Stramit Corporation Pty Ltd v Stone Homes Pty Ltd

Supreme Court of NSW|2014-04-29|Before: Stevenson J

Judgment 1In my judgment of 1 April 2014 (Stramit Corporation Pty Ltd v Stone Homes Pty Ltd [2014] NSWSC 370) I concluded that: (a)Stone Homes and Mr and Mrs McFadden were not in contravention of those parts of the Restraint that are the subject of FBHS's claim, as those aspects of the Restraint should properly be construed; (b)those aspects of the Restraint are, however, valid; and (c)Stone Homes had not established that Mr Richards made the representation to Mr McFadden for which it contended. 2Accordingly, on 1 April 2014 I ordered that: (a)the Amended Statement of Claim be dismissed; (b)the First Cross Claim be dismissed; (c)the Second Cross Claim be dismissed. 3I directed the parties to provide submissions as to costs by 3 April 2014. The parties complied with that order but sought further time to respond to the submissions made by the other. 4Accordingly, on 11 April 2014, by consent, I made directions for the provision of further submissions by FBHS by 14 April 2014 and by Stone Homes by 29 April 2014. 5The parties agreed that, absent an application for oral argument made by 30 April 2014, I should decide the issue on the papers. 6I propose to make the following orders: (1)The plaintiffs pay the defendants' costs thrown away by the vacation of the hearing date of 2 July 2013. (2)In this part of the order: X - equals the total amount of costs and disbursements which the defendants have paid or are liable to pay to their legal advisers in connection with these proceedings. Y - equals the total amount of costs and disbursements allowed on assessment to the defendants in connection with these proceedings. The "Allowed Percentage" equals ((y/x) x 100)% Order the plaintiffs to pay to the defendants interest on the costs payable under Order 1 above at the rates set out in Schedule 5 of the Uniform Civil Procedure Rules on the Allowed Percentage of each amount of costs and disbursements actually paid by the defendants, from the date of such payment until such time as the plaintiffs have paid the costs due to the defendants under Order 1 above. (3)Grant liberty to the defendants to apply on three days' notice to the plaintiffs for an order for payment of a specific amount in respect of the interest awarded upon costs pursuant to Order 2 above. (4)Otherwise there be no order as to costs to the intent that the parties bear their own costs.

The costs reserved arising out of the vacation of the hearing dates commencing 2 July 2013 7The proceedings were commenced on 23 November 2012. 8On 1 March 2013, Pembroke J ordered that: (1)FBHS serve its evidence by 5 April 2013. (2)Stone Homes serve its evidence by 13 May 2013. (3)FBHS serve evidence in reply by 3 June 2013. (4)Stone Homes serve any further evidence by 24 June 2013. (5)The matter be listed for hearing for three days commencing 27 August 2013. 9On 4 March 2013 the hearing date of 27 August 2013 was, at the request of FBHS and with the consent of Stone Homes, vacated and the matter listed for hearing for three days commencing 2 July 2013. 10The plaintiffs served their evidence on 1 and 2 May 2013; almost a month late. My attention has not been drawn to any explanation given to the Court (then or now) by FBHS for that delay. 11The matter was listed for directions before Pembroke J on 3 May 2013 on which occasion Pembroke J said to the solicitor for FBHS: "Mr McGregor, the problem is that having reluctantly made an order for expedition, the list only works if Plaintiffs in particular comply with the directions that are made and to be a month late, for whatever reason, and there is no explanation that you have given me, no affidavit explanation, really means that the Plaintiff is the author of its own misfortune and I had in mind the possibility of extending the time for the Defendants' evidence to Friday 14 June but I'm not prepared to do that. It is too tough." 12Ultimately, Pembroke J ordered that Stone Homes serve its evidence by 24 June 2013. 13Pembroke J maintained the hearing date of 27 August 2013 at FBHS's request. Pembroke J said to FBHS's solicitor: "The onus is on you. If the date has to go, ultimately the fault lies with the delay which has occurred between April and May." 14Pembroke J listed the matter for further directions on 26 June 2013. 15FBHS served its evidence by 25 June 2013 (one day late). 16At the directions hearing before Pembroke J on 28 June 2013, the hearing date of 2 July 2013 was vacated as FBHS needed more time than was available to respond to Stone Homes' evidence. 17In those circumstances, I accept Stone Homes' submissions that the vacation of the 2 July 2013 hearing date was the product of FBHS's unexplained delay in serving its evidence in compliance with Pembroke J's orders of 1 March 2013. 18In those circumstances I accept Stone Homes' submission that the plaintiffs should pay the defendants' costs thrown away by the vacation of the 2 July 2013 hearing dates. 19I also accept Stone Homes' submission that it should have interest on those costs pursuant to s 101(4) of the Civil Procedure Act 2005. There is no requirement that special circumstances be shown before any such order be made (for example, Lahoud v Lahoud [2006] NSWSC 126 per Campbell J at [82]; cited with approval by Macfarlan JA, with whom Tobias AJ agreed in Drummond and Rosen Pty Limited v Easy (No 2) [2009] NSWCA 331; cf Illawarra Hotel Company Pty Limited v Walton Construction Pty Limited (No 2) [2013] NSWCA 211; 84 NSWLR 436 per Meagher, Barrett and Ward JJA at [38] and [39]) and I see no reason why Stone Homes should not be compensated for being out of its money since then. Although I doubt that it is necessary (cf Zepinic v Chateau Constructions (Aust) Limited (No 2) [2014] NSWCA 99 per Basten, Gleeson and Leeming JJA at [43] and [44]) there is evidence that Stone Homes has paid all costs incurred by it prior to 2 July 2013. I am also persuaded I should grant the defendants the liberty to apply set out in the third order at [6] above.

