Plaintiff v Defendant

1 On 18 August 2011 I published my reasons for judgment in these proceedings, which raised three separate claims for determination. One of the claims, the "Consultancy Claim", was brought in both proceedings. PGA Group Pty Ltd ("PGA") was successful on one claim to the extent of establishing that it is entitled to recover the amount of $645,993 from Idameneo (No 789) Limited (formerly Mayne Group Limited) ("Mayne"). Otherwise the plaintiffs in both proceedings were unsuccessful. The Court has now received submissions from the parties on the costs that should be awarded. Additionally, PGA seeks interest pursuant to s 58 of the Supreme Court Act 1986 (Vic) on the amount of $645,993. It is convenient to start with the claim for interest pursuant to statute.

Interest under s 58 of the Supreme Court Act

2 Section 58 of the Supreme Court Act 1986 (Vic) is in the following terms:

(1) If in a proceeding a debt or sum certain is recovered, the Court must on application, unless good cause is shown to the contrary, allow interest to the creditor on the debt or sum at a rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 or, in respect of any bill of exchange or promissory note, at 2% per annum more than that rate from the time when the debt or sum was payable (if payable by virtue of some written instrument and at a date or time certain) or, if payable otherwise, then from the time when demand of payment was made.

(2) Subsection (1) does not authorise the computation of interest on any bill of exchange or promissory note at a higher rate than the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 if there has been no defence pleaded.

(3) A debt or sum payable or a date or time is to be taken to be certain if it has become certain.

3 PGA seeks interest calculated at the penalty interest rates from 2 July 2001 when the debt of $645,993 became payable (at the latest). It was submitted for Mayne that interest should not be allowed for that length of period, but only for twelve months preceding the date of pronouncement of orders. It was argued that there was good cause for not allowing interest from the time that the debt was payable, based on the contention that PGA had delayed in taking steps to recover its debt, and further on the contention that had that debt claim been raised as a discrete claim, it is inconceivable that it could not have been resolved by adjudication within 12 months, assuming that it was not settled.

4 What constitutes good cause in any given case will depend on the particular facts and circumstances. I have to be satisfied on the material before me that there is good reason not to apply the general rule in favour of awarding interest to PGA from 2 July 2001.[1] The good cause requirement has to be measured against the purposes of the statutory power to award interest. Those statutory purposes have been recognised as twofold. First to compensate a plaintiff for the loss or detriment which he or she has suffered by being kept out of his or her money and deprived of its use during the relevant period. Secondly to encourage the early resolution of litigation.[2] It was argued for PGA that PGA has wrongfully been kept out of the sum of $645,993 whereas conversely, Mayne, a large commercial enterprise, has had the benefit of monies to which it was not entitled, including the opportunity to invest those monies at compound rates of interest, alternatively to retire debt that otherwise would have attracted compound rates of interest.

5 In my opinion there is substance in the submission for Mayne that there has been undue delay by PGA in pursuing the recovery of its debt. The authorities show that undue delay in commencing or prosecuting the proceeding may be a good cause for not allowing interest or reducing the time for which interest is allowed.[3]

6 Here, the debt was payable by 2 July 2001 (at the latest). Proceedings, however, were not instituted until 22 December 2006. Evidence was furnished before the Court on behalf of PGA to explain that delay. That evidence was to the effect that until 2003, the parties were negotiating settlement of a number of unresolved matters arising out of the merger and de-merger between Mayne Logistics Pty Ltd and PGA Logistics Pty Ltd. Ultimately the negotiations were unsuccessful and in 2004 PGA engaged Allens Arthur Robinson ("Allens") to investigate its various claims, including claims that were not subsequently prosecuted. In about mid 2006, PGA engaged its current solicitors, Gadens Lawyers, to take over from Allens. That evidence explained why proceedings were not issued before the end of December 2003 but no proper explanation was provided for the lapse of time between 2004 and 2006 before action was commenced.

