INTEREST ON COSTS
40As the applicant has been unsuccessful, it should pay the successful Developer's costs.
41There is a contested claim by the Developer for interest on costs under s 101(4) of the Civil Procedure Act 2005. Section 100 of the Civil Procedure Act 2005 gives the courts a discretion, which is routinely exercised, to order interest on monies recovered up to judgment and provides that such interest is to be included in the amount for which judgment is given. Section 368(5) of the Legal Profession Act 2004 provides for interest on costs after assessment but not before assessment.
42Section 101 of the Civil Procedure Act provides:
101 Interest after judgment
(1) Unless the court orders otherwise, interest is payable on so much of the amount of a judgment (exclusive of any order for costs) as is from time to time unpaid.
(2) Interest under subsection (1) is to be calculated, at the prescribed rate or at such other rate as the court may order, as from:
(a) the date on which the judgment takes effect, or
(b) such later date as the court may order.
(3) Despite subsection (1), interest is not payable on the amount of a judgment if the amount is paid in full within 28 days after the date on which the judgment takes effect, unless the court orders to the contrary.
(4) The court may order that interest is to be paid on any amount payable under an order for the payment of costs.
(5) Interest under subsection (4) is to be calculated, at the prescribed rate or at such other rate as the court may order, as from:
(a) the date or dates on which the costs concerned were paid, or
(b) such later date as the court may order.
...
43The exercise of the discretion under s 101(4) focuses upon whether the successful party has been out of its money for costs already paid and whether that party will be appropriately compensated by an award of costs in its favour without an award of interest on costs already paid: Taylor v Port Macquarie-Hastings Council [2010] NSWLEC 153, 175 LGERA 189 at [84] per Biscoe J; Ying v Song [2011] NSWSC 618 at [102] per Ward J. I think that the focus could also be on whether the successful party is likely to be out of money for costs paid in the future and before interest on costs becomes payable under s 368(5) of the Legal Profession Act.
44Taylor is the only case in this Court in which an order for interest on costs has been sought, so far as I am aware. It was a claim for compensation for compulsory acquisition of land. I ordered the respondent to pay interest on costs awarded to the applicants, adopting the form of order made in the influential judgment of Campbell J in Lahoud v Lahoud [2006] NSWSC 126 and approved by the Court of Appeal in Leda Pty Ltd v Weerden (No 2) [2007] NSWCA 283.
45In Leda at [7] the Court of Appeal approved the following passage in Lahoud at [82] - [87] (omitting citations):
82 In my view it is appropriate to make an order for the payment of interest on costs. There is no requirement, before an order for payment of interest on costs is made, for the Court to be satisfied that the circumstances of the case are out of the ordinary.
83 To the extent to which the plaintiffs have been out of pocket as a result of having to pay their lawyers' costs and disbursements, it is appropriate that the compensation which is recognised in the Court's order for costs take into account the fact that the plaintiffs have been out of pocket in that way. Given the length of time the proceedings have been on foot and the extensive preparation, the amount by which the plaintiffs have been out of pocket could be large. It is relevant that the plaintiffs, and the defendants, each conduct businesses and so the amounts which the plaintiffs have had to pay to finance the litigation is likely to be money which otherwise could have been put to a productive use. Conversely, the defendants, by not being required to pay costs until some time in the future when the costs are agreed or assessed, are likely to have been able to retain, for their own productive use, the amount of those costs.
84 The form of the order for interest on costs has occasioned me some concern. As the plaintiffs have succeeded in obtaining an order for indemnity costs in relation to only one issue in the proceedings, it is possible that there will be some costs and disbursements which the plaintiff has paid from time to time as the litigation progressed, but which are not allowed on assessment. It might sometimes be possible to cast an order in the form of allowing interest only on such costs as the plaintiff has paid as are allowed on assessment - but such an order would require the assessor to conduct what would amount to a separate assessment in relation to each payment that the plaintiffs had made. While the making of such a series of costs assessments would be within the scope of section 353 Legal Profession Act 2004, adopting such a procedure has the potential for making the costs assessment itself more complex and expensive. Further, it sometimes happens in the course of litigation - and the evidence does not tell me whether it has happened in the course of this litigation - that a litigant makes payments to his lawyers from time to time of lump sums on account of costs, without purporting to allocate those payments to particular memoranda of fees or items of work performed. If that had happened in the present case, one could not tell whether the whole or any part of such a payment had been allowed on assessment.
85 In all the circumstances, the appropriate way of calculating interest on costs is to ascertain the total of the amounts which the plaintiffs have paid and are liable to pay for costs and disbursements, ascertain the total amount of costs and disbursements allowed on assessment, calculate the percentage which the total amount allowed on assessment bears to the total costs and disbursements which the plaintiffs have paid or are liable to pay, and allow the plaintiffs interest on that percentage of each payment which they have made from time to time on account of costs and disbursements.
86 I recognise that that method of proceeding contains within it the possibility that the plaintiffs might have paid for some items of work which the assessor discounts considerably or totally. If the plaintiffs had paid such an amount comparatively early in the course of the litigation, and interest was allowed on the percentage of that amount which seems to me to be appropriate, then the plaintiffs would be somewhat overpaid interest, by comparison to the amount that the plaintiffs would receive if individual assessments of each payment made were carried out. Conversely, if the plaintiffs paid for such an item of work comparatively late in the course of the litigation, the method of proceeding which I am proposing to adopt could result in the plaintiffs being underpaid interest, by comparison to the amount that the plaintiffs would receive if individual assessments of each payment made were carried out. However, it seems to me that those possibilities are ones which fall within the ambit of the degree of approximation and estimation which is frequently involved in assessing compensation. I do not regard them as a reason for not following that method.
87 I see no reason for ordering interest to accrue at any rate other than the rate set out in Schedule 5 of the Rules.
46In Leda at [9] the Court of Appeal made an interest on costs order in substantially the same form as that which had been made in Lahoud, as follows:
4.In this order:
X equals the total amount of costs and disbursements paid or liable to be paid to the respondent's legal advisers in connection with these proceedings;
Y equals the total amount of costs and disbursements allowed on assessment to the respondent in connection with these proceedings; and