Duffy v Hepron Pty Ltd[2007] QSC 106

SUPREME COURT OF QUEENSLAND

[1] On 11 April 2007 I gave judgment for the respondent entitling it to recover from the applicant the sum of $221,775.79.  With one exception the components of the respondent’s claim for damages were agreed.  I disallowed the one item in contention.

[2] The relevant components were: (i) $77,113.93 being the difference between the proceeds of sale the respondent would have recovered pursuant to its contract with the applicant, had that contract proceeded to settlement, and the net proceeds recovered by the respondent from the subsequent sales of the individual units in the residential block.  (ii) $11,887.10 which the respondent spent on advertising the units to attract buyers.  (iii) $58,029.76 being interest at nine per cent,  calculated on the capital sum of $2,700,000 (the price the applicant agreed to pay) until the date on which the first of the units were sold to another purchaser and then on balances, successively reduced by the net price of each unit when sold.  The calculation of interest on this basis terminated on 15 February 2006 when the last unit was sold.

[3] The other component of damages is irrelevant for present purposes and may be ignored.

[4] When I gave judgment the respondent sought an order for interest on those three components of the judgment sum and an order for costs on the indemnity basis.  Those questions were not then argued but counsel for both parties have since delivered written submissions.

[5] The respondent’s claim for interest is on the three components of damages which I have mentioned from 16 February 2006 to the present.  It is made pursuant to s. 47 of the Supreme Court Act 1995. 

[6] There can, I think, be no objection to an award of interest on the first and second components.  These are losses which the respondent sustained and in respect of which it has been out of pocket.  On ordinary principles they should attract an award of interest. 

[7] I think the same is true of the third component.  Counsel for the applicant objected to interest on this part of the claim as amounting to interest on interest.  The sum of $58.029.76 represents the loss suffered by the respondent by being held out of its money from the original date set for settlement under the contract with the applicant and the date it received the proceeds of resales of the units.  As such that component of the damages is in the nature of interest but that sum compensates the respondent for being held out of its money only until 16 February 2006.  What it seeks is interest on the amount of that loss, which is agreed, for the subsequent period.  There is no injustice to the applicant in ordering such an award of interest.  It does not amount to double compensation.  It is an award of interest to cover a different period to that which was the basis for the calculation of the quantum of the third component in the claim.

[8] Counsel for the applicant objects that a large part of the consideration for the applicant’s purchase of the units was constituted by shares in a company which could not be sold immediately.  The respondent’s receipt of money from the sale would have been postponed.  This is true but it is answered by the point that the respondent would have been in possession of an asset with the potential to appreciate, and against which it could have borrowed to fund further business activities.  Being deprived of the consideration from the sale of the units was a real loss, and one which sounds in damages.

[9] The parties have agreed upon the arithmetic.  Accordingly I award interest on the sum for which I ordered judgment in the amount of $16,404.79.  The calculation is for the period 16 February 2006 to 15 May 2007.

[10] The respondent seeks indemnity costs.  On 9 March 2007 it made an offer pursuant to the UCPR for an almost equal division of the deposit moneys held by the real estate agent.  The applicant refused the offer and has obviously recovered less than the offer would have given him.

[11] The proceedings were commenced by an originating application but by order made on 21 November 2005 they continued as if commenced by claim.  Pursuant to the order the applicant delivered points of claim and the respondent a defence and counter-claim.  UCPR 360 deals with costs where a plaintiff offers to settle proceedings.  The UCPR defines ‘plaintiff’ to include a party who files a counter-claim.  Accordingly I think that UCPR 360 applies to the respondent’s offer.  Pursuant to the rule in the circumstances which it describes the court ‘must order the defendant to pay the plaintiff’s costs … on the indemnity basis unless the defendant shows another order … is appropriate … .’

[12] Counsel for the applicant submits that the offer was only to settle the counter-claim and not the application so that any order for indemnity costs should be made with respect to the counter-claim only.  Ms Magee also points to the fact that the offer was made quite late, on 9 March 2007, 18 months after the proceedings had commenced and only a month before trial.  It was made at a time when ‘the vast majority of the costs had already been incurred …’.

[13] The first point is not, I think, right.  The respondent’s offer encompassed the disposal of both application and counter-claim.  It was to resolve the entire dispute between the parties.  There is more substance in the second point.  A plaintiff who wishes to take advantage of the generosity of UCPR 360 should make an offer as promptly as is reasonable in the circumstances.  There is, I think, an element of unfairness in visiting on a defendant the entire costs of an action on the indemnity basis where an offer is made on the eve of trial and the offer subsequently turns out to have been a good one.  In my opinion depending, of course, on the circumstances of each case, justice would be better served by ordering indemnity costs only from the date of the offer. 

[14] What makes that approach inappropriate in this case is the point, relied upon by Mr Beacham, that the whole prosecution of the applicant’s proceeding propounded the false assertion that he was dissatisfied with the building report.  The findings I made were to the effect that the applicant dissimulated his dissatisfaction and that his claim to recover the deposit was insincere.

[15] I will accordingly order the applicant to pay the respondent’s costs of and incidental to the proceedings to be assessed on the indemnity basis.