Fried v National Australia Bank Limited [2001] FCA 1280 | Case summary

REASONS FOR JUDGMENT 1 On 17 July 2001 I published reasons for judgment in this proceeding. At the conclusion of those reasons I said: "For the above reasons, I am of the view that judgment should be entered for Evatab Investments Pty Ltd against Bendigo Bank in the sum of $4,300,000, being the total of the amounts wrongly debited to the B101 account as a result of transactions A4, A5, B3, B4, A6 and A7. I have found that the withdrawal in transaction B5 was authorised, so no obligation falls on Bendigo Bank to reinstate any balance in the term deposit account. Evatab Investments Pty Ltd also claims interest. In my view, it is appropriate that interest on the amounts wrongfully debited be calculated at the rate applicable from time to time to an account of the kind that the B101 account was, namely, an 11 am at call account. This is a calculation on which the parties ought to be able to agree. I therefore propose to order that, on a specified date, the parties bring in minutes of orders reflecting these reasons for judgment. The proceeding will be listed for further hearing on that date, when I shall consider the terms of the final order I make. On that date, I shall also expect that the parties will make submissions on the question of costs. This will be a difficult question. One of the applicants has succeeded in part in its claim against one respondent, a claim made relatively late in the interlocutory stages of the proceeding. It has succeeded after a lengthy trial, a good part of which was occupied by opening addresses and evidence in relation to claims and cross-claims involving other parties, which were settled." 2 I appointed today as the date on which I would list the matter for further hearing to deal with those three matters: interest, the terms of the final order and costs. Regrettably, there was initially no agreement between the parties about any matter. Indeed both sides sought to extend what had been a hard fought trial into today. Both made contentions outside the ambit of my reasons for judgment as to what should be done in relation to interest. The fifth applicant, Evatab Investments Pty Ltd, contended for a higher rate. The eleventh respondent, Bendigo Bank Ltd, contended for a partial award of interest. These were matters which I had not expected to have argued. 3 The view that I formed, and that underlay what I said in my reasons for judgment on 17 July 2001, was that the fifth applicant ought to be compensated for being out of the use of its money from the time when the unauthorised withdrawals occurred until the time of judgment. Proper compensation for being out of its money during that period seemed to me to be the interest that it would have received had the money remained in a bank account of the type that it was in when the unauthorised withdrawals were made. I am not persuaded by any of the arguments on behalf of the fifth applicant that I ought to depart from that view. 4 I am not persuaded that the penalty interest rate in the relevant Victorian legislation is an appropriate level of compensation for the fifth applicant for being deprived of the use of its money. It has never been part of my intention to treat the fifth applicant as being a higher risk taker in its investment than it was when it left a large sum of money sitting in an 11 am at call account with the eleventh respondent. This is particularly the case when the matter is viewed retrospectively. I am invited to award a higher rate of interest when there is no risk attached to the investment because the circumstances have been determined in my reasons for judgment. Nor am I of the view that I should discount in any way the compensation by way of interest that I proposed to give. As I have said, what I intended was compensation for loss of use of the money during the entire period. 5 Although s 51A(2)(a) of the Federal Court of Australia Act 1976 (Cth) prohibits the awarding of interest on interest, it seems to me that s 51A(2)(b) permits me to award interest on the debt when the rate was fixed by the contract between the parties, even if that rate involves compound interest. The rate was so fixed as the governing rate for an 11 am at call account. In my view there ought not to be a change in the means of fixing the rate of interest simply because in October 1998 the relevant bank account was closed and the remaining funds were withdrawn. Since the intention is to compensate the fifth applicant at the appropriate rate for being out of its money for the entire period of time, it is appropriate to adopt the continuing rates of interest applicable from time to time to an account of the kind in which the money was originally held. 6 During the luncheon adjournment, the representatives of the parties have agreed on the calculation of interest on that basis. The agreed sum is $1,151,998.39. I propose to include that amount in the order that I pronounce. 7 The question of costs, while left open in my reasons for judgment of 17 July 2001, has also proved more difficult. There have been three issues argued - two of them relatively minor, the third major. 8 The first issue is as to the costs of the application which was made to join Bendigo Bank Ltd as the eleventh respondent. That application was made pursuant to a notice of motion filed on 4 May 1999. It was resisted by Bendigo Bank Ltd. The application of the applicants was successful. They have now succeeded to a very considerable extent against what became the eleventh respondent. Counsel for the eleventh respondent was unable to resist an order that the eleventh respondent pay the applicants' costs of that application to join his client as a party. 