Hutley v Cosco

Orders

The Court makes the following orders: 1. Refuse the application to vary order 2(b) made and entered on 23 February 2021. 2. Otherwise dismiss the amended notice of motion dated 6 September 2021, with no order as to costs.
MACFARLAN JA: I agree that the application for indemnity costs should be refused for the reasons given by Basten JA. I agree also that the application concerning interest on costs should be refused, but I confine my agreement to the reasons relevant to discretion given by Basten and White JJA. I prefer not to express a view on the jurisdictional issues discussed by their Honours in the absence of full argument having occurred.
For these reasons I agree with the orders that Basten JA proposes.
WHITE JA: I agree with Basten JA that the appellant's application for an order for indemnity costs should be refused. I agree with his Honour's reasons for that conclusion. I would add that as the respondent succeeded before the primary judge in obtaining a judgment for damages well in excess of the amounts in the offers of compromise, it could not be said that his rejection of the offers of compromise was unreasonable.
By her notice of motion filed on 3 March 2021, Ms Hutley sought an order: "Pursuant to s 100 of the Civil Procedure Act 2005 (NSW), the respondent is to pay, in addition to costs, interest on the amount of costs assessed in the Common Law Division in accordance with Order 1-3 above, from 4 November 2016 at the rate of 3.5% per annum."
That application was misconceived. Section 100 of the Civil Procedure Act allows for the inclusion of interest in the amount of a judgment in proceedings for the recovery of money. That section has nothing to say as to the power to order interest on costs. At common law the power to order costs is wholly statutory. That power is now conferred by s 98 of the Civil Procedure Act. The power to order costs under s 98 does not include power to order interest on costs (Flower & Hart v White Industries (Qld) Pty Ltd (2001) 109 FCR 280; [2001] FCA 370, approved by this Court in Spedding v Nobles; Spedding v McNally (No 2) [2007] NSWCA 87). The only power to order interest on costs is that conferred by s 101 of the Civil Procedure Act.
Section 101 relevantly provides: "(1) Unless the court orders otherwise, interest is payable on so much of the amount of a judgment (exclusive of any order for costs) as is from time to time unpaid. ... (4) Unless the court orders otherwise, interest is payable on an amount payable under an order for the payment of costs. (5) Interest on an amount payable under an order for the payment of costs is to be calculated, at the prescribed rate or at any other rate that the court orders, as from the date the order was made or any other date that the court orders. ... (7) In this section, a reference to the prescribed rate of interest is a reference to the rate of interest prescribed by the uniform rules for the purposes of this section."
The rate of interest prescribed for the purposes of s 101(7) is set out in r 36.7 of the Uniform Civil Procedure Rules. It is a rate that is 6% above the cash rate published by the Reserve Bank.
By an amended notice of motion filed on 6 September 2021, Ms Hutley withdrew her application for an order under s 100 of the Civil Procedure Act for interest on costs and instead sought the following order: "Pursuant to ss 101(4) and 101(5) of the Civil Procedure Act 2005 (NSW) (CPA), interest is to be paid on the amount of costs assessed in the proceedings in the Common Law Division (2016/332100) at the rate prescribed by the Uniform Civil Procedure Rules 2005 (NSW) for the purposes of the CPA from the date or dates on which costs were paid by the Appellant, until payment of the amounts by the Respondent and/or John Cosco."
This was the first time that a competent application was made for an order for interest on costs from the time costs were paid.
The orders of this Court made on 21 February 2021 were in substance to allow the appeal, to set aside the orders below, in lieu thereof to dismiss the Amended Statement of Claim, and to order that Mr Cosco pay Ms Hutley's costs of the proceedings in the Common Law Division and in this Court.
The first question is whether the application under s 101 of the Civil Procedure Act for an order under s 101(5) that interest be calculated as from the dates costs were paid by the appellant, rather than from 21 February 2021, is barred because that application has not been brought within 14 days after the making of the orders on 21 February 2021. Neither party made submissions on this question, but the Court must itself address the question of its jurisdiction to make the order sought.
