Queensland Judgments
Authorised Reports & Unreported Judgments
  • sclq logo
  1. Caselaw
  2. QSC
  3. 2016
  4. Mad Dogs Pty Ltd (in liq) v Gilligan's Backpackers Hotel & Resort Pty Ltd (No 4) - [2016] QSC 54

Authorised Reports & Unreported Judgments
Exit Distraction Free Reading Mode
  • Unreported Judgment
  • Appeal Determined (QCA)

Mad Dogs Pty Ltd (in liq) v Gilligan's Backpackers Hotel & Resort Pty Ltd (No 4)[2016] QSC 54

Mad Dogs Pty Ltd (in liq) v Gilligan's Backpackers Hotel & Resort Pty Ltd (No 4)[2016] QSC 54

 

SUPREME COURT OF QUEENSLAND

 

CITATION:

Mad Dogs Pty Ltd (in liq) v Gilligan’s Backpackers Hotel & Resort Pty Ltd & Anor (No 4) [2016] QSC 54

PARTIES:

MAD DOGS PTY LTD

ACN 112 568 457 (in liquidation)

(Plaintiff)

v

GILLIGAN’S BACKPACKERS HOTEL & RESORT PTY LTD

ACN 093 636 705

(First Defendant)

and

CHRISTIAN JOHN AINSWORTH

(Second Defendant)

FILE NO/S:

SC No 26 of 2009

DIVISION:

Trial

PROCEEDING:

Claim

ORIGINATING COURT:

Supreme Court at Cairns

DELIVERED ON:

16 March 2016

DELIVERED AT:

Cairns

HEARING DATE:

27 November 2015, further submissions in writing received 30 November 2015, 4 December 2015 and 14 December 2015

JUDGE:

Henry J

ORDERS:

  1. Judgment for the plaintiff against the first defendant in the amount of $351,193.57, being $201,357.44 damages and $149,836.13 interest.
  2. The first defendant pay the second defendant’s costs in excess of the joint representational costs, to be assessed on the standard basis.
  3. The first defendant pay the plaintiff’s costs of its claim against the first defendant (including those of its costs, incurred in joint pursuit of both defendants, which would have been incurred even if the second defendant had not been joined as a party), to be assessed on the standard basis, reduced by the amount of the second defendant’s costs payable under order 2.
  1. The first defendant pay the plaintiff’s and second defendant’s costs of the defendants’ application filed 20 December 2012 to be assessed on the standard basis.
  2. The defendants pay the plaintiff’s costs of the defendants’ application filed 7 March 2014 and of all adjournments thereof to be assessed on the standard basis.
  3. The defendants pay the plaintiff’s costs of the defendants’ application filed 11 March 2015 to be assessed on the standard basis. 

CATCHWORDS:

DAMAGES – GENERAL PRINCIPLES – DIFFICULTY OF ASSESSING DAMAGES – where the plaintiff seeks damages for breach of contract by the defendants – where the plaintiff claims loss of profit under the terminated contract and for future renewal periods - where the parties tendered expert reports on damages – where the court held the appropriate rate for the calculation of the present value of money is 30 percent – where interest is calculated on the basis the plaintiff has been out of pocket since the breach – whether there should be any specific identifiable reduction for tax

PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - DEPRIVING SUCCESSFUL PARTY OF COSTS - OTHER CASES - OTHER CASES – where the second defendant was successful against the plaintiff – where the second defendant seeks costs against the plaintiff – where the second defendant was a de facto Director of the first defendant company – where the second defendant played a very active role as a participant in the dispute – where both defendants were represented by the same solicitors and counsel – where the majority of work performed by the company’s lawyers would have been required regardless of whether the second defendant was made a party to the action - whether an order as to costs other than costs following the event is appropriate.

