INTEREST – RECOVERABILITY OF INTEREST – IN GENERAL –
where judgment in favour of the plaintiffs – where parties
made written
submissions on interest and costs – whether the defendant should pay
Source
Original judgment source is linked above.
Catchwords
INTEREST – RECOVERABILITY OF INTEREST – IN GENERAL –where judgment in favour of the plaintiffs – where partiesmade writtensubmissions on interest and costs – whether the defendant should payinterest to the plaintiffs pursuant to s47 of the Supreme Court Act 1995(Qld) – whether delay relevant to exercise of discretion pursuantto s 47 of the Supreme Court Act 1995 (Qld)PROCEDURE – COSTS – GENERAL RULES – COSTS FOLLOW THEEVENT – THIRD PARTIES – whether original orderas to costs should bevaried – whether defendant should pay plaintiffs’ costs of andincidental to the amendments tothe plaintiffs’ claim – whether thefirst, second and fourth third parties should pay the defendant’scostsCommon Law Practice Act Amendment Act 1972(Qld)Corporations Act 2001 (Cth), s 588FGA, s588FGA(2)Financial Management and Accountability Act 1997
(Cth)
Judiciary Act 1903 (Cth), s 55ZF
Legal Services Directions
2005 (Cth), paragraph 4.2, Appendix B
Supreme Court Act 1995
(Qld), s 47, s 48
Uniform Civil Procedure Rules 1999 (Qld), r 5
Interchase Corporation Limited (in liq) v Grosvenor Hill (Queensland)
Pty Ltd (No 3) [2003] 1 QdR 26 at 53
[2001] QCA 191, considered
Kalls
Enterprises Pty Ltd (in liq) v Baloglow (No 3) [2007] NSWCA 298,
considered
Judgment (86 paragraphs)
[1]
INTEREST - RECOVERABILITY OF INTEREST - IN GENERAL - where judgment in favour of the plaintiffs - where parties made written submissions on interest and costs - whether the defendant should pay interest to the plaintiffs pursuant to s 47 of the Supreme Court Act 1995 (Qld) - whether delay relevant to exercise of discretion pursuant to s 47 of the Supreme Court Act 1995 (Qld)
[2]
PROCEDURE - COSTS - GENERAL RULES - COSTS FOLLOW THE EVENT - THIRD PARTIES - whether original order as to costs should be varied - whether defendant should pay plaintiffs' costs of and incidental to the amendments to the plaintiffs' claim - whether the first, second and fourth third parties should pay the defendant's costs
Interchase Corporation Limited (in liq) v Grosvenor Hill (Queensland) Pty Ltd (No 3)[2003] 1 QdR 26 at 53; [2001] QCA 191, considered
[9]
Kalls Enterprises Pty Ltd (in liq) v Baloglow (No 3)[2007] NSWCA 298, considered
[10]
Legal Services Branch, Australian Taxation Office for the defendant
[11]
Clarke Kann for the first, second and fourth third parties
[12]
[1] MARGARET WILSON J: On 9 July 2010 I delivered reasons for deciding that there should be judgment for the plaintiffs against the defendant for $2,304,310.53 plus interest, and that there should be judgment for the defendant against the first, second and fourth third parties for the amounts against which he sought indemnity.[1] I asked the parties to submit draft orders, including orders as to interest and costs.
[13]
[2] The parties have now made written submissions on interest and costs. I am now making the orders for summary judgment, pre-judgment interest (to today) and costs.
[14]
[3] The plaintiffs sought interest pursuant to s 47 of the Supreme Court Act 1995 (Qld) which provides -
[15]
(1) In any proceedings in respect of a cause of action that arises after the commencement of the Common Law Practice Act Amendment Act 1972 in a court of record for the recovery of money (including proceedings for debt, damages or the value of goods) the court may order that there shall be included in the sum for which judgment is given interest at such rate as it thinks fit on the whole or any part of that sum for the whole or any part of the period between the date when the cause of action arose and the date of the judgment.
