4960/04 - JACKSON v RICHARDS
JUDGMENT
1 HIS HONOUR: I am dealing with an application for damages consequent upon an undertaking to pay damages caused by the grant of an interlocutory injunction which has been dissolved. These matters are almost always dealt with by Associate Justices, but for some unexplained reason, this particular matter was allotted to me.
2 The background is that the defendant was in dispute with a Ms Rose and the court needed to deal with an application under the Property (Relationships) Act 1984 between the defendant and Ms Rose. The defendant retained solicitors Jackson Smith to represent him. The result of the case was that Master McLaughlin, as he then was, ordered that the defendant's house be sold, that 60% of the proceeds be paid to Ms Rose, and the balance to the defendant.
3 In September 2004, just before the proceeds of sale were due to be paid to the defendant, the solicitors approached Campbell J and obtained an injunction freezing the defendant's funds totalling $137,914.14, alleging that they had a fruits of litigation lien over the funds. They gave the usual undertaking as to damages.
4 The monies were placed in some controlled interest account and remained there until 8 July 2005 when White J dismissed the application for final injunction on the basis that the solicitors had no lien.
5 The solicitors asked the defendant how he would like the monies paid out and he asked for a bank cheque. The solicitors asked for details of his bank account, which he gave them.
6 On about 7 July 2005, the solicitors paid the defendant $138,138. 58, so that the ten months that the capital was frozen only produced $224.44 interest.
7 However, in the interim the solicitors had made up their bill, had it assessed by a costs assessor and registered the costs assessor's decision with the District Court. The solicitors were certified as being entitled to $150,792.70 for costs.
8 As soon as the defendant paid the bank cheque into his bank account, a garnishee order operated and paid the monies back to the solicitors on account of that $150,792.70 debt.
9 The defendant makes a number of accusations against the solicitors. First, that they were incompetent about his matter and assigned very junior solicitors and very junior counsel to his claim. Secondly, that there was no proper supervision by experienced solicitors of those junior lawyers. Thirdly, that he gave confidential information as to his bank account which the solicitors used for their own purposes to file garnishee orders. Fourthly, that he had a large number of creditors, and indeed may very well go bankrupt, and the solicitors have used confidential information to prefer their own position and get paid a large sum of money in preference to other creditors. Fifthly, that the solicitors used the time in which the injunction was current in order to make up their bill and have a judgment debt ready on which to base a garnishee order.
10 The defendant represented himself at the hearing before me on 5 December. The solicitors were represented by Ms Rena Sofroniou of counsel. None of the matters, with the possible exception of the last which concerned the defendant and which I have noted above, involved the court in this present action. All I need to do is to assess the damages caused by the injunction. The other matters may be able to be dealt with by some other authority, though Ms Sofroniou makes it clear that all of them are denied and that she says some of them have already been dealt with by the costs assessor.
11 There seems little doubt in my mind that the defendant has suffered some damage by the grant of the injunction. He has been out of his money for 10 months. My principal problem accordingly is to assess the amount that should be awarded to the defendant.
12 Although the usual tag given to the undertaking is "undertaking as to damages", when fixing the amount to be paid, the Court is, for reasons which appear later, really making an order for restitution, not an award of damages.
13 The principles on which the court acts in fixing the amount to be paid were dealt with by the High Court of Australia in Air Express Ltd v Ansett Transport Industries (Operations) Pty Ltd (1981) 146 CLR 249. The report covers both the first instance judgment of Aickin J and also the decision of the Full Court on appeal which upheld Aickin J's decision.
14 The following principles emerge from that case: the brackets refer to the page of the relevant page of the Air Express case.
15 1. It is for the claimant under an undertaking to establish by evidence or by inference from evidence that the grant of the injunction was a cause of his damage and that but for it he would not have suffered that damage (320).
16 2. There is a distinction between damages flowing from the injunction and damages flowing from the litigation itself. Only the former is claimable in this type of proceeding (268).
17 3. The damages must be confined for loss which is the natural consequence of the injunction under the circumstances of which the party obtaining the injunction has notice (267).
18 4. The damages are not the same as damages for breach of contract (266).