9 The other minor issue concerned the costs of today. I indicated to counsel that I did not think there should be any order as to the costs of today. Both parties have sought to make more of today than they should have, in some cases by attempting to reopen issues determined in the reasons for judgment of 17 July 2001, in other cases by making what I regard as extravagant claims, particularly on the part of the fifth applicant in relation to interest. I remain of the view that there should be no order as to the costs of today. 10 The major issue is how to deal with the costs of the proceeding generally. Each side sought an order for costs, at least in relation to part or parts of the proceeding in its favour. I was pressed with authorities containing the general principles relating to costs. I do not think it necessary to deal with those in great detail. The usual rule, of course, is that costs follow the event, ie that a successful party should be entitled to recover costs of the proceeding from the unsuccessful party. There is a recognition, however, that in exceptional circumstances the Court may depart from the usual rule and in its discretion may make a different order for costs. In my view, the circumstances of this case are exceptional and require a departure from the usual rule. 11 This was a very large case involving a large number of parties, several cross-claims and many issues. In the result, all but a relatively small number of issues that lay between the fifth applicant and the eleventh respondent had been settled by 17 November 2000, part way through the trial. All of the cross-claims had been settled by that time and the applicants had settled all of their claims against the National Australia Bank, the first respondent. The multitude of issues that had been apparent on the pleadings had been largely refined by 17 November 2000. The case thereafter proceeded on a fairly narrow basis, as one of wrongful debiting of the bank account by the eleventh respondent, with a range of defences on which the eleventh respondent relied and on all of which, as I held in my reasons for judgment of 17 July 2001, it failed. 12 With respect to the earlier part of the trial, in my view it is impossible to segregate particular issues as being solely related or even mainly related to the ultimate aspects of the case. The eleventh respondent was involved in many of the same issues as were settled between the applicants and the first respondent. The applicants other than the fifth applicant were or claimed to be interested in many of those issues as well. After 17 November the applicants also abandoned a number of the issues that they had previously raised against the eleventh respondent. To analyse the case on the basis of what issues were fought and not fought and what issues were won and lost by the respective remaining parties is in my view a difficult and fruitless task. 13 There is also the factor that the trial originally began in May 2000 before Weinberg J. After approximately three weeks, his Honour was forced to disqualify himself because indications were given that someone with whom he had a professional relationship would be likely to give evidence and, even if he did not give evidence, would be likely to be the subject of findings. The part that that person played in the events that led to this case was not made clear until the trial before Weinberg J was under way. It is still not made clear at this time, perhaps because of the settlement of the applicants' claims against the first respondent and perhaps for other reasons. When he delivered judgment saying that it was necessary to disqualify himself, Weinberg J reserved the costs of the aborted trial. He could not decide at that stage who should pay them. I am certainly not in a better position than his Honour was at that time; indeed I consider myself to be in a worse position than his Honour was to determine who should pay those costs. The controversy about whether the particular person should have been called, by whom he should have been called and what findings might have been made, either on his evidence or without his evidence, has vanished. He was never called during the trial before me. I am simply not in a position to decide whether fault attached to either side or to one of the former parties in relation to the abortion of the first trial. 14 As I said in my reasons for judgment of 17 July 2001, this is a case in which one only of several applicants has succeeded in part of its claim against one only of a number of respondents. The claim was made relatively late in the interlocutory stages of the proceeding. No applicant other than the fifth applicant succeeded in any claim against the eleventh respondent. The fifth applicant failed on one major issue against the eleventh respondent. The settlements between the applicants and other respondents were settlements for global sums. Against the surviving former partners of the firm Aroni Colman the applicants obtained consent to enter judgment for $11,000,000. The settlement with the first respondent was for a global sum of $6,000,000. It was specifically related by agreement between those parties to two transactions involving the withdrawal of moneys. It exceeded by a considerable amount the principal sums involved in those two transactions. An attempt was made to argue that the appropriate amount of interest could be calculated retrospectively, although it was not agreed at the time, and that therefore the amount applicable to costs must be known. I reject that attempt. It does not seem to me to be possible now to calculate what amount the parties might have intended, if they did form any intention, should have gone to interest. 