Rossiter v Core Mining Limited

Supreme Court of NSW|2015-03-31|Before: Adamson J, McDougall J

Solicitors: Petrine Costigan Lawyers (Plaintiff) No appearance (First and Second Defendants) File Number(s): 2014/376549

Introduction

The first defendant is an unlisted private company registered in the British Virgin Islands (BVI). It conducts exploration and mining activities in West Africa. The second defendant is a wholly owned subsidiary of the first defendant. The first defendant's sole director is Socrates Vasiliades. The plaintiff had been the first defendant's Chief Financial Officer (CFO).
The plaintiff commenced proceedings 2011/314267-001 against both defendants and Mr Vasiliades, in the Commercial List of the Equity Division of this Court on 30 September 2011 (the Commercial List Proceedings), in which he claimed an entitlement arising from an agreement alleged to have been made with the first defendant while he was working as its CFO.
The Commercial List Proceedings were resolved and orders made on 22 July 2014 by McDougall J granting leave to the plaintiff to discontinue the proceedings with no order as to costs and noting the Terms of Settlement dated 21 July 2014 that had been agreed by the parties which required the defendants to pay the plaintiff a total of USD$800,000 (the Settlement Sum) in equal instalments of USD$200,000. The first payment was due 90 days from 21 July 2014; the second was due 60 days after the first payment; the third was due 60 days after the second payment and the last, 60 days after the third payment. If there was a default, the whole of the Settlement Sum became due. The agreement specifically provided that the plaintiff would be at liberty to sue the defendants, who were jointly and severally liable, for judgment in the amount owing.

The evidence

Ms Muir of counsel, who appeared on behalf of the plaintiff, read the plaintiff's affidavit of 22 December 2014 as well as affidavits of Ms Costigan (the plaintiff's solicitor) dated 23 December 2014, 13, 27 and 31 March 2015 and an affidavit of Mr Harby (an expert in the corporate law of BVI) of 26 March 2015. She also read the affidavits of service of Steven Turnbull sworn 20 March 2015 and Kendel Sherriffe sworn 16 March 2015.

The orders sought by the plaintiff

According to a BVI Financial Services Commission Registry of Corporate Affairs Register of Companies Search Report dated 30 March 2015, the first defendant has been struck off the BVI companies register for non-payment of fees. I am satisfied, on the basis of the evidence of Mr Harby, that the first defendant continues to exist, notwithstanding the strike off. As the first defendant did not appear, it is not necessary to consider the effect of s 215(1)(b) of the Business Companies Act 2004 (BVI) which precludes a company which has been struck off the Register from defending any legal proceedings.

Leave to proceed against the first defendant

If originating process is served on a defendant outside Australia and the defendant does not enter an appearance, the plaintiff needs leave to proceed against that defendant: UCPR, r 11.4(1).
In Agar v Hyde [2000] HCA 41; 201 CLR 552 at [50]-[61] the High Court addressed the matters to be considered in deciding whether leave under UCPR r 11.4(1) ought be granted are whether: 1. the defendant has been properly served; 2. the claims in the originating process fall within UCPR, Sch 6; 3. the plaintiff has an arguable case in the sense that it would be sufficient to survive an application for summary judgment; and 4. the local forum is clearly inappropriate and there is another more appropriate forum.
These matters will be considered in turn.
The first matter is whether the first defendant has been properly served. Originating process may be served outside Australia in the circumstances referred to in Schedule 6 to the UCPR. A notice to the effect that the originating process is intended to be served on a defendant outside Australia must be included on the originating process: UCPR, r 11.3(1).
The affidavit of service of Kendel Sheriffe sworn 10 March 2015 (annexed to Ms Costigan's affidavit sworn 13 March 2015) established that on 10 February 2015 the summons, the motion filed on 23 December 2014 and the affidavits of Ms Costigan of 23 December 2014 and Mr Rossiter of 22 December 2014 were served on the first defendant in accordance with s 101 of the British Virgin Islands Business Companies Act as they were delivered to its registered office and served on Elizabeth Wilkinson, a representative of its Registered Agent.
However the summons did not include the relevant notice required by UCPR, r 11.3(1). The plaintiff's solicitor identified the omission and arranged for a further summons to be served on the first defendant which included the requisite notice. Service was effected on 16 March 2015, as established by Mr Sheriffe's affidavit referred to above. The plaintiff sought an order that leave be granted to amend the summons in accordance with the draft that was served on that day.
Service outside Australia of a document other than an originating process is valid only if leave is granted, or this Court confirms the service. Accordingly, the plaintiff sought an order that I confirm the service of the summons and the motions dated 23 December 2014 and 16 March 2015. In my view, it is appropriate to do so.
The second matter is the requirement that the claims in the originating process fall within UCPR, Sch 6. The relief claimed in the summons is founded on a breach of a contract that was made in New South Wales (the Terms of Settlement in the Commercial List Proceedings) and also alleged to have been breached in New South Wales (since payment was to be made to the plaintiff who is resident in New South Wales). Accordingly the summons may be served outside Australia since it falls within UCPR, Sch 6, (a), (b) and (c).
The third matter is whether the plaintiff has an arguable case. For reasons given elsewhere in this judgment, I am satisfied that the plaintiff is entitled to summary judgment against both defendants. Accordingly the third matter operates in favour of a grant of leave pursuant to UCPR r 11.4(1).
The fourth matter is whether the local forum is "clearly inappropriate". I am satisfied that New South Wales is the appropriate forum. The contract was made to resolve the Commercial List Proceedings which were brought in the Equity Division of this Court.
In these circumstances I consider it to be appropriate that there be a grant of leave to the plaintiff under UCPR r 11.4(1) to proceed against the first defendant.

