Nemur Varity Pty Ltd v National Australia Bank Limited

INTEREST - ss.58, 59, 60 Supreme Court Act 1986 - delay by plaintiff - reduction in interest that would otherwise have been given.

2. The plaintiff has sought statutory interest as follows:

(1) In respect of the NAB cheques, the sum of $163,309.87 under s.59 of the Supreme Court Act.

(2) In respect of the TT cheque, the sum of $94,604.62 under s.58 of the Supreme Court Act.

(3) In respect of the ANI cheque, the sum of $66,284.39 under s.60 of the Supreme Court Act.

(4) In respect of the loss of business claim, the sum of $183,376.58 under s.60 of the Supreme Court Act.

9. The claims thus made have been calculated upon the penalty interest rate applying from time to time. In all cases the claim to interest is calculated up to 17 September 1999, the date upon which argument as to interest took place.

12. The starting points of the plaintiff's calculations are: in the case of the NAB cheques, the dates of conversion; in the case of the TT cheque, the admitted date of demand; in the case of the ANI cheque and the loss of business claim, the date of issue of the writ.

15. There is no doubt that the starting point for the plaintiff's calculations in the loss of business claim is correct. Although there is some room for doubt, I consider that the starting point taken by the plaintiff for the TT cheque calculation is correct. Concerning the ANI cheque, the plaintiff has taken a starting point to which the defendant raised a possible exception - but one with which it ultimately did not persist.

18. The possible exception turned on whether the moneys awarded in connection with the ANI cheque should be regarded as the recovery of a sum certain, and thus as attracting interest (if at all) under s.58 of the Act, rather than s.60. If s.58 applied, then according to the defendant's written submission, there was no evidence of demand until May 1995.

21. In oral argument, however, senior counsel for the defendant quite clearly submitted that s.60 was the section which had application in the circumstances. That was the position for which the plaintiff contended. I will deal with the claim on what, in substance, was a commonly adopted position.

24. Counsel for the defendant disputed the starting point for the plaintiff's calculations in respect of the NAB cheques. I shall deal with the submission he made in that connection a little later.

27. The defendant resisted the claims to interest on a number of bases. In each case, it was contended, good cause was shown why interest should not be given in accordance with the pertinent provision of the Supreme Court Act.

30. First, counsel for the defendant submitted that interest should be wholly refused in respect of amounts awarded in connection with the NAB, TT and ANI cheques. The argument, in short, was that the plaintiff required no interest to compensate it for being kept out of its money, as having been deprived of its use. The cheques represented clients' premiums. There was no evidence that any of the clients had made claims upon the plaintiff. If a proceeding was now commenced by any client against the plaintiff it might be met by a limitation defence. If a claim was made and succeeded, interest would only be payable from time of commencement of the relevant proceeding. If a claim was made and was met by the plaintiff without need for commencement of a proceeding, payment of interest from date of conversion would be no more than generosity on the part of the plaintiff. There was potential for the plaintiff to make a windfall gain. The exception to the mandate that interest be given had been shown.

33. I reject the overall submission. There was more than one problem with the chain of reasoning upon which it relied. It should not be thought that the plaintiff will not be obliged to account to its clients when it receives the judgment moneys. I do not accept the proposition that the plaintiff will fall under no obligation to account to his clients not only for premium moneys but for any statutory interest awarded thereon - whether or not the clients (or any of them) take proceedings against it. Of the suggestion that the plaintiff could maintain a limitation defence (if such a defence could be and was pleaded) not a word was heard at trial. It was not developed in argument.

36. Second, counsel for the defendant correctly submitted that, in respect of the NAB cheques, the Act fixes no maximum rate of interest. He contended that if I gave interest, I should do so by fixing a rate not exceeding that which the plaintiff could have earned by safely investing the sums represented by the converted cheques. He relied upon the evidence of Mr Wayne Mace, a litigation recoveries officer employed by the defendant, to submit that over the period of ten years since 1990 the average rate that the plaintiff could have earned was 6.85 per cent per annum. He referred me, also, to the observations of Ormiston, J. in Australian Guarantee Corporation Limited v. Commissioners of State Bank of Victoria [1989] VicRp 57; [1989] VR 617 at pp.639-640.

39. The effect of evidence-in-chief given by Mr Mace was, in my opinion, substantially weakened by cross-examination. Whilst it may be agreed that the penalty interest rate does include an element of punishment vis-a-vis a defendant, I consider that in the absence of other cogent evidence it provides an appropriate guide to the rate of interest which ought be allowed under s.59. In Australian Guarantee, Ormiston, J. in his discretion fixed upon a rate "close to but not identical with" the varying rates fixed in accordance with the Penalty Interest Rates Act. The evidence of Mr Mace, viewed overall, has not persuaded me that the rates fixed by the Penalty Interest Rates Act are not appropriate for use in this case.

42. Third, counsel for the defendant submitted that if interest was to be given in connection with the NAB cheques, it should not run until early May 1991, at which time the defendant was first shown to have any knowledge of the allegation of conversion.

