Jacques v Forte Enterprises Pty Ltd

ex tempore Judgment 1In this matter I handed down my reasons for judgment on 14 September 2012 in Jacques v Forte Enterprises Pty Ltd [2012] NSWSC 1241 ("the principal judgment"). Regard should be had to those reasons and I will use the same terminology in these reasons. There are a number of matters which arise from the principal judgment and in respect of which there remain an issue. The first is the amount of the judgment and in that respect it is agreed by the parties that the reasons contained an arithmetical error at [64] and repeated at [68]. The amount should be $60,514. 2Secondly, the plaintiff seeks to agitate the question of the amount of profit on the unit bought by Mr Jacques at cost (see the principal judgment at [4], [25], [63] and [64]). 3Thirdly, the plaintiff seeks an order that the defendants pay the plaintiff's costs. 4The defendants seek an order that the plaintiff's costs be limited to 50 per cent of the ordinary costs as agreed or assessed, relying on the amount of the judgment in comparison to the amount claimed and the fact that the plaintiff, in the defendants' contention, "did not succeed on a number of subissues" and "the plaintiff's damages have been assessed at substantially less than promulgated by the plaintiff during the course of the hearing." Reference is made to Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 39 ASCR 20 and NRMA Ltd v Morgan (No 3) [1999] NSWSC 768. 5The next matter is that the second defendant contends that there should be no judgment against it and that a costs order in its favour be made. 6The sixth matter is that the defendant is considering an appeal and seeks a stay of the proceedings for a period of between four to six weeks based on Mr Jacques' impecuniosity. Profit on the unit 7Dealing with the question of the profit on the unit, reference is made in the submissions to T317.6 - 33 of the transcript. Mr Lloyd, counsel for the plaintiff, says that he thought that there was a concession by both parties that the figure to be adopted as a deduction from the amount claimed by the plaintiff was $100,000 (see par 8 of the plaintiff's submissions for today's hearing). I understood Mr Hourigan, counsel for the defendants, to accept at that time that as at 1 November 1996 the unit which Mr Jacques was agreeing to purchase would be expected to yield $280,000, but that the further $30,000 based on the actual sale price of $310,000 within six weeks of the completion of the purchase by Mr Jacques was appropriately offset against any liability of the defendants. I accept that Mr Hourigan did not concede that $100,000 rather than $130,000 was the correct figure to be applied. On the other hand, I accept Mr Lloyd's assertion that he understood from the comments made by Mr Hourigan and my own comment at T317 that the $100,000 "seemed to be the figure", and in the absence of further submissions on the point, that $100,000 was accepted by both parties as the appropriate figure. 8In these circumstances I think the interests of justice require that Mr Lloyd be given the opportunity to make further submissions on this point. The parties did not dispute that the sort of considerations set out in Australian Securities and Investments Commission v Rich [2006] NSWSC 826 at 18 were relevant (and see Smith v New South Wales Bar Association (1992) 176 CLR 256 at 266 - 267) and in particular it is necessary to have regard to what was said by the Court of Appeal in Urban Transit of Authority of NSW v Nweiser (1992) 28 NSWLR 471 at 478D - F per Clarke JA, with whom Mahoney and Meagher JJA agreed. The guiding principle was discussed by Clarke JA and that is whether the interests of justice are better served by allowing or rejecting the application, as the case may be. 9Having regard to the submissions of both Mr Lloyd and Mr Hourigan in relation to the $75,000 figure, I do not accept it is an appropriate figure. Mr Senes first offered $75,000 as a reduction of the price of the unit to be purchased, but he did not purport to value the property as having a $75,000 profit element if purchased at cost by Mr Senes. I regard Mr Senes' first offer, which was not the basis of the subsequent agreement, as irrelevant to the determination of the benefit to Mr Jacques. Mr Lloyd has quite properly drawn my attention to a matter which is found in Exhibit A1 at p 91. It is a letter from the solicitors acting for the defendants and in it there is a reference to two units being available for purchase, one unit 11 at a list price of $295,000 available to be purchased for a sum of $220,000, which was the unit that Mr Jacques did purchase. Mr Lloyd accepts that is evidence that in fact the benefit to Mr Jacques was $115,000 (arrived at by deducting the $180,000 in fact paid from the $295,000). There is, it seems, no evidence of what unit 11 was in fact worth beyond what has just been referred to other than two things. Firstly, there is evidence of what the average value of all the units was, a figure of $338,000 per unit, which is the figure that has been used in the calculations in the judgment for determining what the Sterling offer would have been worth, firstly to the partnership and ultimately to Mr Jacques. There is also the fact that the unit was sold for $310,000 in about six weeks after the purchase of that unit was completed by Mr Jacques. 