Broadlex Services v RCR Resolve FM; (No 3) [2015] NSWSC 1668

Supreme Court New South Wales

Medium Neutral Citation: Broadlex Services v RCR Resolve FM; (No 3) [2015] NSWSC 1668 Hearing dates: 7 September 2015, 8 September 2015, 9 September 2015, 10 September and 11 September 2015 Date of orders: 03 November 2015 Decision date: 03 November 2015 Jurisdiction: Equity - Commercial List Before: McDougall J Decision: Defendant to pay 60% of plaintiff's costs of the proceedings. Catchwords: COSTS – claim and cross-claim – claimant in each succeeds – verdicts accordingly – judgment for plaintiff for balance after set-off – whether costs should follow each event and then be set off – where amount in issue was not large – where complexity of issues would necessitate a costly assessment – consequence that interests of justice favour a broad brush approach Legislation Cited: Civil Procedure Act 2005 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Barescape Pty Limited v Bacchus Holdings Pty Limited (No 12) [2012] NSWSC 1591 McDonnell and East Limited v McGregor (1936) 56 CLR 50 Category: Costs Parties: Broadlex Services Pty Ltd (Plaintiff / Cross-Defendant) RCR Resolve FM Pty Ltd (Defendant / Cross-Claimant) Representation: Counsel: R C Gration (Plaintiff / Cross-Defendant) T J Breakspear (Defendant / Cross-Claimant)

Solicitors: Johnson Winter & Slattery (Plaintiff / Cross-Defendant) Kennedys (Defendant / Cross-Claimant) File Number(s): 2014/69596

Judgment 1. HIS HONOUR: In these proceedings the plaintiff claimed payment of about $241,000 for services provided by it to the defendant. The defendant did not suggest that the services had not been provided, or that they had been performed inadequately. Rather, the defendant relied on a cross-claim, and defence by way of set-off. 2. To enable what follows to be understood, I set out paras 1 to 8 of my reasons given on 16 October 2015 [2015] NSWSC 1514: 1 HIS HONOUR: The plaintiff (Broadlex) contracted with the defendant (Resolve) to supply cleaning services at the Villawood Immigration Detention Centre (VIDC) and a related "facility" known as Villawood Immigration Residential Housing (VIRH). It is common ground that Resolve has not paid Broadlex the value of some nine invoices for services, amounting in total to a little over $241,000.00. Resolve does not suggest that the services the subject of those invoices were not performed, or were not performed appropriately. It defends the claim by way of what might be called confession and avoidance, together with a claimed set off, and a cross-claim. The issues 2 The real issues in dispute are, in substance: (1) on the proper construction of the contract made between Broadlex and Resolve, what services was Broadlex required to perform for the fixed remuneration payable to it? (2) If the contract is construed as Resolve submits, so that Broadlex was required to provide more services than it did (for reasons that will become apparent, I will call those the "extra charge services"), did the parties nonetheless conduct their relationship on the conventional basis that Broadlex should be paid additional remuneration for those services, so as to give rise to a conventional estoppel? (3) If the contract is to be construed as Resolve contends, and if there is no conventional estoppel, what were the further services that Broadlex should have performed as part of its duties in exchange for the fixed remuneration? (4) On the same assumptions, what if any loss has Resolve sustained by reason of the failure of Broadlex to provide the extra charge services without additional remuneration? (5) Did Broadlex perform such services as it did provide to the standard required by the contract? (6) If Broadlex did not perform its services to that standard, was that breach a material cause of the loss that Resolve claims to have suffered because its principal "abated" payments otherwise due to Resolve? (7) Whether, on the assumption that Resolve's general terms and conditions of contract formed part of the contract between Broadlex and Resolve, Broadlex has any entitlement to interest on any amounts that may be found owing to it having to regard to the proper construction of cl 7.6 of those general terms and its application in the events that have happened. Background 3 Serco Australia Pty Ltd or the group of which it forms part (Serco) has a contract with the Commonwealth of Australia, or the relevant Minister of the Commonwealth, to "manage" immigration detention centres and related facilities throughout Australia. Resolve contracted with Serco to provide "facilities management services" at those centres. As part of that contract, Resolve was required to provide cleaning services at each centre. 4 In about May 2010, Resolve contracted with Broadlex for the latter to supply cleaning services at VIDC and VIRH. There were two separate contracts: one for VIDC and one for VIRH. Only the former is relevant. The parties' contractual relationship continued up until about March 2013. 