White v Data Transfer Services Pty Ltd & Ors (No 3) [2022] NSWSC 1186

Supreme Court New South Wales

Medium Neutral Citation: White v Data Transfer Services Pty Ltd & Ors (No 3) [2022] NSWSC 1186 Hearing dates: On the papers Date of orders: 05 September 2022 Decision date: 05 September 2022 Jurisdiction: Equity - Commercial List Before: Williams J Decision: Defendants to pay plaintiff's costs on an indemnity basis. Catchwords: COSTS – no question of principle. Legislation Cited: Civil Procedure Act 2005 (NSW), s 98 Cases Cited: Commonwealth of Australia v Gretton [2008] NSWCA 117 Texts Cited: N/A Category: Costs Parties: Mr John Anthony White (Plaintiff) Data Transfer Services Pty Ltd (ACN 139 443 708) (First Defendant) Mr Maher Mina (Second Defendant) Representation: Counsel: M T Fernandes (Plaintiff) M J Heath (Defendants)

Solicitors: Fortis Law (Plaintiff) Matthews Folbigg Pty Ltd (Defendants) File Number(s): 2020/48713 Publication restriction: N/A

Judgment 1. Judgment in favour of the plaintiffs was delivered on 20 July 2022: White v Data Transfer Services Pty Ltd & Ors (No 2) [2022] NSWSC 963 (the principal judgment). The plaintiff (Mr White) was held to be entitled to judgment against the first defendant borrower (DTS) and the second defendant guarantor (Mr Mina) for damages in the sum of $1,800,000 plus interest on that sum provided for by the Deed of Loan and Guarantee on which Mr White had sued. The defendants' cross-claim failed in circumstances where no submissions were made in support of it at the final hearing. 2. The parties were directed to bring in short minutes of order giving effect to the principal judgment and the Court subsequently made the following orders on 2 August 2022: "1. Judgment for the plaintiff on his claim in the amount of $2,340,000 (inclusive of pre-judgment interest). 2. Cross-claim dismissed. 3. Defendants pay the plaintiff's costs of his claim and their cross-claim." 1. The pre-judgment interest in order 1 is not statutory interest but the amount of interest payable to Mr White under the Deed of Loan and Guarantee as referred to at [77] and [132] of the principal judgment. 2. Order 3 reflected my observation in the principal judgment that neither party had indicated that they would wish to be heard separately in relation to costs and that costs should therefore simply follow the event. However, Mr White did wish to be heard in relation to costs and filed a notice of motion seeking to vary order 3 by substituting it with an order that the defendants pay the whole of his costs of his claim and of defending the cross-claim on the indemnity basis. Alternatively, Mr White sought an order that the defendants pay his costs on the ordinary basis until 2 September 2021 and on the indemnity basis from 3 September 2021. 3. All parties have now filed and served written submissions in relation to Mr White's motion concerning costs and have agreed that costs may be determined on the papers. 4. Having considered all of those submissions, I have determined that the appropriate exercise of the discretion under s 98 of the Civil Procedure Act 2005 (NSW) in all the circumstances of this case is to order the defendants to pay the plaintiff's costs of the proceedings on an indemnity basis. The relevant circumstances are that, prior to the commencement of the proceedings on 14 February 2020, the plaintiff made an offer to the defendants on 4 November 2019 to accept the sum of $2,000,000 (inclusive of interest) in full and final settlement of the amount owing by the defendants under the Deed of Loan and Guarantee which was continuing to accrue interest daily at the rate of 5.25% per annum. That represented a compromise of $136,000 on the total amount of $2,136,000 that was then owing. The letter referred to the relevant terms of the Deed of Loan and Guarantee and stated that the plaintiff's solicitors were instructed to commence legal proceedings without further notice to the defendants to recover the full amount outstanding, plus interest and costs, if the compromise sum of $2,000,000 was not paid within 14 days. The letter further stated that, if proceedings were commenced, the plaintiff reserved the right to rely on the letter on the question of costs. 5. The defendants properly accept that the letter may be considered in the exercise of the costs discretion but submit that the Court should not order indemnity costs because the offer was not a genuine compromise and because the plaintiff had delayed in making the demand for four and a half years after (as the Court has now found) the borrower ceased making the payments required under the Deed of Loan and Guarantee. 