Service on the second defendant

Section 16 of the Service and Execution of Process Act 1992 (Cth) (SEPA) provides that service is only effective if copies of such notices as are prescribed are attached to the process or the copy of the process served. The prescribed form is Form 1 of the Service and Execution of Process Regulations 1993, Sch 1. That form contains a notice about the time within which the defendant is required to enter an appearance. Section 17 of SEPA sets out how the time for appearance is to be calculated. As the second defendant was obliged to enter an appearance in response to the summons, the period after service within which the person may enter an appearance is the longer of 21 days or the period in which the appearance would have been required/permitted to be entered had the process been served in New South Wales, or such shorter period as this Court, on application, allows: s 17(1) of SEPA.
Where proceedings are commenced by summons, the time in which a defendant must enter an appearance is on or before the return day stated in the summons which, in the present case, is 2 April 2015: UCPR, r 6.10(1)(b).
The matters that are relevant to an application under s 17(1) of SEPA to allow a shorter period include: urgency; the places of residence or business of the parties; and whether a related or similar proceeding has been commenced against the person or another person: s 17(2) of SEPA.
In the present case the return date of the summons was 2 April 2015; the return date of the motion filed on 23 December 2014 was 17 February 2015 and the return date of the motion filed on 16 March 2015 was 31 March 2015. I am satisfied that on 25 February 2015, the summons, supporting affidavits and the motion filed on 23 December 2014 were delivered to the second defendant's registered office in Melbourne. However, neither the summons nor the motion contained the notice required by s 16 of SEPA and Form 1. In order to rectify this omission, copies of the summons, supporting affidavits and the motions filed on 23 December 2014 and 16 March 2015, together with the supporting affidavit were served on the second defendant at its registered office in Melbourne on 16 March 2015. These documents attached the notices required by SEPA.
Accordingly, the second defendant was served in accordance with SEPA 15 days ago, six days short of the requirement of 21 days under s 17(1)(a) of SEPA.
Two weeks have elapsed since the second defendant was properly served. It has been on notice of this application since 25 February 2015 and has chosen not to appear at the hearing on 31 March 2015 to oppose the orders. Further, the Commercial List Proceedings were commenced on 30 September 2011. Both defendants appeared, and were legally represented, in those proceedings and were party to the Terms of Settlement. In these circumstances, I am satisfied that it is appropriate, pursuant to s 17(1)(b) of SEPA to abridge the time within which the second defendant may enter an appearance to the originating process to 30 March 2015.

