FEDERAL COURT OF AUSTRALIA

Wyzenbeek v Australasian Marine Imports Pty Ltd (in Liq) (No 2) [2019] FCAFC 205

ORDERS

THE COURT ORDERS THAT:

1.    The appeal be allowed.

2.    Order 3 made on 10 October 2018 be set aside and in lieu thereof it be ordered that the first and second applicants have judgment against the first, second, third and fourth respondents in the sum of $2,766,798.91, comprising:

(a)    $1,469,876.88 in respect of the left in hand value loss plus interest in the total amount of $816,224.76;

(b)    $410,677.01 in respect of their consequential loss claim plus interest in the total amount of $70,020.26.

3.    Order 1 made on 28 November 2018 be set aside.

4.    Order 5 made on 3 April 2019 be set aside, and in lieu thereof, it be ordered that:

(a)    subject to the costs that would otherwise be payable by the first and second applicants pursuant to order 10 made on 3 April 2019, which costs may be set off, the second, third and fourth respondents pay the first and second applicants’ costs of the proceedings on an indemnity basis;

(b)    there be no order in respect of the costs payable by the first and fifth respondents.

5.    Order 1 made on 10 October 2018 be set aside.

6.    Orders 1, 6, 8 and 9 made on 3 April 2019 be set aside.

7.    To the extent that either or both remains extant, the claims in the statement of cross-claim filed on 14 November 2016 by the second to fourth respondents and the claims in the statement of cross-claim filed on 17 November 2016 by the second respondent be remitted, together with the applicants’ claims against the sixth and seventh respondents, to the primary judge for determination.

8.    The costs of the proceeding before the primary judge between the first and second appellants and the fifth and sixth respondents (being the sixth and seventh respondents in the proceedings below) be determined by the primary judge as part of the remittal referred to in order 7 above.

9.    The second, third, fourth, fifth and sixth respondents in the appeal pay the appellants’ costs of the appeal (including their costs of the application for leave to appeal).

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

1    When we published our reasons on 27 September 2019, we ordered that the parties file and serve agreed short minutes of orders to give effect to those reasons, or their competing versions. We also invited the Marina parties, if they opposed being ordered to pay the appellants’ costs of the trial, to file any submissions in support of that result, and allowed the appellants the opportunity to reply: Wyzenbeek v Australasian Marine Imports Pty Ltd (in Liq) [2019] FCAFC 167. We will use the same defined expressions from those reasons in these.

2    In the event, the parties agreed on all but the following:

(1)    the basis on which prejudgment interest should be calculated on the appellants’ loss using the left in hand value of Cadeau of $1,469,876.88 (the left in hand value loss) that we found (the interest issue);

(2)    whether the Marina parties should pay 80% of the appellants’ costs of the trial or all those costs and, if so, whether that should be on a party and party or indemnity basis (the costs issue); and

(3)    whether the order that the Marina parties and the insurers pay the costs of the appeal should include the costs of the application for leave to appeal (the leave issue).

The Marina parties’ submissions

3    The Marina parties argued that interest on the left in hand value loss should be calculated on half yearly rests based on the total amount by which the vessel had depreciated as at each rest date. Next, they contended that as the primary judge had ordered that AMI pay 80% of Mr and Mrs Wyzenbeek’s costs of the trial (except for one day’s costs arising from their abandonment of causes of action when filing the third further amended statement of claim: see order 10 made on 3 April 2019) based on their limited success on their claim for breach of contract, that this was also an appropriate percentage to award against the other three Marina parties.

4    The Marina parties also argued that they should not be ordered to pay Mr and Mrs Wyzenbeek’s costs of the trial on an indemnity basis because, they contended, their defence to the proceeding was not frivolous and was supported by evidence from Messers Burge and Akacich. The Marina parties said that the appellants had sought to claim about $10 million but did not particularise how they had asserted the quantum of that claim.

Consideration

5    The interest issue: The Marina parties’ argument should be rejected. The calculation of the left in hand value of Cadeau at which we arrived used a rate of depreciation from the time of her purchase. However, the damage that Mr and Mrs Wyzenbeek suffered consisted in their outlay of money in making the purchase in 2011. Their damage, being loss of the use of their money, is different from the progressive increase in the amount of depreciation that the Marina parties’ calculation used. The latter calculation does not conform to the principles on which pre-judgment interest is awarded, namely to compensate the successful party for the use that the unsuccessful parties made (actually or notionally) of the sum of damages awarded that should have been paid at the time of the wrong or breach of contract: Haines v Bendall (1991) 172 CLR 60 at 66 per Mason CJ, Dawson, Toohey and Gaudron JJ. Mr and Mrs Wyzenbeek have been out of pocket since paying for Cadeau in 2011. They should be compensated by interest on this component of the judgment sum from 2011 up to the present time amounting to $816,224.76.

6    The costs issue: We reject the Marina parties’ argument that they should only pay 80% of the appellants’ costs of the trial. The primary judge’s costs assessment proceeded, necessarily, on the basis of his Honour’s overall discretionary assessment of the outcome of the trial. His Honour had exercised his discretion, having regard to his assessment of the merits not to order the appellants to pay AMI its costs in respect of their abandoned claim against it for breach of the implied warranty of merchantable quality. However, we came to a different view as to the merits and so his Honour’s assessment in respect of the costs involving only AMI in a significantly different context is of little assistance here as to how we should exercise the discretion to award costs.

7    In our opinion, the appropriate approach to a costs order for the trial is that the Marina parties should pay Mr and Mrs Wyzenbeek’s costs save for the one day’s costs thrown away by reason of the amendments in order to file their third further amended statement of claim, that the primary judge ordered them to pay.

8    However, his Honour’s views as to the way in which the Marina parties conducted the proceedings below, including the trial, are of considerable assistance. That is because he refused to order any costs in favour of the Marina parties, other than AMI, and made no order as to costs on the claims against them despite having dismissed those claims. The primary judge said that the prima facie entitlement to costs for the successful defence at trial should be displaced because (Wyzenbeek v Australasian Marine Imports Pty Ltd (No 3) [2019] FCA 439 at [51]):

When all matters are taken into account, as between the Wyzenbeeks on the one hand and GCCM, Dean and Ryan on the other, the respondents’ success is counterbalanced significantly by the manner in which they conducted the proceedings. Mr Sullivan QC submitted that, at most, the respondents’ conduct of the defence should only result in there being some reduction in the usual order that costs follow the event. But that understates the extent to which the respondents ignored their obligations under ss 37M and 37N. By taking every conceivable point in defence of the claim, regardless of whether those points were good or bad, they extended the time and cost of the proceedings substantially. Moreover, many of the points taken were shown to be without any merit whatsoever.

    (emphasis added)

9    We agree. The result on appeal is that Mr and Mrs Wyzenbeek succeeded in their claims against the Marina parties. On his Honour’s findings with which we agree, the Marina parties’ defences and general conduct of the proceeding were significantly in breach of their obligations to achieve the overarching purpose of the civil practice and procedure provisions that s 37N(1) of the Federal Court of Australia Act (1976) (Cth) imposed on them, namely to conduct the proceeding to facilitate a just resolution of disputes according to law as quickly, inexpensively and efficiently as possible. The conduct of the Marina parties in the proceeding below was antithetic to that purpose.

10    In our opinion, the Marina parties, other than AMI, should pay the costs of the proceeding on an indemnity basis: cf. Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 231-234 per Sheppard J. Mr and Mrs Wyzenbeek should pay on a party and party basis the one day’s costs thrown away that can be set off. There was no dispute that the costs of the appeal should follow the event on a party and party basis.

11    The leave issue: The respondents only decided not to oppose the grant of leave to appeal on 16 May 2019, being the second day of the hearing of the appeal. That occurred after senior counsel for the Marina parties had to seek and obtain instructions when the Court enquired about the question. On that day, we ordered that the appellants have leave to appeal in the form of what became the filed notice of appeal. There is no reason why Mr and Mrs Wyzenbeek should not have the costs of the application for leave to appeal as part of the order for costs of the appeal to which they are entitled.

Conclusion

12    We will make orders to give effect to these reasons and the orders that the parties otherwise had agreed.

Associate:

Dated:    25 November 2019

SCHEDULE OF PARTIES