Plaintiff v Defendants

"2.2. The parties agree that interest is to be included in the calculation of the losses arising from the Unauthorised Drawings, calculated at rates equal to the rates of interest which would have been earned on the funds (or paid for the borrowing of the funds as the case may be) by the relevant Performing Arts Group account holder if the Unauthorised Drawings had not taken place, up until the date of payment by Westpac in accordance with this Deed."

The final point is the formula in Schedule A which I referred to at [11] in my trial judgment. In short, Westpac was liable to pay 15 percent of the face value of drawings up to $9,999 and 75 percent of the face value of drawings of $10,000 or more, plus interest.

7 Although the only issue now concerns the amount of interest paid by Westpac pursuant to cl 2.2 it is instructive to see what the statement of claim (in its final amended form at trial, as to which see [20]-[43] of my trial judgment) sought to recover. Westpac's claim was limited to the 61 cheques identified in Schedule A attached to the statement of claim, the aggregate amount of which was $2,060,652.05. As the face value of all of these cheques was $10,000 or more, the amount which Westpac paid the PAS Group in respect of them was 75 percent thereof, namely $1,545,489.04.

8 The next thing to note is the concluding paragraphs - 19 and 20 - of the statement of claim. Paragraph 19 alleged that Westpac, being reasonably entitled to do so, had admitted liability to the PAS Group. As noted at [37] of my trial judgment Westpac did not call evidence on all areas of the particulars to this plea. The statement of claim concluded, in para 20, with an allegation of loss and damage suffered as a result of all the preceding pleas. In particulars the loss and damage was identified as the sum of $3,067,274.92 being the amount paid to the PAS Group in satisfaction of Westpac's liability referred to in para 19 and interest. Reference to para 19 and the particulars thereto makes it evident that the liability referred to was the liability under the Deed of Settlement. Finally, in the prayer for relief Westpac claimed $3,067,274.92, damages, interest pursuant to statute and costs. No amount was separately quantified or particularised as damages and no such amount was sought at trial.

9 The next thing to note is how the amount claimed of $3,067,274.92 was made up. Particulars of it were not provided in the statement of claim. Further, how it was made up, in particular how it related to the amount paid under the settlement with the PAS Group in respect of the 61 cheques, was not clear to me even late into counsel's final address. The explanation then provided by counsel was the basis of my observations at [39]-[43] of my trial judgment. Those observations commenced with the statement that the amount of $3,067,274.92 was calculated on a formula in the Deed of Settlement. That is what I was led to believe. Among the evidence referred to by counsel in his explanation was the table of payments in para 2 of the witness statement of Desmond Gerald Curtis which became Exhibit K. In addition counsel referred me to a number of pages in the Court Book which contained detail of the payments made between January and October 2001 inclusive. There were in addition to those payments the final payments of $731,350.79 in December 2001 and $250,000 in September 2002, as to which I noted the following in my trial judgment. I understood that the former payment was a negotiated amount for interest but I did not know how it was calculated. As to the latter amount, I did not know if it included interest or compensation in respect of cheques under $10,000, or how it was calculated. I was, however, able to detect for myself that the earlier payments made between January and October 2001 included compensation of $139,762.67 in respect of cheques under $10,000, and which plainly was not recoverable in the proceeding. It was thus that I said (at [43]) that if Westpac succeeded the amount to be recovered must be recalculated.

10 It was in this context that I heard counsel on 8 December 2006. Counsel for Westpac sought judgment against Mr Hilliard for $2,476,813.04 together with interest of $1,538,045.17, and costs. I am concerned now only with the matter of the judgment amounts, the calculations of which were set out in a sheet provided by counsel at that hearing. I described the set-out of this sheet at [3] of my 15 December 2006 judgment. It is this calculation sheet which has been revised by an exhibit to Mr Troiani's affidavit.

11 To recapitulate, the calculation sheet contained several columns which:

(a) Stated, in relation to each of the 61 cheques, the amount of the face value of the amount that represented 75 percent thereof and the date when it was paid to the PAS Group. The amount was, and remains, $1,545,489.04. Mr Hilliard's counsel does not now, and did not at the hearing on 8 December 2006, dispute that amount.

