Plaintiff v Defendants

Supreme Court of Victoria|2009-09-17|Before: HARGRAVE J

INTEREST - Delay by plaintiff in prosecuting case - Whether deliberate delay arising from plaintiff's impecuniosity - Failure of defendant to discover critical documents - Whether good cause shown to limit period of statutory interest - Whether penalty interest rate or a lesser rate should apply - Interest awarded for the whole period since issue of the writ at penalty rate - Supreme Court Act 1986 (Vic) s 60; Penalty Interest Rates Act 1983 (Vic) s 2.

2 During the interlocutory stages of the trial, the plaintiff had contended that it was open to the Court to base any adjustment order upon a valuation of the assets of the parties at the date of judgment. To this end, the plaintiff pursued many discovery applications to obtain up-to-date financial information concerning the assets of the defendant, in particular his business assets. Prior to the commencement of the trial, however, the parties agreed that any adjustment order would be based upon the Court's valuation of the assets of the parties at the separation date.

3 Obviously, if the issue of the date at which the assets of the parties were to be valued remained unresolved, the duration of the trial would have been extended. In the absence of agreement, the parties would have needed to call evidence and make submissions concerning asset valuations at both the separation date and the time of the trial.

4 In consideration for the plaintiff agreeing that the assets would be valued at the separation date, the defendant agreed to pay interest on any adjustment order made in favour of the plaintiff. Unfortunately, there was a dispute between senior counsel as to the precise terms of that agreement; in particular as to whether the Court should fix the rate of interest in its discretion, or whether the parties had agreed that the rate would be that fixed under s 2 of the Penalty Interest Rates Act 1983 (Vic). Senior counsel for the plaintiff contended that counsel had agreed 'the statutory rate' would apply; meaning the rate fixed from time to time. This contention was later abandoned.

5 Following directions being made for the filing of affidavits by senior and junior counsel, counsel agreed that the defendant should pay interest on the adjustment sum in accordance with the following statement contained in the plaintiff's written outline of opening address:

The parties here agree that it is appropriate to value the assets as at the date of separation (which will save time in evidence, and which will also simplif[y] the issues for determination). It is accepted that interest will accrue, under s. 60 Supreme Court Act 19[86], on any sum awarded to the Plaintiff as at the separation date, from the date of issue of the Writ ... Subject to the following proviso. The Writ was issued some 8 ¼ years ago. The Defendant wishes to argue that some delay has been caused in bringing the matter on for trial by the Plaintiff, and that in consequence some part of the period between issue and judgment should be disallowed when interest is calculated. The Plaintiff does not accept the proposition, either as a matter of fact or as a matter of law, but accepts that the Defendant is entitled to raise that argument when the question of interest comes to be determined.[2]

6 In their response to the plaintiff's outline of opening, counsel for the defendant made no response to the above statement. The defendant's written response states that:

Where a paragraph is not expressly responded to then it can be inferred its contents are non contentious.

7 Accordingly, the trial was conducted on the basis that an agreement had been reached that the defendant would pay interest under s 60 of the Supreme Court Act 1986 (Vic) on any monetary sum awarded by way of adjustment to the property interests of the parties at the separation date. In reaching a determination as to an appropriate adjustment of property interests at the separation date, the Court did not have any regard to the fact that the separation date was approximately nine years ago, and the writ had been issued approximately eight and a quarter years ago. In particular, the adjustment order did not include 'something in the nature of interest'.[3]

8 The agreement provides that the defendant's obligation to pay interest will be quantified by the Court applying s 60 of the Supreme Court Act. Section 60(1) provides:

60 Interest in proceedings for debt or damages

(1) The Court, on application in any proceeding for the recovery of debt or damages, must, unless good cause is shown to the contrary, give damages in the nature of interest at such rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 as it thinks fit from the commencement of the proceeding to the date of the judgment over and above the debt or damages awarded.

9 Approximately eight weeks into the trial, the Court of Appeal decision in Giller v Procopets (No 2)[4] was delivered. In that case, the Court of Appeal approved the decision of the New South Wales Court of Appeal in Manns v Kennedy.[5] As a result, s 60 of the Supreme Court Act has no application to pecuniary orders made under Part IX of the Property Law Act.

10 The question remains as to the juristic basis upon which the Court should determine the amount of interest payable by the defendant on the adjustment order. It appears that the parties were aware of the decision in Manns v Kennedy when they entered into the agreement. Notwithstanding this, they expressly agreed that s 60 would apply to any adjustment order. In these circumstances, and having regard to the way in which the trial was conducted, the Court should give effect to their express agreement.

11 I will deal first with the period during which interest should run, and then with the rate.

Should interest run for the whole period since issue of the writ?

12 The principles governing the exercise of the Court's discretion under s 60 of the Supreme Court Act, to limit the period during which interest is payable, may be shortly stated. The starting point is the requirement that interest 'must' be ordered for the whole of the period after the issue of the writ unless 'good cause is shown to the contrary'. The judgment debtor has the onus of establishing good cause to the contrary.[6] That onus may be satisfied if it is established that allowing interest for the whole of the period since the issue of the writ will cause some injustice to the defendant.[7] The cases discussed below demonstrate that delay may be a relevant discretionary factor.

