Pre-judgment interest
30 Hanave also made an application for pre-judgment interest under s 51A of the Act, which was advanced on the basis it would be necessary to vary the orders entered on 19 February 2000 to include such interest. Section 51A provides:
(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.
(2)…
31 A comparatively recent detailed discussion of many of the principles which govern the exercise of the discretionary power to order pre-judgment interest is found in the judgment of Finn J in H K Frost Holdings Pty Ltd (in liquidation) v Darvall McCutcheon (a firm) [1999] FCA 795. His Honour said (at [6]-[11]):
(1) It is well settled that the objective of provisions of this type is to compensate an applicant for the loss it suffers in being kept out of its money or damages: see Batchelor v Burke (1981) 148 CLR 448 at 455; Clarke v Foodland Stores Pty Ltd [1993] 2 VR 382 at 396; and see Tilbury, Civil Remedies, vol 1, 1990, para 3226ff.
(2) The award of interest under s 51A(1) is mandatory "unless good cause is shown to the contrary": Australian Guarantee Corporation Ltd v Border Printing Services Pty Ltd (Lockhart, Spender and Hill JJ, 21 April 1989, unreported); cf Supreme Court Act 1970 (NSW) s 94 that does not use the "good cause" formula but see eg Donellan v Watson (1990) 21 NSWLR 335 at 345 ("interest is almost invariably to be allowed when claimed"). Ordinarily it will be for the respondent to establish such "good cause": see Wright v West Australian Trustee & Agency Co Ltd [1987] VR 771 at 775; this does not necessarily require that evidence be adduced for the purpose: see Clarke v Foodland Stores Pty Ltd, above at 394. Furthermore, it is open to the court, for example, to take into account such considerations of public policy as may be relevant in the circumstances: see Border Printing Services Pty Ltd v Australian Guarantee Corporation Ltd (Pincus J, 19 December 1988, unreported).
(3) Though the matter is and remains one of judicial discretion, it is the usual practice of this Court in applying s 51A(1) to adopt the rates of interest applied by the Supreme Court of the State or Territory in which this Court is dealing with the matter: Namol Pty Ltd v A W Baulderstone Pty Ltd (1993) 119 ALR 187; Nagy v Masters Dairy Ltd (1997) 150 ALR 301 at 317; though, no less so than a State court, the Court may then depart from those rates as a matter of discretion given the circumstances of the case: see Clarke v Foodland Stores Pty Ltd, above, at 389. A justification for this practice is that it helps to ensure that damages are awarded on the same basis at least as to rates of interest whether a proceeding is instituted in this Court or in a Supreme Court. Parity in the making of interest awards will, though, often be unattainable because the legislation of a particular State may prescribe varying periods for which pre-judgment interest may be awarded (depending upon the nature of the cause of action in question) that differ from what is allowable under s 51A(1): see eg Supreme Court Act 1986 (Vic) s 58 and s 60; Supreme Court Act 1935 (SA) s 30c; Supreme Court Act 1995 (Qld) s 47.
(4) Given the variations in the language and structure of the pre-judgment interest provisions of the various Australian States, care must be taken in using the decisions of State courts on their own statutes to elucidate the meaning of s 51A(1). For example, for the purposes of s 51A(1) the formula "good cause to the contrary" would appear on its proper construction to mean only good cause for not allowing interest at all: see Australian Guarantee Corporation Ltd v Border Printing Services Pty Ltd, above. The subsection itself otherwise provides discretions as to the rate and the period of an interest award. In contrast, the same formula as used in s 58 of the Supreme Court Act 1986 (Vic) has been interpreted to mean good cause for allowing interest otherwise than in accordance with the terms of that section: see Clarke v Foodland Stores Pty Ltd, above, at 391-393. But s 58, notably, does not provide the same discretions as does s 51A(1).
(5) It is neither possible nor desirable to define what will constitute "good cause" disentitling a party to interest under s 51A(1); each case must be considered by reference to its own circumstances: Australian Guarantee Corporation Ltd v Border Printing Services Pty Ltd, above.
