Giller v Procopets

Court of Appeal (Vic)|2009-04-08|Before: MAXWELL ACJ, ASHLEY and NEAVE JJA

COSTS - Whether unsuccessful respondent should pay successful appellant's costs on an indemnity basis - Whether successful appellant should pay unsuccessful respondent's costs - Reasonableness of refusal of settlement offers - Adverse credibility findings of appellant and respondent - Delays caused by appellant.

INTEREST - Whether interest payable on property adjustment - Whether penalty interest payable on damages - Whether interest payable on equitable compensation for breach of confidence - Delays caused by appellant and respondent.

1 On 10 December 2008 the court delivered judgment in this matter and draft orders were distributed to the parties. The court reconvened on 12 March 2009. After hearing submissions on the draft orders, the court made orders that (among other things) required Mr Procopets to pay Ms Giller:

• $45,000 by way of adjustment of property interests under Part IX of the Property Law Act 1958 (Vic);

• $50,000 as damages for assault, of which $13,000 was awarded by way of exemplary damages;

The hearing was adjourned so that submissions could be heard on costs and interest. Ms Giller and Mr Procopets (who is self represented) filed written submissions and the court heard argument on 1 April 2009.

2 Ms Giller's submissions raise two main questions. These are whether -

special costs orders should be made in her favour; and
interest should be payable on the various awards made to her.

3 Ms Giller's counsel submitted that Mr Procopets should pay her costs of the trial and the appeal on an indemnity basis. In support of that submission they relied on an oral offer made to Mr Procopets on 19 February 2004, the eleventh day of the trial. Ms Giller initially offered to settle the proceedings for $200,000, inclusive of costs. Mr Procopets rejected the offer and made a counter-offer of $20,000. Ms Giller then made an offer to settle for $100,000, inclusive of costs. Mr Procopets rejected that offer also. On 23 February the solicitors for Ms Giller sent Mr Procopets a letter in the following terms:

We refer to the above matter and confirm that on 19th February, 2004, an offer was made on behalf of our client in the sum of $200,000 inclusive of all costs and which offer you rejected with a counter offer of $20,000 inclusive of all costs.

We also confirm that a further offer was then made on our client's behalf in the sum of $100,000 inclusive of costs and that offer was also rejected by you.

We further confirm that both offers on our client's behalf were made without prejudice save as to costs.

We herewith confirm that we seek to preserve our client's right to refer to these offers on the question of costs should the need arise.

4 Counsel for Ms Giller submitted that the oral offer to accept $100,000 inclusive of costs satisfied the requirements of a Calderbank offer, that it was unreasonable for Mr Procopets to reject that offer and that Ms Giller's recovery of damages, totalling $135,000, justified the payment of her trial costs on an indemnity basis, at least from the date of the offer.

5 Mr Procopets submitted that the court should make an order requiring Ms Giller to pay his costs of the trial and the appeal, because the learned trial judge had made very adverse findings about Ms Giller's credibility. He relied on his Honour's statement that

There were many instances in the proceeding when the plaintiff gave evidence that was hard to accept or unbelievable and, on occasions, was deliberate lies. She is very intelligent, and it was apparent that she on occasions anticipated the cross examination and was prepared to make up a story or speculate to head off the questions. Not only did the plaintiff tell lies, but she appears to have induced others to tell like lies.[1]

6 In response to that submission counsel for Ms Giller said that this was not a case where a party had fraudulently initiated a claim or resisted a claim made by another person. Ms Giller's claim for intentional infliction of mental distress was not fraudulent, although his Honour rejected Ms Giller's evidence and the evidence of Professor Mendelson that she suffered from an anxiety disorder as a result of the showing of the videotapes. Her claims for an interest either by way of property adjustment or a constructive trust may have been exaggerated, but were not fraudulent, and her other claims had succeeded on appeal.

7 Further, Ms Giller's counsel submitted that she should not be penalised by having costs orders made against her. Although the trial judge considered that Ms Giller was a dishonest witness, he had also disbelieved much of Mr Procopets' evidence. Counsel for the appellant referred to the trial judge's comments that

I am satisfied that [Mr Procopets] would lie and cheat if he could gain something from it. He also falls into the category of a witness whose evidence the Court would not accept unless confirmed or corroborated in some way by independent evidence, admission or false denials of the other party. There were many instances in his evidence where I am satisfied that he was telling deliberate untruths.[2]

In my view both the plaintiff and defendant are amoral; they lie, deceive, and mislead as a way of life. The oath means nothing to either of them. Each will lie if he or she thinks it will benefit him or her.[3]

8 In relation to Ms Giller's reliance on a Calderbank offer, Mr Procopets submitted that it was not unreasonable for him to refuse the offer to settle for $100,000. At the time the offer was made, he argued, Ms Giller had performed poorly in cross-examination and her prospects of success on her property adjustment claim were very uncertain. In addition, her claim for breach of confidence and breach of privacy raised novel legal issues, which at that stage seemed unlikely to be resolved in her favour.

