Optus Networks Pty Ltd & Ors v Leighton Contractors Pty Limited & Ors

CATCHWORDS : Practice and Procedure - Interest on Costs

Courts Legislation Further Amendment Act 1995 (NSW) Legal Profession Act 1987 (NSW) LEGISLATION CITED : Statute Law (Miscellaneous Provisions) Act 1996 Supreme Court Act 1970 (NSW) Supreme Court Rules 1970 (NSW)

Australian Development Corporation Pty Ltd v White [2002] NSWSC 280 Barclays Australia (Finance) Limited v GWG Leviny Pty Limited (Rolfe J, unreported, 10 December 1998, BC 9807789) Davies v Ku-ring-gai Municipal Council [2003] NSWSC 1010 Gray v Guardian Trust Australia Ltd [2003] NSWSC 887 CASES CITED : Grogan v Thiess Contractors Pty Ltd [2000] NSWSC 1101 Hughes Brothers Pty Limited v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney [1999] NSWSC 1051 McWilliams Wines Pty Ltd v Liaweena (NSW) Pty Ltd (1993) 32 NSWLR 190 Maronis Holdings Limited v Nippon Credit Australia Ltd [2001] NSWSC 864

Optus Networks Pty Limited (ACN 008 570 330) (First Respondents/First Plaintiff) Optus Systems Pty Limited (ACN 056 541 167) (First Respondents/Second Plaintiff) Optus Vision Pty Ltd (ACN 066 518 821) (First Respondents/Fourth Plaintiff) Optus Communications Pty Limited (ACN 052 833 208) (First Respondents/Fifth Plaintiff) Leighton Contractors Pty Limited (ACN 000 893 667) (Second Respondent/First Defendant) PARTIES : NDY Management Pty Limited ACN (003 234 571) T/As Norman Disney & Young (Applicant/Second Defendant) Tyco Australia Pty Limited (ACN 008 399 004) (Third Respondent/Third Defendant)

Mr Climpson (First Respondents/Plaintiffs) Mr C Purdy (Second Respondent/First Defendant) COUNSEL : Mr S Robb QC, Ms S Steele (Applicant/second Defendant) Mr Murray, Solicitor (Third Respondent/Third Defendant)

Minter Ellison (First Respondents/Plaintiffs) Moray Agner (Second Respondent/First Defendant) SOLICITORS : Colin Biggers and Paisley (Applicant/Second Defendant) Blake Dawson Waldron (Third Respondent/Third Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY AND CONSTRUCTION LIST

55059/1997 Optus Networks Pty Ltd & Ors v Leighton Contractors Pty Limited & Ors JUDGMENT The notice of motion 1 There is before the Court an amended notice of motion brought by NDY Management Pty Ltd trading as Norman Disney & Young ["NDY"] which was the second defendant in proceedings 55059 of 1997. There are three sets of respondents to the motion: · Optus Networks Pty Ltd, Optus Systems Pty Ltd, Optus Vision Pty Ltd and Optus Communications Pty Ltd who had been respectively the first, second, fourth and fifth plaintiffs ["the Optus companies"]; · Leighton Contractors Pty Ltd ["Leighton"] which had been the first defendant; · Tyco Pty Ltd ["Tyco"] which had been the third defendant. 2 It is unnecessary to repeat the record in the proceedings save to observe that each of the parties to the present motion participated in several capacities not only as parties to the suit proper but also being joined to many of the nine cross claims which were prosecuted. It is also appropriate to observe that the proceedings were truly mammoth in scale. The final judgement extended for 1808 paragraphs following a hearing of extended nature. The orders made 3 NDY obtained a judgment in its favour in the proceedings with the Optus companies ordered to pay its costs in the proceedings. Leighton and Tyco were ordered to pay the costs of the Optus companies and, in the case of Tyco, on an indemnity basis from 23 January 2001, with those costs to include the costs the subject of the first sentence of this paragraph.