13 In Marsh v Ruby,[8] Gowans J stated the applicable principle in the following terms:

As I see it, such discretion as is conferred is not intended to be directed to penalizing the plaintiff but to alleviating the defendant in a proper case. He may be able to show that he has been disadvantaged in some way by the plaintiff's conduct, for example, by showing that he had ceased to have the use of the money by paying it in cash into court, and that the plaintiff had then delayed the progress and hearing of the action for a prolonged period during which he did not have the benefit of the money. But in general the defendant will not establish that he has been disadvantaged by showing that he has had the use of the money for longer than he should have been allowed to keep it. He would need to show collateral effects of the delay to his disadvantage.[9]

14 Gowans J allowed interest for the whole of the period since the issue of the writ, notwithstanding 'protracted and unwarranted delay on the part of the plaintiff'.[10] He considered that the delay:

shows nothing in the way of disadvantage beyond the fact that the defendant is now being called upon to pay interest for a period of use of the plaintiff's money longer than the plaintiff needed to allow to continue.[11]

15 In Clarke v Foodland Stores Pty Ltd,[12] the Appeal Division of this Court accepted that the discretion to limit the period during which interest should run should be:

regarded ... as empowering the court to relieve against injustice to the defendant - "alleviating the defendant in a proper case", as Gowans J put it in Marsh v Ruby ...[13]

16 In Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 3),[14] Gillard J referred to the statements by Gowans J in Marsh v Ruby and continued:

Although what his Honour said usually provides a good answer to any allegation of delay, there is no doubt that delay may in certain circumstances be a basis for refusing interest for the whole period from the date of commencement of the proceeding.[15]

17 However, Gillard J was of the opinion that delay would only be relevant in rare cases:

But in practice delay is rarely a justifiable basis for refusing interest for any period, because of the self-evident observation that the defendants have had the use of the money since the commencement of the proceeding.[16]

18 The plaintiff also relied upon the decision of Eames J in Watare Pty Ltd v Oddo.[17] In that case, Eames J declined to limit the period during which interest should run by reason of a near three year delay. The plaintiff had applied for the matter to be taken out of the list of cases for trial because of a lack of funding. This was known to the defendant. The defendant made a conscious decision to 'let sleeping dogs lie' and wait to see if the plaintiff obtained sufficient funding to prosecute the case.

19 Following a trial at which the plaintiff was successful, Eames J concluded that the plaintiff's impecuniosity was likely caused by the conduct of the defendant which had formed the basis of the plaintiff's successful claim in the proceeding. In these circumstances, and given that the defendant had the use of the money while the case was awaiting trial, Eames J did not limit the period during which the plaintiff could recover interest. However, Eames J stated that delay by a plaintiff can, depending upon the circumstances of the case, constitute good cause for exercising a discretion to limit the period during which interest should run. To the extent that Marsh v Ruby may have stated that delay can never constitute good cause to the contrary, Eames J declined to follow it. On appeal, the Court of Appeal refused to disturb the exercise of discretion by Eames J.

20 In Clarke v Foodland Stores,[18] the Appeal Division reached a similar conclusion. The Court stated that delay may be a relevant factor in determining whether good cause has been shown to the contrary under s 60(1).[19]

21 On behalf of the defendant, particular reliance was placed upon the decision of the Court of Appeal in Giller v Procopets (No 2).[20] As noted above, the Court of Appeal in that case followed Manns v Kennedy in the New South Wales Court of Appeal, and held that interest was not recoverable under s 60 of the Supreme Court Act in respect of pecuniary orders made under Part IX of the Property Law Act.[21] However, that case also concerned an award of damages for assault. Section 60 of the Supreme Court Act applies to such an award. There had been considerable delays in the proceedings, many of which had been caused by the conduct of the successful plaintiff, Ms Giller. In these circumstances, the Court of Appeal stated:

Although some of the delay was caused by the failure of Ms Giller's various solicitors to comply with time limits, rather than by any personal default of hers, we consider that in all the circumstances of this case Mr Procopets should not have to pay interest for unreasonable delay not attributable to his conduct. There is good cause to depart from the principle that interest should be awarded from the commencement of proceedings until the date of judgment. Doing the best we can, we would order payment of a lump sum of $18,000 which approximates interest on the damages for assault calculated by reference to the penalty rate of interest, from the date of commencement of proceedings in the Supreme Court for a period of four years. The four year period reflects the time which it would normally take for a matter to come to trial and for any appeal to be heard and resolved.[22]

22 This statement by the Court of Appeal does not constitute a statement of principle to be applied in subsequent cases. In particular, it does not lay down any general rule that interest should not be awarded during periods of unreasonable delay in bringing a proceeding to trial by a successful plaintiff.

