McKeith v Royal Bank of Scotland Group PLC;; Royal Bank of Scotland Group PLC v James

Court of Appeal (NSW)|2016-09-14|Before: Macfarlan JA, McDougall J

Case number 115116 of 2015 (the McKeith appeal) 1. Appeal allowed in part. 2. The order made by McDougall J on 27 March 2015 directing judgment for the Respondents against the Appellant be set aside. 3. In lieu thereof judgment be entered for the Appellant against the First Respondent in the amount of $375,961.54 together with: a. pre-judgment interest on that amount from 5 December 2008 to 27 April 2012; and b. post-judgment interest on that amount (including pre-judgment interest) from 27 March 2015 to the date of payment. 4. The costs orders made on 22 July 2015 by McDougall J be set aside and in lieu thereof: a. the Respondents to pay the Appellant's cost of the proceedings at first instance on an ordinary basis up to and including 26 April 2012; and b. the Appellant to pay the Respondents' costs of the proceedings at first instance on an indemnity basis after 26 April 2012. 5. The Respondents pay 50 per cent of the Appellant's costs of its appeal on the ordinary basis. 6. Liberty to apply within seven days of the making of these orders for the purpose of correcting any error therein or omission therefrom which is inconsistent with this judgment. Catchwords: PRACTICE AND PROCEDURE - pre-judgment interest - Civil Procedure Act 2005, s 100(1) - calculation of interest - period for which pre-judgment interest should run - whether proceedings were relevantly for damages - whether "appropriate settlement sum" offered - whether "special circumstances" demonstrated

COSTS - interests on costs - partial success enjoyed by all parties - appropriate costs award - whether interest on costs should be awarded under Civil Procedure Act 2005, s 101(4) - application refused

APPEAL - judgment already paid reversed in part on appeal - order for restitution - appropriate rate of interest - whether interest to be calculated at rate other than in accordance with that legislatively prescribed Legislation Cited: Civil Procedure Act 2005 (NSW), ss 98, 100, 101 Courts and Other Justice Portfolio Legislation Amendment Act 2015 (NSW) Supreme Court Act 1970 (NSW), s 75A(10) Uniform Civil Procedure Rules 2005 (NSW), rr 36.7, 51.47, 51.49 Cases Cited: Ambulance Service of New South Wales v Worley (No 2) (2006) 67 NSWLR 719; [2006] NSWCA 236 AV8 Air Charter Pty Ltd v Sydney Helicopters Pty Ltd (No 2) [2014] NSWCA 238 Brymount Pty Ltd v Cummins (No 2) [2005] NSWCA 69 Commonwealth v McCormack (1984) 155 CLR 273; [1984] HCA 57 Davies v Kur-ring-gai Municipal Council [2003] NSWSC 1010 Davis v Swift (No 2) [2015] NSWCA 137 Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd [2014] NSWCA 158 Drummond & Rosen Pty Ltd v Easey (No 2) [2009] NSWCA 331 Ettingshausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404 Fotheringham v Fotheringham (No 2) (1999) 46 NSWLR 194; [1999] NSWCA 21 Gillfillan v Australian Securities and Investments Commission (No 2) [2013] NSWCA 143; (2013) 94 ACSR 543 Government Insurance Office of New South Wales v Healey (No 2) (1991) 22 NSWLR 380 Grace v Grace (No 9) [2014] NSWSC 1239 Grace v Thomas Street Café Pty Ltd (No 2) [2008] NSWCA 72 Grogan v Thiess Contractors Pty Ltd [2000] NSWSC 1101 Heydon v NRMA Ltd (2001) 53 NSWLR 600; [2001] NSWCA 445 Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd (No 2) (2013) 84 NSWLR 436; [2013] NSWCA 211 James v Royal Bank of Scotland PLC; McKeith v Royal Bank of Scotland PLC [2015] NSWSC 243 James v Royal Bank of Scotland PLC; McKeith v Royal Bank of Scotland PLC (No 2) [2015] NSWSC 970 Lahoud v Lahoud [2006] NSWSC 126 McKeith v Royal Bank of Scotland Group PLC; Royal Bank of Scotland Group PLC v James [2016] NSWCA 36 Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344 Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 Robb Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170 Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) [2007] NSWCA 194 Woolworths Ltd v Strong (No 2) (2011) 80 NSWLR 445; [2011] NSWCA 72 Ying v Song [2011] NSWSC 618 Category: Costs Parties: Matter No 2015/115116 (McKeith v RBS)

Colin McKeith (Appellant) Royal Bank of Scotland Group PLC (First Respondent) RFS Holdings BV (Second Respondent) RBS Services (Australia) Limited (Third Respondent)

Royal Bank of Scotland Group PLC (First Appellant) RFS Holdings BV (Second Appellant) RBS Services (Australia) Limited (Third Appellant) Angus James (Respondent) Representation: Counsel:

Matter No 2015/115116 (McKeith v RBS) Mr JN West QC / Mr MJ Steele SC (Appellant) Mr J Sheahan QC/Dr E Peden /Mr G Gee (Respondents)

Matter No 2015/113597 (RBS v James) Mr J Sheahan QC/Dr E Peden /Mr G Gee (Appellants) Mr JN West QC / Mr MJ Steele SC (Respondent)

Matter No 2015/115116 (McKeith v RBS) Harmers Workplace Lawyers (McKeith) Allens Linklaters (Respondents)

Matter No 2015/113597 (RBS v James) Allens Linklaters (Appellants) Harmers Workplace Lawyers (James) File Number(s): 2015/115116 (McKeith)2015/113597 (James) Decision under appeal Court or tribunal: Supreme Court of New South Wales Jurisdiction: Equity Division Citation: [2015] NSWSC 243 Date of Decision: 19 March 2015 Before: McDougall J File Number(s): 2011/320637 (McKeith) 2011/320618 (James)