45. The facts of the present case are not exactly the same as those considered by Ormiston, J. in Australian Guarantee; but there are very obvious similarities. In my opinion it might fairly be said, in all the circumstances, that the defendant acted at its peril in respect of the NAB cheques. I consider that the correct starting point for calculation of interest in respect of the NAB cheques is in each case the date of conversion.

48. Fourth, counsel for the defendant submitted that any interest awarded in respect of the loss of business claim should be calculated, in respect of the net loss assessed by me as having been suffered in any particular financial year, from the last day of that financial year - that is, 30 June. Counsel for the plaintiff submitted that any calculation should be made as from the mid-point of the financial year - he took 1 January.

51. In my opinion the plaintiff's approach is the more appropriate. It may well be that it under-estimates the plaintiff's just claim, having regard to the commencement date of the relevant policies. But the plaintiff was content to put the matter as it did.

54. Fifth, it was submitted that interest should not run on the business loss damages until mid-March 1999, for it was not until then that the plaintiff made a claim for such damages.

57. I reject that submission. True it is that the claim was not formally made until very recently. But according to my reasons the plaintiff has established this head of damages, having progressively lost the use of the net commissions which those damages represent. If the defendant had shown that its conduct of the litigation had in some way (save in the ultimate outcome) been adversely affected by the belatedly made claim, then it might have made a valid point in respect of interest. But no attempt was made to show any such thing. The most I should do is have some regard to the belated bringing of the claim when considering the defendant's submission that the plaintiff inordinately delayed the progress of the litigation.

60. Sixth, counsel for the defendant submitted that the calculation which I made in respect of the loss of business claim took account of the effects of inflation, for which reason no "further amount of compensation for interest" ought be allowed.

63. That submission is, I consider, unsound. What I did in my calculation was to allow for a modest notional increase in commissions beyond those earned in 1990.

66. Seventh, it was submitted for the defendant that any entitlement the plaintiff might otherwise have to interest should be discounted by three-fifths to reflect the plaintiff's inordinate delay in bringing this litigation to trial. This fraction was calculated by taking as a denominator the number of days between commencement of the proceeding and date of commencement of trial: 2462. The numerator was the number of days said by the defendant to be attributable to the plaintiff's delay: 1462.

69. There is no doubt that in deciding whether good cause has been shown why interest should not be given in accordance with the dictate of the Act, delay by the plaintiff may in a particular case be a relevant consideration. In the present case I am satisfied that the plaintiff did delay in prosecuting its claim, that this delay should be considered relevant to the issue of good cause, and that good cause has in fact been shown. It does not follow, however, that I consider it appropriate to reduce each of the components of the claim to interest by three-fifths.

72. In determining what effect delay by the plaintiff should have upon interest, the following matters are pertinent:

(a) In the case of the NAB cheques, the claim for interest dates from the time of their respective conversions. In round terms that was about three years before the proceeding was commenced. The defendant made no submission that by reason of delay this period should be excluded. I do not consider that it should.

(b) In the case of the TT cheque, the claim for interest dates from the demand in May 1991 - about 18 months before commencement of the proceeding. The same observation applies as in the case of the NAB cheques.

(c) The end date of calculation in each case should be the date of judgment, not the date on which the trial commenced. The plaintiff made calculations to 17 September 1999. That is a convenient end date.

(d) It is very likely that some of the delay which the defendant's counsel identified in his submissions was occasioned by the frequency with which the plaintiff changed its solicitors. According to counsel for the plaintiff, those changes were not attributable to the plaintiff's default; and the defendant should not have the benefit of delay resulting therefrom. Even if the delays so occasioned, or any of them, were not attributable to any intent by the plaintiff to delay its claims, that is what happened; and I think the plaintiff must abide the consequences.

(e) On 16 March 1999, on an application by the plaintiff to amend its statement of claim, Hedigan, J. reviewed the history of the proceeding. He described the delay on the plaintiff's part as lamentable. The delay was, he said, "virtually wholly due to the plaintiff". No allegation had been made for the plaintiff that the defendant had caused any delay. His Honour went into book, line and verse of the delay which he said was attributable to the plaintiff. In the end, His Honour allowed the amendment. It might be said that his characterisation of the plaintiff's conduct was unnecessary to his decision. Assuming that were so, my own analysis of the material leads me to an ultimate conclusion similar to that reached by His Honour.

(f) Counsel for the defendant submitted that there were seven discrete periods of delay by the plaintiff. I will refer to each of them in a moment. Counsel for the plaintiff submitted that the chronology upon which these periods were identified was incomplete. Insofar as there was substance to that submission, I have taken it into account when considering whether the defendant has made out each of the periods of delay which its counsel identified.

(g) Counsel for the plaintiff submitted also that the defendant took no steps to bring the matter on, but itself delayed taking necessary interlocutory steps. He contended that whilst it is not for a defendant to make the running in a proceeding, it was relevant to consider the defendant's conduct in that connection in a dispute about interest. I do not exclude the possibility that this matter could tell against a defendant in some circumstances. But in the present case, any default by the defendant pales into insignificance when contrasted with the default of the plaintiff. In expressing that conclusion I have not forgotten the fact that the bank was itself the plaintiff in the possession claim.

