Leeda Projects Pty Ltd v Zeng [No 2] [2020] VSCA 244

1 On 31 July 2020, the Court made orders granting leave to appeal and allowing the appeal in this matter. These reasons should be read with the principal reasons of the Court.[1] The parties were directed to file submissions in relation to the final disposition of the appeal, including as to costs. The last of those submissions were filed on 10 September 2020.

2 The appellant was successful in its challenge to the order of the primary judge that it pay the respondent $471,405.03, inclusive of interest. The parties are agreed that, in place of the order of the primary judge to that effect, it should be ordered that the appellant is to pay the respondent the sum of $378,439.44, again inclusive of interest. That result follows because the respondent succeeded in the appeal in establishing her alternative claim for damages based on wasted expenditure, in that lesser amount.

3 As to the costs of the appeal, the appellant submits that the Court should have regard to the degree of success each party has enjoyed on the appeal and the time devoted to each issue and its importance.[2] The appellant submits that the appropriate outcome is an order that the respondent pay the appellant 60 per cent of its costs of the appeal, recognising the success of the respondent in establishing her claim for damages while also acknowledging that the appellant succeeded in what it submits was the issue of most importance in the proceeding, namely the suitability of market rental value as the measure of damages.

4 The respondent submits that she should be entitled to her costs of the appeal in accordance with the ordinary rule that the unsuccessful party pays the costs of the successful party. She submits that she was substantially successful in defending the judgment of the trial judge.

5 In our opinion, when regard is had to the substance of the appeal, the appellant succeeded in having the judgment against it reduced by approximately $100,000, but failed in its attempt to have the order of the Tribunal awarding nominal damages only reinstated. In all the circumstances, the appellant has been only modestly successful in its appeal and we consider that it ought to be awarded only a relatively small proportion of its costs. It will therefore be ordered that the respondent pay the appellant 30 per cent of its costs of and incidental to the appeal.

6 In relation to the costs of the appeal from the Tribunal before the primary judge, the appellant submits that the respondent ultimately failed in her principal claim based on market rental value and that this claim occupied the bulk of the time and effort of the parties at trial. It is said that waste and expenditure were mentioned in only 34 pages of the 141 page transcript.

7 The respondent submits that she consistently advanced two alternative measures of loss upon which damages should be awarded to her and that both arose out of the same facts and were directed to the same question before the primary judge, namely whether the Tribunal had erred in awarding her only nominal damages. The respondent submits that to count pages of transcript devoted to factual topics, in these circumstances in particular, is a highly artificial way of proceeding.

8 In our view, the respondent's submissions should be accepted. She has been successful, even allowing for the partial success of the subsequent appeal, in displacing an order for nominal damages and recovering a significant sum by way of general damages. It will be ordered that the appellant pay the respondent's costs of the proceeding before the primary judge. [3]

9 The remaining matter concerns the fact that the appellant paid the full amount of the judgment of the primary judge on 29 May 2019 and, as a result of the partial success of the appeal to this Court, the amount of that payment was in excess of that ultimately ordered by an amount of $92,965.64. The appellant seeks an order that the respondent repay that amount, together with interest calculated at the rate of 10 per cent per annum.

10 The primary submission of the respondent in relation to this matter is that the overpayment should be offset against the costs to which she is entitled. However, the repayment is due now, and, so far as we are aware, the costs of the proceeding in the Trial Division have not been taxed. It would be unjust to order a set-off in those circumstances. Such an order would amount to a de facto order for security for costs of the earlier proceeding. It is a matter for the parties whether they wish to enter into such an arrangement. We see no basis for forcing it upon the appellant.

11 In these circumstances, the respondent submits that there is no justification for the appellant to seek interest at 10 per cent per annum. Instead, the respondent submits that an interest rate of 1.14 per cent should apply, which is said to represent the average retail deposit and investment interest rate for the period from June 2019 to August 2020 for one year term deposits greater than $10,000.

12 There is no doubt that the Court has jurisdiction to order the repayment of the amount by which the judgment sum was overpaid. It possesses that jurisdiction so as to give effect to its order that the appeal be allowed.[4] An order for repayment should be made.

13 As to interest, it is plain from the decision of this Court in Meerkin & Apel v Rossett Pty Ltd [No 2],[5] that interest calculated at the penalty interest rate would not be appropriate. The effect of that decision was summarised in MLC Nominees Pty Ltd v Daffy [No 2], in the following terms:

The issue of a successful appellant's entitlement to interest on a judgment sum repayable following an appeal was considered by this Court in Meerkin & Apel v Rossett Pty Ltd (No 2). In that case, the Court held that where a judgment for debt or damages is set aside on appeal after being complied with, the appellant is entitled, by way of restitution, to interest on the judgment sum paid in accordance with the primary judge's orders. In Meerkin & Apel it was accepted that the rate of interest payable by a respondent to a successful appellant was not the penalty rate referred to in ss 58 or 60 of the Supreme Court Act 1986, but a rate calculated to restore to the appellant 'the fruits of the judgment' and to do justice between the parties - a 'restitutionary rate'.[6]

14 As to the rate that should be ordered in the present case, the average retail deposit and investment rate is one available measure but in our view it may tend to understate the real value of a sum in the order of $100,000 over a period of more than a year. We propose to order the payment of interest at the slightly higher rate of 2 per cent. Interest will be calculated from 29 May 2019 to the date of the order for repayment.

(a) in place of paragraph 3 of the orders made by McDonald J on 25 March 2019, it be ordered that the present appellant (the respondent below) is to pay the respondent (being the appellant below) $378,439.44, inclusive of interest of $94,637.24;

(b) paragraph 4 of the orders made by McDonald J on 25 March 2019, as to the costs of the proceeding before him, be restored;

(c) the respondent pay the appellant $95,417.26, inclusive of interest to

21 September 2020 in the amount of $2,451.62;

(d) the respondent pay 30 per cent of the appellant's costs of the application for leave to appeal to this Court and the appeal.

[1] Leeda Projects Pty Ltd v Zeng [2020] VSCA 192.

[2] Investec Bank (Aust) Ltd v Glodale Pty Ltd [No 2] [2009] VSCA 113, [9] (Neave and Redlich JJA and Forrest AJA).

[3] When this Court made orders in this matter on 31 July 2020 it included an order that paragraph 4 of the orders made by the primary judge, dealing with the costs of the appeal before him, be set aside. Given our conclusions, it is necessary to restore paragraph 4 of his Honour's orders.

[4] Commonwealth v McCormack [1984] HCA 57; (1984) 155 CLR 273, 276-7 (Murphy, Wilson, Brennan, Deane and Dawson JJ); Burke v Gillett [1996] VicRp 11; [1996] 1 VR 196, 201 (Tadgell J, Ormiston and Smith JJ agreeing at 201); MLC Nominees Pty Ltd v Daffy [No 2] [2018] VSCA 10, [5] (Beach and McLeish JJA).

[5] [1999] VSCA 10; [1999] 2 VR 31.

[6] [2018] VSCA 10, [7] (citations omitted).