District Court New South Wales Medium Neutral Citation: Dunbrae Pty Ltd v Armani Restaurant Pty Ltd (No. 3) [2023] NSWDC 32 Hearing dates: 5 July 2022 6 July 2022 7 July 2022 28 July 2022 29 July 2022 5 August 2022 (written submissions) 12 August 2022 (written submissions) 2 December 2022 5 December 2022 (written submissions) 14 February 2023 (written submissions) 16 February 2023 Date of orders: 16 February 2023 Decision date: 16 February 2023 Jurisdiction: Civil Before: Montgomery DCJ Decision: (1) Each party is to bear their own costs of the proceedings save that all preceding costs orders are maintained. (2) The amount of security paid into court by the Defendant/Cross-Claimant on 3 June 2021 in compliance with an order by consent made 6 May 2021 is to be paid out to the Defendant/Cross-Claimant. Catchwords: COSTS –– parties, each vastly unsuccessful –– Calderbank offers –– proceedings commenced and conducted in Local Court warranted ACL – costs ACL – costs Legislation Cited: Uniform Civil Procedure Rules 2005 (NSW) r 42.1, r 42.35 Cases Cited: Calderbank v Calderbank [1975] 3 All ER 333 Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2008] NSWCA 85 Category: Costs Parties: Dunbrae Pty Limited, Plaintiff/Cross Defendant Armani Restaurant Pty Ltd, Defendant/Cross Claimant Representation: Counsel: Mr Kaufmann, Counsel for the Plaintiff/Cross Defendant Mr Oakes, Counsel for the Defendant/Cross Claimant Solicitors: Rostron Carlyle Rojas Lawyers, Solicitors for the Plaintiff/Cross Defendant Grove Lawyers, Solicitors for the Defendant/Cross Claimant File Number(s): 2019/00016357 Judgment EX TEMPORE 1. I continue the practice adopted by me in the principal judgment of referring to the Plaintiff/Cross-Defendant as GFE and to the Defendant/Cross-Claimant as Restaurant. On 7 February 2023 I published my judgment determining the issues and the principal proceedings. As requested to do by the parties, I reserved the question of costs. In the judgment, each party was unsuccessful in the vast majority of its arguments made in support of its claims against the other. 2. In my conclusions to the judgment at [176] – [177], I referred to the parties having conducted their cases on the basis of multiple claimed avenues for recovery and to the "central motivating dispute between the parties" being "anchored in their opposed positions" - for GFE that the equipment was misused; and for Restaurant that the equipment was defective, not fit for purpose, or of not acceptable quality. I referred to that factual matrix of the dispute arising from the abnormally high volume of call-outs for servicing of the equipment. I observed in conclusion: "Taking their opposed positions on that central issue is what gave rise to the parties' dispute in their countervailing claims for payment of invoices" 1. In the absence of expert opinion evidence, I was unable to find, in respect of multiple issues, that the parties had satisfied their respective burden of proof. The subject matter was sophisticated and technical equipment for a commercial kitchen. In the result of the case, I found that GFE succeeded to a value of less than 5% of its claim for payment of invoices, and that Restaurant succeeded to a value of about 10% of its claim for payment of invoices. I found that Restaurant failed in its several claims under the ACL. I determined the correct construction of the Sales Contract made 10 May 2015 and of the Preventative Maintenance Service Contract made 19 July 2017 to be not in accordance with most of the arguments run by the parties, at least until the point of further supplementary submissions on 5 December 2022. Monetarily, my findings were that GFE succeeded on its invoice-based claim in the sum of $1,108.82 and Restaurant succeeded in its invoice-based claim in the sum of $3,206.02. The resulting judgment was in the balance sum of $2,097.20 in favour of Restaurant. 2. When delivering judgment and with reference to the parties' request that I reserve the question of costs, I indicated my preliminary view was that the appropriate order would be that each party pay its own costs. I briefly refer to the following bases then given for that preliminary view: 1. each party was successful in a small component and unsuccessful in the far greater component of its claim based on the invoices; 2. Restaurant's Competition and Consumer Act 2010 (Cth), Sch 2 - Australian Consumer Law (ACL) claims, including under ss 54 and 18, did not involve significant Court time. By this I meant that whilst a primary reason for Restaurant to have been unsuccessful in those claims was the absence of expert opinion evidence concerning the complaints involving the equipment, it was apparent that the expert opinion evidence missing from the invoice‑based claims would have referred to the same information and would have been very closely related; 3. both parties had failed in their argument that the evidence of an abnormally high number of call-outs for service of the equipment, in the absence of expert opinion evidence, supported as reasonable either inference for which they contested - this was in relation to the invoice-based claims and Restaurant's cross-claims for relief under the ACL; 4. Restaurant was successful on the Sales Contract construction question but unsuccessful in its case that the warranty exclusion for consumable items was limited to light globes, thermocouples and door seals; 5. Restaurant was unsuccessful in its argument that it contracted only for the works specified at Option 1 in the 19 April 2017 preventative maintenance and service quotation from GFE; 6. GFE was unsuccessful in its argument that the Sales Contract warranty was void or was amended by the Preventative Maintenance Service Contract and only partially successful in its case on the Preventative Maintenance Service Contract warranty argument; 7. neither party's case on construction of the Preventative Maintenance Service Contract was preferred until I returned the matter to Court on 5 December 2022 for supplementary submissions on the point. By that I mean, the final determination was not as the case had been run for most of the hearing by either party. 