Supreme Court New South Wales Medium Neutral Citation: StockCo Agricapital Pty Ltd v Dairy Livestock Services Pty Ltd (No 2) [2020] NSWSC 636 Hearing dates: On the papers; last submission received 12 May 2020 Date of orders: 18 May 2020 Decision date: 18 May 2020 Jurisdiction: Equity Before: Parker J Decision: See [41] Catchwords: COSTS – party/party – general rule that costs follow the event – offer of compromise from successful party – whether the application of UCPR r 42.34 excluded costs on an indemnity basis CIVIL PROCEDURE – interest – whether interest to be awarded under s 100 of the Civil Procedure Act 2005 (NSW) Legislation Cited: Civil Procedure Act 2005 (NSW), ss 90(1), 100 Justice Legislation Amendment Act (No 3) 2018 (NSW) Uniform Civil Procedure Rules 2005 (NSW), rr 6.12(6)-(8), 16.16(1)(b), 36.1, 42.14, 42.34 Cases Cited: Averkin v Insurance Australia Ltd (No 2) [2016] NSWCA 150 Re Dungowan Manly Pty Ltd (in liq) [2015] NSWSC 915 The NTF Group Pty Ltd v PA Putney Finance Australia Pty Ltd [2017] NSWSC 1194 Category: Costs Parties: StockCo Agricapital Pty Ltd (Plaintiff) Dairy Livestock Services Pty Ltd (Defendant) Representation: Counsel: J Stephenson (Plaintiff) Solicitors: ClarkeKann Lawyers (Plaintiff) Patane Lawyers (Defendant) File Number(s): 2018/51401 Publication restriction: Nil Judgment – EX TEMPORE Revised from transcript; issued 4 June 2020 1. On 31 March this year I delivered the principal judgment in these proceedings: StockCo Agricapital Pty Ltd v Dairy Livestock Services Pty Ltd [2020] NSWSC 318. I directed the plaintiff to bring in a minute of order giving effect to my conclusions. The parties disagree on some of the orders to be made, and this judgment resolves those disagreements. It assumes familiarity with, and uses abbreviations used in, the principal judgment. 2. Following delivery of the principal judgment, the parties agreed a timetable for lodgement of written submissions. The last submission was delivered on 12 May. The submissions were accompanied by affidavits of the parties' solicitors, to which no objection was taken. 3. The parties agreed that as a consequence of my decision, there should be judgment in favour of the plaintiff (StockCo) against the defendant (DLS) in the sum of $207,009.87. This figure is made up of two separate amounts to which I found StockCo was entitled, namely $118,924.78 and $88,085.09 (see principal judgment at [6]–[9]). There are two areas of dispute, namely interest and costs. Interest 1. StockCo claims interest under the judgment under the Civil Procedure Act 2005 (NSW) ("CPA"), s 100, at the usual court rates. StockCo ultimately confined its claim to interest on the first amount from 1 June 2017 and on the second amount from 12 July 2017. This was done so as to avoid disputes raised in DLS' submissions about whether StockCo was entitled to interest from earlier dates, as it had first claimed. 2. Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), r 6.12 contains requirements as to the pleading of claims. UCPR 6.12(6)-(8) deal with interest. They provide: … (6) An order for interest up to judgment must be specifically claimed. (7) In the case of a liquidated claim, a claim for an order for interest up to judgment— (a) must specify the period or periods for which interest is claimed, and (b) may specify the rate or rates at which interest is claimed. (8) If no rate of interest is specified under subrule (7)(b), the rate at which interest is claimed is taken to be— (a) in respect of the period from 1 January to 30 June in any year—the rate that is 4% above the cash rate last published by the Reserve Bank of Australia before that period commenced, and (b) in respect of the period from 1 July to 31 December in any year—the rate that is 4% above the cash rate last published by the Reserve Bank of Australia before that period commenced. 1. In its Statement of Claim, StockCo specifically claimed interest under CPA s 100. But the claim on which StockCo succeeded was a claim for money had and received, which is a liquidated claim for the purpose of UCPR 6.12(7). StockCo's Statement of Claim did not specify the period or periods for which interest was claimed in accordance with UCPR 6.12(7)(a). 2. The contention for DLS is that StockCo's failure to comply with the Rules means that its claim for interest must fail. StockCo disputes this but applied, if necessary, for leave to amend its Statement of Claim to specify in it the dates from which interest is now claimed. 3. In Re Dungowan Manly Pty Ltd (in liq) [2015] NSWSC 915, Black J dealt with a claim for interest on a judgment made at the end of the proceedings when interest had not been claimed in the originating process. His Honour said at [40]: Section 14 of the Civil Procedure Act permits the Court to dispense with the application of UCPR 6.12(6)-(8), on which the Shareholders rely, if satisfied that it is appropriate to do so in a particular case. Under s 90(1) of the Civil Procedure Act, the Court is also obliged to give judgment or make such order as the nature of the case requires. Under UCPR r 36.1, the Court may give such judgment or make such order as the nature of the case requires, whether or not a claim for relief extending to that judgment or order is included in any originating process or notice of motion: Farrell v Mulroney [1978] 1 NSWLR 221; NSW Trustee and Guardian v Schneider [2011] NSWSC 424 at [24]. In determining whether to dispense with the application of UCPR 6.12(6)-(8) in this case, I should have regard to the role of the identification of a claim for interest in giving notice of the case that the Shareholders had to meet, but also to the wider interests of justice. I bear in mind the factors summarised by the Full Court of the Federal Court of Australia in Thomson v STX Pan Ocean Co Ltd [2012] FCAFC 15, albeit in the context of whether an unpleaded matter could be raised rather than in the specific context of a claim for interest. The Court observed (at [13]) (omitting authorities) that: It is well-established that the main purposes of pleadings are to give notice to the other party of the case it has to meet, to avoid surprise to that party, to define the issues at trial, to thereby allow only relevant evidence to be admitted at trial and for the trial to be conducted efficiently within permissible bounds …. However, it is also well-established that pleadings are not an end in themselves, instead they are a means to the ultimate attainment of justice between the parties to litigation … For these reasons, the courts do not, at least in the current era, take an unduly technical or restrictive approach to pleadings such that, among other things, a party is strictly bound to the literal meaning of the case it has pleaded. The introduction of case management has, in part, been responsible for this change in approach … Even before the widespread use of case management, the High Court reflected this approach … 1. At [41] his Honour considered the relevant discretionary factors. The claim was brought by individual shareholders of the company the subject of the proceedings, acting in person. The judgment debtors, on the other hand, were companies whose principal was a QC and who were represented by solicitors and counsel. Obviously, they would have been aware of the possibility of a claim for interest. His Honour was satisfied that he should dispense with the requirements of UCPR r 6.12(6)-(8) and awarded interest. 2. In the present case, the claim for interest was pleaded. The requirement of putting DLS on notice of that claim was satisfied. The only deficiency was the failure to specify the period over which interest was claimed. 3. Once a claim for interest has been notified, the date from which such interest is to be awarded will rarely be a significant issue in the conduct of the trial. As in this case, any such question will usually be debated when formulating the final orders if the plaintiff has succeeded in its claim. 4. In my view, it is significant that UCPR 6.12(7) applies to liquidated claims only. I think the purpose of the specific requirement in subr (7)(a) may be to facilitate the calculation of interest due in the event of a default judgment rather than anything else: see UCPR r 16.6(1)(b). Its omission in the present case has clearly occasioned no prejudice. 5. StockCo is a sophisticated client represented by experienced solicitors and counsel. Non-compliance with the Rules should not be encouraged, but I do not think that it should operate to StockCo's detriment in the present case. 6. I do not think it is necessary for the Court to grant formal leave to StockCo to amend its Statement of Claim. The provisions of CPA s 90(1) and UCPR r 36.1, to which Black J referred in Re Dungowan, are sufficient, in my view, to empower the Court to enter judgment for the interest claimed notwithstanding the failure to comply with UCPR 6.12(7). Costs 1. As the successful party in the proceedings, StockCo sought an order for costs. On 28 August 2019 StockCo had made a formal offer of compromise under the Rules to accept judgment in the sum of $80,000. That offer was not accepted. On the strength of being entitled to a more favourable judgment than that contained in its notice of offer, StockCo sought indemnity costs from 29 August 2019 onwards under UCPR r 42.14. 2. In response to StockCo's claim for costs, DLS relied on UCPR r 42.34, which provides: (1) This rule applies if - (a) in proceedings in the Supreme Court, other than defamation proceedings, a plaintiff has obtained a judgment against the defendant or, if more than one defendant, against all the defendants, in an amount of less than $500,000, and (b) the plaintiff would, apart from this rule, be entitled to an order for costs against the defendant or defendants. (2) An order for costs may be made, but will not ordinarily be made, unless the Supreme Court is satisfied that - (a) for proceedings that could have been commenced in the District Court - the commencement and continuation of the proceedings in the Supreme Court, rather than the District Court, was warranted, or (b) for proceedings under Part 2 of Chapter 7 of the Industrial Relations Act 1996 - the commencement and continuation of the proceedings in the Supreme Court, rather than the Local Court, was warranted. 1. DLS submitted, based on the decision of the Court of Appeal in Averkin v Insurance Australia Ltd (No 2) [2016] NSWCA 150 at [9]–[10], that UCPR r 42.34 takes priority over r 42.14, so that if r 42.34 applies, no question of entitlement to indemnity costs can arise. This particular submission was not disputed. The initial questions were whether the proceedings could have been commenced in the District Court and whether their commencement and continuation in this Court was "warranted". 2. Initially, StockCo had claimed $590,000. As stated in [7] and [8] in my judgment, StockCo's second claim in these proceedings concerning the second and third stock sales, was originally for $468,085.09. StockCo received the sum of $380,000 at a later point by calling on a guarantor of the indebtedness of the principal debtor, Reid Agricultural. Eventually, it became clear that the guarantor, which was in liquidation at the time the proceedings were commenced, would not make any claim to recover that money from StockCo, and StockCo limited its claim from DLS to the sum of $88,085.09, which was ultimately successful. 3. DLS pointed out that, even including the initial $380,000, the claim on which StockCo succeeded (a claim for money had and received) fell within the District Court's usual jurisdiction. The amount ultimately recovered was well below the $500,000 specified in UCPR r 42.34(1). Accordingly, DLS contended, StockCo should be deprived of its costs of the proceedings under the rule. 4. In response, counsel for StockCo pointed out that these proceedings were commercial in nature. They were commenced in February 2018 and the Statement of Claim was amended in July 2018. At that time a series of cases, beginning with The NTF Group Pty Ltd v PA Putney Finance Australia Pty Ltd [2017] NSWSC 1194 (see at [38]–[46]), had decided that the District Court did not have jurisdiction to entertain commercial claims. 5. This surprising and unfortunate result was remedied by the Justice Legislation Amendment Act (No 3) 2018 (NSW), which took effect in November 2018. Counsel for StockCo submitted, however, that at the time the proceedings were commenced, the District Court lacked jurisdiction and, accordingly, the proceedings could not have been commenced in the District Court for the purposes of UCPR r 42.34(2)(a). 6. The purpose of UCPR r 42.34(2)(a) is to ensure that proceedings which fall within the District Court's jurisdiction are, except in special circumstances where commencement in this Court is warranted, brought in the District Court. It might be thought that where proceedings were properly commenced in this Court but, as they developed, became proceedings that were suitable to be completed in the District Court, there should be a similar incentive on the parties to have them transferred there. An example of such a case is where proceedings are brought in this Division seeking injunctive relief as well as damages for breach of contract, but where the injunction claim ultimately falls away, leaving a claim for damages or some other monetary amount. 7. The present is another example of a case which, once the remedial legislation had been passed, could, and probably should, have been transferred to the District Court. But while UCPR r 42.34(2)(a) speaks of the "commencement and continuation of the proceedings" in the Supreme Court being warranted, the paragraph is only engaged if the proceedings "could have been commenced" in the District Court. It is not, as a matter of language, engaged if the proceedings could not at the time of their commencement have been commenced in the District Court but subsequently became capable of being completed in that Court. 8. Counsel for StockCo argued that in any event the commencement and continuation of the proceedings in this Court was "warranted" for the purposes of UCPR r 42.34(2)(a). Counsel pointed out that when commenced, the amount claimed was more than $500,000. 9. As a matter of language, the rule is triggered by the obtaining of a judgment for less than $500,000 where the proceedings could have been commenced in the District Court. Clearly, the rule must have been drafted with the contemplation that it could apply where the plaintiff claims an amount exceeding $500,000 but still below the District Court's jurisdiction of $750,000, and then succeeds for a lesser amount. To say that in such circumstances the commencement of proceedings in the District Court is always warranted would, in my view, be to nullify the language of the rule. 10. There may be some circumstances a claim which initially exceeded the $500,000 would warrant commencement in this Court. But arguably there is nothing special about StockCo's claim in this regard. 11. The other point I would make is that even if the commencement of the proceedings in the District Court had been warranted, their continuation was probably not, after it became clear that no claim to claw back the $380,000 would be made against StockCo. The evidence before me shows that the liquidation of the guarantor company was completed in October 2018 and the company was deregistered in February 2019. It would seem that it would have been clear by October 2018, or at the very latest by February 2019 that no claw-back claim would be made. Yet it was not until shortly before the trial that the claim to $380,000 was abandoned. 12. As I have concluded that UCPR 42.34(2)(a) was not engaged because the proceedings could not, at the time of commencement, have been commenced in the District Court, I do not need to decide finally whether the commencement or continuation of the proceedings in this Court was otherwise warranted. StockCo is entitled to its costs of the proceedings. 