Morgan and Banks Developments Pty Limited v Kenoss Pty Limited [2011] NSWSC 124

Supreme Court New South Wales

Medium Neutral Citation: Morgan and Banks Developments Pty Limited v Kenoss Pty Limited [2011] NSWSC 124 Hearing dates: 11 February 2011 Decision date: 11 February 2011 Jurisdiction: Equity Division Before: Rein J Decision: The plaintiff and the first defendant to pay their own costs up until 21 November 2008, but the first defendant to pay the plaintiff's costs on an indemnity basis from 22 November 2008. No interest is payable to the first defendant. Catchwords: PROCEDURE - costs and interest - whether it was unreasonable for the first defendant to not accept the plaintiff's Calderbank offer - whether the plaintiff's offer was more advantageous to the first defendant than the result obtained by the first defendant in the proceeding - whether the first defendant should pay the plaintiff's costs on an indemnity basis - whether the first defendant is entitled to interest Legislation Cited: Civil Procedure Act 2005 (NSW) Category: Consequential orders Parties: Morgan and Banks Developments Pty Limited ACN 097 945 214 (plaintiff) Kenoss Pty Limited ACN 008 544 232 (first defendant) Canberra Land Developments Pty Limited ACN 103 875 823 (second defendant) Representation: Counsel: R I Harper SC (plaintiff) D M Loewenstein (first defendant) Solicitors: Hones La Hood Lawyers (plaintiff) Gillespie-Jones & Co (first defendant) File Number(s): SC 2008/277858

