I published my reasons for judgment in this proceeding on 11 July 2019 (Bernley Corporation Pty Ltd v AFR Group Pty Ltd t/as Anytime Fitness Randwick [2019] NSWDC 315) (the 'Reasons for Judgment'). I relevantly ordered that:
1. there should be judgment for the second plaintiff for the sum of $195,000, plus interest pursuant to section 100 of the Civil Procedure Act; and
2. the cross-claim be dismissed.
I gave the parties the opportunity to make further submissions as to interest (specifically whether and, if so, in what amount it should be recovered) and costs. Short minutes of order proposed by the plaintiffs have been supplied to me and written submissions were received from Counsel for the defendant/cross-claimant (23 July 2019) and Counsel for the plaintiffs (26 July 2019).
The plaintiffs' short minutes of order proposed the following orders:
1. Judgment for the Second Plaintiff against the defendant for the sum of $195,000 (the 'Judgment Sum').
2. The defendant to pay the Second Plaintiff interest, pursuant to section 100 of the Civil Procedure Act, on the Judgment Sum, up to the date of entry of the Judgment, the amount of $87,492.74, calculated as follows:
1. in the period from 29 March 2012 to 18 July 2019 the sum of $74,863.59 (on the first of the loan advances of $165,000);
2. in the period from 20 June 2012 to 18 July 2019, the sum of $8700.18 (on the second of the loan advances of $20,000);
3. in the period from 11 January 2013 to 18 July 2019, in the sum of $3928.97 (on the third of the loan advances of $10,000).
1. the cross-claim be dismissed.
2. Except to the extent of any existing costs orders, the defendant/cross-claimant is to pay 80% of the costs of the plaintiffs and the Cross-defendants, the whole of the proceedings, as agreed or assessed on a party and party basis.
The defendant/cross-claimant consents to orders 1 & 3. It opposes orders 2 & 4, and proposed its own orders for interest and costs.
On the question of interest, the defendant/cross-claimant submitted that interest should run from either:
1. 24 June 2019 to 11 July 2019, when the second plaintiff demanded the repayment of the loan advances, until the date of judgment, or
2. 2 January 2018 to 11 July 2019, when Mr Jepsen (the second plaintiff's accountant/financial adviser) rejected a proposal made by Mr Myssy (the defendant's accountant/financial adviser).
On the question of costs, the defendant/cross-claimant sought orders that:
1. On the cross-claim the first plaintiff pay the cross-claimant's and the cross-defendant's respective costs of the cross-claim (in each case on the ordinary basis, as agreed or assessed).
2. On the plaintiffs' claim, the first plaintiff:
1. pay the second plaintiff's costs in the proceeding from 25 June 2019 on the ordinary basis, as agreed or assessed; and
2. pay the defendant's costs in the proceeding up to and including 24 June 2019:
1. on the ordinary basis up to and including 2 October 2018; and
2. on an indemnity basis on and from 3 October 2018.
The issues for determination, as reflected by the parties respective submissions, are:
1. for what period interest should be paid from;
2. what are the appropriate costs orders; particularly in view of the circumstances that judgment was given for only one of the two plaintiffs and the existence of a cross-claim.
[2]
Identifying the correct plaintiff in the pleadings
As indicated above, and more fully in the Reasons for Judgment, this case concerned three loan advances being made to the defendant over a period from March 2012 to June 2013 (the 'relevant period'). They were made for the purposes of providing 'start-up' loan capital and effectively represented the capital or investment contribution of Mr Turner to the creation of the defendant, the entity that would become the franchisee of the franchise 'Anytime Fitness' in Randwick. This arrangement came about through the dealings between Mr Matthew Connolly and Mr Ben Turner.
The defendant is a subsidiary of the entity 'MCBT Pty Ltd'. At material times, MCBT was owned, in unequal shares, by a corporate entity associated with Mr Connolly ('AF Fit') and the corporate entity associated with Mr Turner ('Bernley Corporation').