[16]
(2) The powers conferred on a court of record by subsection (1) may be exercised by an arbitrator or umpire.
[17]
(a) does not authorise the giving of interest upon interest;
[18]
(b) does not apply in respect of any debt on which interest is payable as of right whether by virtue of an agreement or otherwise;
[19]
(c) does not affect damages recoverable for the dishonour of a bill of exchange."
[20]
[4] The amount for which judgment is to be entered against the defendant is comprised of numerous payments made over various dates within the six months ending on 13 May 2003. With respect to each payment, the plaintiffs sought interest from the date on which they first demanded it from the defendant[2] until judgment. They claimed simple interest at 9% per annum until 30 June 2007 and thereafter at 10% per annum. The total amount of interest claimed to today is $867,545.94.
[21]
[5] Counsel for the defendant submitted that the interest should be limited because of significant delay by the plaintiffs in prosecuting their case; she submitted that any loss resulting from that delay was self-inflicted. In her submission, interest should be allowed as follows -
[22]
(a) $392,048.45, being interest on $2,304,310.53 over 621 days (from 27 October 2008 to 9 July 2010) at 10% per annum;
(b) alternatively, $644,575.63, being interest on $2,304,310.53 over 1021 days (from 27 September 2007 to 9 July 2010) at 10% per annum; or
(c) alternatively, $684,137.99, being her calculation of interest on the various payments from when they were first demanded until 9 July 2010 at 9% per annum to 30 June 2007 and 10% per annum thereafter.
[23]
[6] The defendant claimed indemnity from the third parties as follows -
[24]
(a) as against the first and second third parties - $2,304,310.53 plus any interest and costs the defendant was ordered to pay the plaintiffs;
(b) as against the fourth third party - $1,765,044.74, plus any interest and costs the defendant was ordered to pay the plaintiffs proportionate to this sum.
[25]
The amount claimed against the fourth third party was less because he ceased to be a director on 11 March 2003.[3]
[26]
[7] The third parties were given leave to defend the plaintiffs' claim against the defendant. Their solicitors submitted that the litigation was conducted in such a way that the plaintiffs ought to be denied any interest pursuant to s 47.[4]
[27]
[8] Counsel for the plaintiffs submitted that the defendant should pay their costs of and incidental to the proceeding on the standard basis.
[28]
[9] Counsel for the defendant sought costs as follows -
[29]
(a) that the defendant pay the plaintiffs' costs of and incidental to the claim to be assessed on the standard basis, save for the costs of and incidental to the amendments to the plaintiffs' claim;
(b) that the first, second and fourth third parties pay to the defendant the assessed costs payable by the defendant to the plaintiffs pursuant to the preceding order;
(c) that the first, second and fourth third parties pay the defendant's costs fixed in the amount of $160.[5]
[30]
[10] The solicitors for the third parties complained about the conduct of the plaintiffs and the defendant having increased costs, but did not make any submission on the costs orders which should be made.
[31]
[11] The amount in contest was $2,304,310.53 plus interest. The plaintiffs have prepared detailed schedules showing when they first demanded that the defendant pay the component parts of that amount. The demands can be summarised as follows -
[32]
[12] The plaintiffs were appointed as voluntary administrators of Allens Services Limited on 13 May 2003 and as its liquidators on 4 July 2003. It was not until 5 May 2006 that they first demanded repayment of various amounts totalling $1,655,391.43 which they alleged were preferential payments. A week later, on the eve of the expiration of the limitation period, they commenced this proceeding against the Deputy Commissioner of Taxation, claiming preferential payments totalling $3,226,748.51.