EX TEMPORE Judgment 1I handed down reasons for judgment in this matter on 15 December 2010 and indicated on that occasion that the parties should prepare short minutes of order reflecting the conclusions to which I came. I also indicated that I would hear argument on the issue of costs. This judgment should be read in light of that earlier judgment delivered on 15 December. 2Since that time the parties have, without success, sought to reach agreement on the appropriate orders and issues that remain in respect of interest, costs and, indeed, even the form of the orders. Through written submissions, it was obvious that each of the parties seemed to view itself as having substantially succeeded in the case. In broad terms, however, I see the case as one in which each party had a degree of success and a degree of failure and I view the case as one, subject to the issue of the offers of compromise which the plaintiff has made by means of letters of 21 November 2008 and 4 February 2009, as being one in which the appropriate order is that each party pay its own costs. The plaintiff now has accepted that that is the position and only seeks to argue that it should have an order for indemnity costs from and after 21 November 2008, being the date of its first offer. 3The offers made by the plaintiff were in the form of Calderbank letters and the plaintiff's primary position is that it was unreasonable for the first defendant ( "Kenoss" ) not to have accepted the offer in November 2008 or, alternatively, that Kenoss should have accepted the offer which was subsequently made on 4 February 2009, which is in either identical or very similar terms. 4Mr R I Harper SC, for the plaintiff, submits that Kenoss was, by the letter of 21 November 2008, offered more than it has obtained by virtue of my judgment. The contest on this point seemed to revolve around Kenoss' contention that the offer made was not as beneficial to it as the judgment. This argument had two limbs. The first was based on Kenoss' contention that a sum of approximately $200,000 was not taken into account in the plaintiff's analysis, an analysis which is to be seen in a document which is at tab 14 of Exhibit Note GB4 to the affidavit of Mr Graham Leonard Brand of 1 February 2011. I also received two affidavits of 9 February 2011 of Mr Spiros Brendas on behalf of Kenoss and the solicitor for Kenoss, Mr Ian Gillespie-Jones, and a further affidavit from Mr Brand of 10 February 2011 on this application. 5The second basis asserted by Kenoss was that the valuations placed on the three unsold lots (which in my judgment I had held should be dealt with under the joint venture) were not accurate. Those valuations were referred to in the analysis at tab 14 of Exhibit Note GB4. 6So far as the first limb is concerned, reliance was placed on the evidence of Mr Gillespie-Jones in which he sets out the amounts that Kenoss has incurred in connection with the development and says that these should be taken into account. One of those amounts is a very small amount, as Mr D M Loewenstein, who appears for Kenoss, concedes. The two substantial items are amounts that have been paid to Kenoss already and were not the subject of dispute in the proceedings before me and not the subject of judgment. No proper basis was advanced as to why they should be taken into account in assessing the comparative value of the offer made on 21 November 2008 and the judgment reflected in my reasons for judgment handed down on 15 December 2010. 7The valuation question is also irrelevant since the plaintiff's offer was not based on any particular valuation. What value is ascribed to the lots that have yet to be developed and sold would have to be added to the two amounts under comparison. I think Mr Loewenstein accepted during submissions that this is so. 8The offer made on 21 November 2008 offered Kenoss effectively $288,000 more than the amount obtained by the judgment. The issue on which Kenoss succeeded in the case was already encapsulated in the offer of compromise. 9One argument that was made by Kenoss against that conclusion was that the offer made on 21 November 2008 did not provide any entitlement to Kenoss for reimbursement for construction costs. As Mr Harper in response pointed out, the letter of 21 November 2008 does do so in paragraphs 1 and 3. Indeed, in relation to paragraph 1, an amount of some $1.5 million is to be paid to Kenoss. That is an amount in addition to, and separate from, the $1.4 million that is dealt with in paragraph 2 of the letter. 10The dispute was a commercial dispute following a development of a substantial project, and in my view, the offer made by the plaintiff was an eminently sensible one and I am persuaded in all the circumstances that it was unreasonable for Kenoss not to accept that offer, with the consequence that the costs order should be, as the plaintiff contends, each party pay its own costs until 21 November 2008 and thereafter Kenoss pay the plaintiff's costs on an indemnity basis. 11The remaining issue is one of the interest payable. The money held on account of Canberra Developments Ltd with the solicitors was not, for a period of eight or nine months in 2009, invested as might have been expected for reasons which are presently unknown to the Court. Kenoss submits that interest on the fund should be paid by the plaintiff, not on the basis that the plaintiff is to blame for the failure to invest the monies, because in fact both the plaintiff and Kenoss were jointly, through their officers, in control of Canberra Developments Limited, but because the plaintiff did not pay to Kenoss the money that the Court has now ordered should be paid and therefore Kenoss has been held out of its money for that time. I do not need to determine whether that would support the claim for interest or not because had the offer made by the plaintiff in November 2008 been accepted, Kenoss would have had the benefit of the money from that time, as the lost interest arises from a later period. 12Mr Harper relied on s 100(5) of the Civil Procedure Act 2005 (NSW) which is in the following terms: "In any proceedings for damages, the court may not order the payment of interest under this section in respect of the period from when an appropriate settlement sum was offered (or first offered) by the defendant unless the special circumstances of the case warrant the making of such an order." 13No argument was advanced to me on the basis that these were not proceedings for damages, but there may be some doubt about the direct applicability of that subsection since this was a claim that monies were due by reason of the Development Agreement. Even if the section does not apply, I think it indicates a matter that the Court is entitled to take into account in considering whether interest should be awarded. 14Accordingly, Kenoss has not made out a claim for interest for the nine-month period that the money did not earn interest. 15There was an issue in relation to the form of orders. I indicated that it would be appropriate for the orders to reflect what is contained in the prayer for relief in the amended statement of claim so that the words, "less the costs of construction of dwellings and associated works" be included in paragraphs 1 and 3 of the proposed short minutes of order. 16I make orders to reflect the judgment that I gave on 15 December 2010 and the judgment which I have just given. I make orders in accordance with the document headed "Order" which I shall initial and date with today's date in the top right-hand corner and which I shall place on the court file. I order all exhibits to be returned to the parties on the expiry of 28 days from today's date in the absence of an appeal.