Luben Petkovski v Kai Yin Huang [2020] NSWSC 1182 | Case summary

The Calculation of Interest

The parties are in issue on one question of interest. That question is whether the Huangs as cross-claimants are entitled to pre-judgment interest on the $564,480.46 that Mr Petkovski was ordered to pay to them by Order 2 of the orders made on 14 November 2019.
The relevant legal principles may be shortly stated. Pre-judgment is only to be awarded to a plaintiff where, as a consequence of being deprived of the use of the judgment money during the relevant period, the plaintiff has suffered a real and practical loss or detriment for which it should be compensated in order to ensure that it is restored fully to the position in which it would have been but for the defendant's wrongdoing: Screenco Pty Ltd v RL Dew Pty Ltd (2003) 58 NSWLR 720; [2003] NSWCA 319 at [90] ("Screenco"). All the circumstances must be considered in order to ensure that an award of interest is substantially just for both parties: Star v O'Brien (1996) 40 NSWLR 695; (1996) 22 ACSR 434 at 701 ("Star").
Mr Petkovski submitted that no pre-judgment interest is payable under Civil Procedure Act 2005, s 100 on the judgment sum of $564,480.46. He submits that this judgment sum represents the value of the lost opportunity suffered by the Huangs as at the date of the judgment. The Court held that the Huangs lost the opportunity to acquire three lots in the subdivision and, in valuing those three lots, they used the relevant property valuations that were current as at the date of judgment. Mr Petkovski submits that the Huangs therefore have the benefit of the capital gain in the lots the subject of their lost opportunity up until the date of the judgment. Mr Petkovski submits that an award of interest prior to this date would result in the Huangs being doubly compensated.
The Petkovski parties accept that post-judgment interest applies under Civil Procedure Act, s 101 on the sum $564,480.46 ordered pursuant to Order 2 of the orders made on 14 November 2019.
The Huangs' answer to this submission is persuasive. The Court accepts their submission that they were deprived of their opportunity to purchase the properties on 10 March 2011, the date of their execution of the Trust Deeds. The Huangs do not dispute that the Court has valued the capital amount of their lost commercial opportunity as at the date of judgment. But they say that they continued to suffer real and practical loss from 10 March 2011. They say that they lost the use and benefits to be derived from the ownership of valuable commercial property from that time. In particular, they say that quite apart from capital gain they also lost the value of rents from those properties. They also lost the benefit of the intrinsic value of the ownership of such real property.
The Huangs say that those benefits were not hypothetical. They say they could have used those properties as primary dwellings or as security for raising loans and spreading the risks of their commercial ventures. The Huangs point out that while they were kept out of their money, Mr Petkovski has enjoyed the benefits of his wrongful retention of the properties. The evidence shows that Mr Petkovski has enjoyed the benefits of the use of the properties as an income-producing asset, renting them to tenants, and has also taken advantage of its potential as a security.
Applying the principle of substantial justice in Star and fixing interest compensation in accordance with Screenco to ensure that the Huangs are restored as fully as possible to the position in which they would have been but for Mr Petkovski's wrongdoing, interest from March 2011 should be awarded. If Mr Petkovski's wrongdoing had not occurred, the Huangs would have held an interest in the properties from March 2011 up until the valuation date at the time of the hearing. The fact that the properties were valued including capital gains up to the date of hearing, does not compensate the Huangs for their loss of income up to the date of valuation.
As a matter of practical justice, the way to compensate the Huangs for this lost income is with an order for interest. It can be acknowledged that calculating interest from March 2011 up to the date of hearing on a property valuation inclusive of capital gains might, on the one hand, be thought to over compensate the Huangs for their income losses, particularly in the early years of this period, when the capital value of the property was lower.
But on the other hand, merely awarding interest, rather than loss of the higher returns to be expected from rental income, especially in the latter part of the period, might be thought to under compensate the Huangs. These two factors cancel out to a degree. An award of interest from 11 March 2011 up to judgment at the rates prescribed under Civil Procedure Act, s 100 is an appropriate and just balance in the circumstances.
There is no dispute that the Huangs should have interest on the sum of $564,480 from the date of judgment, 14 November 2019, pursuant to Civil Procedure Act, s 101.