7 Having instituted the proceeding, the writ and statement of claim were then not served for twelve months. Again there was no proper explanation before the Court for the service not having been effected earlier.

8 It was argued for Mayne that there were further delays on the part of PGA in prosecuting the proceeding following the service of the writ and statement of claim. It appears from earlier affidavits filed in the proceeding that there was delay caused by PGA considering amendments to the statement of claim, as a result of which the parties agreed to extensions of time for the defence. In the event, on 1 August 2008 PGA served a summons seeking leave to amend the statement of claim and leave was given on 2 September 2008. PGA served its amended statement of claim on 3 September 2008 pursuant to the leave granted. The defence and counterclaim were filed on 7 November 2008. Following the filing of the defence and counterclaim, there was a small delay in PGA filing its reply, which was explained, and some delay then caused by a request for further and better particulars from Mayne, the provision of particulars by PGA and consideration by Mayne of those particulars. In August 2009 the plaintiffs applied to have the proceedings entered into the Commercial Court. On entry into the Commercial Court the trial was listed for hearing in May of this year, based on a proposed timetable for the steps required to be taken to make the proceeding ready for trial. The trial proceeded on the dates listed for hearing.

9 I am satisfied on the material available to the Court that there has been substantial activity on the part of PGA in prosecuting its claim since it filed its amended statement of claim on 3 September 2008. However, there was no satisfactory explanation in my view for the period between service of the writ and statement of claim and the amendment of the statement of claim on 3 September 2008.

10 The fact of the considerable delay on the part of PGA, without proper or sufficient explanation, both in commencing the proceeding, in serving the writ and statement of claim once the proceeding had been instituted and in seeking to amend its statement of claim show good cause as to why interest should not be allowed to run prior to 3 September 2008. I am not persuaded however, that PGA should be allowed interest only for the 12 month period immediately prior to the pronouncement of orders. It is true that if the debt claim had been prosecuted separately it is possible that the proceeding would have been concluded within 12 months of institution. However the debt claim was caught up in a raft of issues in relation to the Southcorp claim and I do not consider that PGA should be denied interest because it had all issues ventilated at once.

11 Accordingly I have concluded that PGA is entitled to interest under s 58 of the Supreme Court Act 1986 (Vic) at the statutory rate from 3 September 2008.

(a) Mayne pay PGA's costs of the 2006 proceeding, including the cost of the counterclaim and reserved costs; and

(b) that PGA pay Mayne's costs of the 2008 proceeding. The explanation for this order, given that Peter Gunn ("Gunn") was the plaintiff in the 2008 proceeding and unsuccessful on his claim, is that it raised the identical consultancy claim that PGA brought in the 2006 proceeding. PGA submitted that no substantial additional costs were involved in the 2008 proceeding and the Court was invited to make a direction to the Taxing Judge to that effect. I decline to do so for the reason that Taxing Judge will be in a better position than I am to determine whether there were substantial additional costs.

13 On the other hand, Mayne seeks costs orders in the 2006 proceeding as follows:

(a) that it pay PGA's costs of its claim that it was entitled to deduct $645,993 from the Southcorp proceeds received of $5 million; and

(b) otherwise that PGA pay Mayne's costs of the proceeding, including the cost of the counterclaim and reserved costs -

and in the 2008 proceeding that Gunn pay its costs of that proceeding.

14 Under s 24 of the Supreme Court Act 1986 (Vic), the costs of and incidental to all matters are in the discretion of the Court, which has full power to determine by whom and to what extent the costs are to be paid. It is well accepted that the discretion is absolute and unfettered, except that it must be exercised judicially, not arbitrarily or capriciously, and cannot be exercised on grounds unconnected to the litigation.[4] As a general rule, costs should follow the event and the successful party should be entitled to recover its costs of the trial. It was contended for PGA that it was the successful party in the 2006 proceeding because of the order on the debt claim in its favour. It was submitted that PGA should get its costs of the 2006 proceeding. But it does not always follow that a successful party will get its costs. A party that has only been partially successful may be denied some or all of its costs. In Pricom Pty Ltd v Sgarioto[5] Eames J observed that:

... in the exercise of its discretion the court may decline to order costs in favour of a successful party, or may order the successful party to pay the costs of the unsuccessful party, where the plaintiff failed to establish discrete heads of claim, or failed to establish issues which it pursued in its claim, although ultimately succeeding on the basis of another discrete head of claim: Hughes v Western Australia Cricket Association Inc [1986] FCA 382; (1986) ATPR 40-748, per Toohey J, at 48, 136.[6]

The Court may make a successful party which has failed on certain claims or issues liable to pay the other party's costs of those claims or issues, if the interests of justice and fairness so require.[7] The issue for consideration is whether it is just and reasonable that PGA which has been substantially unsuccessful on its claims should get all of its costs because it was successful one aspect of those claims.

15 Although the general rule should not be departed from lightly,[8] the Courts will apportion costs where the general rule will operate unfairly and as the Full Federal Court explained in Bowen Investments Pty Ltd v Tabcorp Holdings Ltd ('Bowen Investments'),[9] the "winner takes all" approach can be "quite unfair":

Its effect is that a winner is entitled to all of his costs even if he raises a plethora of issues on which he is unsuccessful. The unfairness of the traditional rule has been recognised in England where, following Lord Woolf's interim report, Access to Justice (June, 1995) [at para 25.22], the Civil Procedure Rules were modified to require the judge to have regard to the circumstance (if it occurs) that the unsuccessful party has succeeded on some issues: see r 44.3(4)(b). In Western Australia, the Supreme Court Rules provide that costs should follow the event of each pleaded cause of action: see r 66(2)(a). This is narrower than the English approach but certainly more reasonable than adherence to the traditional rule.

We do not believe that there is any need to wait for a change in the Federal Court Rules to adopt an issue by issue approach here. Costs are in the court's discretion. Fairness should dictate how that discretion is to be exercised. So, if an issue by issue approach will produce a result that is fairer than the traditional rule, it should be applied. It is not suggested that such an approach requires a precise arithmetical apportionment of the costs as between the winner and loser of discrete issues. No doubt the assessment will often be rough and ready. But it will have the virtues of both fairness and reasonableness, which are often lacking in the application of the traditional rule.[10]

In the passage from Lord Woolf's report referred to by the Full Federal Court, Lord Woolf stated:

... the general approach is one which involves the winner taking all. This does not necessarily produce a fair result. My approach to case management involves breaking down the issues which make up the litigation. The Court has to be prepared to make different orders for costs in relation to different issues to support the new approach to case management.[11]

In GT Corporation Pty Ltd v Amare Safety Pty Ltd (No 3)[12] Robson J considered that the authorities binding on him were not inconsistent with Lord Woolf's recommendation as cited in Bowen Investments.[13]

16 There is now legislation in force in Victoria in the Civil Procedure Act 2010 (Vic) which provides that a court may make any order it considers appropriate with respect to costs, including the proportions in which the parties are to bear any costs.[14] The guiding principle must be justice and fairness between the parties. The fact that such kinds of orders are not the usual orders is not a reason for not apportioning costs, if the justice of the case requires apportionment.

17 In my view, justice and fairness between the parties in this case dictates the conclusion that apportionment is warranted. In my view it would be unreasonable to deprive Mayne of its costs on the claims on which it successfully defended. Fairness requires that Mayne be entitled to its costs in respect of the issues on which PGA was unsuccessful.

18 I was urged by counsel for Mayne to make an apportionment of costs by ordering costs in favour of PGA on the specific issue on which it was successful but otherwise ordering PGA to pay Mayne's costs of the 2006 proceeding and to order Gunn to pay Mayne's costs of the 2008 proceeding. Senior counsel for PGA submitted that Mayne's proposed costs order was unworkable and would create real complications in the taxation of the costs. I agree. Not only is there the difficulty of identifying those costs that relate directly to the particular issue, but there are undoubtedly costs common to all matters requiring some apportionment methodology to determine a just and fair allocation. I consider that the pragmatic approach[15] is to order a proportion of costs in favour of Mayne. Although imprecise, mathematical precision is not possible nor required.