23 In summary, the cases illustrate that delay by the plaintiff in bringing a proceeding to trial will not usually constitute good cause to limit the period during which interest should run under s 60 of the Supreme Court Act. However, delay may be relevant on the facts and circumstances of an individual case, especially where it is established that the delay has caused prejudice to the defendant.

24 In this case, no financial prejudice to the defendant is relied upon. In affidavit material filed during the course of interlocutory applications, in which the defendant was seeking either to have the matter fixed for trial or to maintain a trial date, there is some mention that the plaintiff's caveats over certain properties were preventing their sale. However, there is no evidence that the caveats have caused the defendant to suffer any financial prejudice, for example by inability to pursue an otherwise available commercial opportunity.

25 Nor does the defendant rely upon prejudice arising from delay by the plaintiff while very serious allegations have been hanging over his head for many years. This kind of prejudice could be relevant in a case where there is unreasonable delay by a plaintiff who, although successful at trial, fails to establish one or more serious allegations maintained for a long time; for example, fraud or other criminal activity. In this case, the plaintiff's claims of violence and sexual assault, on which she failed at trial, were not raised until late in the interlocutory stages.

26 The defendant contends that this is an exceptional case, where the plaintiff's delay in bringing her case to trial was so unreasonable that it constitutes good cause to limit the period during which she should recover interest.

27 The defendant relies upon three principal causes of delay, with some overlapping periods. First, delays arising from unnecessary and repetitive interlocutory applications brought by the plaintiff for the express purpose of delaying the trial. Second, the plaintiff's delay in obtaining the file of the solicitors who previously acted for her in the proceeding. Third, delay arising from the plaintiff's opposition to the defendant's application to restrain the plaintiff's solicitors from representing her in the proceeding.

Was there unnecessary and deliberate delay by the plaintiff?

28 It was submitted on behalf of the defendant that the plaintiff had brought a series of unnecessary interlocutory applications, particularly related to discovery, for the undisclosed and deliberate purpose of delaying a trial of the proceeding while she pursued funding to enable her to prosecute her case. In this regard, reliance was placed upon 'the Pollett spreadsheet' referred to in the principal reasons.[23]

29 In the Pollett spreadsheet, Mr Pollett described the role played by him in assisting the plaintiff in the conduct of this proceeding, and claimed a 'management fee'. He stated that his role in included:

dozens of attendances at Masters of Court hearings covering numerous issues including Discovery, use of delaying tactics due to loss of previously promised funding...[24]

30 Further, the defendant relied upon evidence given by the plaintiff at the trial. In summary, the evidence at trial revealed that the plaintiff had difficulty funding the prosecution of the proceeding. In these circumstances, she entered into an agreement with the defendant's brother, Ken Apostolidis. The plaintiff contended at trial that this agreement provided that Ken would fund the continued prosecution of the proceeding and that Ken breached that agreement. As a result, she was forced to seek funding from Mr Pollett and from her mother. However, when these sources of funds were exhausted, the plaintiff was again left in a position where she had no funds to prosecute her case. In these circumstances, Mr Pollett suggested that the plaintiff apply for litigation funding from a commercial litigation funder. According to the plaintiff, the applications made on her behalf were unsuccessful for a period of approximately 18 months, until 'by some miracle, litigation funding came through' in September 2007.

31 In my opinion, the defendant's contentions in this regard cast an onus upon him to identify with particularity the periods of delay relied upon; and to demonstrate that those periods of delay were the result of unnecessary applications brought by the plaintiff for the undisclosed purpose of delaying a trial of the proceeding until she secured funding. This onus was a heavy one, which could not be satisfied by reference to interlocutory applications which were either refused or which did not, in hindsight following delivery of reasons for judgment, ultimately serve any purpose in the determination of the proceeding. To this end, the Court was burdened with lengthy written submissions by both parties concerning the procedural history of the case, an additional 22 page document titled 'Defendant's history of proceedings', a detailed chronology prepared by the plaintiff's counsel, lengthy oral submissions and voluminous copies of court documents relevant to interlocutory applications. Such a practice should be discouraged in all but the most exceptional cases.

32 The principal ground of delay relied upon by the defendant concerns repeated discovery applications made by the plaintiff. It was submitted on behalf of the defendant that a detailed review of the applications made by the plaintiff for further discovery demonstrates that she was seeking irrelevant documents, or documents of only peripheral relevance to the issues in dispute, and that her numerous discovery applications resulted in no orders of substance being made in her favour. It was submitted that, having regard to the statement in the Pollett spreadsheet, the Court should infer that the plaintiff brought many discovery applications in bad faith and for the express purpose of delaying a trial of the proceeding until she had secured litigation funding.

33 For the reasons appearing below, I accept that the plaintiff's relentless pursuit of discovery from the defendant was motivated, in part, by a desire to delay the trial of the proceeding until litigation funding had been obtained. The period during which this purpose influenced the plaintiff's approach to interlocutory steps is of uncertain duration. On the other hand, throughout the whole of the interlocutory processes, the defendant was in default of his discovery obligations. He failed to discover critical documents, in particular DSK's duplicate copies of invoices and its 'diaries'. The significance of the defendant's failure to discover these documents is evident from the principal reasons.[25] For convenience, I will refer to these as 'the DSK invoices and diaries'.

