Bowenbrae P/L & Anor v Flying Fighters Maintenance and Restoration P/L; Flying Fighters Maintenance and Restoration P/L & Anor v Bowenbrae P/L & Anor; Ultimate Aerobatics P/L v Flying Fighters Maintenance and Restoration P/L (No 2) [2012] QDC 348

DISTRICT COURT OF QUEENSLAND CITATION: Bowenbrae P/L & Anor v Flying Fighters Maintenance and Restoration P/L; Flying Fighters Maintenance and Restoration P/L & Anor v Bowenbrae P/L & Anor; Ultimate Aerobatics P/L v Flying Fighters Maintenance and Restoration P/L (No 2) [2012] QDC 348 PARTIES: BOWENBRAE PTY LTD (ACN 060 747 377) (first plaintiff) and NIGEL EDWARD ARNOT (second plaintiff) v FLYING FIGHTERS MAINTENANCE AND RESTORATION PTY LTD (ACN 087 084 197) (defendant) FLYING FIGHTERS MAINTENACE RESTORATION PTY LTD (ACN 087 084 197) (first plaintiff by counterclaim) and FLYING FIGHTERS PTY LTD (ACN 067 895 005) (second plaintiff by counterclaim) v BOWENBRAE PTY LTD (ACN 060 747 337) (first defendant by counterclaim) and NIGEL EDWARD ARNOT (second defendant by counterclaim) ULTIMATE AEROBATICS PTY LTD (ACN 061 278 564) (plaintiff) v FLYING FIGHTERS MAINTENANCE AND RESTORATION PTY LTD (ACN 087 084 197) (defendant) FILE NO/S: BD1528/08 BD1907/08 JURISDICTION: Civil -- 1 of 11 -- 2 PROCEEDING: Commercial List Proceedings ORIGINATING COURT: District Court, Brisbane DELIVERED ON: 26 November 2012 DELIVERED AT: Brisbane HEARING DATE: On the papers JUDGE: Dorney QC, DCJ ORDERS: 1. In proceeding BD 1528/08, it is ordered that: (a) on the claim: (i) interest of $421.80 is awarded on the judgment of $1,000.00; (ii) FFMR pay Bowenbrae’s costs of the proceeding concerning Bowenbrae’s claims to be assessed on the standard basis; (iii) Arnot pay FFMR’s costs of the proceeding concerning the claim, in full, to be assessed on the standard basis; (b) on the counterclaim: (i) interest of $202,702.81 is awarded on the judgment of $299,792.67 and $65,420.93 on $79,794.95; (ii) FFMR pay Bowenbrae’s costs of the proceeding concerning the counterclaim to be assessed on the standard basis; (iii) Arnot pay FFMR’s and FF’s costs of the proceeding concerning the counterclaim, fixed at 90% of those costs, to be assessed on the indemnity basis. 2. In proceeding BD 1907/08, the judgment of the Court is that: (a) UA pay FFMR’s costs of the proceeding to be assessed on the standard basis. CATCHWORDS: Interest – equitable compensation – commercial rates Costs – whether exceptional circumstances Civil Proceedings Act 2011 (Qld) ss 58, 59, 108, 211 Supreme Court Act 1995 (Qld) s 48 Uniform Civil Procedure Rules 1999 (Qld) rr 283, 360, 361, 386, 681, 684, 692 Mulvaney Holdings Pty Ltd & Anor v Thorne (No 2) [2012] QSC 146 SPJ Nominees Pty Ltd and Ors v Blackwatch Sports Fishing Boats Pty Ltd and Anor (No 2) [2012] QDC 97 Thiess v TCN Channel Nine Pty Ltd (No 5) [1994] 1 Qd R 156 -- 2 of 11 -- 3 West & Ors v Blackgrove & Anor [2012] QCA 321 COUNSEL: S J Given (for the first and second plaintiffs and the defendants by counterclaim in the first proceeding; and for the plaintiff in the second proceeding) P J Roney SC (for the defendant and the plaintiffs by counterclaim in the first proceeding; and for the defendant in the second proceeding) SOLICITORS: Gall Stanfield & Smith Solicitors (for the first and second plaintiffs and the defendants by counterclaim in the first proceeding; and for the plaintiff in the second proceeding) Bickfords Lawyers (for the defendant and the plaintiffs by counterclaim in the first proceeding; and for the defendant in the second proceeding) -- 3 of 11 -- 4 Introduction [1] On 6 November 2012 I gave judgment in the associated proceedings BD1528/08 and BD1907/08. Among the orders made were separate grants of leave given to the parties to file and serve written submissions on the issues of interest and costs. [2] Such submissions, after grants of extension of time to both parties, have now recently been received. Accordingly, I will move to consider both issues. Interest [3] It must be remarked at the outset that the present legislative provisions covering interest are set out in ss 58 and 59 of the Civil Proceedings Act 2011 (Qld) (“CPA”), which repealed the Supreme Court Act 1995 (Qld) (“Supreme Court Act”): see s 211(1) of the CPA. Adopting the terms of s 108 of the CPA, I have taken a reference in the written submissions on interest by both parties to s 48 of the Supreme Court Act as, since the context permits, a reference to s 59 of the CPA. Likewise, although with