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[2023] ACTSC 370
Supreme Court of the ACT
2023-12-08
Mossop J
Original judgment source is linked above.
Source: the ACT Courts (www.courts.act.gov.au). Converted to plain text by ZoeLaw. Not the official version.
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: Nova Builders Pty Ltd v Beno Excavations Pty Ltd (No 5) Citation: [2023] ACTSC 370 Hearing Date: Decided on the papers Decision Date: 8 December 2023 Before: Mossop J Decision: See [39]. Catchwords: PRACTICE AND PROCEDURE – INTEREST – Plaintiff failed to claim interest in its Defence and counterclaim – consideration of r 1619 of the Court Procedures Rules 2006 (ACT) – successful defence of set-off and counterclaim on the ground of mistaken payment – mistaken payments caused by second defendant – interest calculated on the whole of the amount from the date of the mistaken payment – no reason to limit plaintiff’s entitlement to interest – leave given to amend claim to include claim for interest – interest awarded PRACTICE AND PROCEDURE – COSTS – Plaintiff seeks costs on an indemnity basis – second defendant seeks different costs orders for claim and counterclaim – where plaintiff successful on both its defence and counterclaim on the ground of mistaken payment – second defendant’s conduct deliberately caused the mistaken payments – no reason to award separate costs orders for defence and counterclaim – costs awarded in favour of plaintiff Legislation Cited: Court Procedures Rules 2006 (ACT), rr 6, 407(1)(i), 1619, Sch 2, Pt 2.1 Cases Cited: Nova Builders Pty Ltd v Beno Excavations Pty Ltd (No 3) [2023] ACTSC 319 Parties: Nova Builders Pty Ltd (Plaintiff) Beno Excavations Pty Ltd (First Defendant) Civil and Civic Corporation Pty Ltd (Second Defendant) Representation: Counsel R Arthur (Plaintiff) C McKeown (First Defendant) A Greinke (Second Defendant) Solicitors Lexicon Lawyers (Plaintiff) Joseph Tallarita (First Defendant) Chamberlains Law Firm (Second Defendant) File Number: SC 276 of 2020 MOSSOP J: Introduction
These reasons relate to the questions of costs and interest consequent upon the judgment of the court given on 3 November 2023: Nova Builders Pty Ltd v Beno Excavations Pty Ltd (No 3) [2023] ACTSC 319. In these reasons I use the same abbreviations as in the earlier reasons.
That decision determined a claim made by Civil against Nova for $462,003.93. Judgment was given for Nova because it was entitled to set-off two earlier mistaken payments totalling $550,000 made to Civil. The decision also determined a counterclaim made by Nova against Civil for the balance of the mistaken payments, which was a sum of $87,996.07. Judgment was given in favour of Nova against Civil.
Nova seeks its costs of the proceedings on an indemnity basis or alternatively on a solicitor and client basis. It also claims interest on the whole of the amount mistakenly paid to Civil since the date upon which the second of the two mistaken payments was received by Civil.
Civil contends that Nova should pay the costs of its claim for the $462,003.93 and that it should only pay the costs of the plaintiff’s counterclaim from 7 April 2022. It contends that costs should be assessed on a party and party basis. In relation to interest, it contends that no interest is payable to Nova because interest had not been claimed in Nova’s Defence and counterclaim. Further, it claims interest on the $462,003.93 which it had claimed from Nova.
Nova also indicated that it wished to make an application for a third-party costs order against Mr Moseley and against the solicitors who acted for Civil. Those claims are the subject of a separate application in proceeding and are not dealt with in these reasons. Liberty will be granted to Nova to pursue those applications separately.
Interest
Civil contends that Nova did not claim interest in its Defence and counterclaim, and only sought relief by way of set-off in its claim and a counterclaim for the excess. It correctly points out that interest is a matter that must be specifically pleaded: Court Procedures Rules 2006 (ACT) r 407(1)(i). On the other hand, Nova has specifically pleaded its claim for interest on the $462,003.93.
Nova acknowledges that it failed to expressly claim pre-judgment interest. It says that this was an oversight. It seeks an order under r 6 dispensing with the application of r 407(1)(i) in this case or alternatively seeks leave to amend its Defence and counterclaim to make an express claim for interest. It submits that Civil will not have been prejudiced in respect of anything it might have done had the claim been pleaded.
In circumstances where no prejudice is identified and the pleading deficiency is a minor one resulting from an oversight, the appropriate course is to give leave to Nova to amend its Defence and counterclaim so as to make a claim for interest on the amounts paid by mistake.
