Miletich v Murchie

JUDGE: GRAY J DATE: 28 SEPTEMBER 2012 PLACE: MELBOURNE

REASONS FOR JUDGMENT 1 On 17 September 2012 I published reasons for judgment in this proceeding (see Miletich v Murchie [2012] FCA 1013). On that occasion I made orders for the applicants to serve on the liquidator of the third respondent and on the fourth respondent an affidavit as to the terms of settlement reached between the applicants and the first and second respondents, and minutes of proposed orders reflecting the reasons for judgment. I also ordered that the proceeding be listed for further hearing this day for submissions as to the appropriate orders to be made in the proceeding. 2 I am satisfied that the applicants have taken steps to effect the service of the necessary affidavit material on both the third and fourth respondents. It has to be said that the fourth respondent's whereabouts are currently not known. Service has therefore been effected on solicitors who have acted for him at different points in the proceeding. Although those solicitors are not on the record, in the sense that they have not filed a notice of address for service on behalf of the fourth respondent, I am content to accept service on them as service on him. In addition, my associate has made telephone contact with the fourth respondent directly and has forwarded a copy of the reasons for judgment published on 17 September 2012 to him at an email address that he gave her. I am satisfied therefore that the fourth respondent is well aware of the orders that have been made. 3 As is apparent from [121]-[125] of the reasons for judgment published on 17 September 2012, the principal issue in determining what orders are to be made is how to take into account the settlement reached between the applicants and the first and second respondents. That settlement was by means of a deed of release executed on 25 October 2011, the terms of which the parties desire to keep confidential. In the light of that desire and of the practice of the Court to respect the wishes of parties to keep terms of settlement confidential I propose to make an order that the deed be kept confidential. 4 It appears from the terms of the deed that the settlement had two elements. One was a lump sum in full and final settlement of the claims made by the applicants against the first and second respondents. The second element was that the first and second respondents agreed to pay the applicants' costs of the proceeding up to and including 24 October 2011. The definition of costs in the deed makes it clear that those costs are the costs of and incidental to the proceeding against the respondents generally, with the exception of what are said to be three interlocutory applications that were specific to the third respondent. Those interlocutory applications are a notice of motion filed on 2 March 2011, in which a freezing order against the assets of the third respondent was sought, and an interlocutory application filed on 5 October 2011, in which the applicants sought leave to proceed against the third respondent (which was by then in liquidation) and in which they also sought to join the fourth respondent as a party to the proceeding. 5 The difficulty about the calculation of the amount for which judgment should be given against the third and fourth respondents arises from the fact that the lump sum settlement with the first and second respondents does not permit the calculation of how much of it represented a contribution to the loss and damage suffered by the applicants and how much represented interest on that contribution. As the applicants recognised in written submissions filed for the purpose of use today, the simplest calculation appears to be simply to calculate interest on the total sum of damages that I determined in [91] of my reasons for judgment published on 17 September 2012 up to this day and to deduct from that total the lump sum settlement. The applicants' submissions point out that, since the date on which the lump sum was paid pursuant to the deed of release, they have had the use of that money. They are prepared to concede that there ought not to be interest paid in respect of the amount of that lump sum that represents damages. I can see the force of that argument. The difficulty lies in seeing the way to deal with it. The primary method proposed on behalf of the applicants was to calculate interest on the total amount of damages up to the date when the lump sum was paid and deduct from the lump sum the whole of that interest, thereby treating only approximately half of that sum as being in respect of damages. They then calculated interest at the rate to which I referred in [93] of my reasons for judgment on the balance of the damages for the period from the payment of the lump sum up to today. 6 My problem with that method of calculation is that it seems to me to remove any liability on the part of the third and fourth respondents to pay any interest on any amount of the damages in respect of the period up to 17 November 2011, when the lump sum was paid. My view is that, since I am awarding damages against the third and fourth respondents, I should also be awarding interest on those damages in compliance with s 51A of the Federal Court of Australia Act 1976 (Cth) ("the Federal Court Act"). I do not consider the fact that the applicants have received a lump sum from the first and second respondents constitutes good cause for not awarding interest for the relevant period against the third and fourth respondents. Because of the undifferentiated nature of the lump sum, which consists of both interest and damages, it is impossible to make any more accurate calculation in respect of interest. The alternative method proposed by the applicants did not seem to me to solve the problem either. 7 For these reasons it seems to me that I should return to what appears to be the simple method, which is to calculate interest on the whole of the amount of damages assessed up to today, add that interest to the amount of damages, and deduct from that total the amount of the lump sum settlement. This will produce the most just result and, with respect to interest, will comply with s 51A of the Federal Court Act. 8 In making the calculation, I have calculated the interest slightly differently from the calculation done on behalf of the applicants. The differences arise for two reasons. At [94] of my reasons for judgment published on 17 September 2012, I chose 22 October 2007 as the date when the loss of the applicants crystallised. It was the date when they were forced to close their business because it was unviable. The applicants have calculated interest including 22 October 2007. It seems to me appropriate to make that calculation from 23 October 2007, the day after the crystallisation of the loss. The other difference arises from the fact that, in respect of complete half years, the applicants have calculated the rate according to the formula in Practice Note CM16 on a daily basis and counted the number of days in each half year. I have simply taken the rate and calculated interest for a whole year and divided by two to provide a sum for the half year. The difference is not great. 9 The calculation that I have made is as follows: Total damages $398,557.39 Plus total interest from 22 October 2007 to 28 September 2012 $173,133.60 Total amount owing $571,690.99 Less paid pursuant to the settlement $292,728.91 Leaving a total of $278,962.10 That will be the amount for which I will give judgment. 10 As to the calculation of costs, it is necessary to take into account that the applicants have already received, or become entitled to receive, an amount for costs pursuant to the deed of settlement. As I have said, that deed excludes the costs of specific interlocutory applications relating only to the third and fourth respondents. It seems to me the appropriate way to have the costs assessed is to have a calculation made of the whole of the applicants' costs of the proceeding and simply to deduct from that total the amount of costs received by the applicants, or which they are entitled to receive, from the first and second respondents. For the sake of clarity, I propose to make specific reference in the costs order to the costs of the interlocutory applications that were excluded by the terms of the deed of release and, in case it should be thought that the subsequent interlocutory application filed on 26 October 2011 had been omitted deliberately, to that interlocutory application. 11 For these reasons, I make the following orders:

1. The confidential deed of release, marked as Exhibit "MJD1 Confidential" and referred to in the affidavit of Martin John Deutsch sworn on 25 September 2012, be placed on the Court file in a sealed envelope and the sealed envelope only be opened on the order of a judge of the Court.
2. Judgment be entered for the applicants against the third and fourth respondents in the sum of $278,962.10, inclusive of interest from 22 October 2007 to the date of this order calculated at the rate determined from time to time in accordance with Practice Note CM16.
3. The third and fourth respondents pay the applicants' costs of the proceeding, including the costs of and incidental to: (a) the notice of motion filed on 2 March 2011; (b) the interlocutory application filed on 5 October 2011; and (c) the interlocutory application filed on 26 October 2011 but excluding the costs paid to the applicants by the first and second respondents, or which the applicants are entitled to receive from the first and second respondents, pursuant to clauses 3.2 and 3.4 of the confidential deed of release referred to in paragraph 1 of this order. I certify that the preceding eleven (11 ) numbered paragraphs are a true copy of the reasons for judgment herein of the Honourable Justice Gray.