Berry v CCL Secure Pty Ltd

Securency's submissions 13 Securency argued that it was unreasonable for Dr Berry and GSC to have delayed in bringing the proceedings after he appreciated, as his letter of 29 September 2009 demonstrated, that Securency had, in effect, sidelined him from, or acting, as its recognised agent in Nigeria and it had not paid him or GSC any commission since about the end of 2007. It argued that, moreover, Dr Berry and GSC had delayed 4 years before commencing the proceeding, only shortly before the six year limitation period (other than for fraud) would have expired in February 2014, before bringing claims under the agency agreement to set aside the effect of the letter of 24 February 2008 and to enforce their rights. Securency submitted that this delay had exposed it to liability to pay interest potentially at a significant rate over or in respect of all or part of the four year period. Securency agreed that Dr Berry had not explained why he had not commenced the proceeding earlier despite having been given an opportunity by the 22 June 2018 orders to give an explanation. It argued that Dr Berry and GSC had been dilatory and delayed unreasonably in commencing the proceeding and that it would cause injustice to Securency were it to have to pay interest at either rate above zero for the four year period to December 2013.

Consideration 14 The fundamental principle in considering whether, and in what amount to award, or to modify the usual exercise of the Court's discretion to award, pre-judgment interest pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth), and its analogues, for the full period between the accrual of the cause of action and the date of judgment, is that, whatever award is made, it should be just as between the parties and should compensate the plaintiff (or applicant) for being kept out of his, her or its adjudged entitlement to monetary relief. Thus, courts have made orders that take into account periods of delay by a plaintiff (or applicant) in commencing proceedings that otherwise would work injustice to a defendant (or respondent) if the usual rate of pre-judgment interest were applied inflexibly. 15 In Kalls Enterprises Pty Ltd (in liq) v Baloglow (No 3) [2007] NSWCA 298 at [10]-[12], Giles, Ipp and Basten JJA said that, ordinarily, the delay is not a reason for refusing or reducing the inclusion of interest. They recognised that the purpose of provisions such as s 51A is to compensate the plaintiff (or applicant) from being kept out of his, her or its money. They said that the question was one of injustice to the defendant and that if the interest rates used by the plaintiff exceeded commercial interest rates (although such rates were an imprecise criterion), the plaintiff's self-inflicted loss of use of money (caused by the delay in commencing proceeding) may unfairly impose a burden on the defendant. However, they said at [12]: "[u]nreasonable failure needed to be positively demonstrated, and it was not". 16 Their Honours cited, at [16], what Mason P (with whom Beazley JA and Ipp AJA agreed) had said in Heydon v NRMA Limited (No 2) (2001) 53 NSWLR 600 at 609 [32] namely that, in the Supreme Court of New South Wales: the practice is to award restitutionary interest at the rates payable on judgments unless special circumstances exist… (citations omitted) 17 Importantly, in Haines v Bendall (1991) 172 CLR 60 at 66-67, Mason CJ, Dawson, Toohey and Gaudron JJ held that the award of interest is an integral element in the attainment of the object of damages, namely to compensate a plaintiff for injury sustained. Hence, the award of interest is compensatory in character. Their Honours said: the award of interest is nevertheless an essential element in the achievement of true compensation for that damage. In Thompson v. Faraonio [(1979) 54 ALJR 231 at 233; 24 ALR 1 at 7] , the Privy Council stated that "[t]he reason for awarding interest is to compensate the plaintiff for having been kept out of money which theoretically was due to him at the date of his accident"… (italic emphasis in original) 18 However, their Honours held that the wide discretion conferred by provisions such as s 51A must be exercised in accordance with legal principle conformably with the cause of action on which the plaintiff (or applicant) recovers (172 CLR at 66-67). 19 Here, the reason that I found that Dr Berry and GSC are entitled to the judgment sum, that represents unpaid commission for 10 years amounting to nearly AUD50 million, is that Securency could not rely on its fraud, or seek to eschew its effect based on any hypotheses of how, had it not so engaged, it would or might have acted to terminate the agency agreement well before 2018: Berry [2017] FCA 1546 at [322]. Thus, their entitlement to commission had continued to accrue for that period during which Dr Berry and GSC had done little or nothing to further the purposes of the agency. However, Securency had benefited because it had not paid any commission to Dr Berry and GSC, notwithstanding that, in substance, it was their work that had put Securency in the position where it could, and did, earn very large sums of money from sales of its products and the exploitation of its intellectual property to the Nigerian government. 