Uniform Civil Procedure Rules 1999 (Qld) r 681, r 698

Anzaway v Maroun Corporation (No 2) [2003] NSWSC 725, cited

Bamco Villa Pty Ltd v Montedeen Pty Ltd & Anor [1998] VSC 2175, cited

Jamieson & Ors v Westpac [2014] QSC 32, cited

Johnson v Perez (1989 166 CLR 351, cited

Mad Dogs Pty Ltd (in liq) v Gilligan's Backpackers Hotel & Resort Pty Ltd & Anor (No 3) [2015] QSC 319, cited

Mansi v O'Connor [2012] QSC 374, cited

MLC Ltd v J&W Management Services Pty Ltd & Anor [2001] VSC 352, cited

COUNSEL:

CJ Ryall for the Plaintiff

DJ Campbell QC with B Hall for the First and Second Defendants

SOLICITORS:

O'Reilly Stevens Lawyers for the Plaintiff

Creevey Russell Lawyers for the First and Second Defendant

  1. Subsequent to giving judgment for the plaintiff against the first defendant and dismissing the claim as against the second defendant[1] I entertained submissions on the following remaining issues:
    1. calculation of damages;
    2. calculation of interest;
    3. costs as between the plaintiff and first defendant;
    4. costs as between the plaintiff and second defendant;
    5. reserved costs.
  2. These reasons deal with those issues.

Calculation of damages

  1. My judgment made the findings necessary to calculate damages.
  2. Those findings included a finding as to the appropriate discount rate for the calculation of the present value of money.  I found the appropriate rate is 30%.[2]  That rate should be applied in discounting the notional amounts of future trading profits back to their present value as at 26 September 2007.
  3. A matter not addressed in my findings is the point within each relevant annual period at which discounting ought to apply or indeed if it ought to be applied to shorter periods such as monthly periods.  If an annual period is used, during which amounts lost would have accrued continuously, then the mid-point is the logical point for the application of discounting.  The use of annual periods is preferable because it is simpler than monthly periods and if the mid-point is used it is unlikely to produce a materially different outcome than monthly periods.
  4. Discounting should therefore apply at the mid-point of each annual cycle.  It was not submitted otherwise. 
  5. A further affidavit of Mr Jessup, filed 26 November 2015, contains calculations applying my findings and discounting from the mid-point.  The defendant agrees with the outcomes calculated by Mr Jessup and his reduction for offsets.[3]  My calculations using the 30% discount rate, calculating from the mid-points, give rise to amounts so close to those calculated by Mr Jessup as to be immaterial.[4]  Given the parties have already indicated to the court that they agree with Mr Jessup’s figures I will adopt them.
  6. In summary then, applying my findings, the calculation of the value as at 26 September 2007 (“present value”) of future trading profits, reduced for offsets is:

Period

Lost Future Trading Profit

$

Present Value

$

26.09.07 – 29.02.08

15,079.72

  14,252.39

01.03.08 – 28.02.09

54,656.85

  42,821.48

01.03.09 – 28.02.10

63,755.05

  38,422.74

01.03.10 – 28.02.11

72,502.00

  33,610.91

01.03.11 – 29.02.12

77,342.80

  27,570.89

01.03.12 – 28.02.13

106,760.46

  29,264.55

01.03.13 – 28.02.14

116,649.13

  24,596.29

Sub-Totals:

506,746.01

210,539.26

Less offsets:

  9,181.82

Total:

$201,357.44

I award the total amount so calculated as damages.