Costs Issues

Background to the costs issues. Some brief background on the outcome of the Court's previous judgments will assist before costs issues are determined. In the Court's first judgment the Huangs were held to be substantially successful in establishing their claims for unconscionable conduct, misleading and deceptive conduct and economic duress against the cross-defendants.
On the trespass and nuisance claims brought between the parties and determined in the first judgment the outcome was somewhat more mixed. Mr Petkovski was required to bear the cost of removing the 2011 sewer pipe from Lot 2 (No. 55) and relocating it onto Lot 1 (No. 57). Mr Petkovski was found liable for a portion of the Huangs' lost rent by reason of his trespass in placing bricks upon Lot 2 (No. 55), because he thereby contributed to the departure of the Huangs' tenant, Ms Chen.
But Mr Huang was also found liable to Mr Petkovski for his trespasses upon Lot 1 (No. 57) in destroying and removing the 2014 sewer pipe and the stormwater piping attached to the Lot 1 (No. 57) residence. The Court ordered that Mr Huang pay the plaintiffs' costs of reinstating the damaged plumbing, and consequential losses resulting from that trespass.
Consequent upon the findings in the first judgment, the Court made the following detailed orders on 17 December 2018: "Declarations and Orders on the Summons 1. Judgment for the plaintiffs against the first defendant. 2. An order restraining the first defendant from interfering with plumbing works on 51 or otherwise trespassing upon 51 and 57 Watkin Street. 2A. An order restraining the first cross-defendant from depositing materials on or otherwise trespassing on 55 Watkin Street 3. The first defendant to pay to the plaintiffs damages to be assessed in sums equal to the reinstatement of the sewer and storm water pipes and consequential losses resulting from the reasonable period of time required to replace and reinstate such pipes. 4. The defendants grant to the plaintiffs a license to enter upon 55 Watkin Street to carry out such works as necessary to remove the 2011 sewer pipe referred to in paragraph 431 of the judgment. 5. The damages to be paid to the plaintiffs is to be determined and assessed at a separate hearing. 6. The question of costs and interest is to be determined following the damages and relief hearing. Declarations and Orders on the Second Further Amended Cross Claim 1. Judgment for the First Cross Claimant against the First Cross Defendant. 2. Judgment for the Second Cross Claimant against the First Cross Defendant. 3. Judgment for the First Cross Claimant against the Second, Third and Fourth Cross Defendants. 4. Judgment for the Second Cross Claimant against the Second, Third and Fourth Cross Defendants. 5. Declare the First Cross Defendant engaged in conduct that contravened s. 18 of the Australian Consumer Law 2010 ("ACL"). 6. Declare the First Cross Defendant engaged in conduct that contravened s 20 of the ACL. 7. Declare the First Cross Defendant acted with duress and unconscionably in relation to the First Cross Claimant's execution of the Trust Deeds dated 10 March 2011 referred to in paragraph 13 of the judgment. 8. Declare the First Cross Defendant acted with duress and unconscionably in relation to the Second Cross Claimant's execution of the Trust Deeds. 9. Declare the Second, Third and Fourth Defendants were knowingly concerned in the unconscionable conduct of the First Cross Defendant in relation to the First Cross Claimant's execution of the Trust Deeds. 10. Declare the Second, Third and Fourth Defendants were knowingly concerned in the unconscionable conduct of the First Cross Defendant in relation to the Second Cross Claimant's execution of the Trust Deeds. 11. The first cross defendant to pay damages to the cross claimants in a sum to be assessed in respect of the trespass to 55 Watkin Street. 12. The damages to be paid to the cross claimants and any other relief to which they are entitled is to be determined and assessed at a separate hearing. 13. The question of costs and interest is to be determined following the damages and relief hearing."
For the reasons discussed in the second judgment, no consequential relief was granted in relation to declarations 9 and 10 on the Second Further Amended Cross Claim.
