Brakikki Pty Limited v Gofur

District Court of NSW|2011-10-14|Before: Mr J

Applications 1This is an application by the defendant pursuant to r 36.17 of the Uniform Civil Procedure Rules 2005 [ " UCPR " ] , seeking a slip rule amendment to the principal judgment: Brakikki Pty Ltd v Gofur [2011] NSWDC 92. The plaintiff also applied for an order that the defendant pay its costs on an indemnity basis.

Claim for slip rule amendment 2On 14 October 2011 the matter was relisted for the purpose of costs arguments at the request of the parties following the delivery of the principal judgment on 12 August 2011. On that occasion, the defendant also sought amendments to the principal judgment by invoking the slip rule to seek to correct an argued clerical error in the principal judgment: UCPR 2005 r 36.17. 3In the principal judgment I set out my reasons for the plaintiff succeeding in its claim against the defendant for monies owing for unclaimed rent, outgoings, GST and interest on those amounts pursuant to a commercial lease between the parties. 4In the plaintiff's claim against the defendant a verdict was found in favour of the plaintiff in the amount of $82,640.33. 5The defendant also succeeded in his cross claim against the plaintiff in respect of a claim for damages for misleading or deceptive conduct, resulting in a verdict in the defendant's favour on the cross claim, including interest, in the amount of $50,000. 6After a set-off of these respective amounts, a judgment was entered in the plaintiff's favour against the defendant in the amount of $32,640.33, with the costs consequences of the set-off left to be determined following an opportunity for the parties to make submissions on costs, which they did in this application. The defendant now seeks to have the amount of that judgment amended to the sum of $2863.79.

Consideration of the slip rule submissions 7The clerical error contended by the defendant relates to the calculation of the plaintiff's claim for rent and outgoings. In arriving at my findings in respect of those amounts, the schedule of rent and outgoings submitted by the plaintiff in the sum of $58,089.64 was accepted: Principal judgment, Appendix I . 8The underlying findings were that the lease which was the subject of the proceedings was terminated on 30 June 2008: Principal judgment, [29] and [36]. Thereafter, the consequential finding was that the plaintiff's remedy was for damages of a different character to damages pursuant to the lease: Principal judgment, [30]. 9In the principal judgment, paragraph [31] was in the follow ing term s: "31. The defendant has submitted that as the plaintiff has not pleaded a claim for alternative damages in its statement of claim, and has only sought damages for rent and outgoings as a contractual debt, and therefore any claim for damages outside the pleaded case should be disallowed. I accept that submission as there is no effective answer to it." 10The defendant has pointed out, correctly, that Annexure I contained calculations for claimed rent and outgoings between 17 February 2007 and 16 April 2009. Part of those calculations went beyond 30 June 2008, which was the date on which it was found that the lease between the parties had been terminated. 11As a consequence of the terms of paragraph [31] , the defendant submitted it was a clerical error that damages were included in the s chedule of Annexure I to include damages beyond 30 June 2008. Accordingly, the defendant initially submitted that the amount of the plaintiff's verdict before set-off should be reduced from $82,640.33 to $54,160.36, which comprised rent and GST of $36,210.58, interest thereon in the sum of $10,924.73, outgoings of $6061.31, and interest thereon of $963.74, with the result that after set-off if the amendment was made as submitted, there would be a final judgment for the plaintiff in the sum of $4160.36. Subsequently, a revised calculation of adjustments was submitted by the defendant, which if accepted, would result in a final judgment for the plaintiff in the submitted sum of $2863.79. 12The defendant contended that no damages should be awarded in respect of the period from 1 July 2008 onwards because the plaintiff did not make a claim for damages of a different character as stated at [31]. In this regard, the defendant pointed to the terms of the plaintiff's statement of claim, which claimed liquidated damages and not common law damages. 13In contrast, in essence, the plaintiff submitted that the damages calculated in Annexure I comprised the appropriate quantum of damages on the findings made, even though they had been projected as if calculated as being due under the lease after the lease had been terminated on 30 June 2008. 14The plaintiff submitted that this was because a claim had been made for damages " in accordance with clause 12 of the lease " in paragraph 4(a)(iii) of the statement of claim, and the amount submitted in the schedule comprising Annexure I was an appropriate measure of damages, this being for unpaid rent, outgoings and interest, and was correctly calculated. In that regard, the plaintiff referred to the reply filed on 21 July 2010 and the reply to the further amended statement of claim . 15In support of that argument, the plaintiff characterised the damages claim under clause 12 of the lease as being damages for breach of an essential term of the lease. 16I do not accept the slip rule submissions made by the defendant. The slip rule amendment proposed by the defendant does not reflect the finding that I had intended should follow the defendant's non-payment of the rent under the lease. Instead, the order I made, namely that the defendant was liable to the plaintiff in the set-off sum of $32,640.33, was the order that I intended should follow from the defendant's breach of the lease. Accordingly, the justification for slip rule amendment sought by the defendant has not been made out . 17However, that is not the end of the consideration of the slip rule as it applies to this case. The reasons for decision in the principal judgment unfortunately omitted some explanatory text after paragraph [31], which I have already cited. 18There, after paragraph [31], I omitted to record my finding that notwithstanding the view that was no effective answer to the proposition that the plaintiff did not seek to plead a claim for alternative damages, the fact remains that the defendant was in breach of the lease and had failed to pay rent and outgoings. Given that the plaintiff made a claim for damages, and given that the logical foundation for that claim was damages under the lease, which was particularised, this being for unpaid rent, outgoings and interest, I considered that the schedule comprising Appendix I represented a proper basis for assessing such damages. This was identified at paragraphs [39]-[40] of the principal judgment. 19It was for that reason that the damages calculations as listed in Appendix I were not truncated or limited to 30 June 2008. In my view, it would be unjust to proceed otherwise. In that regard, the plaintiff has claimed that as a result of the breach of the lease the defendant has been unjustly enriched: statement of claim filed 16 December 2008, paragraph 16. In those circumstances, where the defendant has been in breach of the lease, it would be unjust to the plaintiff if the relief claimed was denied. 20In providing these explanatory annotations it is not necessary to amend the actual orders made within the principal judgment, as the monetary findings do not alter as a result of these reasons. 21Accordingly, the plaintiff is entitled to the original dispositive orders that I made in the principal judgment.

