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[2006] VSC 285
Supreme Court of Victoria
2006-08-09
BYRNE J
Original judgment source is linked above.
PRACTICE AND PROCEDURE -judgment - whether single judgment for net amount due on successful claim and successful counterclaim - costs
For JJP Geotechnical Engineering Pty Ltd (Barrett Fuller)
1 On this, the second round of judgments in this proceeding, complications multiply. On 25 July 2006, I gave judgment as between the plaintiff, Aquatec, and the defendant, Barwon.[1] I am now concerned with the judgment which is to be each given as between Aquatec and the next party down the contractual chain, Minson Nacap. As on the previous occasion any party wishing to make submission was invited to attend and do so.
2 It will be recalled that Barwon as proprietor entered into a contract with Aquatec for the design and construction of the sewerage treatment plants at Lorne and Apollo Bay. Aquatec then let the design and construction of the civil works by sub-contract to Minson Nacap. The tanks failed in late 1997 and 1998 due to defective design of the civil works. In July 1998 Barwon took the civil works from Aquatec and engaged another contractor for the remediation and completion of those works. About the same time, Aquatec itself terminated its sub-contract with Minson Nacap.
3 As a consequence, two proceedings were commenced as between those parties.
(1) In proceeding number 5083 of 2000 Minson Nacap sued Aquatec for certified sums and for uncertified progress claims. Aquatec brought a counterclaim for damages for defective work. On 5 October 2000 I gave summary judgment to Minson Nacap in the sum of $1,277,020 and costs.[2] Aquatec appealed and on 5 March 2004 the Court of Appeal set aside the judgment and dismissed Minson Nacap's application for summary judgment.[3] For some reason it was not until 30 June 2005 that the Court of Appeal pronounced final orders on the appeal, directing that Aquatec repay to Minson Nacap the amount of $1,655,698 plus $268,563.28 interest and $90,155 for costs paid together with interest on that sum in the amount of $9,899.76.[4] The costs of the now unsuccessful summary judgment application were reserved for the determination of the trial judge.
(2) In proceeding number 7091 of 2000 Aquatec sued Barwon for the amount of about $1.5M for money due under the contract between them. On 21 December 2000 Barwon brought a counterclaim against Aquatec which became the lead proceeding in that litigation.
To this Barwon counterclaim Aquatec on 16 March 2000 joined as co-defendants Minson Nacap, Montgomery Watson, Wynton Stone, Barrett Fuller and Fisher Stewart. On 7 February 2003 TTW was joined as a seventh defendant to the Barwon counterclaim. Aquatec allege against these seven added defendants that they were also liable to Barwon for damages and it sought apportionment orders pursuant to s. 131 of the Building Act 1993.
Furthermore, by notice under s. 23B of the Wrongs Act 1958 Aquatec sought contribution against these seven added defendants.
Meantime, on 27 April 2001, following the entry of summary judgment against Aquatec in proceeding number 5083 of 2000, this proceeding was stayed on the basis that the remaining claims between Aquatec and Minson Nacap might conveniently be brought into this proceeding. On 21 June 2001, Minson Nacap served a statement of claim against Aquatec seeking a variety of relief including payment for its work prior to termination of the sub-contract.[5] Following the successful appeal in proceeding number 5083 of 2000 this statement of claim was amended to include claims for certified sums and uncertified progress claims which had been the subject of the summary judgment application.
To this claim, Aquatec responded with a defence and counterclaim.[6] The counterclaim seeks damages for the defective work of Minson Nacap.
4 I have found that Minson Nacap was in breach of its contractual obligations to Aquatec inasmuch as the design of the tanks for which it was contractually responsible, was defective.