15 Taking into account all of these matters and looking at the proceeding on a global basis, in my view the fairest assessment that can be made is that there should be no order as to costs for any party up to 21 November 2000. 16 By that date a significant change had occurred. By a letter dated 17 November 2000, the solicitors for the applicants offered to accept the sum of $2,000,000 in full settlement of the outstanding claims against the eleventh respondent. By its terms, the letter left the offer open for acceptance until 21 November 2000. On that date the solicitors then acting for the eleventh respondent rejected the offer. They did so in high-handed language, describing the applicants' claims as an abuse of process. 17 As a consequence, counsel for the fifth applicant now says that the fifth applicant should be entitled to its costs on an indemnity basis on and after 21 November 2000 in accordance with the principles in Calderbank v Calderbank [1976] Fam 93 at 105 - 106 as developed in subsequent cases. The issue that arises, therefore, is whether it was unreasonable for the eleventh respondent to reject the offer that was made. The question of the reasonableness of the rejection must be determined on the facts as they were known at the time but with the benefit of hindsight as to the ultimate result. The ultimate result of the case certainly makes it appear that the rejection of the offer was grossly unreasonable. The fifth applicant is to recover more than twice the sum which it was prepared to accept, plus interest, against the eleventh respondent. 18 That does not conclude the matter. Counsel for the eleventh respondent has suggested that it was only after 21 November that the issues in the case evolved to the form in which I pronounced upon them in my reasons for judgment of 17 July 2001. That is an argument that I do not accept. It is true that there was a late amendment to the statement of claim in the course of addresses. The amendment was a formality. It certainly did not take anybody by surprise. It merely brought the pleadings into line with the case as the evidence had disclosed it and as it was well understood by all concerned by 21 November 2000. 19 Counsel for the eleventh respondent also relied on evidence of the circumstances as they existed at the time when the offer was rejected. At that time, the eleventh respondent believed that it had a sound insurance policy with an insurance company. The proceeding was apparently being defended on the basis of instructions received from that insurance company. The offer was rejected on the decision of the insurance company, apparently without being communicated to officers of the eleventh respondent. It turns out that the insurance company was very likely insolvent at the time. It has since ceased business and it is plain that it is unable to meet its obligations under insurance policies that it held. Counsel for the eleventh respondent suggested that these facts are to be taken into account in considering whether it was unreasonable of the eleventh respondent to reject the offer. In my view, they are not to be taken into account. The precise arrangements that are made as between a party involved in litigation and its insurer ought not to be allowed to affect the question from the opposite party's point of view as to costs when a Calderbank-type offer is made. If the eleventh respondent was prepared to allow its defence to be in the hands of its insurer it must bear the consequences of that decision. 20 In my view, therefore, in accordance with the Calderbank principles, the fifth applicant is entitled to its costs from the date when the offer should have been accepted which is 22 November 2000. The costs should include the costs of that day because it is plain that on that day the eleventh respondent's representatives came to Court ready to reject the offer and to proceed with the trial. 21 The remaining question is whether those costs should be awarded on the normal party-party basis, on an indemnity basis or, taking a middle course, on a solicitor and client basis. In my view, in accordance with the Calderbank principles, the proper basis is an indemnity basis. I had some doubts as to whether this should be so because I apprehended that the representatives of the applicants have been somewhat extravagant in the way in which they have conducted the litigation. Certainly the material that was filed with respect to the issues that arose today is an indication of extravagance. Having heard the submissions on both sides, however, I see no reason to depart from the principle that if an offer has been unreasonably refused, the party making it ought not to suffer. 22 For those reasons the orders that I make are as follows: 1. There be judgment for the fifth applicant, Evatab Investments Pty Ltd against the eleventh respondent, Bendigo Bank Ltd, in the sum of $5,451,998.39, including $1,151,998.39 by way of interest. 2. The eleventh respondent pay: (a) the applicants' costs of the application to join the eleventh respondent as a party to the proceeding, made by notice of motion filed on 4 May 1999; (b) the fifth applicant's costs of the trial on and from 21 November 2000 up to and including 11 December 2000, on an indemnity basis. 3. Otherwise there be no order as to the costs of the proceeding, including the costs of today. 4. There be a stay of execution of the judgment until 4.15 pm on 3 September 2001. 5. Any notice of motion filed by the eleventh respondent seeking a further stay be made returnable on 3 September 2001 at 10.15 am.

Fried v National Australia Bank Limited

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Judgment (20 paragraphs)

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