City Pacific Ltd (in liq) v CBRE (V) Pty Ltd (No 2)

1. [1]

   HIS HONOUR: By a further amended statement of claim (“FASOC”) filed in Court on 4 September 2019, City Pacific Ltd (in liq) (“City Pacific”) and Martha Cove Marina Pty Ltd (in liq) (“Martha Cove”) (collectively, “the plaintiffs”) brought a claim for damages against CBRE (V) Pty Ltd (“CBRE”) and Christopher Nicodimou, a certified practising valuer formerly employed by CBRE (collectively, “the defendants”). There is no issue that CBRE was liable for Mr Nicodimou’s conduct. The plaintiffs are now in liquidation.

2. [2]

   The Court delivered judgment on 30 April 2021 in City Pacific Ltd (in liq) v CBRE (V) Pty Ltd [2021] NSWSC 456 (“City Pacific No 1”).

3. [3]

   In City Pacific No 1, the Court reached the following conclusions (at [621]-[622]):

4. [4]

   The Court made the following orders at [623]:

5. [5]

   On 14 May 2021, the plaintiffs sent a communication to the Court attaching proposed short minutes of order (“PSMO”). Those orders appear below:

6. [6]

   The defendant submitted that the Court should make the following orders:

7. [7]

   The defendants in the alternative to 69(c) submitted that the Court make the following orders:

8. [8]

   Thus, the parties were in agreement with respect to proposed Order 1(a). The balance of the orders proposed was in dispute. Those issues will be catalogued below after a review of relevant aspects of the judgment of the Court in City Pacific No 1.

Relevant Findings in City Pacific No 1 and Background

1. [9]

   In addressing these issues, it is convenient to extract parts of the judgment in City Pacific No 1.

2. [10]

   As to an overview, the Court identified the following (at [2]-[14]):

3. [11]

   As to a timeline of events, the Court outlined (at [275]-[279]):

4. [12]

   As to the time of loss, the Court found as follows (at [552]-[560]):

5. [13]

   In relation to damages, the Court found as follows (at [613]-[620]):

6. [14]

   As to contributory negligence, the Court found as follows (at [584]-[589]):

7. [15]

   It was agreed that the following remaining issues requiring resolution in these proceedings are:

   1. (1)

      the date from which interest on the judgment sum should run (order 1(b) in the PSMO);

   2. (2)

      City Pacific’s costs;

   3. (3)

      Martha Cove related costs;

   4. (4)

      interest on costs,

   5. (5)

      return of the security for costs provided by the plaintiffs.

The Plaintiff’s Submissions

1. [16]

   In summary, the plaintiffs made the following submissions in relation to the date which pre-judgment interest should run:

   1. (1)

      The plaintiffs contended that the rate of interest on the judgment sum should be calculated in accordance with the prescribed rate in Practice Note SC Gen 16 and should run from the time its cause of action to recover those monies arose being 23 October 2009, until the date of judgment pursuant to s 100(1) of the Civil Procedure Act 2005 (NSW). Reliance was placed on what they described as the Court’s observations in the City Pacific No 1 (at [555(2)]).

   2. (2)

      The plaintiffs further submitted:

   3. (3)

      In the alternative, the plaintiffs contended that the precise date in 2015 on which its loss arose, and from which interest should run, is 17 April 2015, being the date that Indigo (Martha Cove Marina Land Owner) Pty Ltd (“ILO”) entered into the contract to sell the Marina and the time that Martha Cove became unable to repay the debt it owed to City Pacific, and City Pacific’s loss arose. Those submissions are extracted below:

   4. (4)

      The plaintiffs did not accept the defendants’ contention that City Pacific’s loss arose on settlement of sale on 20 May 2015, since termination occurred on exchange of the contract on 17 April 2015, not on settlement. Further, City Pacific suffered loss on exchange of the contract because that event effected a termination of the Contract of Sale and a transfer of rights where ILO did not secure for the benefit of Martha Cove repayment of any of the Martha Cove Property Monies.

The Defendant’s Submissions

1. [17]

   As to the same, the defendants submitted:

   1. (1)

      That the interest on the judgment sum should run from 20 May 2015, when the cause of action accrued (City Pacific No 1 at [555]), as it was only on that date that repayment of the Martha Cove Monies to City Pacific was unavailable. Interest should not run from 23 October 2009 as sought by the plaintiffs for the following two reasons:

2. [18]

   There is no evidence that one would expect of any loss or the circumstances or payment by City Pacific on behalf of Martha Cove to justify any finding that there would be warrant for interest to run between 2009 and 2015. Even on the alternative finding that your Honour made in City Pacific No 1 at [555] subparagraph (2) (extracted earlier in this judgment), the evidence did not address it. Therefore, it was submitted that interest should not run from 2009 but should run from 2015.

Consideration Pre- Judgment interest

1. [19]

   In the primary proceedings (City Pacific No 1), the parties submissions relevant to this issue were focussed on the question of the time of loss. In that respect, the plaintiff made the following submission:

2. [20]

   As to the same, in City Pacific No 1 the defendant made the following submissions:

3. [21]

   The observation at [555](2) of City Pacific No 1 Ltd, did not make a determination as to the alternative submission advanced by the plaintiffs on the question of time of loss. Nor was there a review the evidence on the question, even though the judgment is expressed in more emphatic language. The discussion of the evidence bearing upon the question in this further hearing was attenuated although the defendants submitted there was an absence of evidence supporting a finding in favour of the alternative submission advanced by the plaintiffs.

4. [22]

   The Court found at [555](1) that Martha Cove’s payment of its obligation to City Pacific was dependent on contingencies and that loss was only suffered when the contingency occurred which resulted in the debt would not be repaid or the obligation discharged. Repayment was only unavailable once the Marina was sold to a third party and ILO was unable to repay the Martha Cove Property Monies to Martha Cove or at best when the contract was terminated. That determination should then be the foundation for a determination as to pre-judgment interest.

5. [23]

   The Court did not determine the precise date for that purpose in City Pacific No 1 (time was found to run from 2015), as it was determining whether the respective claims were time barred. Turning to the immediate question, I accept the plaintiff’s submission that the precise date in 2015 on which loss arose was 17 April 2015, being the date that ILO entered into the contract to sell the Marina and the time that Martha Cove became unable to repay the debt it owed to City Pacific (and accordingly City Pacific’s loss arose). In short, I consider loss arose on the exchange of contract and not on settlement as advanced by the defendants. That is the date from which pre-judgment interest should run.

6. [24]

   The plaintiffs are entitled to pre-judgment interest calculated, in accordance with the prescribed rate in Practice Note SC Gen 16, from 17 April 2015 until the date of judgment pursuant to s 100(1) of the Civil Procedure Act.

The Plaintiffs’ submissions

1. [25]

   In summary, the plaintiff made the following submissions were made by the plaintiffs in relation to City Pacific’s costs:

   1. (1)

      The plaintiffs sought an order that the defendants pay its costs on the ordinary basis until 9 July 2019, and thereafter on the indemnity basis: Bassett v Cameron (No 2) [2021] NSWSC 419 (“Bassett”).

   2. (2)

      It was accepted that the cost orders already made in the proceedings in favour of the defendants should be excluded. All other costs are to be paid and dealt with in the same way as the general costs of the proceedings as set out in r 42.7 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”).

   3. (3)

      The usual order should apply. Reliance in this respect was placed on the history of proceedings, namely, City Pacific was wholly successful against both defendants in both the Representation Case and the Duty Case, except for the issue of contributory negligence in relation to the Third Payment. While City Pacific was not awarded the full amount of damages it sought, it achieved substantial financial success against the defendants.

   4. (4)

      As to the issue of contributory negligence, it was submitted that City Pacific’s (partial) failure on this issue should not disturb the usual order. This submission was advanced based on the following:

   5. (5)

      In addition, City Pacific also sought an order that the defendants pay its costs on the indemnity basis from 9 July 2019. City Pacific relied on its offer to settle proceedings set out in the letter from its solicitors to the defendants’ solicitors and contended that based on the Calderbank letter they are entitled to an order for indemnity costs, for the following reasons:

2. [26]

   In relation to Martha Cove’s claim on costs the plaintiffs’ sought:

   1. (1)

      That the claim be dismissed with no order as to costs. This submission was advanced based on the principles in Currabubula v State Bank of NSW [2000] NSWSC 232 (“Currabubula”). Applying Currabubula, while Martha Cove was unsuccessful, it should only be ordered to pay the defendants’ costs if and to the extent that those costs were increased by Martha Cove’s case over and above the costs that would have been incurred by the defendants in defending City Pacific’s case.

   2. (2)

      The addition of Martha Cove as a plaintiff did not increase (in any significant way) the costs incurred by the defendants. The costs incurred by the defendants were incurred in defending City Pacific’s claim, and the defendants would have incurred those costs in any event, even if Martha Cove was not a plaintiff. It was submitted that this proposition can be tested by considering the counterfactual that only City Pacific advanced the case. In that scenario, the only additional costs possibly attributable to Martha Cove’s case are that part of the submissions addressing Martha Cove’s limitations argument. The transaction and Martha Cove’s involvement were still required to be pleaded and proved.

   3. (3)

      In the alternative, any costs should be limited to those which can be shown to relate only to Martha Cove’s claim. Further, any such order should be limited to the period up to 9 July 2019, and thereafter Martha Cove should be awarded its costs on the indemnity basis for the same reasons given in relation to City Pacific.

3. [27]

   The plaintiff’s position in relation to adopting a “broad brush” approach in determining liability for the costs, was that it should not be adopted based on the following:

   1. (1)

      A broad brush approach would add additional time, costs and delays to the resolution of the proceedings. It was contended that this issue would be more efficiently dealt with by way of a lump sum costs order in an assessment, or perhaps by way of the appointment of a Registrar to mediate costs.

   2. (2)

      The plaintiffs are in liquidation and require separate costs orders for the purposes of the administration of their respective liquidation. The broad brush approach proposed involves treating the plaintiffs jointly, and would complicate the liquidation of each plaintiff.

The Defendant’s Submissions

1. [28]

   The defendant’s submissions in relation to the plaintiff’s costs are summarised below:

   1. (1)

      There should be no order as to costs in the proceedings, and all prior costs orders should be vacated. This was submitted based on the following:

   2. (2)

      In the alternative, the defendants contended that the Court should adopt a “broad brush” approach in determining liability for the costs and in doing so the Court should make orders which reflect the history of the proceedings, namely, the success of City Pacific, the failure of Martha Cove, and the prior costs orders. It may also be necessary for the Court to give some directions to any costs assessor. The defendants suggested that an appropriate form of orders and notations is:

   3. (3)

      In relation to the Calderbank offer, it was submitted:

Consideration: Costs

1. [29]

   City Pacific relied upon its offer to settle proceedings as set out in a letter from its solicitors to the defendants in the nature of a Calderbank letter, as the basis for the seeking of an order for indemnity costs.

2. [30]

   In substance, it was contended that the result of the litigation was that City Pacific became entitled to an award of damages plus interest no less favourable than the amount offered in the Calderbank letter. Having regard to pre-judgment interest and the award of damages to City Pacific that foundational proposition may be readily accepted.

3. [31]

   However, the mere making of an offer by a Calderbank letter and its non-acceptance, followed by a result more favourable to the party making an offer, than that represented by the offer, will not necessarily result in an order for payment of costs on an indemnity basis, such that it would be appropriate for the Court to depart from the ordinary rule as to costs.

4. [32]

   In this matter, I consider there are substantial reasons why the Calderbank letter does not justify an award of indemnity costs from the date of issue of the letter, notwithstanding the judgment in favour of City Pacific will be greater than $7 million and the offer was less than two thirds of the maximum damages of $11.1 million.

5. [33]

   My reasons for that conclusion are as follows:

   1. (1)

      The offer was made with respect to the claims of the plaintiffs, such that the offer included claims made by Martha Cove which were entirely unsuccessful.

   2. (2)

      The offer was made before the amendments to the pleadings at the commencement of the trial.

   3. (3)

      There was a pleading amendment on the third day of the trial and a shift in that respect, in the plaintiff’s case which was not insignificant.

   4. (4)

      The offer was inclusive of costs and did not permit any proper comparison of the success of City Pacific at the trial.

   5. (5)

      The offer was open for a relevantly short period of time, namely, 7 days.

6. [34]

   Returning to the balance of the issues as to costs the following considerations are applicable to the exercise of the Courts discretion:

   1. (1)

      I accept the submission advanced on behalf of the defendants that the plaintiffs conduct in pursuing claims until 5 December 2019, that were then abandoned on that date, had the effect of causing considerable unnecessary litigation and expense. In my view, the defendants’ faced unnecessary and unjustified costs in preparing the matter for trial from December 2017 until 5 December 2019, to deal with four issues which were abandoned in the FASOC. Further, orders made by the Court on 5 December 2019, gave the defendants the costs of the amendment application such that the defendants would be entitled to their costs of the hearing on 2, 3 and 4 of September 2019.

   2. (2)

      City Pacific was wholly successful against the defendants in both the Representation case and the Duty case. However, the plaintiffs did not introduce any claim relying on the amended Indigo Valuation on which City Pacific succeeded until 5 September 2019, when the FASOC was filed. Further, claims were abandoned by the plaintiff during the course of the hearing.

   3. (3)

      A further consideration with respect to the City Pacific’s entitlement to costs as the successful plaintiff, it was the Court’s determination that City Pacific was guilty of contributory negligence in making the third payment and that damages should be reduced accordingly. I accept that the defendants were only partially successful in relation to this issue, the Court finding that there was no contributory negligence with respect to the First or Second Payments and the contributory negligence with respect to the Third Payment was not at the level of a 100%, for which the defendant contended, but this consideration necessarily affects the entitlement by City Pacific to costs arising from its success in the proceeding. I have also had regard, in this respect, to the contributory negligence not being a predominant issue in the proceedings but nonetheless a matter that occupied time and was of some significance in the ultimate disposition.

   4. (4)

      Martha Cove was unsuccessful. I do not accept that that claim should be dismissed with no order as to costs, as proposed by the plaintiffs. That is because I consider the defendants costs were increased by Martha Cove case over and above costs that would have been incurred by the defendants in defending City Pacific’s case. The additional costs incurred by the plaintiffs were not however substantial and primarily related to the limitation argument as well as some aspects of the factual controversy.

7. [35]

   A combination of those considerations, in my view, points in favour of what the defendants described as a broad brush approach in determining liability for costs. I also consider, in that light, the form of orders and notations proposed by the defendants as earlier set out in the summary of the defendant’s submissions in this judgment is appropriate for the disposition of issue as to costs. I would propose to make orders in those terms unless the parties proffered consent lump sum orders.

The Plaintiffs’ Submissions

1. [36]

   In relation to interest on costs, the plaintiff submitted that interest on its costs should be awarded pursuant to s 101(4) of the Civil Procedure Act, calculated at the rate prescribed by Practice Note SC Gen 16 from the date the costs were paid.

The Defendant’s Submissions

1. [37]

   As to the same, the defendants submitted:

   1. (1)

      That if the Court accepted its submission in relation to costs, namely, that there is no order as to costs, this issue would fall away.

   2. (2)

      If the Court makes a costs order in favour of City Pacific, the defendants submitted that there should be no order for interest on costs for the following reasons:

Consideration: Interest on Costs

1. [38]

   I do not consider that any order for interest on costs should be made because any costs paid by the litigation funder was for both plaintiffs and an order for interest on those costs would provide compensation for costs of Martha Cove, which was unsuccessful as well as other cost to which the defendants were entitled to.

The Plaintiffs’ Submissions

1. [39]

   The plaintiffs sought an order that the funds held by the Court on account of security for the defendant’s costs of the proceedings be released to the solicitors for the plaintiffs. It was submitted that the funds should be released as City Pacific has been successful, and the plaintiffs are entitled to their proposed costs orders.

The Defendant Submissions

1. [40]

   The defendant accepted that if the Court makes no order as to costs, the security for costs paid into Court by the plaintiffs should be returned to them. If the Court makes the alternative form of orders, the security should be retained until the cost’s assessment has concluded.

Consideration: Return of Security Costs

1. [41]

   As the Court has made an alternative form of orders as to costs, I consider the security should be retained until the costs are finally resolved.

2. [42]

   As the issues raised by the further proceedings resulting in this judgment were resolved substantially in favour of the defendants, I make an order for costs in favour of the defendants with respect to the further proceedings on pre-interest judgment, costs of the proceedings, and related considerations.

3. [43]

   The plaintiff shall bring in short minutes of order reflecting this judgment, on or before 1pm on Monday 21 March 2022.