4 The cross claims in the matter which involved NDY were all dismissed as against NDY. In relation to those cross claims - · NDY brought the first cross claim against Leighton. His Honour ordered Leighton to pay NDY's costs of the first cross claim other than costs covered by orders 10, 13, 16 and 21 made by his Honour; · NDY brought the second cross claim against Tyco and His Honour ordered Tyco to pay NDY's costs on an indemnity basis from 23 January 2001; · Leighton brought the Third cross claim against NDY and Tyco. Leighton was ordered to pay NDY's costs of the cross claim other than costs covered by orders 10, 13, 16, 17 and 21; · Tyco brought the fourth cross claim against six parties including NDY as the fourth cross defendant. Tyco was ordered to pay NDY's costs of that cross claim including on an indemnity basis from 23 January 2001; · The Work Cover Authority of New South Wales ("Work Cover") brought the fifth cross claim against six parties including NDY as the second cross defendant. His Honour ordered that Tyco pay NDY's costs of that cross claim including on an indemnity basis from 23 January 2001. · EMAE Pty Limited ("EMAE") brought the sixth cross claim against seven parties including NDY as the second cross defendant to that cross claim. His Honour ordered that Tyco pay NDY's costs of the cross claim including on an indemnity basis from 23 January 2001. · NDY brought the Tenth cross claim against Work Cover. His Honour ordered that Tyco pay NDY's costs of that cross claim including on an indemnity basis from 23 January 2003 and pay Work Cover's costs of the cross claim on an indemnity basis. · NDY brought the eleventh cross claim against EMAE. His Honour ordered that Tyco pay NDY's costs of the cross claim including on an indemnity basis from 23 January 2001 and pay EMAE's costs of the cross claim on an indemnity basis. · His Honour ordered that Tyco pay Leighton's costs of the third cross claim including on an indemnity basis from 23 January 2001 with those costs to include the costs Leighton was ordered to pay in relation to NDY's costs order against the Optus companies.

The appeal 5 Tyco appealed aspects of the decision of Hunter J against Optus Networks Pty Limited, Optus Systems Pty Limited, Optus Mobile Pty Limited, Optus Vision Pty Limited and Optus Communications Pty Limited and others. The Court of Appeal made orders inter alia setting aside the Bullock order that Hunter J had made against Leighton and Tyco for the costs the Optus companies had been ordered to pay NDY. 6 The effect of the Court of Appeal's judgment is - · The Optus companies are responsible for NDY's costs of the proceedings; · Leighton is responsible for NDY's costs of the first cross claim and the third cross claim; and · Tyco is responsible for NDY's costs of the second, fourth, fifth, sixth, tenth and eleventh cross claims, including on an indemnity basis from 23 January 2001. The orders sought in the notice of motion 7 NDY seeks the following order in the notice of motion:

"Order that the respondents pay interest on so much of the applicant's costs as agreed or assessed as were personally paid by the applicant at the rates applicable under Schedule J to the Rules from the dates on which such amounts were paid by the Applicant's to its solicitors until the date of the assessor's certificate, the quantum of such interest to be determined by the assessor."

Power and jurisdiction to order payment of interest on costs 8 In Australian Development Corporation Pty Ltd v White [2002] NSWSC 280 I had occasion to examine the sources of jurisdiction to order payment of interest on costs. The matter was explained in that judgment in terms of s 94(4), s 95(1) and s 76 of the Supreme Court Act ["the Act"] as follows: · Section 95 of the Act entitled "Interest on Debt under Judgment and Order" is in the following terms: "95 (1) Where judgment is given or an order is made for the payment of money, interest shall, unless the Court otherwise orders, be payable at the prescribed rate from the date when the judgment or order takes effect on so much of the money as is from time to time unpaid. (2) Notwithstanding subs (1), where, in proceedings on a common law claim the Court gives judgment for damages and the damages are paid within 21 days after the date when the judgment takes effect, interest on the judgment debt is not to be payable under subs (1) unless the Court otherwise orders.

(3) Notwithstanding subs (1), where, in proceedings on a common law claim, the Court makes an order for the payment of costs and the costs are paid within twenty-one days after ascertainment of the amount of the costs by assessment under Division 6 of Pt 11 of the Legal Profession Act 1987 or otherwise, interest on costs shall not be payable under subs (1) unless the Court otherwise orders.

(4) If an order is made for the payment of costs, the Court may order that interest is to be paid on the amount so ordered, at the prescribed rate referred to in subs (1), from the date or dates when the amount in respect of costs was duly paid." · Jurisdiction under s 95(1) relevantly arises from the Court's power under that provision to "otherwise order". · Section 76 of the Act is entitled "Costs". Section 76(1) is in the following terms: "76(1) Subject to this Act and the rules and subject to any other Act: (a) costs shall be in the discretion of the Court. (b) the Court shall have full power to determine by whom and to what extent costs are to be paid, and. (c) the Court may order costs to be assessed on the basis set out in Division 6 of Part 11 of the Legal Profession Act 1987 or on an indemnity basis." · Section 95(4) provides the clearest source of jurisdiction to order payment of interest on costs; · Section 95(4) was introduced in 1995 by the Courts Legislation Further Amendment Act 1995. Section 95(4) commenced operation on 17 May 1996 (see Statute Law (Miscellaneous Provisions) Act 1996). 9 The principles and their application were described [at 17] in the following terms:

"The principal rationale underpinning an order for payment of interest on costs is to compensate the successful litigant for having relevantly been out of pocket from having arranged payment of legal costs to its legal representatives during the course of lengthy proceedings. Consider McWilliams Wines Pty Ltd v Liaweena (NSW) Pty Ltd (1993) 32 NSWLR 190 at 192.