The second and third judgments dealt with four groups of issues (comprising nine sub-claims) the nature and outcome of which may be shortly summarised: 1. The liability of the Petkovski parties other than Mr Petkovski. Although declarations had been made as to the liability of the cross-defendants other than Mr Petkovski, the Court decided for the reasons given in the first judgment that no consequential relief should be given against any of those cross-defendants, so that only Mr Petkovski was found liable under Competition and Consumer Act 2010 (Cth), Schedule 2 ("Australian Consumer Law"), s 236for unconscionable conduct. 2. The assessment of damages in relation to the claims for trespass, nuisance and on the Trust Deeds. In the Court's second judgment, small sums by way of damages were awarded in favour of the Petkovski parties for some but not all of the various acts of trespass and nuisance alleged to have been committed by Mr Huang. A small sum in damages for a trespass by Mr Petkovski was also awarded to the Huangs. 3. The Huangs' claim under the Trust Deeds. This claim was dismissed in part because it was pleaded and in part because it was inconsistent with the Huangs' claims under the Australian Consumer Law. 4. The claim for loss of opportunity to acquire up to three properties and the boundary modification claim. These were claims for damages under Australian Consumer Law, s 236 and for equitable compensation. The Huangs' total loss of opportunity in not being able to acquire the three properties was assessed as $564,480.46 (being the total of the following amounts for each of the three properties $383,040.31, $100,800.08 and $80,640.07). Judgment was entered for this sum on account of the Huangs' loss of opportunity claim. This was contrary to submissions put on behalf of Mr Petkovski that much lower amounts of compensation were appropriate. And in relation to the boundary modification claim, the Court recorded a judgment for $49,068.48 in the Huangs' favour.
The orders made as a result of the outcome of these four groups of issues were as follows. The first two groups of issues were dealt within the Court's second judgment in which the Court made the following orders: "(1) On the plaintiffs'/cross-defendants' motion dated 29 August 2019, being Claim 8 on the relief hearing: (a) Make no order setting aside declarations 9 and 10 of the Court's orders made on 17 December 2018 but no consequential relief will be given upon the declarations; (b) Otherwise dismiss the motion, and (c) Reserve the question of the costs of the motion. (2) Enter the following judgments, exclusive of interest, in respect of Claims 1, 2, 3 and 9 of the relief hearing: (a) On Claim 1, judgment for the plaintiffs/cross defendants in the sum of $2,500; (b) On Claim 2, judgment for the plaintiffs/cross defendants in the sum of $5,250; (c) On Claim 3, judgment for the defendants/cross-claimants; and (d) On Claim 9, judgment for the defendants-cross-claimants in the sum of $560."
The third and fourth groups of issues were dealt with in the Court's third judgment, in which the Court made the following orders: "(1) Judgment for the cross claimants for damages for $49,068.48 against the first cross-defendant on account of the cross claimant's claim for damages for misleading conduct in relation to the Modified Development, as recorded in the Court's principal judgment between [383] and [392); (2) Judgment for $564,480.46 for the cross-claimants for equitable compensation and damages under Australian Consumer Law, s 236 on account of the cross-claimants' claim for the loss of opportunity to purchase the remaining lots in the subdivision. (3) On the cross claimants' claim for indemnity under the Trust Deeds, order that there be judgment for the cross-defendants. (4) The parties are directed to confer in relation to the calculation of appropriate interest on the judgments recorded in these orders and the Court's orders made on 8 November 2011 by 22 November 2019."
Neither of the second or third judgments dealt with questions of interest or costs, which are the subject of this judgment.
The Huangs Submissions. The Huangs submit that an important relevant factors here in assessing an appropriate costs orders is the time devoted to certain issues at trial: Hughes v Western Australian Cricket Association Inc (1986) ATPR 40-748 at 48,136; and see ABB Engineering Construction Pty Limited v Abigroup Contractors Pty Limited [2003] NSWSC 867 at [14].