When the proceeding was commenced on 8 February 2018, the plaintiff was identified as 'Heartland Motors Pty Ltd'. This original iteration of the pleading alleged the three loan advances, in the combined sum of $195,000 over the relevant period. It also alleged that on 22 January 2018 the plaintiff demanded the repayment of this amount; that the defendant failed to comply with the demand and failed to repay the amount. The pleading claimed a liquidated sum, inclusive of interest calculated in accordance with s 100 of the Civil Procedure Act.
On 2 May 2018, following the plaintiff's application, and before any Defence was filed, an Amended Statement of Claim was filed. The amendments consisted of (a) a name change in the plaintiff - from Heartland Motors Pty Ltd to Bernley Corporation Pty Ltd - and (b) the addition of a restitutionary action (for money had and received) [1] .
On 25 June 2018, the defendant filed its Defence. By that Defence, the defendant relevantly:
1. denied entering into an agreement with the plaintiff (Bernley Corporation) to borrow money from it; and said it had not agreed to repay the alleged loan monies;
2. admitted that the plaintiff (ie Bernley Corporation) caused the three loan advances to be made;
3. admitted that it had received a letter of demand;
4. denied liability to repay the total sum advanced to the plaintiff;
5. specifically pleaded that there was a loan agreement between Mr Ben Turner and Mr Connolly whereby the former would advance the defendant $195,000, that this total sum had been advanced by Ben Turner; but that the defendant had repaid a sum (being $166,200), in three separate instalments, over the period October 2014 to May 2016.
6. said, in effect, that if Bernley Corporation was to be regarded as the creditor for the loan advances, then Ben Turner was the agent for the creditor and that it, the defendant, had paid him $166,200.
On 3 August 2018, the defendant filed a cross-claim. The gist of this claim was to pick up the essential factual matters raised in this defence. From that, the cross-claimant alleged that if the true creditor was Bernley Corporation, then it had paid Mr Turner the sum of $166,200 under the mistaken belief that it was he, Mr Turner, who was the creditor. That being so, it contended, it had its own action in restitution against Mr Turner. Secondly, Mr Turner had engaged in misleading or deceptive conduct, and deceitful conduct, in leading the defendant to believe that when he received the sum of $166,200, he was doing so in his own right, and not as an agent for Bernley Corporation. In other words, to the extent that the payments that it made to Mr Turner did not discharge its liability in debt ($195,000) to Bernley Corporation, the defendant should be entitled to recoup the monies paid to Mr Turner in order to allow it to (partially, but not wholly) discharge its continuing liability to Bernley Corporation.
In 3 May 2019 a tutor was appointed to represent the interests of Mr Turner [2] .
On 24 June 2019, virtually on the eve of the hearing (the hearing commenced on 26 June 2019), a Further Amended Statement of Claim was filed. No new causes of action were added, although the quantum of the claim for interest was revised. The main thrust of the amendments was, effectively, to add Mr Ben Turner as a second plaintiff and to assert that in respect to each of the issues concerning the loan advances, the demand for repayment and the entitlement to repayment for the loan advances, the creditor was Bernley Corporation or, alternatively, Mr Turner.
During the hearing, Counsel for the plaintiffs abandoned a claim that the creditor was Bernley Corporation. He submitted that it was Ben Turner who was the true creditor. It followed that the factual premise for the defendant's cross-claim (that it had mistakenly paid $166,200 to Mr Turner as agent for Bernley Corporation) fell away.
The Court's Reasons for Judgment and Orders reflected acceptance that Ben Turner was the creditor to the defendant.
[3]
The 'demands' for repayment
As is apparent in various parts of the Reasons for Judgment, the Court placed significant weight upon email communications between Mr Dominic Myssy (representing Mr Connolly) and Mr Greg Jepsen (representing Mr Turner), between 22 December 2017 and 2 January 2018. The essence of the form of communication was (as noted in the Reasons for Judgment), firstly, an admission being made that Mr Turner's loan advances had been overlooked and that it was proposed that the problem may be addressed by the cancellation of dividends to him from 2016 and 2017; and, secondly, a stipulation (or 'demand') by Mr Jepsen that after accounts had been rectified, "Ben should be repaid these funds", with an appropriate interest factor.
