Waddell v mathematics.com.au Pty Ltd

Supreme Court of NSW|2013-07-25|Before: Rothman J

Judgment 1On 1 March 2013, the Court delivered judgment (hereinafter, "the first judgment") and reasons for judgment (hereinafter, "the principal judgment") awarding damages to Mr Waddell for breach of contract, being non-payment of wages and unpaid leave, and ordered that the defendant pay the plaintiff's costs as agreed or assessed. In the judgment, the Court granted the parties leave to address on any different or special order as to costs, and directed the parties to bring in short minutes. 2The defendant, mathematics.com.au Pty Limited (hereinafter, "MATHS") takes advantage of that leave and seeks an order that the plaintiff pay the defendant's costs of and incidental to the proceedings. The basis for that submission is an offer or offers to compromise the proceedings purportedly made by MATHS to Mr Waddell. There is also a dispute as to the calculation of the damages awarded.

Facts 3On 20 December 2011, the solicitors for MATHS sent a letter to the plaintiff's solicitors enclosing a document purporting to be an Offer of Compromise pursuant to Part 20.26 of the Uniform Civil Procedure Rules 2005 (hereinafter, "UCPR"). Omitting the cover sheet, the Offer of Compromise, annexed to the affidavit of Daniel Delfino of 17 April 2013, was in the following terms: "Offer of Compromise This offer is made in accordance with Part 20 Rule 26 and all other relevant rules of the Uniform Civil Procedure Rules 2005. The Defendant offers to compromise the Plaintiff's claim as follows: 1. The Defendant to issue to the Plaintiff 240,000 shares in the Defendant. 2. The Defendant to pay the Plaintiff the sum of $33,000 inclusive of interest. 3. This offer is exclusive of costs. 4. This offer is open for acceptance for a period of 28 days from the date this offer is made." [Signatures and other formalities omitted.] 4MATHS employed Mr Waddell commencing 12 January 2009. The schedule of wages paid to Mr Waddell (and attached to the affidavit of Sam Ingui of 18 April 2013) shows the first fortnightly payment was made on 23 January 2009. I conclude that, as a matter of fact, Mr Waddell was paid fortnightly in arrears, which is consistent with the contractual terms before the Court. The last payment received did not include a payment for the fortnight ending 28 October 2010, which was the fortnight for which payment was ordered by the Court in the first judgment. 5The annual salary was $150,000 per annum (being the salary under the second contract) providing for a fortnightly pay of $5,753.74. That amount is payable. 6Further, on the material before the Court, superannuation has not been paid in accordance with clause 3 of the second contract and 9 per cent, being the applicable superannuation rate, is payable for the fortnight's pay. 7The first judgment declared that Mr Waddell was entitled to 46.6 days' leave at the date of termination, which, on the foregoing calculations, would be an amount of $26,812.43. That amount is also payable. 8The leave loading of 17.5 per cent is payable on ordinary annual leave alone. The leave that was compensatory of the overtime and requirement to be away from home overnight is not ordinary annual leave and does not attract a loading of 17.5 per cent. The annual leave owing and for which damages are payable is 37 days' leave, making for a payment of $21,288.84 (being 37 x $5,753.74 ÷ 10), which is part of the earlier amount of $26,884.94. 9The proceedings have an unusual history. The claim was fully litigated on the basis that share entitlements, pursuant to the contract, had not issued and were owing. Damages were sought to compensate for the breach of the contract. 10After the judgment was reserved, but before delivery of judgment, the parties reached agreement on the issuing and receipt of shares. Leaving aside a temporary and ultimately resolved difficulty associated with an alleged missed dividend, that resolution dealt with the major aspect of damage agitated before the Court during the course of the proceedings. 11During the course of the proceedings evidence was adduced, which evidence was accepted, that the shares were worth approximately 72 cents each. This evidence was based upon a previous sale at 75 cents. The difficulty is that the true value of the shares is wholly unclear. These are shares in a private company, the sale price of which would depend on an available purchaser, presumably one already connected with the company. 12As a consequence, while the Court for the purpose of assessing damage took the view that the shares were worth at least the 72 cents that was claimed, it is unclear what the true value of the shares would be in any market (assuming a buyer could be found). 13As earlier stated, annexed to the affidavit of Daniel Delfino of 17 April 2013 is an Offer of Compromise dated 20 December 2011. The Offer of Compromise was sent prior to the hearing of the matter. It was not accepted. The share arrangement that settled that aspect of the claim was accepted after the conclusion of the final submissions.