19 If the Court took this approach, senior counsel for PGA submitted that a fair apportionment was that PGA should receive one third of its costs on the basis that the three distinct claims which were the subject of the proceedings occupied roughly an equal amount of time. That submission cannot be borne out by reference to the evidence in the form of transcript time, which indicates that it was something considerably less than the amount of time occupied in evidence with respect to the other matters. Moreover, had PGA prosecuted only the matter on which it succeeded, the work involved in preparing for trial and the trial time itself would have been substantially different. Much of the evidence tendered by both parties related to the other matters on which PGA was unsuccessful. In the circumstances, I consider that fairness requires that Mayne have a substantial portion of its costs by awarding Mayne 85% of its costs in the proceeding in which PGA was successful in part.

20 Accordingly the formal orders that I will pronounce are as follows:

(1) The defendant is ordered to pay to the plaintiff the sum of $645,993 and interest on that sum pursuant to statute calculated from 3 September 2008.

(2) The proceeding (including the counterclaim) is otherwise dismissed.

(3) The plaintiff is ordered to pay 85% of the defendant's costs of the proceeding (including the costs of the counterclaim and any reserved costs), such costs to be taxed in default of agreement.

(2) The plaintiff is ordered to pay the defendant's costs of the proceeding, such costs to be taxed in default of agreement.

[1] Clarke v Foodland Stores Pty Ltd [1993] VicRp 81; [1993] 2 VR 382, 394.

[2] Johnstone Tiles Pty Ltd v Esso Australia Pty Ltd (No 3) [2003] VSC 244 (Unreported, Gillard J, 3 July 2003) [62]; Cameron v McMahon & Anor (No 2) [2009] VSC 412 (Unreported, Davies J, 3 September 2009) [7].

[3] Willetts v Dimos (Unreported, Supreme Court of Victoria, Smith J, No 9150/91, 9 February, 27 February 1998); David Leahey (Aust) Pty Ltd v McPherson's Limited [1991] VicRp 77; [1991] 2 VR 367, 382; University of Sydney v Raine & Horne Commercial (NSW) Pty Ltd (1999) V ConvR 54-607.

[4] Major Engineering Pty Ltd v Helios Electroheat Pty Ltd (No 2) [2006] VSCA 114, [5] (Chernov and Ashley JJA and Mandie AJA).

[5] (1995) V ConvR 54-513.

[6] Cited with approval in Spotless Group Limited v Premier Building & Consulting Pty Ltd [2008] VSCA 115 (Unreported, Redlich and Dodds-Streeton JJA, 30 May, 18 June 2008) [13]; McFadzean v Construction Forestry Mining & Energy Union & Ors [2007] VSCA 289 (Unreported, Warren CJ, Nettle and Redlich JJA, 13 December 2007) [152]; Investec Bank (Australia) Ltd v Glodale Pty Ltd & Ors [2009] VSCA 113 (Unreported, Neave and Redlich JJA and Forrest AJA, 14 May 2009) [4].

[7] Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534, 567.

[8] Bowen Investments Pty Ltd v Tabcorp Holdings Ltd, [2008] FCAFC 107 (Unreported, Finkelstein, Rares and Gordon JJ, 13 June 2008) ('Bowen Investments'). [3] (Finkelstein and Gordon JJ).

[11] Cited in GT Corporation Pty Ltd v Amare Safety Pty Ltd (No 3) [2008] VSC 296 (Unreported, Robson J, 24 June, 12 August 2008) [57].

[14] Section 49(3)(k).

[15] Spotless Group Limited v Premier Building & Consulting Pty Ltd [2008] VSCA 115 (Unreported, Redlich and Dodds-Streeton JJA, 30 May, 18 June 2008) [15] (Redlich JA).