Calculation of Interest

  1. The above damages calculation reflects the value as at 26 September 2007 of the notional future amounts the plaintiff would have received in trading profits for the periods 26 September 2007 to 28 February 2014, but for the breach. 
  2. The rationale that the date of the breach, 26 September 2007, ought to be the date on which damages are assessed is uncontroversial.  It reflects what Mason CJ described in Johnson v Perez[5] as the general, though not universal, rule “that damages for torts or breach of contract are assessed at the date of breach or when the cause of action arises”.  It explains why the hypothetical future profits were reduced, that is, to assess what the monetary value of the plaintiff’s loss would have been had it been compensated for it, when it was entitled to be, on 26 September 2007.
  3. The parties’ agreement as to the quantum of damages implicitly suggested agreement with that rationale.  However, both parties submitted interest should in this case be calculated by reference to the notional lost future trading profit figures unreduced to their present value as at 26 September 2007 (their only dispute was whether there should be an adjustment in the interest calculation for tax).
  4. Such an approach is inconsistent with the rationale by which I have calculated damages.  Having calculated the quantum of damages as at 26 September 2007 and having already made reductions to reflect the benefit of that amount hypothetically being in the plaintiff’s hand back as at that date, the proper approach is to also calculate interest on the basis the plaintiff has been out of pocket by that amount since that date.
  5. This results in a calculation of interest on $201,357.44 from 26 September 2007, the detail of which is annexed to this judgment.  That calculation assesses interest as at today in the amount of $149,836.13.
  6. The parties were put on notice by me of my above reasoning as to the calculation of interest because I perceived it had not been the subject of direct argument.  Their written responses[6] indicated, without abandoning submissions already made, they did not wish to be heard.
  7. Counsel for the defendants had submitted the interest to be awarded should be calculated by reference to the notional amounts of lost future trading profits after they are notionally reduced by the company tax rate of 30%.[7]  That submission was premised on an approach to calculating interest which I have rejected. 
  8. Using the approach I have adopted it would be wrong to reduce the interest to allow for tax because the interest calculation is based upon the damages amount the plaintiff should theoretically have had available to it from the date of breach.
  9. If there were to be any specific identifiable reduction for tax it would logically only apply in reduction of the damages amount, that being the amount of the loss as assessed as at the date of the breach.  In effect the first defendant’s argument would have to be that the damages as calculated above represent a windfall because no allowance has been made for the notional future trading profits being reduced by tax.
  10. It not practicable on the information available in this case to identify with any degree of certainty to what extent, if any, the true value to the plaintiff of the lost notional future trading profits of the plaintiff’s business would have been reduced by the plaintiff’s corporate tax obligations.  It might or might not have been reduced, just as the plaintiff’s historically poorly financially managed business might or might not have continued to operate for as long as I have made hypothetical allowance for.  They are the kind of unknowns which warrant an allowance for exigencies of the dimension already made. 
  11. Such an allowance was inherent in using known information about the company’s moderate profitability, including identifiable reductions, and extrapolating it to the end of the second option period but no longer.  It was also inherent in the very substantial discount rate adopted in calculating the present value of the loss at the time of breach.  The allowance already made in substantially moderating the assessment of loss makes sufficient allowance for a variety of uncertainties of which liability for tax is an example.  No further reduction is required.
  12. Accordingly the total award will be:
     

Damages$201,357.44

Plus Interest$149,836.13

= Total$351,193.57

Costs as between the plaintiff and first defendant

  1. On the face of it costs should follow the event on the standard basis as between the plaintiff and first defendant.[8]  No submission has been made in support of any other outcome than that the first defendant pay the plaintiff’s costs of its claim against the first defendant.
  2. I will order accordingly. 
  3. To remove doubt, the unusual circumstances of this case mean the plaintiff’s costs of its claim against the first defendant should not by reason that it failed against the second defendant be assessed as equating to half its overall costs[9].  The second defendant played a very active role as a participant in the dispute that developed.  It was inevitable that his activities and the capacity in which he conducted them would be canvassed in the evidence and submissions prepared and advanced by the plaintiff, regardless of whether he was made a defendant.  It is likely that substantially more than half the work performed by the plaintiff’s lawyers would have been required regardless of whether the second defendant was made a party to the action.   The costs of the plaintiff’s claim against the first defendant should be assessed on the basis they include those of its costs, incurred in joint pursuit of both defendants, which would have been incurred even if the second defendant had not been joined as a party.

