Galati v GC NSW Pty Ltd

Judgment

1. On 12 March 2020, the Court delivered the primary judgment in this matter: Galati v GC NSW Pty Ltd [2020] NSWSC 217.
2. There are two questions that remain to be decided.

Mrs Galati's damages claim for interest

1. First, at [390] of the primary judgment, I observe that the subsidiary terms of the 17 March 2017 Agreement included an obligation on GC NSW to continue to pay, on behalf of Mrs Galati, the interest on the Galati home loan. However, at [391], I observed that I could not find the evidence that established that the amount of unpaid interest was $10,979.41, as claimed by Mrs Galati
2. The Court made orders following the delivery of the primary judgment on 25 March 2020, after the parties had brought in short minutes of order to give effect to the reasons for judgment. Orders 3 and 5 provided for the parties to deliver submissions concerning the resolution of the outstanding question of the quantification of Mrs Galati's interest claim. The parties have now delivered those written submissions.
3. Mrs Galati relied upon six aspects of the evidence in the court book.
4. First, Mrs Galati relied upon three emails from Bruno Galati to Mr Van Aardt, which she submitted confirmed that the interest for May and June 2017 was $10,979.41.
5. Bruno Galati's 21 July 2017 email to Mr Van Aardt included How soon can you arrange for the (sic) all the remaining to be finalised? $10,979.41 May & Jun 17 Interest…
6. Bruno Galati's 28 September 2017 email to Mr Van Aardt said: … I was following up on my email below and our telephone conversation on the 14th September 2017 confirming Greencapital has agreed to finalise the (sic) all the items listed in my previous email. Are you able to confirm when payments and delivery will be received?
7. Then, in a further email in the chain, on 14 October 2017, Bruno Galati sent an email to Mr Van Aardt that included: Hope all is well and I received your message with request of the outstanding items. The outstanding items are $10,979.41 May & Jun Interest…
8. These emails provide some evidence that Mr Van Aardt asked Bruno Galati to inform him of the matters that were outstanding under the 17 March 2017 Agreement, and that on two occasions, Mr Galati stated that the amount of interest for May and June 2017 was $10,979.41.
9. Secondly, Mrs Galati submitted that Mr Van Aardt acknowledged receiving Bruno Galati's emails and expressed an intention to discuss them with the Greencapital group's principal, Mr Lin Wu Tang (known as Tom). Mrs Galati relied upon a 28 July 2017 response from Mr Van Aardt to Bruno Galati in relation to the 21 July 2017 email. The response appears to be a text message that said: Bruno I have received your email and intend to talk to Tom soon after when I will get back to you
10. The third aspect of the evidence was text messages between Bruno Galati and Mr Van Aardt on 1, 3, 24 (×2), 29 and 30 August 2017.
11. On 31 July and 1 August 2017, Bruno Galati sent texts seeking a response from Mr Van Aardt.
12. On 1 August 2017, Mr Van Aardt sent a text to Bruno Galati in the following terms: Bruno I have spoken with Tom and the discussion is ongoing, I would like to resolve it as amicably as possible as soon as possible and intend to get his approval as soon as possible I hope to have a response to you within a week or so
13. Then, on 3 August 2017, Bruno Galati sent a further text in which he said it would be appreciated if the matter could be resolved.
14. On 24 August 2017, Bruno Galati sent a further text seeking an update from Mr Van Aardt. On the same date, Mr Van Aardt responded by saying: "Hi Bruno let's talk tomorrow but I think it's all good".
15. On 29 August 2017, Bruno Galati sent a text to Mr Van Aardt in which he asked whether it was "all good with interest and $10k".
16. Mr Van Aardt responded on 30 August 2017 saying: Hi Bruno I believe it's all now ok I will confirm with Tom and get it addressed asap
17. Bruno Galati sent a text to Mr Van Aardt on the same day thanking him.
18. The fourth step in Mrs Galati's submission relied upon a text message from Mr Van Aardt to Bruno Galati on 6 September 2017 in which Mr Van Aardt said: I have spoken with Tom and he is now fine with the payments (sic), as you know he was extremely hurt but I have also got him to agree to not take any further action which is great and to finalise this when I get back. I will call you next week to finally address all these issues
19. Mr Van Aardt's reference to 'getting back' related to the fact that, because of an illness from which he suffered, he expected to be in hospital throughout the week in which this text was sent.