Summary judgment

Rule 13.1 of the UCPR provides that the Court may order summary judgment where there is evidence of the facts on which the claim is based and there is evidence given by either the plaintiff or a responsible person that the defendant has no defence to the claim or part of the claim. The plaintiff has established the contract constituted by the Terms of Settlement that were agreed to resolve the Commercial List proceedings and that no payment has been made by either defendant as required. Ms Costigan, in her affidavit of 23 December 2014, deposed to her belief as to the lack of defence. I am satisfied that the cause of action, the absence of defence and the quantum of damages have been clearly demonstrated: General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69; 112 CLR 125. In these circumstances I consider the present case to be an appropriate one in which to order summary judgment.

The appropriate currency for the judgment sum

The determination of the appropriate currency for the judgment sum depends in part on the proper law of the contract. In my view the proper law of the contract is the law of New South Wales since it is "the system of law with which the transaction has its closest and most real connection": Akai Pty Ltd v People's Insurance Co Ltd (1996) 188 CLR 418 at 434. Mr Rossiter signed the Terms of Settlement in New South Wales; the defendants were obliged to pay the Settlement Sum to Mr Rossiter, who lives in this State; and the Terms of Settlement were concluded for the purpose of resolving proceedings that had been commenced in New South Wales.
Section 90 of the Civil Procedure Act 2005 (NSW) (which applies of its own force, irrespective of the proper law) requires the Court to give such judgment or make such order as the nature of the case requires. This provision does not modify the common law principle (which forms part of the law of New South Wales which I have found to be the proper law of the contract) that a judgment may be expressed in a currency other than the currency of the forum: Brown Boveri (Australia) Pty Ltd v Baltic Shipping Co. (1989) 15 NSWLR 448.
It is generally accepted that the judgment should be specified in the currency which best expresses the loss suffered by the plaintiff: Brown Boveri (Australia) Pty Ltd v Baltic Shipping Co. However, the terms of the agreement prevail over this general principle: see the authorities referred to by Allsop P (Macfarlan and Meagher JJA agreeing) in OneSteel Manufacturing Pty Ltd v BlueScope Steel (AIS) Pty Ltd [2013] NSWCA 27; 85 NSWLR 1 at [114].
That being the case, I am persuaded by Ms Muir's contentions that it is both appropriate, and desirable, that judgment be awarded in USD for these reasons: 1. The parties to the Terms of Settlement negotiated a settlement in USD and chose to express the Settlement Sum in USD. 2. To order judgment in AUD rather than USD would permit the defendants to profit from their own breach since, due to the fluctuations in the USD/AUD exchange rate, the current AUD equivalent of USD$800,000 would be less than at the times for payment provided for by the Terms of Settlement. 3. The second defendant has chosen not to appear to oppose the order that the judgment be expressed in USD.

The appropriate interest rate for the period up to judgment

Section 100 of the Civil Procedure Act permits the Court to award pre-judgment interest at such rate as it thinks fit. The guiding principle is that the purpose of an award of interest is to compensate the plaintiff for the detriment that he has suffered by being kept out of his money: Batchelor v Burke (1981) 148 CLR 448 at 455.
The defendants were in breach of their obligations under the Terms of Settlement as follows: Period of breach Amount unpaid 19 October 2014 - 16 November 2014 USD $200,000 17 November 2014 - 31 March 2015 (present) USD $800,000

Mr Rossiter claimed US$20,352 in pre-judgment interest, calculated by reference to the rates provided for pre-judgment interest in UCPR r 36.7.
The question of what interest rate ought apply when a judgment is awarded in a foreign currency was addressed by Giles J in Swiss Bank Corporation v State of NSW (1993) 33 NSWLR 63 at 64-65: "Where the judgment is in a foreign currency, compensation to the plaintiff often calls for interest to be calculated at the interest rates relevant to that currency [citations omitted]. The reason for the regard to the interest rates relevant to the foreign currency is that the plaintiff's loss through being kept out of its money has come home in that foreign currency. The plaintiff has had to borrow money in the foreign currency to replace the money of which it has been deprived, or has lost the opportunity of earning interest on money in that foreign currency, and in the ordinary course where the plaintiff claims judgment in a foreign currency that is the currency in which it operates and in which it borrows or invests. But it will not always be so, and in the particular circumstances the plaintiff's loss may come home in a currency other than that in which it obtains judgment ... What are the appropriate rates depends on all the circumstances, of which the currency of judgment is only one. It must be remembered that there ought not be a fixed rule, and there is always an exercise of discretion in the court ordering that there be included in the judgment interest, as s 94(1) says, 'at such rate as it thinks fit.'" [Emphasis added]
Mr Rossiter's unchallenged evidence was that if the payments had been made in accordance with the Terms of Settlement, he would have converted the funds to AUD, and either invested them in AUD, or deposited them in a savings account which would have earned interest in AUD. Accordingly I am satisfied that, notwithstanding that the monies were to be paid in USD, the plaintiff's loss of the use of the Settlement Sum has "come home" (to borrow the words of Giles J in the passage italicised above) in New South Wales. As such, I consider the appropriate rate of interest to be the pre-judgment interest rate specified in Supreme Court Practice Note SC Gen 16- Pre-judgment Interest rates, which was, for the relevant period, 6.5%.

