Yara Nipro P/L v Interfert Australia P/L [2010] QCA 164

SUPREME COURT OF QUEENSLAND

CITATION: Yara Nipro P/L v Interfert Australia P/L [2010] QCA 164

PARTIES: INTERFERT AUSTRALIA PTY LTD / ACN 112 758 666 / (defendant/appellant/cross respondent) / v / YARA NIPRO PTY LTD / ACN 066 700 276 / (plaintiff/respondent/cross appellant) / v / COSIMO UBALDINO / (third party/not party to the appeal)

FILE NO/S: Appeal No 12074 of 2009 / Appeal No 2349 of 2010 / SC No 8849 of 2008

DIVISION: Court of Appeal

PROCEEDING: General Civil Appeal – Further Orders

ORIGINATING COURT: Supreme Court at Brisbane

DELIVERED ON: Judgment delivered 28 May 2010 / Further Orders delivered 25 June 2010

DELIVERED AT: Brisbane

HEARING DATE: 19 April 2010

JUDGES: Muir and Fraser JJA and Ann Lyons J / Judgment of the Court

ORDERS: Vary paragraphs a), b) and c) of order 2 of the orders made on 28 May 2010 so that the orders of the Court, as so varied, provide:Dismiss the appeal in Appeal No 12074 of 2009. Allow the cross appeal in Appeal No 12074 of 2009, set aside the orders made by the trial judge on 30 September 2009 dismissing the plaintiff’s claim and giving judgment for the defendant on the counterclaim for $77,058.65 and the order made by the trial judge on 5 February 2010 ordering the plaintiff to pay the defendant’s costs upon the claim and counterclaim, and instead order that:a)The defendant is to pay the plaintiff $1,040,133.08;b)The defendant is to pay the plaintiff’s costs of the claim, to be assessed on the indemnity basis;c)The counterclaim is dismissed with costs to be assessed on the standard basis.The appellant/cross respondent is to pay the respondent/cross appellant’s costs of the appeal and cross appeal in Appeal No 12074 of 2009, to be assessed on the standard basis. The appeal in Appeal No 2349 of 2010 against the order refusing leave to appeal made by the trial judge on 5 March 2010 is dismissed with costs to be assessed on the standard basis.

CATCHWORDS: PROCEDURE – COSTS – GENERAL RULE – COSTS FOLLOW THE EVENT – COSTS OF WHOLE ACTION – GENERALLY – where the respondent/cross appellant seeks the costs of the claim and counterclaim in the trial division and the costs of the appeal and cross appeal on the indemnity basis – where costs are sought on the grounds that the respondent/cross appellant obtained a judgment no less favourable than an offer made before trial – where the appellant/cross respondent submits that it pay the costs of the appeal, cross appeal and counterclaim, and the costs of the claim not referrable to its defence of the Trade Practices Act 1974 (Cth) claim – where the appellant/cross respondent opposes the application for the costs on the indemnity basis and submits that rule 360 Uniform Civil Procedure Rules 1999 (Qld) is not applicable in the appeal and that its refusal of the offer before trial was reasonable in the circumstances – whether the respondent/cross appellant should have its costs of the claim and counterclaim on the indemnity basis – whether respondent/cross appellant should obtain costs on the appeal and cross appeal on the indemnity basis / Trade Practices Act 1974 (Cth), s 52, s 58 / Uniform Civil Procedure Rules 1999 (Qld), r 360 / Australand Corporation (Qld) Pty Ltd v Johnson & Ors [2007] QSC 128, cited / Ballesteros v Chidlow & Anor [2006] QCA 368, cited / BHP Coal Pty Ltd and Ors v O & K Orenstein & Koppel AG and Ors (No 2) [2009] QSC 64, cited / Calderbank v Calderbank [1976] Fam 93; [1975] 3 WLR 586, cited / Deepcliffe P/L & Anor v The Council of the City of Gold Coast & Anor [2001] QCA 396, cited / Equuscorp Pty Ltd & Anor v Glengallan Investments Pty Ltd & Ors [2006] QCA 414, cited / Hanak v Green [1958] 2 QB 9, cited / Sultana Investments Pty Ltd v Cellcom Pty Ltd (No 2) [2009] 2 Qd R 287; [2008] QCA 398, cited / Tamwoy v Solomon [1996] 2 Qd R 93; [1995] QCA 447, cited / Tector v FAI General Insurance Company Ltd [2001] 2 Qd R 463; [2000] QCA 426, cited / Todrell Pty Ltd v Finch (No 2) [2008] 2 Qd R 95; [2007] QSC 386, cited / Wright & Anor v Keenfilly P/L & Anor [2007] QCA 148, cited / Yara Nipro P/L v Interfert Australia P/L & Anor [2010] QCA 128, cited / Yara Nipro P/L v Interfert Australia P/L & Anor [2009] QSC 314, cited