20. Then, fifthly, on 17 November 2017, GC NSW's solicitor sent an email to Mrs Galati's solicitor in which she said that she had been instructed that the parties had agreed to enter into a deed of settlement and release for all actions and claims, and then added: Subject to the above, our client has agreed to the following: payment to your client of $10,979.41 for May & Jun 17 Interest… Once you confirm agreement of the above we will draft the deed and issue to you for your client's execution and return.
21. Finally, Mrs Galati relied upon an email dated 22 November 2017 from GC NSW's solicitor to her solicitor, which referred to the earlier email and asked for an urgent response.
22. The better view is that GC NSW's solicitor's 17 November 2017 email could not be treated as an agreement that the amount of the outstanding interest was $10,979.41, as the statement as to GC NSW's agreement was expressed to be subject to the parties entering into the deed of settlement and release. It may be a separate matter as to whether the email constituted an acknowledgement that the amount of the interest was $10,979.41.
23. GC NSW's first submission was that there is no direct evidence of the amount (if any) of interest paid by Mrs Galati in respect of her home loan between 17 March 2017 and 20 June 2017 (being the date on which the sale of the Property to GC NSW was completed).
24. GC NSW submitted that it is unclear whether Mrs Galati alleges that the 'agreement' as to the amount of the interest, said to arise from the email and text correspondence relied upon by Mrs Galati, took effect as some form of variation of the 17 March 2017 Agreement, or operated as some species of estoppel preventing GC NSW from now putting Mrs Galati to proof as to the quantum of her claim for damages in respect of non-payment of the interest.
25. As submitted by GC NSW, Mrs Galati did not plead such a claim, and nor was any such claim determined by the primary judgment.
26. In any event, GC NSW submitted that there were further difficulties with the manner in which Mrs Galati seeks to rely upon the correspondence to establish the quantum of the claim for damages for non-payment of the interest. This submission involves an analysis of the correspondence for the purpose of a submission that, on its proper construction, there was no agreement as to the amount of the interest, the evidence was no more than bare assertions by Bruno Galati concerning the amount of the interest, and there was no evidence establishing that Mr Van Aardt had sufficient knowledge of the amount of the interest paid to justify the treatment of any response made by him as being an admission.
27. In her submissions in reply, Mrs Galati made it clear that she had not submitted by her initial submissions that she and GC NSW had made any new agreement concerning the amount of the interest. Mrs Galati's primary argument was that the quantum of the claim had been agreed between the parties and this constituted an admission by GC NSW.
28. I accept Mrs Galati's submission that the evidence is sufficient to establish that the amount of interest was $10,979.41. That finding is on the basis that GC NSW admitted the amount of the interest. That admission is primarily found in a combination of Bruno Galati's various assertions that the amount of the interest was $10,979.41 and Mr Van Aardt's 6 September 2017 text to Bruno Galati that Tom "is now fine with the payments". The evidence satisfies me that Bruno Galati asserted the amount of the interest, and that the claim was discussed by Mr Van Aardt and Mr Lin Wu Tang. They were both, I infer, experienced businessmen who were capable of deciding for themselves whether to accept the validity of the interest claim or to seek proof. I infer that they accepted the claim, and Mr Van Aardt informed Bruno Galati to that effect.
29. Admissions of this nature are not absolutely binding on the maker of the admission, as would be an admission in a pleading. GC NSW was entitled to lead contrary evidence, or probably even to give Mrs Galati notice that it did not accept the quantification of the claim. On a subsidiary evidentiary issue of this nature, GC NSW was not entitled to accept the quantification in correspondence, and then seek in submissions to take advantage of the fact that Mrs Galati had proceeded on the basis that there was no issue as to quantification, and consequently had not tendered the evidence that should have readily been available to her, had she understood that the matter was in issue.

