Laurel Star Pty Ltd v Babstock Pty Ltd [No 4]
[2023] QDC 31
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- Unreported Judgment
- Appeal Determined (QCA)
- Laurel Star Pty Ltd v Babstock Pty Ltd [No 4][2023] QDC 31
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Laurel Star Pty Ltd v Babstock Pty Ltd [No 4][2023] QDC 31
Laurel Star Pty Ltd v Babstock Pty Ltd [No 4][2023] QDC 31
DISTRICT COURT OF QUEENSLAND
CITATION: | Laurel Star Pty Ltd v Babstock Pty Ltd (No 4) [2023] QDC 31 | |
PARTIES: | LAUREL STAR PTY LTD ACN 624 444 864 as trustee for the Alan and Dorothy Marburg Family Trust (First plaintiff) AND DOROTHY ANN MARBURG (Second plaintiff) v BABSTOCK PTY LTD ACN 010 443 124 as trustee for The Kenman Real Estate Unit Trust ABN 60 266 220 872 (First defendant) AND WAG PROPERTY MANAGEMENT PTY LTD ACN 136 174 242 as trustee for The WAG Unit Trust (Second defendant) | |
FILE NO: | 2326/18 | |
DIVISION: | Civil | |
PROCEEDING: | Trial | |
DELIVERED ON: | 3 March 2023 | |
DELIVERED AT: | Brisbane | |
HEARING DATE: | On the papers | |
JUDGE: | Barlow KC DCJ | |
ORDERS | The defendants pay the plaintiffs’ costs of the proceeding, including reserved costs. | |
CATCHWORDS: | PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS – INFORMAL OFFERS AND CALDERBANK LETTERS – UNREASONABLE REFUSAL OF OFFER – the plaintiffs made a number of informal offers – some of the plaintiffs’ claims were not pressed or determined by the court – whether the defendants’ rejection of those offers was unreasonable – whether costs should be ordered on the indemnity basis PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND SETTLEMENTS – INFORMAL OFFERS AND CALDERBANK LETTERS – UNREASONABLE REFUSAL OF OFFER –the defendants made an offer to the plaintiffs before trial – the offer was open for five days over the Easter weekend – whether the plaintiffs’ costs should be limited to the period to the date of the offer – whether plaintiffs’ rejection of the offer was unreasonable PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – GENERAL RULE: COSTS FOLLOW EVENT – PARTIAL SUCCESS – the plaintiffs succeeded on some but not all bases for their claims – whether plaintiffs’ costs should be limited to a proportion of their overall costs PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – SCALES OF COSTS – APPLICABLE SCALE – the amount of damages sought and recovered by the first plaintiff was within the jurisdiction of the Magistrates Courts – the defendants’ counterclaim was within the jurisdiction of the Magistrates Courts – the second plaintiff sought relief beyond the jurisdiction of the Magistrates Courts – the order made was beyond the jurisdiction of the Magistrates Courts – whether costs should be assessed on the Magistrates Courts scale Acts Interpretation Act 1954, s 38 Civil Proceedings Act 2011, s 29 Magistrates Courts Act 1921, s 4 | |
COUNSEL: | BWJ Kidston for the defendants | |
SOLICITORS: | Sarinas Legal for the plaintiffs Carter Capner Law for the defendants | |
- [1]On 10 February 2023, I delivered judgment in this proceeding[1] (on remittal from the Court of Appeal[2]). I gave judgment for the plaintiffs and dismissed the defendants’ counterclaim. I ordered that unless, within 14 days, a party provided to my associate submissions about costs, the defendants pay the plaintiffs’ costs of the proceeding, including any reserved costs.
- [2]On 23 February, the plaintiffs’ solicitors informed my associate that they did not intend to make any further submissions about costs. However, on 24 February, the defendants provided submissions on costs to my associate. It is therefore now necessary for me to consider whether an alternative order should be made. Before doing so, I gave the plaintiffs the opportunity to provide any submissions in response to the defendants’ submissions. On 2 March, I received submissions from the plaintiffs’ solicitors that not only responded to the defendants’ submissions, but did in fact seek a different order as to costs, namely that the defendants pay the plaintiffs’ costs on the indemnity basis. Given my conclusion below on that submission, it was unnecessary to obtain further submissions from the defendants about it.
