Martech International Pty Ltd v Energy World Corporation Limited [2007] FCAFC 127 (14 August 2007)

Last Updated: 16 August 2007

FEDERAL COURT OF AUSTRALIA

Martech International Pty Ltd v Energy World Corporation Limited [2007] FCAFC 127

COSTS – indemnity costs – offer of compromise not accepted – result obtained exceeded offer – appellant entitled to costs where principal claim succeeds on appeal – respondent entitled to some discount where appellant failed in relation to other grounds which occupied much of the proceeding below

INTEREST – prejudgment interest should be calculated from date of demand



Federal Court of Australia Act 1976 (Cth), s 51A(1)(a)
Federal Court Rules, O 23


Martech International Pty Ltd v Energy World Corporation Limited [2007] FCAFC 35 related
Martech International Pty Ltd v Energy World Corporation Limited (No 4) [2006] FCA 1779 related
Martech International Pty Ltd v Energy World Corporation Limited [2006] FCA 1004 related
Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 distinguished
Golden West Refining Corp Ltd v Daly Laboratories Pty Ltd, unreported, Carr J, 16 February 1995 cited
Hanave Pty Ltd v LFOT Pty Ltd (2004)] [2004] FCAFC 180; 136 FCR 566 cited
HK Frost Holdings Pty Ltd (in liq) v Darvall McCutcheon (a firm) [1999] FCA 795 cited
Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No 2) [2004] FCA 1437; (2004) 212 ALR 281 referred to










MARTECH INTERNATIONAL PTY LTD (ACN 009 022 799) v ENERGY WORLD CORPORATION LIMITED (ACN 009 124 994)
WAD 239 OF 2006

MOORE, TAMBERLIN AND GYLES JJ
14 AUGUST 2007
SYDNEY (VIA VIDEO LINK TO PERTH) (HEARD IN PERTH)

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 239 OF 2006

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	MARTECH INTERNATIONAL PTY LTD (ACN 009 022 799) Appellant
AND:	ENERGY WORLD CORPORATION LIMITED (ACN 009 124 994) Respondent

JUDGES:	MOORE, TAMBERLIN AND GYLES JJ
DATE OF ORDER:	14 AUGUST 2007
WHERE MADE:	SYDNEY (VIA VIDEO LINK TO PERTH) (HEARD IN PERTH)

THE COURT ORDERS THAT:

The appellant bring in short minutes to give effect to these orders.


Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	WAD 239 OF 2006

ON APPEAL FROM A SINGLE JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	MARTECH INTERNATIONAL PTY LTD (ACN 009 022 799) Appellant
AND:	ENERGY WORLD CORPORATION LIMITED (ACN 009 124 994) Respondent

JUDGES:	MOORE, TAMBERLIN AND GYLES JJ
DATE:	14 AUGUST 2007
PLACE:	SYDNEY (VIA VIDEO LINK TO PERTH) (HEARD IN PERTH)

REASONS FOR JUDGMENT

THE COURT:

1 On 21 March last the Court delivered judgment allowing the appeal, setting aside the judgment and orders below and ordering that the appellant bring in minutes of order covering the orders that should be made in lieu of the orders made below, including costs (Martech International Pty Ltd v Energy World Corporation Limited [2007] FCAFC 35). The parties have agreed upon some orders but there are issues in relation to both interest and costs which require determination. This judgment should be read with the reasons for judgment on the appeal, together with the judgment below (Martech International Pty Ltd v Energy World Corporation Limited [2006] FCA 1004) as to the substantive issues and the further judgment of the primary judge as to costs and interest (Martech International Pty Ltd v Energy World Corporation Limited (No 4) [2006] FCA 1779). We shall not repeat the background to, or the substance of, those judgments.

INTEREST

2 The rate of interest to be applied is agreed but there is an issue as to the date from which pre-interest judgment should run. The appellant, Martech International Pty Ltd (Martech), submits that interest should run from the accrual of the cause of action on 29 September 2000 pursuant to s 51A(1)(a) of the Federal Court of Australia Act 1976 (Cth). That follows "unless good cause is shown to the contrary". This reflects the fact that, normally, a successful applicant should be compensated for being out of its use of the money sum and that, correspondingly, the respondent has had the benefit and use of the money in the intervening period. The respondent, Energy World Corporation Limited (Energy World), has submitted that such good cause has been shown by reason of various periods of delay in making a claim on the basis that succeeded and then in bringing proceedings, referring to Golden West Refining Corp Ltd v Daly Laboratories Pty Ltd, unreported, Carr J, 16 February 1995; HK Frost Holdings Pty Ltd (in liq) v Darvall McCutcheon (a firm) [1999] FCA 795 and Hanave Pty Ltd v LFOT Pty Ltd (2004)] [2004] FCAFC 180; 136 FCR 566, particularly per Kiefel J. It is submitted that the first relevant invoice was not issued until 10 December 2001 and that invoice was not based upon the same footing as the ultimate judgment. It was not until 6 November 2003 that an invoice was forwarded on the basis that proved to be successful, although it did not include any claim for interest. The proceeding was not commenced until 25 March 2004.