no legislative imprimatur, I have taken the reference to s 47 of the Supreme Court Act as a reference to s 58 of the CPA. [4] The regime for setting the rates for default judgment and for money orders has been changed. Now, by force of the amended r 283 of the Uniform Civil Procedure Rules 1999 (Qld) (“UCPR”), and by s 59(3) of the CPA, the relevant interest rates are set by Practice Directions of the Supreme Court of Queensland. By Supreme Court Practice Directions Nos 21 and 22 of 2012, the interest rates payable upon money orders under s 59(3) and the interest on default judgments under r 283 for the purposes of s 58 are both 10% per annum from the 1st day of September 2012. [5] Interest rates on default judgments in the District Court have been the subject of a number of Practice Directions relevant to the period in question here. From 8 August 2001 until 21 March 2002 the rate was 9.5% per annum. From 22 March 2002 until 21 June 2007 it was 9% per annum. And from 22 June 2007 until 31 August 2012 it was 10% per annum. As just indicated, on and from 1 September 2012 it has remained at 10% per annum. [6] An analysis of the principles behind fixing interest assessed pursuant to the repealed s 47 of the Supreme Court Act (the predecessor to the CPA) has been recently undertaken by McMeekin J in Mulvaney Holdings Pty Ltd & Anor v Thorne (No 2)1. As with the present case (except for the small sum for damages for detention), in that case the sum which was to bear interest, if allowed, was a sum awarded by way of equitable compensation. As was remarked there, it has not been necessary to have recourse to a statute for awarding interest on such a sum because interest was always able to be awarded in a suit at equity: at [12]. Interest of that kind, though, has not been sought here and, therefore, I will not need to consider whether justice would have demanded an award not of simple interest but, rather, compound interest. [7] Again, like Mulvaney Holdings, here I have been given no information on the state of the claimants’ finances or of alternative courses they may have taken with their money. But, in common with McMeekin J, I do not see that as critical, particularly 1 [2012] QSC 146. -- 4 of 11 -- 5 where, as here, the judgment sums are by way of compensation and therefore interest which is awarded to compensate for the detriment that is suffered by being kept out of the relevant money is to much the same effect: see Mulvaney Holdings at [15]. [8] The arguments presented in Mulvaney Holdings are similar to the arguments presented here on behalf of Flying Fighters Maintenance and Restoration Pty Ltd (“FFMR”) and Flying Fighters Pty Ltd (“FF”). I will not pause to outline the development of the analysis in that case, accepting that the analysis, properly undertaken, leads to the following conclusions:  the discretion to award interest pursuant to the relevant statutory provisions is “unfettered”;  where compensation has been assessed for a past loss in then equivalent nominal monetary amounts, it is appropriate to adopt commercial rates;  in assessing an appropriate rate, it is relevant to determine how the moneys may have been applied by the claimant;  where the claimant was involved in commercial business, a commercial return is a reasonable expectation;  where no evidence is led of commercial rates expected to be earned or incurred, it is reasonable to have regard to the rate of interest applied, pursuant to statutory provisions, on what now are called “money orders”;  the rates that best meet the exigencies of the case – at least in commercial settings – are ones higher than that expected to be charged by a bank on loans secured by first mortgages on conservatively valued real estate; and  the rate set out under the then s 48 of the Supreme Court Act of 10% per annum is some guide to the reasonable cost of keeping the particular claimant out of its money prior to judgment; : at [19]–[31]. [9] Nevertheless, where, as here, there has been a variation in the interest rates over the period in question, I intend to take the relevantly conservative approach of adopting a median rate of 9.5% per annum (simple interest). [10] The next concern is with the periods that should apply. In Mulvaney Holdings, the period chosen was the whole of the time that elapsed since the various amounts were “advanced”: at [32]. [11] While on occasions, the courts, in the exercise of the relevant discretion, choose a period from