COUNSEL: B O'Donnell QC, with N Ferrett, for the appellant / P Morrison QC, with G Handran, for the respondent

SOLICITORS: McKays Solicitors for the appellant / Hemming and Hart Lawyers for the respondent

THE COURT: On 28 May 2010 the Court made the following orders:¹

“1.Dismiss the appeal in Appeal No 12074 of 2009.

Allow the cross appeal in Appeal No 12074 of 2009, set aside the orders made by the trial judge on 30 September 2009 dismissing the plaintiff’s claim and giving judgment for the defendant on the counterclaim for $77,058.65 and the order made by the trial judge on 5 February 2010 ordering the plaintiff to pay the defendant’s costs upon the claim and counterclaim, and instead order that:

a)The defendant is to pay the plaintiff an amount to be fixed by the Court;

b)The defendant is to pay the plaintiff’s costs of the claim, to be assessed on the standard basis;

c)Unless the Court is earlier notified that the parties have agreed upon the appropriate orders, each party has leave to make one concise submission in writing within 7 days of the date of delivery of this judgment as to the amount to be fixed by the Court under paragraph (a) to reflect the Court’s reasons in that respect and as to the costs of the counterclaim.

The appellant/cross respondent is to pay the respondent/cross appellant’s costs of the appeal and cross appeal in Appeal No 12074 of 2009, to be assessed on the standard basis.

The appeal in Appeal No 2349 of 2010 against the order refusing leave to appeal made by the trial judge on 5 March 2010 is dismissed with costs to be assessed on the standard basis.”

Judgment sum

Pursuant to order 2 c) the parties have notified the Court that the amount to be fixed for order 2 a) is $1,040,133.08. Nipro’s submissions set out the following explanation of that sum:

“Interest on the counter-claim

The rate of 12% applies to both claim and counterclaim; for the counterclaim, it runs from 1 July 2008 [Interfert Australia P/L v Yara Nipro P/L [2010] QCA 128, paragraph [71]].

Interest on $907,061 @ 12% from 1 July 2008 to 28 May 2010:

(a)1 July 2008 to 28 May 2010 = 696 days;

(b)907,061 x 12% @ 697 days = $207,555.44.

Interest on Nipro’s claim

The amount for the claim is [Interfert Australia P/L v Yara Nipro P/L [2010] QCA 128, paragraph [70]-[71]]:

(a)$3,537,975.20;

(b)LESS $1,804,004.91 (the amount payable under the original contract);

(c )LESS $80,000 (extra handling costs);

(d)PLUS the deposit $176,000;

(e)The resultant figure is $1,829,970.29. Interest should however only run on the sum of $1,653,970.29 as the deposit is dealt with below.

Reference to Ex 168A (Appeal Book p 745) reveals that:

(a)the purchases by Nipro were made incrementally between 30 October and 30 December 2008; and

(b)by 11 December the cost of purchases exceeded half the total.

Interest should be approached in a broad and practical way [Fire and All Risks Insurance Co Limited v Callinan (1978) 140 CLR 427 at 432-433; Cullen v Trappell (1980) 146 CLR 1 at 22] In the instant case, it is practical to take 11 December 2008 as the date from which interest should run on the claim. [The date is half way through the period; thus, applying it permits an assessment of the interest on the total of what were progressively accruing sums. The list of purchases by Nipro is contained in exhibit 168A - Appeal Book pages 745-748.].

Interest on $1,829,970.29 @ 12% from 11 December 2008 to 28 May 2010:

(a)11 December 2008 to 28 May 2010 = 533 days;

(b)$1,653,970.29 by 12% @ 533 days = $289,829.97.

Interest on the deposit

The deposit was $176,000. It was repayable when the contract was terminated. Interest should run from 1 October 2008.

Interest on $176,000 @ 12% from 1 October 2008 to 28 May 2010:

(a)1 October 2008 to 28 May 2010 = 604 days;

(b)$176,000 by 12% @ 604 days = $34,949.26.

Total interest on claim

Total interest on claim = $289,829.97 + $34,949.26 = $324,779.23.