As noted, the statement of claim (as variously amended) has, at all times, referred to a letter of demand being made, in the form of a letter (sent by email) from the first plaintiff's solicitor, to Mr Connolly, on 22 January 2018.
Counsel for the defendant submitted that a demand for repayment was only made, on behalf of Mr Turner, when the Further Amended Statement of Claim (which added him as a second plaintiff) was filed on 24 June 2019.
[4]
Defendant's offer of settlement
On 2 October 2018, before Mr Turner was added as a second plaintiff, Mr Watson, the solicitor for the defendant/cross-claimant sent an email to the solicitor for the first plaintiff, on terms that it was sent 'Without prejudice save as to costs'. The content of the email was that an offer of settlement was made on the following 'grounds':
1. proceedings be dismissed with the order as to costs;
2. any costs orders and the proceedings are to be set aside;
3. the defendant/cross-claimant is to pay the cross-defendant (Mr Turner) the sum of $$29,000;
4. the parties bear their own costs of the proceedings;
5. the above terms are to be captured in a deed of settlement and release, which is to be drafted by the defendant /cross claimant at first instance, and each party is also to bear their own costs in respect of that deed.
The offer was open for acceptance until 5:00pm, 16 October 2008. The offer was rejected.
[5]
Interest
Counsel for the defendant/cross-claimant submitted, first, that interest should only run from the time that the demand for repayment was made. Counsel identified the date when the demand for repayment was made as being either on 24 June 2019 (when Mr Turner was formally joined to the proceeding as a second plaintiff) or, alternatively 2 January 2018 (when Mr Jepsen sent his email communication to Mr Myssy). If the interest ran from 24 June 2019, Counsel says, the quantum of the interest up until the date of judgement was in the sum of $514.21. If the interest ran from 2 January 2018 until the date of judgement, interest was in the sum of $16,322.57.
Counsel for the defendant submitted that it was inappropriate to award interest from the dates the advances were, respectively, made (notwithstanding that it was the date of the advances that the limitation period commenced to run). This was because, so it was argued, Mr Turner suffered no real practical detriment or harm until he made his demand for the return of money.
In response, Counsel for the plaintiffs submitted that interest should run from the date that the advances were made. Counsel argues that Mr Turner has been deprived of the use of the monies the advanced (and the defendant has had the corresponding benefit of the monies) since he made his advances; the first of which was in 2012. Alternatively, he submits that it should run from 16 December 2016, being the date when Mr Turner's purpose in providing start-up working capital had been fulfilled as a result of another of his associated company (Ben Turner Pty Ltd) ceasing to having any further interest in the business of the defendant (or MCBT Pty Ltd) on that date. Counsel says that if interest is to be calculated from 16 December 2016 to 11 July 2016 it will amounts to the sum of $27,567.14.
Counsel for the plaintiffs submitted that it was inappropriate for interest to become payable only from the date of the demand for repayment.
[6]
Costs
The defendant/cross-claimant submits that since a claim made on behalf of Bernley Corporation was abandoned and the cross-claim fell away, the costs orders should reflect this, or at least take into account those circumstances. It relies on the circumstances that over a prolonged period, throughout the proceedings, the parties commonly proceeded on the assumption, or belief, that Bernley Corporation was the correct creditor; and that the bulk of the costs of the proceedings were incurred on that footing. Given that the claim for Bernley Corporation was abandoned, the ordinary operation of rule 42.20 would see to it that Bernley Corporation should pay the defendant's costs of the proceedings up to 24 June 2019.
Counsel also argued that it was the making of a claim by Bernley Corporation that was the catalyst for the cross-claim, which was premised upon the assumption that Bernley Corporation was the appropriate creditor. That being so, and in accordance with its case theory prior to the hearing (that it was Mr Turner who provided the advances and it was Mr Turner to whom the advances were repaid), Bernley Corporation should pay the cross-claimant's costs and those of Mr Turner.