(h) I am satisfied that the plaintiff was responsible for most of the first period of alleged delay - that is, between 26 March and 6 December 1993. I consider, however, that it was reasonable for the plaintiff to consider and decide to join the ANZ as a defendant; and I should allow some time for it to have done so - albeit that joinder was not in fact effected until 1995. I reduce the delay attributable to the plaintiff to 200 days.

(i) I am satisfied that the plaintiff was responsible for most of the second period of alleged delay - that is, between 9 August 1994 and 18 May 1995. In this period, however, the plaintiff needed to give consideration to the possession claim then recently commenced by the defendant. I reduce the delay attributable to the plaintiff to 250 days.

(j) I am satisfied that the plaintiff was responsible for delay between 14 April 1996 and 9 September 1996. Between the latter date and 6 November 1996 the plaintiff did take some action to have the three proceedings then on foot heard together. The application was, it seems, adjourned sine die. But in substance it was not without merit. In due course the three proceedings were heard together. I am not satisfied that there was any delay between 6 November and 24 December 1996, the latter date being the date on which, according to the defendant, the third period of delay ended. I consider, then, that the plaintiff was responsible for delay, in the third period identified by the defendant, amounting to about 150 days.

(k) I am not satisfied that the defendant has made out the fourth period of delay which it alleges - a period commencing 15 January 1997 and ending 11 March 1997. 15 January 1997 is the day, the defendant says, that the plaintiff should have answered interrogatories which it, the defendant, chose to serve on Christmas Eve. In the overall scheme of things any delay in answering the interrogatories was so small as to be insignificant.

(l) The defendant has not made good its claim in respect of the fifth period of alleged delay - between 15 May and 15 July 1997. That period commences a month after NAB filed its amended defence, and concludes a fortnight before a mediation was held. The selection of dates appears to be arbitrary. There is nothing to suggest that the plaintiff delayed in getting the matter on for mediation in 1997.

(m) The defendant has not made good its claim in respect of the sixth period of alleged delay - between 8 August and 2 September 1997. On the latter date, it seems, the proceeding was fixed for trial. That was only about five weeks after the mediation ended. It is difficult to imagine what the plaintiff could have done to speed up that sequence of events.

(n) The defendant has satisfied me that the seventh period of delay - between 18 February 1998 and 2 August 1999, a total of 530 days - was attributable to the default of the plaintiff. It was on the plaintiff's application that on 18 February 1998 the trial date for March 1998 was vacated. The matter was in due course refixed for trial in mid-March 1999. It had to be adjourned at that time when the plaintiff belatedly applied to amend its statement of claim. There could be no fresh hearing until August of this year. The plaintiff's counsel submitted that the defendant's side had not been idle in preparing its case in the period between February 1998 and August 1999. That could be expected to be the case. It provides no reason to excuse the plaintiff for the delay.

(o) In all, the defendant has satisfied me, then, that the plaintiff was responsible for delays amounting to 1,130 days. I consider, in the present case, that it accords with the pertinent provisions of the Act to take that entire period of days into account so as to reduce the interest which I would otherwise give the plaintiff.

* In the case of the NAB cheques, the average period from conversion to date of judgment (actually 17 September 1999, the date of argument, but a few days matters not) was 3,673 days.

The period of the plaintiff's delay was thus about 31 per cent of the total period. Accepting the plaintiff's calculation of interest for the total period I give the plaintiff damages in the nature of interest at $112,685.

* In the case of the TT cheque, the period from demand to date of judgment was 3,034 days. The period of the plaintiff's delay was thus about 37 per cent of the total period. Accepting the plaintiff's calculation of interest for the total period at the penalty interest rate applying from time to time as being appropriate, I give the plaintiff interest in the sum of $59,600.

* In the case of the ANI cheque, the period from date of commencement of the proceeding to judgment was 2,506 days. The period of delay was thus about 45 per cent of the total period. Allowing 55 per cent of the damages in the nature of interest which I would otherwise give, I allow $36,450.

* In the case of the business loss claim, I should also allow 55 per cent of the damages in the nature of interest which I would otherwise give. I allow $100,860. In this calculation, and in the case of the ANI cheque calculation, I have considered the rates applying from time to time under the Penalty Interest Rates Act to be appropriate.

84. I thus give the plaintiff damages in the nature of interest (that description is apposite in the case of s.58 as it is in the cases of ss.59 and 60) amounting in total to $309,595.

89. I should order that the first defendant pay the plaintiff's costs, including reserved costs.

94. I will grant the first defendant a stay of 14 days.

99. Judgment for the plaintiff against the first defendant in the sum of $590,915 plus damages in the nature of interest fixed at $309,595. Order that the first defendant pay the plaintiff's costs, including reserved costs. Stay 14 days.

I certify that this and the 9 preceding pages are a true copy of the reasons for judgment of Ashley J of the Supreme Court of Victoria delivered on 21 September 1999.