The Huangs submit that although, the relief hearing "produced a mixed result in relation to the various claims of the parties", the respective amounts awarded to the parties indicate the comparative importance of their claims and the real quality of success on those claims. The cross-claimants were awarded a total of $614,108.94 in compensatory damages (being, $49,068.48 plus $564,480.46 plus $560), whereas the Petkovski parties as plaintiffs were awarded $7,750 in respect of their trespass and nuisance claims. Put simply and numerically, the Petkovski parties' monetary success was a bare 1.26% of the Huang's monetary success.
The Huangs submit that the disparity of monetary result is also an appropriate measure of the level of complexity that these issues involved, and indicates the preparation and time likely to have been accorded to these matters by the parties. The Huangs classify the plaintiffs' claims as only involving an "over-the-fence" style trespass and nuisance claim, whereas in contrast the Huangs' cross-claim involved allegations of intentional predatory behaviour of a most serious kind.
The Huangs submit that the plaintiffs' minor successes in their claims for trespass and nuisance should not result in any costs order for their benefit. This is in part because the other Petkovski parties made common cause with Mr Petkovski by declining to give evidence about the matters of which they had knowledge, thereby making the burden of the Huangs' case more difficult. For example, the Huangs were forced to reverse engineer and construct a case largely based upon subpoenaed materials before they could achieve success.
The Huangs submit that on 7 July 2017, they served a Calderbank offer which was left open until 14 July 2017, which offered terms that in effect each party walk away and bear his or her own costs of the proceedings. The Huangs submit that the Petkovski parties unreasonably rejected this offer, as it was more generous than the damages award eventually made against the Petkovski parties.
And the Huangs submit that the Court did not set aside declarations 9 and 10 made on 17 December 2018, although no consequential relief was ordered. So they submit that no order as to costs orders should now be made as between the Huangs and the Petkovski parties. They also submit that Mr Petkovski should be ordered to pay the Huangs' costs as agreed assessed on the ordinary basis and on indemnity basis after 14 July 2017, by reason of the unaccepted Calderbank offer.
The Petkovski Submissions. The plaintiffs/cross-defendants, Mr Petkovski and the Petkovski parties, submit that Mr Huang should pay the plaintiffs' costs of the proceedings on the Summons and Statement of Claim and that Mr Petkovski should pay 70% of the Huangs' costs of the proceedings on the Cross-Claim. And the plaintiffs/cross-defendants submit that the Huangs should pay the Petkovski parties' costs of the Cross-Claim.
As to the costs of the Summons and statement of Claim, Mr Petkovski and the Petkovski parties submit that the Court upheld the two out of three of their trespass claims and rejected only the third. Moreover, Mr Petkovski and the Petkovski parties point out that the Court ordered Mr Huang to pay them damages for his trespass to the sewer and storm water pipes measured by the cost of their reinstatement and that Mr Huang unsuccessfully disputed the amounts required for reinstatement. Mr Petkovski and the Petkovski parties submit there is no reason why costs should not follow the event with respect to the Summons and Statement of Claim.
As to the costs of the proceedings on the Cross-Claim, Mr Petkovski and the Petkovski parties submit that Mr Petkovski should be ordered to pay 70% of those costs. They point out that the Huangs' primary claim was for $11 million and they only succeeded in an amount of $564,480.46, an amount that was only about 5% of the original claim.
And the Petkovski parties submit that the Huangs should pay their costs of the Cross-Claim. This is because the only relief sought against them on the Cross-Claim were: claims totalling $1,709.91 in reliance upon the Trust Deeds; a claim for loss of rent for six weeks; damages claims for trespass and nuisance; and a claim under Conveyancing Act 1919, s 88K(4) for compensation for a statutory easement. Only the claim for rent was successful and even that was only successful as to one week so the Court gave judgment for the Huangs only for $560. And even that sum was the product of Mr Petkovski's conduct in depositing bricks on the Huangs' property. The Petkovski parties had nothing to do with the trespass in question.