Appropriate order for costs

1. The second outstanding issue concerns the costs order that should be made by the Court. This issue has raised two disputes between the parties. First, Mrs Galati's position is that the Court should order the defendants to pay her costs of the proceedings, while the defendants contend that they should only be ordered to pay 50% of Mrs Galati's costs. Secondly, based upon a number of Calderbank offers that Mrs Galati served on the defendants, Mrs Galati submits that the defendant should be ordered to pay her costs on the indemnity basis from particular dates. The indemnity costs order is resisted by the defendants.
2. The defendants accepted that the costs incurred by the plaintiffs should be treated as a single set of costs and that nothing flowed from the fact, so far as costs orders may be concerned, that ultimately Mrs Galati succeeded on her claim in a manner that benefited the other plaintiffs.
3. It is well-established that the Court's discretion to award costs under s 98 of the Civil Procedure Act 2005 (NSW) (CPA) is unfettered, subject to the Court's obligation to exercise the discretion judicially.
4. The general rule is for the Court to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs: see Uniform Civil Procedure Rules 2005 (NSW) r 42.1.
5. It is clear in this case that the relevant event is the success of Mrs Galati in the proceedings, so that the Court should order the defendants to pay her costs, unless there is reason for the Court to make some other order.
6. The defendants submit that there are such grounds. Those arise out of the fact that, in pars 41 to 53 of their statement of claim, the plaintiffs pleaded a number of representations, which they alleged in par 59 gave rise to an estoppel, and in par 60 constituted engagement in misleading and deceptive conduct contrary to the provisions of the Competition and Consumer Act 2010 (Cth), Schedule 2 (the Australian Consumer Law) ss 18 and 30.
7. At the beginning of the hearing, the plaintiffs abandoned the misleading and deceptive conduct claim. The plaintiffs pursued the estoppel claim but that claim failed: see primary judgment at [395] to [431]. However, as noted by the Court at [398], as Mrs Galati succeeded on her claim based upon the 17 March 2017 Agreement, it was not strictly necessary for the Court to determine her alternative estoppel claims.
8. Although the Court ultimately found that the estoppel claim would have failed, had it been necessary for Mrs Galati to rely upon that claim for success, the estoppel claim was an alternative way in which Mrs Galati's case could have succeeded, had she failed on her principal contract claim. In my view, this aspect of the defendants' submissions should be rejected. The relevant principles were established in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304, where the Court held: [38] The principles governing the making of an order as to costs so as to reflect the time taken in dealing with a particular issue in which the successful party in the proceedings or on the appeal did not succeed were reviewed by this court in Elite Protective Personnel Pty Ltd v Salmon (No 2) [2007] NSWCA 373. Those principles may be summarised as follows: Where there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. Unless a particular issue or group of issues is clearly dominant or separable it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed: Waters v P C Henderson (Aust) Pty Ltd (Court of Appeal, 6 July 1994, unreported). In relation to trials it has been said 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: Sabah Yazgi v Permanent Custodians Ltd (No 2) [2007] NSWCA 306 at [24]. A similar approach is adopted on appeal. If the appellant loses on a separate issue argued on the appeal which has increased the time taken in hearing the appeal, then a special order for costs may be appropriate which deprives the appellant of the costs of that issue: Sydney City Council v Geftlick (No 2) [2006] NSWCA 374 at [27]. Whether an order contrary to the general rule that costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the court, which powers should be liberally construed: New South Wales v Stanley [2007] NSWCA 330 at [18] per Hislop J (with whom Beazley and Tobias JJA agreed). A 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: James v Surf Road Nominees Pty Ltd (No 2) [2005] NSWCA 296 at [34]. Where there is a mixed outcome in proceedings, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends upon matters of impression and evaluation: James v Surf Road Nominees Pty Ltd (No 2), citing Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 272. These principles were applied in City of Canada Bay Council v Bonaccorso Pty Ltd (No 3) [2008] NSWCA 57 at [22] and most recently in Turkmani v Visvalingham (No 2) [2009] NSWCA 279.
9. I do not consider that it is appropriate in this case for the Court to differentiate between the issues on which Mrs Galati was successful and those on which she failed. Mrs Galati put her claim on a number of bases all of which were directed at achieving the end on which she succeeded.
10. In particular, I do not think that it would be appropriate to penalise Mrs Galati by reason of her abandonment of the misleading and deceptive conduct claim at the beginning of the hearing. It does not follow from the abandonment that it was necessarily unreasonable for Mrs Galati to have made that claim, or that its chances of success were hopeless. Counsel for Mrs Galati may have made a forensic judgment that, on balance, her interests were not served by continuing to prosecute that claim. It is in the interests of the just, quick and cheap resolution of the real issues in proceedings, which is the overriding purpose established by s 56 of the CPA, that parties be encouraged to make judgments that lead to the efficient conduct of hearings. While each case will depend upon its own facts, the Court should be wary of penalising parties who abandon claims, at least in cases where it is not self-evident that the claims should not have been made in the first place. Otherwise, the response of parties will likely be to continue to prosecute doubtful claims to avoid jeopardising the costs order that would otherwise have been made in their favour if successful in the proceedings.
