C&V Engineering v Metropolitan

District Court of NSW|2022-09-21

REASONS FOR Judgment

The principal judgment in this matter was delivered on 12 May 2022. Reasons were published on Caselaw [1] . The issue of quantum of the plaintiff's successful claim for damages for breach of contract in respect to works on Building B was referred out. On 25 May 2022, directions were made for the reference, as well as a timetable for remaining issues, including costs.
The referee reported on 19 August 2022. Following the report, subject to a narrow dispute, the parties agreed that the report should be adopted. That then left arguments about interest and costs.
The parties were content that that these remaining disputes be determined on the papers after the parties served written submissions and supplementary evidence.

The referee's report

The referee reported on three questions, relating to the justification and reasonableness of three matters: hourly rates, workshop usage costs and consumables.
The parties agreed that the sum for labour of $61,357.81 should be adopted.

Workshop usage costs

As to the former, I had found in the judgment that C&V was entitled to claim workshop usage costs and further that this be done in accordance with the standard terms and conditions in the 4 July quote. The referee provided two options at paragraph 2.19(a) and (b) of his report. The former option, preferred by Metropolitan was the sum of $10,789.97. The latter option, preferred by C&V, was the sum of $18,714.13 (both sums being exclusive of GST).
Metropolitan submits that the smaller sum should be adopted. It represented a reasonable sum. Metropolitan argued that the terms of the referral indicated that if no agreement could be reached on whether the sum was justified, then, effectively as a default option, the referee should report on a reasonable sum and the smaller sum reflected the referee's view.
C&V submits that, reflecting the standard terms, the additional sum for workshop usage costs is a simple calculation of 30.5% of the sum charged for works carried out. Given that the referee had found that the reasonable sum was $61,357.81 (excl GST).
C&V's submissions are preferred, reflecting that the charge is proportionate to the reasonable sum for works carried out. Allowance is therefore made for $18,714.13.

Consumables

I found that the contract provided for consumables and the referee found that C&V was entitled to charge for it. C&V submitted that the referee found that C&V was justified in claiming consumables at the rate of 5.5% of the sum invoiced for the works carried out. That amounted to $3,374.68 (excl GST).
Metropolitan argued that the contract provided for consumables to be charged at cost plus 25.63%. C&V had not proven the cost of consumables.
Again, I prefer C&V's submission, reflecting the referee's views.
Allowance is made for $3,374.68 (GST excl).
I accept that C&V is provisionally entitled to $83,446.62 (excl GST).

Credit for payment for the statutory debt

As Metropolitan observed, and C&V did not dispute, Metropolitan had paid the sum of $41,008 under an adjudication under the Building and Construction Industry Security of Payment Act 1999 (NSW). Section 32(2) of the Act required that allowance to be deducted from judgment as an interim payment.
The judgment sum is $42,438.62.

Interest

Ultimately, it was common ground that C&V should receive an award of interest on that judgment sum under s 100 of the Civil Procedure Act. That should be payable from 24 July 2018.

Costs

The main dispute concerned costs. As was evident from the earlier judgment, C&V sued on two discrete contracts.
There are two issues associated with costs. The first is what costs are payable and the second is on what basis.

Should costs be apportioned?

It will be recalled that the plaintiff succeeded in establishing claims for damages for breach of contract for Building B, but it failed in respect to its claim for breach of contract in relation to Building C.

Parties' submissions

C&V recognised, I think, that there was a 'mixed' outcome, but argued that an apportionment of costs was inappropriate. It argued that the main dispute in relation to Building B concerned whether C&V overcharged Metropolitan. This was not a case where there were discrete issues that could stand alone and it was artificial to divide the time spent on different issues, since the commercial relationship was relevant to both claims; and the same factual matrix applied to both (which was especially relevant to the process of construction on the unsuccessful claim in relation to Building C); even if the judgment divided up the facts for two claims for analytical convenience. It was apparent that the correspondence and conversations did not distinguish the events in this way. Further, C&V had to bring the action in relation to Building B at the same time as the claim in relation to Building C, rather than commence a separate proceeding, to forestall a defence to (the later) proceeding.
Metropolitan submitted that it was the claim in relation to Building C which was the main dispute (adopting my reference in paragraph 6 of the Joint Judgment). For Building B, C&V obtained far less than it claimed. Metropolitan succeeded overall.

Principles for apportionment of costs

The principles underlying apportionment of costs on separate issues were recently set out, if not restated by Ward CJ (in Eq) (as the President then was) in Masters in Building Training Pty Ltd v State of New South Wales (No 2) [2022] NSWSC 697 at [7]-[8], where her Honour said (omitting citations): "It is noted that issues in proceedings may be differentiated on the question of costs when an issue or group of issues is clearly "dominant or separable" …. that a dominant or separable issue can relate to "any disputed question of fact or law" before a court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter …. that 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 … and that departing from the usual rule depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed. Further, it is noted that the question of apportionment where there is a mixed outcome in proceedings is a matter of discretion, impression and evaluation ..."
At [34] of the same judgment, her honour referred to an earlier decision, In the matters of Earth Civil Australia Pty Ltd, RCG CBD Pty Ltd, Bluemine Pty Ltd, Diamondwish Pty Ltd and Rackforce Pty Ltd (all in liq) (No 2) [2021] NSWSC 1161 as follows in which her Honour similarly said (at [83]-[85] (citations omitted)): "83. …Costs may be apportioned where there has been a mixed outcome in the issues in proceedings… 84. Relevantly, the circumstances in which apportionment of costs as between different issues may be appropriate include: where, in respect of one or more issues, the successful party has "unfairly, improperly, or unnecessarily increased the costs" …. where the bulk of the time has been taken on an issue on which the unsuccessful party had succeeded …. or where a particular issue or group of issues is clearly dominant or separable …. 85. Where the apportionment of the costs attributable to such issues is considered appropriate, the question of apportionment is recognised to be a matter of discretion, the exercise of which "will often depend upon matters of impression and evaluation …"
I respectfully adopt this statement of principles for the purpose of considering Metropolitan's argument.