In this sense, the overriding principle is to provide the successful litigant with full justice and compensation for delay and not penalise the losing party. Thus, in Barclays Australia , above, Rolfe J said: 'The view I take as to the proper exercise of discretion on the facts of this case can...be put quite shortly and, I believe, in accordance with accepted principles. The defendants paid out money, quite properly, to their former solicitors as the litigation progressed. Subsequently, it was held that Barclays and Morgan were obliged to pay portion of that money to the defendants. The rationale behind the payment of interest is, generally speaking, that the party ultimately ordered to pay money, whether by way of damages, debt or costs has had the benefit of the money from the institution of the proceedings, that benefit being either that the party is not obliged to pay over money upon which it could be earning interest or which it could be using in its own commercial enterprise, or it has not been subjected to the burden of borrowing money on which it would be obliged to pay interest. In the present case both Barclays and Morgan were engaged in commercial activities and the only reasonable inference to be drawn is that moneys they did not have to expend on costs could be used in their businesses. They have had the advantage of either retaining or not having to borrow money whilst the defendants, to which and who the money is now payable, have been out of pocket. In all those circumstances the requirements of a proper indemnification demand the payment of interest as from the date when costs were paid to their solicitors'. In Hughes Bros , above, Foster A J said that the principles upon which such an order may be made 'are founded upon common sense and justice.' Foster A J also stated the rationale as being the need to compensate the successful litigant-- 'In circumstances where a successful party has outlaid, from an early stage and often continuously, amounts of money, by way of payments to his legal representatives to finance the conduct of the litigation, he will, manifestly, be significantly out of pocket if he receives, by way of reimbursement of this payments, only an amount of taxed or assessed costs at a far later stage, after he has successfully prosecuted the litigation to finality. Such a financial detriment can only be compensated by the making of an appropriate award of interest to be paid in respect of those payments, providing, of course, that the relevant payments can be properly allocated to the successful outcome of the litigation in whole or in part.' Similarly, in Maronis Holdings Ltd , above, Bryson J said (at para 30): 'The Second Defendant and the Seventh Defendants have each sought an award of interest on costs. I regard it as appropriate to award interest in exercise of the power in subs 95(4) of the Supreme Court Act 1970 so that interest is to be paid on amounts of costs paid from the dates when amounts in respect of costs were paid. I regard this as appropriate because the interlocutory stages of the litigation and the hearing were very protracted, largely because of the conduct of the plaintiffs and complexities arising out of the plaintiffs having made many amendments to their pleadings. It would in my view be unjust that the defendants should not recover any interest in respect of the period between the dates, which could now be over six years ago, when they were called on to pay costs to their own representatives and the date when an order for costs is made.' More recently in Grogan v Thiess Contractors Pty Ltd [2000] NSWSC 1101 Barr J confirmed (at para 12) that the legislative purpose behind s 95(4) 'is not to penalise but to recompense a litigant for being out of pocket whilst the other side has had the use of the money.'.

Furthermore, in Grogan Barr J stated (at para 11) that factors that the Court may take into account in deciding whether to award interest on costs include: 'the amount of costs paid, the length of time the claimant has been out of pocket before recovery, whether during the time between commitment and assessment the respondent has been relieved of the need to borrow at interest or has obtained the advantage of leaving monies invested at interest and how the parties have conducted themselves during the litigation.'" The issues presently arising for consideration 10 The Optus companies [who were joined in this regard by the other respondents to the motion] citing two decisions of Austin J, Gray v Guardian Trust Australia Ltd [2003] NSWSC 887 at [11] to [13] and Davies v Ku-ring-gai Municipal Council [2003] NSWSC 1010 at [2], submitted that the normal rule in respect of interest on costs in the Equity Division is the allocatur rule, namely that interest in relation to orders for costs begins to run from the date of the certificate of assessment. 11 In consequence during the hearing of the motion much focus was placed upon these decisions. It is to be observed that in Gray, Austin J did not have ADC V White cited to him and hence this decision was not referred to. However his Honour did refer to ADC v White in his later decision in Davies. 12 In Davies his Honour at [14] accepted that there was nothing in the wording of section 95(4) that would impose any jurisdictional limitation upon the Court making an order for payment of interest on costs before the amount of costs had been assessed, referring to decisions including ADC v White, which had proceeded on the basis that an order for payment of interest could be made prior to assessment. 13 His Honour at [7] further accepted that an order for payment of interest under section 95 (4) did not require a "special" case inter alia citing ADC v White. His Honour went on to add at [7]:

"However no case been cited in which interest on costs has been ordered in the Equity Division purely on the basis that the claimant made one or more payments to his or her solicitor before succeeding in the principal litigation. This suggests that in the Equity Division an order departing from the allocatur rule will not be made of course, simply on the ground that the claimant has demonstrated payments to his or her solicitor on account of costs." 14 To my mind it is strictly unnecessary to dwell on the suggested inconsistency between the two lines of authority for the following reasons: · it seems clear that although Austin J held that the allocatur rule was the usual/normal rule under Part 40 rule 3(4) in respect of interest on costs in Equity Division proceedings, so that interest begins to run only when the costs assessment takes effect; Gray at [34], Davies at [2], his Honour appears to have accepted the existence of the Court's discretion under sections 76 and 95 of the Supreme Court Act to depart from the usual rule by ordering that interest accruing from a different time; · the submissions advanced by the Optus companies accepted that a party was not required to make out a "special" case for interest on costs but at the same time submitted that in the absence of very good reasons as to why the so-called "normal" rule should not apply, costs orders should not "take effect" until a certificate of assessment had issued. Hence even these submissions accepted the courts jurisdiction although placing very special emphasis indeed on the so-called "normal" rule 15 There is one area in respect of which it may well be appropriate to seek to distinguish the present proceedings from those before Austin J. His Honour appears to have placed very special emphasis upon the holding that in Gray the proceedings could not be common law claims because: · [at 8] they were in the Equity Division; · [at 8] the claims made were equitable claims in nature. 16 It could certainly not be suggested that the claims made in the present proceedings were equitable claims in nature. They were common law claims. 17 The present proceedings commenced in the Common Law Division Construction List at a time when the practice was that Building and Construction matters were administered and heard by judges sitting in the then Commercial Division. When the Commercial Division was abolished matters such as the present proceedings were placed into the new Equity Division Construction List [later renamed the Construction and Technology list] and were and still are administered by the judges of the Commercial List, also a new part of the Equity Division. It would not have been necessary for the instant proceedings to be subjected to an application for transfer from the Common Law Division and although the file cannot now be located by the registry I would doubt that any such application was ever made. In those circumstances[if there was any relevance in this peculiar background, which I doubt], it does not seem to me that the accident of history which led to these proceedings ultimately being heard in the Equity Division could or should result in some different other approach to that appropriate to be taken to common law claims made in common law proceedings. Discretionary considerations 18 The major discretionary considerations put forward by the respondents to the motion in support of the proposition that the orders sought in the motion are inappropriate and should not be made were grounded upon the propositions that: · there is no indication in any of the many communications from NDY's solicitors to the effect that NDY intended to claim or assert a right to interest on its costs, until the notice of motion was filed on 15 November 2004, (some two and a half years after the order for costs was made by the trial judge). Hence until NDY filed the motion the parties are said to have been proceeding on the basis that what was put as "the normal rule" applied; · no satisfactory explanation is said to be provided in NDY's affidavits as to why there was no suggestion of a claim for interest until the motion was filed; · in contrast, NDY is said to have clearly been willing to protect its interests in relation to the costs of assessment in its "without prejudice save as to costs" correspondence. · NDY made its application for costs in April 2002 and obtained various costs orders under section 76 Supreme Court Act; · If NDY considered that it was entitled to interest on costs because of payments that it had made before that time, it would have been appropriate for an application for interest to have been made at that stage; · there had been significant delays by NDY in having its assessment prepared. NDY took approximately 2 years before instructing a third party to prepare the bill of costs, and that bill was prepared within 2 months of the date of such instruction; · NDY was perfectly entitled to proceed to prepare an assessment of costs from the date of the order for costs, 17 May 2002. 19 The general proposition was that there was no evidence to suggest that the respondents acted otherwise than reasonably in the circumstances or in any way sought to delay the completion of the assessment of the costs. 20 The submission was that for those reasons any interest on the respondents costs should be limited to allocatur rule, namely, schedule J interest from the date of the certificate of assessment. Dealing with the matter 21 Whilst the parties prepared detailed chronologies [and the affidavits before the court are replete with detail of the relevant communications between the respective solicitors] it is only necessary for present purposes to note that what occurred against the background of the notices of appeal filed shortly after delivery of the 17 May 2002 judgment on costs was that the solicitors for the parties to this motion were endeavouring to negotiate an agreement as to costs. 22 The correspondence is replete with suggestions that the parties would be able to reach some effective resolution without the delay and cost of formal assessments in respect of the various costs orders. Indeed in an e-mail of 6 August 2003 Mr Murray, the solicitor for Tyco, in replying to an email from the solicitor for NDY [the latter seeking to ensure that he might avoid having to deal with the costs consultant by asking for an agreement as to the amount which Tyco would pay] stated:

"The matter of your client's costs is still under consideration. Your client's proposed action appears precipitant in the circumstances. It would appear to be in all parties interest (including bearing in mind the appeal against the Bullock Order) for discussions to continue. Can you advise what Optus' position is in respect of your client's costs sought from them? Should your client continue in its proposed course at this point our client will seek its costs of the assessment." 23 The gravamen of the proposition put by the respondents to the motion was that the whole of the environment in which the negotiations seeking to achieve costs settlements without an assessment took place, must be regarded as having been unfair to the respondents for the reason that at no stage did NDY telegraph the fact that it may seek interest of the type sought in the present motion. The proposition is that had any such possibility been telegraphed to the respondents then they would undoubtedly have put the utmost pressure upon NDY to forthwith proceed to obtain a costs assessment because the respondents would have been anxious to limit their possible interest exposure. 24 I could not infer and do not accept that against the background of the extant appeal against the Bullock order and in a context in which the whole of the appeal with its many issues was pending, any of the respondents would have been astute to pay on any costs assessment until the appeal had been determined. In any event I cannot accept for one moment that the respondents could claim to have been unaware at all material times of the Court's jurisdiction to order payment of interest on costs or the provisions of s 94(4), s 95(1) and s 76 of the Supreme Court Act earlier explained. If any of the respondents was relying upon some special rule in that regard, there is no evidence to that effect and even if there was, no such reliance could be reasonable in the circumstances bearing in mind the authorities. These were respondents acting with legal advice in major litigation. The costs of obtaining a costs assessment would have been understood as being considerable. It was by no means unreasonable for the respective solicitors to act as they did in endeavouring to reach some form of consensus. 25 In short I reject the foundational proposition put forward by the respondents to the effect that it was unreasonable in the circumstances for NDY not to have communicated an intent to seek interest of the type presently sought. Parties have the rights which are granted by statute and by the Supreme Court Rules. In the subject mammoth litigation they are to be assumed as being cognisant of one another's rights. The parties and their legal advisers in the instant litigation could not be regarded as "babes in the wood". The width of the power conferred by section 95 (4) was quite clear. The statute contained no restriction to special circumstances. 26 The Court is clearly satisfied of the presence of circumstances in which the proper exercise of the Court's discretion is to make the precise order sought for the payment of interest on costs. To say that the interlocutory stages and the hearing were very protracted would be a considerable understatement. These proceedings would be amongst the most complex heard in the Court at the time. A mere glance at the many volumes of the appeal books as well as the pleadings makes good that proposition. The factors which the Court takes into account in deciding whether to award interest on costs all speak to the propriety of making the order now sought; cf the factors identified by Barr J in Grogan earlier referred to each of which are satisfied in relation to the present proceedings. 27 Even if: · it had been necessary to show special circumstances in order for NDY to succeed on the motion and/or; · the suggested usual/normal rule in respect of interest on costs in Equity Division proceedings was engaged,

it is clear that sufficient in the nature of special circumstances truly justify the making of an order for interest to accrue from a different time to the time when the costs assessment takes effect. The litigation extended over a very long time. The litigation was mammoth indeed. NDY is shown to have paid substantial legal costs from time to time over a very lengthy period. 28 There is no substance in the submission that on the evidence before the court the interest rates prima facie applicable under Schedule J to the Supreme Courts Rules should not be applied under the order which is sought in the motion. The respondents were unable to establish by reference to such evidence as was before the court [going to NDY's financial position and overdraft facilities] that the usual Schedule J interest rates should be departed from. If the respondents wished to make such a case then it would have been necessary for them [by notices to produce or by subpoena to outside parties or by cross examination] to prove the need for any such departure. The inchoate and essentially marginal reference to ambiguous materials and non-definitive and difficult to follow schedules fell very short of making good that case. Decision 29 For those reasons an order is to be made in terms of paragraph 1 of the amended notice of motion. NDY is to bring in short minutes of order accordingly on which occasion costs may be argued.

I certify that paragraphs 1 - 29 are a true copy of the reasons for judgment herein of the Hon. Justice Einstein given on 9 March 2005

      Susan Piggott
      Associate

9 March 2005

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