Bathurst Regional Council v Local Government Financial Services Pty Ltd

Counsel for the First Respondent: Mr G Parker SC with Mr J C Giles

Solicitor for the First Respondent: Norton Rose

Counsel for the Second Respondent: Mr I M Jackman SC

Solicitor for the Second Respondent: Allens

Counsel for the Third Respondent: Mr S Finch SC with Ms K Barrett

Solicitor for the Third Respondent: Clayton Utz

Counsel for the Cross-Claimant on the Fifth Cross-Claim Mr S Couper QC with Mr J V Gooley

Solicitor for the Cross-Claimant on the Fifth Cross-Claim: Wotton and Kearney Lawyers

Counsel for the Applicants: Mr A Coleman SC with Mr C H Withers

Solicitor for the Applicants: Piper Alderman

Counsel for the First Respondent: Mr G Parker SC with Mr J C Giles

Solicitor for the First Respondent: Norton Rose

Counsel for the Second Respondent: Mr I M Jackman SC

Solicitor for the Second Respondent: Allens

Counsel for the Third Respondent: Mr S Finch SC with Ms K Barrett

Solicitor for the Third Respondent: Clayton Utz

Counsel for the Cross-Claimant on the Fifth Cross-Claim Mr S Couper QC with Mr J V Gooley

Solicitor for the Cross-Claimant on the Fifth Cross-Claim: Wotton and Kearney Lawyers

Counsel for the Applicant: The applicant did not appear

Counsel for the First Respondent: Mr G Parker SC with Mr J C Giles

Solicitor for the First Respondent: Norton Rose

Counsel for the Second Respondent: Mr I M Jackman SC

Solicitor for the Second Respondent: Allens

Counsel for the Third Respondent: Mr S Finch SC with Ms K Barrett

Solicitor for the Third Respondent: Clayton Utz

Counsel for the Cross-Claimant on the Fifth Cross-Claim Mr S Couper QC with Mr J V Gooley

Solicitor for the Cross-Claimant on the Fifth Cross-Claim: Wotton and Kearney Lawyers