9 Mr Procopets also submitted that he himself had made three offers of compromise to Ms Giller - on 19 June 1999, 17 October 2002 (the 'second offer') and 21 May 2003 ('the third offer') respectively - and that Ms Giller had not responded to either the second or third offer. The second offer was said to be an offer in the sum of $135,480 and the third was said to be an offer in the sum of $163,480. (We deal further with these offers below.)

10 Finally, Mr Procopets submitted that Ms Giller was not entitled to her costs - and certainly not to a special order for costs - because the trial and the appeal were delayed by her repeated failures to comply with various time limits for the filing of documents and other court processes.

11 Plainly, the oral offers made by the appellant to the respondent did not satisfy the requirements of Order 26.02 of the Supreme Court (General Civil Procedure) Rules 2005.[4] Further, Ms Giller's counsel properly conceded that the letter of 23 February was not an offer, but rather a record of offers made and rejected. On the assumption that the second of the oral offers amounted to a Calderbank offer, however, the question for consideration is whether, in all the circumstances, it was unreasonable for Mr Procopets to reject that offer.[5]

12 In Hazeldene's Chicken Farm v Victorian Workcover Authority,[6] this court said that

The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:

(a) the stage of the proceeding at which the offer was received;

(b) the time allowed to the offeree to consider the offer;

(c) the extent of the compromise offered;

(d) the offeree's prospects of success, assessed as at the date of the offer;

(e) the clarity with which the terms of the offer were expressed;

(f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree's rejecting it.[7]

13 It has been held that a technical approach should not be taken in determining whether a Calderbank offer has been made.[8] But it is unnecessary to decide whether the oral offer of $100,000 satisfied the requirements of such an offer as we consider that it was not unreasonable for Mr Procopets to decline to accept it.

14 So far as the property adjustment claim was concerned, the couple had lived together for a relatively short period and Mr Procopets made almost all the financial contributions to the property of the parties. It was not unreasonable for him to consider that Ms Giller might receive only a small pecuniary award in her property adjustment claim and that her breach of confidence claim, which raised novel legal questions, was unlikely to succeed. Mr Procopets must have been aware that Ms Giller was likely to recover damages for his assaults on her, but he might reasonably have taken the view that the amount awarded for all of her claims would be significantly less than $100,000.

15 Mr Procopets relied, as we have already said, on three offers to Ms Giller. These were as follows:

On 4 June 1999, Mr Procopets offered Ms Giller a sum of $26,500 for interim litigation costs, in return for his being free to operate his Bank of Melbourne account without restriction. He also offered to consent to, or not oppose, Ms Giller being granted leave pursuant to s 23A(2) of the Limitation of Actions Act 1958 (Vic) for an extension of time to enable the third and fourth assault claims to proceed. In return, the first and second assault claims would remain statute barred and he would be able to file an amended defence.
On 17 October 2002, he offered her a sum of $22,000 from the proceeds of sale of the property situated at 22 Orrong Crescent, Caulfield North as settlement for the entire claim, subject to various conditions. The offer stated that this was in addition to various other payments he had made to her, some of which were disputed. When those other amounts were added to the $22,000, the offer was said to total $135,480.
On 21 May 2003, he offered her a sum of $50,000 from the proceeds of sale of the property, which were again said to be in addition to the other payments that he had made to her. The offer and the other payments were said to total $163,480.

16 The 17 June offer related only to interim litigation costs and not to the amounts sought by Ms Giller for property adjustment, breach of confidence and assault. The second and third offers did not warn Ms Giller of the possible cost consequences of rejection of the offer and were not unconditional. Mr Procopets is not entitled to rely on disputed amounts which he says he paid Ms Giller to support his claim that the total amount she was awarded was less than the amount he offered. In the circumstances it was not unreasonable for Ms Giller to refuse these offers. They do not provide a basis for making an award of costs in Mr Procopets' favour. Nor, we add, do they provide a basis for Mr Procopets resisting her claim for costs.