Amount to be fixed by the Court – sums to be set off

The sums to be set off are:

(a)Claim plus interest: $1,829,970.29 + $324,779.23 = $2,154,749.52

(b)LESS Counterclaim plus interest: $907,061 + $207,555.44 = $1,114,616.44;

Therefore the amount to be fixed by the Court [Interfert Australia P/L v Yara Nipro P/L [2010] QCA 128, paragraph [74], Order 2(a)] is $1,040,133.08.”

That amount should be fixed as the amount of Nipro’s judgment under order 2 a) of this Court’s orders made on 28 May 2010.

The parties’ arguments about costs

Nipro submits that it should have its costs of the counterclaim for the following reasons: Nipro’s statement of claim allowed a set off for Interfert’s counterclaim and that counterclaim was also admitted in Nipro’s reply and answer; the trial was conducted on that footing; there was no issue as to the counterclaim, the only evidence upon it being the dates of invoices adduced in order to establish a date from which interest was to run; and because the result of this Court’s finding is that Nipro’s claim over-topped Interfert’s counterclaim, the counterclaim should be dismissed with costs.

Nipro submits that those costs and its costs of the claim in the trial division and the appeal and cross appeal should be assessed on the indemnity basis. It argues that it has obtained a judgment no less favourable than an offer it made before the trial, on 9 July 2009, under Chapter 9, Part 5 of the Uniform Civil Procedure Rules 1999 (Qld). That offer, which was expressed to be “without prejudice save as to costs,” was that Nipro would accept $700,000 (inclusive of interest) plus costs on the standard basis in full and final satisfaction of the claim and counterclaim.

Interfert argues that the appropriate cost orders are that Interfert pay Nipro’s costs of the appeal and cross appeal, Nipro pay Interfert’s costs of the counterclaim in the trial division, Nipro pay so much of Interfert’s costs of Nipro’s claim in the trial division as were directly referrable to Interfert’s defence against Nipro’s claim under the Trade Practices Act 1974 (Cth) (“the TPA claim”), and that Interfert pay so much of Nipro’s costs of Nipro’s claim in the trial division as are not referrable to the TPA claim.

Interfert does not oppose the grant of leave to enable Nipro to apply for costs on the indemnity basis in reliance upon Nipro’s offer of 9 July 2009, but Interfert opposes such an order. It argues that the relevant rule in Chapter 9, Part 5 of UCPR, r 360, does not apply in an appeal and that there is sufficient reason generally to conclude that an order for costs other than on the indemnity basis “is appropriate in the circumstances,” in terms of r 360. Interfert accepts that although r 360 is not applicable in the appeal Nipro’s “Calderbank offer”² might constitute a basis for an award of costs on an indemnity basis on the footing that refusal of the offer was unreasonable. Interfert argues that its refusal of the compromise was reasonable for the following reasons: Nipro made a claim both under s 52 and s 58 of the Trade Practices Act 1974 (Cth) (“TPA”); an element of the claim under s 58 was an intention effectively to defraud, and contravention of that section also constitutes a criminal offence; Interfert therefore could vindicate its reputation only by proceeding to trial in circumstances in which Nipro made no offer to apologise or withdraw the allegations “of fraud and criminality”; Nipro pursued the claim under the TPA to trial; it was discussed on the morning of the first day of trial, further particulars were given, and Interfert and Nipro made submissions about this claim at the end of the trial; the claim under the TPA required substantial extra effort by Interfert in dealing with questions otherwise irrelevant on the pleadings, particularly concerning Interfert’s subjective intention when it made alleged representations prior to contract; and the offer of compromise came only shortly before the trial when Interfert had completed most of its investigations on that claim.

Costs in the trial division

A result of the appeal is that Nipro must now be regarded as having been the successful party on its claim in the trial division. Costs should follow the event. In the particular circumstances here, the mere fact that Nipro failed to make good its alternative claim under the TPA should not be regarded as sufficient to deprive it of part of its costs of the claim. In rejecting Nipro’s appeal against the trial judge’s refusal of leave to appeal against costs orders in favour of Interfert, the Court noted³ that the trial judge had applied a principle expressed in previous decisions that ordinarily a successful party is not denied its costs because it has succeeded on one argument and not on an alternative case.⁴ The same approach should now be applied in Nipro’s favour.