34 The DSK invoices and diaries were always relevant documents. As the defendant was the sole owner of DSK at all relevant times, these documents were always in the possession or control of the defendant. The proceeding was commenced in November 2000, some eight months after the separation date. At this time, DSK was required by law to be in possession of its financial records covering the previous seven years of its business operations.[26] Whether or not the defendant caused DSK to comply with its statutory obligations in this regard, I am satisfied from the evidence at trial that DSK would have in fact been in possession of a substantial volume of the DSK invoices and diaries at the time the proceeding was commenced. From the commencement of the proceeding, there was no justification for any of these documents being discarded or destroyed. Accordingly, the DSK invoices and diaries should have been included in the first affidavit of documents sworn by the defendant in November 2001. For the reasons given in the principal reasons, there was no justification for the defendant's failure to discover them.[27]

35 The evidence discloses that the defendant swore eight further affidavits of documents. In none of them did he discover the DSK invoices or diaries. Not only this, but in an affidavit sworn by him on 19 September 2006 in response to a discovery application by the plaintiff, the defendant swore that the defendants had no further discoverable documents relevant to the proceeding. That was false.

36 In this context, I proceed to consider the relevant procedural history.

37 The defendant's attack commenced with the plaintiff's summons for further discovery filed on 16 July 2003. I have read that summons and the affidavit material filed in connection with it. At this time, the parties were still in dispute as to the appropriate date for the valuation of their assets. Accordingly, the defendant's current assets remained a relevant issue in the proceeding. In these circumstances, the plaintiff was justified in seeking discovery of the documents enumerated. However, for a series of reasons, the July 2003 summons was never heard and determined. It was overtaken by an application concerning the plaintiff's statement of claim, the filing of a further amended statement of claim, a mediation, the plaintiff terminating the retainer of her previous solicitors, attempts by the plaintiff to obtain the file of her previous solicitors and the defendant's assertion that the plaintiff's present solicitors should not act for her because of information obtained by them in the course of acting for Ken Apostolidis in his case against the defendant. These events resulted in a number of adjournments of the July 2003 summons. According to an affidavit sworn by the defendant's solicitor, Mr Tonkin, Master Evans said on 5 July 2004 that he considered the July 2003 summons had been dealt with or abandoned. However, the summons was not dismissed, but adjourned to a date to be fixed.

38 In an affidavit sworn in opposition to the July 2003 summons, the defendant's solicitor agreed that certain documents would be provided, but not others. It appears that those documents were provided at about this time.

39 There was considerable delay by the plaintiff in making a formal application to the Court for delivery-up of the file of her previous solicitors. Her previous solicitors filed notice that they had ceased to act on 19 February 2004. It was not until October 2005, after 18 months had elapsed, that proceedings were commenced by the plaintiff to recover the file. Those proceedings were heard on 1 March 2006, and an order made for delivery-up of the file. The period of delay is considered separately below.

40 The defendant also delayed making his application to restrain the plaintiff's present solicitors from acting on her behalf. An application was initially threatened in March 2004. It was not commenced until August 2004. The application was dismissed with costs in February 2005. The delay arising from this application is considered separately below.

41 By July 2005, the defendant had commenced pressing for directions to be made so that the matter could proceed to trial. The plaintiff and her solicitors did not co-operate. They contended that the defendant remained delinquent in providing discovery. Accordingly, by summons dated 5 October 2005, the plaintiff sought wide-ranging further discovery from the defendant. The October 2005 summons sought to amend the July 2003 summons. This was presumably so as to preserve the plaintiff's right to claim the costs of the July 2003 summons.

42 The October 2005 summons was directed at obtaining financial documents relevant to the defendant's assets at relevant times. Although this summons was substantially dismissed by the Master, and the plaintiff was ordered to pay the defendant's costs, it cannot be said that the summons sought only unnecessary documents or was obviously motivated by a desire to delay the proceeding. Although the October 2005 summons seeks wide-ranging discovery, perhaps bordering on the oppressive, a substantial proportion of the documents sought were obviously discoverable. With hindsight, the Master should have ordered that they be discovered. Of particular note is the request for discovery of all documents constituting the financial records of DSK and other companies owned and controlled by the defendant. Hindsight demonstrates that the defendant had many such documents in his possession or control, in particular the DSK invoices and diaries, and that these ought to have been discovered. The fact that this aspect of the October 2005 summons was dismissed by the Master is not to the point. The plaintiff was entitled to pursue discovery of such documents and it cannot be said that her conduct in doing so was unnecessary.