1. From the commencement of the hearing, I encouraged the parties to consider the risks of their proceeding in their individual cases in the absence of expert opinion evidence interpreting the technical information involved in the call‑outs and complaints of equipment faults and in that, obviously, in the invoices as well as commenting upon defects, deficiencies and quality of the equipment on the one hand; and, whether or not Restaurant operated the equipment with reasonable practices, or misused it on the other hand. My judgment refers to many transcript references of my exchanges with counsel for the parties of that effect and purpose. 2. In particular, at the close of the second day of the hearing, and specifically dealing with the likelihood of the need for expert opinion evidence in each party's case in order that they might be successful in satisfying their burden of proof, I raised the prospect of the expensive litigation continuing at hearing in the absence of expert opinion evidence. At that point, the plaintiff had closed its case. I refer to transcript between 130 - 133. At T 130. 35 I said: "HIS HONOUR: It's very imprecise evidence, gentlemen. So long as there is a question of characterising the fault of a machine, to use the benign use of the word 'fault', or defect of a machine, to use that benign sense of the word 'defect' to which you yourselves earlier adopted for 'breakdown or fault', that characterisation question arises in relation to this question of whether it's under warranty or not. It is inescapable, isn't it?" 1. To this inquiry, counsel for GFE conceded that it was, but Counsel for Restaurant did not. Counsel for Restaurant took the position that "… all I need to do is demonstrate a breakdown.": See T 130. 45 – 131. 7. In short, and as at the end of this expensive litigation, I found the state of play to be, GFE was conceding its difficulty of succeeding in its claim on the invoices in the absence of expert opinion evidence in support of that claim; whilst Restaurant, with very much the same burden of proof, elected to proceed with its case on a premise of proof at law which was wrong. I found that the evidence in Restaurant's invoice-based claim did not always support the finding of the prima facie presumption that the work was covered by the Sales Contract warranty because, in the absence of further evidence including expert opinion evidence, I was unable to find, even at that low standard of proof, the necessary element of connection between the service call‑out and the warranty. SUBMISSIONS AND EVIDENCE DISPUTING COSTS ORDERS 1. GFE reads affidavits of its solicitor, Mr Finch, made 14 and 16 February 2023. Restaurant reads the affidavit of its solicitor, Ms. Elachi, made 1 October 2021. The procedural history set out in those affidavits is of some significance. Shortly, GFE commenced the proceedings in the Local Court of New South Wales on its invoice-based claim seeking recovery in the total sum of $23,876.75. Restaurant's invoice‑based claim was in a modest quantum also suitable for litigation in the Local Court of New South Wales. What brought the matter to this Court, which transfer was by consent, was Restaurant's cross-claim for full recovery of the purchase price of the equipment in the sum of $217,000, which relief was sought on several bases under the ACL. The more significant point, however, is that both parties continually failed to complete their evidence in accordance with the expectation of litigation in the courts of New South Wales and specifically in non-compliance with several orders made in the Local Court and more so in this Court. 2. Having commenced proceedings on 16 January 2019 in the Local Court of New South Wales, GFE served six of its affidavits in October 2020. Restaurant, having filed its Defence in that Court on 18 September 2019, and then its Statement of Cross‑Claim in that Court, had not filed any evidence by late 2020, no doubt relying on the circumstances that GFE had not served its evidence. The matter was returned on eight occasions before the Courts because of the parties' laxity in serving of evidence. Significantly, on 9 June 2020 the matter had been listed as a special fixture for hearing of four days, 2 - 5 November 2020, in the Local Court. That was a hearing to be of the claims in the Statement of Claim, and those in the Cross‑Claim. In late October 2020 the special-fixture was vacated and on 20 November 2020 the proceedings were transferred to this Court by consent. I make these observations aware of the hardships upon practitioners during the conditions of the pandemic. But even allowing for that, one readily observes that the proceedings were commenced on 16 January 2019, and it was not until July 2021 that GFE completed its evidence, and after that that Restaurant completed its evidence. 