(6) There is considerable diversity in judicial opinion as to the extent to which, if at all, the rate or (more usually) the period selected for an interest award should as a discretionary matter be moulded adversely to a party that delays in the prosecution or defence of a claim where no resultant detriment to the other party is shown: see eg Geoffrey W Hill & Associates (Insurance Brokers) Pty Ltd v Squash Centre (Allawah North) Pty Ltd (1990) 6 ANZ Insurance Cases s61-012 ("[t]he principle of punishment is not borne out by a consideration of the purpose of the statutory discretion"); De Girolamo v South Australia (1991) 56 SASR 40 at 44-45; but cf Keates v Nelson (NSW Court of Appeal, Kirby P, Mahoney and Cripps JA, 16 April 1992, unreported); Golden West Refining Corporation Ltd v Daly Laboratories Pty Ltd (Carr J, 16 February 1995, unreported): Tilbury, above, para 3230; and see also BP Exploration Co (Libya) Ltd v Hunt (No 2) [1979] WLR 783 at 845-847 and McGregor on Damages, 16th Ed, 1997, paras 668-669. Nonetheless, insofar as concerns a successful applicant who has been guilty of unreasonable delay, the view I am prepared to follow in the absence of binding authority is that the period for which the interest award is made can properly be adjusted if to allow interest for the whole period for which it could otherwise be ordered would work an injustice to the respondent in the circumstances: cf Clarke v Foodland Stores Pty Ltd, above, at 400. Such would seem to be consistent with the policy of the s 51A(1) in that an applicant that has been held out of the benefit of its money because of its own unreasonable actions should not be allowed as of course to cast the effects of a 'self-inflicted burden' onto the respondent: Keithara Pty Ltd v J G L Holdings Pty Ltd (Supreme Court of Victoria, Smith J, 6 December 1994, unreported).
32 However, in this matter, there is a question as to whether the power to order pre-judgment interest can be exercised at all. That is because, prior to the entry of judgment requiring Mr Tresidder and LFOT to pay $750,000, no application was made for pre-judgment interest as contemplated by the section. Indeed, as noted earlier, the application for pre-judgment interest was first made on 20 February 2003 by an amendment to the original application for post-judgment interest.
33 Generally, once a judgment of the Court has been passed and entered, the Court lacks power to make an order which alters or sets aside that judgment: Caboolture Park Shopping Centre Pty Ltd (In liquidation) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224 at 234. Counsel for Hanave did not submit that the order for interest should be characterised as a supplementary order of the type considered by the Full Court in the authority just cited. On the approach relied on by Hanave, because judgment has been entered, the means by which this variation (making provision for pre-judgment interest) can be made is under O 35 r 7 of the Federal Court Rules, which relevantly provides:
(1) The Court may vary or set aside a judgment or order before it has been entered.
(2) The Court, where it is not exercising its appellate or related jurisdiction under Division 2 of Part III of the Act, may if it thinks fit vary or set aside a judgment or order after the order has been entered where:
(a) the order has been made in the absence of a party, whether or not the absent party is in default of appearance or otherwise in default and whether or not the absent party had notice of the motion for the order;
(b) the order was obtained by fraud;
(c) the order is interlocutory;
(d) the order is an injunction or for the appointment of a receiver;
(e) the order does not reflect the intention of the Court; or
(f) the party in whose favour the order was made consents.
(3) A clerical mistake in a judgment or order, or an error arising in a judgment order from an accidental slip or omission, may at any time be corrected by the Court.
(4) Subrule (2) shall not affect the power of the Court to vary or terminate the operation of an order by a supplementary order.
Counsel for Hanave accepted neither subr 7(1) or subr 7(2) applied, but submitted that the order should be varied pursuant to subr 7(3) ("the slip rule"). It was submitted that prior to the entry of the orders, Mr Burke made an accidental omission in failing to apply for pre-judgment interest. Counsel for Hanave submitted something was an "accident" for the purposes of the slip rule if it is "something that happens without intention or design": see Australian Casualty Company Ltd v Federico (1985) 160 CLR 513 at 537 per Wilson, Deane and Dawson JJ. Counsel for the respondents submitted the Court had no power to make the order sought on the basis on which it was sought.