43 The extent to which the October 2005 summons was dismissed is unclear from the orders made by the Master. Clearly, the Master did not intend to dismiss it entirely, as the further hearing of the summons was adjourned to a date to be fixed. In any event, the plaintiff continued in her attempts to gain full discovery of financial documents from the defendant. In this context, as appears above, the defendant swore an affidavit on 19 September 2006 in which he asserted that none of the defendants had any further discoverable documents relevant to the proceedings. At the very least, that assertion was false with respect to the DSK invoices and diaries. However, this false statement by the defendant could not be ignored by counsel then acting for the plaintiff. Two days later, on 21 September 2006, the plaintiff's counsel consented to an order which finally dismissed the October 2005 summons 'without adjudication'. This order was consented to on the basis of a memorandum of understanding signed by counsel, which purposed to finalise all discovery issues.

44 The defendant relied heavily in argument upon the fact that the memorandum of understanding gave the plaintiff only a small proportion of the further discovery sought. In circumstances where the memorandum of understanding was obviously affected by the false affidavit sworn by the defendant, there is no merit in that submission.

45 In October 2006, the Listing Master fixed the proceeding for trial on 10 September 2007 on an estimated duration of 10 days. Pre-trial directions were made at this time.

46 In December 2006, the Listing Master re-fixed the proceeding for trial on 7 November 2007, to accommodate the unavailability of a principal witness of the defendant, his accountant Mr Stevens.

47 In July 2007, the defendant's solicitors filed a summons seeking further discovery from the plaintiff and variations to the pre-trial directions. In an affidavit in support of that summons, the defendant's solicitor noted that the plaintiff had not complied with any of the pre-trial directions made by the Listing Master. A week later, the plaintiff filed her own application. In her summons she sought an order that the trial date be vacated and sought further discovery from the defendant. The further discovery sought by the plaintiff was not critical, and provided no reasonable basis for the trial date to be vacated. By this time, I am satisfied that the plaintiff was endeavouring to delay the trial because she had no funding.

48 On the hearing of the cross-applications, a Master made discovery orders in favour of both parties, varied the pre-trial directions made by the Listing Master and refused to vacate the trial date. On the day of this hearing, there was a fire at the defendant's business premises. The defendant contends that all of the existing financial records of his companies which were then in existence were destroyed by that fire.

49 On 21 September 2007 the plaintiff finally obtained litigation funding. As a result, she was able to engage a forensic accountant to give advice concerning valuation of the defendant's assets. The forensic accountant, Mr Sincock, advised that further documents were required. Accordingly, on 9 October 2007, the plaintiff filed a further summons seeking to vacate the trial date. The defendant immediately responded with a summons seeking to dismiss the proceeding for want of prosecution, or alternatively seeking an order under Rule 47.04 that there be a trial of questions excluding the value of the defendant's business. The defendant's applications were dismissed.

50 The plaintiff's summons was supported by affidavits sworn by two deponents. First, an employee solicitor, Mr Leonidas, deposed to issues relating to further discovery and pre-trial directions and stated that the plaintiff was unable to maintain the hearing date until discovery was completed. In my view, there was only one matter in that affidavit which may have justified vacating the trial date. That was the reference to further documents sought by the forensic accountant to complete his valuation of the defendant's assets. In a later affidavit, Mr Leonidas disclosed, for the first time, that the plaintiff had been unable to comply with pre-trial directions, in particular the filing of an expert witness statement from a forensic accountant, until litigation funding was secured on 21 September 2007.

51 Second, the plaintiff relied upon affidavits sworn by the forensic accountant, Mr Sincock. Mr Sincock swore that he was unable to complete his valuations of the defendant's businesses until further documents were discovered. He referred to his instructions that the defendant dealt in large amounts of cash. As a result, he said that he was concerned that there were cash transactions which were not recorded in the accounts of the defendant's businesses. For this reason, he said that he could not complete his valuation tasks until 'a proper forensic accounting investigation' was carried out.

52 In his final affidavit, sworn on 29 October 2007, Mr Sincock made specific reference to the need for him to obtain documents of prime entry generated by DSK in the period 1993 to 2000, including any documents recording cash transactions, cash receipts journals, cash payments journals, general ledgers and detailed payroll records. These documents included the DSK invoices and diaries.

53 The defendant swore an affidavit, in response to Mr Sincock's affidavits, on 30 October 2007. He deposed that he was unaware of DSK maintaining any documents of prime entry of the kind sought by Mr Sincock, and that 'insofar as there may have been any such documents (of which I am not aware) then such documents would have been destroyed in the fire'. This statement was false. The defendant well knew that DSK maintained the DSK invoices and diaries at relevant times.

54 Further, on the basis of advice received from the defendant's forensic accountant, Mr Wilkinson, the defendant swore that the documents sought by Mr Sincock 'would only be relevant if one was examining the same as part of a fraud investigation.' In fact, that is the precise reason why Mr Sincock was seeking the documents. As the principal reasons demonstrate, he was justified in so doing. The defendant had been engaged in tax fraud at relevant times, and the financial statements and tax returns of DSK and the defendant were false as a result.