3. Based on that history it is particularly disappointing that the case arrived in this Court in a state which I considered to be not of a clear presentation of the legal and factual issues concerning the claims. Most disappointingly, the case at the commencement of the hearing did not clearly present the factual issues concerning each of the invoice services, including both those in which Restaurant called out GFE service persons and those in which Restaurant caused third parties to respond and for which it claimed compensation under warranty. As those pages of transcript at the close of the second day at 130 - 133 express, the proposition of the parties on the state of the preparation of the technical evidence as it was when the matter was brought to hearing in this Court, was that I, as a judge without the required expertise and special knowledge to do so, would trawl through approximately 900 pages of evidence concerning communications between the parties relating to the call‑outs, as well as invoices for all call‑outs. This was not just those invoices upon which the parties sued. It was only near the end of the case, and only because of the encouragement of the Court, that the parties produced the schedules Exhibit B (concerning GFE's invoice claims) and MFI 10 (concerning Restaurant's invoice claims) in which the relevant factual matter was legibly presented with each party's submission on liability and contemplated application of warranty in relation to each invoice. Plainly, the case required presentation of the dispute between the parties in some form of organised schedule. This ought to have been done by the parties prior to the commencement of the hearing. It ought not have required the Court's insistence for that to occur near the end of the hearing. 4. GFE submits the following points: * In the result Restaurant has been unsuccessful in its claim for substantial damages or other relief pursuant to ACL; the proceedings ought to have been continued in the Local Court of New South Wales. * Pursuant to the Uniform Civil Procedure Rules 2005 (NSW) r 42.1 (UCPR), the usual order that costs follow the event is supportive of GFE being awarded 99% of its costs in the proceedings because taking the whole of the quantum of the claims prosecuted by Restaurant, Restaurant recovered only about 1%, and in that way GFE was successful. * That because GFE was to some extent successful in one part of the claim being its claim based on invoices, and Restaurant, whilst successful to some extent on a second part of the case, being Restaurant's claim on invoices, was unsuccessful in the far larger claim for relief under the ACL, Restaurant should pay GFE's costs in the range of 33% to 66% of the proceedings. * In the alternative, that it would be appropriate for the Court in the exercise of its discretion if it be not in favour of either of the two preceding applications, to order each party to bear its own costs "as they have both succeeded and failed in part." 1. In my opinion, an obvious feature of those submissions in relation to the first two proposed orders, which I find unattractive, is that GFE characterises success of the very minor percentage of the parties in the case as "the event" for the purposes of the rule. Obviously, each party was predominantly unsuccessful in each of the causes it prosecuted. 2. Restaurants submits the following point: * That it should have the benefit of Calderbank offers made by it on 2 July 2022 and 6 July 2022, but not to the extent of an order in its favour for costs of the proceedings. Rather, Restaurant proposes the following orders: (1) Each party is to bear its own costs, up to and including 2 July 2022, or alternatively 6 July 2022. (2) The Plaintiff/Cross-Defendant is to pay the Defendant/Cross-Claimant's costs after 2 July 2022, or alternatively 6 July 2022, on the indemnity (alternatively, ordinary) basis. 1. Turning to the Calderbank offers. As I said, the first of them was dated 2 July 2022. It was emailed in the late afternoon of Saturday 2 July 2022, when the hearing was listed to commence on Tuesday 5 July 2022. The terms of the offer, expressed under the title "without prejudice except as to costs", and in the emailed letter referring to the case of Calderbank v Calderbank [1975] 3 All ER 333 were: "(1) Proceedings to be dismissed with no order as to costs; (2) The parties irrevocably release each other from all claims which are the subject of the proceedings and all other claims, whether the subject of the proceedings or not, to the extent permitted by law; (3) The parties enter into a deed of settlement and release, on the above terms, including the usual clauses as to confidentiality and non-disparagement. This offer is open for acceptance until 12pm on Monday 4 July 2022, after which time it is withdrawn." 1. I do not refer to the balance of the communication, as did neither party during their submissions. 