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

Judgment

MACFARLAN JA: I agree with Tobias AJA.
TOBIAS AJA: In September and December 2008 respectively, Mr Angus James (Mr James) and Mr Colin McKeith (Mr McKeith) (together the plaintiffs), both senior employees of ABN AMRO Australia Holdings Ltd (AAAH), were retrenched. Each commenced proceedings in the Equity Division of the Supreme Court against AAAH and Royal Bank of Scotland Group PLC and RFS Holdings BV (RBS parties) seeking damages for non-payment of severance and ex gratia payments to which they contended they were entitled under the terms of AAAH's redundancy policy (Policy). At the time, the RBS parties were members of a consortium that was attempting to acquire the holding company of AAAH.
At first instance the primary judge, McDougall J, upheld Mr James' claim but dismissed that of Mr McKeith: James v Royal Bank of Scotland PLC; McKeith v Royal Bank of Scotland PLC [2015] NSWSC 243. Accordingly, his Honour entered judgment in favour of Mr James in the sum of $2,932,692.31 together with pre-judgment interest for the period 9 September 2008 to 27 March 2015, the date of judgment. On the same day, judgment was entered against Mr McKeith. The primary judge, however, reserved the question of costs in both matters.
On 22 July 2015, the primary judge delivered a lengthy costs judgment in which he made various complex orders in relation to the costs of the proceedings before him (costs judgment): James v Royal Bank of Scotland PLC; McKeith v Royal Bank of Scotland PLC (No 2) [2015] NSWSC 970. These orders were not the subject of an appeal.
In this Court, Mr McKeith challenged the primary judge's findings against him in favour of the RBS parties and AAAH. Like the primary judge, I treat these parties as one entity for the purposes of costs and henceforth refer to them as RBS: see costs judgment at [10]. RBS, as the unsuccessful party in the James proceedings, likewise appealed the findings in favour of Mr James. On 9 March 2016, this Court delivered judgment on the two appeals (principal judgment): McKeith v Royal Bank of Scotland Group PLC; Royal Bank of Scotland Group PLC v James [2016] NSWCA 36.
The conclusions of this Court are relevantly summarised at [304] of the principal judgment. It will, for present purposes, suffice to observe that although the Policy, properly construed, entitled each plaintiff to a severance payment, it did not confer upon either plaintiff a right to an ex gratia payment.
The severance payment to which Mr James was held to be entitled under the Policy amounted to $432,692.31 and that of Mr McKeith's came to $375,961.54. In each case, the Court indicated that pre-judgment interest should be paid on those sums from 9 September 2008, in respect of Mr James, and 5 December 2008, in respect of Mr McKeith, to the date of final orders made by the primary judge (27 March 2015).
In light of the measure of mixed success and failure experienced by each party before this Court, the question of costs relative to both the proceedings below and on the appeal invited further attention. Pursuant to directions made in the principal judgment, the parties have filed detailed written submissions as to orders and costs upon the basis that the Court would deal with the issues raised in the submissions on the papers.
Although somewhat out of order, it is convenient at this point to dispose of one particular matter. In satisfaction of the orders made by the primary judge on 27 March 2015, RBS paid Mr James the sum of $3,022,901.39 on 5 May 2015. That sum comprised the severance and ex gratia payments ($1,495,673.08) after deducting PAYE tax and $1,527,228.31 in pre-judgment interest. Of the amount of tax to be deducted and remitted to the Australia Taxation Office (ATO), $1,225,000.00 related to the ex gratia payment.
It is common ground that RBS was entitled to restitution of the difference between the amount which had been paid to Mr James on 5 May 2015 and the amount to which this Court held Mr James was entitled. Notwithstanding the view expressed by this Court as to the pre-judgment interest payable on the severance payments (see [7] above), RBS disputes the date to which pre-judgment interest should run.
In its submissions as to orders and costs, RBS seeks the repayment to it by Mr James of the $3,022,901.39 paid to him on 5 May 2015 less the severance payment to which this Court held he was entitled ($432,692.31), being a net amount of $2,590,209.08. As is immediately apparent, this amount makes no allowance for pre-judgment interest on the severance payment to run from the date it ought to have been paid (9 September 2008) to the date of judgment at first instance (27 March 2015). In answer, RBS submits that the period for which pre-judgment interest is payable should not extend beyond 26 April 2012, representing the date of the first of three offers of compromise made to Mr James by RBS in the proceedings below. Further reference to this issue is made below at [17]-[27].
RBS also seeks interest on the restitutionary sum of $2,590,209.08 for the period from 5 May 2015 to the date the money was repaid on the footing that during that period Mr James had the benefit of that money. On 1 April 2016, Mr James repaid the sum of $2,367,380.88 to RBS comprising the amount paid to him on 5 May 2015 less an amount for pre-judgment interest on the severance payment ($222,828.20). The pre-judgment interest was calculated according to the period 9 September 2008 to 6 February 2013, the date of the second offer of compromise by RBS to Mr James.

The issues in respect of which the parties are in agreement

RBS's entitlement to be reimbursed by Mr James in the amount representing the ex gratia payment to which he was held not to be entitled in the principal judgment is not the subject of dispute. As noted, subject only to the relevant period that Mr James' entitlement to pre-judgment interest on the severance payment falls to be calculated, Mr James has repaid the overpayment.
The parties have also reached agreement as to the costs of the proceedings as first instance, namely, that RBS should pay the costs of both Mr James and Mr McKeith on the ordinary basis to 26 April 2012, but that they should pay the costs of RBS on an indemnity basis thereafter.
Finally, it bears mentioning that an issue also arose as to which party bore the obligation of recovering the $1,225,000.00 in tax paid to the ATO by RBS on the ex gratia payment to which Mr James was held to be entitled at first instance. The parties have, however, resolved the manner in which that tax should be recovered and it is reflected in final orders I propose below.

The issues in respect of which the parties are still in dispute

Those issues are: (a) whether the plaintiffs are entitled to pre-judgment interest on the severance payments and, if so, for what period; (b) the costs of the appeal, including whether they should be paid on an indemnity basis; (c) whether RBS is entitled to an order pursuant to s 101(4) of the Civil Procedure Act 2005 (NSW) (CPA) for interest on the costs and disbursements it has outlaid since the commencement of the litigation in October 2011; and (d) whether interest is payable on the restitutionary sum owed by Mr James to RBS and which he repaid on 1 April 2016 and, if so, at what rate.