In response, counsel for the plaintiffs submitted that the second plaintiff was wholly successful. He submitted that the defences raised by the defendant to the claims (ultimately advanced by the plaintiffs in the alternative) centred upon the ultimate issues of whether $195,000 was repaid to Mr Turner, or some other entity. He submitted that the filing of the cross-claim was unnecessary. This was based upon the circumstances that a premise for the cross-claim - that $166,200 had been mistakenly (re)paid to Mr Turner, or procured by Mr Turner's misleading conduct - must, on a fair reading of the Reasons the judgment, have been taken to have failed in any event. He also submits that there was no waste, in terms of time or cost, due to the circumstances that eventually the identity of the creditor was placed on an alternative footing: the same interlocutory processes were used to assist the parties to run their cases irrespective of the true identity of the creditor.
Counsel submitted that if there is to be any recognition of success in the cross-claim (or the defendant's success against Bernley Corporation), the authorities suggest that an apportionment might be made to reflect the 'mixed outcome'. He submitted that in these circumstances that should, practically, reflect in a (20%) discount in percentage of costs that the plaintiffs should recover.
[7]
Offer of settlement
The defendant relies upon the offer of settlement, which it says was made at a time where Bernley Corporation was the sole asserted creditor. It is said that the settlement sum that was offered, being $29,000, was calculated between the difference between the $195,000 lent by Mr Turner and the defendant's view that $166,000 had been repaid. The offer of settlement was made in the circumstances of a claim which was eventually abandoned. It was said that the offer was therefore genuine and, in light of the abandonment Bernley Corporation's claim, it was unreasonable to reject the offer.
The plaintiffs emphasise that the settlement offer was only the sum of $29,000 to Mr Turner whereas the judgement sum was in the amount of $195,000 (plus any interest as the Court would determine); and that the offer was intended to cover both the proceedings on the plaintiff's claim and the cross-claim. The circumstances, they argued, meant that it was not unreasonable for the plaintiffs to reject the settlement offer for. Further, they argue, that if the settlement offer was to be characterised as 'Calderbank' offer (the only realistic form of offer made given that the offer of settlement was not a 'rules' offer), Calderbank principles did not arise here since the defendant did not obtain a more favourable outcome at the trial then it did through the terms of this offer.
[8]
Costs
Section 56(1) of the Civil Procedure Act 2005 (the 'Act') provides that the overriding purpose of this Act is to facilitate the just, quick and cheap resolution of the real issues in the proceedings.
Section 56(2) of the Act provides that the court must seek to give effect to the overriding purpose when exercise any power given to it by this Act or by rules of court and when it interprets any provision of this Act or any such rule
Section 98(1)(a) of the Civil Procedure Act 2005 provides that subject to rules of court and to this or any other Act costs are in the discretion of the court.
Rule 42.1 of the Uniform Civil Procedure Rules ('UCPR') provides that subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears the court that some other order should be made as to the whole or any part of the costs.
In Ryde Developments Pty Ltd v The Property Investors Alliance Pty Ltd (No.2) [2018] NSWCA 40 at [6]-[7] the Court of Appeal identified the applicable principles where there is a 'mixed outcome' in the proceedings. In such cases where it is appropriate to entertain the process of apportioning costs as between different issues in the proceedings, in general such an exercise will be carried out in a relatively broad brush basis and largely as a matter of impression and evaluation by the Court.
Where there are multiple issues, the Court of Appeal continued, the Court gender does not generally attempts to differentiate between the issues on which a party was successful and those in which it failed. Unless a particular issue, or group of issues, is clearly dominant or separable, it will ordinarily be appropriate or what the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those in which it failed. In relation to trials, it may be appropriate to deprive a successful party of costs or a portion of the costs, if the matters upon which that party was unsuccessful took up a significant part of the trial, either by way of evidence or argument.
[9]
Pre-judgment interest
Section 100(1) of the Act provides that in any proceedings for the recovery of money (including, relevantly, a debt) the court may include interest in the amount for which judgement is given, the interest is to be calculated at such rate as the court thinks fit: (a) on the whole or any part of the money, and (b) for the whole or any part of the period from the time the cause of action arose until the time the judgement takes effect.
