Mallesons Stephen Jaques v Trenorth Ltd [1998] VSCA 58

8. I propose that there be orders in accordance with the following minutes:

3. The judgment given by the Honourable Mr. Justice Eames on 15 November 1996 is set aside.

4. In lieu thereof the judgment of the Court is that:

(a) the third party pay the defendant $30,000 together with damages in the nature of interest (from 5 June 1996 to the date of judgment) in the sum of $9,098, making a total of $39,098;

(b) the defendant pay the third party's costs of the third party proceeding before the Honourable Mr. Justice Eames; and

(c) the third party pay the defendant's costs of the third party proceeding before the Honourable Mr. Justice O'Bryan, such costs not to be limited by the provisions of Rule 63.24(1) of the Rules of Court.

5. The appellant is to have leave to amend its notice of appeal dated 29 November 1996 nunc pro tunc in accordance with the summons filed on its behalf on 25th August 1998.

6. The respondent is to pay the appellant by way of restitution:

(a) the sum of $1,408,480.25 paid pursuant to the judgment given by the Honourable Mr. Justice Eames on 15 November 1996 together with interest thereon in the sum of $314,215, making a total of $1,722,695.25; and

(b) the plaintiffs' costs paid by the appellant to the respondent pursuant to the said judgment, in the following amounts:

(i) the plaintiffs' costs of the Supreme Court proceedings, taxed and agreed at $115,000, together with interest thereon in the sum of $16,636, making a total of $131,636; and

(ii) the plaintiffs' costs of the High Court proceeding, agreed at $50,000, together with interest thereon in the sum of $7,040, making a total of $57,040.

7. The respondent is to pay the appellant's costs of the appeal and cross-appeal.

and that the respondent be granted an indemnity certificate under s.13(1) of the Appeal Costs Act 1964 .

28. Reasons for judgment in this case were delivered on 18 August 1998. On that day, too, the Court indicated the form of orders which it was tentatively minded to make. In view of the complexity of the history of the proceedings, the Court stated that it would afford counsel an opportunity to consider the matter and to make written submissions as to the orders which it should finally make.

33. In accordance with the reasons for judgment delivered on 18 August 1998, the appeal is to be allowed and the judgment of the judge below set aside. There is to be judgment that Mallesons Stephen Jaques ("Mallesons") pay Trenorth Ltd ("Trenorth") the sum of $30,000 together with interest from 5 June 1996 until the date of judgment. A commencement date of 5 June 1996 was previously accepted by both parties, in their notices of appeal and cross-appeal respectively. That was the date upon which Trenorth made payment to the Krakowskis pursuant to the judgment of McDonald, J. delivered on 17 May 1996. It was the date relied on by the judge below for the calculation of interest to be paid by Mallesons. In these circumstances, I reject the submission made by counsel for Trenorth that interest ought to be calculated from 6 May 1991, the date of issue of the third party notice, and not from 5 June 1996.

37. Trenorth has had limited success against Mallesons. Counsel for Mallesons submits in written submissions that the firm is entitled to the benefit of Rule 63.24(1) of the Rules of Court. The Rule provides in substance that if, in a proceeding for debt or damages, a plaintiff recovers an amount (exclusive of costs) not exceeding one-half of the amount to which the jurisdiction of the County Court is limited, then unless the Court otherwise orders, the plaintiff shall be entitled only to the costs to which he would have been entitled if he had brought the proceeding in the County Court. Mallesons accepts liability to pay Trenorth's costs of the third party proceeding before O'Bryan, J., but it submits that those costs should be assessed in accordance with Rule 63.24(1). I reject that submission. It suffices to say that Trenorth's claim against Mallesons was made in a third party proceeding and, even if Rule 63.24(1) were applicable, it has not been said that Trenorth's claim was inappropriately brought as a third party proceeding. Having regard to the nature of the plaintiffs' claim, any such submission would have been bound to fail.

