Judgment was given in favour of Mr and Mrs Keys in May (see Keys v Salway [2015] NSWSC 613). The parties are not agreed as to the calculation of interest or costs.
[2]
Interest
Mr and Mrs Keys claimed interest in their amended statement of claim, in clauses 7 and 8. Rule 6.12 of the Uniform Civil Procedure Rules 2005 (NSW) requires that an order for interest up to judgement be specifically claimed; that for liquidated claims the rate claimed may be specified and if not specified, the rate at which interest is claimed "is taken to be" the rate specified in Rule 6.12(8).
In clause 7 the amount owing under clause 20.3 of the lease, was claimed to be $83,302.01 plus interest. In clause 8 damages for breach of other specified clauses of the lease totalling $62,238.87 was claimed, plus interest.
At trial, Mr and Mrs Keys' schedule of damages (mfi 20), however, made no reference to interest and it was not otherwise addressed, nor dealt with, in the May judgment.
Mr and Mrs Keys now claim that interest should be calculated in accordance with item 15 of the lease. Mr Salway conceded that they should have an order for pre-judgment interest, but argued that interest not having been pressed at trial on the basis now sought, Mr and Mrs Keys are entitled only to pre-judgment interest calculated in accordance with the Rules.
In a case such as this, for recovery of money, "including any debt or damages", s 100 of the Civil Procedure Act 2005 (NSW) gives the Court a discretion to order the payment of pre-judgment interest at "such rate as the court thinks fit". The Court's Practice Note SC Gen 16 sets the rate of such pre-judgment interest.
It has been held in relation to the predecessor provision, s 94 of the Supreme Court Act 1970 (NSW), however, that where a party has an independent entitlement to interest under a lease, interest cannot be awarded under the section (see Degmam Pty Ltd (in liq) v Wright [1983] 2 NSWLR 348). That was a case the opposite of that here, where the interest rate provided by the lease was less than that fixed under the Court's Rules. Holland J concluded (at 353) that the intention of s 94 was to provide a discretion to award interest to fill a gap, where a legal right to include a claim for interest on a debt did not exist.
The language of the two sections is not identical, but is relevantly similar. Even if it were not, the existence of a legal right to recover interest at an agreed rate is relevant to the exercise of the statutory discretion under s 100.
Clause 5 of the lease "Money What must the lessee pay?" specifies that the lessee must pay rent specified in item 13A, a share of outgoings, the lessor's reasonable costs of remedying a default and of dealing with any application for consent under the lease, plus interest at the rate specified in item 15. Item 20.3 provides for a payment of an additional year's rent, if at the expiration of the lease, Mr Salway's herd had not achieved non-assessed or higher status. In its terms, the interest provided for in clause 5.1 and item 15 of the lease does not apply to the additional rent specified in item 20.3.
In the result, even though not identified by either party, it appears that Mr and Mrs Keys do not have a legal right under clause 5 of the lease to interest at the rate specified in item 15 for the additional rent flowing from item 20.3. The position in relation to the claims the subject of clause 8 of the amended statement of claim may be different, but this was also not addressed by the parties, nor raised by the amended statement of claim, which made no reference to item 15 of the lease.
In those circumstances, it cannot be concluded that Mr and Mrs Keys have established a basis on which the calculation of interest can be approached as they now belatedly claim. Accordingly, interest must be calculated on the basis conceded by Mr Salway.
[3]
Costs
Affidavits sworn by the parties' solicitors reveal that Mr and Mrs Keys made a number of offers of settlement, none of which were accepted.
The proceedings were commenced in the District Court in June 2012. Particulars were sought and provided in July. Further particulars were sought and before answers were provided, an offer was made by Mr and Mrs Keys in December 2012. Answers to the particulars were provided in January and the offer then extended to 15 February 2013.
Before the proceedings were commenced, however, in February 2012, Mr Salway had made a Calderbank offer to settle for $22,000. Mr and Mrs Keys advised that they were prepared to accept that offer, so long as Mr Salway left the troughs and pressure tank in situ at the farm, when he vacated. There was no response and when Mr Salway vacated, he removed the tank in breach of the lease. This was dealt with in the May judgment.