Rule 1619 provides that in a proceeding for the recovery of money, the court may order that interest be included in the amount for which judgment is given at a rate it considers appropriate, on all or part of the money and for all or any part of the period beginning on the day the cause of action arose and ending on the day before the day judgment is entered. For the purposes of that rule, the court may set the rate of interest, having regard to the rate of interest applying under Sch 2, Pt 2.1 of the Rules.
The chronology of payments and liabilities is as follows: (a) 3 February 2020: Nova made the first mistaken payment of $275,000 in response to an invoice from Civil. (b) 20 February 2020: Nova made the second mistaken payment of $275,000 in response to an invoice from Civil. (c) 17 March 2020: Civil issued an invoice numbered 3391 for $275,000. The terms of the invoice were described as “Net 30”. (d) 24 July 2020: Civil provided three invoices to Nova for works done on the Greenway site: (i) a revised version of invoice 3391: in the sum of $275,000; (ii) invoice 39: in the sum of $108,075; and (iii) invoice 89: in the sum of $55,003.93. The invoices issued on 24 July 2020 totalled $438,078.93. Each of these invoices are shown as being payable on 7 August 2020. (e) 30 April 2021: Civil invoiced Nova for $23,925, being a retention sum. The invoice is shown as being payable on 31 May 2021.
There is obviously a difference between the two versions of invoice 3391. The evidence does not make clear why the invoice was issued in different terms with a different due date on 24 July 2020. However, having regard to the terms of the second version of the invoice, it is not appropriate that any interest run against Nova prior to the due date stated on the second version of the invoice. Calculation of interest
Method 1: Calculation which takes account of both sides of the ledger
For the purposes of this method of calculating interest, both Nova and Civil would have interest calculated on the amounts owed to them. Nova would be entitled to interest from the date of each mistaken payment. That is because Mr Moseley deliberately deceived Mr Pierlot to procure the mistaken payment. It is therefore not a case where the existence of the mistake was unknown to the recipient.
Civil would be entitled to interest on the unpaid invoices. They were invoices for works carried out and the only reason for non-payment was the entitlement to set off the mistaken payment against the monies owed.
The end result is summarised in the following table:
Amount Dates Interest Payable Interest Payable to Nova to Civil
$275,000 4/2/20 - 2/11/23 $52,058.20
$275,000 21/2/20 - 2/11/23 $51,451.47
$438,078.93 8/8/2020 - 2/11/23 $72,581.93
$23,925 1/6/21 - 2/11/23 $3152.53
Total $103,509.67 $75,734.46
Net payable to $27,775.21 Nova
This calculation identifies the value of the respective loss of use of the money in question. Method 2: Calculation based on Nova being out of pocket
If interest is calculated on the whole of the $550,000 from the dates that the payments were made by Nova, the interest would be $103,509.67. A dispute about the detail of this method of calculation of interest is addressed later in these reasons.
Method 3: Calculation based on net amount of the judgment
Interpretation of r 1619
Rule 1619(1) provides: 1619 Interest up to judgment (1) In a proceeding for the recovery of money, including a debt or damages or the value of goods, the court may— (a) order that interest be included in the amount for which judgment is given— (i) at a rate it considers appropriate; and (ii) on all or any part of the money; and (iii) for all or any part of the period beginning on the day the cause of action arose and ending on the day before the day judgment is entered; or (b) order that a lump sum be included in the amount for which judgment is given instead of interest under paragraph (a).
The submissions put on behalf of Nova assumed that this language was sufficient to permit an award of interest on the whole of the $550,000. That assumes that a defence by way of set-off comes within the expression of “a proceeding for the recovery of money”.
The reference to “recovery of money” in the chapeau is picked up in subs (1)(a)(ii) in the reference to “the money”. Interest is able to be awarded on all or part of the money of which recovery is sought. Although in most cases “the money” (in subs (1)(a)(ii)) will be part of “the amount for which judgment is given” in subs (1)(a), the reference to “the money” is a reference to the chapeau to subs (1), rather than “the amount” in subs (1)(a). The words “the amount for which judgment is given” should be read as if they were “the amount of money for which judgment is given”.
The expression “proceeding for the recovery of money” is not defined. It appears consistent with the purpose of the provision that it should be interpreted so as to apply even to an amount claimed as a set-off against a claim made by another party. If it were interpreted as excluding a claim by way of set-off, then there would be the potential for significant practical injustice to arise as a result of the inability to properly take into account the different times at which the primary liabilities were incurred.