the time the allegation is made in the relevant pleading containing the claim to the date of judgment, where, as here, the sums involved are payments by way of equitable compensation, I conclude that it is reasonable and appropriate to allow the periods to be those which cover the whole of the time for which that part of the compensation is payable. [12] For the small sum of $1,000.00 that has been awarded as damages for detention, I can see no reason why the same rate should not be adopted where I have found that the detention, in legal terms, was wrongful. Adopting the approach that I accept below, at 9.5% per annum from the date of the demand in the Claim in the first proceeding to 22 November 2012 (a period of 4.44 years), a yield of $421.80 is calculated. -- 5 of 11 -- 6 [13] The approach that FFMR and FF have taken is to seek interest at the appropriate rate on components of the claim “from the date when it may be said with certainty that the entirety of that component or the entirety of the amount claimed in that cause of action accrued”, with the “one exception (being) to treat the labour components of the Staggerwing claim as set out in the evidence which has not been challenged as accruing in each year from September 2001”. I accept that that is a proper way to approach such sums in this case. [14] For the Court’s benefit, the written submissions of FFMR and FF have an attached spreadsheet which sets out, on the bases that I have accepted, calculations of interest. Using that attachment and applying the rate of 9.5% per annum interest to 20 November 2012 (which I accept for present purposes, given the many variables involved, is not an unrealistic date), yields of $202,702.81 in respect of the equitable compensation payable to FFMR and $65,420.93 for that awarded to FF are calculated. Costs [15] The primary provision is r 681 of the UCPR. Its terms and scope were considered recently in West & Ors v Blackgrove & Anor2 at [47]-[51]. That is, usually, a successful party is entitled to an award of costs in its favour. As for rr 386 and 692, they take effect according to their terms. Bowenbrae Pty Ltd (“Bowenbrae”) [16] Turning first to Bowenbrae: it was the first plaintiff and the first defendant by counterclaim in proceeding BD1528/08, and was not involved in proceeding BD1907/08. [17] Bowenbrae succeeded on its claim for delivery up of the Staggerwing and for the payment of $1,000.00 as damages for detention of it. [18] No claim was sustained against it in the various claims made in the Further Amended Defence and Counterclaim. One aspect on which it might be said that Bowenbrae “failed” was the recovery of “associated parts, tools and equipment”; but even the submissions by FFMR and FF do not contend that that claim involved any significant time or any significant expense, particularly at trial. The only other contention raised against Bowenbrae in those written submissions is that it made “an entirely unfounded, and knowingly unfounded, claim for damages resulting from the alleged malicious and vexatious service of a statutory demand”. Given the concession, though, that the claim was apparently brought in Bowenbrae’s name without the knowledge or instructions of its sole shareholder and director, Mr Beattie, and given that Nigel Edward Arnot (“Arnot”) is himself a party to this first proceeding and the principal instrument behind the litigation on that side of the record, he must be held to bear the primary responsibility for this. Thus, I hold that there is no impediment to Bowenbrae being awarded costs of both its claim and the counterclaim made against it in proceeding No BD1528/08, particularly where I hold that no register of wins and losses is appropriate here: see paragraph [21] below. That conclusion means that I reject the contention that there are special circumstances concerning it within the principles canvassed. I hold that r 681 is the applicable rule (i.e. costs “follow(ing) the event”). I intend to examine these special 2 [2012] QCA 321. -- 6 of 11 -- 7 circumstances in detail later but it suffices at the present time to note that I have concluded that the actual costs involving Bowenbrae will be in no way as significant, or even complex, as those involving Arnot. In such circumstances where I (later) determine that Arnot should bear the particular costs that he does, I do not accept that special circumstances apply in Bowenbrae’s case to remove it from the ambit of r 681 of