Calculation of damage 14As stated in the foregoing facts, some of which are contentious, the plaintiff was entitled, pursuant to the judgment of 1 March 2013, to damages for the period up to 28 October 2010 (one fortnight) and 46.6 days leave. The calculation of leave is contentious, although it is disappointing, in the circumstances, that the parties could not agree on the rate of pay for a fortnight. 15Nevertheless, the rate of pay per annum was $150,000. A weekly salary would be calculated by dividing that annual salary by 52.14 (365/7) multiplied by 2, which is an amount of $5,753.74 per fortnight. 16As a consequence of the foregoing calculation, the plaintiff is entitled to $5,753.74 in wages together with $517.81 superannuation, calculated at 9 per cent of the gross wage. I accept that superannuation is payable under clause 3 of the second contract and there is no evidence that the superannuation for that fortnight has been paid. Rather, the evidence (particularly the schedule of superannuation payments) indicates it has not been paid. 17The outstanding leave entitlement of 46.6 days, based on the foregoing calculation, amounts to $26,812.43 and the leave loading (17.5 per cent) is expressed to be payable on the "4 weeks' paid annual leave". As recited at [5] of the principal judgment, clause 7 of the second contract entitled Mr Waddell "to 4 weeks' annual leave p.a., with leave loading at the standard rate ... and for every day necessarily spent away from home ... he shall accrue 0.5 extra day's annual paid leave". 18The contract, properly construed, refers to the loading being paid on the ordinary entitlement to annual leave. The additional half-day's leave to compensate for the requirement to spend time away from home is additional to the four weeks' leave and loading. The contract does not prescribe additional loading; only additional leave. Additional leave that is granted in compensation for the necessity to be away from home overnight is not subject to "the standard loading" (i.e. 17.5 per cent). 19The compensatory additional leave is in lieu of "overtime" and does not attract any loading. On the foregoing basis, there are, as stated, 46.6 days of paid leave but only 37 days of leave that have accumulated at 4 weeks per year. The amount payable for annual leave loading is $3,725.55 (calculated in the following way: 37 x $5,753.74 ÷ 10 = $21,288.84 x 17.5%). 20I should make clear that leave had been taken (as Exhibit C evidences) and I have calculated "ordinary annual leave" by taking the approach that leave utilised would first reduce the additional leave before reducing the four weeks' annual leave. 21As a consequence of the above, the amount that is payable in damages, before the calculation of interest, is calculated by adding $5,753.74 (2 weeks' pay), $517.84 (superannuation), $26,812.43 (46.6 days at $5,753.74 for 10 days) and $3,725.55 (leave loading). The amount of damages (before any interest) is $36,809.56, plus a further amount of $8,132.52 for interest up to judgment, pursuant to s 100 of the Civil Procedure Act 2005. 22As the offer from MATHS was, ignoring the share dispute, for $33,000, inclusive of interest, the offer is not equal to or greater than the damages to be awarded, and interest could not affect that conclusion. 23Interest before judgment calculated from 28 October 2010 until 25 July 2013 is $8,132.52, in accordance with the following table: Date from Date To Base Days In Period Rate Daily Rate Simple Interest 28/10/2010 31/12/2010 36,809 65 8.5% 0.02327% 556.75 01/01/2011 30/06/2011 36,809 181 8.75% 0.02396% 1,596.32 01/07/2011 31/12/2011 36,809 184 8.75% 0.02396% 1,622.78 01/01/2012 30/06/2012 36,809 182 8.25% 0.02259% 1,513.36 01/07/2012 31/12/2012 36,809 184 7.5% 0.02053% 1,390.47 01/01/2013 25/07/2013 36,809 206 7% 0.01916% 1,452.84 Total Interest: 8,132.52