Interest on severance payments

The plaintiffs seek an award of interest on the severance payments pursuant to the provisions of s 100(1) of the CPA. RBS resists any award of interest after 26 April 2012, the date of the first offer of compromise. It does so in reliance upon s 100(4) which provides as follows: "In any proceedings for damages, the court may not order that the payment of interest under this section in respect of the period from when an appropriate settlement sum was offered (or first offered) by the defendant unless the special circumstances of the case warrant the making of such an order."
Section 100(5) defines the expression "appropriate settlement sum" in sub-s (4) as "a sum offered in settlement of proceedings in which the amount for which judgment is given (including interest accrued up to and including the date of the offer) does not exceed the sum offered by more than 10 per cent". Neither Mr James nor Mr McKeith suggests that the sum offered in any of the three offers of compromise was other than an "appropriate settlement sum" as defined.
The plaintiffs nevertheless seek to obviate the application of s 100(4) to the present case on the ground that the proceedings were not for "damages" but rather for the payment of a "debt". To this effect, they submit that they were contractually entitled under the Policy to the payment of the non-discretionary severance amount on retrenchment, non-payment of which gave rise to a debt. They further submit that regardless of whether the proceedings were, as a matter of form, for "damages", in substance the amount owing under the Policy was a liquidated sum and neither AAAH nor RBS had ever tendered the amount owing. It is upon this basis that the plaintiffs contend that the Court should order payment of interest at pre-judgment rates to the date of judgment at first instance.
It is accepted, as a general rule, that a successful plaintiff is prima facie entitled to an award of interest. Yet, as the terms of s 100(1) of the CPA make clear, an award of interest is at the court's discretion, the exercise of which requires it to assess the practical loss the plaintiff has suffered as a consequence of the unsuccessful party's wrong. Against this, it is equally established that where the plaintiff has rejected an appropriate settlement sum, the court will ordinarily only award interest for the period subsequent to the date of that offer in "special circumstances": s 100(4) (see [17] above). Neither party appears to doubt the correctness of the foregoing.
If special circumstances are established in the present case it would be open to this Court to award interest beyond 26 April 2012. As noted, the plaintiffs submit that the proceedings, properly viewed, were in substance for debt rather than damages. If, however, this Court was minded to find that s 100(4) is engaged, they alternatively submit that their characterisation of the proceedings (as one for debt) falls with the ambit of "special circumstances" contemplated by sub-s (4). Another "special circumstance" relied upon by the plaintiffs concerns the efficacy of the first offer of compromise. By reason of a delay in the discovery process, the plaintiffs contend they were not in a position to reasonably assess the merits of the respective offers. This, so the plaintiffs submit, constitutes a "special circumstance" for the purposes of s 100(4).
These submissions, in my view, should be rejected. With a view to both the pleadings and the manner in which the matter was ultimately determined in this Court (see principal judgment at [18], [24], [251], [304 (7)]), it is clear the argument advanced in support of the first "special circumstance" occupies untenable ground. First, this Court relevantly found that a contract was established between each of the plaintiffs and RBS whereby, in consideration of each continuing their employment with AAAH, the Policy would be applied to them in the event either was made redundant before 10 October 2009. It does not follow from that finding that there came into existence a liquidated debt owed by RBS to the plaintiffs. Rather, as held by this Court, the failure of RBS to apply the Policy constituted a breach of contract sounding in damages equivalent to the amount of the severance payment to which each was otherwise entitled. Secondly, the Commercial List Statements of Mr James and Mr McKeith were each framed in terms of a claim for damages. In my view s 100(4) is engaged.
Even assuming that the claims for the severance payments did constitute claims for a debt, other aspects of the proceedings were clearly proceedings for damages. As RBS points out, the claims in respect of the ex gratia payments both at first instance and on appeal, and the Appointment Promise Case advanced at first instance, were all claims for damages. The primary judge's description of that of Mr James' (referred to in principal judgment at [27]) at [70] in the costs judgment as a "substantial and distinct claim" was supported by a deal of evidence. That the claims in respect of the ex gratia payments were substantial and considerably outweighed the severance payment claims in terms of monetary value is also not without significance. These considerations, as RBS submits, demonstrate that the proceedings were not in substance for debt but rather in substance for damages.
RBS's submissions can be reduced to the proposition that s 100(4) of the CPA applies generally to proceedings comprising a number of claims notwithstanding that one or more may constitute claims for a liquidated sum. So much may be accepted. Even if it were correct to characterise the severance claims as claims in substance for debt, it is clear the proceedings as a whole were for damages.
The second "special circumstance" relied upon by the plaintiffs requires some elucidation. They claim that because discovery regarding the history of pro rata bonus payments made to senior executives on retrenchment had not been given as at 26 April 2012, they could not properly assess the offer of compromise made on that date. Against this, RBS emphasise that the evidence ultimately established, contrary to the plaintiffs' case, that the historical granting of bonuses was a "truly discretionary practice".
A similar submission put by Mr McKeith, albeit in relation to whether the Court should make an "order otherwise" than in accordance with the general rule in relation to offers of compromise, was considered and rejected by the primary judge at [171] of the costs judgment. His Honour had noted at [154] RBS's assertion that the reason Mr McKeith had rejected the offer was principally because he had insufficient information to assess it. The primary judge's treatment of this contention was not challenged on appeal. It is therefore difficult, if not impossible, for the plaintiffs to now assert that it was reasonable for them to reject the first offer of compromise. Much less can this view, misconceived as it is, constitute a "special circumstance" for the purposes of s 100(4).
There is, as I have indicated, no substance to the argument that the proceedings were not relevantly for damages. As a consequence, s 100(4) prima facie applied to the proceedings unless the plaintiffs could establish "special circumstances". In my view, they have failed to do so. It follows that pre-judgment interest on the amount of the severance payment to which each of the plaintiffs is entitled should cease running on 27 April 2012.