19 5. Whilst the common law principles of remoteness are relevant, those dealing with causation are not (319).
20 The principles were further considered by the Appeal Division of the Victorian Supreme Court in National Australia Bank Ltd v Bond Brewing Holdings Ltd [1991] 1 VR 386. The court's reasons on the present point are dicta in the Bond case, the judge having omitted to take an undertaking as to damages.
21 In the Bond case, Brooking J said at 597:
"… the principle on which the courts have for centuries acted is that when an erroneous judgment or order is overturned, whether by means of appeal or by any other procedure, the court will achieve a just result by requiring anything taken from him by the other party to be restored."
22 Although I am not here dealing with an erroneous judgment as the order made by Campbell J was correct on the material that his Honour then had and on the principles he was bound to apply, the statement made after an analysis of the authorities is a useful one to follow.
23 The defendant says that he is entitled to damages of $135,000. This is obviously an ambit claim. At the hearing the defendant pressed damages under three heads, viz:
(1) Interest that would have been paid on the money;
(2) Damages for the inability of the defendant to use the money for medical and dental treatment;
(3) Damage suffered by the defendant because the existence of the injunction enabled the solicitors to manoeuvre themselves into a position where as soon as it was dissolved, they were able to obtain the whole of the amount instead of a mere rateable payment with other creditors.
24 As to the claim for interest, Ms Sofroniou says this is only claimable if the evidence were to show that the defendant would have invested the money. She says that the evidence really shows he would not have done so. He would have used the money, at least in part, for medical and dental payment and in paying some of his debts.
25 Ms Sofroniou further says that if I take that view that I should not adopt the court rate suggested by the defendant.
26 The defendant says that the proper way to approach interest is to take the court rate of interest of 9% on the relevant sum and then deducting the $224 which actually accrued. If one were to do that sum, on my calculation one gets a figure of $10,119.
27 Authority tells against both of Ms Sofroniou's propositions. As Brooking J said in the Bond case at 597:
"Interest is for this purpose treated as the fruit of money and he who has had the use of money will not be heard to say that there were no fruits."
28 Those words were uttered in the contest of reversal of a final judgment, but, they are applicable to the present situation. See also Eyre v Woodfine (1582) Cro Eliz 278; 78 ER 533.
29 Furthermore, interest will, unless there are special circumstances, be allowed at the court rate, Production Spray Painting & Panel Beating Pty Ltd v Newnham (1991) 27 NSWLR 659 at 663 and Mason & Carter, Restitution Law in Australia (Butterworths, Sydney, 1995) [710].
30 The second head of claim really balances the first. One can either invest one's money or one can use it. If one uses it, one does not get interest; if one invests it, one does not use the money. Assuming a perfect world, the combined damages under heads (1) and (2) would be $10,119.
31 The defendant says that if he had had the money he would know that he would probably go bankrupt and accordingly he would do whatever was within the law to protect himself. He would first make sure that he got proper medical and dental treatment. He has an ongoing illness and he did not get proper medical treatment because he did not have the cash funds to do it. He did not have dental treatment. Now that the money has been absorbed by the solicitors under their garnishee, he will never get that treatment. In the same plight he would have bought himself a car of the value to which bankrupts are entitled to retain under the Bankruptcy Rules, but he has not had that opportunity and so he has been without a car.
32 The remoteness of damages rules apply to claims under the undertaking as to damages. Ordinarily, a person who has not had money because of the acts of another party does not get damages for what he could have done with the money had he had it in his hands because the law would say that he should just have borrowed it at interest and claimed the interest as damages.
33 However, the situation is different when the other party knows of the impecuniosity of the defendant. In the present case, the solicitors had been involved in proceedings under the Property (Relationships) Act and, assuming they were doing their job properly, as they claim to have done, they must have had intimate knowledge of the capital and income of the defendant; thus, on the balance of probabilities they knew of his debts and of his limited capital.
34 Where this situation appertains, extra damages may be awarded to a claimant under contracts, such as breach of contract to make a loan; see eg Prehn v The Royal Bank of Liverpool (1870) LR 5 Ex 92.
