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

Optus Networks Pty Ltd & Ors v Leighton Contractors Pty Limited & Ors - [2005] NSWSC 156 - NSWSC 2005 case summary — Zoe

[12]

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.

[19]

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.'.

[21]

"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:

[22]

"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,

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