The costs of the appeal

As noted, the parties have reached agreement as to the costs of the proceedings at first instance but not as to the costs of the appeal. With respect to the latter, Mr McKeith submits that RBS should pay the whole of his costs on appeal whereas Mr James accepts that he should pay 50 per cent of RBS's costs of its appeal. RBS's submissions, on the other hand, disclose a preference that Mr James and Mr McKeith pay its costs of the appeal on an indemnity basis. In the event that the Court rejects that submission, RBS submits that Mr James and Mr McKeith should pay its costs of the appeal on the ordinary basis. Alternatively, it submits that given the measure of mixed success and failure experienced by all parties on the appeal, an appropriate exercise of the Court's discretion would be to order that RBS pay 50 per cent of the costs of Mr McKeith's appeal and Mr James (as he agreed to do) pay 50 per cent of the RBS's costs of its appeal.
The first issue to be determined concerns RBS's submission that its costs of the appeal should be paid by Mr McKeith and Mr James on an indemnity basis. The application for indemnity costs is based on the three offers of compromise made to each of Mr James and Mr McKeith in essentially identical terms but which were not accepted. Relevantly, each of those offers of compromise was made prior to the hearing commencing before the primary judge.
The offers of compromise made to Mr James and Mr McKeith each comprised the amount claimed by each as a severance payment together with interest thereon calculated from the date of the termination of their employment to the date of the offer. The first offer of compromise was made on 26 April 2012, the second on 6 February 2013 and the third on 28 August 2014. It is to be noted that each offer was specifically expressed to be open for a "period of 28 days only". No offers of compromise were made between the date of the primary judge's orders and the hearing of the appeals.
In its submissions in reply, RBS accepts that the offers of compromise in question do not carry the same consequences in relation to an appeal as would an offer of compromise served in the period leading up to the appeal. While an offer of compromise made at first instance might be relevant to the costs of the appeal (Ettingshausen v Australian Consolidated Press Ltd (1995) 38 NSWLR 404 at 410; Fotheringham v Fotheringham (No 2) (1999) 46 NSWLR 194; [1999] NSWCA 21 at [33]), it does not give rise to a prima facie presumption in favour of indemnity costs if the offer is not bettered" in the result ultimately reached: Trustee for the Salvation Army (NSW) Property Trust v Becker (No 2) [2007] NSWCA 194 at [7] ("Salvation Army"); Davis v Swift (No 2) [2015] NSWCA 137 at [25]. This principle finds reflection in the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 51.49 which provides that the Court may "have regard to" offers of compromise served in the proceedings at first instance when exercising its discretion as to costs under s 98 of the CPA.
In Salvation Army, Ipp JA, with whom Mason P and McColl JA agreed, referred (at [8]) with apparent approval to what Beazley JA had said in Brymount Pty Ltd v Cummins (No 2) [2005] NSWCA 69 at [29]. There, her Honour, in refusing an order for indemnity costs and having noted that the offers of compromise relied upon substantially predated proceedings in the Court of Appeal, observed that the parties seeking indemnity costs should have advanced subsequent offers in the period between the trial and appeal if they wished to secure such a claim. Ipp JA observed that the same considerations as those that influenced the Court in Brymount applied to the case before him: Salvation Army at [9]. Of particular significance was the fact that the relevant offer in that case had lapsed and was not thereafter renewed. His Honour continued: "As the offer had so lapsed (prior to the conclusion of the trial), it was not possible for the appellants to accept it thereafter. In particular, it could not have been accepted on the launching of the appeal or thereafter. On that basis alone, it seems to me, the offer could play no part in the exercise of the discretion to order indemnity costs in regard to the appeal."
It can be accepted that the making of an offer of compromise in the proceedings at first instance but which is not renewed for the purposes of an appeal constitutes a relevant consideration informing the discretion to be exercised by the Court under s 98 of the CPA. Yet, as was stated by Gleeson JA and Tobias AJA in Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 at [72] ("Perisher Blue"), if a pre-trial offer is not renewed (either in the same or different terms) prior to the appeal, the Court will not, as a general rule, make a special costs order in respect of the appeal. Notwithstanding its lack of statutory effect, this is not to suggest, however, that a pre-trial offer may not be relevantly persuasive in the exercise of the Court's discretion when weighed against all the circumstances of the case: Grace v Thomas Street Café Pty Ltd (No 2) [2008] NSWCA 72 at [33] and authorities there cited.
The immediate issue requiring consideration therefore turns on whether the pre-trial offers in question attract such weight as to shift the balance of consideration in favour of an order for indemnity costs. In my view, the particular circumstances of this case do not reach the necessary level of persuasion to justify the making of such an order in favour of RBS.
Plainly enough, the circumstances of the present case invite application of the proposition (referred to above) that failure to renew an offer of compromise made at first instance for the purposes of an appeal is a factor militating against an award of indemnity costs on appeal. It is as well to add that the Court will be similarly disinclined to make an award for indemnity costs where a pre-trial offer is no longer open for acceptance when the appeal is instituted or before significant costs have been incurred in the appeal: Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at [4], [71]. Here, each of the offers made at first instance expressly lapsed 28 days after they were made and were not renewed before the appeal.
Another important consideration concerns the relevance or otherwise of notice of intention to rely upon pre-trial offers of compromise. As Hoeben JA, with whom Barrett and Ward JJA agreed, observed in AV8 Air Charter Pty Ltd v Sydney Helicopters Pty Ltd (No 2) [2014] NSWCA 238 at [29], "[i]f a party to an appeal wishes to rely upon an Offer of Compromise or Calderbank offer made before trial, that party should at the very least provide clear notice to the other party or parties of that intention". The reason for so doing, namely to preserve the policy rationale for the acceptance of such offers, is fairly obvious. If it were otherwise, the objective of prompt and economic disposal of litigation animating proceedings both at trial and appellate level would be defeated.
In the present case the plaintiffs maintain that no such notice was given. Although the offers of compromise to Mr McKeith were in evidence before the primary judge when his Honour was dealing with the issue of costs, I would not regard that fact as constituting relevant notice. The offers of compromise were not renewed prior to the appeal, nor were any fresh offers forthcoming. In accordance with the authority of this Court, RBS should have appreciated the significance that would attach to that circumstance.