Consideration of application for indemnity costs 22The parties made competing claims concerning the costs consequences of the outcome of the proceedings where the plaintiff has succeeded in its claim against the defendant and the defendant has partly succeeded on his cross claim. 23The proceedings involved multiple complex factual and legal issues, which occupied a tot al of 9 hearing days. After set-off the plaintiff has recovered an amount that was within the jurisdiction of the Local Court. It is therefore necessary to consider the application of the cost limiting provisions of UCPR r 42.35 to these proceedings. 24Having regard to the issues that were fought at trial, and which are set out in the principal judgment, I consider that it is appropriate that the proceedings were commenced and continued in this court rather than in the Local Court: UCPR r 42.35(2). Accordingly, the need arises for consideration of the appropriate order for costs to be made in the se proceedings. 25The parties exchanged written offers of settlement in their attempts to resolve the litigation before the hearing.

Plaintiff's offers 26On 17 July 2009, in a letter from its solicitor, the plaintiff made a Calderbank offer to the defend ant in the sum of $71,739.96. By letter dated 23 July 2009, that offer was rejected on behalf of the defendant, by his solicitor. At the time, I consider that offer was in effect an invitation to the defendant that he capitulate to the plaintiff's claim as was then quantified against him. In that regard, I do not consider the offer to have been a genuine offer of compromise: Leichhardt Municipal Council v Green [2004] NSWCA 341, at [21]-[24]. 27Given the issues that concerned Mr Gofur in the litigation, and which ultimately found their way into his cross claim, I do not consider that it was unreasonable for Mr Gofur to have rejected that offer: Commonwealth of Australia v Gretton [2008] NSWCA 117, at [74] and [117]. 28This is because the amount of the offer was far greater than the amount of the judgment ultimately obtained by the plaintiff. Furthermore, the issues that arose and which were ventilated in the cross claim were not fully formulated at the time of the plaintiff's offer, and it could not reasonably be said that Mr Gofur was then able to fully evaluate the significance of that offer having regard to the cross claim issues, which were at that time still in their embryonic form. 29Accordingly, as a consequence of rejection of the 17 July 2009 offer made by the plaintiff and rejected by the defendant, I see no proper basis for departing from the ordinary costs rule with respect to the plaintiff's claim against the defendant. 30On 23 September 2010, the plaintiff made further offers in identical terms, one by way of an offer of compromise in accordance with the UCPR r 20.26, the other being a Calderbank offer. If accepted, the effect of those offers would have been that the plaintiff would have succeeded in obtaining a judgment against the defendant in an amount of $25,000 in its claim against the defendant, the amended cross claim brought against the plaintiff would have be en dismissed, and the defendant/ cross claimant would have been liable for the plaintiff's costs. That offer was not accepted. 31The consequences of non-acceptance of either of these offers must be considered in the light of the interplay of these offers as they impacted upon the issues fought between the parties.