55 On 31 October 2007, the Listing Master vacated the trial date fixed for 7 November 2007 and re-fixed the trial with priority for hearing on 21 April 2008 on an estimate of 10 days. In hindsight, that estimate was clearly unachievable. Further, in vacating the trial date, the Listing Master obviously took into account the fact that the plaintiff had only recently obtained funding and that her expert could not complete his valuation report in time for a trial on 7 November 2007. Fresh pre-trial directions were made.

56 In the period leading up to the trial fixed for 21 April 2008, there were other interlocutory skirmishes. These included the filing of many subpoenas by the plaintiff, a substantial proportion of which were set aside. It cannot be said that the plaintiff was engaged in delaying tactics at this time. She was clearly gearing up for a trial.

57 The trial could not proceed in April 2008. Following the exchange of witness statements, it became apparent that the trial would not be completed within the 10 day estimate. Although the defendant's legal practitioners maintained that the 10 day estimate was adequate, that was an unrealistic position to adopt. History shows that the trial occupied 40 sitting days.

58 In these circumstances, the Listing Master again vacated the trial date and re-fixed it for 2 February 2009 on an estimate of 25 days. I accept that this was a realistic estimate. The trial commenced on that date.

59 Other aspects of the procedural history of the case were urged upon me by the parties. However, the above summary is in my view sufficient to reach a conclusion on the defendant's contention that the plaintiff should be deprived of interest for part of the period since the issue of the writ, on the ground that she engaged in deliberate delaying tactics.

60 In the context of the defendant's dishonesty concerning his discovery obligations, the conduct of the plaintiff in seeking irrelevant documents or documents of only marginal relevance, for purposes including delaying the trial of the proceeding, is of reduced significance. She was wholly justified in seeking discovery of all of the financial records of DSK, and mistrusting the published financial statements and tax returns. Further, prior to the parties reaching agreement as to the date upon which the assets would be valued, the plaintiff was entitled to pursue discovery of the defendant's current assets. This involved 'updating' the discovery of financial documents as the years went by.

61 In determining whether to limit the period during which interest should run on the adjustment order, it is also relevant to consider the following matters.

62 First, the defendant did not suffer any financial prejudice as a result of the delay in the proceeding coming on for trial. As appears above, he was unable to point to any financial loss resulting from the plaintiff's caveats, such as the inability to pursue an available commercial transaction. To the contrary, the evidence at trial indicated that the defendant has continued to grow his business and assets since the separation date.

63 Second, the defendant has had the use of the monetary sum which is the subject of the adjustment order since the separation date. He has used that money to grow his overall assets.

64 Third, the plaintiff's impecuniosity and resultant inability to progress the proceeding to trial in an expeditious manner was affected by the defendant's conduct. When the parties separated in March 2000, the defendant failed to give any proper recognition to the significant contributions made by the plaintiff: of the kind referred to in s 285(1) of the Property Law Act and which are the subject of findings in her favour in the principal reasons.

65 In all the circumstances, I am not persuaded that the conduct of the plaintiff in pursuing discovery applications of unnecessary width, some of which were motivated (in whole or in part) by a desire to delay a trial, constitutes good cause to limit the period during which the plaintiff should recover interest.

Delay in obtaining file of plaintiff's previous solicitors

66 The second period of delay relied upon by the defendant relates to the time taken by the plaintiff to pursue an application to gain access to the file of her previous solicitors. The relevant facts may be shortly stated. In early February 2004, following a mediation of this proceeding, the plaintiff lost confidence in her previous solicitors and terminated their retainer. Her conduct in this regard was justified.[28] On 19 February 2004, she appointed her present solicitors to act. There was then a period of negotiation between the plaintiff's present and previous solicitors, in which the plaintiff was seeking production of the file of her previous solicitors. Apart from this reference to negotiations, there was no other explanation as to the delay in the plaintiff commencing proceedings to recover the file. Eventually, on 7 October 2005, after a period of 18 months, the plaintiff commenced proceedings against her previous solicitors seeking recovery of the file on the basis of misconduct by them. The plaintiff prosecuted that application diligently. On 1 March 2006, Smith J ordered that the plaintiff's previous solicitors deliver their file to the plaintiff's present solicitors.[29] Even then, the plaintiff's previous solicitors were reluctant to produce the file. It was only after a contempt summons was brought before the Court on 21 April 2006 that the file was provided.

67 In the meantime, the defendant objected to the plaintiff retaining her present solicitors. That objection was first raised on 31 March 2004. Soon after, the defendant changed solicitors. As a result, there was a delay in the defendant making an application to restrain the plaintiff's solicitors from acting. The defendant's application was not determined until 18 February 2005, when it was dismissed by Hansen J.[30] Accordingly, nearly 11 months was lost pending the hearing and determination of that application.

68 In these circumstances, the 18 month delay by the plaintiff in commencing her application to obtain the file of her previous solicitors constituted an effective delay of only seven months. I do not accept that this was deliberate delay. The plaintiff obviously required the file to prosecute this proceeding, and the application was successfully pursued well prior to the plaintiff obtaining litigation funding.