[10]
Interest
In this case, and with reference to the principle in Ogilvie v Adams [1981] VR 1041, the Court determined (at [84]-[85] of the Reasons for Judgment), that the cause of action in debt ran from the moment that the loan advance was made, without the need for a demand for repayment. Prima facie, the wording of section 100 of the Act would indicate that interest should run, separately, from the dates that each of the three respective loan advances were made, to the date of the Court's orders; and not from the date when any demand for repayment was made.
Counsel for the defendant says that the verbal contract made no provision for the payment of interest. But the second plaintiff did not claim interest on the basis of any contractual term that provided for interest. He did so under the Act. There was therefore no issue before the Court requiring any determination of whether and (if so) in what sum, interest could be recovered under the verbal agreement. This basis for opposition to the interest claim fails.
Counsel for the defendant then argues that time should run from the moment a demand for repayment was made. I have already noted that the wording of s 100 would not require this result to an action to recover a debt in the circumstances of this case, even if the Court does have the discretion to reduce the period for which interest should run. Counsel referred me to the decision of the Supreme Court of New South Wales in Ottavio v Hayvio [2011] NSWSC 1125 (per Ward J, as her Honour then was) at [15]-[16] as an example of where pre-judgement interest was awarded from the date a demand for repayment was made. But although the award for interest, in that decision, was made on that basis, it does not appear that the judgment creditor asked for an award from the earlier time when the loan advance and I do not understand Her Honour's order, with respect, to reflect any immutable principle that for advances payable on demand, interest could only run from the date that the demand for repayment is made.
The real question is whether the Court's discretion should be exercised in this case to award interest from the date repayment was demanded. Counsel for the defendant submitted that there was 'no operative wrongdoing' by the defendant until a demand for repayment was made. However, that submission misstates the test in a way that appears to engender a notion of punishment of the defendant. All that s 100 envisages is an award that is compensatory, (MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657 at 666). I do not see a reason why the period from which interest should run should be abbreviated on account of a period of delay in making such demand. This is all the more so where, in this case, because of the disarray in which the defendant's accounting and financial statements were in, to such degree that the defendant's accountant (belatedly) admitted Mr Turner's loans had been "overlooked", there was a lack of transparency when they were made (and who they were made by). This ground for opposition to interest is also rejected.
Counsel for the defendant further argued that there is a need for the successful plaintiff to demonstrate, as a matter of practical reality, actual loss occasioned by being kept out of his money. He cites the decision in Screenco Pty Ltd v R L Dew Pty Ltd (2003) 58 NSWLR 720 at [81] as authority for this proposition. However, Screenco is distinguishable. Screenco concerned the unusual circumstance where the successful claimant in that case had acquired ownership of a chattel, without having paid money for it. The chattel was later destroyed in fire. In circumstances where the case also concerned arrangements between the claimant and its parent company, it was determined by the Court that the claimant had not parted with its money. In this case, it was found that Mr Turner had parted with his money.
In the circumstances interest in respect to the three loan advances should run from the date of those advances. In the light of these reasons, I propose to give the plaintiff further opportunity to revise the appropriate calculations.
[11]
General
Counsel for the defendant primarily submitted that: (a) the first plaintiff should never have been joined, as a claimant to recover the money; that it was (b) forced the defendant to bring a cross-claim against Mr Turner. The erroneous joinder of the first plaintiff meant that the 'vast bulk of the costs' of the proceeding were incurred on a false footing. Since the first plaintiff lost and caused the defendant to incur wasted costs of its cross-claim, the first plaintiff should pay the defendant's costs (as well as those of the second plaintiff, from the time when it was joined), then it should pay Mr Turner's costs of the cross-claim as well.
I generally reject these submissions as being highly artificial.
The dispositive issue at trial, and the one that occupied virtually all of the time for evidence and argument, was whether payments that the defendant said were made to Mr Turner were properly characterised as repayments of his loan advances or something else. On this issue, the defendant lost.