the UCPR. Arnot [19] I will deal first with proceeding BD1528/08. In that proceeding, Arnot was the driving force behind both parties in the claim and the counterclaim. Given his lack of success on both, he will be held to pay costs. The extent of those costs, though, will need to be investigated in some detail. [20] In SPJ Nominees Pty Ltd and Ors v Blackwatch Sports Fishing Boats Pty Ltd and Anor (No 2)3 I had cause to examine the effect of r 684 of the UCPR in the context of awarding costs of something less than the full costs involved in a party’s case. [21] I do not intend to re-examine all the principles discussed in SPJ Nominees. From that examination I draw upon the following aspects:  r 684 confers a wider discretion than the former rule (which was limited to “issues”), such that a “head of controversy” or a “unit of litigation”, if identifiable, can give rise to a discretion to separately award costs in relation to that “question”;  it must be recognised that r 684 of the UCPR is an exception to the general rule which is expressed in r 681(1);  because the circumstances which can engage r 684 are “exceptional” circumstances, the enquiry must be: “what is it about the present case which warrants a departure from the general rule?”;  the fact that a successful claimant fails on particular issues does not mean that the claimant should be deprived of some of the claimant’s costs, although it may be appropriate to award costs on a particular question, or part of a proceeding, where that matter is definable and severable and has occupied a significant part of the trial;  the courts will hesitate to depart from the general rule, so departing only in unusual cases;  while there might be aspects of a party’s claim which are abandoned late, or in which the party ultimately does not succeed, it is inappropriate for a Court simply “to keep a register of the wins and losses”; and  a Court should, if possible, avoid making multiple costs orders because it is “not an attractive or convenient course” to make many costs orders in relation to different issues; : at [4]-[14]. [22] The fact that FFMR failed in its claim for at least an equitable charge cannot be laid at Bowenbrae’s feet but can be laid squarely at the feet of Arnot – though not him alone. The Court was not satisfied to the appropriate standard that Arnot had a proprietary interest in the Staggerwing. Furthermore, the success of the equitable compensation claim against Arnot could not be found to flow on “against his 3 [2012] QDC 97. -- 7 of 11 -- 8 innocent co-owner” – although the co-owner was in fact the party that could have been joined by FFMR: it was a party in the associated proceeding BD1907/08. On the obverse, with respect to the claim brought in the first proceeding, Arnot was not able to establish his right to ownership which would have founded any claim in detinue and, consequently, any claim by him for damages for such detention. To this extent it can only be concluded that he lost on all issues agitated with respect to his part of the claim. Thus, concerning the claims by Arnot in the first proceeding, FFMR should have its costs against him for his part in those claims. Given the very minor part played by Mr Beattie – at least in terms of affidavits filed and other procedural steps taken – it is not apparent to the Court why FFMR should not recover its costs involved in defending the claims made by the plaintiffs in full. But that – as noted above – does not justify Bowenbrae being denied its costs. After all, it was also the subject of claims made in the counterclaim seeking declarations which would, if given, have provided a defence to the detinue claim by it, and it could hardly have extracted its claim for detinue from this first proceeding. It does not mean that the approach of the Full Court in Thiess v TCN Channel Nine Pty Ltd (No 5)4, or at least a variation of it, is not applicable here, especially where Arnot’s role is relatively clearly identifiable insofar as the plaintiffs’ case is concerned; but that is limited here primarily to the counterclaim. [23] With respect to the counterclaim brought by FFMR and FF, it is true that in the final relevant pleading (namely, the Further Amended Defence and Counterclaim) the only issue upon which there was any “failure” at trial was with respect to the most minor of the claims, being for an amount less than $500.00. [24] Nevertheless, there were many claims which were part of the