Costs as between the plaintiff and second defendant

  1. The second defendant, having been successful, submits costs ought follow the event pursuant to rule 681 and the plaintiff ought be ordered to pay the second defendant’s costs. 
  2. The plaintiff submits the court ought order otherwise, arguing there should be no order as to the second defendant’s costs[10] or alternatively that any costs order in the second defendant’s favour ought only relate to such of his costs as exceeded the costs of the joint representation.[11]
  3. The unusual circumstances of this case make the latter order appropriate.
  4. The same solicitors and counsel represented the second defendant as represented his company, the first defendant.  It will be recalled the second defendant was not some mere uninvolved bystander dragged mistakenly into the dispute of others.  He was the controlling mind of the company against which I have found.  As earlier observed, he was an active player in the dispute that developed and it was inevitable his activities and the capacity in which he conducted them would be canvassed in evidence and submissions, regardless of whether he was made a defendant.  It follows that the majority of work performed by his company’s lawyers would have been required regardless of whether the second defendant was made a party to the action.   I will for convenience refer to the costs which would have been incurred regardless of whether the second defendant was a party as the “joint representational costs”.
  5. These considerations explain why an order as to costs other than costs following the event is appropriate. They also lend some support to the conclusion there ought be no order as to costs as between the plaintiff and second defendant.  But such a conclusion would not fairly allow for the reality that some costs would have been incurred solely by reason of the second defendant’s inclusion as a party and thus exceed the joint representational costs in the proceeding. 
  6. There are two obvious examples of that in this case.  First, the second defendant’s inclusion as a party would have involved some additional work in respect of the pleadings that would otherwise have been unnecessary.  Second, it also required the preparation and advancing of submissions about his liability as a defendant which would have involved some work additional to that which would in any event have been required to prepare and advance submissions dealing with his activities as relevant to the liability of the first defendant.  It is inevitable the extent of those costs will be proportionately much smaller than the defendants’ joint representational costs of the proceeding but they would not be so negligible that the second defendant ought not receive the benefit of any costs order at all.
  7. The appropriate outcome is that the second defendant should not have any component of  the joint representational costs and only have those of his costs in excess of the joint representational costs.
  8. The second defendant highlighted the difficulty in securing payment of costs by a party in liquidation.  In that context it was submitted the plaintiff’s liquidator should bear a personal costs order because it was improper for the action against the second defendant to have been continued after the dismissal of the summary judgment application.  I perceive no such impropriety.  The reasoning upon which I found the second defendant not liable because he was a de facto director does not appear to be the subject of binding appellate authority.   Further, my conclusion as to the inadequacy of evidence of tortious interference during the relevant period turned upon my own view of a body of circumstantial evidence.  The case against the second defendant was not a case so obviously doomed to fail that it was improper to run it. 
  9. A less controversial means advanced by the second defendant in order to secure his costs entitlement from a party in liquidation was to have his costs set off against the judgment amount payable by his company.[12]   However recourse to the judgment sum hardly seems necessary where such costs as the second defendant may be entitled to from the plaintiff will inevitably be exceeded by the costs to which the plaintiff is entitled from the first defendant. 
  10. The second defendant’s concern about the status of the plaintiff in liquidation is properly raised but it can be adequately addressed by a set off against the costs the first defendant is liable to pay the plaintiff, so that the liability to pay the second defendant’s costs will shift to the first defendant.
  11. Thus the first defendant should be ordered to pay the second defendant’s costs in excess of the joint representational costs and the order that the first defendant pay the plaintiff’s costs of its claim against the first defendant should be modified by reducing it by the amount of the second defendant’s costs in excess of the joint representational costs.

