BestCare Foods Ltd v Origin Energy LPG Ltd

Supreme Court of NSW|2013-11-14|Before: Stevenson J, McDougall J, Clarke JA

Introduction 1The lengthy history of these proceedings is set out in my judgment of 10 September 2013 (BestCare Foods Ltd v Origin Energy LPG Ltd (formerly Boral Gas (NSW) Pty Ltd) [2013] NSWSC 1287). 2In these reasons I shall use the same abbreviations as I used in that judgment. 3These proceedings have been long and hard fought. All substantive issues between the parties have now been decided. 4The result is that BestCare's total damages have been assessed at $35,488,890.75. 5What remains for consideration is: (a)whether BestCare should be awarded interest to judgment; (b)what order should be made in respect of the costs of: (i)the Reference; (ii)the argument before McDougall J concerning the adoption of the Referee's Report; and (iii)the hearing of the remitter before me; (c)the question of interest on costs.

Interest to judgment 6The purpose of the award of pre-judgment interest is compensatory: MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657 at 663; Bennett v Jones [1977] 2 NSWLR 355. 7Accordingly, a successful plaintiff who obtains a money judgment will generally be entitled to an award of interest: Ruby v Marsh (1975) 132 CLR 642 at 644; Falkner v Bourke (1990) 19 NSWLR 574 at 576B ("almost invariably to be allowed"). 8A successful plaintiff is to be compensated because it has been kept out of its money. Conversely, an unsuccessful defendant has had the use of that money in the interim. 9In Star v O'Brien (1996) 40 NSWLR 695, Clarke JA said (at 701 - 702): "The general rule... is that interest should be awarded for the period between the accrual of the cause of action and the date of judgment... ...where no more appears than that action was commenced within a reasonable time after the accrual of the cause of action and there is no evidence of any actual prejudice to an unsuccessful party the court would usually apply the general principle." 10There was no dispute before me that BestCare is entitled, in principle, to interest to judgment. 11The dispute was as to whether BestCare is entitled to interest on that part of the judgment as represents its loss of profits. 12Mr Romaniuk SC, who appeared with Mr Smith for the defendants, submitted that because of BestCare's "unsupportable promotion of the IAMS 2 (or even the IAMS 1) scenario" BestCare should not have any (or alternatively only half) of interest on "any damages recovered for future profits". 13I do not accept that submission. 14It is true that BestCare's case, before the Referee, and again before McDougall J, for loss of profits associated with its connection with IAMS was found by the Court of Appeal in its judgment of 24 April 2013 (Origin Energy LPG Ltd (formerly Boral Gas (NSW) Pty Ltd) v BestCare Foods Ltd [2013] NSWCA 90) to be unsupported by evidence. 15The Referee, whose Report was adopted by McDougall J, concluded that BestCare's loss of profits was in the order of $26.4 million, of which the IAMS loss comprised some 66 per cent. 16Following the Court of Appeal's judgment in April 2013, and my determination of the remitter, the amount awarded for loss of profits is in the order of $12.2 million, of which the IAMS component comprises only 7.5 per cent. 17However, in my opinion, it does not follow from these matters that BestCare should not get interest on those heads of damages to which it has been held entitled. 18To make the order contended for by Mr Romaniuk would deprive BestCare of interest on damages that the Court has found BestCare has actually suffered as a result of Origin's breach of contract and duty of care (as found by Nicholas J and confirmed by the Court of Appeal). 19Although BestCare has, ultimately, failed to establish much of its claim for loss of profits concerning its connection with IAMS, it has proved that, overall, it has suffered loss of profits in the order of $12.2 million. It has been held out of this money since the explosion on 25 January 2003. I can see no reason why I should not award interest to judgment on that component of its damages award. 20Indeed, a denial of such interest would amount to punishment for running an argument found, ultimately, to have no foundation in the evidence. I do not think that this would be an appropriate exercise of my discretion. 21Second, I have not been taken to any evidence of "actual prejudice" to Origin (other than as to costs, which prejudice has been, and will be, dealt with by appropriate costs orders). 22At the conclusion of the hearing earlier today, I announced that I proposed to award BestCare interest to judgment. The quantum of that interest was agreed. For that reason, I have entered judgment for BestCare against Origin in the sum of $67,126,499.51.

Costs 23The general rule is that costs follow the event: Uniform Civil Procedure Rules 2005, r 42.1. 24Generally speaking, the costs that follow the event include costs of issues on which the ultimately successful party has failed. 25An ultimately successful party might be deprived of its costs of particular issues if it can be shown that there is a clearly defined and separate issue on which the otherwise successful party failed that occupied a significant part of the trial (Re Cheal Industries Pty Ltd [2012] NSWSC 932 per Ward J (as her Honour then was) at [158]) or that, in respect of that issue, the otherwise successful party "unfairly, improperly, or unnecessarily increased the costs" (see, for example, Windsurfing International Incorporated v Petit (1987) AIPC 90-441 at 37861-37862). 26Mr Romaniuk did not dispute that BestCare should have an order for its costs of the proceedings. 27The dispute before me was whether that order should include the costs of the Reference, the adoption hearing and remitter.