The Petkovski parties submit that the fact that declarations were made against the Petkovski parties does not entitle the Huangs to costs, because of the Court's findings that no consequential relief could be given because of the limitations of the pleadings against the Petkovski parties.
The Petkovski parties submit that the Huangs' reliance on the July 2017 Calderbank letter is misplaced. First, the offer in the letter included dismissal of the Statement of Claim upon which the plaintiffs have succeeded. And they submit that it was not unreasonable for the Petkovski parties to reject an offer that entailed them abandoning their meritorious claims. Secondly, the Huangs have not achieved a more favourable outcome against the Petkovski parties (the second, third and fourth plaintiffs/second, third and fourth cross-defendants) than that proffered for acceptance in the letter.
And finally, the Petkovski parties submit the Huangs' submission that they were put to additional and unnecessary expense because "they were forced to reverse engineer and construct a case largely based upon subpoenaed materials" because the Petkovski parties did not give evidence does not recognise that the Huangs bore the onus of proving their case, and the Petkovski parties had no obligation to become witnesses.
The Court's Analysis. The better and more costs-efficient course in a case such as this is for the Court to look at costs of the proceedings as a whole, taking the Statement of Claim and Cross-Claim together. This will avoid the undesirable outcome of an unnecessarily complex cost assessment, where the parties and the cost assessor are trying to divide up the costs of the claim and the cross-claim.
Approached in that way by far the greatest amount of time was taken up in the proceedings on the claims on which the Huangs were successful on the cross-claim: the claims for unconscionable conduct against Mr Petkovski. The Huangs are correct that the principal time taken by the parties in the proceedings and in preparation for the proceedings was the contest about this unconscionable conduct claim.
But Mr Petkovski had some minor success on the very small money claims he brought in some minor success in the claims brought against him. Some allowance should be made for this. In the Court's opinion the Huangs' should have 95% of their costs of the proceedings against Mr Petkovski.
These costs should be assessed on the ordinary basis. The Huang's reliance upon the offer of compromise has been well answered by Mr Petkovski and the Petkovski parties. It was not unreasonable of them to refuse the offer, given that it required them to abandon claims in which they have been successful.
But the Petkovski parties other than Mr Petkovski have had a broad measure of success both as plaintiffs and as cross defendants and they should have an order for costs in their favour. But they have taken only a very minor role of the proceedings. Almost every argument that could be put at every step in the proceedings on their behalf could also have been (and was) taken on behalf on Mr Petkovski. They did not give evidence. Their separate case as distinct from that of Mr Petkovski in the proceedings was mostly barely discernible.
The applicable rules of practice are clear. Ordinarily where a solicitor acts for more than one successful defendant in a proceeding, each successful defendant is only entitled to that party's proportion of the costs incurred on behalf of all, plus any extra costs incurred exclusively on behalf of that party; and this rule is said to be convenient for the "ordinary case" but is not to be automatically applied in every case: King Network Group Pty Ltd v Club of the Clubs Pty Ltd (No 2) [2009] NSWCA 204, at [25] - [35]), (per Young JA, Hodgson and Campbell JJA agreeing) ("King Network Group"). The Petkovski parties are also plaintiffs and in that respect the rule is slightly different: Currabubula Holdings Pty Ltd v State Bank of New South Wales v State Bank of NSW [2000] NSWSC 232 at [104].
Here applying these principles, the Court would assess the Petkovski parties' costs as representing no more than 5% of the combined costs incurred on behalf of the plaintiffs/cross-defendants in the proceedings and including taking into account any costs incurred exclusively for them. The Court will award costs in their favour on the ordinary basis in that amount.

Luben Petkovski v Kai Yin Huang

At a glance

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Judgment (5 paragraphs)

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Legislation Cited (2)

Cases Cited (9)