[33]
[13] The defendant did not file a notice of intention to defend and defence until 26 November 2008. In the meantime there were protracted negotiations between the plaintiffs and the defendant, leading to the plaintiffs' filing an application for leave to amend the claim and statement of claim on 13 September 2007. On 27 September 2007 the defendant consented to an order giving the plaintiffs leave to amend and making the costs of the application costs in the proceeding. The plaintiffs withdrew many of the payments originally claimed and added others. The plaintiffs can be fairly criticised for not isolating the relevant payments before commencing the proceeding. Criticism can be fairly levelled at the Australian Taxation Office, which was representing the defendant, for prolonging the negotiations by foreshadowing a settlement offer and the joinder of the third parties. The third party notice was not filed until 5 December 2008, and not served until various dates in February 2009.
[34]
[14] The third party notice had to be brought in the name of the Commissioner of Taxation,[6] and from an early date the Commissioner of Taxation tried to persuade the plaintiffs to apply to substitute him as the defendant. The plaintiffs have always contended the proceeding was properly commenced against the Deputy Commissioner. Moreover, they were concerned about the expiration of the limitation period. Eventually the Deputy Commissioner filed an application to amend the name of the defendant. No orders to that effect were made, but the plaintiffs consented to orders substituting the Commissioner as defendant on terms protecting them as to the limitation period. The plaintiffs filed a further amended claim and statement of claim on 27 October 2008, naming the Commissioner of Taxation as the defendant. No criticism can be fairly levelled at the plaintiffs in this regard: certainly there was nothing in their conduct in this regard which would warrant limiting the amount of interest otherwise to be awarded to them.
[35]
[15] The first, second and fourth third parties filed a joint defence to the third party notice on 1 April 2009.
[36]
[16] On the application of the third parties filed on 28 August 2009, the proceeding was placed on the Commercial List on 30 September 2009. The third parties were given leave to defend the plaintiffs' claim against the defendant, and the Court gave directions for the further conduct of the proceeding. There were some delays in complying with those directions, but the summary judgment applications were heard on 9 March 2010.
[37]
[17] The Court must determine what, if any, interest the defendant must pay the plaintiffs. That involves the exercise of a judicial discretion. Once that is determined, the third parties must indemnify the defendant against it pursuant to s 588FGA(2) of the Corporations Act 2001 (Cth).[7] The Court does not have a discretion in fixing the amount of interest against which the third parties must indemnify the defendant.
[38]
[18] An award of interest pursuant to s 47 is essentially compensatory in character: it is to compensate the successful party for being held out of its money in circumstances where the unsuccessful party has had the benefit of that money during the period in question. It follows that delay is not ordinarily a reason for refusing or limiting an award of interest. In Interchase Corporation Limited (in liq) v Grosvenor Hill (Queensland) Pty Ltd (No 3)[8] McPherson JA said -
[39]
"It is, to my mind, not immediately apparent why, as a matter of justice, that delay should operate to defeat or reduce a plaintiff's right to receive interest as compensation or damages for the whole of the period during which the amount was not paid. Quite apart from the loss to the plaintiff, the defendant has had the benefit of the money, and may be assumed to have put it to good use. In giving the reasons of the Full Court in Serisier Investments Pty Limited v English[9], Thomas J (as he then was) referred to circumstances in which it would sometimes be unfair to order a defendant to pay interest for the whole period between accrual of the cause of action and the date of judgment. Among the examples given by his Honour was the case 'where the plaintiff has been guilty of unreasonable delay in prosecuting the claim.' In Serisier, the trial judge had awarded interest from the date of accrual of the cause of action, and had done so despite a delay of four years and four months between issue of the writ and the commencement of the trial. Observing that it was an area in which the trial judge 'must be allowed a wide discretion and in 'which appeal courts are reluctant to intervene'[10] his Honour said he was not prepared to decide that the judge had erred in failing to limit the period over which pre-trial interest had been allowed."