The parties’ submissions
- [3]The defendants submit, in essence, that the plaintiffs succeeded only on less than half of the issues raised by the pleadings and they obtained judgment for a far lower sum than they had claimed. The defendants estimate that more than 55% of the pleadings, trial, evidence and submissions concerned the plaintiffs’ breach of contract case, on which they ultimately failed, and they did not press a substantial proportion of the pleaded damages. Only about 35-45% of the proceeding concerned the misleading or deceptive conduct claims on which the plaintiffs ultimately succeeded. In the circumstances, the plaintiffs should be awarded only 40% of their costs of the proceeding. Furthermore, the amount the plaintiffs ultimately recovered was well within the jurisdiction of the Magistrates Court and therefore it is appropriate to award that proportion of the plaintiffs’ costs on the Magistrates Court scale. In this respect, the defendants submit that the court should give weight to the principle underpinning rule 697, which would have been engaged if it were not for this court’s order setting aside the contracts.
- [4]The defendants also submit that the plaintiffs’ costs should be allowed only up to 9 April 2020 because, on that date (just over one month before the trial was due to start), the defendants made an offer (without prejudice except as to costs) that was on terms more favourable to the plaintiffs than the court’s judgment. (The defendants do not submit that the plaintiffs should pay the defendants’ costs from that date, but only that the plaintiffs bear their own costs since then.) In this respect, they submit:
- (a)the Court awarded the first plaintiff damages of $42,844.86 and ordered that the defendants return to it the deposits of $41,250 and $500 paid under the two contracts concerned;
- (b)the defendants’ offer, which was open for five days, was to pay the plaintiffs $100,000 by monthly instalments of $3,500 and to repay the larger deposit, with the claim and the counterclaim being dismissed by consent with no order as to costs;
- (c)the defendants’ offer was clearly more advantageous to the plaintiffs than the Court’s judgment, even allowing for the costs that the plaintiffs would have incurred by the date of the offer and given that the costs of preparing for and conducting the trial would likely have vastly exceeded the amount claimed or recovered; and
- (d)it was unreasonable for the plaintiffs not to have accepted the offer, so they should not be awarded their costs after its date.
- (a)
- [5]The plaintiffs submit that the defendants’ submissions should not succeed (essentially for reasons that I discuss below). They go on to submit that the defendants should pay the plaintiffs’ costs of the proceeding on the indemnity basis, consequent on several offers to settle that the plaintiffs made to the defendants.
Issues-based order
- [6]In my view, most of the trial involved evidence that went to all the issues in the proceeding. The submissions at the original trial concerned all the issues,[3] while the submissions on the remittal mostly concerned the plaintiffs’ misleading or deceptive conduct claim and the appropriate relief if they were to succeed, as well as the appropriate relief on the counterclaim. On the remittal, all parties relied on relevant parts of their original submissions and, of course, referred to relevant parts of the evidence.
- [7]I do not consider that the costs ought to be divided by reference to the parties’ success or failure on the different issues. As I said, most of the trial (especially most of the evidence) was relevant to most or all issues. Each party spent differing proportions of their submissions on the various issues, which is an indication of the differing perceptions of the importance of particular issues or evidence.
- [8]I shall not, therefore, order that the plaintiffs’ recovered costs be limited to a proportion of their overall costs.
Appropriate scale
- [9]The first plaintiff claimed rectification of the Rent Roll Contract, a declaration that it had validly terminated the contracts, an order that the defendants repay the deposits to it, damages of $29,864.58 for breach of contract and damages of $37,115 for misleading or deceptive conduct. The second plaintiff sought rectification and an order that her guarantee be declared void and unenforceable. All of these forms of relief, apart from the order concerning the second plaintiff’s guarantee, could have been sought in a Magistrates Court.
- [10]In their counterclaim, the defendants sought damages of about $160,000. While ordinarily a claim in that sum would be beyond the jurisdiction of a Magistrates Court, as it was a counterclaim the effect of s 29 of the Civil Proceedings Act 2011 is that the counterclaim was within the jurisdiction of that court. Of course, the damages to which I found the defendants would have been entitled if they had succeeded on their counterclaim ($62,736.23) were well within the Magistrates Court’s jurisdiction.