Result in this case
In the present case, it is clearly appropriate for Nova to be compensated for being kept out of the $550,000 for the period that it was. Nova was tricked into paying money to a party to whom the money was not owed.
Civil, on the other hand, was kept out of money that it was owed because Nova, having recognised that it had been tricked and may be liable to pay money to Benex, sought to protect its position by paying the money into court. However, as the money was paid into court, Nova did not have the benefit of the money arising from the non-payment to Civil. In those circumstances, should Civil be compensated by Nova for being kept out of its money? In my view, it should not. Consistent with the findings that I made in the earlier judgment, the mistaken payments were caused by Mr Moseley and Civil. They involved conduct which Mr Moseley knew was wrong. The failure by Nova to pay the $462,003.93 was because the conduct of Mr Moseley and Civil had exposed it to the potential for a claim from Benex and because, if the money had been paid to Civil, it would have been practically lost to Nova. In circumstances where the crisis was generated by the wrongful conduct of Mr Moseley, and where Nova has acted reasonably and did not have the benefit of the money, I do not consider that it is appropriate to incorporate Civil’s notional entitlement to interest on the money paid into court into the calculation of interest to be awarded to Nova.
This means that the second method of calculating interest set out above is the appropriate one.
Why the calculations of interest by the parties are not appropriate
The calculations of interest made by the parties included calculations that addressed the situation in which interest was awarded in favour of Nova for the whole of the relevant period.
The interest calculations made by the parties commenced on 21 February 2020, the day after the receipt of the second of the two mistaken payments.
In contrast to the calculations made by the parties, the calculation that I have made addresses the fact that the two payments that comprise the $550,000 were made on different dates. The first was on 3 February 2020, and the second was on 20 February 2020.
There is a further dispute between the parties about the manner in which interest on $550,000 for the whole of the period should be calculated. Nova contends that the amount of interest, calculated in accordance with Court Procedures Rules rates, is $103,082.80. The calculation appears to have been made using the interest rate calculator on the ACT Civil and Administrative Tribunal (ACAT) website. This calculation is disputed by counsel for Civil who contends that the correctly calculated amount was not $103,082.80, but instead $103,024.99, a difference of $57.81. The calculation provided by Civil is based upon the netlaw.com.au website. The difference between the calculations appears to arise from the fact that 2020 was a leap year and contained 366 days rather than 365 days. The Netlaw calculator adjusted for the additional day in 2020 and, as a consequence, arrived at an amount of interest per day that is slightly lower than the ACAT calculator, which did not take account of the fact that 2020 was a leap year. The appropriate calculation of interest is therefore $103,024.99.
In making the calculations that I have in order to arrive at the figure of $103,509.57, I have adopted the Netlaw calculations which incorporate the fact that 2020 was a leap year.
Other submissions
I reject the submission made by Civil that interest should only run on the $550,000 from the date when Nova first filed its counterclaim. That was said to be because, in its attempts to extricate itself from the proceedings and interplead, Nova disclaimed any interest in the funds that had been paid into court. It was said that the counterclaim filed on 7 April 2022 “was a change in position on the part of Nova, which had previously adopted a neutral stance”. The relevant chronology is as follows: (a) 7 August 2020: The proceedings were commenced as an application by Nova to interplead. (b) 17 September 2020: McWilliam AsJ granted leave to Nova to interplead. Civil was on notice of the application and chose not to appear. Both Nova and Benex appeared. (c) 9 October 2020: Benex filed a Statement of Claim claiming $772,767.84 from Nova. (d) 11 March 2021: Civil filed a Statement of Claim claiming $438,078.93 from Nova. (e) 30 April 2021: Civil filed an application seeking to have the order made by McWilliam AsJ on 17 September 2020 set aside because the claims made by Benex and Civil related to separate contracts for works performed at different times. (f) 6 May 2021: Benex filed an application in proceeding seeking to have the $438,078.93 paid out to Benex. (g) 19 July 2021: McWilliam AJ heard an application from Civil seeking summary judgment and an application from Benex that the money paid into court be paid out. (h) 18 November 2021: McWilliam AJ dismissed both applications. In the course of doing so, her Honour considered the submission made by Civil that interpleader relief was not appropriate and determined that it was not appropriate. (i) 24 February 2022: McWilliam AJ gave leave to Civil to file an Amended Statement of Claim. That was filed on 24 March 2022. (j) 7 April 2022: Nova filed a Defence and counterclaim seeking to set-off the $550,000 and counterclaim for the excess over the $462,003.93. (k) 28 April 2022: Benex filed a Statement of Claim seeking $666,726.96. (l) 13 May 2022: Kennett J heard Nova’s application seeking to strike out Benex’s claim. His Honour dismissed that application on 7 June 2022. (m) 16 June 2022: Nova filed a Defence to Benex’s claim. (n) 28 June 2022: Civil filed a Further Amended Statement of Claim. This was the claim where the existence of a joint venture involving both Civil and Benex was alleged for the first time. (o) 1 August 2022: Nova filed a Defence and counterclaim to Civil’s Further Amended Statement of Claim. (p) The proceedings were heard on 23-27 October 2023 and 1 November 2023, and judgment given in relation to the proceedings as between Nova and Civil on 3 November 2023.