Appropriate rate for post-judgment interest

Under subs 101(1) and (2) of the Civil Procedure Act, interest is payable at the prescribed rate on so much of the amount of a judgment (exclusive of any order for costs) as is from time to time unpaid after 28 days of the date of judgment, unless the Court orders otherwise. That a judgment is given in a foreign currency may provide a reason for the Court to order that interest be payable at a rate other than the prescribed rate. However, for substantially the same reasons as I consider the appropriate rate for pre-judgment interest to be the conventional rate provided for in the relevant Practice Note and the UCPR, I consider the appropriate rate post-judgment to be the one provided for by the UCPR. The rate is presently 8.5%.

Gross sum costs order: s 98(4)(c) of the Civil Procedure Act

The plaintiff is entitled to an order for costs in his favour in accordance with the principle that costs follow the event. He seeks a gross sum costs order under s. 98(4)(c) of the Civil Procedure Act. The power to make such an order is not confined and may be made whenever the circumstances warrant it: Harrison v Schipp (2002) 54 NSWLR 738 at [21]; see also Hamod v The State of New South Wales [2011] NSWCA 375 at [813]-[820] per Beazley JA.
In determining the amount of a gross sum costs order, regard is to be had to the criteria in s 364(1) of the Legal Profession Act 2004 (NSW), which sets out the criteria to be applied by a costs assessor when determining a reasonable amount for party/party costs: whether it was reasonable to carry out the work to which the costs related; whether or not the work was carried out in a reasonable manner; and the fair and reasonable amount of costs for the work concerned.
The defendants have not complied with their obligations under the Terms of Settlement. It cannot be assumed that, in light of this history, they will comply with the assessment process for costs or that they will not default in complying with any costs order. The first defendant is based in the BVI and the second defendant may have no assets. In these circumstances it may be both difficult and expensive for the plaintiff to enforce any costs order and, in my view, unreasonable to require him to have to incur further costs in having his costs assessed. Moreover, any costs order will ultimately need to be registered as a judgment, and enforced, in the BVI. This exercise cannot take place until the amount due is quantified.
The defendants' conduct has undoubtedly contributed to the cost of these proceedings. Had they entered appearances and nominated a legal representative to accept service, the plaintiff would not have been put to the trouble and expense of arranging service interstate and in the BVI or of arranging the expert evidence of Mr Harby on a question of BVI law.
I am satisfied that it is to make a gross sum costs order.

Amount of the gross sum costs order

The plaintiff sought a gross sum costs order in the sum of $17,322.83. I am satisfied on the basis of Ms Costigan's affidavits that this amount, which has been discounted to reflect the likely outcome if they were assessed on a party/party basis, is reasonable. The copies of tax invoices and costs agreements constitute adequate information to enable the Court to properly and fairly make an assessment of the costs that have been incurred, and to properly and fairly fix a gross sum costs order.
The plaintiff also claimed a sum of $61.78 for interest on costs under s 101(4) and 101(5)(a) of the Civil Procedure Act. Although the amount claimed is modest, in deference to Ms Muir's careful submissions, I propose to address the claim although I consider it preferable to round up the amount claimed for gross sum costs, rather than to make a specific award for interest.
Section 101(4) of the Civil Procedure Act permits the court to order that interest be paid on any amount payable under an order for the payment of costs. Section 101(5)(a) prescribes that interest under subs (4) is to be calculated at the prescribed rate or at any other rate as the court may order, as from the date(s) on which the costs concerned were paid. Interest should be calculated in respect of each payment of costs actually made, on the portion of that payment that reflects the ratio between the total amount of the costs actually ordered to be paid and the total of the costs actually claimed: Lahoud v Lahoud [2006] NSWSC 126 at [82]-[85] per Campbell J.
Interest is intended to be compensatory, on the basis that the person entitled to costs has been wrongly required to spend money on litigation to enforce established rights. It is not clear whether, in the absence of any countervailing discretionary factor, it is appropriate that an order for interest on costs be made to compensate the party having the benefit of a costs order for being out of pocket in respect of the costs it has paid (Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd [2014] NSWCA 158 at [403] (Gleeson JA, Ward and Emmett JJA ; agreeing)), or whether some positive case must be made in support of the application: Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd (No 2) [2013] NSWCA 211; 84 NSWLR 436 at [36] (Meagher, Barrett and Ward JJA).
In the circumstances of the present case I am satisfied that the plaintiff has made out a positive case for interest, if one be required. The Terms of Settlement were annexed to the minute of orders in the Commercial List Proceedings. The defendants have breached the Terms of Settlement sanctioned by the Court. They have also put the plaintiff to a great deal of expense by having failed to respond to any of his communications, and by not taking any active part in these proceedings.