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 936 of 2009

AND: LOCAL GOVERNMENT FINANCIAL SERVICES PTY LTD ACN 001 681 741

JUDGE: JAGOT J DATE OF ORDER: 1 March 2013 WHERE MADE: SYDNEY

1. Judgment for the Applicant (Bathurst) against the first respondent (LGFS) in the sum of $932,956.90 plus pre judgment interest from 24 October 2008 calculated at the rate of 4% above the cash rate last published by the Reserve Bank of Australia as set out in Practice Note CM 16 - Pre-judgment interest (the Practice Note CM 16 rate).
2. Judgment for Bathurst against the second respondent (ABN) in the sum of $310,985.63 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
3. Judgment for Bathurst against the third respondent (S&P) in the sum of $310,985.63 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
4. Post judgment interest shall accrue on the judgment sums in paragraphs 1, 2 and 3 from the date of this judgment to the date of payment calculated pursuant to Rule 39.06.
5. Bathurst is not entitled to recover more than the amount of $932,956.90 plus interest calculated at the Practice Note CM 16 rate in total from the Respondents.
6. LGFS, ABN and S&P pay Bathurst's costs of the proceedings. First Cross Claim
7. Judgment for LGFS against ABN in the sum of $7,985,092.36 plus pre judgment interest from 20 March 2008 calculated at the Practice Note CM 16 rate.
8. Judgment for LGFS against S&P in the sum of $7,985,092.36 plus pre judgment interest from 20 March 2008 calculated at the Practice Note CM 16 rate.
9. Post judgment interest shall accrue on the judgment sums in paragraph 7 and 8 from the date of this judgment to the date of payment calculated pursuant to Rule 39.06.
10. Declares that ABN and S&P are each liable to indemnify LGFS for 33⅓% of all payments made by LGFS to Bathurst in respect to the liability of LGFS to Bathurst arising from orders 1 and 6.
11. ABN and S&P pay LGFS's costs of the first cross claim. Third and Fifth Cross Claims
12. Declares that the Cross Defendant to the Third Cross Claim (AHAC) is liable to indemnify LGFS in respect to the amounts payable by LGFS to the applicants in these proceedings and in proceedings NSD 1073 of 2009.
13. Declares that AHAC is liable to indemnify LGFS in respect to its reasonable and necessary, fees, costs and expenses resulting solely from the investigation, adjustment and defence of these proceedings and of proceedings NSD 1073 of 2009 (less those costs already paid by AHAC) (Defence Costs) provided that the total amount recoverable by LGFS from AHAC in NSD 1073 of 2009, NSD 1268 of 2009 and these proceedings, excluding interest under s57 of the Insurance Contracts Act 1985 (Cth) and LGFS's costs of the proceedings which AHAC is ordered to pay, shall not exceed $20,000,000 being the sum insured.
14. The question of the quantum of the Defence Costs incurred by LGFS be referred under Rule 28.61 for an inquiry and a report.
15. AHAC shall pay interest on the amount payable by it to LGFS in these proceedings and proceedings NSD 1073 of 2009 calculated at the rate specified in Regulation 32 of the Insurance Contracts Regulations 1985 (Cth): (a) in relation to defence costs, from the date those costs were paid by LGFS until the date of payment by AHAC; (b) in relation to the judgment in favour of Bathurst and against LGFS, from the date of payment of that judgment by LGFS to the date of payment by AHAC to LGFS.
16. The Fifth Cross Claim be dismissed.
17. Order that AHAC pay LGFS's costs of the Third Cross Claim and the Fifth Cross Claim to be taxed on an indemnity basis if not agreed. Second and Fourth Cross Claims
18. ABN's cross claim against S&P be dismissed.
19. S&P's cross claim against ABN be dismissed.
20. S&P and ABN are each to pay their own costs of the Second and Fourth Cross Claims. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1073 of 2009