5 It is not contentious that, in April 2011, the unfortunate inmates of VIDC rioted, and set fire to some of the buildings within that complex. Very considerable damage was caused. Resolve and Broadlex agreed that Broadlex would undertake additional services, essentially cleaning up the damage and making good. Of course, that was for additional remuneration. 6 Resolve asserted that it was entitled to be paid $6.3 million by Serco for services provided "to additional assets". It claimed, further, that Serco owed it about $1.4 million in respect of work done and invoiced, but not paid. The total claim was a little in excess of $7.7 million. 7 Serco defended Resolve's claim, and filed a cross-claim. In that cross-claim, it asserted that Resolve had failed to meet "Key Performance Indicators" (KPIs) in respect of services provided at VIDC. Serco said that it "was entitled to adjust the fee to be paid by [it] to Resolve by the amount of $266,240.45". It said that it had not deducted that amount from fees otherwise due to Resolve, and, accordingly, that the amount was due and payable. That is the "abatement" referred to in the sixth issue. 8 The claim between Resolve and Serco was settled on 30 June 2015. On that date, the parties executed a deed of release and settlement, under which Serco agreed to pay Resolve $3.685 million in full settlement of all claims, and the parties released each other. That sum was paid a few days later. There is no evidence as to how that sum was calculated. There is no material allocating it between the two claims that Resolve made against Serco, and the abatement that Serco claimed against Resolve. 1. I concluded that the plaintiff had made good its claim, and that the defendant had made good part of its cross-claim. I said that there should be verdicts each way (with interest); that the verdicts should be set off; and that there should be judgment for the plaintiff for the balance. The parties are agreed on the orders to be made to give effect to that outcome. The result will be that the plaintiff recovers about $52,500. 2. The remaining dispute is as to costs. At [328] of my earlier reasons, I suggested that costs should follow the events of the claim and the cross claim. The defendant supports that approach. The plaintiff contends for a different approach. 3. It is important to note at the outset that UCPR r 42.34 can be put to one side. The plaintiff's claim had been properly commenced in the District Court. It was transferred to this Court, on the application of the defendant and over the opposition of the plaintiff, by reason of a perceived connection with the Serco proceedings to which I referred in my earlier reasons. Since the dispute between the defendant and Serco was settled only very late in the piece, it was convenient for the remaining issues – the plaintiff's claim and the defendant's cross-claim – to be litigated in and resolved by this court. 4. I remain of the view that, in the ordinary event, the proper order for costs would be that which I said should prima facie follow. That approach is supported by many decisions of high authority. As Mr Breakspear of counsel submitted, those decisions include the decision of Dixon J (speaking with the concurrence of McTiernan J) in McDonnell and East Limited v McGregor (1936) 56 CLR 50 at 62. 5. Black J reviewed the position, and the authorities, in Barescape Pty Limited v Bacchus Holdings Pty Limited (No 12) [2012] NSWSC 1591 at [5] and following. I will not repeat what his Honour said. I draw from it that the general position is as I stated it at [328] of my earlier reasons, but that in all cases the court retains a discretion to fashion a costs order that is appropriate to the particular facts of the particular dispute in respect of which costs are sought. 6. Although I have said that r 42.34 has no application, it should not be thought that this means also that the relatively small amounts at issue are of no significance. In my view, they are. Resolution of the dispute between the plaintiff and the defendant occupied some five days of hearing, and no doubt several separate appearances for directions (in addition to the application for transfer to this Court). It is apparent that the parties have been put to very great expense to resolve what is, in monetary terms, a small dispute. It is equally apparent, in my view, that the court should bear in mind s 56 of the Civil Procedure Act 2005 (NSW), in considering the appropriate discretionary exercise as to costs. 7. If I were to make the order that I flagged, and for which the defendant contended, the likely outcome is that there would be separate assessments of costs on the claim and the cross-claim. Because the cross-claim was pleaded also as a defence to the claim, and because the estoppel issue on which ultimately the plaintiff succeeded was raised in answer to the cross-claim (as well as on its claim), separation out of the issues, and allocation of costs, is likely to be a contentious process. 8. I find it very difficult to understand how the just, quick and cheap resolution of the issues in dispute as to costs would require that the parties be put to that lengthy and expensive exercise. 9. The salient matters to be borne in mind include the following. First, the plaintiff's claim was essentially unopposed, save for the set-off and cross-claim to which I have referred. Thus, in many ways, the real issues were those raised on the cross-claim. 10. Second, in this context, the cross-claim raised a number of aspects of asserted defective or incomplete performance. The major claim raised by the cross-claim sought in excess of $886,000 for the plaintiff's failure to perform some 12 specified periodical cleaning tasks. That was answered, in my view, by the estoppel case, on which I found the plaintiff succeeded. 11. The next aspect of the cross-claim related to an asserted "abatement" applied by Serco to the defendant under the contract between them – something that was in issue in the proceedings between Serco and the defendant. I concluded that the defendant had failed to prove that it had suffered any loss as a result of this abatement. 12. Next, there was a general claim for defective cleaning performance. That really went nowhere, given the conclusions I had reached in respect of the two earlier aspects of the cross-claim. 13. The final aspect of the cross claim, and the only one on which the defendant succeeded, related to over-charges rendered by the plaintiff and paid by the defendant for the provision of a site supervisor. I concluded that the plaintiff had not provided any such officer. 14. In those circumstances, as I have said, the plaintiff succeeded notionally in whole on its claim, the defendant succeeded in part (and a small part) as to its cross-claim, and the effect of those outcomes was to diminish, but not to extinguish, the amount of the plaintiff's entitlement. 15. The third matter to consider, in relation to question of costs, is that as a general rule, the Court should not attempt to isolate, identify and narrow down issues, with a view to allocating success and failure on an issue by issue basis, as a preliminary to fashioning a costs order that reflects success and failure on individual issues. That this is inappropriate is, in my view, the position a fortiori in this case bearing in mind the relatively small amounts at issue. 16. The outcome may be characterised in various ways. It could be said that the defendant had substantial success, because the outcome of the case is that the plaintiff had recovered only about a fifth or a quarter of the amount of its claim. However, and conversely, it could be said that the defendant has had only very partial success because it recovered only about 20 per cent of the asserted value of its cross claim. 17. The force of that alternative characterisation is diminished by reason of a matter that must be mentioned. Mr Breakspear made it clear, at the outset of the hearing, that the cross-claim was purely defensive. He said that the defendant would drop it if the plaintiff dropped its claim. Thus, in essence, the cross-claim succeeded to the extent of reducing very substantially the amount payable by the defendant to the plaintiff. 18. In all the circumstances, it seems to me that it would be inappropriate to make the costs order that I foreshadowed. That would be so, in my view, for the reasons I have mentioned: namely, the complexity and cost of any assessment. 19. Thus, the Court must seek to do substantial costs justice, as between the parties, on a more broad-brush and less precise basis. To my mind, the appropriate way to do this is to take a view of the proceedings overall and to make a costs order that reflects both the plaintiff's success overall and the defendant's undoubted success in reducing the amount otherwise payable. The costs order should also, in my view, reflect the fact that many of the issues raised by the defendant in its cross-claim failed. 20. Matters such as those are inevitably impressionistic and require the Court to attempt to reconstruct what happened, with a view to doing costs justice. The outcome of that process is inevitably imprecise. It is not an outcome that is capable of any detailed, rational and logical justification. 21. In my view, bearing in mind all the factors to which I have referred and taking into account the need to try and resolve matters so far as the Court can do, the appropriate outcome is that apart from the costs of the application to transfer the matter from the District Court to this Court (which the defendant should pay in any event, because they are obviously costs resulting from the "complication" introduced by the Serco proceedings), the defendant should pay 60% of the plaintiff's costs of the proceedings, including the cross-claim. 22. Accordingly, I find a verdict in favour of the plaintiff in accordance with para 1 of the form of judgment initialled by me and dated today's date. I find a verdict in favour of the cross-claimant in accordance with para 2. I direct entry of judgment in accordance with para 3. I make the costs orders set out in paras 4 and 5, and otherwise, as foreshadowed in para 6, make no order as to costs.