Southern Equity Pty Limited v Timevale Pty Limited [2015] NSWSC 208

Supreme Court New South Wales

Medium Neutral Citation: Southern Equity Pty Limited v Timevale Pty Limited [2015] NSWSC 208 Hearing dates: 11 February 2015 Date of orders: 11 February 2015 Decision date: 11 February 2015 Jurisdiction: Equity Division - Corporations List Before: Brereton J Decision: Plaintiff to pay defendant's costs of proceedings in Federal Court; defendant to pay 25% of plaintiff's costs up to judgment; defendant to pay plaintiff's costs of accounts. Catchwords: COSTS – where proceedings initiated by plaintiff in Federal Court did not advance case – where proceedings in Supreme Court only partly successful – where much of relief sought abandoned by plaintiff – were Calderbank offer made inclusive of costs so as not to permit comparison with outcome. Legislation Cited: (Cth) Jurisdiction of Courts (Cross-vesting) Act 1987, s 12 Cases Cited: Southern Equity Pty Limited v Timevale Pty Limited [2012] NSWSC 15 Category: Costs Parties: Southern Equity Pty Ltd ACN 003 364 985 (plaintiff) Timevale Pty Ltd (defendant) Representation: Counsel: Mr M Merlo (solicitor) (plaintiff) Mr C Harris SC (defendant)

Solicitors: Melbourne Legal Chambers (plaintiff) Matthews Folbigg (defendant) File Number(s): 2008/280635

Judgment (ex tempore) 1. HIS HONOUR: Following a hearing on 20 and 21 June 2011, I gave judgment in these proceedings on 3 February 2012: [Southern Equity Pty Limited v Timevale Pty Limited [2012] NSWSC 15]. Consequent on that judgment, orders were made on 3 May 2012 as follows: 1. Declare that upon the true construction of the Agreement made on 18 November 1993 between Kenneth Charles Maynard, Ken Maynard Studios Pty Limited and the defendant Timevale Pty Limited ("the Agreement") and in the events which have happened: 1. The Barn does not form part of the Hotel premises, and moneys received by the defendant from sales and other income generating activity in the Barn are not subject to the 2% royalty under clause 9.1(a); 2. The 1% royalty charged by clause 9.1(b) applies and applies only to the direct proceeds, when received by the defendant or an associate, of sale through a retail outlet in the Facility to an ultimate consumer, of souvenirs not incorporating EPIP and analogous sales of articles that can be taken away, including food and drink, giftware, clothing, toys, plants and nursery stock, mechanical items and pharmaceuticals, but not including tickets for amusement rides, facility entry fees, takings from amusement devices and games and commission derived from vending machines, or rents received from tenants, whether or not calculated by reference to turnover; 3. Moneys received by the defendant from sales from the Barn of the type referred to in b. attract the 1% royalty under clause 9.1(b) whenever the Barn is not being used exclusively for a function or entertainment, but when it is being so used incur no royalty; 4. Moneys received by the defendant from sales of the type referred to in (b) from outlets other than the Barn in connection with functions, wheresoever held, attract the 1% royalty under clause 9.1(b), and are not exempt from that royalty even if the relevant function is held wholly or partly in the Barn; 5. Food prepared in Blueys but delivered to an exempt Barn function is not sold from the hotel premises but is attributable to the Barn, and money received from such sales does not incur the 2% royalty under clause. 9.1(a)(i); and' 6. Food prepared in FJ's but delivered to an exempt Barn function is not sold from FJ's but is attributable to the Barn, and money received from such sales does not incur the 1% royalty under clause 9.1(b)(i). 1. Declare that in breach of clause 9.1(b) and (c), the defendant has: 1. failed until 9 December 2006 to pay royalties in respect of moneys received from sales from the Barn of the type described in 1(b) when the Barn was not being used exclusively for a function or entertainment; and 2. failed to pay royalties in respect of moneys received from sales of the type described in 1(b) from FJ's and other outlets within the Palmview Facility in connection with functions and group bookings, wheresoever held. 1. Order that an inquiry be held and an account taken of: 1. Royalties payable under clause 9.1(b) in respect of moneys received by the defendant and its associates from Barn sales when the Barn was not being used exclusively for a function or entertainment during the period 30 March 2000 to 9 December 2006; 2. Royalties payable under clause 9.1(b) in respect of moneys received by the defendant and its associates from sales from FJ's (other than sales of food delivered to an exempt Barn function) and other retail outlets in connection with functions and group bookings, wheresoever held, during the period 30 March 2000 to date. 1. Order that until further order, the inquiry and account proceed before me. 2. Give judgement that the Defendant pay the Plaintiff the amount certified to be due on the taking of such account, together with interest calculated in accordance with clause 12.7 of the Licence Agreement. 