69 These events do not constitute good cause to limit the period during which the plaintiff is entitled to interest. The defendant suffered no financial prejudice by the extra delay of about seven months, and he had the use of the amount of the adjustment order during this period. Further, as stated above, to the extent that the plaintiff's impecuniosity was the cause of this delay, the defendant's conduct contributed to that impecuniosity.

Delay arising from defendant's application to restrain plaintiff's solicitors from acting

70 The third period of delay relied upon by the defendant arises from his own failed application to restrain the plaintiff's solicitors from acting on her behalf. The delay involved was approximately 11 months, between 31 March 2004 and 18 February 2005 when the Court dismissed the defendant's application.[31].

71 It was submitted on behalf of the defendant that this delay was caused by the plaintiff swearing a false affidavit in opposition to the defendant's application. It was submitted that, in the absence of the false affidavit, the application would have been refused. For the reasons appearing below, I do not accept the defendant's submissions in this regard.

72 First, the defendant delayed for nearly five months in bringing on his application to restrain the plaintiff's solicitors from acting. That delay was due to the defendant changing solicitors. It was not the fault of the plaintiff.

73 Second, I am not satisfied that the plaintiff told lies in her affidavit in opposition to the application. She may have exaggerated the extent of her knowledge of the defendant's businesses to a certain degree, but the defendant made a deliberate decision not to cross-examine her before Hansen J. Further, although the plaintiff said in evidence at the trial that her affidavit was incorrect concerning her involvement in the negotiations to settle the proceedings between the defendant and his brother, Ken, I find it is more likely that the version of events in her affidavit is the correct one. At the time of the trial and settlement of Ken's proceeding, he and the plaintiff were working together against the defendant, who they viewed as their common enemy.

74 Third, the plaintiff should not be responsible for the four month delay in the delivery of the Court's reasons for judgment on the defendant's application.

75 Fourth, I am not satisfied that the plaintiff's evidence was decisive in the dismissal of the defendant's application. Hansen J was heavily influenced by the failure of the defendant to identify or relevantly particularise the confidential information requiring the protection of injunctive relief.[32] In this context, Hansen J took the view that the alleged confidential information, insofar as it was generally identified, was likely to come into the possession of the plaintiff in any event as a result of discovery and interrogation in this proceeding.[33] Further, Hansen J noted that there was nothing preventing the plaintiff from calling Ken Apostolidis to give evidence on her behalf at trial about the supposedly confidential information.[34]

76 These events do not constitute good cause to limit the period during which the plaintiff is entitled to interest. The delay involved was short and not caused by the plaintiff. She was justified in opposing the application. Further and in any event, as noted above, during the period of any delay caused by this application the defendant suffered no identified financial prejudice and he had the use of the amount of the adjustment order.

Conclusion: interest should run for the whole period

77 For the reasons given above, I am not satisfied that any of the delays relied upon by the defendant constitute good cause to limit the period during which the plaintiff is entitled to interest. I turn to consider the rate of interest to which the plaintiff is entitled.

78 The rate of interest is always a matter in the discretion of the Court, subject to the proviso that it cannot exceed the rate prescribed under s 2 of the Penalty Interest Rates Act (the 'penalty rate').[35] As a general rule, the starting point is the penalty rate. In practice, unless the defendant seeks to argue for a lesser rate, the penalty rate is routinely awarded by the Court. [36]

79 It was submitted on behalf of the defendant that, during the period for which interest is allowed, the Court should award interest at the rates paid by financial institutions upon term deposits. It was submitted that this would be consistent with the evidence at trial, that the plaintiff paid larger sums of money at her disposal into term deposit accounts and left the money there for periods of years.

80 I do not accept that the conduct of the plaintiff, in placing her limited financial resources on term deposit during the course of her de facto relationship with the defendant, provides a sound basis for concluding that the plaintiff would have adopted that approach if she had received a sum of $500,000 from the defendant in March 2000. At the conclusion of the de facto relationship, the plaintiff had limited financial resources and owned no real estate. She did not have the financial capacity to both purchase a home and fund the prosecution of this proceeding. However, I am satisfied that the plaintiff would, had she received from the defendant an amount of $500,000 in March 2000, have purchased a home. The evidence at trial established that the plaintiff owned a half-interest in a home when she met the defendant, and only sold that home when the defendant persuaded her to do so.[37] I accept the submission of the plaintiff's counsel that the value of any home purchased by the plaintiff in 2000 would have appreciated in value at a rate at least equal to, and probably exceeding, the application of the penalty rate to the acquisition cost.[38]

81 Further, the conduct of the plaintiff during the course of her de facto relationship with the defendant was in circumstances where he provided her with a home and paid her day-to-day living expenses, but paid her no salary for her contributions to his business. In these circumstances, the plaintiff was not in a position to buy real estate during the course of the relationship.[39]

82 Next, the defendant contends that there is in any event no justification for applying the penalty rate in the circumstances of this case. It was submitted that the penalty rate includes a penalty component, and at all relevant times exceeded commercial rates of interest. Reliance was placed upon the statements of Gillard J in Johnson Tiles Pty Ltd & Ors v Esso Australia Pty Ltd & Ors (No 3).[40]