Trenorth is to pay costs of proceedings below and in this Court

41. It is further submitted on Mallesons' behalf that Trenorth ought to pay Mallesons' costs of the balance of the third party proceeding. This submission is made on the basis that the third party proceeding progressed beyond the hearing before O'Bryan, J. because (a) the plaintiff sought to establish fraud against Trenorth and succeeded, and (b) Trenorth sought to recover indemnity against Mallesons and failed. I accept the submission only insofar as it relates to Mallesons' costs of the third party proceeding before Eames, J. and the costs of the appeal in this Court. Trenorth, by its minute of orders, proposes that it pay the costs of the cross-appeal.

Mallesons is not to pay the costs paid by Trenorth nor is it to pay interest

45. In written submissions, counsel for Trenorth said that Mallesons should pay to it the costs which Trenorth had paid to the Krakowskis and Trenorth's costs of defending the action brought by the Krakowskis. I reject this submission: it is entirely inconsistent with the reasons for judgment which have been delivered. It was further submitted by Trenorth that Mallesons should pay interest on the judgment sum fixed below in respect of the period 16 November 1996 to 14 January 1997, being the period between entry of judgment against Mallesons and the date upon which the judgment sum was paid. This submission was, in my view, misconceived.

Mallesons to be repaid the amount paid under the judgment below

49. In its submissions and draft minutes of orders Mallesons sought repayment of moneys paid by it to Trenorth in accordance with judgment of Eames, J. below. The making of those payments is described in an affidavit of Giles Howard Montgomerie Hunt sworn 24 August 1998. According to that affidavit, the judgment sum of $1,380,871 was paid by Mallesons to Trenorth in two stages, by cheques totalling $1,281,844.54 on 10 January 1997 and by a further cheque for $99,026.46 on 14 January 1997. That amount of $1,380,871 itself included penalty interest. In addition, interest payable on the judgment sum was agreed at $27,609.25. Cheques totalling $7,718.85 were forwarded to the respondent's solicitors on 17 February 1997 and a further cheque for $19,890.40 on 4 March 1997. The total sum (other than the plaintiffs' costs) paid pursuant to the judgment was therefore $1,408,480.25. Mallesons also paid the following sums on the dates set out below in payment of the Krakowskis' costs:

60. The sums paid by Mallesons to Trenorth between 10 January 1997 and 10 September 1997 (the judgment sum, interest thereon and the Krakowskis' costs) were paid in accordance with the judgment of the judge below, but the reasons for judgment of the Court of Appeal now show that judgment to have been in error. I would accede to Mallesons' application, made upon summons dated 24 August 1998, that it have leave to amend its notice of appeal nunc pro tunc to seek repayment. I accept that this Court has power to order repayment: cf. Burke v. Gillett [1996] VicRp 11; [1996] 1 V.R. 196, at 201 and Commonwealth v. McCormack [1984] HCA 57; (1984) 155 C.L.R. 273, at 276. Plainly enough, Mallesons is entitled to an order for the repayment of the amount which has been paid by it in satisfaction of the judgment entered against it and reversed on appeal. The principle was explained by Brooking, J. in National Australia Bank Ltd v. Bond Brewing Holdings Ltd [1991] 1 V.R. 570, at 597 in the following terms:

"... 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 that has been taken from him by the other party by virtue of the wrong decision to be restored. 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. The principle is, as it was in the reign of the first Elizabeth ..., one of restitution or restoration. The court is seeking to restore to one party what it has wrongly taken from him and given to the other. It does not seek to restore the successful party to his former position by awarding damages to compensate him for loss flowing from the erroneous judgment or order." Neither party proposed that there be any set off of the $30,000 plus interest against any part of the amount to be repaid.

Mallesons is to receive interest as fixed by the Penalty Interest Rates Act 1983

65. There is little dispute between the parties that Mallesons is entitled to be paid interest upon the amount to be repaid by Trenorth, including interest upon that part representing costs paid under the judgment: cf. J.S.W. (Vic.) Pty. Ltd. v. Tsiloglou [1994] VicRp 16; [1994] 1 V.R. 237, at 249. The parties are not, however, in agreement as to the rate of interest. It was submitted on Mallesons' behalf that interest should be calculated on the rate payable on judgments under the Penalty Interest Rates Act 1983. This was opposed by Trenorth, which contended for a lower rate. In support of that contention, it pointed out that the $1,380,871 already included penalty interest. In Trenorth's written submissions it was also stated:

"The proper measure to put Mallesons in the position it would have been in if it had not failed before Eames, J., is the interest it could have earned since 14 January 1997 on the money which it paid to Trenorth. A fair measure is interest at a cash rate (i.e. five per cent). This is higher than interest at bank deposit rates."