Reserved costs

  1. Absent specific order, reserved costs follow the event pursuant to r 698.  The plaintiff submits for specific orders in respect of some reserved costs.
  2. There was a successful application for security for costs filed 20 December 2012 by the defendants against the plaintiff in respect of which costs were reserved.  The first defendant ultimately failed at trial and the costs of the application should follow that event.  Given the security the second defendant sought was in the end result shown only to be necessary by reason of the first defendant’s breach it is appropriate that the first defendant pay the costs of both the plaintiff and second defendant in respect of that application.
  3. The defendants’ application filed 7 March 2014 sought summary judgment on two bases.  First it was contended the plaintiff did not have a maintainable claim against the second defendant for interference with contractual relations because the second defendant was a de facto director and thus excluded from individual liability.  That argument, ultimately successful at trial, failed largely because of the state of the defendants’ own pleading, particularly its then denial the second defendant was the controlling mind of the company.  Second it was contended the plaintiff’s claim against the first defendant had to fail because of the plaintiff’s election to continue with the agreement after the first defendant’s termination letter.  That argument, successful at trial in respect of liability for earlier conduct, failed in part because the plaintiff’s pleadings, while then ambiguous, left open the prospect that subsequent conduct may attract liability, as in the end result it did.  Hence while in both contentions the defendants’ had what were at trial shown to be meritorious legal points they were destined to fail at that stage because of the state of the cases as pleaded. The further amendments in which both sides subsequently engaged makes it inappropriate to determine the costs of the application by reasoning backwards from the outcome at trial.   The application failed and the defendants (for the application was brought by both) should pay the plaintiff’s costs of meeting it and the adjournments thereof.
  4. The plaintiff’s application filed 11 March 2015 sought the striking out of then paragraph 32 of the second amended defence, which raised a limitations argument. While I held, contrary to the plaintiff’s argument, that the defendants were not legally precluded from pleading a limitations defence, I agreed with the plaintiff’s argument that the pleading was defective for want of particularity and struck it out.  The plaintiff’s application having succeeded, costs should follow that event.  At that stage the paragraph was, in its admittedly vague terms, pleaded for the “defendants”.  Accordingly the defendants should be ordered to pay the plaintiff’s costs of the application.

Orders

  1. My orders are:
    1. Judgment for the plaintiff against the first defendant in the amount of $351,193.57, being $201,357.44 damages and $149,836.13 interest.
    2. The first defendant pay the second defendant’s costs in excess of the joint representational costs, to be assessed on the standard basis.
    3. The first defendant pay the plaintiff’s costs of its claim against the first defendant (including those of its costs, incurred in joint pursuit of both defendants, which would have been incurred even if the second defendant had not been joined as a party), to be assessed on the standard basis, reduced by the amount of the second defendant’s costs payable under order 2.
    4. The first defendant pay the plaintiff’s and second defendant’s costs of the defendants’ application filed 20 December 2012 to be assessed on the standard basis.
    5. The defendants pay the plaintiff’s costs of the defendants’ application filed 7 March 2014 and of all adjournments thereof to be assessed on the standard basis.
    6. The defendants pay the plaintiff’s costs of the defendants’ application filed 11 March 2015 to be assessed on the standard basis.

 

Annexure: Calculation of Interest

 

PrincipalDate FromDate ToCash RateDefault Rate    DaysInterest

$201,357.4426/9/0731/12/07-1097 $5,351.14

$201,357.441/1/0831/12/08-10366$20,135.74

$201,357.441/1/0931/12/09-10365$20,135.74

$201,357.441/1/1031/12/10-10365$20,135.74

$201,357.441/1/1131/12/11-10365$20,135.74

$201,357.441/1/1231/8/12-10244$13,423.83

$201,357.441/9/1231/12/12-10122$6,711.91

$201,357.441/1/1318/4/13-10108$5,957.97

$201,357.4419/4/1330/6/133473$2,819.00

$201,357.441/7/1331/12/132.754184$6,851.67

$201,357.441/1/1430/6/142.54181$6,490.33

$201,357.441/7/1431/12/142.54184$6,597.90

$201,357.441/1/1530/6/152.54181$6,490.33

$201,357.441/7/1531/12/1524184$6,090.37

$201,357.441/1/1616/3/162476$2,508.72

 

Total Interest               $149,836.13

 

Footnotes

[1] [2015] QSC 319.

[2]  Ibid [215].

[3] The offsets being 9,181.82 (auction proceeds less bond).

[4] A mere product of variance in the extent of decimal point and time rounding adopted in such calculations.

[5] (1989) 166 CLR 351, 355-6.