The position might be different if Nipro had pursued the TPA claim unreasonably or had improperly alleged dishonesty but the material does not establish that it did so. Nipro’s statement of claim did not allege that Interfert had acted dishonestly. Rather, it pleaded that Interfert “had reasonable grounds for believing that it would not be able to supply the product… within the period of time specified, in breach of s 58 of the TPA.”⁵ At the trial Nipro opened that claim in a moderate way. Further, as Interfert’s senior counsel pointed out in final submissions, the cross examination of Interfert’s witnesses did not challenge their honesty. The primary judge rejected the TPA case because, on the evidence accepted by the trial judge, Nipro failed to prove loss which was recoverable under the TPA resulting from alleged contraventions of that Act, it did not establish the falsity of the pleaded representations or the absence of any reasonable basis for them, and (in relation to representations as to future matters) Interfert had a reasonable basis for believing that the product would be delivered by the represented due date.⁶ That the TPA claim failed at trial for those reasons does not demonstrate that Nipro did not have a reasonable basis for pursuing it.

As to Interfert’s counterclaim, it should be dismissed because it was over-topped by the amount of Nipro’s claim, which allowed for a set off of the amount of the counterclaim. Nipro was therefore the successful party on the counterclaim. Absent any disentitling circumstance, Nipro should therefore also have its costs of defending the counterclaim.

Basis of assessment of costs

Rule 360(1) provides:

“(1)If -

(a) the plaintiff makes an offer to settle that is not accepted by the defendant and the plaintiff obtains a judgment no less favourable than the offer to settle; and

(b) the court is satisfied that the plaintiff was at all material times willing and able to carry out what was proposed in the offer;

the court must order the defendant to pay the plaintiff's costs calculated on the indemnity basis unless the defendant shows another order for costs is appropriate in the circumstances.”

Rule 360 has no relevant application in relation to Nipro’s costs incurred as a defendant to the counterclaim. It cannot be given such an operation merely because Nipro’s offer to settle allowed for a set off of the counterclaim. Nipro did not seek to rely upon any other rule in support of its application for indemnity costs. Nor did Nipro submit that Interfert acted unreasonably in bringing or pursuing its counterclaim or that there was any other ground for departing from the usual rule that costs should be assessed on the standard basis.

On the other hand, no sufficient ground appears for denying the prima facie operation of r 360(1) in relation to Nipro’s costs of its claim in the proceedings in the trial division. In particular, for reasons given earlier the mere fact that Nipro failed on its alternative cause of action under the TPA is in this matter insufficient to justify departure from the indemnity basis of assessment. Nipro should have those costs on the indemnity basis.

A different approach must be applied to the determination of the appropriate basis of assessment of costs incurred in the appeal. The difference is explained in the following passages in the judgment of the Court (McMurdo P, Fryberg and Douglas JJ) in Ballesteros v Chidlow & Anor:⁷

“[3] The appellant’s submission is that because the formal offer was made at the start of the action, if it had been accepted, none of the subsequent costs of the action or of the appeal would have been incurred. Her argument is that her offer should have been accepted when it was made, that the amount of the judgment is modest and the costs to her will be significant. Her counsel rely upon a decision of this Court in Ibbs v Woodrow [2002] QCA 298 where the damages were increased on appeal to a level which took them beyond the original formal offer before trial and the costs of the action and of the appeal were allowed on the indemnity basis. There was no discussion as to whether the discretion should be exercised differently on an appeal as compared to after a trial but the decision referred to r 360(1) of the Uniform Civil Procedure Rules 1999.

…

[7] It was conceded by the appellant that r 360 does not bind the exercise of our discretion at the appellate level. That was established by the decision in Tamwoy v Solomon [1996] 2 Qd R 93 and applied to the UCPR in Tector v FAI General Insurance Co Ltd [2000] QCA 426 in a further order made on 8 December 2000 where the Court said:

“The appeal was instituted on 13 August 1999 so that the Uniform Civil Procedure Rules ('UCPR') which came into force on 1 July 1999 apply to this appeal. By r 766(1)(d) the Court of Appeal may make the order as to the whole or part of the costs of an appeal which it considers appropriate. There is no suggestion that the regime governing offers to settle in Chapter 9 Part 4 of the UCPR apply to appeals. That was the conclusion of the Court of Appeal in Tamwoy v Solomon [1996] 2 Qd R 93 in respect of O 26 of the Rules of the Supreme Court which were replaced by the UCPR and on this point there appears to be no appreciable difference between Chapter 9 Part 4 and O 26.”