[40]
And in Kalls Enterprises Pty Ltd (in liq) v Baloglow (No 3)[11] the New South Wales Court of Appeal said -
[41]
"Delay is ordinarily not a reason for refusing or reducing the inclusion of interest. The defendant has had the use of the money, and the plaintiff has been out of its use and should be compensated accordingly. The purpose is to compensate the plaintiff for being kept out of its money (Bennett v Jones[12]; MBP (SA) Pty Ltd v Gogic[13]; Grincelis v House[14]), not to punish it for delay (Bennett v Jones[15]; Geoffrey W Hill & Associates(Insurance Brokers) Pty Ltd v Squash Centre (Allawah North) Pty Ltd[16]; Clarke v Foodland Stores Pty Ltd[17]). Interest should be included unless good cause be shown, in order to fulfil the purpose (Ruby v Marsh[18]; Falkner v Bourke[19]; Clarke v Foodland Stores Pty Ltd[20]).
[42]
Delay can nonetheless be relevant to the exercise of the discretion. For example, unreasonable delay and a high interest rate may mean that the defendant is unjustly left as the source of the plaintiff's investment income. The question is one of injustice to the defendant. If the interest rates used by the plaintiff exceed commercial interest rates (although commercial interest rates are an imprecise criterion, see below), the plaintiff's self-inflicted loss of use of money may be unfairly made a burden on the defendant. "
"5 Philosophy--overriding obligations of parties and court
[45]
(1) The purpose of these rules is to facilitate the just and expeditious resolution of the real issues in civil proceedings at a minimum of expense.
[46]
(2) Accordingly, these rules are to be applied by the courts with the objective of avoiding undue delay, expense and technicality and facilitating the purpose of these rules.
[47]
(3) In a proceeding in a court, a party impliedly undertakes to the court and to the other parties to proceed in an expeditious way.
[48]
(4) The court may impose appropriate sanctions if a party does not comply with these rules or an order of the court.
[49]
The court may dismiss a proceeding or impose a sanction as to costs, if, in breach of the implied undertaking, a plaintiff fails to proceed as required by these rules or an order of the court."
[50]
[20] The solicitors for the third parties submitted that the plaintiffs should be denied interest as a sanction for breach of their implied undertaking to proceed with the litigation in an expeditious way. In my view that submission was misconceived. Recovery of interest pursuant to s 47 of the Supreme Court Act 1995 (Qld) is a matter of substantive law, albeit dependent on the exercise of a judicial discretion to do what is just in the statutory context and in all the circumstances of the case. Unreasonable delay causing injustice to the unsuccessful party may be a relevant factor in the exercise of that discretion, although generally, the discretion should not be exercised in a punitive fashion against a dilatory successful party. The exercise of that discretion is conceptually quite different from the imposition of a sanction for breach of an implied undertaking to fulfil procedural obligations.
[51]
"46. The Defendant must comply with the Model Litigant Policy.
[52]
The obligation contained in the Policy requires the State [sic] and its agencies to act honestly and fairly in handling the claims and litigation by:
Dealing with claims promptly and not causing unnecessary delay in the handling of claims and litigation;
Where it is not possible to avoid litigation, keeping the costs of litigation to a minimum
[53]
The Plaintiffs and the Defendant have not complied with the Rules, the Model Litigant Policy nor the Orders made in this matter. Consequently, the costs of each party have been increased and the interest accruing is now excessive."
[54]
They did not identify the provenance or authority of the policy. The reference to "the State and its agencies" is curious, given that the defendant holds a Commonwealth statutory office.[21] At any rate, to deny a successful party interest because of non-compliance with such a policy would be to exercise the judicial discretion in s 47 wrongly for a punitive purpose.
[55]
[22] There is no evidence that the plaintiffs' conduct in not identifying the relevant payments before commencing the proceeding caused injustice to the defendant. It may well have increased the defendant's costs, but that is a separate issue. In short, I have concluded that the defendant should be ordered to pay the interest sought by the plaintiffs - $867,545.94.
[56]
[23] The first and second third parties should be ordered to pay the defendant interest in the same amount - $867,545.94.