Stone Homes' offers of 25 February 2013 and 2 October 2013 20Stone Homes made offers of compromise in letters dated 25 February and 2 October 2013. 21Both letters offered to settle the matter on the basis of a verdict for Stone Homes on FBHS's claim and a verdict for FBHS of Stone Homes' cross claim with no order as to costs. 22The 25 February 2013 offer was expressed to be open for 21 days. The 2 October 2013 offer contained no time limit. 23As Stone Homes accepts in its written submissions, its offer was, in effect, to "walk away" and pay its own costs. 24The letters were not expressed to be "Calderbank" letters but, assuming they should be so treated, the conclusion to which I have come is that FBHS's failure to accept either offer does not warrant the making of an adverse costs order. 25The principles associated with Calderbank offers are well known and were summarised by Black J in Ryding v Miles (No 2) [2012] NSWSC 312 at [15] as follows: "In order to be entitled to indemnity costs under a Calderbank offer, the Defendants must establish both that the offer represents a genuine element of compromise of the dispute and that it was unreasonable for the Plaintiff to reject it. The making of a Calderbank offer does not automatically result in a favourable costs order, even if the judgment is more favourable to the party making the offer than the terms of the offer". (citation omitted) 26Here, Stone Homes has not achieved a result more favourable than its offer (leaving aside the question of costs); the result is as offered. 27I accept that both offers represented compromise in that Stone Homes offered to bear its own costs, which were in the order $57,000 as at 25 February 2013 and some $200,000 as at 2 October 2013. 28However, I am not satisfied that it was unreasonable of FBHS not to accept the offers. 29Ultimately FBHS has failed because of my conclusions as to the proper construction of the Restraint and as to the alleged similarity between the "concept" inherent in the businesses of the parties. 30Stone Homes drew attention to the observations of Spigelman CJ, Beazley and McColl JJA in Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 at [29]: "As is usually the case in proceedings turning on an issue of contractual interpretation, this was an all or nothing case. The claims did not involve a process of evaluation or assessment in which the end result could vary over a range. Either one party or the other party was correct." (citation omitted) 31Stone Homes also draws attention to the fact that, until part way through the hearing, FBHS relied only on cl 5(b) of the Restraint and only amended its claim to raise a breach of cl 5(a) of the Restraint during the hearing (see [52] to [59] of my judgment of 1 April 2014). 32However, there is something to be said for FBHS's submission that the issue of construction was "challenging" and "delicately poised". Although I ultimately came to the conclusions set forth at [72] to [104] of my 1 April 2014 judgment I confess to not having found the issue an easy one. 33In those circumstances I am not persuaded that it was unreasonable of FBHS not to accept Stone Homes' offers and do not propose to make any special costs order arising from the making of the offers.

The result in the proceedings 34When I delivered judgment, I offered the preliminary observation that the result in the case was a "nil all draw" and suggested that an appropriate costs order might be that there be no order as to costs. 35Having carefully considered Stone Homes' submissions to the contrary, I remain of that opinion. 36The substance of the matter is that both parties have failed to make out the case for which they contended. 37FBHS failed on what I regard to be the critical question of the construction of the Restraint and on the issue of the alleged similarity between the business processes of the parties. FBHS has, however, succeeded in relation to the question of the reasonableness of the Restraint. 38On the other hand, Stone Homes has failed completely in relation to its cross claim. 39Stone Homes has offered an analysis of the number of affidavit paragraphs, submissions paragraphs, transcript pages and judgment paragraphs devoted to the various issues and submitted that a fair assessment is that FBHS should pay 65 per cent of Stone Homes' costs. 40I think that an unrealistic way to look at the matter. As FBHS submits, the substance of the matter is that each party has failed to make out the case that they came to Court to establish. In my opinion, it has been a "nil all draw" and the appropriate order is that there be no orders as to costs. 41For those reasons, I make the orders referred to in par [6].

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