Nevertheless, RBS advances four reasons which, so it claims, justify an award of indemnity costs in the appeal. The first is that the offers reflected the exact amounts that Mr James and Mr McKeith each ultimately recovered. In my view, this observation does not assist RBS.
As Mr James fully succeeded at first instance, the offers of compromise made to him in the proceedings below were irrelevant on appeal and played no part in the costs hearing before the primary judge. Conversely, as Mr McKeith wholly failed at trial, RBS made an application for indemnity costs on the basis of the first offer of compromise: see costs judgment at [127]. Mr McKeith sought to defend his position in those proceedings on the basis that the offer was invalid, a contention rejected by his Honour. Mr McKeith further submitted that it was not unreasonable for him to reject the offer as he did. As I have noted (see [26] above), this was also rejected by the primary judge.
Having succeeded, at least in part, on appeal, I do not consider that Mr McKeith should now be required to pay indemnity costs on the basis of an offer of compromise which had lapsed and was not renewed notwithstanding the findings of the primary judge upholding its validity. If RBS had renewed its offer for the purposes of the appeal, and had that offer been rejected, it could have relied on the findings of the primary judge (which were not the subject of challenge by Mr McKeith on appeal) to strengthen its application for indemnity costs. That course was eschewed by RBS.
The second reason advanced by RBS in support of its claim for indemnity costs invites attention on the expenditure of costs and judicial time that had come to pass by reason of the plaintiffs' rejection of the offers of compromise. RBS submits that indemnity costs are warranted given the court's time both at first instance and on appeal was utilised to hear claims which had already been the subject of an offer that mirrored the final relief granted. I disagree. Of itself, this ground merely restates the first ground, albeit in different language, and should therefore meet the same fate.
The third reason proffered is the fact that the offers of compromise were made on three separate occasions at significant intervals apart. I do not find this reason persuasive.
The fourth reason advanced by RBS is premised on the contention that RBS's failure to renew the offers of compromise for the purposes of the appeal should not attract the significance that would ordinarily attach. This, so RBS submits, is because the expectation that the relevant offers should have been renewed runs contrary to common sense. Thus, in the case of Mr James, there was little to no prospect of such an offer being accepted prior to the appeal given he had obtained judgment in his favour for approximately $4.5 million. Similarly as regards Mr McKeith, it would have been unreasonable to expect RBS to have renewed its offers in circumstances where he had appealed against his loss on all issues below and previously rejected three offers in substantially the same terms.
There are at least three reasons which undercut the cogency of this argument. First, it is well accepted that the main tactical advantage afforded by an offer of compromise is the potential it carries for a special costs order to be made against the party who unreasonably rejects the offer and subsequently fails in whole or in part at trial or on appeal. Secondly, but no less importantly, the public policy rationale underlying offers of compromise - that of encouraging the "prompt and economic disposal of litigation" - applies equally to appeal proceedings. As the Court (Spigelman CJ, Beazley and McColl JJA) in Regency Media Pty Ltd v AAV Australia Pty Ltd [2009] NSWCA 368 ("Regency Media") observed at [42]: "The fact that one party has won at first instance does not mean that efforts to compromise should cease."
To be clear, the Court's discretion to make special costs orders will not generally be exercised in favour of a successful party who has not invoked the relevant provisions of Div 8 of Pt 51 of the UCPR, particularly r 51.47 which permits the making of an offer of compromise for the purposes of an appeal. As was observed by the Court in Regency Media at [43], something special is required to vary the usual order as to costs in this Court.
Finally, it should be noted that the Court in Perisher Blue at [74] referred to the judgment of Basten JA in Miwa Pty Ltd v Siantan Properties Pty Ltd (No 2) [2011] NSWCA 344 where his Honour (at [22]) proffered three reasons as to why an informal offer made prior to the judgment under appeal, and reasonably rejected by the successful party at first instance, might not be successfully relied upon by the offeror to obtain indemnity costs in respect of the costs of its subsequent appeal. His Honour said: "First, when the offer has expired and not been renewed, the offeree is entitled to say that its success at trial would be a significant event, rendering reasonable the hypothetical rejection of a renewed offer. Secondly, the failure of the offeror to renew the offer prevents that possibility being tested. Thirdly, the offer in the court below to settle 'the proceedings' may reasonably be treated as referring to the proceedings on foot, and not to the possibility of an appeal."
The first of these three reasons is apposite in the present context insofar as Mr James is concerned while the second and third reasons are of relevance to both plaintiffs.
The weight of authority in this Court clearly opposes the making of a special costs order in favour of RBS based on the failure of the plaintiffs to accept any of the relevant offers. No cogent justification for granting RBS's application for indemnity costs on appeal flows from the mere fact of the three offers of compromise in the proceedings below.
As RBS has failed to make good its application for a special costs order, it is necessary to address its submissions in the alternative. As noted above at [28], RBS's submissions reflect a preference for an order that the plaintiffs pay its costs of the appeal on the ordinary basis. By way of a fall-back position, RBS submits that in light of the partial success enjoyed by each party on the appeal, a suitable order would have Mr James pay 50 per cent of RBS's costs of the appeal while RBS pay 50 per cent of Mr McKeith's costs of the appeal. As noted, Mr James accepts that he should pay 50 per cent of RBS's costs of its appeal.
The parties differ, however, as to the costs of Mr McKeith's appeal. Mr McKeith submits that RBS should be ordered to pay the entirety of his costs on the appeal given his success in what is referred to in the principal judgment as the contract point. RBS contends that the failure of Mr McKeith's ex gratia payment claim renders inappropriate such an order. In support of this submission, RBS emphasise that an order that RBS pay only 50 per cent of his costs on appeal will better reflect the relative success of each party.
It is true that Mr McKeith, having succeeded in part of his appeal, has obtained judgment for a substantial sum. Nevertheless, I do not accept that an appropriate exercise of the Court's discretion would have RBS pay the entirety of Mr McKeith's costs of the appeal. The severance payment to which this Court found Mr McKeith was entitled came to $375,961.54 together with pre-judgment interest. Yet, he also claimed an ex gratia payment of $4 million, a claim which failed. The time expended in dealing with that issue was not insignificant. Accordingly, in my view an appropriate exercise of the Court's discretion is to "otherwise order" with respect to Mr McKeith's costs of the appeal by ordering RBS to pay 50 per cent of those costs on the ordinary basis.

