Supreme Court of WA|2000-05-18|Before: Ipp J, Templeman J

Beagle Holdings Pty Ltd & Anor v Equus Financial Services Ltd [2000] WASC 128 (18 May 2000)

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : BEAGLE HOLDINGS PTY LTD & ANOR -v- EQUUS FINANCIAL SERVICES LTD [2000] WASC 128

Judgment - Resolution of outstanding issues - Costs - Interest - Whether monthly arrears reports were notices of default - Turns on own facts

Rulings made as to interest on judgment debt, costs and construction of monthly arrears reports

Boranga v Flintoff (1997) 19 WAR 1

Christmas Island Resorts Pty Ltd v Geraldton Building Co Pty Ltd (1992) 11 WAR 40

Clarke v Foodlands Stores Pty Ltd [1993] VicRp 81; (1993) 2 VR 382

Commonwealth of Australia v Verwayen (1990) 170 CLR 394

Government Employees Superannuation Board v Martin (1997), unreported; SCt of WA (Ipp J); Library No 970434; 2 September 1997

Hide 'n Skin Trading Pty Ltd v Oceanic Meat Traders Ltd (1990) 20 NSWLR 310

Nicholls v The Sheep's Back Bar Pty Ltd (1997) 25 ACSR 374

Peter Turnball & Co Pty Ltd v Mundas Trading Co (Australia) Pty Ltd [1954] HCA 25; (1954) 90 CLR 235

Sargent v ASL Developments Ltd [1974] HCA 40; (1974) 131 CLR 634

1 TEMPLEMAN J: On 16 February 2000 I delivered what I described as interim reasons, leaving it to the parties to consider what, if any, additional findings or rulings would be necessary to conclude the proceedings.

2 I have subsequently heard argument in relation to issues of interest and costs. I have also considered written submissions in which I was invited by Equus to find that the monthly arrears reports which it provided to Beagle from time to time, constituted Notices of Default for the purpose of cl 5.1(b) of the Variation Agreement. At my direction, Beagle filed written submissions in answer.

3 I have not been invited to hear additional argument in relation to this point. I do not consider it necessary to do so: the point is a short one and the respective contentions are set out clearly in the written submissions.

4 I am therefore able to set out my reasons relating to all outstanding issues and thereby bring the proceedings to an end.

The Monthly Arrears Reports: were they Notices of Default?

5 As I noted in par 57 of my reasons, cl 5.1(b) of the Variation Agreement provided for Equus to serve a Notice of Default if an investor was in default for more than 45 days.

6 In par 200 of my reasons I referred to the fact that throughout 1993 Equus submitted monthly reports to Templegate: these being "computer print-outs showing details of the accounts relating to investors introduced by Templegate."

7 It is now submitted by Equus that insofar as those computer print-outs showed that investors were in default, they should be regarded as Notices of Default for the purposes of cl 5.1(b).

8 I do not accept that submission. Clause 5.1(b) called for the issue of specific and clearly defined documents. As I noted in my reasons at pars 211, 219 and 220, Equus did issue default notices in the appropriate form in relation to certain investors. This is not, therefore, a case in which the parties adopted a convention of treating the monthly computer print-outs as default notices.

9 Indeed, it was never suggested, either in the pleadings, nor in the cross-examination of any of Templegate's witnesses, that the print-outs were to stand as Notices of Default; not that they were regarded by Templegate as serving that purpose.

10 Equus' contention therefore raises a matter which was never put in issue and which, as a matter of construction of the Variation Agreement, is without merit in any event.

11 Equus goes on to submit that it should not have been denied the right to serve a payout notice pursuant to cl 5.1(d)(i) of the Variation Agreement if Templegate had failed to deposit 30 per cent of the relevant investor's indebtedness into the No 2 Account by 15 days after the issue of the Notice of Default.

"Equus ought not to be disadvantaged in being shut out from serving a payout notice in circumstances where Beagle has itself defaulted in the performance of an essential step."

13 I do not accept this submission. As a matter of construction, Equus' entitlement to serve a payout notice is not related to Templegate's obligation to deposit the default deposit into the No 2 Account.