3. Declare that in breach of clause 9.3 of the Licence Agreement, the Defendant has failed to provide to the Plaintiff detailed monthly royalty statements that show the number of souvenirs sold for each category of souvenirs and the moneys received for each such category. 4. Order that the Defendant henceforth include in its monthly royalty statements pursuant to clause 9.3 of the Licence Agreement the number of souvenirs sold for each category of souvenirs and the moneys received for each such category. 5. Direct that the Defendant within 42 days file and serve on the Plaintiff its detailed account, verified by affidavit, of : 1. all monies received by the Defendant and its associates from Barn sales when the Barn was not being used exclusively for a function or entertainment during the period 30 March 2000 until 9 December 2006; and 2. all monies received by the Defendant and its associates from sales from FJ's (other than sales of food delivered to an exempt Barn function) and other retail outlets in connection with functions and group bookings, wheresoever held, during the period 30 March 2000 to date. 1. Direct that such account specify, in respect of each receipt, the date and amount thereof and the purpose or account for which the amount was received. 2. Direct that the items of such account be numbered consecutively. 3. Direct that the Plaintiff, within 42 days after service upon it of the account, file and serve upon the Defendant its surcharges, falsifications and objections (if any) thereto. 4. Direct that all vouching be done out of court on or before the period of 28 days after service of the Plaintiff's notice of surcharges, falsifications and objections. 5. Direct that the matter be stood over to 12 September 2012 at 9.30am for the purposes of fixing a date for the hearing of the inquiry into the account, or alternatively for the making of further orders as necessary. 6. Costs reserved. 7. Liberty to either party to apply on the giving of 7 days' notice in writing specifying the nature of the orders to be sought. 1. As will be seen, those orders provided for an inquiry and account of certain royalties payable under certain provisions of the licence agreement and a judgment that the defendant pay the plaintiff the amount certified on the taking of such account together with interest. 2. Since then, the matter has proceeded towards the taking of accounts, which was ultimately set down for a week in December last year. This was characterised by what might kindly be referred to as shortcomings in proficiency and efficiency on both sides in preparing appropriate accounts and in preparing appropriate notices of objections, surcharges and falsifications. Very shortly before the hearing, the parties agreed that the amount to be certified, inclusive of interest, should be $45,000. That was communicated to the Court on 8 December 2014, the matter being listed to commence on Monday, 15 December 2014. The Court is informed, and it does not appear to be in dispute, that the intention of the parties was that the sum of $45,000 should be the amount payable at the time that the agreement was reached and, in those circumstances, the parties agreed that interest should not run on the judgment until what I will take to be 15 December 2014, being the date upon which the taking of accounts was to commence. 3. That then leaves the question of costs. Both parties have made written submissions and supplemented them orally and I have read and taken into account the written submissions. As it seems to me, and as the submissions largely dealt with them this way, it is convenient to deal with the costs of the proceedings in three phases, the first being the proceedings in the Federal Court, the second being the proceedings until judgment in this Court and the third being the proceedings on the accounts in this Court. 4. So far as concerns the first phase, the proceedings in the Federal Court were initiated by the plaintiff claiming some federal relief. However, all claims to relief involving a federal element had been abandoned by the date upon which the hearing was to commence, when the proceedings were transferred to this Court, at least inter alia because, there no longer being any federal element, that Court no longer had jurisdiction. 5. An order was made in the Federal Court that the plaintiff pay the defendant's costs of an amendment and also the costs thrown away by the vacation of the hearing. That, however, leaves all the other costs of the proceedings in the Federal Court, with which this Court is able to deal pursuant to the (Cth) Jurisdiction of Courts (Cross-vesting) Act 1987, s 12. 