- [11]The second plaintiff’s claim was always outside the jurisdiction of a Magistrates Court.[4] The order (although not originally sought by the plaintiffs) that both contracts be set aside ab initio was also not within those courts’ jurisdiction. Neither party, at any stage of the proceeding, applied to have the proceeding transferred to a Magistrates Court. In my view, the complexity of the issues and the extent of the evidence and submissions, together with the fact that the second plaintiff’s claim and the order setting aside both contracts on the remittal of the proceeding were not within a Magistrates Court’s jurisdiction, meant that it was a proper matter to be heard and determined in this court. Indeed, I reached the same conclusion in my original decision on costs[5] and there is no reason to depart from that conclusion as a result of the remitted trial.
- [12]Therefore, I do not consider that the plaintiffs’ costs should be assessed on the Magistrates Courts’ scale.
The defendants’ offer
- [13]The next question is the effect of the defendants’ offer.
- [14]I have summarised above the extent and nature of the claims and the counterclaim. Had I not ordered that the contracts be declared ab initio, I would have awarded damages (and repayment of the deposit) in favour of the first plaintiff in the total sum of $84,344.86 and damages in favour of the defendants in the sum of $62,736.23. The net effect of those awards would have been that the plaintiffs would have received $21,606.63.
- [15]The sum of $141,250 offered by the defendants a month before trial was obviously substantially more than that net amount.
- [16]In fact, as the defendants did not succeed on their counterclaim, the net effect of the payments ordered in favour of the plaintiffs was $84,344.86. The defendants point out that that sum is $56,905.14 less than the amount the plaintiffs would have been paid under the offer (even though the bulk of it would have been paid over 29 months). Thus, they submit, the excess represented a substantial payment toward the plaintiffs’ costs to the date of the offer, although one cannot say whether it would have covered the plaintiffs’ costs to then. But acceptance of the offer would have avoided both parties having to pay the costs of the trial, which would have been significant.
- [17]The plaintiffs submit that it was not unreasonable for them not to accept the offer when it was made. They contend that it was made in the midst of a contentious interlocutory application for an injunction to restrain the defendants from proceeding with a proposal to encumber their assets to other companies controlled by the defendants’ directors and the offer would have required the plaintiffs to wait 29 months for full payment (with the possibility of default) in circumstances where other entities associated with the defendants would be secured while the debt to the plaintiffs would be unsecured.
- [18]As the offer did not include an offer to pay the plaintiffs’ costs to that date, it is not possible to determine if it would have been a better outcome for the plaintiffs, taking into account their costs, than the outcome after judgment. That itself is a reason why the offer is not a persuasive reason to limit the plaintiffs’ entitlement to costs to those up to the date of the offer.
- [19]In my view, having regard to the amount of the plaintiffs’ claims and of the counterclaim, the risks of any litigation, but particularly of this case in which the result would depend on the analysis and construction of complicated contracts and a large number of conversations and documents, compared with the amount of the offer as a total, together with the real possibility that the unsuccessful party would appeal this court’s decision, it would have been unreasonable for the plaintiffs not to accept the defendants’ offer if it had been for payment of the full amount within a short period plus costs to that date and if they had had a suitable opportunity to consider it before it lapsed. However, that was not the nature of the offer. I consider that it was not unreasonable to refuse the extended payment terms, especially when any judgment in the plaintiffs’ favour would be payable immediately.
- [20]Furthermore, the offer was open only for five days and, notably, it was conveyed to the plaintiffs at 4.57pm on Maundy Thursday and was open for acceptance by 10.00am the following Tuesday. That is, it was made after normal service hours on the day before the Easter weekend and it was only open to early on the day after that weekend.[6] Even if the offer had been served in the morning of 9 April, it would have been open for only one business day. Indeed, if it had been served by 10.00am that day and one were to determine time in accordance with s 38 of the Acts Interpretation Act 1954, not even one business day was allowed. But in any event the offer was not open for even one business day. It is also notable that the period for which it was open was within school holidays, when one might expect that either or both of the plaintiffs’ solicitors and counsel may well be on holidays. In my view, that was an entirely unreasonable period of time for the offer to remain open. The plaintiffs could not be expected to receive the offer from their solicitors, obtain advice about it from their solicitors and perhaps their counsel, consider the offer and that advice and make a decision within that time.