Rule 36.16 of the Uniform Civil Procedure Rules provides: "36.16 Further power to set aside or vary judgment or order(cf SCR Part 40, rule 9) (1) The court may set aside or vary a judgment or order if notice of motion for the setting aside or variation is filed before entry of the judgment or order. (2) The court may set aside or vary a judgment or order after it has been entered if - (a) it is a default judgment (other than a default judgment given in open court), or (b) it has been given or made in the absence of a party, whether or not the absent party had notice of the relevant hearing or of the application for the judgment or order, or (c) in the case of proceedings for possession of land, it has been given or made in the absence of a person whom the court has ordered to be added as a defendant, whether or not the absent person had notice of the relevant hearing or of the application for the judgment or order. (3) In addition to its powers under subrules (1) and (2), the court may set aside or vary any judgment or order except so far as it - (a) determines any claim for relief, or determines any question (whether of fact or law or both) arising on any claim for relief, or (b) dismisses proceedings, or dismisses proceedings so far as concerns the whole or any part of any claim for relief. (3A) If notice of motion for the setting aside or variation of a judgment or order is filed within 14 days after the judgment or order is entered, the court may determine the matter, and (if appropriate) set aside or vary the judgment or order under subrule (1), as if the judgment or order had not been entered. (3B) Within 14 days after a judgment or order is entered, the court may of its own motion set aside or vary the judgment or order as if the judgment or order had not been entered. (3C) Despite rule 1.12, the court may not extend the time limited by subrule (3A) or (3B). (4) Nothing in this rule affects any other power of the court to set aside or vary a judgment or order."
Prior to 2015 no interest was payable on costs except if the court made an order for interest on costs ([65] below).
There is authority that r 36.16(3A) required that an application for an order for interest on costs be made within 14 days after the costs order is entered (Drummond and Rosen Pty Ltd v Easey & Ors (No 2) [2009] NSWCA 331 (at [49]); and Zepinic v Chateau Constructions (Aust) Ltd (No 2) [2013] NSWCA 227 (at [85])).
The discussion of this question in Drummond and Rosen Pty Ltd v Easey & Ors (No 2) was obiter and lacked reasoning. The decision of McColl JA in Zepinic v Chateau Constructions (Aust) Ltd (No 2) was given when her Honour was sitting as a single judge of appeal under s 46 of the Supreme Court Act 1970 (NSW). Since those decisions there has been a number of first instance judgments to contrary effect including Short v Crawley (No 45) [2013] NSWSC 1541 (White J), Grace v Grace (No 9) [2014] NSWSC 1239 (Brereton J), Gray v Richards (No 4) [2017] NSWSC 1714 (McCallum J), and Tjiong v Tjiong (No 2) [2018] NSWSC 1981 (Parker J).
The same issue arises with respect to an application under s 101(5) for the court to order that interest be payable from a different date than the date of the costs order.
I adhere to the reasons I gave in Short v Crawley (No 45).
The first question is whether the application to vary the date from which interest on costs is payable is an application to set aside or vary the orders made on 21 February 2021. The answer to that question is no. The orders made by this court on 21 February were made pursuant to s 98 of the Civil Procedure Act. They did not engage and did not address the power to make an order varying the date from which interest on costs is payable pursuant to s 101(5). The orders made on 21 February 2021 will be unaffected whether such an order is made or refused.
In Rodi v Gelonesi [2016] NSWCA 348, Payne JA held (at [35]-[36]) that it was arguable that an application under s 98(1)(b) or s 99 of the Civil Procedure Act that a solicitor for the plaintiffs pay the costs of the successful party could be characterised an application to vary the costs order already made that those costs be paid by the plaintiffs. His Honour said that it was arguable that the costs order determined a claim for relief, the claim being orders disposing of the costs of the proceedings. Payne JA found support for this approach in Roads and Traffic Authority of NSW v Palmer (No 2) [2005] NSWCA 140. There a plaintiff succeeded against three defendants at trial. An appeal by one defendant was successful but the appeals by the other defendants were dismissed. The court ordered the plaintiff to pay the costs of the ultimately successful defendant. It dismissed the appeals brought by the other defendants with costs. Thus the unsuccessful defendants were ordered to pay the plaintiff's costs of the appeal and of the trial.
Two years later the plaintiff sought a Bullock order (Bullock v London General Omnibus Co [1907] 1 KB 264) that the unsuccessful defendants pay the plaintiff the costs she had been ordered to pay the successful defendants. [8]
Giles JA, with whom Spigelman CJ and Handley JA agreed, held that this was an application to vary the costs orders previously made and did not fall within Pt 40 r 9(3) of the Supreme Court Rules (the equivalent of UCPR r 36.16(3)) because the costs orders did determine the claim for relief, being orders disposing of the costs of the trial (at [21]).