In March 2012, Mr and Mrs Keys made a further offer to settle for $37,000, advising of various problems they had identified after Mr Salway had vacated. There was no response and so the proceedings were commenced.
In December 2012, Mr and Mrs Keys made a further offer to settle for $75,000, but again there was no response. It was only in December 2013 that Mr Salway suggested that he had not had sufficient information to respond to that offer, given a failure to provide particulars ordered by the Registrar in November 2012. That did not explain why the offer was not accepted when particulars were provided and the offer extended to February 2013.
Mr and Mrs Keys made a further offer to settle for $75,000 in July 2014. In February 2015, there was a further offer to settle for $66,000 plus $34,000 towards costs.
After the May 2015 judgment, the parties agreed that damages must be quantified in a sum of $80,652.72 plus interest for breach of clause 20.3 and $23,909.15, plus interest for breach of the other clauses of the lease dealt with in the May judgment (mfi 11). Mr and Mrs Keys' case was that in those circumstances, they should have an indemnity costs order in their favour from March 2012. Mr Salway conceded that an indemnity costs order must be made in their favour, but argued that the date should be from February 2013, given that the earlier offer was made before particulars of the claim had been provided.
It seems to me that the indemnity costs order should date from March 2012. Given what was in issue, the March 2012 offer to settle for $37,000 was obviously a very significant compromise. That the proceedings had not then been commenced and particulars of the claim had not been sought or provided is a relevant consideration, of course. Also to be considered, however, is that the lease provided for a yearly rent of $66,000. Mr Salway not having exercised his option under the lease and having left the property contaminated as it was, when he vacated, his agreement to pay an additional year's rent under clause 20.3, increased by CPI increases, had crystallised.
No explanation was sought of the March 2012 offer. Plainly, none was needed at the time, given the significance of the compromise being offered, not only in relation to the additional years' rent, but for Mr Salway's other breaches of his obligations under the lease. Had particulars been sought or provided at the time, they would have merely reinforced the significance of the compromise Mr and Mrs Keys were then prepared to make, before embarking on litigation.
The rejection of that and later offers was plainly unreasonable in the circumstances discussed in the May judgment. What had been agreed from the outset was that Mr and Mrs Keys would only allow Mr Salway to bring his infected herd onto their uninfected land, if Mr Salway agreed to pay a year's rent, if he left the property at a time when his herd was still infected with BJD and the land still contaminated. Clause 20.3 of the lease did not give effect to the parties' common intention in that regard. It was ambiguous and would have to be rectified, if Mr Salway was not prepared to adhere to what had been agreed. Mr Salway's evidence established that when he received the offer in March 2012, he was aware that he had also breached other obligations under the lease. That was consistent with his prior conduct, Mr Salway having himself earlier offered to settle for $22,000. That offer reflected an appreciation that he was at risk, if litigation was commenced by Mr and Mrs Keys.
It was evident that the settlement for $37,000 offered in March 2012, after Mr Salway had further breached the lease by removing the tank, despite Mr and Mrs Keys' preparedness to accept his earlier offer of $22,000, was a very significant compromise, in all of the circumstances then prevailing. It would also then have been apparent that the difference between the two offers would have been swiftly eaten up by the costs incurred, if Mr and Mrs Keys commenced proceedings, to pursue Mr Salway's breaches of the lease.
In all of those circumstances, I am satisfied that justice demands that there be a departure from the usual costs order from 19 March 2012, the date that the March offer expired.
[4]
Order
For the reasons given, I order that Mr and Mrs Keys file final orders reflecting the conclusions I have reached as to interest and costs within 7 days of the date of this judgment.
All exhibits and subpoenaed material may be returned forthwith; any exhibits returned must be retained intact by the party or person that produced the material until the expiry of the time to file an appeal, or until any appeal has been determined.
[5]
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Decision last updated: 01 July 2015