BETWEEN: COOMA MONARO SHIRE COUNCIL ABN 19 204 741 100

AND: LOCAL GOVERNMENT FINANCIAL SERVICES PTY LTD ACN 001 681 741

JUDGE: JAGOT J DATE OF ORDER: 1 march 2013 WHERE MADE: SYDNEY

1. Judgment for the First Applicant (Cooma) against the first respondent (LGFS) in the sum of $1,866,451.67 plus pre judgment interest from 24 October 2008 calculated at the rate of 4% above the cash rate last published by the Reserve Bank of Australia as set out in Practice Note CM 16 - Pre-judgment interest (the Practice Note CM 16 rate).
2. Judgment for Cooma against the second respondent (ABN) in the sum of $622,150.56 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
3. Judgment for Cooma against the third respondent (S&P) in the sum of $622,150.56 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
4. Subject to orders 49 and 50 Cooma is not entitled to recover more than the amount of $1,866,451.67 plus pre judgment interest calculated at the Practice Note CM 16 rate in total from the Respondents.
5. Judgment for the Second Applicant (Corowa) against LGFS in the sum of $933,225.83 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
6. Judgment for Corowa against ABN in the sum of $311,075.28 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
7. Judgment for Corowa against S&P in the sum of $311,075.28 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
8. Subject to orders 49 and 50 Corowa is not entitled to recover more than the amount of $933,225.83 plus pre judgment interest calculated at the Practice Note CM 16 rate in total from the Respondents.
9. Judgment for the Third Applicant (Deniliquin) against LGFS in the sum of $466,612.92 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
10. Judgment for Deniliquin against ABN in the sum of $155,537.64 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
11. Judgment for Deniliquin against S&P in the sum of $155,537.64 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
12. Subject to orders 49 and 50 Deniliquin is not entitled to recover more than the amount of $466,612.92 plus pre judgment interest calculated at the Practice Note CM 16 rate in total from the Respondents.
13. Judgment for the Fourth Applicant (Eurobodalla) against LGFS in the sum of $466,612.92 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
14. Judgment for Eurobodalla against S&P in the sum of $155,537.64 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
15. Judgment for Eurobodalla against S&P in the sum of $155,537.64 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
16. Subject to orders 49 and 50 Eurobodalla is not entitled to recover more than the amount of $466,612.92 plus interest calculated at the Practice Note CM 16 rate in total from the Respondents.
17. Judgment for the Fifth Applicant (Moree) against LGFS in the sum of $1,866,451.67 plus pre judgment interest from 24 October 2008 calculated at Practice Note CM 16 rate.
18. Judgment for Moree against ABN in the sum of $622,150.56 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
19. Judgment for Moree against S&P in the sum of $622,150.56 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
20. Subject to orders 49 and 50 Moree is not entitled to recover more than the amount of $1,866,451.67 plus pre judgment interest calculated at the Practice Note CM 16 rate in total from the Respondents.
21. Judgment for the Sixth Applicant (Murray) against LGFS in the sum of $933,225.83 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
22. Judgment for Murray against ABN in the sum of $311,075.28 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
23. Judgment for Murray against S&P in the sum of $311,075.28 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
24. Subject to orders 49 and 50 Murray is not entitled to recover more than the amount of $933,225.83 plus pre judgment interest calculated at the Practice Note CM 16 rate in total from the Respondents.
25. Judgment for the Seventh Applicant (Narrandera) against LGFS in the sum of $1,866,451.67 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
26. Judgment for Narrandera against ABN in the sum of $622,150.56 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
27. Judgment for Narrandera against S&P in the sum of $622,150.56 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
28. Subject to orders 49 and 50 Narrandera is not entitled to recover more than the amount of $1,866,451.67 plus pre judgment calculated at the Practice Note CM 16 rate in total from the Respondents.
29. Judgment for the Eighth Applicant (Narromine) against LGFS in the sum of $466,612.92 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
30. Judgment for Narromine against ABN in the sum of $155,537.64 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
31. Judgment for Narromine against S&P in the sum of $155,537.64 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
32. Subject to orders 49 and 50 Narromine is not entitled to recover more than the amount of $466,612.92 plus pre judgment interest calculated at the Practice Note CM 16 rate in total from the Respondents.
33. Judgment for the Ninth Applicant (Oberon) against LGFS in the sum of $933,225.83 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
34. Judgment for Oberon against ABN in the sum of $311,075.28 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
35. Judgment for Oberon against S&P in the sum of $311,075.28 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
36. Subject to orders 49 and 50 Narromine is not entitled to recover more than the amount of $933,225.83 plus pre judgment interest calculated at the Practice Note CM 16 rate in total from the Respondents.
37. Judgment for the Tenth Applicant (Orange) against LGFS in the sum of $1,399,838.75 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
38. Judgment for Orange against ABN in the sum of $466,612.92 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
39. Judgment for Orange against S&P in the sum of $466,612.92 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
40. Subject to orders 49 and 50 Orange is not entitled to recover more than the amount of $1,399,838.75 plus pre judgment interest calculated at the Practice Note CM 16 rate in total from the Respondents.
41. Judgment for the Eleventh Applicant (Parkes) against LGFS in the sum of $2,799,677.05 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
42. Judgment for Parkes against ABN in the sum of $933,225.83 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
43. Judgment for Parkes against S&P in the sum of $933,225.83 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
44. Subject to orders 49 and 50 Orange is not entitled to recover more than the amount of $2,799,677.05 plus pre judgment interest calculated at the Practice Note CM 16 rate in total from the Respondents.
45. Judgment for the Twelfth Applicant (Ryde) against LGFS in the sum of $933,225.83 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
46. Judgment for Ryde against ABN in the sum of $311,075.38 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
47. Judgment for Ryde against S&P in the sum of $311,075.28 plus pre judgment interest from 24 October 2008 calculated at the Practice Note CM 16 rate.
48. Subject to orders 49 and 50 Ryde is not entitled to recover more than the amount of $933,225.83 plus pre judgment interest calculated at the Practice Note CM 16 rate in total from the Respondents.
49. Post judgment interest shall accrue on the judgment sums in paragraphs 1 to 47 from the date of this judgment to the date of payment calculated pursuant to Rule 39.06.
50. LGFS, ABN and S&P pay the applicants' costs of the claim. First Cross Claim
51. Declares that ABN and S&P are each liable to indemnify LGFS for 33⅓% of all payments made by LGFS to the applicants in respect to the judgments in favour of the Applicants against LGFS and the order in paragraph 50.
52. ABN and S&P pay LGFS's costs of the first cross claim. Third and Fifth Cross Claims
53. The Third and Fifth Cross Claims be dismissed.
54. Order that AHAC pay LGFS's costs of the Third Cross Claim and the Fifth Cross Claim to be taxed if not agreed. Second and Fourth Cross Claims
55. ABN's cross claim against S&P be dismissed.
56. S&P's cross claim against ABN be dismissed.
57. S&P and ABN are each to pay their own costs of the Second and Fourth Cross Claims. Lump sum costs application
58. The Applicants are to file and serve any application for the making of a costs order in a specific sum by 8 March 2013.
59. Any such application is listed for directions before Jagot J at 9.30am on 12 March 2013. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1268 of 2010