It is true that there was an issue that assumed prominence prior to the trial, being the identity of the creditor. On this issue, as reflected by its final iteration of its pleading, the plaintiffs were ambivalent: the creditor was either the first plaintiff (a corporate entity closely associated with Mr Turner, effectively, his alter ego) or Mr Turner. But this ambivalence was by no means co-incidental. As its own Defence (paragraphs 4(b), 5(b) and 6(b)) indicates, the defendant accepted that the first plaintiff had "caused" payments made on behalf of the second plaintiff. That circumstance, alone, in my view made it not unreasonable for the plaintiff, so as to ensure that all necessary parties were joined to the proceeding, to see to it that both the first plaintiff and second plaintiff were joined. This joinder was thereafter made all the more reasonable, if not necessary, because of the state of the accounting and financial documentation of the defendant obtained by the plaintiffs through their invocation of pre-trial processes. That documentation was far from a model of clarity in indicating who the correct creditor was. In the circumstances, I consider that the joinder of both plaintiffs was reasonable and was a decision substantially contributed to by the conduct of the defendant prior to and during the course of the proceeding, as indicated.
The defendant also positively asserted in its Defence that if loan advances had thereafter been made by Mr Turner, then they had been repaid (paragraphs 19-20). In this way the consequences of the joinder of these two claimants, and the way that the defendant pleaded its defence, in my opinion, had no material effect on the costs incurred by all parties to prove the ultimate and dispositive issue as to whether the true creditor (whoever it was) had been repaid.
As to the cross-claim, that was filed upon the contingency that the true creditor was found to be the first plaintiff. But once that contingency did not materialise, it was unnecessary for the Court to consider the merits of the factual assertions against Mr Turner. No time was spent at trial dealing with any of those particular assertions. For example, there was no evidence relied upon at trial by the cross-claimant to prove its assertions before Counsel for the plaintiffs abandoned the claim on behalf of the first plaintiff. Indeed, at the trial, there was no evidence called at all by the defendant/cross-claimant. There is no evidentiary basis put before me generally to support the bold submission that the bulk of costs incurred in this proceeding were erroneously premised upon the first plaintiff being the correct creditor.
If, which I doubt, this truly is a case of a 'mixed outcome', it would only result in a small reduction in the net entitlement of the plaintiffs to recover their costs in the proceeding.
[12]
Offer of settlement
The contents of this document do not assist the defendant. It was not expressed in the familiar way in which Calderbank offers are usually expressed: that is, that its terms were expressed to be be relied upon in the event that the offeror eventually obtained a result no less favourable than the terms upon they are offered. Plainly, in this case, Mr Turner obtained a better outcome than the $29,000 offered to him (exclusive of costs, for which no provision at all was made to him) by the defendant. It was therefore not unreasonable to reject the offer, however 'genuine' it was.
[13]
ORDERS
For these reasons, I direct Counsel for the plaintiffs to revise the short minutes of order previously provided to the Court to reflect the outcome that:
1. The proposed Orders 1 & 3 from the earlier version of the draft short minutes should be retained
2. As to proposed order 2, pre-judgment interest in respect to each of the three unpaid loan advances made by the second plaintiff, under section 100 of the Civil Procedure Act, should run from the date of those respective advances until 9 August 2019.
3. Proposed order 4 should be excised;
4. As to proposed order 5, this order should be revised so that, as a whole, the defendant/cross-claimant is to pay 80% of the costs of the plaintiffs (and cross-defendant) of the proceedings (including the cross-claim) as agreed or assessed on a party/party basis.
Those short minutes should be served upon the defendant's legal representatives by 2 August 2019.
The defendant should convey its position in response to the revised short minutes by notifying the plaintiff's solicitors by 7 August 2019.
The plaintiffs' legal representative is thereafter to send to my Associate (by email) further proposed short minutes and any further correspondence received from the defendant indicating disagreement to that version, by 9 August 2019.
Final orders will thereafter be made in Chambers on the papers.
[14]
Endnotes
Although the amended pleading also clarified that the letter of demand of 22 January 2018 was made on behalf of a related company to the plaintiff.
In the Reasons for Judgment at [12], I noted the personal health concerns of Mr Turner.
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 30 July 2019