(b) Then stated, in relation to each cheque, an amount that represented an allocation of the interest paid by Westpac to the PAS Group. In the calculation sheet provided to me on 8 December this amount was $931,324; in the revised calculation sheet the amount has been reduced to $548,760.82. Liability for this item is denied, as it was on 8 December 2006, it being submitted by Mr Hilliard's counsel that Westpac is not entitled to any amount at all on this account.

(c) Then stated, in separate columns, in relation to each cheque, interest calculated under s 60 of the Supreme Court Act 1986 as follows:

(i) Interest on the 75 percent amount from the respective date of payment of compensation, initially $1,002,441.68 to 8 December 2006, but increased to $1,035,544.79 as at 16 February 2007. This amount is not disputed, just as the earlier calculation was not disputed on 8 December 2006.

(ii) Interest on the interest component referred to in (b) above from 6 December 2001 to 8 December 2006 but now revised to 16 February 2007. The initial amount claimed was $535,603.49. The revised calculation has reduced this amount to $327,168.70. Liability under this head is, and was, disputed on the basis that Mr Hilliard is not liable to pay the amount allocated as interest under (b) above.

12 In short, the dispute, on 8 December and now, concerns the amount allocated as interest paid by Westpac to the PAS Group. If or to the extent that Mr Hilliard is liable to pay such interest he accepts that he is liable to pay s 60 interest thereon. It is, therefore, to the matter of the amount allocated as interest paid to the PAS Group that attention must be directed. It was for the purpose of providing Westpac with a further opportunity to enlighten the Court on this matter that I granted it the indulgence of an adjournment and a further hearing.

13 It is important to bear in mind that what Westpac has sought to do by the affidavit of Mr Troiani sworn for the purpose of this third hearing is to give evidence as to, and explain, that which should have been dealt with by evidence and explanation at the trial. That is because the item in question sought to recover amounts paid by Westpac to the PAS Group as compensation under the Deed of Settlement and the Deed of Release and, as such, was an item of loss suffered by Westpac. Thus the amounts were included in the amount of $3,067,274.92 claimed in the prayer for relief. It was not interest on judgment under the Supreme Court Act.

14 Mr Troiani swore his affidavit expressly for the purpose of providing evidence regarding the calculation of the interest paid to the PAS Group including the basis for that calculation and payment. It is to be noted that Mr Troiani does not say why the evidence as to these matters was not given, either at the trial or now, by the person or persons who were personally involved in the conduct of the subject matters. Nor, it might be noted, does he identify such person or persons and indicate whether they could have given evidence at the trial and could do so now. Such person or persons are, of course, the person or persons who handled the assessment of PAS Group claims including the calculation of amounts payable and the payment thereof. Such evidence would, for example, have disclosed the technical exactness and appropriateness of the application of cl 2.2 of the Deed of Settlement in the determination of interest payable, and paid, to the PAS Group. Admissible evidence of this nature to establish the facts as to the calculation of the amounts paid as to interest would have explained and given content to Westpac documents in the Court Book pertaining to calculations and payments, and, with the appropriate evidentiary foundation thus provided, would have laid the matter bare for judicial determination. But, as I say, that was not done at trial and it has not been done now. What has been done, by reliance on Mr Troiani's affidavit, is to have a party's solicitor give evidence in lieu of those able to give admissible evidence of the relevant matters.

15 Mr Troiani swears in para 2 of his affidavit that where he deposes to matters based on information and belief he believes those matters to be true. It is important in this respect to bear in mind that we are still in the trial and not engaged in an interlocutory application at which evidence on information and belief may be received. Apart from that however is the fact that Mr Troiani does not identify the part or parts of his evidence that are based on information and belief. Doubtless as the solicitor responsible for the conduct of the proceeding for Westpac since its inception Mr Troiani has come to possess a close familiarity with the papers and the course of events. But he is and remains the solicitor for the party, and perhaps unavoidably in consequence the affidavit is in the nature of a commentary on documents in the Court Book and events and facts which he refers to for the purpose of establishing the interest allocation claim. It seems to me that this evidence is not admissible for the simple reason that it is infected, obviously, with much that is deposed to on information and belief.