AND: LOCAL GOVERNMENT FINANCIAL SERVICES PTY LTD ACN 001 681 741

JUDGE: JAGOT J DATE OF ORDER: 1 March 2013 WHERE MADE: SYDNEY

1. Judgment for the Cross Claimant on the First Cross Claim (LGFS) against the First Cross Respondent to the First Cross Claim (ABN AMRO) in the sum of $1,058,333.33 plus pre judgment interest from 21 September 2011 calculated at the rate of 4% above the cash rate last published by the Reserve Bank of Australia as set out in Practice Note CM 16 - Pre-judgment interest (the Practice Note CM 16 rate).
2. Judgment for LGFS against the Second Cross Respondent to the First Cross Claim (S&P) in the sum of $1,058,333.33 plus pre judgment interest from 21 September 2011 calculated at the Practice Note CM 16 rate. 3. Post judgment interest shall accrue on the judgment sums in paragraphs 1 and 2 from the date of this judgment to the date of payment calculated pursuant to Rule 39.06. 4. ABN and S&P to pay LGFS's costs of the First Cross-Claim to be taxed if not agreed. Third and Fifth Cross Claims 5. Declares that the Cross Defendant to the Third Cross Claim (AHAC) is liable to indemnify LGFS in respect to the settlement sum paid by LGFS to Statecover and LGFS's reasonable and necessary, fees, costs and expenses resulting solely from the investigation, adjustment and defence of these proceedings (less those costs already paid by AHAC) provided that: (a) insofar as the amounts payable under paragraphs 1 to 4 are paid to LGFS, LGFS is not entitled to recover the amounts so paid from AHAC; (b) LGFS to pay to AHAC a deductible of $100,000; (c) the total amount recoverable by LGFS from AHAC in NSD936 of 2009, NSD 1073 of 0209 and these proceedings, excluding interest under s.57 of the Insurance Contracts Act 1985 (Cth) and LGFS's costs of the proceedings which AHAC is ordered to pay, shall not exceed $20,000,000 being the sum insured. 6. Order that the question of the quantum of LGFS's reasonable and necessary, fees, costs and expenses incurred with the written consent of AHAC resulting solely from the investigation, adjustment, defence of these proceedings be referred under Rule 28.61 for an inquiry and a report. 7. AHAC shall pay interest on the amount payable by it to LGFS calculated at the rate specified in Regulation 32 of the Insurance Contracts Regulations 1985 (Cth): (a) in relation to defence costs, from the date those costs were paid by LGFS until the date of payment by AHAC; (b) in relation to the settlement sum from 21 September 2011 until the date of payment. 8. The Fifth Cross Claim be dismissed. 9. Order that AHAC pay LGFS's costs of the Third Cross Claim and the Fifth Cross Claim to be taxed if not agreed. Second and Fourth Cross Claims 10. ABN's cross claim against S&P be dismissed. 11. S&P's cross claim against ABN be dismissed. 12. S&P and ABN are each to pay their own costs of the Second and Fourth Cross Claims. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 936 of 2009