Cross claimant's offer 32On 24 September 2010, through his solicitor, the defendant/cross claimant made an offer of compromise in accordance with UCPR r 20.26. If accepted, the effect of that offer would have been that the plaintiff's claim for unpaid rent, outgoings and interest under the lease would have been dismissed and judgment entered in favour of the defendant on that claim, the defendant would have obtained a judgment for $50,000 on his cross claim against the plaintiff, and the plaintiff/cross defendant would have had to pay the defendant/cross claimant's costs. That offer was allowed to lapse without acceptance.

Inter-play between the offers of compromise 33The plaintiff submitted that in accordance with the conventional approach of an application of the rules as to costs, the defendant's non-acceptance of its 23 September 2010 offer in accordance with UCPR r 20.26 should result in the defendant being ordered to pay the plaintiff's costs on the indemnity basis from the time of that offer. That position does not obtain automatically, and it needs to be evaluated in light of the way the litigation unfolded. 34It is plain that most of the issues that were fought out between the parties arose in the cross claim. These were largely separate and distinct from those issues that arose from the plaintiff's claim for unpaid rent, outgoings and GST. 35It is also plain that although in its claim against the defendant, the plaintiff obtained a slightly better outcome than that provided for in its offers, the manner in which the offers were expressed if accepted, would have resulted in the dismissal of the defendant's cross claim. This was in circumstances where ultimately, the defendant was successful in establishing that the plaintiff had engaged in misleading or deceptive conduct, and had therefore achieved a measure of success on his cross claim which was based on that notion. 36This was a fundamentally different outcome to that which would have arisen if the plaintiff's offers had been accepted. This must be weighed as a significant factor that should be considered in the exercise of discretion on costs in those circumstances: Yazgi v Permanent Custodians Limited (No 2) [2007] NSWCA 306, at [9 ]-[11]. 37Accordingly, I consider that outcome is determinative of the conclusion that UCPR r 42.14 should not apply to the plaintiff's offer of compromise dated 23 September 2010 so as to impose costs sanctions on the defendant that would require the defendant to bear the costs of the proceedings on the indemnity basis on the overall result. 38As to the cost consequences of the plaintiff's Calderbank offer that was expressed in similar terms and also dated 23 September 2010, I consider the same outcome should apply to the plaintiff's claim for indemnity costs. As in the case of an offer of compromise as analysed above, the refusal of a Calderbank offer should not automatically result in a more favourable cost order than would otherwise arise: Jones v Bradley (No 2) [2003] NSWCA 258, at [8]-[9]. In that regard, for an indemnity costs order to arise, it must be shown that the defendant's refusal of the offer was unreasonable. 39As the acceptance of the plaintiff's Calderbank offer dated 23 September 2010 would have resulted in a dismissal of the defendant's cross claim on which he ultimately succeeded, I do not consider that it could be reasonably said that the defendant's refusal of that offer was unreasonable. In this case, the exercise of discretion on costs should not be determined purely on the monetary result. There were difficult issues that underpinned the cross claim and which received no acknowledgment or compromise allowed for in either the offer of compromise or the Calderbank offer, each of which was dated 23 September 2010. The effect of the offers was that the plaintiff required the defendant to capitulate on his cross claim. 40Furthermore, I consider that the plaintiff's second Calderbank offer dated 23 October 2010, which was expressed to be open for 14 days, was not unreasonably refused by the defendant having regard to the relatively short time specified for its acceptance, particularly as by then, the circumstances, namely the inter-mix of issues in the litigation had expanded or changed with the advent of the cross claim: Rae v Beddison Corporation (No 2) [2009] NSWSC 178, at [ 44].

Conclusions on costs 41In the circumstances, I consider that the ordinary costs rule should separately apply to both the claim made by the plaintiff, and the cross claim brought by the defendant, without the imposition of any sanctions by way of any indemnity costs orders.

Orders 42I make the following orders: (a)The application for amendment of the principal judgment pursuant to UCPR r 36.17 is refused; (b)The defendant is to pay the plaintiff's costs of the refused slip rule application for amendment to the principal judgment; (c)The defendant is to pay the plaintiff 's costs of the plaintiff's proceedings on the ordinary basis; (d)The plaintiff/cross defendant is to pay the defendant/cross claimant's costs of the cross claim on the ordinary basis; (e)The exhibits may be returned. 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: 16 December 2011

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