Citation: Stillwell Trucks Pty Ltd v Williams [2018] NSWDC 38
Court: District Court of New South Wales
Date: 20 February 2018
Judge: Gibson DCJ
Background
A truck sales business brought proceedings against its former sales manager for breach of contract arising from a sustained scheme of employee fraud. The defendant had worked for the plaintiff since 2002 and was promoted to sales manager in 2008. From around 2011, he used the autonomy of that role to raise fraudulent purchase orders through a supplier, ordering mobile phones and tablets (including iPhones and iPads) that were billed to customers who had neither requested nor received them.
The fraud was uncovered in March 2014 through the initiative of a junior stock controller, a competitor supplier who recognised the suspicious nature of the orders, and an on-site accountant. When confronted, the defendant initially denied wrongdoing but later admitted collecting the items and distributing them to friends. A forensic accountant was engaged to quantify the losses.
The defendant failed to file a defence, and the Registrar entered default judgment in November 2017. The matter came before Gibson DCJ for assessment of damages and costs. The defendant did not appear at that hearing, despite having been served with notice of the date and the evidence to be relied upon.
Legal Issues
- Whether, in the absence of the defendant, the court could be satisfied that proper notice of the hearing had been given and that the evidence had been carefully considered on a basis fair to the missing party.
- The quantum of damages, including interest, to be awarded for the plaintiff's losses arising from the fraud.
- Whether a gross sum costs order was appropriate, and what deduction (if any) should be made from the claimed costs figure having regard to the small amount in dispute.
Decision
Procedural fairness to the absent defendant
Gibson DCJ applied the approach set out by Barrett J in Satz v ACN 069 808 957 Pty Ltd [2010] NSWSC 365, which requires the court, when a party does not appear, to confirm that proper notice was given, that the playing field is level, and that the evidence is examined with care. The court was satisfied that the defendant had received notice of the hearing date by letter sent to the address at which he had been served, that the affidavit evidence had been served on him, and that there was no attempt by him to contact the court. The court proceeded accordingly.
Damages and interest
The court accepted the evidence of the forensic accountant and found that the fraudulent scheme was sustained, systematic, and deliberately concealed through obscure invoicing. Judgment was entered in favour of the plaintiff for the sum of $162,879.71, inclusive of interest calculated under s 100 of the Civil Procedure Act 2005 (NSW).
Gross sum costs order
The plaintiff sought a gross sum costs order under s 98 of the Civil Procedure Act 2005 (NSW), which allows the court to fix costs as a lump sum rather than requiring a formal costs assessment. The solicitor-and-client costs claimed were $8,500, with disbursements of $1,487.69. The court acknowledged that a "rule of thumb" discount is ordinarily applied to solicitor-and-client costs claimed on a gross sum basis, with previous cases applying reductions of between 15% and 30%. However, drawing on the Court of Appeal's decision in Wilkie v Brown [2016] NSWCA 128, where no deduction was made from a modest costs sum of just over $5,000, Gibson DCJ held that only a token reduction was warranted given the small amount involved. The solicitor-and-client costs were reduced from $8,500 to $8,000, with all disbursements allowed in full.
Direction to the Commissioner of Police
Following Rafidi v Commonwealth Bank of Australia [2017] NSWCA 96, the court directed the Registrar to provide a copy of the judgment to the Commissioner of Police, noting that a police investigation remained ongoing despite the passage of nearly four years since the fraud was reported.
Orders Made
- Judgment for the plaintiff in the sum of $162,879.71 inclusive of interest.
- The defendant to pay the plaintiff's costs of $9,487.69 on a gross sum basis, pursuant to s 98 of the Civil Procedure Act 2005 (NSW).
- The Registrar directed to provide a copy of the judgment to the Commissioner of Police.
- Exhibits retained for 28 days.
- Plaintiff to notify the defendant of the orders.
Key Takeaways
- Where a defendant fails to appear at a damages assessment hearing, the court must still be satisfied that proper notice was given, that the evidence has been carefully examined, and that the absent party's position has been fairly considered before proceeding to judgment.
- A gross sum costs order under s 98 of the Civil Procedure Act 2005 (NSW) is available as an alternative to formal costs assessment, and courts retain discretion to reduce the "rule of thumb" discount where the costs sum in question is small.
- The District Court applied Wilkie v Brown [2016] NSWCA 128 to justify a minimal reduction (from $8,500 to $8,000) in solicitor-and-client costs, treating the smallness of the sum as a reason to depart from the standard 15–30% discount range.
- Under the principle in Rafidi v Commonwealth Bank of Australia [2017] NSWCA 96, courts may direct that a copy of a civil judgment be provided to the Commissioner of Police where an ongoing criminal investigation is connected to the subject matter of the proceedings.
- Sustained employee fraud, documented by forensic accounting evidence, can support a significant damages award in breach of contract proceedings even where the defendant takes no part in the assessment hearing.
Legislation and Cases Referenced
Legislation
- Civil Procedure Act 2005 (NSW), ss 98 and 100
- Uniform Civil Procedure Rules 2005 (NSW), r 30.1
Cases
- Aesthete No 3 Pty Limited v Gilmore Finance Pty Limited [2018] NSWDC 1
- Bobb v Wombat Securities Pty Ltd (No 2) [2013] NSWSC 863
- Harrison v Schipp (2002) 54 NSWLR 738
- Palladium Consulting Pty Ltd [2013] NSWSC 92
- Prime Marble and Granite Pty Ltd v Mehajer [2017] NSWDC 273
- Rafidi v Commonwealth Bank of Australia [2017] NSWCA 96
- Satz v ACN 069 808 957 Pty Ltd [2010] NSWSC 365
- Star Diamond v Diamond (No 4) [2013] NSWCA 811
- Wilkie v Brown [2016] NSWCA 128