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- Unreported Judgment
Metal Manufacturers Ltd v GMJ Electrical Projects Pty Ltd QDC 95
DISTRICT COURT OF QUEENSLAND
Metal Manufacturers Limited v GMJ Electrical Projects Pty Ltd & Ors  QDC 95
METAL MANUFACTURERS LIMITED (ACN 003 762 641)
GMJ ELECTRICAL PROJECTS PTY LTD (ACN 139 383 618)
4794 of 2013
Application for costs
11 June 2019
On the papers
Porter QC DCJ
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – RECOVERY OF COSTS – where the plaintiff’s proceedings against the third defendant for breach of fiduciary and statutory duties had been dismissed – where the third defendant’s proceedings against the second defendant for contribution or indemnity had been dismissed – where all disputed factual matters were raised by the second defendant – where all disputed factual matters were decided against the second defendant – what proportion of costs should be ordered against the plaintiff.
PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – RECOVERY OF COSTS – where the second defendant made two offers to settle the proceedings – where the plaintiff rejected both offers – where the offers were conditional on unstated terms – whether it was unreasonable for the plaintiff to reject the offers – whether the offers to settle affect the proportion of costs to be ordered against the plaintiff.
G Coveney for the Plaintiff
Case Legal for the Plaintiff
- The plaintiff is a well-known supplier of electrical products under the name “Haymans” (Haymans). The first defendant (GMJ) was an electrical contractor providing fit out services to small to medium sized projects. It carried on business with Haymans from about 2010 until about August 2013. It was placed into administration in January 2014 and wound up soon after. GMJ took no part in this proceeding.
- The second defendant (Mr Johnston) was the sole director and shareholder of GMJ and its guiding mind. He also directed and managed GMJ’s projects with the assistance of a number of employees.
- The third defendant (Mr Stockill) was a “Profit Centre Manager” for Haymans. He was responsible for management of Haymans’ Ipswich Branch.
- The fourth defendant (Ms Johnston) is the wife of Mr Johnston.
- The plaintiff sued the defendants in relation to losses said to have been suffered by reason of Mr Stockill’s breach of fiduciary duty and duties under the Corporations Act 2001 (Cth) which applied to him in his capacity as the manager of the plaintiff’s Ipswich Branch.
- It was contended in short that Mr Stockill breached those duties by supplying goods on credit to GMJ without authority and that it was thereby entitled to equitable compensation or alternatively compensation under the Corporations Act for its losses totalling some $235,000. The plaintiff also claimed a remedy from Mr Johnston and Ms Johnston on the basis of accessory liability arising from their knowledge of an involvement in the breaches alleged against Mr Stockill.
- It is also relevant to these reasons to note that:
- (a)Mr Stockill sought contribution or indemnity from Mr Johnston to the extent he was found liable to the plaintiff; and
- (b)The case against Ms Johnston was settled early in the trial.
- I heard the trial of the action over four days. The proceedings were dismissed because the plaintiff failed to make out its pleaded case against Mr Stockill. In particular I found that:
- (a)Mr Stockill did not owe equitable fiduciary duties arising from his role as employee;
- (b)Mr Stockill did not breach the fiduciary duties pleaded by the plaintiff; and
- (c)Mr Stockill did not breach his duties under the Corporations Act because the plaintiff did not make out the relevant purpose in his actions.
- However, those matters were resolved on the basis of quite narrow questions of fact relating to Mr Stockill’s position as employee and his purpose in advancing goods without authority to GMJ.
- The rest of the matters relating to Mr Stockill’s conduct including the fact of making unauthorised credit supplies, his knowledge that they were unauthorised and the amount of such supplies were uncontentious as between Mr Stockill and the plaintiff.
- All disputed factual matters which occupied the Court during the trial were matters raised by Mr Johnston in his defence of the claim against him. They were all decided against him. They greatly added to the time and cost of the trial. Indeed most of the trial was taken up with these matters, particularly those relating to Mr Johnston’s knowledge of the unauthorised supplies from time to time and their amount and his dealings with Mr Stockill relevant to those issues.
- In those circumstances, the costs orders should reflect the fact that most of the trial was taken up with issues upon which Mr Johnston failed and that his success was on narrow factual and legal issues relating to Mr Stockill’s liability which were barely addressed in his pleadings or at trial, if at all.