17 Normally, a successful party will have an order for the costs of the proceeding. But the court has a discretion to refuse to make an order in favour of a successful party because of his or her conduct prior to or during the trial. The discretion may extend to the making of a costs order in favour of the opposing party, which is what Mr Procopets sought here.

18 In this case, his Honour made very adverse credit findings against both Ms Giller and Mr Procopets. But his rejection of Ms Giller's claim for intentional infliction of mental distress was based solely on the view that the law did not permit recovery unless the plaintiff had suffered a recognisable psychiatric illness. His Honour also upheld Ms Giller's claims that she was assaulted by Mr Procopets on five occasions.

19 In these circumstances, and having regard to our conclusion that the offers made by Mr Procopets do not avail him, we accept the submission for Ms Giller that the adverse credibility findings made against Ms Giller by the trial judge do not justify an order requiring her to pay Mr Procopet's costs of the trial.

20 In our view, Ms Giller should have her costs of the proceeding. But the costs, save in respect of the appeal, should be reduced to some extent to reflect his Honour's finding that Ms Giller lied in giving her evidence and that she induced others to lie. That is a very serious adverse finding indeed, and it is plainly relevant to the exercise of the costs discretion. The proceeding was made more complicated, and the length of the trial prolonged, because of the need to identify areas where Ms Giller's evidence was untrue. On the other hand, Mr Procopets' behaviour was equally deserving of censure, for the above reasons. In these circumstances, we would order that, save in respect of the appeal, Mr Procopets pay 75 per cent of Ms Giller's costs on a party/party basis.

21 Ms Giller succeeded on appeal. The court accepted her claim that the trial judge had erred in certain respects. This Court also found that equitable compensation could be recovered for breach of confidence, though the breach did not cause psychiatric injury. In our opinion her conduct at the trial does not justify a departure from the principle that the costs of the appeal should follow the event. We would therefore order that Mr Procopets should pay Ms Giller's costs of the appeal on a party/party basis. Mr Procopets drew to our attention the fact that he paid $15,000 to Ms Giller under an interim order for costs made by Kellam J.[9] The submission that this amount should be returned to him must be rejected. However the $15,000 stands in part satisfaction of Ms Giller's costs entitlement.

22 The second question is whether Mr Procopets is liable to pay interest on the amounts awarded. If interest is payable, it is necessary to determine the interest period and the interest rate which should apply. We now turn to the principles governing payment of interest which are applicable to

the award of $45,000 made to adjust the parties' property interests under Part IX of the Property Law Act 1958 (Vic);
the award of $50,000 as damages for assault; and
the award of $40,000 equitable compensation for breach of confidence.

23 Section 58(1) of the Supreme Court Act 1986 (Vic) provides:

If in a proceeding a debt or sum certain is recovered, the Court must on application, unless good cause is shown to the contrary, allow interest to the creditor on the debt or sum at a rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 or, in respect of any bill of exchange or promissory note, at 2% per annum more than that rate from the time when the debt or sum was payable (if payable by virtue of some written instrument and at a date or time certain) or, if payable otherwise, then from the time when demand of payment was made.

24 In Dimos v Willetts[10] this court rejected the argument that the word 'creditor' in s 58 should be given a broad meaning and was 'simply a shorthand method for denoting a successful plaintiff or someone who recovers a sum certain.'[11] Batt JA said that

[b]y contrast with s.60(1), s.58(1) pre-supposes, ..., that the debt or sum certain was payable before the commencement of the proceeding, for it authorises the allowing of interest, unless good cause is shown to the contrary, "from the time when the debt or sum was payable" and, save perhaps in exceptional cases, a debt or sum must be payable before it can be sued for or recovered. It is true that in the alternative s.58(1) authorises the allowance of interest "from the time when demand of payment was made"; but, except where a writ may be treated as itself the demand, a demand necessarily precedes the commencement of the proceeding.[12]

(1) The Court, on application in any proceeding for the recovery of debt or damages, must, unless good cause is shown to the contrary, give damages in the nature of interest at such rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 as it thinks fit from the commencement of the proceeding to the date of the judgment over and above the debt or damages awarded.

(2) Nothing in this section -

...

(e) applies in relation to any sum on which interest might be awarded by virtue of section 58 or 59; or

(f) limits the operation of any enactment or rule of law which, apart from this section, provides for the award of interest.

(3) If the damages awarded by the Court or jury include or if the Court in its absolute discretion determines that the damages awarded include any amount for -

...

