Bannister & Hunter v Transition Resort Holdings

The remaining issues 12Transition moves for adoption of the report, judgment (both pursuant to my earlier reasons and in consequence of the adoption of the report) and costs (including a special costs order). BH accepts that it follows from my earlier reasons (and the arithmetical correction to which I have referred) that Transition is entitled to damages in the corrected sum referred to at [3] above. However, it contends that the report should be varied so that the damages for the cost of rectification of the VENM layer should be limited to the cost of rectification of the Undeveloped Portion. 13There are several distinct issues as to costs. I will set those out later in these reasons.

Adoption of the report 14It is apparent that the question dividing the parties, as to adoption of the report, is whether damages for the cost of rectification of the VENM layer should be assessed in respect of the whole of the VENM layer or in respect of the Undeveloped Portion only. Transition submits that this issue was decided, in its favour, by my earlier reasons. 15BH refers to the (undisputed) facts that: (1) Transition had sold the site to another developer; (2) no rectification work has ever been done, before or after that sale, to bring the VENM layer into conformity with the specification; (3) the purchaser of the site has developed it so that 90% of it comprised residential lots (on some of which houses have been constructed), roads, and other services; (4) rectification of the developed portion of the site cannot and will never be undertaken by anyone; and (5) in any event, it may be inferred that rectification of the remaining 10% of the site will never be undertaken by anyone. 16The position taken by BH reflected its position at trial. Transition had sold the site before the hearing. BH contended that the fact of sale, coupled with the absence of any agreement between Transition and the purchaser that Transition would undertake rectification of the VENM layer and the absence of any evidence that the sale price had been diminished by the state of the VENM layer, meant that "cost of rectification" damages should not be allowed. I dealt with that submission at [302] to [345] and concluded, at the last-mentioned paragraph, "that the fact of sale does not preclude Transition from receiving damages based on the cost of rectification of the defects in the VENM layer". 17The additional facts, that the purchaser has developed the land and that 90% of it has now been given over to residential lots, roads, and other services, does not seem to me to add anything. On the evidence at trial, it was open to infer (more accurately, "obvious") that Transition would never rectify the VENM layer and that there was no agreement in place between it and the purchaser in relation to rectification. 18In substance, it seems to me, BH sought to reargue before the referee a question - namely, the applicability of the "Bellgrove" measure of damages (Bellgrove v Eldridge (1954) 90 CLR 613) in the events that had happened - that had been argued at trial, and dealt with in my reasons. I do not accept that the additional facts, relating to the extent to which the purchaser has developed the land, added anything relevant to the debate, or provided any justification for reopening the debate. 19Further, not content with a second bite at the cherry, BH has sought to reargue the issue again, on the question of adoption. 20To my mind, the referee was correct to conclude, on the basis of my reasons, that the question referred to him required him to assess damages for the cost of rectification of the VENM layer across the entire site. 21The conclusion to which I came on the Bellgrove question may be right, or it may be wrong. Nonetheless, unless and until it is set aside on appeal, it is dispositive of that issue between the parties. And, being in that sense dispositive, it decided the basis on which damages for which rectification on the VENM layer be assessed. 22Accordingly, I do not accept BH's challenge to the adoption of the report. It follows that Mr Goldstein's report should be adopted.

Consequences of adoption; interest 23I turn to the question of quantification of damages. 24On 12 February 2014, I directed entry of judgment for BH on its claim against Transition for the unpaid fees and interest. I directed entry of judgment for Transition on its cross-claim against BH "for damages to be assessed". No monetary judgment has in fact been entered, either for BH or for Transition (not surprisingly, in the case of the latter's cross-claim). It follows, contrary to Mr Weinberger's submission, that Transition should not have pre-judgment interest on the earlier quantified aspect of its cross-claim (for $667,021.00, after correcting my arithmetical error) up until 12 February 2014 and post-judgment interest thereafter. 25To my mind, the simplest way to deal with this is to direct that the judgments be entered at the date of delivery of these reasons, with interest on the amounts claimed (in the case of damages for rectification of the VENM layer, only from the date of the report, since that is the date at which those damages were assessed) and for those judgments to be set off. I accept, as Mr Muston of Counsel submitted for BH, that it is not appropriate to give Transition interest up until judgment at an earlier time, and interest on a judgment sum (itself comprising a substantial amount of interest) thereafter. 26The parties should work out the monetary consequences of that process.