2. The offer of an order that the proceedings be dismissed with no order as to costs was in itself, in my opinion, appropriate and reasonable. However, it was expressed to terminate at noon on Monday 4 July 2022. In reality, although the offer was made at a time when the parties ought to have been well prepared for hearing and therefore able to deal with contemplation of and the provision of advices and reply in relation to the offer of compromise quickly; nevertheless, it allowed only one half of one business day for acceptance. In my opinion, that was an unreasonably short time. The question of reasonableness must be judged objectively, in the circumstances known, or which should reasonably have been anticipated by both parties. In my opinion, in the present case the time allowed was, on any view, extremely short for consideration of a global assessment of this reasonably complex dispute. The onus falls upon Restaurant to satisfy the Court that its offer was left open for a period which was reasonable in all the circumstances. In my opinion Restaurant has failed to establish that fact: See Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd [2008] NSWCA 85 at [18] – [23]. I note that that case considered a formal offer made under UCPR r 20.26. 3. The second offer was made at 7.59pm on 6 July 2022. I apply consideration of the same principled approach. That second offer was in the following terms: "(1) Armani to pay to Dunbrae Pty Ltd the sum of $5,000 within 14 days, in full and final settlement of these proceedings. (2) Each party to bear its own costs of the proceedings. (3) The parties irrevocably release each other from all claims which are the subject of the proceedings and all other claims, whether the subject of the proceedings or not, to the extent permitted by law. (4) The parties enter into a deed of settlement and release on the above terms, including the usual clauses as to confidentiality and non-disparagement. This offer is open for acceptance until 10.30am on Thursday 7 July 2022, after which time it is withdrawn." 1. Again, the letter, which was emailed, was headed "without prejudice except as to costs," and made reference to the Calderbank case and consequences of a special order being applied for. The submissions do not cause me to have to refer to the balance of that communication. 2. Obviously, the offer was emailed late evening, following the second day of the hearing. At that time the parties were truly abreast of their problems, as in my opinion I had expressed the foreshadowed state of the evidence and law to be, in particular, regarding proof in each of their cases, given the absence of expert opinion evidence. 3. As I have observed, in my opinion, Restaurant's understanding of its onus of proof to the standard of prima facie persuasion of connection between the invoiced service and the warranty, was wrong. That inadequacy in the evidence and law upon which Restaurant relied, the evidence being only invoices, the content of which was glib expert trade terminology, ultimately exposed the defect in its case. However, Restaurant's Calderbank offer by letter emailed 6 July 2022 did monetarily offer a reasonable compromise. It exceeded the amount for which Restaurant was ultimately successful. Restaurant offered to pay $5,000 within 14 days in final settlement of the proceedings. Again, in my opinion, it was reasonable to offer that each party bear its own costs in the proceedings, but again the time limit for acceptance was not reasonable. The offer was expressed to remain open only until 10.30 am on the third day of the hearing, 7 July 2022. In other words, the offer permitted GFE only less than two normal business hours to elect whether or not it was to be accepted. 4. Even bearing in mind that by its Calderbank offer of 6 July 2022, Restaurant proposed to resolve the case in the monetary sum in excess of that for which it was ultimately successful in the final judgment; had I been of the view that, according to the principles of Calderbank offers, I would make an order for costs in its favour from the date of the offer; I would not do so in the circumstances that these proceedings as ultimately determined ought to have been conducted in the Local Court of New South Wales. 5. As I have said, I am unpersuaded by GFE's submissions as to either of the first two alternative orders it seeks. As I said to the parties during oral submissions, in a nutshell each party succeeded minimally in its claims and its success in opposition of the other party's claim was only of the nature of that party's failure to prove its case. I will not again repeat my description of the inadequacy of the evidence. 6. These proceedings were heard over a period far in excess of the parties' estimate of the hearing. The proceedings were, as my principal judgment has described, unnecessarily complex because of how the parties conducted their cases. The first and final proposition is that each party was predominantly and vastly unsuccessful in the case it prosecuted. 7. Restaurant has, in that qualified way, been ultimately successful, minimally, in the event. I am not satisfied that the commencement and continuation of the proceedings in the District Court rather than the Local Court was warranted. In accordance with UCPR r 42.35 and noting that the judgment was in an amount well less than $40,000, in the exercise of my discretion I would decline to make an order in favour of Restaurant. ORDERS 1. In my opinion, the appropriate order and the order which I make is that: 1. Each party is to bear their own costs of the proceedings save that all preceding costs orders are maintained. 2. The amount of security paid into court by the Defendant/Cross-Claimant on 3 June 2021 in compliance with an order by consent made 6 May 2021 is to be paid out to the Defendant/Cross-Claimant. ********** 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: 20 February 2023