- [21]Given the terms of the offer and that it was barely open before it lapsed, it was not unreasonable for the plaintiffs not to accept it. It does not justify limiting the plaintiffs costs.
The plaintiffs’ offers
- [22]The plaintiffs rely on a number of offers that they made to settle the proceeding. I discussed those offers in my original decision on costs and I concluded that, although two offers were more favourable to the defendants than the ultimate result, it was not unreasonable for the defendants to have rejected them.
- [23]The plaintiffs now contend that, notwithstanding my conclusions on that occasion, the defendants did act unreasonably in rejecting the informal offers. They say so on the basis that the defendants knew that the representations were made and were false, they ought to have known that the plaintiffs would have relied on them and they should have known that their defences to the claim for misleading or deceptive conduct would be unsuccessful. Also, the offers were very generous to the defendants given the uncertainties of the claims and counterclaim.
- [24]I do not accept that it was unreasonable for the defendants not to have accepted any of the offers. The reasons I gave in my original judgment on costs for rejecting that contention apply equally now. Indeed, the defendants’ success on the plaintiffs’ claim for breach of contract demonstrates that they had good reason to consider that they had good grounds for their defences and for their counterclaim. Notably, at the time of the offers (and indeed, even up to the initial judgment), the first plaintiff did not seek an order declaring the contracts void ab initio, which is the basis on which that plaintiff ultimately succeeded on the remitted trial. That is an important consideration in determining whether the defendants acted unreasonably.
- [25]In that respect, however, the plaintiffs submit that the final result under my judgment is the same as that for which the plaintiffs contended in the letter from their solicitors[7] by which they purported to terminate the contracts for breach by the defendants or on alternative grounds: that is, the result is that both contracts have effectively now been set aside. Had the defendants accepted that position, the litigation would have been avoided altogether and it is therefore just that the defendants fully compensate the plaintiffs for their costs of the proceeding.
- [26]The plaintiffs do not point to any authority for the proposition that a plaintiff whose initial position has been vindicated in a later proceeding is, or may be, entitled to the costs of the proceeding on the indemnity basis. Indeed, such a proposition is contrary to the normal course where a plaintiff is successful: the plaintiff is ordinarily entitled to costs, but on the standard basis. Success of itself is not a reason to award indemnity costs.
- [27]Finally, the plaintiffs submit that they were entirely innocent in this dispute, they have succeeded after a long battle to return them to their pre-contractual position and they can only be returned to that position by an indemnity costs order in their favour. I reject this submission (which seems to me to be a variation of the last submission referred to above). The plaintiffs are no different to many other successful plaintiffs in that regard. A successful plaintiff is ordinarily entitled to be paid standard costs by the unsuccessful party. Something more is necessary to justify an indemnity costs order.
- [28]Therefore, I do not consider it appropriate to order that the defendants pay the plaintiffs’ costs on the indemnity basis.
Result
- [29]I therefore order that the defendants pay the plaintiffs’ costs of the proceeding, including reserved costs.
Footnotes
[1]Laurel Star Pty Ltd v Babstock Pty Ltd (No 3) [2023] QDC 10.
[2]Babstock Pty Ltd v Laurel Star Pty Ltd [2022] QCA 63.
[3]In brief, misleading or deceptive conduct, breach of contract, rectification of the Rent Roll Contract, damages for the plaintiffs’ claims and the counterclaim.
[4]Such an order does not appear to fall within the scope of s 4 of the Magistrates Courts Act 1921.
[5]Laurel Star Pty Ltd v Babstock Pty Ltd (No 2) [2021] QDC 1, [15].
[6]This timing, somewhat misleadingly, was not pointed out to the court by the defendants’ counsel, nor by the plaintiffs’ solicitors, in their submissions, but it is important to the result.
[7]Letter dated 10 May 2018: exhibit 62A.