34 A similar issue arose in L Shaddock & Associates Pty Ltd v Parramatta City Council (1982) 151 CLR 590, though that was a case relating to interest between the date on which the trial judge gave judgment and the date of judgment in a successful appeal took effect. In that matter, an action for damages in the Supreme Court of NSW was dismissed, on the basis that the defendant owed no duty of care to the plaintiff. However, the trial judge assessed the amount of damages to which the plaintiff would have been entitled in the event that his decision was reversed on appeal. The Court of Appeal dismissed the appeal though a further appeal was allowed by the High Court which ordered damages in the amount determined by the trial judge. In the notices of appeal to the Court of Appeal and the High Court, no interest was sought for the period from the time of the initial judgment and any successful appeal. Following the successful appeal to the High Court (during the hearing of which the question of interest was not raised) the plaintiff applied for an order under O 29 r 11 of the High Court Rules (a slip rule) that the order from the High Court be amended to include an award of interest for the relevant period. The evidence was that the failure to advert to the issue of interest in argument was an accidental omission on the part of counsel. In its reasons for judgment, the High Court said that if such an application had been made and the Court had power to do so, an order for interest would have certainly been made "but for the inadvertence of counsel for the applicants". Mason ACJ, Wilson & Deane JJ said at 594 - 595:
Order 29, r. 11 is in the traditional form of a slip rule. It reflects the inherent jurisdiction of a court "at any time to correct an error in a decree or order arising from a slip or accidental omission" (see Milson v Carter [1893] A.C. 638). In terms, the rule provides, inter alia, that "an error arising in a judgment or order from an accidental slip or omission, may at any time be corrected by the Court or a Justice on motion or summons". The rule extends to authoize an omission resulting from the inadvertence of a party's legal representative (see Fritz v Hobson (1880) 14 Ch.D. 542; Chessum & Sons v Gordon [1901] 1 K.B. 694; In re: Inchcape (Earl) [1942] Ch. 394; Coppins v Helmers & Brambles Constructions Pty Ltd [1969] 2 N.S.W.R. 279; Tak Ming Co Ltd v Yee Sang Metal Supplies Co [1973] 1 W.L.R. 300, at p. 304; [1973] 1 All E.R. 569. This is so, regardless of whether the order has been drawn up, passed and entered (see Milson v Carter [1893] A.C., at p. 640; Fritz v Hobson (1880) 14 Ch.D., at p. 560).
…
The question whether the Council should be ordered to pay interest on any damages which the applicants proved the had sustained as a subsidiary or consequential question which only arose when the substantial issue between the parties as to liability and resulting damages had been determined. It should, of course, have been mentioned in the notices of appeal. Nevertheless, in the circumstances, we consider that it is competent for this Court, pursuant to the slip rule, to amend the Court's previous order to make provision for interest upon the damages, to which the applicants have been held to be entitled, for the period between the date on which judgment was given in the Supreme Court and the date on which the orders were made in this Court on appeal.
35 Post-judgment interest was ordered by the High Court for the relevant period. However, the Court made observations about three matters concerning the application of the slip rule. The first related to the case of Whitlock v Brew (1968) 118 CLR 445, which is discussed shortly. The second related to the appellant's alternative argument that an order for interest should be made under O 43 r 3 of the High Court Rules, and is not relevant to this discussion. The third was whether an order under the slip rule was available as a matter of course. In relation to this issue, the Court said at 597:
There is a discretion in the court to refuse an order if something has intervened which would render it inexpedient or inequitable that it be made (see Tak Ming [1973] 1 W.L.R., at p. 306; [1973] 1 All E.R., at p. 572 ; and the cases there cited). In the present case, there was considerable delay in filing the notice of motion. The Court's decision was given on 28 October 1981 and the judgment entered at the end of November 1981. The motion to amend the order is dated 22 July 1982. The general principle in support of finality of litigation together with the fact that a party against whom judgment in a money sum is entered is entitled to regard that judgment as finally determining the extent of his liability combine to stress the importance of prompt action under the slip rule. The seriousness of the delay in this case is, however, minimized by the fact that the interest and the delay in making the application to the Court is, to no small extent, explained by the content of the correspondence between the parties during the months prior to the filing of the application.