No evidence was, however, placed before the Court in support of that submission. In the absence of specific evidence as to applicable rates of interest, such authorities as there are tend to support the approach for which Mallesons contends: cf. Production Spray Painting and Panel Beating Pty. Ltd. v. Newnham [No.2] (1992) 27 N.S.W.L.R. 659, at 663; Haig v. Minister Administering the National Parks and Wildlife Act (1974) [No.3] (1996) 90 L.G.E.R.A. 408, at 412; Government Insurance Office of New South Wales v. Healy [No.2] (1991) 22 N.S.W.L.R. 380, at 386-7; contrast J.S.W. (Vic.) Pty. Ltd. v. Tsiloglou [1994] VicRp 16; [1994] 1 V.R. 237, at 249.

70. Furthermore, Mr. Hunt deposed, in the affidavit to which I have earlier referred, that, prior to the hearing of the appeal, the solicitors for Mallesons and for Trenorth discussed repayment of the judgment sum if the appeal was successful, including the applicable rate of interest. Mr. Hunt deposed:

"Trenorth's parent company Heine Management Ltd. agreed to provide a guarantee with regard to re-payment of the judgment sum and by way of facsimile dated 10 December 1996 from [Mallesons' solicitors] to [Trenorth's solicitors] we sought to confirm that the guarantee extended to payment of any interest on any part of the judgment sum which Trenorth was required to pay, at the Penalty Interest Act rate of 13.2 per cent. This was confirmed by [Trenorth's solicitors] by return facsimile of that date."

74. By letter dated 18 December 1996, the solicitors for Trenorth wrote to the solicitors for Mallesons, stating, amongst other things:

"Although our client was not obliged to do so, our client offered to procure from its parent, Heine Management Limited, a guarantee that should your client, once having paid to our client the amount due pursuant to the judgment of Eames, J., become entitled on appeal to a refund of all or some part of those moneys (contrary to our client's expectation), Heine Management Limited will guarantee the repayment of such moneys to your client within 21 days, with interest thereon at the Supreme Court rate, and we so advised you on 9 and 10 December 1996. We are now instructed to confirm on behalf of both Trenorth Limited and Heine Management Limited, the offer of such guarantee."

78. The terms of an undertaking given to the Court by Trenorth (and Heine Management Ltd) on 20 December 1996 indicate that Mallesons, as third party and prospective appellant, did not seek a stay in regard to payment of the sums due under the judgment below, on account of the guarantee to be provided by Trenorth's parent company. The guarantee was duly executed on 21 January 1998 and purportsto guarantee payment by Trenorth of "the Guaranteed Money", which is defined so as to include "interest prescribed under the Penalty Interest Rates Act 1983". In the circumstances of the case and absent any contrary evidence, the applicable rate of interest should, in my view, be as fixed under the Penalty Interest Rates Act 1983.

82. Trenorth has made application for an indemnity certificate under s.13(1) of the Appeal Costs Act 1964. That provision relevantly confers power to grant an indemnity certificate where an appellant succeeds on appeal on a question of law, or on the ground that the judgment was against the evidence. Trenorth submits that Mallesons has succeeded on a question of law "as to the application of the principles of causation". I reject that submission. It is, or should be, tolerably clear from the reasons for judgment which have already been delivered that a question of causation is one of fact. Mallesons succeeded on that question and not on a question of law. Can it properly be said that Mallesons has succeeded on the ground that the judgment was against the evidence? I am of the opinion that it can: the appeal has succeeded because the evidence in the case did not permit findings to be made against Mallesons that it was guilty of fraud, or that its negligence was a cause of Trenorth's loss. The latter ground was not addressed in Mallesons' written submissions but, given the nature of the function which the Court performs in granting an indemnity certificate, that failure should not be treated as fatal. I would grant the application for an indemnity certificate under the Appeal Costs Act.

85. I agree that the orders of the Court be as proposed by Callaway J.A.

90. I agree with the orders proposed by Callaway, J.A. for the reasons given by Kenny, J.A.