FEDERAL COURT OF AUSTRALIA

Trenfield, In the matter of ACN 089 008 668 Pty Ltd (in liq) v JMD Park Pty Ltd (No 2) [2020] FCA 45

ORDERS

THE COURT ORDERS THAT:

1.    The defendant pay to the second plaintiff interest on the amount of the judgment in the sum of $97,365.67 calculated as follows:

(a)    pre-judgment interest on the sum of $358,778 from 26 May 2016 to 13 August 2017, being $24,653.34;

(b)    pre-judgment interest on the sum of $534,547.54 from 14 August 2017 to 19 December 2019, being $68,480.66; and

(c)    post-judgment interest on the sum of $534,547.54 from 20 December 2019 to 30 January 2020, being $4,231.67.

2.    The defendant pay the plaintiffs’ costs of the action save as is provided for in orders 3 and 4.

3.    The plaintiffs pay the defendant’s costs thrown away by the adjournment of the trial listed to commence on 4 March 2019.

4.    The plaintiffs pay the defendant’s costs thrown away by reason of the adjournment of the trial listed for hearing on 17, 18 and 19 June 2019.

5.    The assessment of the costs orders in orders 2, 3 and 4 be made by way of the lump-sum costs procedure pursuant to r 40.02 of the Federal Court Rules 2011 (Cth).

6.    The District Registrar is directed pursuant to r 1.37 of the Federal Court Rules 2011 (Cth) to determine the quantum of the plaintiffs’ costs and of the defendant’s costs in such manner as he deems fit including, if thought appropriate, on the papers.

7.    At the conclusion of the lump-sum costs order process, the District Registrar is to make orders about the payment of the plaintiffs’ costs in the sum or sums determined, and of the defendant’s costs in the sum or sums determined, to be payable within 28 days of such orders.

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

REASONS FOR JUDGMENT

DERRINGTON J:

1    On 20 December 2019, this Court made declarations that certain payments made by the company formerly known as Aluminium Boats Australia Pty Ltd (ABA) to the defendant, JMD Park Ltd, were voidable transactions within the meaning of s 588FE(2) of the Corporations Act 2001 (Cth) (the Act) and further orders that amounts equal to those payments be paid to ABA. The relevant amounts were $358,778, which had been paid on 21 October 2014, and a further $175,769.54, which had been paid on or about the same date. In general terms, the plaintiffs, which included the liquidators of ABA, were successful in the litigation in respect of the case which was agitated at trial. A claim in relation to a relatively small sum was abandoned at the commencement of the hearing, but that is largely inconsequential.

Interest

2    The parties relevantly agreed as to the plaintiffs’ entitlement to interest based upon the orders made on 20 December 2019. The defendant very properly concedes that interest in the sum of $97,365.67 is payable as at today’s date and I will adopt that figure. Some calculations were set out in the plaintiffs’ submissions, but a slight miscalculation had resulted in a figure of some $30 less than the defendant’s figure. In any event, the correct figure is as identified.

Costs

3    Ordinarily, the principle applied in this Court is that costs follow the event, such that the successful party is entitled to an order that the losing party or parties pay their costs. That principle is not disputed by the defendant.

4    However, the plaintiffs claim that they are entitled to an order under r 40.02 of the Federal Court Rules 2011 (Cth) that their costs be paid on an indemnity basis. The foundation of that submission is that they had delivered to the defendant an offer to settle the action in the form of a Calderbank letter and have secured judgment on better terms than the offer. The offer was contained in a letter of 8 March 2018 and was to the effect that the plaintiffs would accept the sum of $484,547.83 in full and final satisfaction of the claim. That amount was said to be inclusive of the claim, interest and costs. It can be readily seen that the judgment secured by the plaintiffs was in excess of that amount.

5    Somewhat unusually, the letter of offer stated that it was made pursuant to Part 5 Chapter 9 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPRs) and was open for acceptance for 14 days from its date. That statement was apt to confuse. Firstly, the UCPRs of the Supreme Court of Queensland are inapplicable in this Court. Secondly, even if the reference to the UCPRs was read as a reference to Part 25 of the Federal Court Rules 2011 (Cth), the letter was patently not an offer which complied with those rules.