AND: LOCAL GOVERNMENT FINANCIAL SERVICES PTY LTD ACN 001 681 741

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1073 of 2009

BETWEEN: COOMA MONARO SHIRE COUNCIL ABN 19 204 741 100

AND: LOCAL GOVERNMENT FINANCIAL SERVICES PTY LTD ACN 001 681 741

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1268 of 2010

AND: LOCAL GOVERNMENT FINANCIAL SERVICES PTY LTD ACN 001 681 741

JUDGE: JAGOT J DATE: 1 MARCH 2013 PLACE: SYDNEY

REMAINING ISSUES 1 To resolve the orders which should be made consequential upon the publication of my principal reasons for judgment (Bathurst Regional Council v Local Government Financial Services Pty Ltd (No 5) [2012] FCA 1200 it is necessary to determine the remaining issues between the parties which are as follows: (1) whether the liability of LGFS to the councils for breach of fiduciary duty is apportionable in any way; (2) whether the councils and LGFS are entitled to pre-judgment interest and, if so, at what rate; (3) should the PA councils obtain an order for indemnity costs against LGFS in respect of the breach of fiduciary duty claims by reason of an offer to settle the proceedings; (4) should LGFS obtain an order for indemnity costs against AHAC; (5) should directions be made for the hearing of a foreshadowed application by the PA councils for a costs order in a specific sum; and (6) is there a typographical error in [2376] of the principal reasons for judgment. 2 Abbreviations used in these reasons for judgment have the same meaning as set out in the principal reasons for judgment.

LGFS's LIABILITY 3 In the principal reasons for judgment I found that LGFS breached its fiduciary duty to the councils. I also found that the councils' claims for equitable compensation from LGFS for breach of fiduciary duty were not apportionable as between LGFS, S&P and ABN Amro. 4 LGFS submitted that, nevertheless, it should have an indemnity from S&P and ABN Amro for that liability reduced by one third due to LGFS's contributory negligence or, alternatively, that because orders have not been entered I should reconsider the issue and find the liability apportionable. AHAC supported LGFS's submission except that according to AHAC, LGFS's concession that its indemnity should be reduced by one-third was misconceived. 5 First, I do not accept that it is appropriate to re-consider the conclusion I reached that the liability of LGFS for breach of fiduciary duty is not apportionable. As S&P submitted it is open to LGFS to appeal against this conclusion but it is not open to LGFS to seek to re-argue the issue before me. 6 Secondly, I do not accept that LGFS is entitled to claim any indemnity from S&P and ABN Amro in respect of LGFS's liability to the councils for breach of fiduciary duty. Leaving aside the arguments put by S&P and ABN Amro that no such claim was pleaded or even argued against them I consider LGFS's arguments and those of AHAC in support unpersuasive. To the extent that it is said that causation has already been established by my principal reasons for judgment, I must disagree. I rejected the argument that LGFS's negligence severed the chain of causation between the conduct of S&P and ABN Amro and the loss suffered by LGFS in terms of its liability to the councils but I did not find any causal relationship between LGFS's breach of fiduciary duty and that loss. The conduct of S&P and ABN Amro was a circumstance without which LGFS's breach of fiduciary duty could not have occurred, but this does not constitute their conduct as a material cause of LGFS's breach. As S&P submitted in circumstances where the breach of fiduciary duty was caused by LGFS alone during its dealings with the councils and as a result of a duty which LGFS alone owed to the councils, how can it be said that the requirement of causation for loss suffered as a result of that breach of duty is somehow attributable to S&P and ABN AMRO. 7 Thirdly, in response to LGFS's argument that a declaration should be made as to the respective portions that each of LGFS, ABN Amro and S&P will be required to pay for the purpose of avoiding a future dispute it is again sufficient to adopt S&P's submissions. As S&P put it the claim for a declaration is based upon pure conjecture about what might happen in the future because LGFS has not paid the full judgment amount. Moreover all parties agree that the orders must not permit any party with a right to recovery to obtain more than the total amount owed to that party.