10Mr Lloyd in relation to the $130,000 has made a number of points. Firstly, he submits that it is not appropriate to use the $130,000 differential because that is only evidence of what the unit was worth in an arms-length transaction at the time that it occurred, which was well after the breach. He submits that the relevant date to look at the question of value of the unit is at the date of breach. He also submits that in determining what profit was made by Mr Jacques it would be necessary to have regard to matters such as the holding costs, acquisition costs including stamp duty, selling costs of the unit, improvements done to the unit and whether any benefit would be the subject of capital gains tax. He made reference to the principles set out in N C Seddon and M P Ellinghaus, Cheshire & Fifoot's Law of Contract, 9th Aust ed (2008), LexisNexis Butterworths at pars 23.25 to 23.26, which can be stated essentially as the damages are normally assessed at the time of breach and that assessment is based on the market value at the time of breach. 11The countervailing arguments to these two points are, firstly, that this is a case in which the plaintiff was asserting that the Sterling deal would have gone ahead but for Mr Senes' breach and Forte's breach of fiduciary duty. If the Sterling deal had gone ahead, the units would have had to be constructed and sold before the partnership, and hence Mr Jacques, would have seen any benefit from that deal. That, I think it is agreed, would not have occurred until at least 18 months after the sale would have gone ahead in September or October 1996, had that route been taken. Mr Lloyd submits that what the property was sold for a year and a half later does not reflect what it was worth when Mr Jacques received the benefit of an agreement to purchase at cost. In one sense there is a difficulty, I think, in looking at the benefit as the right to buy the unit at cost and assessing the value as at the date of that agreement as opposed to the date when the sales would take place when the process of evaluating the loss to Mr Jacques is based on the sales some 18 months later. The logic of using the later date is that it is a very similar date to the date when the benefits would have been received. So this is a case in which the usual rule ought not apply since one is measuring what would have been achieved at a later date as opposed to what was received and what was "received" was a benefit to crystallise in the future. 12I think that it is appropriate to look at the value of the property that Mr Jacques obtained as at the date he completed the purchase and paid the purchase price and compare it to what he achieved on sale but six weeks later. In this sense there is a conformity of examination of the dates. Accordingly $130,000 is the correct figure. I should say that if I am wrong in that view I would have adopted the $115,000 based on the letter to which Mr Lloyd today referred: see Exhibit A1 at p 91. 13So far as the next point is concerned about holding costs and so forth, there is no evidence that Mr Jacques paid a deposit, and it is not now asserted that there is any such evidence, but whilst there may have been holding costs and there may have been stamp duty, I think the defendant has established that there was a sale which yielded Mr Jacques $310,000 and for which he paid six weeks earlier $180,000. I accept there might be reasons why the differential of $130,000 should be reduced, but those were matters within the knowledge of the plaintiff and if they were to be taken into account, in my view, the plaintiff had the onus of putting them forward, not the defendants. Another way of looking at it is to say that one looks, in terms of evidence, as to who had the power to produce evidence. That matter is discussed in Blatch v Archer (1774) 98 ER 769, which is a case which has been referred to fairly recently in Morley v Australian Securities and Investments Commission [2010] NSWCA 331 at 730. The defendants proved that Mr Jacques received $130,000 over and above what he paid six weeks earlier and it was open to Mr Jacques to establish that to earn the $130,000 he had had to expend more than the $180,000. It follows, in my view, that the figure of $130,000 should be allowed in favour of the defendants. 