24The amount payable to Mr Waddell, inclusive of pre-judgment interest, as at the date of judgment is $36,809.56, plus interest of $8,132.52, resulting in damages, including interest up to judgment, of $44,942.08. That amount will be awarded as damages; interest will accrue on $36,809.56 from the date of judgment until the date upon which the amount is paid. 25It should be made clear that were the original judgment, drafted but not delivered because of the agreement of the parties as to the shares, to have issued, the damages for the breach of the share arrangement would have been calculated at 72 cents per share. I am not convinced that the realisable sale price, given the limited market, is 72 cents per share. As a consequence, Mr Waddell's acceptance of the shares seems to have realised a significant saving to the defendant. 26Further, given the nature of the shares, which were special issue shares, the cost to the defendant of the issue of the shares (and their acceptance) was nil. The cost to the existing shareholders was negligible compared with the damages that would have been awarded, resulting in a significant saving to the defendant. 27In those circumstances I am not prepared to order indemnity costs as sought by the defendant on and from the expiry of the Offer of Compromise. 28The principles to be applied to costs are that costs are neither a punishment nor a reward. They are part of a compensation for the enforcement of or the defence of a party's rights. In that sense costs are compensatory: Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 at 543, per Mason CJ; Ohn v Walton (1995) 36 NSWLR 77 at 79, per Gleeson CJ. 29As has been stated innumerable times, in ordinary circumstances costs follow the event: s 98 of the Civil Procedure Act and UCPR r 42.1. The Civil Procedure Act gives the Court a wide discretion to award costs and discretion as to the identity of the party (and, in some circumstances, non-party) responsible for the costs and the basis of the assessment of those costs. Such discretion is not unfettered. The Court must exercise the discretion judicially. The UCPR deal with the manner of the exercise of that discretion. 30In particular, the provisions of UCPR r 42.15 deal with the situation where an offer is made by a defendant and judgment issues that is as or less favourable to the plaintiff than the offer that had been made. In those circumstances, ordinarily the situation that arises is, regardless of the event, the defendant is entitled to an order against the plaintiff for the defendant's costs, assessed on an indemnity basis, in current circumstances, from the day following the day upon which the offer was made: see UCPR r 42.15(2)(b). 31The offer that was made was inclusive of interest and exclusive of costs. The UCPR require that the offer of compromise must be exclusive of costs: UCPR r 20.26(2). 32Applying the principles associated with an offer by a defendant to the calculations applicable in the present circumstances, and leaving aside interest, the amount payable by the defendant is $36,809.56 plus interest. The offer of 20 December 2011 was for $33,000 inclusive of interest. 33Whether or not the offer complies with the UCPR, the offer is less than that ordered by the Court. The foregoing pays no regard to the shares. 34No regard is paid to the shares on two bases: firstly, that aspect of the dispute between the parties has been resolved; secondly, for the reasons already described associated with the nature of the shares in a private company, the value of the shares is anything but certain and the Court is not satisfied that the plaintiff will or would realise a price for the shares that would have been as much as the damages that were to have been awarded, were the proceedings not to have settled in relation to that aspect of the claim. In the circumstances, I consider it appropriate to ignore that aspect in determining whether to order indemnity costs. Nor do I consider it was unreasonable, in that regard, for the plaintiff to reject that aspect of the original offer. 35For the foregoing reasons, order 2 of the orders issued on 1 March 2013 will be the basis of the costs order issued by the Court, without alteration. 36The Court makes the following orders: (1)Judgment for the plaintiff in the sum of $44,942.08; (2)Interest is payable on the amount of $36,809.56 on and from the date of these orders pursuant to s 101 of the Civil Procedure Act 2005 at the rate prescribed in the Uniform Civil Procedure Rules 2005; (3)The defendant shall pay the plaintiff's costs of and incidental to these proceedings, as agreed or assessed; (4)Proceedings are dismissed.

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: 25 July 2013

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