Interest on costs

Section 101(4) of the CPA provided (prior to its amendment in November 2015) that the Court may order that interest be paid on any amount payable under an order for the payment of costs. In reliance upon this provision RBS seeks an order for interest on the costs and disbursements it has outlaid since the commencement of litigation in October 2011.
It is common ground that an order for the payment of interest on costs does not require special circumstances to be demonstrated (Lahoud v Lahoud [2006] NSWSC 126 at [82] per Campbell J) and that the purpose of such an order is to compensate a party having the benefit of a costs order for being "wrongly required to spend money on litigation to enforce established rights": Robb Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170 at [44] per Basten JA, Campbell JA agreeing; Davies v Kur-ring-gai Municipal Council [2003] NSWSC 1010 at [5] per Austin J; Drummond & Rosen Pty Ltd v Easey (No 2) [2009] NSWCA 331 at [4] per Macfarlan JA; Gillfillan v Australian Securities and Investments Commission (No 2) [2013] NSWCA 143; (2013) 94 ACSR 543 at [33] per Sackville AJA, Beazley P and Barrett JA agreeing.
Whilst it is accepted that an application for interests on costs need not point to any special or otherwise out of the ordinary circumstances, an expectation that the court will undertake a general assessment of the circumstances of the case finds some support in the authorities referred to. To this end, relevant matters include the conduct of the parties, whether the successful party has been out of pocket in respect of costs it has paid and for what length of time, as well as whether the unsuccessful party has benefited from the use of that money in the relevant period: Ying v Song [2011] NSWSC 618 at [100] per Ward J citing Grogan v Thiess Contractors Pty Ltd [2000] NSWSC 1101 at [11] per Barr J.
Some recent formulations of the principle as to interest on costs appear to frame it as giving rise to a presumption that interest will be awarded as a matter of course in the absence of any countervailing discretionary consideration: see Grace v Grace (No 9) [2014] NSWSC 1239 at [66] per Brereton J. This approach is, however, possibly at odds with the statements, albeit obiter, by this Court in Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd (No 2) (2013) 84 NSWLR 436; [2013] NSWCA 211 ("Illawarra Hotel") at [38] where it was accepted that generally some positive case in support of the application must be established. The Court (Meagher, Barrett and Ward JJA) observed that a party who contends that there should be an order for interest on costs must do more than simply point to the fact that the proceedings were protracted and that it had to outlay moneys on its own costs over an extended period.
In Grace v Grace, Brereton J (at [59]-[60]) comprehensively reviewed the authorities as to interest on costs, including Illawarra Hotel which he declined to follow for reasons articulated at [62]. Significantly, his Honour (at [68], [76]) emphasised that the circumstances in which a claim for interest is liable to be refused "are rare".
At [60] Brereton J cited the following passage from the judgment of Gleeson JA in Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd [2014] NSWCA 158 at [403]: "Thus, in the absence of any countervailing discretionary factor, it is appropriate that an order for interest on costs be made to compensate the party having the benefit of a costs order for being out of pocket in respect of relevant costs which it had paid. There is no requirement to establish that the circumstances of the case are out of the ordinary."
Drummond and Rosen Pty Ltd v Easey was cited in support of his Honour's remarks. I note that s 101(4) was recently amended with effect from 24 November 2015 by the Courts and Other Justice Portfolio Legislation Amendment Act 2015 (NSW). It now reads: "Unless the court orders otherwise, interest is payable on an amount payable under an order for the payment of costs."
It may be observed that the effect of the amendment is that whereas under the previous sub-section the onus lay upon the party seeking an order for the payment of interest, under the new provision the onus is on the party resisting the payment of interest to persuade the court to "order otherwise". Absent such an order interest is payable by force of the mandatory terms of the sub-section and a court order is no longer required.
In the present case, however, it was not suggested that the Court should proceed otherwise than in accordance with the unamended sub-section. That was the position at the time of trial and, relevantly, at the time the primary judge was requested to consider the question of costs in July 2015 and at the time of the hearing of the appeal in October 2015. I therefore proceed accordingly.
Mr McKeith resists RBS's application on the ground that no such application was made for the proceedings at first instance. He submits that the failure to do so has deprived this Court of an assessment by the primary judge of the relevant factors which might otherwise have persuaded his Honour, who had intimate knowledge of the proceedings and their history compared to the more limited knowledge of this Court, to make an order for the payment of interest on the costs he awarded RBS.
In Illawarra Hotel the Court (at [34]) noted that the applicant's amended notice of appeal contained no claim for interest on costs and nor did any ground of appeal raise the matter. While the same observation may be made in this case as regards RBS's position vis-à-vis Mr McKeith, it is less surprising given RBS was the respondent in the proceedings before this Court. In these circumstances, it is perhaps appropriate that the issue only arises as a consequence of the outcome of the appeal, which in the present case involved only partial success by both parties.
Nevertheless, there is force to the view that the issue of interest on costs did not arise simply by reason of the outcome of Mr McKeith's appeal. Had RBS made such a claim in the proceedings below, it would have been dealt with on appeal. RBS's failure in this regard is significant, particularly in light of Mr McKeith's partial success before this Court and where I propose that this Court order RBS to pay 50 per cent of his costs of the appeal. That a different order for costs with respect to the proceedings at first instance is to be made on account of the outcome of the appeal does not militate against this conclusion.
RBS's position with respect to Mr McKeith is not dissimilar from that the subject of consideration as to interest on costs in Illawarra Hotel. Much like the present case, no application for an order for the payment of interest on costs was made to the primary judge in that case. Nor in either case did the issue arise as a consequence of the outcome of the appeal. To cite the Court in Illawarra Hotel at [34]: "Illawarra [the applicant] seems to say simply that it should have from the Court of Appeal an order in respect of costs at first instance, that, so far as the record shows, was not sought in the court below and does not flow from the decision on appeal. That is a quite unsupportable proposition."
In important respects Mr James' position is somewhat different to that of Mr McKeith. In his case, RBS was the appellant in this Court and was seeking an order that the judgment entered in Mr James' favour against RBS by the primary judge be reversed and that Mr James pay RBS's costs at first instance. Against Mr James' total success in the proceedings below, so RBS submits, there was no opportunity for RBS to make an application for interest on costs because, with one exception, they were awarded against RBS in Mr James' favour. Upon this basis, RBS points to an order in its amended notice of appeal seeking interest on both the costs of the proceedings below and on the appeal upon the assumption it obtained an order for costs in its favour.
It is to be noted, however, that although Mr James succeeded before the primary judge as to the severance and ex gratia payment claims, he failed on the claim referred to by his Honour as the "Appointment Promise Case" (see costs judgment at [14]-[15]). Mr James pleaded the latter at paras 55-61 of his Commercial List Statement. Paragraphs 1 and 2 of the order made by the primary judge in Mr James' proceedings provided that he should pay the costs of and incidental to that claim, in part on an indemnity basis. Notably, RBS did not seek an order from the primary judge that it be paid interest thereon.
Against this, it might be said that RBS's application for an order for interest on costs to be paid by Mr James does, at least to a limited extent, flow from the decision on the appeal insofar as the damages to which Mr James is entitled have been substantially reduced from those ordered by the primary judge.
In my view, a number of countervailing discretionary factors tend against the making of orders in favour of any of the parties as to interest on costs of both the proceedings below and now on appeal. First, it is necessary to take account of the fact that the parties have agreed that RBS should pay the plaintiffs' costs at first instance on the ordinary basis up to 26 April 2012 and that the plaintiffs should pay the costs of RBS on an indemnity basis thereafter. This split in the costs orders principally follows by reason of the first offer of compromise as opposed to the outcome of the appeal. Secondly, as already determined, I propose to make an order that Mr James pay 50 per cent of RBS's costs of the appeal and that RBS pay 50 per cent of Mr McKeith's costs of the appeal. Consequently, both Mr James and Mr McKeith submit that if they are required to pay interest on the costs awarded against them in favour of RBS, the latter should likewise pay interest on the costs incurred by them prior to 26 April 2012 as well as upon the costs of the appeal to the extent that they have been awarded in their favour. In this context, it is to be noted that Mr James did not seek an order from the primary judge that he be awarded interest on the costs awarded to him at first instance.
Accordingly, notwithstanding the compensatory nature of the statutory provision for the payment of interest on costs, the balance of advantage and disadvantage in the present case renders it inappropriate for such an order to be made in respect of any of the parties. Whether this case answers the description of a rare case or not, it is, in my view, one of those cases where an order for interest on costs should be refused. In these circumstances, it is unnecessary to deal in detail with the parties' submissions as to the rate of interest which would have applied had the payment of interest been upheld. Had it been necessary to deal with this issue, my tentative view is that the rate of interest to be applied is that contemplated by UCPR, r 36.7.