16 Counsel for Mr Hilliard objected, as he did at the earlier hearing on 8 December 2006, that Westpac had not proved this aspect of the case. That was because it had not gone into evidence to establish the alleged reasonableness of the settlement, an aspect of which was the failure to call witnesses in relation to the payments made to the PAS Group. I have already referred to Westpac's failure to call evidence at the trial and there is thus substance in the submission. Separately however is the fact that the affidavit of Mr Troiani, designed to cover that gap, is inadmissible for the reasons discussed, and I so treat it.

17 What this means is that in terms of evidence Westpac has not advanced the position beyond that which existed on 8 December 2006.

18 Let it be assumed however that the affidavit is admissible with the consequence that regard is had to its contents. The matters deposed to are dealt with under the following headings, namely:

(a) Monies paid by Westpac to the PAS Group.

(b) Calculation of the October interest claim by the PAS Group.

(c) Calculation of the interest paid by Westpac to the PAS Group for the 61 cheques the subject of the proceeding.

As summarily as possible I indicate what is deposed to under each heading.

(a) Monies paid by Westpac to the PAS Group

19 The total paid was $3,067,274.92 comprised of the following:

(i) $139,762.75 for cheques under $10,000;

(ii) $1,577,512.16 for cheques over $9,999;

(iii) $1,100,000 for interest;

(iv) $250,000 as the final payment under the Deed of Release.

20 Amounts (i) and (ii) appear on the October 2001 summary at Court Book 2619. As to the amount in (ii), after excluding certain cheques the claim was confined to the 61 cheques 75 percent of which was $1,545,489.04.

21 As to (iv), Mr Troiani states that the parties agreed on $250,000 as an amount to conclude the settlement process. It was not referable to particular unauthorised drawings or interest claims. This clarifies the doubt that I expressed in my trial judgment at [40]. It means that the amount of $250,000 was not paid under an obligation to do so under the Deed of Settlement but rather to an obligation otherwise assumed by Westpac under the Deed of Release. In these circumstances it is hardly surprising that Mr Troiani excluded the amount from consideration in the calculations referred to later in his affidavit.

22 Mr Troiani then dealt with the payment of interest. There were two payments, $368,649.21 shown in the September claim summary at Court Book 2583 and $731,350.79 in December. As stated at [40] in my trial judgment, the latter amount was negotiated from a higher figure claimed by the PAS Group. These two payments total $1,100,000.

23 The above explains how the claimed amount of $3,067,274.92 was made up.

(b) Calculation of the October interest claim by the PAS Group

24 The calculation of this claim appears in the Court Book at 2592-2593. A claim and payment summary is at Court Book 2619. The PAS Group claimed interest and bank fees of $1,222,156.82. Mr Troiani deposed to this claim having been disputed by Westpac and that following negotiations the parties agreed on a total payment of interest of $1,100,000 which was paid by the two payments referred to above. The critical thing though was how the interest was calculated and, in particular, whether it was calculated in accordance with cl 2.2 of the Deed of Settlement. Save for the inclusion of the above pages in the Court Book evidence was not led as to this at the trial. The pages at Court Book 2592-2593 contain much detail behind which lay a deal of evidentiary material not led at the trial. Mr Troiani has sought to overcome this want of evidence. But, of course, he is the solicitor for Westpac, not the PAS Group, and what he has in effect done is to provide commentary and explanation upon the claim as it appears in the Court Book, and in the process stating how the PAS Group prepared the claim. Not only is the evidence in the nature of commentary by the solicitor for a party but in view of the lack of evidence at the trial to establish the subject facts it is assertive and conclusionary.

25 In the end, I am not satisfied, on the balance of probabilities, that Westpac has established that interest was calculated and paid pursuant to cl 2.2 of the Deed of Settlement.

26 It is however important to note Mr Troiani's concluding evidence on the matter of the calculation of the October interest. He said this. The October interest claim included cheques in addition to the subject 61 cheques. A calculation had been made (which he produced) of interest on the face value of the 61 cheques "using the same interest rates and monthly compounding as the PAS Group used for the purpose of the October interest claim". The calculations "indicate that out of the total October interest claim an amount of $609,901.16 can be attributed to the 61 cheques". I interpolate that that was a significant reduction on the amount claimed on 8 December 2006 of $931,324.