5 Aquatec therefore now seeks judgment against Minson Nacap. The judgment it seeks is made up as follows:
(a) The agreed amount of the costs incurred by Barwon in carrying out the remediation and completion works. This sum was included in the judgment in favour of Barwon against Aquatec and was accepted by Minson Nacap as being a proper component of the Aquatec damages claim
(b) The agreed amount of the cost of Minson Nacap's uncompleted civil works
(c) The agreed consequential costs of Aquatec arising out of the failure of the tanks
(d) (Less) the agreed amount payable to Minson Nacap for unpaid work
(e) Statutory interest on $3,223,392 calculated from 14 April 2000, the date on which Minson Nacap commenced proceeding number 5083 of 2000. This interest, calculated to 31 July 2006, is
(f) A Bullock order or a Sanderson order that Minson Nacap pay the costs ordered to be paid by Aquatec to Barwon
(g) The costs of Aquatec of this proceeding on a party and party basis
(h) The costs reserved by the Court of Appeal of the Minson Nacap summary judgment application in proceeding number 5083 of 2000
(i) Aquatec's costs of the proceeding number 5083 of 2000
6 There were in effect three issues argued before me:
• whether there should be two judgments or one judgment for the nett amount;
• interest on the judgment or judgments; and
• costs.
ONE JUDGMENT OR TWO JUDGMENTS
7 In essence Aquatec has been successful in its claim for damages for breach of the sub-contract in the sum of over $4M and Minson Nacap has been successful in its claim for about $1M for payment for work performed under this contract.
8 I have no doubt that, in these circumstances, there should be but one judgment for the nett amount. In its defence Aquatec assets a right of set-off against the claims of Minson Nacap as it was entitled. Rule 10.09 contemplates that one judgment may be given. [7] Furthermore, the commercial realities of this litigation clearly point to this as the correct approach. Aquatec withheld money from Minson Nacap on the basis that the work was defective and the Court of Appeal held that there was a triable issue as to the correctness of this course. Since the amounts were then substantially agreed before me there was little debate about this matter at trial. I will therefore enter judgment for the nett amount.
INTEREST
9 There were a number of positions adopted on the question of interest. Aquatec argued that it should have interest on the nett amount of $3,223,392. Minson Nacap resisted this, offering three alternative positions all of which depended upon the proposition that Aquatec should not have interest on money which it had not spent. Its further alternative position was rather different.
10 The first position adopted by Minson Nacap was that there should be no interest paid to Aquatec. Interest on a judgment is awarded to compensate a plaintiff for being out of its money. Since Aquatec's claim represents the sums which it must pay but has not yet paid, to Barwon, it is not out of pocket. Accordingly, it was put, an award of interest would be a windfall to Aquatec since it has always had the use of that money; it should not have the money as well as interest on that money.
11 I am not persuaded that this is a correct analysis. The effect of the judgment against Minson Nacap is that it ought, at the commencement of this proceeding, to have paid a substantial sum to Aquatec. This it has not done, preferring to hold the money in its own account. Had it paid the amount then, when it was legally obliged to, Aquatec would have had the money. Whether it would have passed this money to Barwon or not, it was money which Aquatec should have had available to it.
12 A further consideration tending to the same conclusion is that the judgment in favour of Barwon itself contains an interest component, so that Aquatec has, to this extent, suffered from not having the money due to it by Minson Nacap. There was some debate before me as to this matter. It was said that Minson Nacap was not bound by the sums agreed between Barwon and Aquatec to be paid or as to their characterisation, as interest or otherwise. I do not enter into this. I base my conclusion on this point on the fact that it is of no relevant concern to Minson Nacap what Aquatec does or has done with respect to its obligations to Barwon. The amount which Minson Nacap is obliged to pay under its sub-contract is not earmarked for any purpose in the hands of Aquatec.
13 The second and associated position can now be dealt with shortly. This was that interest should be paid only items (b) and (c) referred to in paragraph [5] above, for these were matters for which Aquatec was truly out of pocket. Item (a) should not bear interest for the reasons already discussed. For the same reasons I reject this contention.
14 The third alternative position was that interest should run only on $1,314,139. This sum represents the difference between $4,238,696[8] and $2,924,557 which is the nett amount of the judgment entered in favour of Barwon. The argument was that this difference represents the only amount for which Aquatec was truly out of pocket. This is but another variation of the argument which I have rejected. I reject it also.