Consideration

Section 98 of the Civil Procedure Act 2005 (NSW) confers a broad discretion on the court on costs; though of course that has to be exercised judicially.
For different reasons, the parties' positions reflected a binary outcome: one or the other succeeds in obtaining all of its costs. I do not agree and do not regard that result as reflecting the justice of the result.
I am not persuaded by C&V's submission that the issues associated with resolving the claims in relation to Buildings B and C were inseparable. In my view, they were separable or discrete. That was reflected in the pleadings [2] , the articulation of issues for the Court's adjudication and the way in which the Court's judgment was framed with reference to those identified issues. Moreover, as I said in the earlier judgment, the claim in relation to Building C was 'predominant.' In particular, the issues associated with the resolution of the claim in relation to B were much more narrowly centred upon overcharging on a single invoice. The issues in relation to Building C were much broader in scope. The way the case was fought by the parties should be reflected in the costs outcome. In other words, for the purposes of r 42.1 of the Uniform Civil Procedure Rules, there were, in substance or effect, two "events".
I consider the appropriate exercise of the Court's discretion, in principle, is that Metropolitan should have its costs in relation to C&V's unsuccessful claim in relation to Building C; whilst C&V should have its costs in relation to Building B.
The parties have been in vigorous dispute over a great many issues. In an attempt to minimise further disputation, delay and further costs, in my view, it is appropriate to reach an outcome that reflects my broad-brush assessment that the issues associated with Building C (upon which Metropolitan ultimately succeeded) occupied 70% of the dispute and issues associated with Building B (upon which C&V ultimately succeeded) occupied 30% of the dispute. To reflect that outcome, C&V should pay 40% of Metropolitan's costs of the proceeding.

Application for a partial order for indemnity costs

Both parties claimed partial indemnity orders. As is apparent from my indication of the appropriate costs order, only Metropolitan's application needs to be considered.

Evidence on the application

On 27 August 2021, Metropolitan made a Calderbank offer. It was open for acceptance to 3 September 2021 (ie it was open for a period of one week). The terms were that Metropolitan would pay $105,964.11 (incl GST) with no order as to costs. The letter commented on C&V's prospects of defending an application for security for costs. It also opined, in a general sense, to the weakness of C&V's case overall.
On 28 April 2022, with a hearing due to start on 3 May 2022, Metropolitan served an offer of compromise purporting to comply with r 20.26 of the UCPR. The terms of the offer were that Metropolitan offered to pay C&V the sum of $39,000. A notation was affixed indicating that this offered settlement sum did not take into account the sum of money paid under the Security of Payment legislation.

Consideration

As to the Calderbank offer, in substance, all that the offer comprised was an offer to pay for the unpaid invoice in relation to the claim for Building B. Other than generic statements, it ascribed no value for the claim for Building C so the Calderbank offer provided no offer of compromise to that extent. To the contrary, C & V was effectively invited to capitulate on it. The failure to ascribe value to the other action, which was hard fought and which occupied most of the hearing time and the preparation of evidence, indicates that, in my view it was not unreasonable for C&V to reject it. Indeed, as was apparent in the earlier reasons, some of Metropolitan's case and submissions about the claim concerning Building C was rejected. To the extent that the application relies on the Calderbank offer, it is rejected.
As to the offer of compromise, leaving aside the shortness of time for acceptance, C&V obtained a more favourable result (including after the deduction was made for the Security of Payment legislation) than it did if it had accepted the offer. C&V's rejection of the rules offer does not engage r 42.15 or 42.15A of the Uniform Civil Procedure Rules 2005 (NSW).
In the circumstances, the ordinary rule that costs be payable on the ordinary basis (r 42.2) is not displaced.

Orders

The Court orders: 1. Judgment for the plaintiff for the sum of $42,438.62; 2. The defendant is to pay pre-judgment interest under s 100 of the Civil Procedure Act 2005 (NSW) from 24 July 2018; 3. The plaintiff is to pay 40% of the defendant's costs on the ordinary basis, as agreed or assessed.

Endnotes

C & V Engineering Pty Ltd v Metropolitan Demolitions Pty Ltd [2022] NSWDC 154
See paragraphs 6, 7 (whilst recognising an alternative position of one contract for both buildings) of the Amended Statement of Claim. 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: 21 September 2022

Uniform Civil Procedure Rules 2005(NSW)rr 42.1, 42.15, 42.15A, 42.2

At a glance

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Judgment (17 paragraphs)

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Legislation Cited (3)

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Cited By (3)