20 The injury that Dr Berry and GSC sustained was the fraudulent procurement of the termination letter that led to them receiving no commission payments until after I decided the parties' rights and liabilities. That meant that they were kept out of receiving commission over the lengthy ten year period as and when it was due. Were I to accept Securency's argument, its non-payment of commission should attract a lesser rate of interest for six of those ten years by leaving out of account some of the interest that would have been due in respect of the four year period to December 2013, immediately before action brought. 21 In a real sense, Securency's ability to earn money from the sales of its product to Nigeria was created by and due to the efforts of Dr Berry for which the agency agreement contemplated he and GSC would earn commission. That right to commission arose, and continued by reason of, the operation of the mechanism of the agency agreement's automatic renewal each two years, unless one party exercised a right to terminate it under one of the various provisions for termination (see [2017] FCA 1546 at [93]). 22 Securency never revisited the question of terminating the agency agreement until it sent the 13 March 2018 letter doing so. Instead, it made a decision early in the proceeding to plead in its defence, and argue, that it would have done so, had it not procured the 24 February 2008 letter which, as I found, was obtained by its fraud. That conduct indicated a conscious decision on Securency's part not to formally terminate the agency agreement earlier either under cl 2.6(a) as it later did, or under cl 3.2, to guard against the event that Dr Berry and GSC might succeed in their claim at the trial (see Berry [2017] FCA 1546). 23 Securency persisted in maintaining the legal efficacy of the termination letter of 24 February 2008, despite its commercial incongruity, as I found, and Mr Chapman's dishonest conduct. Securency maintained that stance even after Mr Chapman's convictions in May 2016 became public knowledge. As I held, the policy of the law is that a person in Securency's position cannot take advantage of his, her or its own wrongdoing: Gnych v Polish Club Ltd (2015) 255 CLR 414 at 426-427 [45] per French CJ, Kiefel, Keane and Nettle JJ; Berry [2017] FCA 1546 at [319]-[322]. 24 As I found, Securency remained bound by the agency agreement to pay commission to Dr Berry and GSC as and when it was earned. Because of Securency's wrong, Dr Berry and GSC ceased to be in a position to send Securency any statements within ten business days of the end of the month, making a relevant claim to commission on sales in the preceding period under cl 8.4 of the agency agreement. However, cl 8.5 required that Securency pay commission within 20 business days after it received such a statement. Securency, by its wrongful conduct deprived Dr Berry and GSC the use of money generated by their entitlement to be paid commission for the whole ten year period. 25 I do not consider that Dr Berry and GSC are disentitled to the ordinary right to interest over the four year period to December 2013. That sum should be quantified by taking account of the fact that Dr Berry and GSC's loss of use of the money should be treated as a loss occurring in England (as the parties had agreed) using the UK rate. 26 In my opinion, Dr Berry was entitled to wait until sometime close to when he did, before commencing this proceeding. The onus was on Securency to establish that it was unreasonable of Dr Berry and GSC not to have commenced earlier. In my opinion, on the evidence before me from the trial and now, albeit without particular dates for the events being fixed, Dr Berry knew that the Serious Fraud Office was investigating him as a suspect from when it had raided his house, taking documents and computers from it. Ultimately the Serious Fraud Office had to restore the seized property and pay Dr Berry's costs. Moreover, some of the evidence at the trial consisted of documents that, at least, had passed through the Serious Fraud Office's hands, being marked with their identifiers. It is not unreasonable for a person who, in Dr Berry's position, might have been at risk of criminal proceedings, albeit that there was no evidence that he, was or could have been, implicated in any wrongdoings of the kind alleged against others who were agents or employees of Securency, including Mr Chapman. 27 I am not satisfied that Securency has demonstrated any unreasonableness in Dr Berry and GSC's delay in commencing this proceeding, unfortunate as it was both for Securency and for the overall administration of justice: Kalls [2007] NSWCA 298 at [12]. Nor am I satisfied that a diminution in the UK rate uplifted by 4% on the Australian dollar principal judgment sum would compensate Dr Berry and GSC properly in accordance with principle at a fair level of compensation: Haines 172 CLR at 66-67.

Conclusion 28 For these reasons, in my opinion, the appropriate order is that I should enter judgment in favour of Dr Berry and GSC in the principal sum together with pre-judgment interest in the further sum calculated at the UK rate plus 4%. That will produce a total judgment, including pre-judgment interest, of AUD 64,813,227.14. I certify that the preceding twenty-eight (28) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.