PRE-JUDGMENT INTEREST 8 Section 51A of the Federal Court of Australia Act 1976 (Cth), insofar as relevant, is in these terms: (1) In any proceedings for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either: (a) order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or (b) without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest. … (3) Where the sum for which judgment is given (in this subsection referred to as the relevant sum) includes, or where the Court in its absolute discretion, or a Judge in that Judge's absolute discretion, determines that the relevant sum includes, any amount for: (a) compensation in respect of liabilities incurred which do not carry interest as against the person claiming interest or claiming a sum in lieu of interest; (b) compensation for loss or damage to be incurred or suffered after the date on which judgment is given; or (c) exemplary or punitive damages; interest, or a sum in lieu of interest, shall not be given under subsection (1) in respect of any such amount or in respect of so much of the relevant sum as in the opinion of the Court or the Judge represents any such amount. (4) Subsection (3) shall not be taken to preclude interest or a sum in lieu of interest being given, pursuant to this section, upon compensation in respect of a liability of the kind referred to in paragraph (3)(a) where that liability has been met by the applicant, as from the date upon which that liability was so met. 9 Practice Note CM 16 - Pre-judgment Interest is as follows: 1. Section 51A(1)(a) of the Federal Court of Australia Act 1976 (Cth) provides for the making of orders for the inclusion of interest in judgments. 2. Practitioners and litigants should expect that where, pursuant to section 51A(1)(a), interest in respect of a pre-judgment period is to be included in a judgment, the Court will have regard to the following rates, being rates agreed upon by the Discount and Interest Rate Harmonisation Committee established following a referral by the Council of Chief Justices of Australia and New Zealand: (a) in respect of the period from 1 January to 30 June in any year - the rate that is 4% above the cash rate last published by the Reserve Bank of Australia before that period commenced, and (b) in respect of the period from 1 July to 31 December in any year - the rate that is 4% above the cash rate last published by the Reserve Bank of Australia before that period commenced. 10 S&P submitted that the councils and LGFS should not be awarded pre-judgment interest as, in effect, they had not proved any profit they might have made or loss suffered by reason of being kept out of their money (citing, in support, Riches v Westminster Bank Ltd [1947] AC 390 at 400). S&P also said that it is not the case that "good reason" must be shown before an award of interest is declined, citing Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003] VSC 244 at [45]. Gillard J in this case in fact said at [45]: The phrase "unless good cause is shown to the contrary" qualifies the obligation of the court to grant an award of damages in the nature of interest and indeed, in a rare case, the court could refuse to allow interest at all or allow interest on terms which are less onerous to the judgment debtor than those prescribed by the subsection, namely, the date of commencement of the period for interest. On the other hand, the determination of the appropriate rate of interest is a question of discretion for the court and does not depend upon establishing good cause to the contrary. These propositions are supported by what the Full Court said in Clarke's case, above [Clarke v Foodland Stores Pty Ltd [1993] 2 VR 382]. 11 ABN Amro, for its part, submitted that the councils and LGFs should not be awarded interest at the rate in Practice Note CM 16. First, in the principal reasons for judgment at [2860] I had found how the councils would have invested their funds if they had not invested in the Rembrandt CPDO notes and the rate of interest the councils would have earned from such investments was far less than the rate specified in Practice Note CM 16 (being about 36 bps over BBSW for Cooma and 20 bps over BBSW for the other councils compared to 400 bps over BBSW under Practice Note CM 16). Second, even under the Rembrandt CPDO notes themselves the councils and LGFS were entitled to interest at the rate of only 190 bps over BBSW. S&P adopted ABN Amro's submissions in the alternative if its own position of no pre-judgment interest were rejected. 12 In Management 3 Group Pty Ltd (in liq) v Lenny's Commercial Kitchens Pty Ltd (No 2) (2012) 289 ALR 275; [2012] FCAFC 92 the Full Court at [25] said: Pre-judgment interest is awarded to compensate an applicant for being kept out of the applicant's money by the respondent's refusal to pay that which the court at trial orders to be paid, and not to punish the respondent for the respondent's refusal to pay: Batchelor v Burke (1981) 148 CLR 448 at 455; 35 ALR 15 at 19 (Batchelor) per Gibbs CJ; Thompson v Faraonio (1979) 24 ALR 1 at 7. The rate at which interest is payable is the subject of the court's discretion under s 51A(1)(a): Kazar [Kazar v Kargarian (2011) 197 FCR 113; [2011] FCAFC 136] at [97]. Because the award of pre-judgment interest is intended to be compensatory, the interest rates provided for in the Penalty Interest Rate Act have no application. The proper rate of interest to be applied should be the rate prevailing from time to time in the market place which would represent the cost of the money to a successful applicant. The court has suggested in Practice Note CM16 that that rate is 4% above the cash rate fixed by the Reserve Bank. In our opinion that rate is a rough and ready guide of the prevailing interest rate at any given time and should be applied in relation to pre-judgment interest on any award which has been calculated as at the date that the cause of action arose. 13 The rate in Practice Note CM 16 is a "rough and ready guide" but it is a guide nonetheless, published by the court as to what parties should expect the court will have regard to in respect of pre-judgment interest. In the present case I do not accept the submissions of S&P or ABN Amro. The findings at [2860] have to be read in context. My primary finding was that but for the unlawful conduct of S&P and ABN Amro the councils and LGFS would not have invested in the CPDO notes at all. Insofar as the councils are concerned, I found that it was unnecessary for them to prove what might have happened in the "alternative universe" of them not investing in the CPDO notes (an argument S&P and ABN Amro put against the councils). I also found that the notion that there had to be some alternative investment the councils would have made was itself misconceived because they might not have made any investment (at [2859]). That is, the councils might have spent the money on performing their primary functions of public services rather than investing the money either at all or at some time in the 10 year term of the CPDO notes. The findings I made at [2860] are alternative findings assuming my primary findings are wrong. Even on that basis, they are findings about nothing more than what the evidence established the councils would most likely have done had they chosen to invest at all as at the date they invested in the CPDO notes. As the evidence also disclosed, most council investments were for terms far less than 10 years. I made no alternative finding, and could not have done so, about what the councils most likely would have done with their funds after the initial investment that I am satisfied they most likely would have made assuming they made any investment at all. 14 For these reasons the councils and LGFS are in an equivalent position in terms of my findings. They would not have invested in the CPDO notes and would not have lost their money but for the unlawful conduct of S&P and ABN Amro. Hence, they would have had the use of those funds for the period from investment onwards. Beyond that, the next step in the reasoning process involves hypothesis for the councils not a finding (that is, the hypothesis the councils might have invested rather than spent the money) and neither hypothesis nor finding for LGFS. But I do not accept this means that the councils and LGFS are not entitled to pre-judgment interest to compensate them for the loss of their money. They will have been kept out of their money from the date of cash-out until the date orders are made. On the date of cash-out they lost their principal and their future interest. It is the purpose of pre-judgment interest to compensate them for that loss. They did not need to prove a profit they otherwise would have made. The compensatory purpose extends to the loss of the use of the money they otherwise would have had. That is sufficient to enliven the compensatory purpose unless good cause is shown to the contrary. No good cause is shown. It is just that the councils and LGFS be awarded pre-judgment interest, the relevant starting date, however, being the date of cash-out rather than the date of initial investment. Confining the period of pre-judgment interest in this way is appropriate because the councils and LGFS were out of their money from that date onwards. 15 In terms of the rate, I can see no reason to depart from the expectation established by Practice Note CM 16. As to the other investments made by the councils, as noted, they tended to be over relatively short periods which would have attracted lower rates of interest than an investment over 10 years such as the CPDO notes. Moreover, the councils and LGFS have now been out of their money since the cash-out date which is agreed to have occurred on 24 October 2008. Further, the CPDO notes offered interest over the full period of BBSW plus 190 bps so LGFS and the councils would have had the use of the interest at that rate for over four years which they have been denied. In these circumstances, the "rough and ready guide" afforded by Practice Note CM 16 should be applied.