(c) exemplary or punitive damages -

the Court must not allow interest in respect of any amount so included or in respect of so much of the award as in its opinion represents any such damages.

26 Counsel for Ms Giller conceded that neither s 58 or s 60 applied to the pecuniary award made under Part IX of the Property Law Act 1958 (Vic). In our opinion, that concession was properly made. To obtain an order adjusting property interests is not to recover a 'debt or sum certain' within s 58, or 'a debt or damages' within s 60(1).

27 In Manns v Kennedy,[13] the New South Wales Court of Appeal held that interest was not payable under s 100(1) of the Civil Procedure Act 2005 (NSW) on an award made under s 20 of the Property (Relationships) Act 1984 (NSW). Section 100(1) provides for the payment of interest in 'proceedings for the recovery of any money', 'the recovery of a debt', or the 'recovery of damages'. Campbell JA (with whom Santow JA and Bryson AJA agreed) held that an application for adjustment of property interests did not come within any of these descriptions. He said:

Under s 20 of the Property (Relationships) Act, the court has a discretionary power to adjust interests with respect to property as it sees fit. All the property of both parties to the relationship is, potentially, the subject of such an order. While it is within the court's power to make an order for the payment of money, in an appropriate case, an application under s 20 cannot readily be described as "proceedings for the recovery of money". Nor is it proceedings "for ... recovery of any debt", because until such time as the court makes its order an applicant has no enforceable legal right to receive the property that is the subject of the order - all that the applicant has, as a matter of legal right, is the right to approach the court for the making of an order. Nor are the proceedings properly able to be described as ones "for ... the recovery of damages, or of the value of any goods".

Further, s 100 of the Civil Procedure Act proceeds on the assumption that the proceedings in which interest is awarded are ones concerning which one can identify the "time the cause of action arose". That language also does not sit well with the juristic nature of an application under s 20 of the Property (Relationships) Act. In one sense, the right to approach the court for an order under s 20 arises as soon as the relationship terminates. However, post-relationship contributions can be taken into account in deciding what is a just and equitable adjustment of property interests, and a s 20 order, insofar as it awards a monetary sum, speaks in the money of the day the order is made. For these reasons it is not as though an applicant had, even in a chrysalis form, at the time the relationship ended any sort of right to obtain the particular order that the court might have made: see Van Zonneveld v Seaton (2005) DFC 95-311; [2005] NSWSC 175 at [3]- [4].[14]

These remarks are equally applicable to a claim under Part IX of the Property Law Act 1958 (Vic).

28 Campbell JA considered, however, that 'something in the nature of interest might be awarded' in property adjustment proceedings, as part of the process of deciding what order was just and equitable, though it would not necessarily follow that interest would be calculated at the rate payable under the Civil Procedure Act 2005 (NSW).[15] He noted that in deciding whether interest should be awarded on that basis a trial judge would need to be aware of the risk of introducing a 'a false air of precision' into the award, because in many cases the parties' contributions could only be established 'in an extremely broad brush manner'.[16]

29 It was not submitted in the appeal that the orders made to adjust the parties' property interests should include an amount akin to interest. Had such an allowance been sought and made, it would not have been an allowance by way of interest on the amount awarded.

30 We finally note, for completeness, that counsel for Ms Giller advanced no other basis - for instance, in equity - upon which interest might be allowed on the property adjustment amount.

31 Under s 60 of the Supreme Court Act 1986 (Vic), penalty interest is payable on the portion of the award for damages for assault which is not exemplary damages. Interest is payable 'from the commencement of the proceeding to the date of judgment' unless good cause is shown to the contrary. It follows that interest is payable at the penalty interest rate on the $37,000 awarded as compensation damages for the assault.

32 It was initially contended that interest should be payable from 26 August 1998 (the date on which proceedings were initiated in the Family Court).[17] At the hearing, however, counsel for Ms Giller conceded that the reference to 'the proceeding' in s 60(1) referred to the commencement of proceedings in this Court, that is, from 3 December 1999.

33 In this case there were very considerable delays in the conduct of proceedings. The majority of these were caused by the conduct of Ms Giller and her legal advisers, although in 2002 Kellam J noted that Mr Procopets had also failed to comply with interlocutory orders by relevant dates.[18] Ms Giller applied for an extension of time to file documents relating to the trial on 24 August 2001. Two trial dates were vacated because Ms Giller was not ready to proceed. A new date of 13 October 2003 was fixed but the trial judge then disqualified himself from hearing the matter. The trial began on 4 February 2004, more than four years after Supreme Court proceedings were initiated, and judgment was delivered on 7 April 2004.