Orders

Following the conclusion of the hearing on 31 March 2015 I made the following orders: The Court orders that: Leave to proceed against the first defendant 1 The plaintiff have leave to file in Court a Notice of Motion dated 31 March 2015 seeking leave to proceed against the first defendant under rule 11.4(1) of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR). 2 Pursuant to rule 11.4(1) of the UCPR, that the plaintiff have leave to proceed against the first defendant. Service 3 Pursuant to rule 11.5 of the UCPR, the Court: (a) Confirms the service of the Summons filed on 23 December 2014 on the first defendant; (b) Confirms the service of the Notice of Motion filed on 23 December 2013 on the first defendant; (c) Confirms the service of the Notice of Motion filed on 16 March 2015 on the first defendant. 4 Pursuant to s 17(1)(b) of the Service and Execution of Process Act 1992 (Cth), abridge the time within which the second defendant must enter an appearance to the Summons filed on 16 March 2015 to 30 March 2015. Judgment, interest, costs and interest on costs 5 Pursuant to s. 73 Civil Procedure Act 2005 (NSW) (CPA), rule 36.1 of the UCPR or rule 13.1 UCPR, judgment be entered in favour of the plaintiff for US Dollars (USD) $800,000, being the sum specified in the Terms of Settlement annexed to the orders made by this Court on 21 July 2014 in Commercial List proceedings no. 2011/314267-001. 6 Order that interest be payable on the judgment sum specified in order 5 from 29 April 2015 at the rate of 8.5%, which rate shall apply until 30 June 2015. If the judgment, or any part of it remains outstanding after 30 June 2015, the applicable interest rate is that provided for in UCPR 36.7(1), namely 6% above the cash rate published by the Reserve Bank for the commencement of each corresponding 6 month period. 7 Pursuant to s. 98(1) of the CPA, order the defendants to pay the plaintiff's costs of these proceedings. 8 Pursuant to s. 98(4)(c) of the CPA, order that the plaintiff is entitled to a specified gross sum of $ AUD$17,500 instead of assessed costs. 9 Pursuant to s 100 of the CPA, order the defendants to pay the plaintiff a total of USD $20,252 in pre-judgment interest, which consists of the sum of: (a) Interest on USD $200,000 from 19 October 2014 to 16 November 2014: USD $1,032; and (b) Interest on USD $800,000 from 17 November 2014 to 31 March 2015: USD $19,220. Leave to amend the Summons 10 Pursuant to rule 19.1 of the UCPR and s. 64(1) CPA, the plaintiff have leave to amend the Summons filed on 23 December 2015 to include the words "This Summons is intended to be served on a defendant, Core Mining Limited, outside Australia" and "The plaintiff intends to proceed in respect of the second defendant, Core Mining Pty Ltd, under the Service and Execution of Process Act 1992 (Cth)." Other 11 The plaintiff have leave to file the amended Summons in Court today. 12 The plaintiff have leave under rule 11.5 of the UCPR to serve these orders on the first defendant in the British Virgin Islands and order that service may be effected by pre-paid registered post. 13 The directions hearing listed for 2 April 2015 be vacated.

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: 08 April 2015

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