- Absent any relevant offers, I would order that the plaintiff pay 20 per cent of Mr Johnston’s costs of the proceeding on a standard basis. The 20 per cent is appropriate, despite Mr Johnston’s almost complete lack of success on all of the matters which he pursued at trial, because ultimately, the plaintiff’s case against him failed and there needs to be some recognition of that reality.
- That conclusion must be considered in the light of Mr Johnston’s offers made on 26 March 2018 and 10 December 2018.
- On 26 March 2018, Mr Johnston offered to settle the proceedings by the plaintiff against him for an amount of $20,000, inclusive of interest, GST and costs. The offer was conditional upon all parties entering a deed of release in respect of all issue between them connected with the proceedings. It made clear that the other defendants had not been approached. The offer was rejected.
- On 10 December 2018, Mr Johnston offered to settle the proceedings by the plaintiff against him for an amount of $50,000, inclusive of interest, GST and costs. The offer was conditional upon all parties entering a deed of release in respect of all issue between them connected with the proceedings. It made clear that the other defendants had not been approached. The offer was for payment by installments over 10 months.
- In response, the plaintiff asked for the second and fourth defendants to provide a signed statement of assets and liabilities to sustain the inference from the second offer that the second defendant could not pay the amount offered in a lump sum.
- The second defendant did not give the information sought in the form sought. Rather he gave the information to his solicitors who communicated it on instructions. He relied for independent corroboration on a statement from Cowlishaw & Co, apparently his accountant, as at 15 January 2019:
Gregory Johnston has requested the following statement of her [sic] net worth be prepared for submission to debt management and collection agencies.
The following information was provided by Gregory Johnston along with some prima facie evidence of substantiation. We cannot give any opinion or information as to whether this statement is comprehensive of all relevant information.
- It showed nil assets and liabilities of some $220,000.
- The letter also enclosed a statement of the fourth defendant from Cowlishaw & Co, which contained somewhat more detail but the same proviso. There was no response to this information from the plaintiff. However, it is evident that the offer was not accepted.
- I do not consider either offer to lead to a different costs order from that identified in paragraph  above. I do not consider that it was unreasonable for the plaintiff to reject the first or second offer because both were conditional on the third and fourth defendants giving releases of all claims on terms which were not stated. Apart from the conditional nature of the offer, this required the plaintiff to give up its claims against the third defendant seemingly for nothing. Alternatively, it required the third defendant to give up any claim he might have against the second defendant for indemnity or contribution seemingly for nothing. There was no evidence from which I could infer how the third defendant would have reacted to these proposals. It was evident they were never put to him.
- All of this was too conditional and ambiguous to permit the conclusion that it was unreasonable for the plaintiff not to accept the conditional offers made. Indeed neither offer could be accepted so as to give rise to a binding settlement agreement. I note the plaintiff’s submissions on this point in paragraphs 11 to 16 of its submission on costs. While I am not certain that as a matter of law, the fact an offer is conditional necessarily excludes the application of Calderbank principles, the conditional character of these offers is sufficient to do so.
- That only leaves the position of the third defendant. The plaintiff seeks no order for costs against him. The second defendant seeks an order against the third defendant for costs of the third defendant’s claim against him. The second defendant does not rely on his two offers. However the second defendant sought an order that the third defendant pay the second defendant’s costs of the proceeding on a standard basis.
- As formulated this seems to seek indemnity from Mr Stockill for costs of the whole proceeding because of his failure on his claim for indemnity and contribution from the second defendant. There is no reason why that should be the case.
- Indeed, Mr Stockill’s claim took up almost no time at trial and the added cost of that claim to the overall cost of the trial was negligible. Further, even if one looked only at the costs of the claim for indemnity and contribution, it would be strongly arguable that any costs payable by Mr Stockill should be the subject of indemnity from the plaintiff. To the extent that claim added any material costs, it should be treated in the same way as the costs as between the parties who were the principal protagonists at trial, Haymans and Mr Johnston. Taking those minor costs into account does not lead me to conclude that there ought to be any change to the order identified in paragraph  above.
- Accordingly, I order that the plaintiff pay 20 per cent of the second defendant’s costs of the proceedings on the standard basis and that there otherwise be no order as to costs.
- Published Case Name:
Metal Manufacturers Limited v GMJ Electrical Projects Pty Ltd & Ors
- Shortened Case Name:
Metal Manufacturers Ltd v GMJ Electrical Projects Pty Ltd
 QDC 95
11 Jun 2019