14 Further, cl 5.1(j) provided Equus with an entitlement to require Templegate to top up the No 2 Account if the total amount of all loans outstanding from defaulting investors was greater than the total amounts standing to the credit of the No 2 Account and the Reserve Fund: see par 66 of my reasons. Equus' remedy, if Templegate did not comply with that demand, was to declare the Variation Agreement void and revert to the FPA.

15 In my view, Equus' submission is inconsistent with this provision.

16 Furthermore, it seems to me to be commercially unrealistic to suppose that Equus would be relieved of an obligation to serve payout notices in a timely manner if Templegate defaulted on its obligation to deposit moneys into the No 2 Account. If anything, one would expect the parties to have intended that Equus would be the more anxious to serve a payout notice in those circumstances. This is particularly so, given that, at least from September 1992, when solicitors became involved on both sides, the parties were at arms' length: see the matters referred to under Issue 10 of my reasons and par 247 in particular.

17 In par 292 to par 293 of my reasons, I concluded that Beagle was required to pay Equus a net sum of $158,809.17. I said that interest would run on that sum from August 1992 (allowing reasonable time for payment) to 20 May 1994, when Equus had the use of the Reserve Fund.

18 It is submitted by Equus that this reasoning discloses an error of principle because the debt due in respect of the Group A investors arose under the side agreement, whereas Equus had a separate entitlement - flowing from the FPA and the Variation Agreement - to interest on moneys standing to the credit of the Reserve Fund.

19 Having considered this matter further, I accept Equus' submission. I am now of the view that the correct analysis is as follows:

(1) pursuant to the side agreement, Equus was entitled to be paid $289,183.78 (being 70 per cent of the amount due from the Group A investors) less the amounts received in respect of the Kingston Craft settlement and the Stancic debt, a net sum of $158,809.17 (see par 292 of my reasons).

(2) Equus is entitled to interest on this sum from (say) 1 August 1992 until judgment.

I fix the rate at 8 per cent per annum from 1 August 1992 until 12 September 1997 and at 6 per cent per annum from 13 September 1997 to judgment. I fix the rates in the exercise of my discretion pursuant to s 32 of the Supreme Court Act 1935, by utilising the gazetted rates of interest on judgments (see Seaman at par [42.2.3]). I adopt those rates in the absence of any evidence as to more appropriate rates. I do not accept Equus' submission that interest should run at 20 per cent per annum because that was the rate contemplated by the parties pursuant to the FPA and the Variation Agreement. In relation to the side agreement, pursuant to which this entitlement to interest arises, the parties did not address the question of interest.

(3) the balancing 30 per cent of the amounts due from the Group A investors, being $123,935.91, was paid by Templegate on 18 May 1992 and credited to the No 2 Account. It there earned interest amounting to $36,824.25 down to 20 May 1994: see par 293 of my reasons.

(4) on 20 May 1994, when Equus debited the No 2 Account, it received that interest, which had been accruing at 15 per cent per annum pursuant to cl 6B.2 of the Variation Agreement.

(5) I consider that the accrued interest of $36,824.25 should be set off against the interest which is to be calculated in accordance with par (1) and par (2) above. This is an equitable set-off: cl 6B.4 of the Variation Agreement has no application in these circumstances.

(6) on 20 May 1994, Equus withdrew $420,984.46 from the Reserve Fund. This included the sum of $160,760.16 which had been transferred from the No 2 Account on the same day. I have held that Equus was not entitled to any moneys other than that sum, and that it should therefore repay an amount of $260,224.30 to the Reserve Fund.

(7) that conclusion has no interest consequences: Equus was always entitled to interest accruing on moneys standing to the credit of the Reserve Fund.

20 This has been a complex action in which neither side has achieved total success. Indeed, it is difficult to identify the criteria by which success should be measured. However, the action is essentially a commercial cause. I therefore think it appropriate to have regard to the commercial outcome in deciding how the costs should be awarded.

21 Essentially, issue was joined between the parties because Equus sought payment of $1,187,508.50 pursuant to the various payout notices of February, August and September 1994.