6    The defendant has submitted that the Court should disregard the offer made in the letter of 8 March because it was not “a valid offer”. It was said that the offer was not made pursuant to Part 25 of the Rules as is required and nor did the plaintiffs indicate that they intended to rely on the offer as a Calderbank offer. Whilst it was accepted that an offer which is intended to be an offer under a statutory regime but is ineffective may operate as a Calderbank offer: Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) [2007] NSWCA 194 at [27]; it was submitted that such was not the case in the present circumstances.

7    In this latter respect the defendant relied upon the decision in Whitney v Dream Developments Pty Ltd (2013) 84 NSWLR 311. There the terms of an offer, which was purportedly delivered in accordance with the Uniform Civil Procedure Rules 2005 (NSW), but which did not satisfy those statutory requirements, did not indicate that it was intended to have some secondary or alternative significance. The decision of the majority of the Court included acceptance of the following passages by Barrett JA at 324 [59]-[60]:

59 As this passage makes clear, the crucial matter is the manifested intention of the offeror. In the present case, the message conveyed by the making of each offer in the context in which it was made was that the plaintiff intended to have resort to the r 20.26 regime. In the absence of any intimation (for, example, in a covering letter) that the plaintiff intended its offer expressly founded on r 20.26 to have some secondary or alternative significance, the fact that the plaintiff’s attempt to act under r 20.26 miscarried neither required nor justified any assumption of intended secondary or alternative significance. Faced with an offer that purported to have significance under r 20.26 (and not otherwise) but which, on its face, exhibited a feature inconsistent with that rule, the correct course for the defendant to adopt was to regard the purported offer as having no force at all. The defendant was not required to speculate about some alternative intention on the part of the plaintiff; nor was the defendant justified in doing so.

60 The plaintiff did not indicate, either expressly or by implication, that, if the offer did not take effect under the rules, the plaintiff still reserved the right to rely on it on the question of costs. An essential ingredient of a Calderbank offer was therefore absent: see Calderbank v Calderbank at 596. The correct characterisation in this case corresponds with that which, in Old v McInnes, commended itself to Meagher JA (at [106]) and Giles JA (concurring).

8    The essential ingredient referred to by Barrett JA was the indication by the offeror that the letter might be deployed as a basis for seeking a special costs order in the event of that party’s ultimate success in the action. At [57] his Honour said:

57 An offer is of the Calderbank type only if the maker of it is shown to intend that the fact of its non-acceptance may be deployed as a basis for seeking a special costs order in the event of that party’s ultimate success in the action. Everything therefore depends on the message conveyed by the offer itself and any covering letter or other attendant circumstance.

9    That comment is reflective also of the observations of Bathurst CJ at paragraph 42 of that decision.

10    Mr Jardine for the defendant also referred the court to decision in Ziliotto v Hakim [2013] NSWCA 539 and, in particular, to paragraph 128. This paragraph is acutely relevant in the present case as it deals with the effect of the words “Without prejudice except as to costs”, included on a letter which fails to comply with the statutory regime. In particular, the question was whether that formulation of words can, in the absence of any other statement, accord the letter of offer the essential characteristic of a Calderbank offer. At paragraph 128, Tobias AJA (with whom Macfarlan JA agreed) found that those words were insufficient to justify regarding a letter as a Calderbank offer. His Honour said:

In my view, the Respondent’s contention that the words “Without prejudice except as to costs” were sufficient to evince an intention that the Offer would be relied upon, if invalid under r 20.26, as a Calderbank offer, cannot be sustained. The attached Offer was expressly stated to be made in accordance with r 20.26. There was nothing in the covering letter or the Offer itself to indicate that it had some “secondary or alternative significance”: Whitney at [59]. The Respondent’s submission that the words “Without prejudice except as to costs” are a standard short form of words sufficient to indicate that an offer is relied upon as a Calderbank offer cannot be accepted. None of the cases cited by the Respondent stands for such a proposition. Indeed, none goes further than the observation in Dunstan (at [46]) that a Calderbank offer is conventionally headed “without prejudice save as to costs”. That is clearly a very different proposition to that advocated by the Respondent.

11    Here, the letter of 8 March 2018 was headed “without prejudice save as to costs”. Whilst that indicated that the letter would be relied upon in the event that the plaintiffs were successful, that may well have been on the basis that the offer was one which satisfied the requirements of the UCPRs of the Supreme Court of Queensland. Whilst reliance on the UCPRs was an obvious error, there is nothing in the letter which suggests that, if the offer’s intended operation under that scheme was ineffective, the letter should somehow operate as a Calderbank offer. Further, the observations in Ziliotto are applicable in this case and the words “Without prejudice save as to costs” do not indicate the letter had some secondary characteristic which gave it the character of a Calderbank offer. The conclusion of Tobias AJA as set out above is plainly correct and ought be applied in this case.

12    For those reasons, the offer should not be regarded as a Calderbank offer. This is by no means a harsh result. The making of an offer to settle an action is an offer to enter into a contract, on the acceptance of which the parties will be bound. Necessarily, an offer to settle should be drafted in an intelligible way to ensure that, upon its acceptance, the agreement between the parties is reasonably ascertainable. Here, the offer was not so drafted. It can be added that compliance with the statutory regimes for making offers to settle is a relatively simple task and can be achieved with a minimal amount of reasonable care. The same applies to making a Calderbank offer. That said, the fact that errors occur so frequently might suggest to the contrary.

13    It should be added, however, that even if the letter of 8 March 2018 could be regarded as a Calderbank offer, in the circumstances of the present case, there is a real doubt that the refusal by the defendant to accept the terms was unreasonable. As the reasons for judgment disclose, the result of the trial turned upon the credibility of each parties’ witnesses to central conversations. Whilst findings have been made as to the veracity of the evidence given and the credibility of the witnesses, the mere fact that the matter turns on those issues renders it difficult to determine the reasonableness or otherwise of the defendant in refusing to accept the offer.

14    It follows that whilst the plaintiffs are entitled to an order for costs in their favour, it ought only be on the party or party basis.

Defendant’s claim for costs thrown away by adjournments

15    Originally the trial of this matter was listed for three days on 4, 5 and 6 March 2019. On 1 March 2019, which was one business day prior to the hearing, the plaintiffs filed and served a further affidavit of one of the liquidators, Ms Trenfield. It was a substantial affidavit and the material in it went to the second plaintiff’s insolvency. The affidavit was admitted despite the defendant’s objection, but an adjournment of the trial necessarily followed.

16    In argument before the court today, Mr O’Brien submitted, and not without some force, that it is difficult to attribute error for the need for the affidavit solely to the plaintiffs. That submission was founded upon the fact that the need for the affidavit became apparent to the plaintiffs after Counsel had engaged in consultation with each other about the admissibility of evidence. Directions had been previously made for Counsel to confer about those matters but, as events happened, the conferences did not occur. There is very little evidence as to exactly why the conference did not occur at any relevant time in the period leading up to the trial.

17    Nevertheless, that issue is apt to distract from the real issue, which was that the original affidavit relating to the insolvency of the second plaintiff was inadequate for the purposes of the trial. The second affidavit of Ms Trenfield was a substantial document and indeed, ultimately, it was persuasive, in that the defendant subsequently accepted the fact of ABA’s insolvency and as from the date Ms Trenfield identified. It follows that the real cause of the need for the further affidavit was the inadequacy of the original affidavit going to insolvency. Consequently, the cause of the adjournment was the delivery of that by the plaintiffs. Although its delivery may have ultimately shortened the trial, the adjournment was caused by the plaintiffs’ conduct and they must pay the costs thrown away by the adjournment of the trial commencing on 4 March 2019.

18    I should add that one can understand, in the circumstances of cases of this nature being conducted by liquidators, that, in an attempt to preserve what limited funds they might have, and in the hope that issues will be resolved before trial, it might not be seen to be unreasonable to avoid expending funds producing affidavits in relation to issues which might ultimately be agreed upon. That is, it is not necessarily unreasonable to run a “skinny case” until it is realised that, ultimately, the issue must be fully established. Even so, this is a matter for the liquidators only and it does not impact upon the question of costs between the parties.

19    The matter was then listed for trial for three days on 17, 18 and 19 June 2019. The matter was called on for hearing and, in fact, commenced. Some matters or disputes concerning the admissibility of evidence were dealt with. However, on that first day, the plaintiffs indicated that one of their most important witnesses, Ms Karen Whitewood, wished to substantially change her evidence. She had previously deposed to the occurrence of certain conversations which she had said happened on a specific day. The substance of the changed evidence was that conversations to which she had previously deposed as having occurred on one day, in fact occurred on a subsequent day. This led, ultimately, to the trial being adjourned for a second time and, indeed, additional affidavits had to be secured by the defendants because, on its case, third parties attended the meeting at which the conversations occurred on that second day.

20    The need for Ms Whitewood to amend her evidence arose fairly clearly from the fact that, in preparing her initial affidavit, she had read the affidavit of her erstwhile husband relating to the same events and had obviously been influenced by it and thereupon repeated his evidence in her affidavit. The inappropriateness of a witness of fact considering the evidence of another witness on the same facts prior to providing a witness statement or affidavit is obvious. Witnesses ought be interviewed individually and, as far as possible, their recollection preserved without taint from others.

21    There is probably no need to go any further into that issue, but it suffices to say that the cause of the need for the further affidavit of Ms Whitewood and the cause of the adjournment was the initial failure in the preparation of the first affidavit. In those circumstances, the submissions made by Mr Jardine for the defendant should be accepted and the defendant should have the costs thrown away by the adjournment of the trial of 17 June 2019.

Lump-sum orders for costs

22    As is apparent from item 4.1 of the Costs Practice Note (GPN-COSTS), the Court’s preference is for making of a lump sum cost order whenever appropriate, and when it is practicable to do so. In this case, both parties have acknowledged that the making of such orders ought to occur. There is good sense in that and, necessarily, a broad brush approach will be applied. In the assessment of the appropriate amount, the expertise of the district registrar ought to be utilised and the matter will be referred to him for determination in accordance with any directions which he sees fit.

23    That said, both the solicitors on either side of the record are well respected solicitors of many years’ experience, and it would surprise me if some agreement were not ultimately reached, but that is a matter for them.

24    In the result, I make the following orders:

8.    The defendant pay to the second plaintiff interest on the amount of the judgment in the sum of $97,365.67 calculated as follows:

(a) pre-judgment interest on the sum of $358,778 from 26 May 2016 to 13 August 2017,

being $24,653.34;

(b) pre-judgment interest on the sum of $534,547.54 from 14 August 2017 to 19 December 2019, being $68,480.66; and

(c) post-judgment interest on the sum of $534,547.54 from 20 December 2019 to 30 January 2020, being $4,231.67.

9.    The defendant pay the plaintiffs' costs of the action save as is provided for in orders 3 and 4.

10.    The plaintiffs pay the defendant's costs thrown away by the adjournment of the trial listed to commence on 4 March 2019.

11.    The plaintiffs pay the defendant's costs thrown away by reason of the adjournment of the trial listed for hearing on 17, 18 and 19 June 2019.

12.    The assessment of the costs orders in orders 2, 3 and 4 be made by way of the lump-sum costs procedure pursuant to r 40.02 of the Federal Court Rules 2011 (Cth).

13.    The District Registrar is directed pursuant to r 1.37 of the Federal Court Rules 2011 (Cth) to determine the quantum of the plaintiffs' costs and of the defendant's costs in such manner as he deems fit including, if thought appropriate, on the papers.

14.    At the conclusion of the lump-sum costs order process, the District Registrar is to make orders about the payment of the plaintiffs' costs in the sum or sums determined, and of the defendant's costs in the sum or sums determined, to be payable within 28 days of such orders.

Associate:    

Dated:    30 January 2020