15 An issue of a rather different character raised by Minson Nacap was whether interest should be calculated on the nett amount of the judgment awarded to Aquatec, as Aquatec contends. The position of Minson Nacap was that I should calculate interest on the amount payable by Aquatec to Minson Nacap and that on the amount payable by Minson Nacap to Aquatec and then set off each of the amounts including interest.
16 I reject this Minson Nacap submission. There is to be one judgment reflecting the fact that, on balance, only one sum is to be paid. This is the sum which should bear interest.
17 I will therefore award statutory interest which has been agreed in the sum of $2,367,688.80, representing the amount of $2,358,946 agreed to 31 July 2006 plus nine days interest at $971.43.
COSTS
18 Given my conclusion that there be one judgment, it follows that there should be one award of costs. It was accepted that this should be on a party and party basis and I will so order.
19 Aquatec sought an order that Minson Nacap pay to it or to Barwon directly, the amount of costs which Aquatec has been ordered to pay to Barwon in the first judgment. I was referred to cases where such an order was made against third parties. It was submitted that this was a case where Aquatec reasonably defended the Barwon claim and that, if successful, this would have been to a benefit of Minson Nacap.
20 As I mentioned in argument, a surprising aspect of this case has been the fact that Aquatec did not accept its liability to Barwon at the outset and, further, that it avoided payment for some five years when it was apparent that it had no real defence. It may be said that this is of no concern to Minson Nacap, but the fact remains that Aquatec resisted the Barwon claims for many years so that Barwon incurred legal costs. While it is true that the amount of Barwon's entitlement was a matter of continuing uncertainty until it was substantially agreed some days after the trial commenced, I am not satisfied that the justice of the case requires that Minson Nacap should pay to Aquatec the amount of Barwon's costs. Had Aquatec been prepared to accept at an early stage what it accepted at trial, namely, that it was liable to Barwon, much of these costs would have been avoided.
21 The final matter is the costs of the stayed proceeding number 5083 of 2000, including the costs of the summary judgment application reserved by the Court of Appeal for my determination.
22 Aquatec seeks these costs on the basis that, in that proceeding, the result would have been in its favour given its set-off and counterclaim for damages for defective work. It is not appropriate for me now to re-enter upon the issues of the summary judgment application which the Court of Appeal has found to have failed. In the normal course, upon the failure of such an application, the costs would be costs in the cause unless it was plainly doomed to fail. If such an order were made in this application attention would then turn to the outcome of the cause. Given the conclusions which I have now reached, the result of that proceeding would have been a judgment in favour of Aquatec. In these circumstances, the costs of that proceeding including the costs of the unsuccessful summary judgment application must be paid by Minson Nacap.
CONCLUSION
23 The orders which I propose are therefore as follows:
Proceeding Number 7091 of 2000
(a) Judgment for Aquatec on the Minson Nacap claim against Aquatec.
(b) Judgment for Aquatec on its counterclaim for damages in the sum of $3,223,392 together with damages in the nature of interest in the sum of $2,367,688.80
(b) Minson Nacap pay Aquatec's costs of the claim and counterclaim in this proceeding between those parties, including reserve costs.
Proceeding Number 5083 of 2000
Judgment for Aquatec with costs including reserved costs such costs to include the costs of Minson Nacap's application for summary judgment.
As in the case of the judgment between Barwon and Aquatec too I have deferred any orders arising out of any claims for apportionment of liability to Aquatec.
[5] The current version of this pleading is an amended statement of claim filed on 25 August 2004.
[6] Second further amended defence and counterclaim filed October 2005.
[7] See Cain Constructions Pty Ltd v Sopov (No 2) (2005) 22 BCL 202 at 213 [63]-[68].
[8] This comprises items (a) (b) and (c) in paragraph [5] above.
# Aquatec-Maxcon Pty Ltd
Barwon Region Water Authority