27 But Mr Troiani then took the exercise a stage further. Noting that the agreement on $1,100,000 as the total amount to be paid for interest amounted to a reduction of 10.02 percent in the amount claimed, the application of that reduction reduced the figure of $609,901.16 to $548,760.82. That is the amount claimed in the revised calculation sheet as the amount of interest attributable to the 61 cheques sued upon.

(c) Calculation of interest paid by Westpac to the PAS Group for the 61 cheques sued upon

28 Mr Troiani commenced this section by stating that as the amount paid for interest was a negotiated lump sum following the PAS Group's October claim, "the amounts were not then apportioned as between each cheque". Therefore, he said, it was necessary to apportion the amount for interest paid to the PAS Group for each of the subject 61 cheques "by some other means". The following paragraphs were directed to establishing "some other means".

29 He commenced this exercise by referring to the amount of $931,324 which Westpac advanced at the hearing on 8 December 2006 as the total amount of interest allocated to the 61 cheques. He explained that the calculation allocated the $1,100,000 between all unauthorised cheques (over and under $10,000) by reference to the compensation amounts (that is, 75 percent and 15 percent) of the cheques. That produced $931,324 which was approximately 84.7 percent of the $1,100,000 paid. The alternative calculation of $548,760.82 was (in the revised calculation sheet) allocated to the 61 cheques using the same methodology.

30 The calculations which produced the amounts appearing in the initial and revised calculation sheets as interest allocated to each of the 61 cheques "make it possible to calculate the effective rate of simple interest which would result in a total interest amount on the 61 cheques of $931,324 and $548,760.82 respectively if applied to the amount of compensation paid on each of the 61 cheques from the date the cheque was paid to the date on which the PAS Group's claim to compensation was settled by the Plaintiff". The results of the calculations are that:

(a) An interest amount of $931,324 represents simple interest calculated at the rate of 16.45 percent per annum on the amount being 75 percent of the face value of the cheques; whereas

(b) An interest amount of $548,760.82 represents simple interest at the rate of 9.69 percent per annum on the amount being 75 percent of the face value of the cheques.

31 It is evident that the exercise has a degree of reconstruction and artificiality about it. Perhaps it was an awareness of the difficulties that led Westpac to pass by proof of the allocated interest part of the claim at trial. But these things do not go away and the course of events subsequent to trial constitute an unfairness to Mr Hilliard and an inconvenience to the Court. Thus far the Court has indulged Westpac but enough is enough. Westpac has had more than a sufficient opportunity to present its case.

32 I can now refer to the submissions of Westpac's counsel. It is instructive to see how he put the claim for interest. I should first mention that one of the objections of Mr Hilliard's counsel on 8 December 2006 to the allocation of interest claim was that simple interest only was allowable and that Westpac had not established that the interest it was seeking to recover ($931,324) was simple interest. It appeared that rather than simple interest the amount represented a compromise of a claim by the PAS Group. It is evident that Westpac has sought to meet these and other objections, and my expressed concern as to the lack of relevant evidentiary proof. It is pertinent to note that in his affidavit Mr Troiani refers to "compounding" being involved in the PAS Group claim. In his submissions Westpac's counsel conceded that the interest paid to Westpac "is calculated on a compound basis on different rates of interest".

33 The submissions of Westpac's counsel made it clear that Westpac had changed its ground on the basis of the interest claim. Whereas the claimed amount had been sought as the amount paid as interest under cl 2.2 of the Deed of Settlement and allocated to the subject 61 cheques, Westpac now sought an amount of interest on the judgment amount under s 58 of the Supreme Court Act. Then it sought interest on that interest under s 60. Thus is seen the significance of the calculations of rates of simple interest deposed to by Mr Troiani. Doubtless appreciating that a rate of 16.45 percent was high and at risk of not being allowed, Westpac has re-examined the figures and found a way to produce a reduction in the amount claimed and from which reduction a lower rate of 9.69 percent is produced. That rate is then taken, in a sort of reasoning backwards way, to reflect reasonableness of the amount claimed of $548,760.82. The steps in counsel's submission were these. The power of the Court to award interest derived, not from the amount of interest that Westpac paid or the reasonableness of that amount, but from the finding that Westpac paid money under a mistake and on which amount interest would ordinarily be ordered. The interest that Westpac sought was an amount equal to the interest paid to the PAS Group. That amount could be calculated as simple interest on the amount awarded from the date of enrichment at the rate of 9.69 percent. That was a just rate and within the range of the penalty interest rate. On this basis the way in which the PAS Group claimed interest, and in which the interest agreed on was calculated, was not directly relevant to the award of interest by the Court except as a point of reference to see that no more is ordered than was actually paid.