3 In our opinion, the only period to be considered in this respect is that between 29 September 2000 and 10 December 2001. Until 19 November 2001, Martech continued to provide services to Energy World and made no claim for a termination payment. In our opinion, it would be anomalous to allow interest on a claim not made whilst the commercial relationship continued. Once that relationship ceased, a claim for termination fee was made promptly. There is nothing out of the ordinary about the later progress of the matter which would provide a proper basis for depriving the appellant of interest on the money withheld. The fact that the precise basis for the claim differs from the final formulation of it does not detract from that conclusion. Thus, interest should run from 10 December 2001 to the date of final orders. That accords with the approach of the primary judge.

COSTS

Indemnity Costs?

4 On 22 August 2005 Martech served a Notice of Offer of Compromise on Energy World pursuant to O 23 of the Federal Court Rules offering to settle its claim on the following basis:

(1) A payment of the sum of $671,663.
(2) A payment of interest in the sum of $197,413.
(3) Energy World to pay Martech’s costs to date on a party/party basis.

This amounted to settling all of its claims for a total payment of $869,076 plus costs.

5 On any basis, the result obtained by Martech exceeds that offer. The termination fee of $895,125 beats the offer on its own, without regard to GST and interest. If GST and interest are included from 10 December 2001 to the date upon which the offer was to be accepted, then the amount recovered far exceeds the offer.

6 Energy World submitted that Martech must show that the rejection of the offer was imprudent or plainly unreasonable (Dukemaster Pty Ltd v Bluehive Pty Ltd [2003] FCAFC 1 at [7]. However, the offer of compromise in Dukemaster [2003] FCAFC 1 was not in accordance with O 23. The authorities establish that compelling and exceptional circumstances are required to avoid an order for indemnity costs following non-acceptance of an offer made under O 23 (Port Kembla Coal Terminal Ltd v Braverus Maritime Inc (No 2) [2004] FCA 1437; (2004) 212 ALR 281). A reasonable refusal does not displace the prima facie operation of O 23. In any event, Martech points out that the offer was made contemporaneously with an amendment to the proceeding, which had been earlier foreshadowed to make clear the basis upon which Martech was proceeding, at a time close enough to the hearing for Energy World to be in a position to make a sound assessment of the impact of that amendment and of the case generally. The mere fact that Energy World succeeded on the point at first instance does not displace the effect of O 23. The offer of compromise was open until 6 September 2005 and Martech is entitled to indemnity costs thereafter.

Costs to 6 September 2005

7 The trial judge made no order as to the costs of the claim in circumstances where the most significant claim, which was based upon termination, had failed and a much smaller forbearance claim had succeeded. Martech submits that, having succeeded now upon its principal claim, there is no reason why it should not have the costs of the claim below up to 6 September 2005. Energy World submits that Martech adopted a "shotgun" approach to its claim for a termination payment, putting various alternatives, a number of which required considerable evidence and upon which it failed. In particular, up until 23 August 2005, that claim rested solely on an allegation of an oral agreement made at the board meeting which failed.

8 If Energy World had conceded once the basis upon which Martech succeeded was clearly raised, then there would be some substance to its argument. It did not. It continued to resist all claims. That shows that Martech was in a position where it had to pursue all available bases for the remedy it sought. It is not customary to apportion between bases for action unless there is a clear ground for so doing. On the other hand, Martech did fail in relation to grounds that occupied much of the hearing. That provides a proper basis for some discount which must, of necessity, be arbitrary. The basis upon which Martech succeeded was relatively straight forward from an evidentiary point of view. In the circumstances, an order that Energy World pay 75 per cent of the costs incurred by Martech up to 6 September 2005 is appropriate.

9 Martech should bring in short minutes to give effect to these orders.

I certify that the preceding nine (9) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Moore, Tamberlin and Gyles.

Associate:

Dated: 14 August 2007

Counsel for the Appellant:	Mr DM Stone of Williams & Hughes, Solicitors
Counsel for the Respondent:	Mr P McGowan
Solicitor for the Respondent:	Christensen Vaughan

Date of Hearing:	8 June 2007
Date of Judgment:	14 August 2007