[Emphasis added]
36 Whitlock v Brew concerned the sale of a petrol station in Victoria. No oral application was made to the Full Court in the Victorian Supreme Court for interest, although the notice of appeal to the Full Court sought judgment for the amount claimed "and interest thereon". Although the plaintiff was successful in his appeal, the Full Court made no order as to interest. The Full Court's orders were subsequently entered. The plaintiff then moved the Full Court to include an order for interest. This order was dismissed: Brew v Whitlock [No 3] [1968] VR 504. Following the defendant's appeal to the High Court, the plaintiff cross-appealed against the failure of the Full Court to order interest. The High Court dismissed the plaintiff's cross appeal by a majority. The reasoning of Taylor, Menzies and Owen JJ was based on the terms of the Supreme Court Act 1958 (Vic) relating to pre-judgment interest. As the majority noted in Shaddock at 596:
The judgment of the Full Court of the Supreme Court makes clear, however, that the decision that the slip rule was not applicable flowed from the wording of s. 78 of the Supreme Court Act 1958 (Vict.) which, unlike s. 94 of the New South Wales Act, provided that an order allowing interest could only be made "at the hearing ... upon application" and the fact that no such application for interest had been made at the hearing. In this Court, Taylor, Menzies and Owen JJ, in their majority judgment, plainly indicated that their approval of the decision of the Full Court was on that basis.
37 A not dissimilar issue arose in Kewside Pty Ltd v Warman International Ltd (1990) ATPR 41-012, a judgment of this Court concerning pre-judgment interest. In that matter, the applicant was awarded an amount for damages that included interest, while the respondent was awarded damages only, and no application was made for interest on behalf of the respondent. French J amended the judgment to include interest using O 35 r 7(3), basing his decision on essentially the same reasoning as the High Court in Shaddock, again noting that finality in litigation was an important consideration in the making of any such order. However the orders in Kewside had not been entered when the order for interest was made and the application was also made relatively promptly.
38 In my opinion, I do have power to make the order sought on the basis that it will involve a correction of an accidental slip or omission. Putting to one side, for the moment, the terms on which the power to order pre-judgment interest is conferred by s 51A, it is clear from the judgment of the High Court in Shaddock that the failure of a legal representative to apply for an order concerning interest is comprehended by the expression "accidental slip or omission" in a slip rule of the type found in the Federal Court Rules. Accordingly that rule enables the Court to correct the order if it otherwise has power to do so.
39 However it is necessary to bear in mind that the power to order pre-judgment interest is governed by statute: see Grincelis v House (2000) 201 CLR 321 at 325-326. In addition, the section conferring power to award interest in Shaddock was not, in any relevant sense, expressed in terms which limited the circumstances in which it could be exercised. That was not the case in Whitlock v Brew where an order could only be made "at the hearing…upon application". In this matter, the power conferred by s 51A is enlivened "upon application". The section is silent as to when the power can be exercised. On one view, it is intended that the power be exercised at the time judgment is pronounced. That is suggested by the language in which pars (a) and (b) is expressed. Those paragraphs appear to contemplate that an order for pre-judgment interest is made as part of the process of pronouncing judgment. That is, the power is to be exercised at the time judgment is pronounced on the footing that an application for its exercise has already been made. However it is by no means obvious that the power can only be exercised at that time. I apprehend that the reasoning of the High Court in Shaddock indicates that a narrow view should not be taken of the circumstances in which an order for interest can be made unless the language of the section conferring power is intractable. The trend of recent authority is to take a wide rather than narrow view of the Court's powers even after judgment has been entered: see Caboolture Park Shopping Centre Pty Ltd (In liquidation) v White Industries (Qld) Pty Ltd (supra). Section 51A should not be construed as limiting the exercise of the power to order pre-judgment interest to situations where an application has been made prior to judgment being pronounced.