Costs of the Reference 28The Reference proceeded for 39 days before Rolfe QC. 29At the Reference, BestCare put forward evidence of its loss based on a number of projections, but ultimately contended for an award of $38.4 million on account of lost profits, plus $22.9 million on account of other items. 30On the other hand, Origin contended that the explosion was not the cause of BestCare's insolvency and contended that, even if it was, BestCare had suffered no loss. 31Thus, Origin's position at the Reference (and indeed thereafter) was that, even if BestCare established liability, no damages should be awarded. 32In monetary terms, a significant part of BestCare's claim arose under the IAMS 2 scenario. The Court of Appeal has held that there was no evidentiary foundation for that case and ordered that the Referee's findings on that subject be set aside. That had the effect of reducing, significantly, the Referee's award. 33For that reason, whilst Origin accepts that BestCare is entitled to a costs order in respect of the Reference, it submitted that BestCare should recover "no greater than two thirds of its costs, and closer to half of its costs" of the Reference. 34Much attention was paid during the Reference to the "future loss of profits issue". However, nearly all of the time devoted to that issue concerned BestCare's "core" business. In respect of that issue, BestCare has been successful. 35Much time was also devoted during the Reference to Origin's contention that the explosion was not the cause of BestCare's insolvency and that BestCare was not entitled to any damages at all. BestCare has been entirely successful in relation to that issue. 36BestCare has thus, in substance, retained the benefit of a significant part of the Reference. 37It is common ground that no more than approximately 8 per cent of the time of the Reference was concerned with the IAMS issue. Thus, notwithstanding the high dollar component of the Referee's award on this subject, and its ultimate rejection by the Court of Appeal, the issue took relatively little time at the Reference itself. 38In those circumstances, the conclusion to which I have come is that BestCare is entitled to the bulk of its costs of the Reference. 39The order I propose to make is that Origin pay 85 per cent of BestCare's costs of the Reference.

Costs of the adoption hearing 40This hearing took place over four days before McDougall J in May 2012. 41At the adoption hearing, Origin continued to contend that the true position was that BestCare had suffered no loss at all as a result of the explosion. Origin argued that the Referee's Report should be rejected, in total. 42The Court of Appeal has set aside McDougall J's order for adoption of the Referee's Report in so far as it related to the matters remitted to me for hearing (the loss of profits associated with IAMS, Nestlé, Safcol and Doane). 43Otherwise, the Report remains "adopted"; particularly in relation to BestCare's claim for the loss of its core business and its trading loss otherwise than in connection with the particular entities I have named. 44In those circumstances, Mr Lawrance, who appeared with Mr Lee for BestCare, contended that it had achieved "substantial success" on the adoption. 45However, perusal of McDougall J's judgment reveals that the IAMS scenarios (on which BestCare's ultimate success was but a fraction of that before the Referee and McDougall J) loomed large and constituted the major point of contention on the adoption hearing. 46My conclusion is that, in those circumstances, BestCare can only claim partial success on the adoption hearing. 47In my opinion, the appropriate order is that Origin pay 60 per cent of BestCare's costs of the adoption hearing.

Costs of the remitter 48The remitter was concerned with BestCare's claim for loss of profits associated with its connection with IAMS generally, and with Nestlé, Safcol and Doane after 30 June 2008. 49Before me, BestCare was unsuccessful in relation to its claims concerning Nestlé, Safcol and Doane. 50So far as concerns IAMS, BestCare argued for an award of $5.668 million. I gave an award of $911,405 - some 16 per cent of the amount claimed. 51The result was that BestCare's total award for damages for loss of profits increased from $11,260,620 (an amount that Origin accepted, following the Court of Appeal's decision in April 2013) to $12,172,025; an increase of some 8 per cent. 52Although, as Mr Lawrance submitted, $911,405 is, taken alone, a significant amount, in the context of the overall claim by BestCare, I do not consider that it achieved "substantial successful" before me. 53In my opinion, my judgment of 10 September 2013 reveals that both parties achieved a measure of success. Origin repelled BestCare's claim concerning Nestlé, Safcol and Doane entirely. BestCare achieved only moderate success in relation to its IAMS claim. 54In those circumstances, my opinion is that there should be no order as to the costs of the remitter, with the intention that each party pay its own costs of the remitter.

Interest on costs 55There was no dispute before me that BestCare should be awarded interest on its costs.

Conclusion 56I invite the parties to bring in short minutes to give effect to these reasons.

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: 18 November 2013

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