original Defence and Counterclaim and which were not abandoned until the Amended Defence and Counterclaim was filed on 4 March 2011 (pursuant to leave granted by me on 1 March 2011). As can be seen from the affidavits relied upon by both parties at trial, there were a number of affidavits which were prepared prior to early March 2011. But it must also be noted that the original claims which were abandoned were set out in a pleading filed as early 16 July 2008, even if the counterclaim in which they appeared was stayed from 17 April 2009 by orders made that day by McGill SC DCJ, and that that stay continued until 4 March 2011 when the security ordered for costs was provided. In addition, with respect to the claim abandoned in April 2011 for the proceeds of sale of a Yak Aircraft, it was only introduced in March 2011 and abandoned after receipt of correspondence from the plaintiff’s solicitors dated 13 April 2011. [25] Even so, they were heads of controversy or units of litigation which would have taken some time to consider, as was the discrete unsuccessful counterclaim against Bowenbrae, for which costs of FFMR and FF should not be paid by Arnot. On the basis of the principles canvassed above, I conclude that the appropriate path to follow is one which grants a percentage only of the costs which might be otherwise be recovered in full to take account of these matters. In determining the costs with respect to the counterclaim in the first proceeding, I accept that the matters which did consume most of the factual enquiry at trial led to findings favourable to FFMR and FF on their claims against Arnot – but him only. 4 [1994] 1 Qd R 156. -- 8 of 11 -- 9 [26] Before considering the issue of indemnity costs in the first proceeding, if awardable as a result of an effective UCPR offer, I would, on the above considerations, hold that FFMR should be paid its full costs in defending the claims brought in the first proceeding but should be limited to 90% of the costs involved in its counterclaim because there were exceptional circumstances arising from the definable and severable question of the “other” abandoned claims worth some $480,000.00 (even leaving the “sale” of the Yak aside), though they were abandoned at an early enough stage to have the effect that the percentage of costs recoverable is significantly higher than the mere proportion of the figures to each other. I do not consider that other concerns (such as the disclosure application heard on the second day devoted to pre-trial objections) and the overall merit of the objections themselves (including those as to documents) are sufficiently exceptional as to be treated as additional “questions” impacting on this decision under r 684, although that 90% takes account of the fact that, for the counterclaim, FFMR and FF should not recover costs against Arnot for the unsuccessful suing of Bowenbrae. [27] Concerning the counterclaim brought by FF against Arnot, I see no reason to differ in the approach I take between both plaintiffs by counterclaim in the first proceeding, especially since it was not entirely clear for most, if not all, of the trial which corporate entity was involved in the different aspects of the case. So, FF is to be awarded its costs on the basis of 90% of recovery as well. Consequently, although their claims were different, the order should simply be that both are jointly entitled to 90% of the costs of the counterclaim against Arnot. [28] Turning, then, to the second proceeding. This involved simply Ultimate Aerobatics Pty Ltd (“UA”), as plaintiff, and FFMR, as defendant. In this proceeding, which I have called the second proceeding, FFMR succeeded entirely. Accordingly, it should receive its costs to be assessed on the standard basis. Offer to settle [29] This offer, purported to be made in accordance with Part 5 of Chapter 9 of the UCPR, was contained in a letter from FFMR’s and FF’s solicitors to Bowenbrae’s and Arnot’s solicitors and was dated 11 March 2011. As can be seen from the history canvassed above, that was a week after the Amended Defence and Counterclaim was filed. It concerns simply the first proceeding (namely, BD1528/08). [30] The reason that I say “purported” offer is that such is the term used in the plaintiff’s response submissions on costs. But there is nothing contained in those submissions that satisfies me that the offer was not a proper offer in terms of the UCPR. Thus, the concern for this Court is simply to