11. I do not accept the defendants' submission that the misleading and deceptive conduct and estoppel claims were, in the necessary sense, distinct or separable: see Griffith v Australian Broadcasting Corporation (No 2) [2011] NSWCA 145 at [15] to [20].
12. Further, I do not accept the defendants' submission that it was the estoppel claim that necessitated extensive oral evidence and cross-examination that had the effect of substantially increasing the costs of the proceedings, when compared with the contractual issue upon which Mrs Galati succeeded.
13. For completeness, I should indicate that, had I been persuaded that Mrs Galati's order for costs should be reduced by some percentage, I would not countenance the submission that 50% of the whole of the costs of the proceedings incurred by Mrs Galati should be attributed to the misleading and deceptive conduct and estoppel issues. In my view the defendants would be hard-pressed to justify any more than, say, a 15% reduction in the order for costs.
14. Consequently, I find that Mrs Galati is entitled to an order that the defendants pay her costs on the ordinary basis.
15. The question then becomes whether the defendants should be ordered to pay Mrs Galati's costs on the indemnity basis for any period.
16. Mrs Galati submitted that the defendants should be ordered to pay her costs on the ordinary basis up to and including 2 October 2018, and on the indemnity basis on and from 3 October 2018: see Mrs Galati's submissions dated 27 March 2020 par 3.
17. Mrs Galati put in evidence Calderbank offers dated 16 July 2018, 2 October 2018 and 28 March 2019. It appears that Mrs Galati relies primarily on the second of the two offers. Her submissions made clear, however, that if she fails in respect of that offer, she makes an alternative claim based upon the 28th March 2019 offer.
18. As I understand it, the parties were agreed that the relevant principle was as stated in Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [8]. Two questions must be asked, namely whether (a) there was a genuine offer of compromise, and (b) whether it was unreasonable for the offeree not to accept it. See also Tati v Stonewall Hotel Pty Ltd (No 2) [2012] NSWCA 124 at [10].
19. By the first of the Calderbank offers, made on 16 July 2018, Mrs Galati offered to settle her claim on the following basis, which I have paraphrased: (1) GC NSW would sell the five lots on the basis provided for in the 17 March 2017 Agreement; (2) all other claims would be released; (3) the defendants would indemnify Mrs Galati and Bruno Galati "in respect of any claim for loss or damage relating to 198 and 212 Garfield Road East, Riverstone, NSW".
20. I will return below to a consideration of the third component of this offer.
21. The offer did not mention the costs of the proceedings.
22. The letter pointed out the nature of the compromise offered by Mrs Galati. It was the abandonment of the $10,000 discount on Lot 301, the abandonment of the claim for 12 tonnes of firewood, the abandonment of the claim for $10,979.41 in mortgage repayments, and the abandonment of interest on those sums.
23. By her second Calderbank offer, made on 2 October 2018, Mrs Galati repeated her earlier offer but added: "this offer contains a further compromise in that my clients are offering to bear their own costs".
24. Mrs Galati's 28 March 2019 offer was substantially different to her to earlier offers. The primary difference was that Mrs Galati offered to accept GC NSW transferring only two of the five lots for the price of $790 per square metre, inclusive of GST, being the agreed price in the 17 March 2017 Agreement. Otherwise the parties were to release each other from all claims.
25. This offer also included, however, the requirement for the indemnity from the defendants in respect of any claim for loss or damage relating to 198 and 212 Garfield Road East.
26. The third Calderbank offer contained observations concerning the effect of an earlier offer made by the defendants and the effect of the third offer made by Mrs Galati.
27. The letter referred to the fact that the defendants had asserted that the market value of the lots was approximately $1300 per square metre. Mrs Galati accepted that figure for the sake of the calculations, although the letter stated that she did not agree to it.
28. The defendants had apparently offered to transfer the five lots on the basis that the price would be reduced from $1300 per square metre to $1100 per square metre, which the letter asserted amounted to a total discount of $342,600 across the five lots. The letter asserted that, if Mrs Galati succeeded on her claim in relation to the five lots, the total discount would be $539,595. It also asserted that, if the defendants accepted the offer made by Mrs Galati, the total discount would be reduced to $373,269.
29. The parties did not in their submissions address the correctness of these calculations. However, as they were made, and not contradicted, I will rely upon them in a general way to assess the extent of the compromises offered by Mrs Galati.
30. If the value of success by Mrs Galati in relation to the five lots was $539,595, the compromise in the first Calderbank offer had a value of $20,979.40, plus the value of 12 tonnes of firewood. The evidence in the proceedings did not establish the value of the firewood.
31. I would not have considered that the first offer involved a sufficient discount to be a genuine compromise, given the complexity and the contentious nature of the proceedings.