34 A year later Ms Giller applied on summons for orders that her appeal not be taken to have been abandoned and for an extension of time to file appeal books. That order was made on 3 June 2005. In his reasons, Winneke P noted that these delays were caused not by Ms Giller, but by her solicitor.[19]

35 Although some of the delay was caused by the failure of Ms Giller's various solicitors to comply with time limits, rather than by any personal default of hers, we consider that in all the circumstances of this case Mr Procopets should not have to pay interest for unreasonable delay not attributable to his conduct. There is good cause to depart from the principle that interest should be awarded from the commencement of proceedings until the date of judgment. Doing the best we can, we would order payment of a lump sum of $18,000 which approximates interest on the damages for assault calculated by reference to the penalty rate of interest, from the date of commencement of proceedings in the Supreme Court for a period of four years. The four year period reflects the time which it would normally take for a matter to come to trial and for any appeal to be heard and resolved.

36 It has been held that interest is payable under s 58 of the Supreme Court Act 1986 (Vic) on an award of equitable compensation which is a sum certain - for example, an amount for which a defendant is required to account as a constructive trustee.[20] That principle is not applicable to Ms Giller's award of compensation for breach of confidence, however. Until this court assessed the compensation payable to Ms Giller for breach of confidence, that amount was neither a debt nor a sum certain.

37 It may be that equitable damages awarded for breach of confidence are 'damages' within s 60(1). That would be consistent with the view that s 38 of the Supreme Court Act 1986 (Vic) permits the award of damages for breach of a right recognised only in equity.[21] Even if that is not the case, equitable principles permit the award of interest on an award of equitable compensation.[22] According to Halsbury's Laws of Australia, 'interest may be charged on a sum awarded by way of [equitable] compensation, but only as an element in a proper measure of restitution, not by way of penalty.'[23] In our opinion Ms Giller should receive interest on the $40,000 award from the date of commencement of the proceeding for a period of four years.

38 There was no evidence before the court as to the commercial rate or the trustee rate over the relevant period. Doing the best we can, we would award a lump sum of $12,800 which approximates the interest calculated at the trustee rate of 8 per cent from the date of the commencement of the proceeding for four years.

39 We note that under s 101 of the Supreme Court Act 1986 (Vic), Ms Giller will be entitled to interest on the total award at the penalty rate, from the date of the judgment of this Court.

[1] Giller v Procopets [2004] VSC 113, [25].

[4] Order 26.02(3) requires the offers to be made in writing and to contain a statement that they are served in accordance with the Order.

[5] Hazeldene's Chicken Farm v Victorian Workcover Authority [2005] VSCA 298 [23]-[24].

[8] BMD Major Projects Pty Ltd v Victorian Urban Development Authority (No. 2) [2007] VSCA 441 [4].

[9] Giller v Procopets [2002] VSC 305, [73].

[11] Ibid 209 (Batt JA; Ormiston and Tadgell JJA agreeing).

[15] Ibid [136]. This appears to be what Cummins J had in mind in Robertson v Fox [2008] VSC 199, [4] when he said that an award of interest could be made 'according to the equitable principle of being just to the parties given the findings of fact'. In that case he held that pre-judgment interest should not be awarded, but did order interest on the award.

[17] These proceedings were discontinued following the decision in Re Wakim; ex parte McNally [1999] HCA 27; (1999) 198 CLR 511.

[18] Giller v Procopets [2002] VSC 305, [25].

[19] Unreported application on summons 3 June 2005.

[20] Farrow Finance Company Ltd (in liquidation) v Farrow Properties Pty Ltd (in liquidation) [1999] 1 VR 584, 637-640; Anchen v Da Costa [2005] VSC 191.

[21] Giller v Procopets [2008] VSCA 236, [398]-[403]. See also [135]-[142].

[22] See also Re Hatton Developments (Aust) Pty Ltd and the Companies Act (1978) 3 ACLR 484; Hillig v Darkingjung Local Aboriginal Land Council [2006] NSWSC 1371.

[23] Halsbury's Laws of Australia, online edition (8 April 2009) 185 Equity '(C) Damages and Compensation in Equity [185-1580] Equitable Compensation.

Court (General Civil Procedure) Rules 2005

Interest Rates Act 1983

(Relationships) Act 1984

At a glance

Court

Decision date

Before

Source

Judgment (75 paragraphs)

Parties

Legislation Cited (7)

Cases Cited (2)