6. The defendants' submission that the offer did not represent a genuine compromise has two elements. First, the compromise was limited to $136,000. Second, the whole of the interest had accrued by reason of the plaintiff's delay in enforcing his rights under the Deed of Loan and Guarantee. 7. I reject both elements of the defendants' submission. 8. As the plaintiff submitted, a compromise of $136,000 of interest is a material element of compromise, particularly in the circumstances of this case where the defendants were well aware that they were liable to repay the $2,000,000 loan, as is clear from their solicitor's file note dated 22 August 2014 referred to at [70] of the principal judgment, and interest was accruing on that sum in accordance with the terms of the Deed of Loan and Guarantee. The defendants' submissions seek to obscure the true position by referring to the plaintiff's delay in enforcing his rights, and the fact that the compromise related to the interest that had accrued during that period of delay. A demand made by the plaintiff for payment of an instalment that was overdue under the Deed of Loan and Guarantee on 25 February 2015 had been met with a disingenuous response by the defendants, as referred to in the principal judgment at [100]-[107]. As the plaintiff submitted, the interest accrued because the defendants failed to pay the amount owing under the Deed of Loan and Guarantee at any time during the following four and half years. The defendants had received the benefit of the plaintiff's businesses being transferred to them and they had paid only part of the whole of the purchase price they had agreed to pay for the businesses. As their solicitor recorded in his 22 August 2014 file note, the defendants had agreed that $2,000,000 of the total purchase price would be paid by way of repayments under the Deed of Loan and Guarantee. The defendants were in a good position to properly assess the plaintiff's 4 November 2019 offer. As the plaintiff submitted, the defendants acted unreasonably in failing to accept that offer of compromise, choosing instead to put the plaintiff to the trouble of suing them, and choosing to defend these proceedings adopting essentially the same disingenuous approach with which they had rebuffed the plaintiff's 25 February 2015 demand. 9. For those reasons, the plaintiff has discharged its onus of satisfying the Court that it should exercise the costs discretion by ordering the defendants pay the plaintiff's costs of the whole of the proceedings on the indemnity basis: Commonwealth of Australia v Gretton [2008] NSWCA 117 at [44]-[46] and the authorities there referred to. 10. It is not necessary to consider the plaintiff's second offer made on 3 September 2021 which was the basis for the alternative indemnity costs order sought by the plaintiff. 11. I reject the defendants' submissions that they should not be ordered to pay the costs of the plaintiff's two affidavits, one of which he effectively abandoned in cross-examination and the other of which was prepared without the plaintiff paying due attention to the contents of the affidavit and the documents exhibited to it: see principal judgment at [14] and [16]. The plaintiff would have had no occasion to prepare any affidavits at all but for the defendants' unreasonable failure to accept the plaintiff's 4 November 2019 offer. 12. The defendants made the curious submission that the plaintiff "should not be entitled to the full claim for prejudgment interest". The Court has already determined in the principal judgment that the plaintiff has a contractual entitlement to that interest and orders have been made giving effect to that judgment. As the plaintiff submitted, the Court is now functus officio except in relation to the exercise of power to vary the costs order in determining the plaintiff's notice of motion. In any event, the "prejudgment interest" is a matter of contractual entitlement and not something that the Court has a discretion to award or decline to award. 13. For those reasons, the orders of the Court are as follows: 1. Vary order 3 made on 2 August 2022 by setting it aside and substituting the following order: "Order the defendants to pay the plaintiff's costs of his claim and of defending the cross-claim in these proceedings on an indemnity basis in such amount as may be agreed or assessed."