83 In that case, Gillard J accepted that the penalty rate has 'a penalty component over and above the compensatory function of the award of interest.'[41] On this basis, Gillard J summarised the objectives of an award of interest to a successful claimant in the following terms:

There are three main objectives of the award of interest. First, as compensation to the judgment creditor for being out of the funds from the date of commencement of the proceeding until judgment; secondly, to deter judgment debtors from delaying proceedings and thereby having the use of the money for a longer period; and finally, to encourage defendants to make realistic assessments of their liability in a case and to take bona fide steps to compromise the claim.[42]

84 In the circumstances of that case, Gillard J determined to award interest at bank overdraft rates to commercial borrowers. This was because the defendant, Esso, did not have full details of the claims until five years after the proceedings were commenced and was not in a position to fully analyse the claims and to attempt to compromise them until this occurred.[43]

85 In this case, although the plaintiff's allegations concerning the amount and content of her contributions expanded as her pleadings and particulars evolved, there is no evidence of the defendant endeavouring to compromise the proceeding at any time. During the trial, the defendant challenged the extent of the plaintiff's homemaker contributions, and expressly denied any financial contribution by the plaintiff. As the principal reasons illustrate, he was wrong to do so. In my opinion, there has been nothing preventing the defendant from analysing the plaintiff's claims and endeavouring to compromise them from an early stage. He has had the use of the amount of the adjustment order for the whole of the period since the issue of the writ. He has at all times been represented by lawyers, and could have been in no doubt that any monetary order obtained by the plaintiff would carry interest at the penalty rate.[44]

86 Next, the defendant contends that the determination of the interest rate should take account of the fact that the plaintiff's claim was not for a debt or damages, within the terms of s 60 of the Supreme Court Act, but was a claim for the exercise of a discretion in her favour under Part IX of the Property Law Act. Reliance was placed upon the statements of the New South Wales Court of Appeal to this effect in Manns v Kennedy,[45] which were approved by the Court of Appeal in this state in Giller v Procopets (No 2).[46] It was submitted that awarding interest for the whole of the period at the penalty rate would introduce a false air of precision into the adjustment order, contrary to the broad brush nature of the discretion arising under Part IX of the Property Law Act. I do not accept that submission. The Court is not engaged in the task of arriving at an adjustment order which includes 'something in the nature of interest', as referred to in Manns v Kennedy.[47] If that was the task to be performed, there may have been merit in the submission. However, the juristic basis for awarding interest in this case does not arise as part of the Court's broad discretion under Part IX of the Property Law Act. It arises under the agreement of the parties that the defendant will pay interest, as determined by the Court in accordance with s 60 of the Supreme Court Act, on any monetary sum comprised in an adjustment order.

87 In all the circumstances, I exercise my discretion to award interest on the amount of the adjustment order at the penalty rate.

88 The defendant has not shown good cause to limit the period during which interest should run on the amount of the adjustment order. In all of the circumstances of the case, it is appropriate that interest be awarded at the penalty rate. Accordingly, the plaintiff is entitled to judgment in the sum of $500,000, together with interest in the sum of $509,109. I will hear the parties as to the precise form of the judgment, and as to costs.

[1] Kalenik v Apostolidis [2009] VSC 208.

[2] Plaintiff's written outline of opening submissions, 28 January 2009 at [41].

[3] Manns v Kennedy [2007] NSWCA 217, [136]; Giller v Procopets (No 2) [2009] VSCA 72, [28].

[6] Marsh v Ruby [1975] VicRp 20; [1975] VR 191, 193.

[7] Ibid; Clarke v Foodland Stores Pty Ltd [1993] VicRp 81; [1993] 2 VR 382, 393.

[17] Unreported, Eames J, 6 March 1998; BC 9800611.

[23] Kalenik v Apostolidis [2009] VSC 208, [54]-[69].

[27] Kalenik v Apostolidis [2009] VSC 208, [364].

[28] Kalenik v Hallett [2006] VSC 65.

[30] Kalenik v Apostolidis [2005] VSC 27.

[35] Clarke v Foodland Stores [1993] VicRp 81; [1993] 2 VR 382, 389.

[36] Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 3) [2003] VSC 244, [64].

[37] Kalenik v Apostolidis [2009] VSC 208, [460].

[38] Reference was made to the house price index published by the Australian Bureau of Statistics to support this submission.

[39] Kalenik v Apostolidis [2009] VSC 208, [532], [680].

[40] [2003] VSC 244, [59]-[70].

[44] Cf Johnson Tiles Pty Ltd & Ors v Esso Australia Pty Ltd & Ors (No 3) [2003] VSC 244, [68].

[45] [2007] NSWCA 217, [129]-[137].

[47] [2007] NSWCA 217, [136]; and see Giller v Procopets (No 2) [2009] VSCA 72, [28]-[29].

Interest Rates Act 1983

At a glance

Court

Decision date

Before

Source

Judgment (134 paragraphs)

Parties

Legislation Cited (3)