There can be no quarrel with either conclusion. The costs orders determined the extent of the liability of the unsuccessful defendants to the plaintiff. In the present case this Court has not determined whether there should be any variation to the default position concerning interest on costs.
In Zepinic v Chateau Constructions (Aust) Ltd (No 2) McColl JA held (at [85]) that the application for the order for interest on costs sought a variation of the orders of the court by way of making an additional order (at [85]). If that were so, then the Court would nonetheless have the power to make the order under r 36.16(3) because the Court has not determined the claim for relief, namely the claim to vary the date from which interest on costs is to be payable. The 14 day limitation under r 36.16(3A-3C) does not apply to an application under r 36.16(3). (Short v Crawley (No 45) at [77]-[78]).
Having concluded that the application is not one to vary the previous orders, the question is whether the Court can made no order under s 101 because of the principles of finality of litigation. The classic expression of those principles was given by Barwick CJ in Bailey v Marinoff (1971) 125 CLR 529 at 530: "Once an order disposing of a proceeding has been perfected by being drawn up as the record of a court, that proceeding apart from any specific and relevant statutory provision is at an end in that court and is in its substance, in my opinion, beyond recall by that court. It would, in my opinion, not promote the due administration of the law or the promotion of justice for a court to have a power to reinstate a proceeding of which it has finally disposed."
That principle is subject to statutory qualification. In Short v Crawley (No 45) I held that there was such a statutory qualification in s 98(3) of the Civil Procedure Act. I there held, and I adhere to that view, that an application for an order for interest on costs is an order "as to" costs within the meaning of s 98(3) even though the power to order interest on costs is a separate power from the power to order costs.
In Grace v Grace (No 9) [2014] NSWSC 1239, Brereton J reached the same conclusion for different reasons. His Honour said: "[35] ... Generally speaking, unless the question of costs has been dealt with, explicitly or implicitly, in the final judgment, a costs order does not involve any variation of or attack on the final substantive judgment. Accordingly, the finality principle is not offended by subsequently entertaining and dealing with an application for costs because it does not involve impugning "the operative and substantive part" of the judgment. In NSW Insurance Ministerial Corporation v Edkins (1998) 45 NSWLR 8, the Court of Appeal held that a judge was not functus officio after giving judgment and making costs orders if the duties in the case were not otherwise completed (even though the judge was not then aware of it), and that in circumstances where there was a costs argument still to be heard - although it had not until that point been made - he was not functus officio and was entitled to entertain and deal with an application for a special costs order made immediate[ly] following the delivery of judgment. While that result could be supported as a variation to the order made on application before it was entered, under the then equivalent of UCPR r 36.16, that is not how the Court of Appeal put it (at 12E): Also in my opinion there is no merit in the argument concerning the judge being functus officio at the point where he announced his verdicts and costs orders in the two actions. Although he did not know it at that moment, he had not then completed his duties in the cases, there was a costs argument still to be heard. He heard it immediately and acted quite properly and with proper authority in doing so. … [37] However, provision to similar effect was made in the Rules [(NSW) Supreme Court Rules 1970, Pt 52, r 5; Pt 52A, r 5]. It may be allowed that s 98(3) is concerned with costs orders after the substantive decision has been given, and must be subject to finality from entry of costs orders already made, so that it would not not authorise re-opening a final costs order that has already been made [Roads and Traffic Authority of New South Wales, Council of the Shire of Evans and Pioneer Road Services Pty Ltd v Palmer (No 2) [2005] NSWCA 140, [17] (considering (former) SCR, Pt 52A r 5)]. But subject to that qualification it is, in the words used by Barwick CJ, a "specific and relevant statutory provision" to the contrary. [38] Accordingly, an order for costs can be made after the conclusion of proceedings, so long as it does not impugn or alter a final costs order already made [see also Cotie v Cox [2006] NSWSC 859, [22]-[27] (Latham J)]. And if an order as to costs can be made after the conclusion of proceedings, it must follow that an order for interest on costs can be made after the conclusion of proceedings."
Brereton J also concluded that a claim for interest on costs does not merge in the relevant costs order (at [40]) and by reference to authority on cognate rules prior to the introduction of the Civil Procedure Act concluded that the power to make an order for interest on costs did not have to be exercised at the time of making the relevant costs order so that a judge was not rendered functus officio and precluded from making a later order for interest on costs (at [43]-[52]).