40 However the exercise of the power conferred by s 51A (which obliges the Court to order pre-judgment interest) is conditioned by the words "unless good cause is shown". In the present case the respondents rely on the delay in seeking pre-judgment interest. The justification or explanation for the delay was put on the following basis, as I understood the submissions made on behalf of Hanave. As far as the respondents were concerned, the matter was finalised on 13 October 2000, when they discontinued their application for special leave to appeal to the High Court. From 13 October 2000 the respondents were always going to be required to pay $750,000. The only issue that remained was whether Mr Burke had to contribute $375,000. However, the entitlements of Hanave (I interpolate, if no distinction is drawn between Hanave and Mr Burke) depended on the outcome of the proceedings in the High Court. Applying for pre-judgment interest at that stage was not appropriate. In addition, there was no unfairness or injustice to the respondents, particularly as the respondents were on notice of a claim for pre-judgment interest from September 2000, when Mr Burke sent the letter of demand.
41 Counsel for the respondents referred to the judgment of Moffitt P in Simonius Vischer & Co v Holt & Thompson [1979] 2 NSWLR 322 at 338-339:
It has been long generally accepted that, whatever be the cause, delay between cause of action and judgment is productive of unfairness to one or other or both parties. While accepting that the defendant has the advantage of not having to pay the money and has the use of it, it does seem to me that, to make an order for the payment of interest at commercial rates extending for long periods into the past is prima facie productive of unfairness to the defendant; and that it is the more so if he has had no notice, or no early notice, of such a claim. For a defendant or his insurer or both to order their affairs over a long period of years in ignorance that the claim against them is subject to a claim for interest at commercial rates during all that period, is likely to be productive of unfairness and detriment, but possibly of a kind difficult precisely to pinpoint or demonstrate. In some instances, for example, complications may arise by virtue of the incidence of taxation in relation to benefits derived from the money notionally not paid in particular years compared with the liability to pay the full commercial rate of interest. Of course, the plaintiff himself may be worse off by the delay in not receiving the money to which he is entitled, but if the delay is his, this factor may have less weight. At least, it is reasonable to conclude the plaintiffs had it in their power to bring their claim to a conclusion some years earlier than they did. It has been argued, however, on behalf of the plaintiffs that, if some detriment has accrued to the defendants, then this could have been proved by evidence. However, particularly when notice of the claim is given years later, the type of detriment often will be difficult to demonstrate, except by some exhaustive review of the financial structure and operations of the defendant and/or his insurer. This would be a matter of some difficulty in the present case, having regard to the international character of the parties and the changes in exchange rates which occurred during relevant periods. It would be unfortunate that awards of interest should depend upon such inquiries, or that where, for example, proceedings are grossly delayed by reason of the rate at which the plaintiff elects to proceed, the defendant should face an order of interest throughout the period, unless he is able by evidence to pinpoint and prove some particular detriment.
[Emphasis added]
42 To similar effect was a conclusion of Carr J in Golden West Refining Corporation Ltd v Daly Laboratories Pty Ltd (unreported, 16 February 1995, Carr J) where his Honour refused to order pre-judgment interest for a period between the time the cause of action arose and the commencement of the proceedings and the delay was caused by the successful applicants. Also to similar effect was the judgment of Mansfield J in Gibbett v Forwood Products Pty Ltd (No 2) [2001] FCA 434 where again pre-judgment interest was not awarded for a period (occurring while the litigation was on foot) during which there was delay resulting from the conduct of the successful party who sought interest. In both matters the question of whether pre-judgment interest should be ordered in full was approached on the basis that such interest is awarded because the successful party has been "kept out of its money". In those cases, the successful party had been responsible for some of the period in which they were "kept out". An additional consideration referred to by Mansfield J was that the general objective of a provision such as s 51A might be to encourage early resolution of litigation: see MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657 at 663, and that purpose would not be served by awarding pre-judgment interest for a period occasioned by the delay of the successful party.