34 As already mentioned, counsel for Mr Hilliard opposed the interest claim. Noting that interest was now sought as restitutionary damages he submitted that Westpac had not established any loss in that respect. The steps in the argument were these. Prior to commencement of the proceeding in December 2000 Westpac had not paid any money to the PAS Group. Thereafter payments were made in January, February, April, May, June, July, October and December 2001 and the final payment in September 2002. The payment in December 2001 and part of the payment in October was for interest, and the payment in September 2002 was not attributable to interest or recompense of the value of the cheques. Otherwise the payments represented 75 percent of the face value of cheques.

35 The question of loss being regarded from the point of view of Westpac, the problem in the circumstances is to ascertain what loss it had at any time. If, for instance, the payment of a cheque meant that the amount on which it might otherwise have paid the PAS Group interest was reduced it had no loss. If, for instance, the payment of cheques put an account into overdraft Westpac had received interest on a greater sum than would otherwise have been the case. Hence Westpac suffered no loss until it recompensed the PAS Group under the Deed of Settlement. It was that actual loss which Westpac had sought to recover, and it had not established that claim insofar as it related to the interest paid. Indeed it now disavowed that claim and sought instead restitutionary damage interest, a claim neither pleaded nor proved. In any event the basis on which the rate of 9.69 percent was derived was flawed in that what Westpac had paid (and did not press as its claim) did not provide a proper measure of a restitutionary flat rate of interest. The proper claim to be made here was for interest paid pursuant to the settlement. That claim not being established, no amount should be allowed for or in respect of interest paid to the PAS Group.

36 In reply Westpac's counsel said that interest was sought under s 58, and equitable principles and Hungerford type principles were not relied upon. There was not a great deal of authority making the point clear but he suggested that interest on an unjust enrichment should run from the date of the enrichment as the defendant was liable to repay the money from that date.

37 There are some difficulties with Westpac's submission. In the first place, in my view, s 58 is not applicable in the circumstances. The amount for which there will be judgment as representing 75 percent of the face value of the cheques, namely $1,545,489.04 is not payable at a date or time certain by virtue of a written instrument. The question, therefore, is whether Westpac demanded payment of that amount. Westpac's counsel did not refer me to such a demand and I have not located one on a perusal of the Court Book. In these circumstances the conditions for the operation of s 58 are not satisfied. This being the case, and the claim to recover interest paid as allocated in the calculation sheet not being established or pressed, the subject claim for interest must fail. The further consequence is that the claim for s 60 interest thereon must also fail.

38 Finally, it seems to me to be appropriate to review the order for costs indicated in my judgment on 15 December 2006 in light of the further hearing and its attendant costs. My decision was that Mr Hilliard should pay Westpac's costs excluding the costs of issues in certain paragraphs of the statement of claim. That order would give Westpac its costs of the hearing on 8 December 2006. I consider however that in all of the circumstances it would be unreasonable and unjust for the order to extend to the costs of and incidental to the hearing on 16 February and the affidavit of Mr Troiani. It was entirely Westpac's option to take up the invitation to submit material to establish its then claim for allocated interest. It exercised the option and has wholly failed. Further, the hearing should never have been necessary as Westpac should have put its best foot forward on the issue at the trial, which would have enabled the issue to be dealt with in the trial judgment. While I would hear counsel if they wish, my view is that the order for costs should be varied by:

(a) excluding from the costs payable to Westpac, the costs of and incidental to the affidavit of Mr Troiani and the hearing on 16 February 2007, and

(b) ordering that Westpac pay Mr Hilliard's costs of and incidental to the hearing on 16 February 2007.

39 There will otherwise be judgment for $1,545,489.04 with interest thereon under s 60.

[1] [2006] VSC 470.

[2] [2006] VSC 489.