Canadian Solar Construction (Australia) Pty Ltd v Re Oakey Pty Ltd [No 2]
[2024] QSC 27
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- Notable Unreported Decision
- Appeal Determined (QCA)
- Canadian Solar Construction (Australia) Pty Ltd v Re Oakey Pty Ltd [No 2][2024] QSC 27
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Canadian Solar Construction (Australia) Pty Ltd v Re Oakey Pty Ltd [No 2][2024] QSC 27
Canadian Solar Construction (Australia) Pty Ltd v Re Oakey Pty Ltd [No 2][2024] QSC 27
SUPREME COURT OF QUEENSLAND
CITATION: | Canadian Solar Construction (Australia) Pty Ltd v Re Oakey Pty Ltd [2024] QSC 27 |
PARTIES: | CANADIAN SOLAR CONSTRUCTION (AUSTRALIA0 PTY LTD (ACN 620 225 630) (plaintiff) v RE OAKEY PTY LTD (ACN 160 581 626) (defendant) |
FILE NO/S: | BS11591/23 |
DIVISION: | Trial |
PROCEEDING: | Originating Application |
ORIGINATING COURT: | Supreme Court |
DELIVERED ON: | 5 March 2024 |
DELIVERED AT: | Brisbane |
HEARING DATE: | On the papers |
JUDGE: | Freeburn J |
ORDER: | The defendant pay the plaintiff’s costs of the proceeding. |
CATCHWORDS: | PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – OFFERS OF COMPROMISE, PAYMENTS INTO COURT AND COMPROMISE – INFORMAL OFFERS AND CALDERBANK LETTERS – where plaintiff seeks costs calculated on an indemnity basis, after the day of service of an offer to settle – where plaintiff says offer was to settle claim – where letter accompanying offer was sufficiently detailed so as to allow plaintiff to pursue other claims against defendant – where the defendant had its own counterclaims against the plaintiff – whether plaintiff obtained order no less favourable than the offer PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – TAXATION AND OTHER FORMS OF ASSESSMENT – GST CONSIDERATIONS – where plaintiff seeks costs with order of GST under payment claim – whether defendant should pay GST where absence of applications or supporting material PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – INTEREST ON COSTS – where plaintiff contends it is entitled to compound interest and defendant contents it is to pay simple interest – whether s 67P of the Queensland Building and Construction Commission Act 1991 requires the payment of compound interest |
COUNSEL: | M Steele KC and BA Reading for the plaintiff AC Stumer KC and AP McKinnon for the defendant |
SOLICITORS: | Norton Rose Fulbright Australia for the plaintiff Thomson Geer for the defendant |
REASONS
- [1]There was a trial of this proceeding on 29 and 30 November 2023. On 15 December 2023 the court made two orders, namely:
- Pursuant to section 78(2)(a) of the Building Industry Fairness (Security of Payment) Act 2017, the defendant pay to the plaintiff the sum of $4,030,714.74 (excluding GST);
- The defendant pay to the plaintiff interest on that sum of $4,030,714.74 calculated pursuant to section 67P of the Queensland Building and Constructions Commission Act 1991 (Qld).
The parties were to be heard on costs. The orders and reasons are published at Canadian Solar Construction (Australia) Pty Ltd v Re Oakey Pty Ltd.[1]
- [2]The parties have subsequently filed written submissions on costs and on two other issues.
Costs
- [3]On 14 November 2023, that is about two weeks before the trial, the plaintiff’s solicitors wrote to the defendant’s solicitors enclosing an offer to settle. The offer was in these terms:
- The Plaintiff offers to settle all the claims and counterclaims in this proceeding on the conditions set out in this offer.
- The Defendant pay the Plaintiff $3,085,000.00 (excluding GST) within 28 days of acceptance of the offer.
- The application filed 15 September 2023 be dismissed.
- Each party bear its own costs.
- [4]In an accompanying letter, the plaintiff’s solicitors explained their client’s offer in this way:
2 We attach the Plaintiff’s Offer to Settle. The Plaintiff offers to settle all the claims and counterclaims in the proceeding on the conditions set out in the Offer to Settle.
3 The amount of $3,085,000.00 (excluding GST) comprises the following amounts claim in Progress Claim No. 64 dated 26 June 2023:
(1) $635,000.00 (excluding GST) in relation to Milestone 4 (4 of 4) Project Management;
(2) $2,000,000.00 (excluding GST) in relation to Milestone 33 Substantial Completion; and
(3) $450,000.00 (excluding GST), being 50% of the amount claimed for “Construction work carried out by the Contractor and claimable pursuant to clause 24.7 and clause 39.2(b) of the EPC Contract”.
4 If accepted, the Defendant [presumably this was a mistake and was intended to refer to the Plaintiff] will withdraw Progress Claim No. 64 insofar as it claims payment for:
(1) $57,766.42 (excluding GST) in relation to Variation No. 02 – ON Connection rev 2;
(2) $230,876.07 (excluding GST) in relation to Variation No. 05 – Rev 4 – Additional Harmonics Studies;
(3) $207,072.25 (excluding GST) in relation to Variation No. 07 – Additional GPS Modelling; and
(4) $450,000.00 (excluding GST), being 50% of the amount claimed for “Construction work carried out by the Contractor and claimable pursuant to clause 24.7 and clause 39.2(b) of the EPC Contract”
(together, Remaining Claims).
5 For the avoidance of doubt, the Plaintiff reserves its right to claim payment from the Defendant in relation to the Remaining Claims pursuant to the Contract, but not pursuant to Progress Claim No. 64.
- [5]The critical issue is the nature of the offer made by the plaintiff. Or, put another way, if the offer was accepted, and the defendant paid $3,085,000 to the plaintiff, what would be the effect of that acceptance and payment?
- [6]Canadian Solar contends that Oakey’s non-acceptance of the offer engages rule 360 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR) because Canadian Solar’s offer to accept $3,085,000 was, to use the language of rule 360, “no less favourable than the offer”. In other words, the overall effect of the judgment is that the defendant is required to pay $4,030,714 to the plaintiff as compared with the offer sum of $3,085,000.
- [7]For that reason, Canadian Solar contends that the court should order the defendant to pay the plaintiff’s costs on the standard basis up to the date of the offer and on an indemnity basis from that date onwards. That general rule is the effect of rule 360, unless the defendant shows that another order for costs is appropriate in the circumstances.
- [8]Canadian Solar points out that its offer was to settle only its claim in the proceeding. However, that is not strictly accurate. The offer made was to settle “all the claims and counterclaims in this proceeding”. Canadian Solar’s claim was for $4,030,714 pursuant to s 78(2) of the Building Industry Fairness (Security of Payment) Act 2017 (BIF Act). However, Oakey’s counterclaim was for:
- an injunction restraining Canadian Solar from enforcing payment of Payment Claim 64 (PC64) in reliance on s 77 or 78 of the BIF Act;
- damages pursuant to s 236 of s 237 of the Australian Consumer Law (ACL) in the amount of any liability it had to Canadian Solar in respect of PC64;
- damages pursuant to s 236 or s 237 of the ACL in the amount of the costs it has incurred and is incurring in the present proceeding.
- [9]And so, whilst it is true that Canadian Solar’s claim was confined to a claim under s 78 of the BIF Act (and interest and costs) Oakey did not merely defend that case. Oakey had its own counterclaims. And so, I reject the plaintiff’s contention that the only dispute agitated was Canadian Solar’s claim for $4,030,714.
- [10]The letter accompanying the offer explained the offer. As can be seen from paragraph 3 of the letter (quoted above), the offer of $3,085,000 was expressed to comprise three components. Those components comprised two milestones and 50% of the amount claim for amounts claim for “Construction work carried out by the Contractor and claimable pursuant to clause 24.7 and clause 39.2(b) of the EPC Contract”.
- [11]The letter also explained that, if the offer was accepted, Oakey was to withdraw PC64 in so far as it made four remaining claims, and Canadian Solar reserved its right to pursue those four remaining claims – but it would not do so pursuant to PC64. Those four remaining claims totalled roughly $945,000.
- [12]It follows that what Canadian Solar proposed by means of its offer differs from the orders made by the court. What the offer proposed was an adjustment of the parties’ rights under PC64. Under the court’s order Oakey was required to pay PC64 but appreciating that any payment under s 78 of the BIF Act is in effect an interim payment on account because of the effect of s 101 of the BIF Act. On the other hand, under the offer, as explained by the covering letter, roughly $3m was to be paid for a reduced PC64 and rights were reserved for a further $945,000.
- [13]Of course, in some cases, the offer made is in effect a standalone offer and there is no need to consider the accompanying letter. And, in some cases, the letter from a solicitor accompanying an offer under the rules may merely explain the constituent elements of the offer. But that is not this case. Here the letter accompanying the offer went beyond merely explaining the offer. The letter specified that PC64 was to be withdrawn in so far as it made the four remaining claims totalling $945,000, and that Canadian Solar reserved its right to pursue those four remaining claims – but explained that it would not do so pursuant to PC64.
- [14]In the circumstances the accompanying letter was designed to be read with the offer. The letter should be considered, first, in making the comparison which rule 360 requires and, second, in deciding whether Oakey has shown whether another order for costs is appropriate.
- [15]As to the first aspect, the letter is clearly designed to explain the basis for the offer and how the proposed altered rights of the parties under PC64 are to work. No evidence explains why the court’s decision of an “interim” $4m gives a less favourable result than the offer which prescribes adjusted rights under PC64, with a payment of $3m now, and with a reservation of rights in relation to the balance.
- [16]As to the second aspect, Oakey was entitled to read the letter with the offer. That was what Canadian Solar’s solicitors intended. They intended, for example, that their client’s rights to make the remaining claims be reserved.
- [17]Canadian Solar contended that acceptance of the offer would not have determined the parties’ underlying substantive dispute. That is true. The parties are presently engaged in an arbitration. Their final, rather than interim, rights are yet to be determined. However, the acceptance of the offer would have altered the parties’ interim rights. Instead of having a claim for $4,030,714 pursuant to PC64, Canadian Solar would receive a payment of $3,085,000, and Oakey’s counterclaims would be extinguished, and Canadian Solar would preserve its rights to claim a further $945,000 for the remaining claims.
- [18]It follows that the evidence does not establish, and I am not satisfied that the offer is ‘no less favourable’ than the court’s decision. This is certainly not a case where it is appropriate to simply compare the offer of $3m against the judgment of $4m. The comparison is more complex than that. The adjusted rights of the parties under the offer may or may not be more favourable for Oakey. Much depends on future events, namely, what was to happen with the remaining claims, and whether and when they were prosecuted, and how they were to be resolved, the costs of resolving them.
- [19]In any event, the letter and its reservation of rights, placed Oakey in a position where it was comparing apples and oranges. On the one hand, Oakey could chance its arm in the litigation which, if it lost, would result in an order that it pay $4m but subject to a final adjustment of the parties’ rights. On the other hand, it could chance its arm under the adjusted rights scheme proposed in the offer whereby it was required to pay $3m, presumably also on an interim basis, but it may well have faced an uncertain future with the four remaining claims totalling $945,000.
- [20]Of course, one factor relevant here is whether there is evidence which establishes that Oakey was acting unreasonably to chance its arm in the litigation. I do not think that is the case. In my view, the uncertainty of the position under the offer means that Oakey has shown whether another order for costs is appropriate, that is, the usual order that costs follow the event.
- [21]It follows that the plaintiff should have its costs on the standard basis.
GST
- [22]The claim that Canadian Solar made was for “$4,030,714 (excluding GST)”. That is the sum and the expression reflected in the judgment.
- [23]Canadian Solar, having obtained the order it sought, now seeks an order that Oakey is liable to pay the GST claimed within PC64, being the total sum of $313,071.47.
- [24]There are, as Oakey submits, two distinct issues. The first is whether the order made by the court on 15 December 2023 requires the payment of GST. Plainly, the order did not require the payment of GST. No such order was sought.
- [25]Canadian Solar seeks to make submissions as what components of PC64 are subject to GST. However, there is no application to amend the claim made in the proceeding, and no application to re-open the evidence (so as to admit a further affidavit of Mr Ruttledge), and no application to vary the orders made.
- [26]In the absence of those applications, and material supporting the applications, I decline to make the order requested.
- [27]The second issue is whether Oakey is liable to pay GST on the amount stated in PC64. That issue does not require resolution because of the absence of any of the applications referred to above.
- [28]Of course, the orders made by the court did not purport to restrict or alter or even declare the parties’ rights under the GST legislation.
Interest
- [29]The parties also disagree on the calculation of interest. Canadian Solar contends that it is entitled to compound interest. Oakey disagrees and has paid simple interest.
- [30]Pursuant to the judgment on 15 December 2023 (quoted above) interest is to be calculated pursuant to s 67P of the Queensland Building and Construction Commission Act 1991. That section provides:
- This section applies if—
- the contracting party for a building contract is required to pay an amount (the progress amount) to the contracted party for the building contract; and
- the progress amount is payable as the whole or a part of a progress payment; and
- the time (the payment time) by which the progress amount is required to be paid has passed, and the progress amount, or a part of the progress amount, has not been paid.
- For the period for which the progress amount, or the part of the progress amount, is still unpaid after the payment time, the contracting party is also required to pay the contracted party interest at the penalty rate, as applying from time to time, for each day the amount is unpaid.
- In this section—
penalty rate means—
- the rate made up of the sum of the following—
- 10% a year;
- the rate comprising the annual rate, as published from time to time by the Reserve Bank of Australia, for 90 day bills; or
- if the building contract provides for a higher rate of interest than the rate worked out under paragraph (a)—the higher rate.
- [31]Canadian Solar distinguishes between the use of the words “progress amount” and “the amount” in s 67P(2). However, in my view, the latter expression is merely shorthand for the former. The section merely requires interest to be paid for each day the sum is unpaid. I do not read s 67P(2) as requiring the payment of compound interest.
- [32]As Oakey points out, that view is consistent with the simple interest calculation in Built Qld Pty Ltd v Pro-Invest Australian Hospitality Opportunity (ST) Pty Ltd (No. 2)[2] at [6]-[8].
- [33]It follows that there is no need to make any further orders regarding interest.