6. Mr Merlo very fairly accepted that, ultimately, the proceedings in the Federal Court did not advance the plaintiff's case one iota, and as Mr Harris of senior counsel for the defendants submitted, the proceedings effectively recommenced in this Court. It seems to me that the plaintiff did at least incur properly the costs of filing and serving the initiating process in the Federal Court, but otherwise the time and effort expended in that Court were entirely wasted, and with the exception of the costs associated with the initiating process, the plaintiff should pay the defendant's costs of the proceedings in the Federal Court. 7. So far as concerns the proceedings in this Court, the important starting point is that if one asks which party was substantially successful, the answer must be that, notwithstanding that much of its original claims were abandoned and notwithstanding that it failed on quite a number of issues, the plaintiff ultimately succeeded in obtaining final relief which it had to come to Court to obtain, there being no suggestion that there was any offer or other event which precluded the necessity to litigate the matter to a final judgment. In those circumstances, the starting point is that the plaintiff is entitled to the costs of the proceedings in this Court. 8. However, as I have said, its success was very partial. It abandoned much of the relief claimed at the outset of the hearing; it failed on other aspects that were argued at the hearing; and it must also be remembered that it filed a motion shortly before the hearing seeking vacation of the hearing, which was also abandoned. On the other hand, the defendant brought a cross-claim which it too abandoned at the outset of the hearing. 9. In my view, the defendant should pay 25% of the plaintiff's costs of the proceedings up to judgment in this Court, taking into account the dominant factor of the plaintiff's ultimate success, but also that the plaintiff should not recover costs in respect of the extensive issues on which it did not succeed. 10. As to the proceedings on the account, in principle they were necessitated solely by the plaintiff's success on the issues on which it succeeded, and resulted ultimately in an order being made in the plaintiff's favour. In principle, the plaintiff should be entitled to the costs of the taking of the accounts. Both parties have, as I said, been somewhat delinquent in the prosecution of the accounts, but costs orders have been made along the way against both parties to reflect that where appropriate. However, the plaintiff's numerous attempts to produce a satisfactory statement of objections, surcharges and falsifications do not entitle it to recover the costs of multiple attempts at doing so and it should recover the costs of only one notice of objections, surcharges and falsifications. 11. In or about June 2013, the plaintiff made a Calderbank offer to accept the sum of $15,000 in satisfaction of the orders for accounts and costs generally. That was not accepted. On 22 July 2014, the plaintiff made a further offer to settle the matter on the basis that the proceeding be dismissed with no order as to costs. The defendant says that it was reasonable for it not to accept those offers on the basis that it required them to forego its claim for the costs of the Federal Court proceedings. 12. Because the offers were expressed to be inclusive of costs, and in the light of the views to which I have come about the appropriate costs orders, it is just not possible for me to know where the balance of those costs orders will lie, and whether the plaintiff's entitlement to costs of proceedings in this Court will outweigh the defendant's costs in the Federal Court. In those circumstances, it is just not possible to be satisfied that the Calderbank offers were more favourable to the defendant than the orders I propose ultimately to make, although it may be that they were. However, that, I am afraid, is a consequence of the form in which the offer was made, it often having been indicated that where such offers are expressed to be inclusive of costs, difficulties may arise in relying on them. 13. For those reasons, the Court by consent certifies that: 1. The amount due on the taking of the account referred to in parargaph 3 of the order made on 3 May 2012 inclusive of interest for the purpose of paragraph 5 of that order is $45,000. 1. The Court by consent orders that: 1. Interest on the judgment in paragraph 5 of the order of 3 May 2012 not run until 15 December 2014. 1. The Court orders that: 1. Save insofar as any other costs order already made in this Court or in the Federal Court of Australia otherwise provides: 1. The plaintiff pay the defendant's costs of the proceedings in the Federal Court, other than the costs of filing and serving the initiating process. 2. The defendant pay 25% of the plaintiff's costs of the proceedings in this Court up to and including 5 May 2012, and of the costs of filing and serving the initiating process in the Federal Court. 3. The defendant pay the plaintiff's costs of the proceedings in this Court since 5 May 2012, provided that the plaintiff be entitled to recover the costs of preparing and otherwise in connection with a single notice of objections, surcharges and falsifications only.