The submission made on behalf of Civil that the pleading of an entitlement to set-off and counterclaim on the basis of the mistaken payment of $550,000 involved a change of position that might disentitle Nova to interest lacks merit.
In my earlier decision, I concluded that Mr Moseley knew that his efforts to take over the Greenway contracts and keep his course of conduct secret from Benex was wrong. He knew that Civil had no entitlement to the money which it claimed from Nova. He knew that Civil was not the contracting party. In those circumstances, there is no unfairness in awarding interest from the date of the mistaken payments that he wrongfully procured. That was the day the “cause of action arose” for the purposes of r 1619(1)(a)(iii).
Costs
Nova succeeded on both its defence of Civil’s claim against it and on its counterclaim.
Nova attempted to take a neutral position in relation to the $550,000. It sought to interplead. As pointed out, that was initially acquiesced to by Civil, which then subsequently made submissions against that course. When Civil and Benex pleaded their claims, they both chose to target them at Nova and not at each other. That forced Nova to take an active role in order to defend itself. So far as the claim made by Civil was concerned, Nova was wholly successful. Given that Nova’s success in defending Civil’s claim was based on its entitlement to set-off and that the entitlement to set-off had the same foundation at its counterclaim, there is no basis for accepting the submission made on behalf of Civil that the proceedings should be treated as involving two separate claims. Nova was wholly successful against Civil and that should be reflected in any costs order.
However, in my view, Nova is entitled to a better than usual costs order. The necessity for the proceedings arose wholly from Mr Moseley and Civil’s conduct in deliberately engendering a mistake on the part of Mr Pierlot and thereby causing him to make the two mistaken payments. Mr Moseley and Civil thereafter sought to deny that the payments were made by mistake and put forward what I concluded (at [85], [107]) was evidence that was “not honestly given” and “disingenuous” during the course of the proceedings, in an attempt to defeat Nova’s entitlement to set-off the mistaken payments against Civil’s claim and to defeat Nova’s counterclaim. There can be no doubt that the conduct of Mr Moseley and thereby Civil was, at the very least, unreasonable from the start. Although it is not necessary that it have done so, in a letter dated 18 February 2022, Nova provided a fair summary of the position which made it clear that Civil could not have access to the $462,003.93 until it repaid the $550,000. That fair summary of the position was not accepted by Civil, which sought to retain its wrongful gain.
In those circumstances, this is a clear case in which costs should be awarded against Civil and in favour of Nova on an indemnity basis.
Orders
I certify that the preceding thirty-nine [39] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Justice Mossop. Associate: Date: 8 December 2023 ************** Amendments
23 January 2024 Replace “2/11/13” with “2/11/23” Paragraph 15
Nova Builders Pty Ltd
Beno Excavations Pty Ltd
There are a variety of different approaches to the calculation of interest in this case. Before determining which method is appropriate, it is useful to set out the methodology involved in each such approach and the consequences of adopting each such approach.
Insofar as it is relevant to examine the detail of the conduct of the proceedings, the chronology referred to above indicates that Nova sought to address the potential for conflicting claims against it. Civil chose not to appear on the occasion when the order for interpleader was initially made, but then subsequently at the hearing on 19 July 2021 made the submission that the order was inappropriate and should be set aside. Civil was at that point on notice that the Defence filed in response to the claim made by Civil would include a claim for restitution of the $550,000. That was in substance the case when the Defence was filed on 7 April 2022. Having regard to the circumstances faced by Nova and the approach taken by Civil, there is nothing in this history which would warrant a limitation on Nova’s entitlement to interest.