determine whether FFMR and FF obtained “a judgment no less favourable than the offer to settle” [in terms of r 360(1)(a)] and, or alternatively, the plaintiffs obtained “a judgment no more favourable” to them against FFMR [in terms of r 361(1)(a)]. [31] Before considering its actual terms, on my acceptance that the calculations with respect to interest in the attachment to FFMR’s and FF’s submissions should be calculated on the basis of 9.5% per annum, it is clear that the interest on that basis up to 11 March 2011, taken together with the equitable compensation awarded would significantly exceed the sum of $350,000.00. The offer made of 11 March 2011 was to “settle” the first proceeding, by Bowenbrae and Arnot paying FFMR -- 9 of 11 -- 10 and FF the sum of $350,000.00 and – clearly as part and parcel of the same offer – by FFMR releasing the Staggerwing aircraft the subject of the first proceeding. [32] I do not construe the offer as attaching conditions to the return of the Staggerwing aircraft. Rather, on its structure, it is an offer to settle which involves two, though inseparable, components, being the payment by parties on one side of the record and the return of the aircraft by parties on the other side of the record. As such, it is to be judged against the background of what the Court finally ordered in the first proceeding. [33] Before moving to consideration of that matter, no argument was raised in either set of submissions about the absence of any costs orders being part of the offer. There are cases where the offer of a sum of money which includes both the payment of a sum of money and some aspect (usually unidentified) of the total sum as being for costs can lead to uncertainty as to what is being offered. In contrast, here the offer is simply for the payment of money on one part and the return of an aircraft on the other. The only reasonable implication open is that each party would bear its own costs. [34] In my judgment, the offer is relevant only to the counterclaim in the first proceeding. As for the offer as a defendant to the claim, Bowenbrae succeeded in obtaining $1,000.00 damages as well as the return of the aircraft, in a context where no set-off could be applicable; and Arnot did not succeed in anything (having no interest in the aircraft). Hence, insofar it affects Arnot, no judgment was obtained by him, rendering r 361 of the UCPR inapplicable. No argument was presented to the Court about what should then happen. I intend simply to exercise the Court’s general discretion as to costs. Although this Court must be satisfied, in terms of r 360(1)(b) that the “plaintiff” was at all times willing and able to carry out what was proposed in the offer, where, as here, FFMR and FF have simply sought a money judgment there can be no issue as to their ability to carry out the offer by accepting payment and discontinuing the counterclaim. I have no doubt that, if so paid, FFMR would have caused the return of the aircraft to occur. [35] Given the mandatory nature of r 360 of the UCPR, the order that the Court will make is that Arnot pay FFMR’s and FF’s costs of the counterclaim, limited to 90%, to be assessed on the indemnity basis (because Arnot has not shown that another order for costs is appropriate in these particular circumstances). Summary [36] Regarding interest on the claim in the first proceeding and on the counterclaim in the first proceeding, the Court will allow interest on the basis of 9.5% per annum. For Bowenbrae the calculated sum is $421.80. For the periods set out in the attachment to FFMR’s and FF’s submissions, the calculated sums are $202,702.81 for FFMR and $65,420.93 for FF. [37] With respect to costs the orders that will be made are as follows: (a) In proceeding BD1528/08:  On the claim:  FFMR is to pay Bowenbrae’s costs of the proceeding concerning Bowenbrae’s claims to be assessed on the standard basis;  Arnot is to pay FFMR’s costs of the proceeding concerning the claim, in full, to be assessed on the standard basis; -- 10 of 11 -- 11  On the counterclaim:  FFMR is to pay Bowenbrae’s costs of the proceeding concerning the counterclaim against Bowenbrae to be assessed on the standard basis;  Arnot is to pay FFMR’s and FF’s costs of the proceeding concerning the counterclaim, fixed at 90% of those costs, to be assessed on the indemnity basis. (b) In proceeding BD1907/08:  UA is to pay FFMR’s costs of the proceeding to be assessed on the standard basis. -- 11 of 11 --