The payment of interest on the restitutionary sum by Mr James

Mr James accepts that he is obliged to repay to RBS the excess of the amount paid to him on 5 May 2015 over the amount now held to be due to him. That amount, noted at [11] above, is said to be $2,590,208.08. This amount is based upon pre-judgment interest for the severance payment being limited to the period from 8 September 2008 to 26 April 2012. RBS submits that it is entitled to interest for the period during which Mr James had the benefit of this money.
It is well established that where a judgment is reversed or set aside on appeal the appellant becomes entitled as of right to restitution of the sum paid in satisfaction of the judgment below with interest: Woolworths Ltd v Strong (No 2) (2011) 80 NSWLR 445; [2011] NSWCA 72 at [25] per Campbell JA, Handley AJA and Harrison J agreeing; Heydon v NRMA Ltd (2001) 53 NSWLR 600; [2001] NSWCA 445 at [14] per Mason P, Beazley JA and Ipp AJA agreeing; Commonwealth v McCormack (1984) 155 CLR 273; [1984] HCA 57 at 276. Invariably, the Supreme Court Act 1970 (NSW), s 75A(10) is identified as the source of this power: see Ambulance Service of New South Wales v Worley (No 2) (2006) NSWLR 719; [2006] NSWCA 236 at [29], per Basten JA, Tobias and McColl JJA agreeing.
Although already canvassed ([9]-[12] above), it is desirable to again set out the sequence of events relevant to the restitutionary sum. On 1 April 2016, Mr James paid to RBS the sum of $2,367,380.88 being the $3,022,901.39 paid to him on 5 May 2015 less his severance payment ($432,692.31) and interest on the severance payment amounting to $222,828.20. The latter was arrived at on the basis of the period 9 September 2008 to 6 February 2013, the date of the second offer of compromise. For reasons given above, I do not consider Mr James is entitled to pre-judgment interest beyond the date of the first offer of compromise, 26 April 2012. It follows that a further sum of $82,607.88 is repayable by him to RBS. This represents the difference between the pre-judgment interest claimed by Mr James in the sum of $222,828.20 and the pre-judgment interest to which we have found he is entitled, namely, $140,220.32.
The remaining dispute therefore concerns the appropriate rate at which Mr James should be required to pay interest on the amount refunded by him to RBS. RBS submits that it is entitled to interest on that amount according to the legislatively prescribed rate of 6 per cent: see Practice Note SC Gen 16. Mr James, on the other hand, contends that payment of interest on a restitutionary sum raises different considerations to the case of a party being ordered to pay pre-judgment interest on damages.
Mr James submits that it would accord more evenly with the dictates of justice to apply a rate of interest to the restitutionary sum reflecting the market rate of an objectively appropriate investment of such moneys pending appeal. Evidence was filed on behalf of Mr James to the effect that if the funds had been invested with an Australian bank at the relevant time, the rate for a one-month term deposit would have been 1.95 per cent and between 2.05 per cent and 2.35 per cent per annum for a three-month term deposit. In view of this, Mr James suggests that a fair rate would be 2.5 per cent per annum as measured according to average bank interest rates. Notably, the evidence established that Mr James had deployed the moneys in payment of legal costs with the balance invested in a managed fund that accrued a return over the year of 2.6 per cent. On this footing, Mr James submits that an order applying the legislatively prescribed rate of 6 per cent per annum would work considerable unfairness.
There can be no doubt that the requirement that an unsuccessful party on appeal pay interest on a restitutionary sum may in some cases occasion injustice. Kirby P so stated in Government Insurance Office of New South Wales v Healey (No 2) (1991) 22 NSWLR 380 at 383. Nevertheless, contrary to that advanced by Mr James, the President did not suggest that a different rate of interest ought to necessarily apply to a restitutionary sum compared to pre-judgment interest on damages.
Implicit in Kirby P's reasoning, taken at its highest, is an acknowledgment that it is within the discretion of the court to order that a different rate of interest apply, provided the relevant party seeking to depart from the court's general practice has displaced the evidentiary and persuasive burden.
The applicable principles are set out in the judgment of Mason P in Heydon v NRMA Ltd at [24] - [36]. The President made a number of observations which I have adapted to the present case:

The issue of restitutionary interest presents itself in a context where no particular loss is identifiable as regards RBS and no particular gain is identifiable as regards Mr James;
Mr James was entitled to demand and receive the sum ordered to be paid in the court below. RBS's right to restitution following the reversal of that judgment is personal and not proprietary. This would suggest that RBS would not necessarily be entitled to any windfall gain made by Mr James flowing from an extremely provident or speculative investment of the relevant funds entered into without recourse to RBS;
Doing justice to both sides also means that Mr James cannot be made hostage to RBS's particular susceptibility any more than RBS can be made hostage to Mr James' particular caution or carelessness;
It cannot be said that a respondent such as Mr James can never avoid the statutory or prescribed rate unless able to prove that the loss actually suffered by an appellant such as RBS was less than the sum which those rates would have produced. That would be to confuse restoration/restitution with compensation. Nor does the actual benefit derived by Mr James from the (reasonable) use of the judgment moneys fix the upper limit of any obligation to restore RBS to the position that should have been obtained at first instance.