43 This case presents some unusual features. The delay complained of occurred after judgment was given and was not delay before judgment extending the time by which judgment was given. That is, it has not been argued that Hanave was "kept out of its money" (when speaking of the damages awarded under s 82 of the Trade Practices Act 1974 (Cth) ("TPA Act")) because of delay for which it was responsible, occurring before judgment was given in its favour. But I should note that the statement of claim was not amended to raise the allegation concerning nondisclosure of the incentive payment (the point on which Hanave succeeded before the Full Court) until 2 May 1997, almost three years after the damage was suffered and over a year and a half after the commencement of the proceedings (see (1998) ATPR 41-658 at 41,323). What is relied on is the considerable delay in seeking pre-judgment interest. There is no real reason why the application should not have been made before judgment was given in November 1999. There is certainly no reason at all why the application should not have been made immediately after the judgment of the High Court in April 2002.
44 A Full Court considered the range of circumstances which might give rise to "good cause" in Australian Guarantee Corporation Ltd v Border Printing Services Pty Ltd (1989) Q ConvR 54-319. In that matter a lessee of goods sought damages under s 82 of the TPA Act because of misleading representations made by the lessor. The lessor cross-claimed seeking all rent due under a term of the lease (clause 8) which was enlivened by the repudiation of the lease by the lessee. The lessor failed on that claim because the primary judge viewed the clause as imposing a penalty and unenforceable. The lessor did succeed in obtaining damages at common law in its cross-claim. The primary judge refused to order interest on the sum recovered by the lessor. As the Full Court understood the approach of the primary judge, his Honour had done so for reasons which included that clause 8 was obscure and the lessee would not have known what their obligations were at the time of the repudiation of the lease agreement. The Full Court accepted this was a relevant consideration. Their Honours said:
It is neither possible nor desirable to define what will constitute good cause; each case must be considered by reference to its own circumstances.
45 In my opinion, the failure of Hanave to seek pre-judgment interest before 20 February 2003 creates circumstances which constitute "good cause". These proceedings have been protracted. That they have been, has not been the fault of any party. However the fact that they have been protracted simply exacerbates the consequences of the delay of Hanave in making the application for pre-judgment interest. Mr Tresidder was entitled to assume when the High Court gave judgment in April 2002 that all issues arising from the application of Hanave filed in September 1995 (concerning events in August 1994) had been settled to the extent they required judicial determination. Moreover had an application for pre-judgment interest been made before or at the time judgment was given in 1999, it probably would have been uncontroversial and Hanave would have gained the benefit intended to be conferred by s 51A. It would have been unnecessary for the Court to engage in the type of adjudication reflected in these reasons.
46 The importance of finality in litigation is well settled: see Bailey v Marinoff (1971) 125 CLR 529. As the High Court pointed out in Gould v Vaggelas (1985) 157 CLR 215, the jurisdiction invoking the slip rule to make an order concerning interest on application made after judgment is to be exercised sparingly because to do otherwise would encourage carelessness by a party's legal representatives and expose to risk the public interest in finality of litigation. In this matter I am satisfied that, at the very least, Mr Burke has been careless in relation to Hanave's rights to interest. While it is true that he turned his mind to pre-judgment interest when he wrote the letter of 5 September 2002, he made no attempt to ascertain the legal basis on which interest might be payable and whether it was necessary to obtain an order from the Court. He then believed Hanave was entitled to at least $375,000 but did nothing to secure payment of interest, even on that sum, beyond writing the letter of 5 September 2002.
47 The respondents submitted during the hearing that if I did accept that the slip rule applied in these circumstances and I did not consider that the delay should deny any claim for pre-judgment interest, then I should use my discretion under s 51A to lower the amount of pre-judgment interest payable. I am satisfied that I should follow this course.
48 The parties made submissions on the issue of costs. I propose that Hanave pay the respondents' costs of this application. The application has been made necessary by Mr Burke's carelessness. The respondents should not be required to bear the cost burden of the application even though Hanave has been partially successful and the application has been opposed. That opposition was, in the circumstances, reasonable.
I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Moore.