PA COuncils - INDEMNITY COSTS 16 The claim for indemnity costs is based on a letter of offer dated 5 December 2011. There are a number of reasons why this claim deserves short-shrift. The letter is to LGFS, S&P and ABN Amro. It did not make an offer capable of acceptance by any one party without consultation and agreement as to contribution having been reached with the other parties. This is recognised in the letter by the reference to the prospect of confidentiality over the contribution of each party to the proposed 85% settlement. Accordingly, LGFS could not have simply discharged its liability to the councils by acceptance of the offer. Also, LGFS itself had claims against S&P and ABN Amro making its position complicated. The claim for indemnity costs is based solely on the success of the councils on the fiduciary duty claims where there is some basis for saying that the councils achieved a better result against LGFS than the offer (100% compared to 85%). But the offer related to all claims against LGFS and LGFS succeeded in establishing proportionate liability against S&P and ABN Amro as to two thirds of the councils' claims on all other grounds. To add to the complexity, the letter requested a response within one day. In all of these circumstances it cannot be said that LGFS's conduct in not accepting the offer was unreasonable in any way, irrespective of the stage which the proceedings had reached as at 5 December 2012. The offer was not cast in terms reasonably capable of acceptance. 17 For these reasons there is no proper basis for an order for indemnity costs against LGFS.