His Honour then said this (at [30]): "It would be intolerably burdensome if a court required evidence and argument in every case as to what rate or rates of interest would do justice to the principles which I have endeavoured to summarise. The interest of the parties and of the court, including the interest of consistency as a component of justice, are served by taking a broad, standard approach whereby interest is calculated according to pre-determined rates that the parties can take into account in their dealings during the litigation and in their endeavour to avoid wasteful disputation concerning its outcome."
His Honour observed that similar principles may be gleaned from case law discussing the circumstances where a court should exercise its discretion to depart from the statutory rate in an award of pre-judgment interest. He noted (at [32]) that in the Court of Appeal the practice was to award restitutionary interest at the rates payable on judgments unless special circumstances warranted otherwise.
While the Court has some leeway in determining the rate of interest most apt to reflect the measure of the respondent's enrichment, it will not be so moved unless the party seeking to vary the usual approach of the Court has discharged the relevant persuasive and evidentiary burden.
As Mason P observed in Heydon v NRMA Ltd at [36], the burden is persuasive in the sense that "the whole purpose of having a general rule is to cast such burden upon the party who claims exemption from it". It is evidentiary in the sense that, as in the present case, Mr James is best positioned to prove how he disposed of the money during the relevant period. It follows that the party claiming restitutionary interest need not demonstrate that the statutory rate ought to apply: Ambulance Service of New South Wales v Worley (No 2) at [34] per Basten JA, Tobias and McColl JJA agreeing.
Mr James' submissions have sought to demonstrate that any earnings he has derived by reason of the judgment moneys are less than what would have been earned had the moneys been invested at the statutory prescribed rates. RBS submits that the evidence relied upon by Mr James to this effect is not sufficient to justify departure from the general rule. This, so RBS claims, is particularly so where Mr James has not provided evidence of other available investments or of his overall financial position so as to enable an understanding of why he chose the particular investment in question. RBS also points out that the onus lay upon Mr James to establish that RBS could not have earned 6 per cent on the moneys but only 2.5 per cent. I accept those submissions.
It accordingly follows that the general practice of the Court should be adopted and that the appropriate rate of interest to be paid in respect of the restitutionary amount is 6 per cent per annum. That the general rule is animated by considerations of utility, fairness and commercial reality perhaps bears some emphasis: see Heydon v NRMA Ltd at [36]. To be clear, the rate adopted in the Practice Note (which commenced on 1 July 2010) must be taken as reflecting the appropriate economic and commercial conditions at the time. There is nothing to suggest that these conditions have altered in the time since. In any event, as the Practice Note provides for a rate that is four per cent above the cash rate relevantly last published by the Reserve Bank of Australia, it follows that any reduction in that rate is reflected in the relevant calculation.

The withholding tax issue

As noted at [9] above, on 5 May 2015 the RBS parties paid Mr James the sum of $3,022,901.39 after withholding PAYE tax ($1,437,019.23). Of the amount withheld as tax, $1,225,000.00 related to the ex gratia payment to which this Court has held Mr James is not entitled. It follows that Mr James wishes to obtain a refund of that amount.
The parties have reached agreement as to how that exercise should be conducted and it is reflected in order 8 of the Court's orders set out below with respect to the James appeal.

Conclusion

For the foregoing reasons I propose the following orders in each appeal: Case number 113597 of 2015 (the James appeal)
Appeal allowed in part.
The order made by McDougall J on 27 March 2015 directing judgment for the Respondent against the Third Appellant in the amount of $2,932,692.31 together with pre-judgment interest in the amount of $1,490,149.15 be set aside.
In lieu thereof judgment be entered in favour of the Respondent against the First Appellant in the amount of $432,692.31 together with pre-judgment interest in the amount of $140,220.32.
The Respondent make further restitution to the Third Appellant in the amount of $82,607.88 noting that the Respondent on 1 April 2016 made restitution to the Third Appellant in the amount of $2,367,380.88.
The Respondent to pay to the Third Appellant interest on the restitutionary amount of $2,449,988.70 from 5 May 2015 to 1 April 2016 at the rate of 6 per cent per annum and on the further amount of $82,607.88 from 1 April 2016 to the date of payment of that amount at the rate of 6 per cent per annum
The costs orders made on 22 July 2015 by McDougall J be set aside and in lieu thereof: a. the Appellants pay the Respondent's costs of the proceedings at first instance on an ordinary basis up to and including 26 April 2012; and b. the Respondent pay the Appellants' costs of the proceedings at first instance on an indemnity basis after 26 April 2012.
The Respondent pay 50 per cent of the Appellants' costs of its appeal on the ordinary basis.
The parties cooperate in recovering from the Australian Taxation Office (ATO) the amount of $1,225,000.00 in tax paid to the ATO by the First Appellant in respect of the amount of $2,500,000.00 ordered to be paid to the Respondent by McDougall J including, if necessary, by: a. the expeditious filing by the Respondent of his income tax return for the year ended 30 June 2015 claiming that income tax amount as a credit; and b. the payment of that amount by the Respondent to the Third Appellant upon receipt by him of a Notice of Assessment confirming that amount as a credit against his income tax.
Liberty to apply within seven days of the making of these orders for the purpose of correcting any error therein or omission therefrom which is inconsistent with this judgment. Case number 115116 of 2015 (the McKeith appeal)
Appeal allowed in part.
The order made by McDougall J on 27 March 2015 directing judgment for the Respondents against the Appellant be set aside.
In lieu thereof judgment be entered for the Appellant against the First Respondent in the amount of $375,961.54 together with: a. pre-judgment interest on that amount from 5 December 2008 to 27 April 2012; and b. post-judgment interest on that amount (including pre-judgment interest) from 27 March 2015 to the date of payment.
The costs orders made on 22 July 2015 by McDougall J be set aside and in lieu thereof: a. the Respondents to pay the Appellant's cost of the proceedings at first instance on an ordinary basis up to and including 26 April 2012; and b. the Appellant to pay the Respondents' costs of the proceedings at first instance on an indemnity basis after 26 April 2012.
The Respondents pay 50 per cent of the Appellant's costs of its appeal on the ordinary basis.
Liberty to apply within seven days of the making of these orders for the purpose of correcting any error therein or omission therefrom which is inconsistent with this judgment.
EMMETT AJA: In these two appeals, the Court may orders on 9 March 2016. The question in the appeals was whether each plaintiff in the primary proceedings was, upon termination of their employment, entitled to a severance payment and, in addition, to an ex gratia payment. The effect of the orders made by this Court is that each plaintiff is entitled to a severance payment but neither is entitled to an ex gratia payment. As a result, one of the plaintiffs, Mr James, was required to make restitution to the defendant of part of the payment that had been made to him as a result of the orders of the primary judge.
Several questions remained to be resolved following the making of orders on 9 March 2016. A number of those questions have been the subject of agreement between the parties. However, four questions remain for determination by this Court as follows:

Whether the plaintiffs are entitled to pre-judgment interest on the severance payments and, if so, for what period?
The costs of the appeal, including whether costs should be paid on an indemnity basis?
Whether the defendant is entitled to an order for interest on the costs and disbursements that it has outlaid since the commencement of the litigation?
Whether interest is payable on the amount paid by way of restitution by Mr James to the defendant and, if so, at what rate?

I have had the advantage of reading in draft form the proposed reasons of Tobias AJA. For the reasons proposed by his Honour I agree with the conclusions reached by him on each of the above questions. I agree that the Court should make orders as proposed by Tobias AJA in each of the appeals.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 14 September 2016

Courts and Other Justice Portfolio Legislation Amendment Act 2015(NSW)

Invariably, the Supreme Court Act 1970(NSW)

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