Brereton J concluded: "[53] The foregoing analysis results in the following conclusions. As an order for interest on costs derives from a different statutory source than the costs order, does not impugn the operative and substantive costs order, and results in a separate judgment from the judgment under the costs order, a claim for interest on costs does not merge in the relevant costs order, and a judge does not become functus officio in that respect on making the relevant costs order. Prior to the commencement of the costs assessment regime in 1994, it was accepted that an order for interest on costs did not have to be sought when the relevant costs order was made, but could be made subsequently; the introduction of the costs assessment scheme, while removing the power from taxing officers, was not intended to affect this; and the substantial re-enactment of SCA, s 95 as CPA, s 101 assumed the established position. The predominance of judicial authority also favours that view. [54] In my judgment, therefore, if there is a time limit for seeking an order under CPA, s 101(4), it is not the making of the relevant costs order (or 14 days thereafter), and no viable alternative has been identified, let alone suggested to be applicable in this case. (Arguably, the (NSW) Limitation Act 1969 may provide one, by s 14(1)(d) or s 17, and the Court might decline as a matter of discretion to entertain an unduly belated application [cf Cotie v Cox, [25]-[26]], but it is unnecessary to explore those possibilities further)."
Whether for the reasons I advanced in Short v Crawley (No 45) or for the separate reasons advanced by Brereton J in Grace v Grace (No 9), with which I agree (save that in any event I consider the issue to be resolved by s 98(3)), the Court is not functus officio.
Mr Cosco did not submit otherwise.
In Short v Crawley (No 45) at [84]-[85] I advanced a number of reasons as to why the construction of r 36.16 which I favoured was consistent with the dictates of ss 56 and 57(2) of the Civil Procedure Act. Section 101 of that Act was amended in 2015 (Courts and Justice Portfolio Legislation Amendment Act 2015 (NSW) Sch 1 cl 2). Prior to the amendment no interest was payable on costs unless the court made an order for such payment; in which event interest was payable from the date or dates on which costs were paid or such later date as the court might order.
The 2015 amendment to s 101 raises a different question, but one which also indicates that in accordance with ss 56(2) and 57(2) of the Civil Procedure Act r 36.16 should not be interpreted as requiring an application for a contrary order under s 101(4) or (5) to be brought within 14 days of the making of the costs order. A good reason for a party liable to pay costs to seek a contrary order under s 101(4) or (5) would be if the party entitled to costs had not made any payment. In the ordinary course that would not be known to the party liable to pay costs within 14 days of the making of the costs order.
Ms Hutley adduced no evidence as to what costs payments she made. Nor did she lead evidence as to how any payments she might have made were funded. She led no evidence as to whether she has sustained loss by making payments towards costs, whether by borrowing, or by withdrawing moneys that would otherwise have earned interest, or dividends, or appreciated in capital value.
The appellant submitted that evidence as to the dates on which costs were paid is not essential for an application for an order for interest on costs, citing Drummond and Rosen Pty Ltd v Easy (No 2) [2009] NSWCA 331 (at [3]-[4]). That is true. But the absence of such evidence and evidence as to how the appellant is out of pocket is a discretionary reason for not making an order for interest on costs (Spedding v Nobles; Spedding v McNalley (No 2) [2007] NSWCA 87 at [17]; Illawarra Hotel Co Pty Ltd v Walton Construction Pty Ltd (No 2) (2013) 84 NSWLR 436; [2013] NSWCA 211 at [38]).
If the prescribed rate of interest under s 101 (6% above the Reserve Bank cash rate) is materially higher than any interest cost incurred by Ms Hutley in paying costs, or any return which she would otherwise have received from the moneys used to pay costs, that would be a material consideration in the exercise of the discretion under s 101(5) to order that interest be paid at the rates prescribed for the purposes of s 101 from the date or dates on which costs were paid by Ms Hutley.
Further, $750,000 has been provided by way of security for costs. That money has been paid to the NSW Trustee and Guardian for payment into a common fund. Ms Hutley will be entitled to any interest earned on so much of those moneys as she is entitled to receive in payment of her costs from the money paid into court (Uniform Civil Procedure Rules r 41.6).
In the absence of evidence on these matters, the application to vary the date from which interest on costs is payable should be refused.

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