32. The second Calderbank offer only added to the earlier offer that the plaintiffs would bear their own costs of the proceedings. The evidence has not established the amount of those costs, as at the date of the 2 October 2018 offer. However, I note that all of the plaintiffs' affidavits were sworn in December 2018 or May 2019, and so it is likely that the offer was made before the plaintiffs incurred the costs of preparing their affidavits. I am not satisfied that the amount of the costs that the plaintiffs offered to abandon, as at 2 October 2018, were substantial.
33. I would accept that the 29 March 2019 Calderbank offer contained a genuine and adequate level of compromise, in so far as Mrs Galati offered to settle her claim on the basis that only two of the five lots were to be transferred. Given that the primary aspect of Mrs Galati's claim was to secure the transfer of five lots, the acceptance of two lots is inherently a substantial compromise.
34. In the circumstances, and accepting Mrs Galati's figures for the sake of argument, the reduction of her claim to be entitled to a discount on the purchase price of the five lots of $539,595 by $166,326 is a sufficient element of compromise.
35. I would therefore have regarded the 23 March 2019 Calderbank offer as an effective one in the circumstances, but for the possible effect of the indemnity term.
36. Unfortunately, the evidence in the proceedings does not enable the Court readily to determine the significance of that claim.
37. It is sufficient to note that Mrs Galati's property adjoined two other properties that were owned by relatives of Mrs Galati. Those properties were 198 and 212 Garfield Road East. GC NSW ultimately acquired the three properties under interdependent contracts, as the feasibility of the development proposed to be conducted by GC NSW depended on it acquiring all three properties.
38. There was a substantial amount of evidence that, at some time shortly before the completion of the sale of Mrs Galati's property to GC NSW, considerable damage was done to the Property. There is a suggestion in the evidence that some amount of damage was also done to the other two properties. That matter was not explored in the evidence in any depth, because it became apparent that even the damage to Mrs Galati's property had no real significance to the resolution of the proceedings.
39. The intent of the third provision in the three offers of compromise appears to be that the defendants were required to indemnify Mrs Galati and Bruno Galati in respect of any claim for loss or damage relating to the other two properties.
40. There is no basis for the Court even to speculate as to what the value of that damage may have been, or even as to the circumstances in which Mrs Galati and Bruno Galati could have been liable in any way to any party in relation to that damage. There was no suggestion at all that Mrs Galati or Bruno Galati had caused that damage. I am at a loss to understand why the required indemnity may have been valuable to Mrs Galati as a term of compromising her claim.
41. That said, the Court has no basis to rule out the possibility that the indemnity may have been valuable to Mrs Galati, as there may possibly have been some risk to her and Bruno Galati, and if the risk existed, it would have been contingent and for some unquantified amount of loss or damage.
42. This brings the Court to the defendants' submission that the subject matter of the indemnity required by Mrs Galati was not an issue in these proceedings, and it was not unreasonable for the defendants to have rejected all of Mrs Galati's Calderbank offers, because they were not reasonably required to agree to the inclusion of a term dealing with an extraneous subject, which was not relevant to any claim made in the proceedings, and accordingly had not been investigated by the defendants, and may have subjected them to a risk that was not able to be quantified.
43. I agree with the defendants' submission. I do not generalise, but in my view it will usually be the case that, if a party makes a Calderbank offer that requires the other party to accept as a term of the compromise some liability that is extraneous to the proceedings and not within the claims made, then it is likely to be reasonable for the other party to reject the offer. Furthermore, as in the present case, where such an extraneous term is required by the Calderbank offer, when the issue of costs comes to be determined by the Court after the completion of the proceedings, the Court is unlikely to be able to find that it was unreasonable for the party receiving the offer to reject it, because the absence of any forensic examination of the extraneous issue would make that judgment a purely speculative one.

Orders

1. In relation to the damages payable in respect of the home loan interest, Mrs Galati's submission calculated the pre-judgment interest under s 100 of the CPA from 20 June 2017 to the 27 March 2020 date of Mrs Galati's submissions as being $1,649.38, and continuing at the daily rate of $1.57. GC NSW does not appear to have challenged that calculation. However, I have carried out a calculation of the daily rate as per Practice Note SC Gen 16. For the period between 1 January and 30 June 2020, the rate is 4.75%, being 4% higher than the 0.75% rate published by the RBA in December 2019. Consequently, the correct daily rate is $1.43 after multiplying $10,979.41 by 0.0475 and then dividing by 365. The amount of interest to the date of the making of the orders is therefore $1,683.70.
2. I make the following orders: 1. Enter judgment and verdict for the first plaintiff against the first defendant for damages of $10,979.41 plus interest pursuant to s 100 of the Civil Procedure Act 2005 (NSW) to the date of judgment of $1,683.70. 2. Order the defendants to pay the plaintiffs' costs of the proceedings on the ordinary basis.

Amendments 30 April 2020 - Par 75 full stops added 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 April 2020