[6] Admitted and collectively marked exhibit 66.

[7] As occurred, for example, in Jamieson & Ors v Westpac [2014] QSC 32.

[8] It is unnecessary to specifically order that they be assessed on the District Court scale given the effect of r 697(4) in a case such as this is that they must be so assessed.

[9] A form of the so-called “rule of thumb”, discussed by Austin J in Anzaway v Maroun Corporation (No 2) [2003] NSWSC 725, [89]-[106].

[10] As occurred for example in Bamco Villa Pty Ltd v Montedeen Pty Ltd & Anor [1998] VSC 2175 of 1996; BC9800837.

[11] As occurred for example in MLC Ltd v J&W Management Services Pty Ltd & Anor [2001] VSC 352.

[12] See for example Mansi v O'Connor [2012] QSC 374.

Close

Editorial Notes

  • Published Case Name:

    Mad Dogs Pty Ltd (in liq) v Gilligan's Backpackers Hotel & Resort Pty Ltd & Anor (No 4)

  • Shortened Case Name:

    Mad Dogs Pty Ltd (in liq) v Gilligan's Backpackers Hotel & Resort Pty Ltd (No 4)

  • MNC:

    [2016] QSC 54

  • Court:

    QSC

  • Judge(s):

    Henry J

  • Date:

    16 Mar 2016

Litigation History

EventCitation or FileDateNotes
Primary Judgment[2014] QSC 16525 Jul 2014Application for summary judgment or strike out of pleadings without leave to re-plead dismissed: Henry J.
Primary Judgment[2015] QSC 31909 Nov 2015Judgment for plaintiff on trial of claim for breach and wrongful termination of contract: Henry J.
Primary Judgment[2016] QSC 5416 Mar 2016Orders as to damages and costs: Henry J.
Notice of Appeal FiledFile Number: Appeal 3745/1612 Apr 2016-
Appeal Determined (QCA)[2016] QCA 30418 Nov 2016Appeal against [2015] QSC 319 and [2016] QSC 54 allowed; judgment set aside; claim dismissed: Fraser, Philippides and Philip McMurdo JJA.

Appeal Status

Appeal Determined (QCA)

Cases Cited

Case NameFull CitationFrequency
Anzaway v Maroun Corporation (No 2) [2003] NSWSC 725
2 citations
Jump To
Cite 1 - [2003] NSWSC 725
Cite 2 - [2003] NSWSC 725
Bamco Villa Pty Ltd v Montedeen Pty Ltd & Anor [1998] VSC 2175
2 citations
Jump To
Cite 1 - [1998] VSC 2175
Cite 2 - [1998] VSC 2175
Jamieson v Westpac Banking Corporation [2014] QSC 32
2 citations
Jump To
Cite 1 - [2014] QSC 32
Cite 2 - [2014] QSC 32
Johnson v Perez (1989 166 CLR 351
2 citations
Jump To
Cite 1 - (1989 166 CLR 351
Cite 2 - (1989 166 CLR 351
Mad Dogs Pty Ltd (in liq) v Gilligan's Backpackers Hotel & Resort Pty Ltd (No 3) [2015] QSC 319
2 citations
Jump To
Cite 1 - [2015] QSC 319
Cite 2 - [2015] QSC 319
Mansi v O'Connor [2012] QSC 374
2 citations
Jump To
Cite 1 - [2012] QSC 374
Cite 2 - [2012] QSC 374
MLC Ltd v J&W Management Services Pty Ltd & Anor [2001] VSC 352
2 citations
Jump To
Cite 1 - [2001] VSC 352
Cite 2 - [2001] VSC 352

Cases Citing

Case NameFull CitationFrequency
Gilligan's Backpackers Hotel & Resort Pty Ltd v Mad Dogs Pty Ltd [2016] QCA 304 2 citations
Kelly v Slade [2018] QDC 182 citations
1

Require Technical Assistance?

Message sent!

Thanks for reaching out! Someone from our team will get back to you soon.

Message not sent!

Something went wrong. Please try again.