[57]
[24] The fourth third party should be ordered to pay the defendant interest on each of the payments made before 11 March 2003 comprising the amount for which the defendant sought summary judgment against it ($1,765,044.74), from the date on which the plaintiffs first demanded it from the defendant until judgment - $669,859.13.
[58]
[25] As I have said, the plaintiffs can be fairly criticised for not isolating the relevant payments before commencing the proceeding. Nevertheless, by 21 December 2006 they had demanded all of the payments on which they ultimately succeeded, and by 27 September 2007 all of those payments had been included in their pleading. The defendant should not be visited with the plaintiffs' costs of and incidental to amending the claim and statement of claim pursuant to leave granted on 27 September 2007. By contrast, the subsequent amendment on 27 October 2008 to change the name of the defendant to the Commissioner of Taxation was for the defendant's benefit in the third party proceeding, and the plaintiffs should not be denied their costs of and incidental to it. The plaintiffs were very largely successful in recovering the amount claimed in their amended pleading: that the amount claimed in the pleading current at the commencement of the hearing on 9 March 2010 was a little in excess of that pursued in the summary judgment application does not warrant penalising them in costs.
[59]
[26] The defendant should pay the plaintiffs' costs of and incidental to the claim to be assessed on the standard basis, save for their costs of and incidental to amending their claim and statement of claim pursuant to leave granted on 27 September 2007.
[60]
[27] The first, second and fourth third parties should pay the defendant's the costs (assessed on the standard basis) payable by the defendant to the plaintiffs.
[61]
[28] The first, second and fourth third parties should pay to the defendant costs of and incidental to the third party proceeding fixed in the amount of $160.
[62]
(i) that pursuant to s 588FF of the Corporations Act 2001 (Cth), the defendant pay Allens Services Limited (in liq) ACN 091 344 535 the amount of $2,304,310.53 plus interest in the amount of $867,545.94;
[63]
(ii) that pursuant to s 588FGA(2) of the Corporations Act 2001 (Cth), the first and second third parties pay the defendant the amount of $2,304,310.53 plus interest in the amount of $867,545.94;
[64]
(iii) that pursuant to s 588FGA(2) of the Corporations Act 2001 (Cth), the fourth third party pay the defendant the amount of $1,765,044.74 plus interest in the amount of $669,859.13;
[65]
(iv) that the defendant pay the plaintiffs' costs of and incidental to the claim to be assessed on the standard basis, save for their costs of and incidental to amending their claim and statement of claim pursuant to leave granted on 27 September 2007;
[66]
(v) that the first, second and fourth third parties pay the defendant the costs (assessed on the standard basis) payable by the defendant to the plaintiffs;
[67]
(vi) that the first, second and fourth third parties pay the defendant's costs of and incidental to the third party proceeding fixed in the amount of $160.
[3] The payments made while the fourth third party was a director totalled $1,789,645.89. However, the defendant sought summary judgment against the fourth third party for only $1,765,044.74.
[71]
[4] The solicitors for the third parties submitted also that the plaintiffs ought to be denied interest pursuant to s 48 of the Supreme Court Act 1995 (Qld). That section relates to post-judgment interest. I do not intend to deal with that submission, as recovery of post-judgment interest was not in issue before me.
[72]
[5] The defendant did not seek to recover professional costs, but only his outlays in serving the third party notices.
[21] The Legal Services Directions 2005 (Cth), made under s 55ZF of the Judiciary Act1903 (Cth), provide at paragraph 4.2 that agencies subject to the Financial Management and Accountability Act1997 (Cth) are to handle claims and conduct litigation in accordance with the Commonwealth's obligations as a model litigant, contained in Appendix B to the Directions. In Queensland, model litigant principles have been issued at the Direction of the State Cabinet. See Department of Justice and Attorney-General, Model litigant principles (2009) http://www.justice.qld.gov.au/_data/assets/ pdf_file/0006/43881/20100505095729872.pdf, at 19 July 2010.