13. The next matter to be determined in StockCo's claim is that it should receive costs on an indemnity basis. 14. DLS' written submissions argued that StockCo had not obtained a judgment more favourable than that in its offer. The argument was that the ultimate judgment amount should be compared not just with the amount of the offer but with the costs which StockCo would be entitled to. The submissions argued that once the costs were taken into account, StockCo's ultimate recovery would not exceed the judgment sum to which I have already referred. 15. I do not accept this argument, which seems to me to be based on a misunderstanding of the Rules. An offer under the Rules is exclusive of costs and the proper comparison is between the amount of the offer, in this case $80,000, and the amount of judgment. 16. The effect of UCPR r 42.14 is to create a presumption in favour of the award of indemnity costs where, as here, the plaintiff has achieved a more favourable result than that specified in an earlier offer. The question is whether there is anything in the circumstances of this case which requires the Court to depart from that presumption. 17. DLS' written submissions relied on various factors which, so it was argued, meant that the presumption in favour of indemnity costs should be displaced. One of those was the late abandonment of the claim so far as it concerned the $380,000. DLS' submissions went so far as to contend that DLS had, in fact, succeeded on this "claim". 18. The submissions also argued that in various other ways StockCo's conduct of the proceedings had involved disproportionate cost. The submissions pointed to changes in the way in which StockCo put its case, the fact that StockCo retained both senior and junior counsel, and an overall lack of proportionality of the costs (said by StockCo in correspondence to have reached around $140,000 by September 2019, even before the trial took place) to the amounts at stake. 19. On the face of it, StockCo could and should have confined its second claim by excluding the $380,000 at a much earlier point than it did. But there was no evidence of any prejudice to DLS in the form of specific additional costs incurred as a result. In fact, the amount of $380,000 was not a separate claim at all. It was simply a credit offered by StockCo to avoid double recovery. On my findings, StockCo was entitled as against DLS to recover the full $468,085.09 which DLS received from the second and third stock sales in mid-2017. I do not see how StockCo's failure to offer the credit at an earlier point would have made any substantial difference to meeting the claim. 20. Furthermore, the question I am considering is whether the offer should have its presumptive effect. The offer figure was so low that it clearly implied an abandonment of the $380,000 in any event. 21. It is also fair to say that the time and effort spent on the litigation was disproportionate to the amount at stake. As I pointed out in my principal judgment, the hearing itself occupied two days and was followed by a further round of written submissions, another hearing and yet further written submissions. It is also correct that the further submissions involved a significant expansion of the arguments and trespassed into areas which had not previously been agitated, or even pleaded, by the parties. 22. But this cannot fairly be blamed on StockCo alone. Counsel for DLS also raised new points and advanced a number of arguments which, as the case twisted and turned, later were not pressed or fell away. 23. I do not find it profitable to go back into the maze of arguments which I was presented with in this case for the purpose of trying to determine whether one party was more or less responsible for the way in which the case ultimately developed. The fact that proceedings may go off on unexpected tangents and may take longer and cost more to resolve than was initially expected is a commonplace of litigation. In my view, it does not provide a reason for failing to give effect to the policy behind the Rules concerning offers of compromise, which is to create deterrents and incentives designed to encourage the parties to compromise proceedings rather than bring them to trial. To the contrary, it is the very sort of thing that a party facing a formal offer of compromise should consider in deciding whether to accept it. 24. The effect of upholding StockCo's submissions is to give it an award of indemnity costs (which will no doubt be very substantial) of proceedings which could, and in my view should, have been transferred to the District Court rather than pursued to trial in this Court. This appears hard on DLS. But for the reasons I have given, I think it is what the Rules require. Orders 1. I make the following orders: 1. Judgment for the plaintiff against the defendant in the sum of $207,009.87, together with interest of $31,769.19. 2. Order that the defendant pay the plaintiff's costs of the proceedings up to and including 28 August 2019 on the ordinary basis and from 29 August 2019 onwards on the indemnity basis. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 04 June 2020