14That produces a judgment sum of $138,899, which includes interest of $78,385 on the $60,514 amount. The second defendant 15Turning now to the issue of judgment against the second defendant, having regard to the fact that the question of joinder of the second defendant or any differentiation in the position of the three defendants was never made an issue in the case, that the second defendant's interest in the partnership was taken over by Mr Senes and that the representation for the second defendant was at all times joint with the other defendants, I do not think this is a case on which there is any proper basis for ordering the plaintiff to pay that defendant's costs. Mr Lloyd accepts that the judgment should not be entered against the second defendant and I propose to omit the second defendant as a party against whom judgment is entered but to make no order as to the second defendant's costs. Costs 16In my view the plaintiff has succeeded on his claim and there is no basis to reduce the amount of his costs because he did not obtain as much as he had claimed. The general rule is that the unsuccessful party will be ordered to pay the costs of a successful party unless, and for a reason connected with the case, a different order is specially warranted: see Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 and Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72. See also Uniform Civil Procedure Rules 2005 ("UCPR"), r 42.1. 17I accept that it is open to a court to reduce the amount of costs and Mr Hourigan has referred to Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) and NRMA Ltd v Morgan (No 3), both cases in which there was a reduction of the costs awarded. In NRMA Ltd v Morgan (No 3) itself it was said at [24]: "If a party fails on some issues, the circumstances may make it reasonable that he be deprived of the costs of those issues, or even be ordered to pay the other party's costs of those issues... But it must be remembered that parties should not be dissuaded by the risk of costs from canvassing all issues that might be material to the decision in the case, and unless a particular issue or group of issues is clearly dominant or separable from the balance of the proceedings it will ordinarily be appropriate to award the costs of the proceedings to the successful party without attempting to differentiate between the issues on which he was successful and those on which he failed. It is sufficient to refer to Cretazzo v Lombardi (1975) 13 SASR 4 at 12; Hughes v Western Australian Cricket Association (1986) ATPR 40-748 at 48,136; Dodds Family Investments Pty Ltd v Lane Industries Pty Ltd (1993) 26 IPR 261 at 271-2; and Waters v P C Henderson (Australia) Pty Ltd (NSWCA, 6 July 1997, unreported)." There is no separate issue on which the plaintiff failed in this case. The fact that he achieved a result considerably less than that which he maintained was appropriate in dollar terms does not warrant reducing the amount of costs. 18Mr Hourigan made reference to r 42.34 of the UCPR but made it clear that he does not say that the rule applies but rather that the fact that recovery of $500,000 minimum is referred to there demonstrates how small the amount that the plaintiff recovered is. I accept that the amount involved is a relatively small sum, but there were questions about the nature of the relief sought and the issue of fiduciary duties involved. I do not think that the fact that the amount recovered is small of itself provides a basis for reducing the costs awarded to the plaintiff except where r 42.34 applies. It is accepted by the plaintiff, however, that any previous costs orders obtained by the defendants against the plaintiffs should be off-set against the costs order that I will make now in this case. Stay of judgment 19There has been an application for a stay. There is clear evidence that the plaintiff is impecunious. There are issues about whether or not his defence of any appeal would be stultified if he does not receive the benefit of the judgment, and the plaintiff has indicated a willingness to accept a stay provided 50 per cent of the judgment sum is paid in the event that the defendants do intend to appeal and articulate the grounds for such an appeal, but it seems to be agreed that the appropriate course is that the first and third defendants not be required to pay the amount due under the judgment until 23 November 2012. I grant that stay until 23 November 2012. 20In the event that it is decided by the first and third defendants before 23 November 2012 that they do not intend to maintain an appeal, they should notify the plaintiff's solicitor that that is their position.