[8] The decision in Ibbs v Woodrow did not refer to these decisions. One of the bases for the decision in Tamwoy v Solomon was that the then equivalent to r 360 could not be made to operate in a reciprocal or even-handed way to both a plaintiff and a defendant on appeal; see at 98. The decision of the New South Wales Court of Appeal in Maitland Hospital v Fisher [No 2] (1992) 27 NSWLR 721 that their equivalent rule could continue to apply on appeal in favour of the party who was the plaintiff in the trial was not followed; see at 99 - 100. It is necessary, therefore, to consider the issue of the costs of the appeal divorced from the background of the offer under r 360 that was relevant for the trial.”

Although the circumstances in which costs on an indemnity basis might be awarded are at large,⁸ Ballesteros v Chidlow & Anor and other authorities⁹ establish both that r 360 does not apply in appeals and that assessment on an indemnity basis in an appeal is ordinarily not ordered unless there is some unusual circumstance or unreasonable conduct other than mere non-acceptance of an offer to settle made before trial.

The offer made by Nipro before the trial proved to be much more favourable to Interfert than the result after the appeal, but that is of itself an insufficient basis for ordering Nipro’s costs of appeal and cross appeal to be assessed on the indemnity basis. Although Interfert was unsuccessful in both appeal and cross appeal, Nipro did not argue that Interfert acted unreasonably in appealing or in opposing the cross appeal or that any other circumstance justified departure from the usual order that the costs in this Court should be assessed on the standard basis. Nipro’s costs of the appeal and cross appeal should be assessed on that basis.

Orders

To give effect to these reasons it is appropriate to vary paragraphs a), b) and c) of order 2 of the orders made on 28 May 2010 so that the orders of the Court, as so varied, provide:

Dismiss the appeal in Appeal No 12074 of 2009.

Allow the cross appeal in Appeal No 12074 of 2009, set aside the orders made by the trial judge on 30 September 2009 dismissing the plaintiff’s claim and giving judgment for the defendant on the counterclaim for $77,058.65 and the order made by the trial judge on 5 February 2010 ordering the plaintiff to pay the defendant’s costs upon the claim and counterclaim, and instead order that:

a)The defendant is to pay the plaintiff $1,040,133.08;

b)The defendant is to pay the plaintiff’s costs of the claim, to be assessed on the indemnity basis;

c)The counterclaim is dismissed with costs to be assessed on the standard basis.

The appellant/cross respondent is to pay the respondent/cross appellant’s costs of the appeal and cross appeal in Appeal No 12074 of 2009, to be assessed on the standard basis.

The appeal in Appeal No 2349 of 2010 against the order refusing leave to appeal made by the trial judge on 5 March 2010 is dismissed with costs to be assessed on the standard basis.

Footnotes

1. Yara Nipro P/L v Interfert Australia P/L & Anor [2010] QCA 128. ↩

2. Calderbank v Calderbank [1976] Fam 93 at 103-104. ↩

3. [2010] QCA 128 at [65]. ↩

4. Australand Corporation (Qld) Pty Ltd v Johnson & Ors [2007] QSC 128 at [17]; Todrell Pty Ltd v Finch (No 2) [2008] 2 Qd R 95 at [21]; BHP Coal Pty Ltd and Ors v O & K Orenstein & Koppel AG and Ors (No 2) [2009] QSC 64. The trial judge also recorded that the costs orders sought by Interfert accorded with the outcome in Hanak v Green [1958] 2 QB 9. ↩

5. Amended Statement of Claim at paragraph 19, with reference to representations pleaded in paragraph 12. ↩

6. Yara Nipro P/L v Interfert Australia P/L & Anor [2009] QSC 314 at [68]-[72]. ↩

7. [2006] QCA 368. Emphasis added. ↩

8. Sultana Investments Pty Ltd v Cellcom Pty Ltd (No 2) [2009] 2 Qd R 287 per White AJA (McMurdo P and Holmes JA agreeing) at [14]. ↩

9. Equuscorp Pty Ltd & Anor v Glengallan Investments Pty Ltd & Ors [2006] QCA 414 per Holmes JA (MacPherson and Jerard JJA agreeing) at [14]-[26] and Wright & Anor v Keenfilly P/L & Anor [2007] QCA 148 per McMurdo P, Holmes JA and Mackenzie J at [4]-[12], and the decisions referred to therein, particularly Tamwoy v Solomon [1996] 2 Qd R 93, Tector v FAI General Insurance Company Ltd [2001] 2 Qd R 463 at 464, and Deepcliffe P/L & Anor v The Council of the City of Gold Coast & Anor [2001] QCA 396.