22 Beagle denied that it was liable to pay any amount. It sought an account because it was not satisfied with the accuracy of the information which had been provided to it by Equus. Underlying this dispute, and fundamental to it, was the question of construction of the FPA and the Variation Agreement and the effect of the informal arrangements made in anticipation of, and subsequent to, the Variation Agreement.

23 Beagle was largely successful in these construction issues. However, it was unsuccessful in its contention the Equus was obliged to follow reasonable collection procedures.

24 In dealing with that contention, Equus assembled a mass of documentary evidence. Equus asserts that the exercise "was the most time-consuming evidentiary issue", the inference being that it involved effort which has largely been wasted.

25 I have not been given any detail of the work involved but it obviously was time-consuming. However, the exercise was not entirely wasted. I was obliged to refer to a substantial number of the documents in resolving the issues about Equus' entitlement to serve the payout notices. And in that issue, Equus was largely unsuccessful.

26 As a consequence, Beagle has not been required to pay the substantial amounts of money which Equus sought from it. And Equus has been ordered to restore moneys which it withdrew from the Reserve Fund on 20 May 1994. The parties have since agreed that the sum of $260,224.30 should be paid to Beagle with interest from 31 March 1998 to the date of judgment. This agreement is recorded in a memorandum dated 14 April 2000 signed by the parties' solicitors.

27 Equus has been awarded damages in respect of one of the side agreements to which I referred in my reasons. Further, Equus has successfully defended Beagle's claim that it repudiated the FPA.

28 Equus contends that a number of issues in the action were inter-related to such a degree that it would be impossible to segregate with any degree of accuracy the time spent, or the work undertaken, before and during the trial. It submits that the Court should take a broad brush approach and make no order as to costs.

29 Although that submission is not without merit, I do not think it accords closely enough to the commercial outcome to which I have referred above.

30 Beagle submits that I should be guided by the decision of Toohey J in Hughes v Western Australian Cricket Association (Inc) [1986] FCA 382; (1986) ATPR 40-748. At 48,137, Toohey J said:

"I approach the matter on the basis that the applicant succeeded substantially in what he set out to achieve through his application. He failed on some issues in circumstances where, not only should he not have the costs of those issues, but there should be some compensation to the respondents for the time taken in meeting those issues both prior to and at the hearing."

31 In the result, the applicant was awarded 75 per cent of his costs. However, there was one major and discrete issue in which the applicant was unsuccessful. It occupied "not less than 3 days". The total length of the trial is not clear from the report.

32 In the present case, there have not been any such clearly discrete issues. I must therefore exercise a discretion based largely on impression. However, in so doing, I take into account the pleadings, the issues on which the action was tried ultimately, the findings which I have made and the submissions on costs which have been made to me both in writing and in the course of argument.

33 Taking these matters into account, I conclude that Beagle has been substantially successful, but by no means overwhelmingly so.

34 Beagle submits that Equus should pay 75 per cent of Beagle's costs, with a certificate for transcript. It is submitted also that Equus should be ordered to pay the costs of the counterclaim incurred by the defendants to the counterclaim, all of those defendants being associated in some way with Beagle.

35 I do not think it appropriate to make separate orders in respect of the claim and counterclaim. Nor do I think it appropriate to draw a distinction between the costs incurred by Beagle and those incurred by the other parties associated with it. The commercial reality is that there have been two parties: Beagle and Equus.

36 In my view, a fair outcome would be to have Beagle's costs (including those of the associated parties) of the claim and counterclaim, including reserved costs, taxed together and for Equus to pay two-thirds of those costs. There should be a certificate for transcript.

37 Equus should pay Beagle's costs of responding to the submissions relating to the Notice of Default issue to which I have referred above.

38 I shall expect the parties now to perform the calculations necessary to give effect to these reasons and prepare a minute of order.

39 Finally, I wish to correct a typographical error appearing in par 120 of my reasons. The date referred to in the first sentence should be 4 May 1992, not 1991.

Beagle Holdings Pty Ltd & Anor v Equus Financial Services Ltd [2000] WASC 128

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Judgment (63 paragraphs)

Beagle Holdings Pty Ltd & Anor v Equus Financial Services Ltd [2000] WASC 128 (18 May 2000)

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Legislation Cited (1)

Cases Cited (7)