Plaintiff v Defendants

Supreme Court of Victoria|2013-07-26|Before: SIFRIS J

JUDGMENT - Interest - Whether interest payable from date debt due or date of later demand - Supreme Court Act 1986 (Vic) s 58(1).

1 On 14 June 2013 I published my reasons for deciding that the plaintiff was entitled to commission from the defendants pursuant to an Agency Agreement entered into between the plaintiff and the defendants on 1 May 2011. The commission was an agreed fixed commission of $1 million plus GST. In the published reasons I indicated that I would hear from the parties in relation to interest and costs. On 19 July 2013 I heard argument in relation to interest and costs.

2 The plaintiff submitted that he was entitled to interest pursuant to the Agency Agreement. