Skywest Aviation Pty Limited v the Commonwealth of Australia [1995] ACTSC 151 (22 December 1995)

SUPREME COURT OF THE ACT

SKYWEST AVIATION PTY LIMITED v. THE COMMONWEALTH OF AUSTRALIA
No. SC 838 of 1991
Number of pages - 6
Contract - Pre-Judgment Interest - Costs

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
MILES CJ

CATCHWORDS

Contract - plaintiff failed to give notice of claim for payment - notice was paid under contract - defendant made open offer of payment as if notice of claim had been made - defendant not entitled to set up failure to claim as a defence - plaintiff entitled to amount owing to date of judgment and to declaration of future rights to payment.

Pre-Judgment Interest - conduct of case by plaintiff - discretion to award lump sum in lieu of interest.

Costs - special costs order - conduct of parties - offer made by defendant of amount found by court to be owing - offer rejected by plaintiff with no counter-offer - inflated claim by plaintiff - defendant to pay costs up to date of offer -plaintiff to pay costs thereafter - both on party and party basis.

Rules of the Federal Court of Australia, Order 23 Rule 11(4)
Rules of the Supreme Court of NSW, Part 52 Rule 17(5)

Quirk v. Bawden [1992] ACTSC 118; (1992) 111 FLR 115

HEARING

CANBERRA, 14 September 1995
22:12:1995

Counsel for the plaintiff: Mr. P.W. Gray

Solicitors for the plaintiff: Deacons Graham and James
(formerly Sly and Weigall)

Counsel for the defendant: Mr. A. Robertson

Solicitors for the defendant: Australian Government Solicitor

ORDER

THE COURT ORDERS THAT:
1. The plaintiff have liberty to enter judgment in the sum of $1,113,633.00.

2. The counter-claim be dismissed.

3. The defendant pay the plaintiff's costs of the proceedings up to and including 8 February 1994 including reserved costs and that the plaintiff pay the defendant's costs of the proceedings after 8 February 1994, the costs payable by each party to be assessed or taxed on a party and party basis.

THE COURT DECLARES THAT:
1. The plaintiff is entitled to a variation to the Fixed Cost Component payable in relation to Task Two from 20 December 1995 to 30 June 1996 in the sum of $7,790 per fortnight.

DECISION

MILES CJ On 14 March 1995 I published my reasons for deciding that the plaintiff was entitled to claim a variation of the Fixed Cost Component for Task Two as provided for in clause 4A of the Coastwatch contract, only by reference to the purchase price of aircraft purchased by it which were not modified to SeaScan at the time of purchase. I indicated that I would dismiss the plaintiff's claim in equitable estoppel and that I would dismiss the defendant's cross-claim for rectification of the Coastwatch contract. I stood over for further hearings the matters of the form of orders and the quantification of any sum to which the plaintiff might be entitled as part of the appropriate relief. I also stood over the matter of costs.

Form of orders to be made
2. In relation to the form of relief, the plaintiff submits that as a consequence of my decision on the interpretation of clause 4A that it is entitled to judgment for a sum which may be ascertained by reference to the provisions of the contract which entitled the plaintiff to payment of a service fee. The service fee includes the Fixed Cost Component.

3. The defendant submits that the plaintiff has not complied with its own obligations under clause 4A and that such compliance is a pre-condition to any entitlement of the plaintiff to a service fee adjusted by reason of the variation to the fixed cost component. The defendant is willing to submit to a declaration that, on the requirements of clause 4A being satisfied, the plaintiff is entitled to the variation sought and in the event of such declaration being made, the defendant would give an undertaking to pay a sum which represents an increase in the service fee which the variation would bring about.

4. The resolution of this particular dispute, coming as it does at the heel of the hunt, must begin by a re-examination of the pleadings. In para.31(a) of the second further amended statement of claim the plaintiff claimed that it served on the defendant on 24 June 1992 a document entitled "Accounting Evidence" which constituted a notification to the defendant of a variation pursuant to sub-clause 4A.1. The plaintiff claimed that the documents served included or had attached thereto all supporting documentation detailing the effect on the fixed cost component of any variation in the purchase price, foreign exchange rates applicable to the purchase price, and depreciation costs, as required by sub-clause 4A.2.

5. The plaintiff claims now that it has performed all that it was required to do under clause 4A in order to be entitled to a variation and that the defendant cannot rely on its own failure to verify the notice and supporting documentation pursuant to sub-clause 4A.3 in order to deny the plaintiff its entitlements to a variation and consequent payment.

6. The defendant admits receipt of the documents served on 24 June 1992 but denies that they were a notice or sufficient notice under sub-clause 4A.2 and asserts that any question of failure on the part of the defendant to verify such a notice and supporting documentation under sub-clause 4A.3 simply does not arise.

7. I accept that, as the defendant submits, the terms of the contract are such that the plaintiff was obliged to comply with sub-clause 4A.2 before the defendant was obliged to comply with sub-clause 4A.3 and that the obligation cast on the plaintiff was a pre-condition to entitlement to a variation of the fixed cost component. The onus is on the plaintiff to show that it complied with its obligation.

8. In support of the plaintiff's submission a number of documents were relied on, namely a letter from Mr. Davin to Australian Customs Services of 8 July 1991 which enclosed the joint opinion of Messrs. Conti and Gray of counsel (undated), various bills of sale relating to the aircraft in question, a document entitled "Conversion costs" prepared by the plaintiff and a document entitled "Calculation of claim" also prepared by the plaintiff. The plaintiff also relied on a further letter from Mr. Davin to the National Manager Coastwatch dated 20 September 1991. The defendant rejected these letters from Mr. Davin at the time of receipt as insufficient to constitute notification under clause 4A.

9. No particular reliance was placed by the plaintiff in argument on the document entitled "Accounting evidence" of 24 June 1992 referred to in the statement of claim.

10. The defendant relied on a letter written to the plaintiff's solicitors dated 8 February 1994 stating in effect that as a result of discovery the defendant was in a position to calculate a sum to which the defendant would be entitled if the variation to the fixed cost component took effect in accordance with the defendant's construction of clause 4A. That sum and certain details of how the sum was calculated were disclosed. It is now conceded by the plaintiff that in the light of my findings the sum was correct.

11. The onus being on the plaintiff, I am not satisfied that it had discharged the obligation entitling it to a variation prior to 8 February 1994. In my view, the documents served on the defendant fell well short of a proper notification within clause 4A.

12. On the other hand, I do not think that the defendant is entitled to be heard to say that after 8 February 1994 there had been no prior notification on the part of the plaintiff. In my view, to approach the matter in that way at this stage would be to create a false issue. In effect, the letter of 8 February 1994 should be regarded as verification by the defendant under clause 4A.3 of the defective notification previously received and the verification should be regarded as curing any defect in the notification. To declare that the plaintiff would be entitled to payment of the consequent increase in service fee, only upon notification by the plaintiff and verification by the defendant pursuant to sub-clause 4A.2 and sub-clause 4A.3 would at this stage of the relationship between the parties be so artificial as to be inequitable and contrary to justice. Whether the plaintiff's claim should therefore be regarded strictly as a claim in law for damages for breach of contract or a claim for equitable damages, or, if in law, the defendant should be regarded as having some sort of equitable defence, I do not propose to decide. The result in any event is that the plaintiff should have judgment, which includes damages, for the increase in service fee effected by the variation as it is calculated up to the present date or thereabouts. The calculation is as follows:

To 1 February 1994 $ 631,923
From 2 February 1994 to 19 December 1995
at $7,790 per fortnight $ 381,710
Total: $1,013,633

Interest before judgment: Supreme Court Act 1933, s.69
13. There is, in my view, no reason why the plaintiff should not be entitled to an award of interest on the sum to which it is entitled by way of damages, save to this extent. The issues for determination were considerably clouded by the plaintiff's unsuccessful claims and the bulk of the time taken at the hearing was in relation to the plaintiff's unsuccessful claim in equitable estoppel. It is likely that the plaintiff would have been paid long ago if it had not persisted in its unsuccessful claims. Interest is a discretionary matter, but not to be refused except for good reason. I think that in all the circumstances, including those discussed below, it is appropriate to award a lump sum in lieu of interest. In that regard I award $100,000 as the appropriate lump sum. It becomes part of the sum for which the plaintiff will have liberty to sign judgment.

Costs
14. Both parties are agreed that the plaintiff should have its costs up to 8 February 1994 and that such costs should be assessed or taxed on a party and party basis.

15. The letter of that date, only a week or so before the date fixed for the commencement of the hearing, made an offer on the part of the defendant to pay to the plaintiff the sum calculated by the defendant in accordance with what is now recognized as the correct interpretation of the contract, together with party and party costs to date. The letter indicated that if the offer were not accepted and the court decided in favour of the construction of clause 4A as contended for by the defendant, then the defendant would seek an order for costs from that date forth on an indemnity basis.

16. The Full Court has considered the question of the effect of pre-trial offers on any costs order that may be made consequent upon trial: Quirk v. Bawden [1992] ACTSC 118; (1992) 111 FLR 115. It recognized the discretion to make special costs orders according to the circumstances of the case. The discretion is an open one and is to be exercised bearing in mind the public interest in the prompt and economical disposition of litigation as well as the interests of the parties. The existence of the discretion to make special costs orders is expected to operate as a carrot and not as a stick upon litigants and their lawyers.

17. Both parties in the present case argued for a special costs order. The plaintiff contended that each party should pay its own costs after 8 February 1994. The defendant contended that the plaintiff should pay indemnity costs after that date.

18. There is some force in the submissions put for both sides. In favour of the plaintiff it may be said that there was little or no element of compromise in the defendant's offer and that the offer was the bare minimum which the defendant could contemplate paying in the light of its own interpretation of clause 4A, that the offer was made late in the proceedings, that the defendant's claim for rectification was unsuccessful, that the defendant elected not to pay into court and that no part of the large sum offered has ever been paid.

19. For the defendant it may be said that some of the time taken at the trial was in respect of the unsuccessful claim for an interpretation of the contract which required extensive evidence of extrinsic facts but which in the end failed, that the bulk of the time taken at the trial was in respect of the unsuccessful claim in equitable estoppel, that the claim for rectification was in essence only an alternative to the defence and/or only enlivened by the late allegations relating to equitable estoppel, that there were adverse findings as to the credit of the principal witness for the plaintiff and that the plaintiff never made any counter offer by way of compromise.

20. Reference was made to Rules of Court in the Federal Court of Australia, Order 23 Rule 11(4) and in the Supreme Court of New South Wales, Part 52 Rule 17(5), which provide that where an offer is made by a defendant and the plaintiff does not get a more favourable result at the trial, the defendant will normally recover costs after the offer on a party and party basis. Again, while there is no specific rule to such an effect in this Court, and while there is much to be said for the sort of approach that is embodied in the rule, each case must depend upon its own circumstances. I think that the position of the parties in the present case is such that, in the light of the offer by the defendant and in the light of the rejection by the plaintiff and in the further light of the orders I am about to make, the appropriate orders for costs are that the defendant should pay the plaintiff's costs up until 8 February 1994 and that the plaintiff should pay the defendant's costs thereafter, in both instances on a party and party basis.

21. I would urge upon the parties to try to reach agreement on the quantum of costs. It may be appropriate that in the end each side pays it own costs but as I was not furnished with any information as to the costs of either side, I was unable to entertain that possibility as the basis of an order.

Orders and relief

1. The plaintiff has liberty to enter judgment in the sum of
$1,113,633.00.
2. The Court declares that the plaintiff is entitled to a variation
to the Fixed Cost Component payable in relation to Task Two from 20
December 1995 to 30 June 1996 in the sum of $7,790 per fortnight.
3. Counter-claim dismissed.
4. Order that the defendant pay the plaintiff's costs of the
proceedings up to and including 8 February 1994 including reserved
costs and that the plaintiff pay the defendant's costs of the
proceedings after 8 February 1994, the costs payable by each party
to be assessed or taxed on a party and party basis.