Costs: the reference out 27I turn to the question of costs. Leaving aside the costs of the reference, and the question of a special order as to costs, the overall position is that Transition succeeded. BH accepts that, leaving aside the two qualifications to which I have referred, costs should follow the event. Once the judgments are set off, the event will be that Transition succeeds. 28Transition accepts that it should pay the costs of the reference, but with qualifications. Those qualifications are that the costs payable should exclude those which would have been payable in any event, and that BH should not "have its costs to the extent they were incurred for the purpose of seeking to collaterally attack the Court's finding that Transition is entitled to rectification costs". 29The starting point is that the reference was necessary only because BH had not adduced evidence at trial quantifying its damages for rectification of the VENM layer. For reasons that I gave, and which I will not repeat, I concluded that the evidence was insufficient to support even an educated guess as to the cost of rectification. That view has been fortified by the evidence given to, and acted on by, the referee. Thus, as I indicated in the course of argument at the trial, the reference out was at Transition's risk as to costs. It was for that reason that, at [354] of my earlier reasons, I reserved expressly the question of costs of the reference. 30If matters went no further, I would order BH to pay Transition's costs of the hearing, excluding the costs of the reference; Transition to pay BH's costs of the reference; and costs to be set off. 31It may be correct to say, as Mr Weinberger submitted, that some of the costs incurred with respect to the reference would have been incurred at trial in any event, because they related to quantifying the cost of rectification. However, I am not satisfied that the full cost of adducing that evidence on a "stand-alone" basis, for the purposes of the reference, would have been incurred had that question been addressed as one of the numerous questions canvassed in the very substantial amount of expert evidence given at trial. On the contrary, I think that the cost of adducing the evidence specifically for the purposes of the reference must have exceeded very substantially the incremental cost of doing so as part of the expert evidence adduced at the trial. 32Since the necessity for the reference arose entirely from Transition's failure to deal with this matter appropriately in its evidence in chief (or at all), I do not think that a carve-out of "costs which would have been incurred in any event" is justified. 33Transition's second point does have substance. As the referee's report and its supporting documents show, the parties' experts agreed on the method of rectification and the costs thereof, on the assumption that those costs should relate to rectification of the whole site. The actual hearing before the referee, and the issues that he was required to decide, related only to BH's attempt to reargue matters that had been decided in my earlier reasons. 34In short, there has been a substantial expenditure of costs, in relation to the reference, for two reasons. One reason is the failure of Transition to deal with the matter, as it should have done, at trial. The other is BH's insistence on rearguing matters that, as the referee concluded and I have said, were effectively decided by my earlier reasons. 35In the circumstances, sufficient justice, as to the costs of the reference, is done by making no order as to those costs, to the intent that: (1) each party should pay one-half of the referee's costs, and indemnify the other to the extent that it may have overpaid; and (2) otherwise, each party should bear its own costs of the reference.

Indemnity costs 36I turn to the application for a special order as to costs. 37It is common ground that Transition made four offers to settle: (1) an offer of compromise made on 27 September 2013 (about six weeks before the commencement of the trial) to settle the claim and the cross-claim by judgment in its favour for $3 million; (2) an offer made on 11 February 2014 (a week before the order for reference out was made), to settle the claim and cross-claim for an amount of little under $3 million (presumably, on the basis of a judgment in its favour) together with costs on the ordinary basis; (3) an offer made on 17 April 2014 (four weeks before the date then fixed for the commencement of the hearing on the reference) to settle the claim for rectification costs in the sum of $2 million, on the basis that each party paid its own costs of the reference; and (4) an offer made on 23 May 2014, (a little under two weeks before the rescheduled commencement of the hearing on the reference), to settle the claim for rectification costs in the sum of $1,750,000.00, on the basis that each party paid its own costs of the reference. 38The first offer was made not only by offer of compromise under UCPR r 20.26, but also "in accordance with the principles enunciated... in Calderbank v Calderbank [1976] Fam 93". 39For reasons best known to Transition and its legal advisers, but consistent with the way in which the case for Transition had been conducted in some respects, the Court was not provided with the offer of compromise. Fortunately, that does not matter. BH accepts that, if I were to conclude that the referee's report should be adopted, one consequence is that the amount recoverable by Transition will exceed the amount offered, so that the consequences of non-acceptance prescribed by UCPR r 42.13 should follow. 40It is thus necessary to do no more in respect of the second, third and fourth offers than to note that they were made "without prejudice save as to costs (or "save as to costs of the Reference hearing"), and were clearly intended to and did evoke the Calderbank principle. Conclusion on costs 41It follows that: (1) BH should pay Transition's costs of the proceedings (save for costs in respect of the reference, as to which there should be no order as to costs); and (2) the costs so payable should be assessed on the ordinary basis up until 27 September 2013 and on the indemnity basis thereafter.

Orders 42I make the following orders: (1) Order that the report of Mr Steven Goldstein as referee dated 27 June 2014 be adopted. (2) Direct the parties to bring in, within 7 days, a form of judgment in accordance with [25], [26] above. (3) Subject to orders (4) to (6), order the plaintiff/first cross-defendant to pay the defendant/cross-claimant's costs of the proceedings including the first cross-claim. (4) Order that the costs so payable exclude all costs of and incidental to the reference out. (5) Order the plaintiff/first cross-defendant and the defendant/cross-claimant to pay equally the costs of the referee, and each to indemnify the other to the extent that it may have overpaid its one-half share; (6) Otherwise, make no order as to the costs of the reference, to the intent that each of the plaintiff/first cross-defendant and the defendant/cross-claimant shall pay its own costs thereof. (7) Order that costs payable by the plaintiff/first cross-defendant to the defendant/cross-claimant be assessed on the ordinary basis up until 27 September 2013 and on the indemnity basis thereafter. (8) Direct that the exhibits be handed out. (9) Reserve liberty to apply, in respect of the judgment to be entered in favour of the defendant/cross-claimant pursuant to these orders and the Court's earlier reasons, on 7 day's notice.

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