35 However, in the instant case, there is no evidence of any particular extra expense caused to the defendant, nor is there any evidence that his health suffered as a result of not obtaining the treatment.
36 If, for instance, the defendant had gone to the money sharks and had borrowed money at 48%, it may be that the solicitors would have had to pay that large amount of interest because they would have known that the defendant was only able to borrow because of his precarious financial position at a much higher rate of interest than normal. However, that did not happen.
37 There does not appear to be any case where damages have been allowed for depriving a person of cash flow. In this 21st century, that, however, is a matter which can be one of serious concern.
38 A claimant must prove his damages when seeking to be compensated for disruption caused by the grant of an injunction. However, there is also an interest in the court in seeing to it that its processes are not taken advantage of by people who are not fully and fairly willing to compensate those who suffer from their putting the court's processes in motion. I consider that it is appropriate to increase the award by a further $1,000 to cover unspecified inconvenience as a result of deprivation of the money.
39 This then brings me to the third head.
40 There is no doubt at all that the solicitors benefited by the injunction being in place. The 10 months enabled them to prepare their bill and be in a position to garnishee. The enquiry of the client as to where his bank account was located was ostensibly to help him but actually to assist the solicitors to issue their garnishee, is not usually the conduct one expects from professional people, but that does not affect the result of this case.
41 The solicitors were enriched by this manoeuvre because, in the ordinary course of events, they would have had to rank equally with other claimants. Because of the injunction they were paid all but about $13,000 of their fees.
42 I should note that I accept the evidence of Mr Lalic, the junior solicitor involved in the case on the part of the solicitors, that he did not seek the injunction in order to give his firm time to have its costs assessed and prepare for garnishee, but took advantage of it.
43 There is little authority on the point as to whether a person who suffered under an interlocutory injunction is limited to damages he or she suffers or whether, in addition, account may be taken of the advantage that the other party gained at his or her expense.
44 It is frequently empathized that in this sort of case, one is really rendering restitution, not awarding damages in the true sense. However, allowing interest is part of restitution; see eg Rodger v Comptoir D'Escompte de Paris (1871) LR 3 PC 465 which is regarded by everyone as a leading authority in the field.
45 In Greenwood County v Duke Power 107 F (2d) 484 (1939), a decision of the 4th Circuit Court of Appeals, it was made clear with reference to copious United States authority that one cannot give compensation for delay or even for allowing the party who gained the injunction from continuing to trade in a monopoly situation. The court said that one cannot disguise a claim for damages as a claim for restitution (p 487).
46 Mason & Carter op cit at [708] instance an Israeli case, Palimport v Ziba Geigi (1975) 29(1) PD 592 where a final injunction prevented the claimant from marketing a product on the grounds of infringement of patent. The injunction was later reversed on appeal. During the periods the injunction was in force, the only person who could market the product was the opposing party. The Supreme Court of Israel held that the claimant had a right to have restitution of the profits on the sales to his customers over the period when the injunction was in force.
47 I believe that I would follow that decision in a case where the claimant showed that it was his or her profits which were taken by the opponent. However, where the opponent was merely allowed to trade generally and exploited a monopoly, the claimant cannot point to anything which he or she has lost and the other party gained.
48 In the present case, although the solicitors have received a benefit from the injunction, the defendant has not shown that they have taken that which, had the injunction not been granted, would have belonged to the defendant.
49 Thus I cannot give anything under this third head.
50 Accordingly I order that the solicitors pay to the defendant the sum of $11,119 under the undertaking as to damages. They must also pay the costs of this application.
51 The accounts between the solicitors and the defendant appear to be that the defendant owes about $13,000 costs (and there may be some interest) and the solicitors owe the defendant his costs of the proceedings before White J and Campbell J. Although the defendant was unrepresented before White J, the probabilities are the costs due to the defendant will outweigh the costs due to the solicitors. However, the only real way to ascertain this is for the defendant to have his costs assessed.
52 However, because the probabilities are as I have indicated, I do not consider that it would be appropriate to set-off the present judgment of
$11,119 plus costs against anything that is owed by the solicitors so that the $11,119 and in due course, the costs, must be paid in cash to the defendant.