LGFS - INDEMNITY COSTS AGAINST AHAC 18 LGFS claims indemnity costs against AHAC because AHAC's defence of LGFS's claim for indemnity under the contract of insurance was "hopeless" and AHAC wasted time and money in making unjustified attacks on the credit of LGFS and its officers which were doomed to fail. 19 LGFS's submissions are based on hindsight having regard to the findings I made rejecting AHAC's case against LGFS. AHAC's conduct of the litigation was within the bounds of ordinary forensic decisions, made on the basis of the available information about which reasonable minds could have differed, albeit ultimately unsuccessful on all grounds. To describe AHAC's case as hopeless or doomed is nothing more than hindsight. To describe AHAC's conduct as delinquent in any way is not reasonably open. AHAC had the right to put its case and, in accordance with the directions which were made to avoid duplication, did so with a reasonable level of efficiency. There is simply nothing which founds LGFS's application for indemnity costs in the circumstances.

COSTS QUANTIFICATION 20 The PA councils wish to make an application for me to determine costs in a specific sum rather than requiring the parties to prepare bills of costs and be subjected to the processes of taxation which can be costly in and of themselves. LGFS wants to be heard as to whether this is appropriate and ABN Amro submitted that if any such application was to made it should have been made and heard on the date fixed for argument about final orders. 21 I do not consider that it was unreasonable for the councils to await the making of final orders before making their application. I also understand why LGFS might wish to be heard about whether embarking upon the preparation of evidence necessary for the determination of a lump sum costs order is appropriate. I propose to make directions to enable LGFS, and any other party who wishes, to be heard. Accordingly, it is premature to make directions for evidence and the fixing of a hearing date of the PA councils foreshadowed application as they sought.

[2376] of the principal reasons for judgment 22 There is a typographical error in this paragraph. The word "and" in the first line of [2376] should be read as "that".

CONCLUSIONS AND ORDERS 23 For the reasons set out above: (1) the liability of LGFS to the councils for breach of fiduciary duty is not apportionable in any way and S&P and ABN Amro are not liable to indemnify LGFS for that liability; (2) the councils and LGFS are entitled to pre-judgment interest at the rate identified in Practice Note CM 16; (3) the PA councils should not obtain an order for indemnity costs against LGFS in respect of the breach of fiduciary duty claims by reason of their offer to settle the proceedings; (4) LGFS should not obtain an order for indemnity costs against AHAC; (5) directions should be made for the hearing of a foreshadowed application by the PA councils for a quantified costs order; and (6) there a typographical error in [2376] of the principal reasons for judgment in that the word "and" in the first line of [2376] should be read as "that". 24 Orders will be made in accordance with the principal reasons for judgment and on the basis of the additional matters set out above. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot.