relevantly influenced a decision to accept the offer. In this instance, the misleading of the defendant was in respect of a matter that detracted from, rather than supported, the plaintiff’s claim and in the circumstances, could only have served to make the plaintiff’s offer appear less rather than more attractive to the defendant. [8] However, that is not so say that the misleading claim made by the plaintiff is in any way to be condoned and that consideration may be adequately reflected by noting that although and subject to the defendant showing that another order is appropriate, the plaintiff would be entitled under UCPR 360, to all of its costs on the indemnity basis. However and as noted, the plaintiff only seeks an order for indemnity costs from the date of the making of the offer and such an order is also reflected in the alternative submission of the defendant.5 4 [2007] QCA 74, at [61]-[64]. 5 Albeit that that alternative submission is made in the context that the order would otherwise be on the relevant magistrates court scale; see defendant’s submissions as to costs, at [29]. -- 5 of 7 -- 6 [9] In the circumstances and whilst not persuaded that the defendant has shown that another order for costs in terms of entire limitation to costs on the standard basis, is appropriate, it may be concluded that it has been shown that it is appropriate, in the circumstances, to only order that the defendant pay the plaintiff’s costs calculated on the indemnity basis from the date of the making of the offer. That is, 4 July 2014. The appropriate scale? [10] As the judgment given in this matter could have been given in a Magistrates Court, including when the proceeding began, UCPR 697(1) is engaged and accordingly pursuant to UCPR 697(2): “697 Costs of proceeding in wrong court … (2) The costs the plaintiff may recover must be assessed as if the proceeding had been started in the Magistrates Court, unless the court orders otherwise.” [11] Accordingly, the plaintiff must satisfy the Court that it is appropriate to order otherwise. The first contention of the plaintiff is directed at the risk of its damages exceeding an amount of $150,000 (excluding interest). However and in this respect, the misleading inclusion of the claim for storage costs is of some particular significance. This is because, as is correctly pointed out for the defendant, the initial claim of the plaintiff, as presented in the first report of the plaintiff’s accountant was for an award in the range of $142,439 to $180,414. However, that range reflected the inclusion of the storage costs and as the position was ultimately revised and adjusted (to take out the storage costs and make the other adjustments that are referred to in the substantive judgment), the revised range was $132,273 to $150,229. However and because each assessment included a calculation for interest, it is clear that the real position was that there was no relevant risk of exceeding an award of $150,000, in damages. [12] Accordingly the plaintiff’s application depends on the contention that: “the proceeding was one that was factually complex and somewhat unusual – this was especially so with respect to the assessment of damages, which called for both parties to engage forensic accounting experts”.6 6 Plaintiff’s written submissions as to costs, at [14(b)] (citations omitted). -- 6 of 7 -- 7 [13] As is apparent from the substantive judgment, it may be accepted that this matter was not without some factual complication. Although, that, in the first instance, ultimately resolved to a question as to the assessment of the credibility of the evidence of each of Mr Walsh and Mr Thompson, there were also the difficulties that were noted in respect of the assessment of damages and the approaches of the forensic accountants engaged on each side and the consistency of those approaches with the application of appropriate legal principles. [14] Although it is not contended that there was any particular complexity as to the legal issues, as the substantive judgment further indicates, some care and consideration was necessary in identification of the legal issues raised, both as to liability and also in respect of damages and so that the appropriate questions of fact could be determined. Whilst not perhaps a particularly compelling example of such a case, it should nevertheless be concluded that this case was sufficiently unusual and of such complexity, as to be an exception to the usual rule in UCPR 697(2). Orders [15] Accordingly the further order is that: The defendant is to pay the plaintiff’s costs of and incidental to the proceedings, as agreed or assessed: (a) for the period prior to 4 July 2014, on the standard basis in reference to the District Court scale of costs; and (b) for the period from 4 July 2014, on the indemnity basis, having regard to the District Court scale of costs.7 7 See: UCPR 730(3). -- 7 of 7 --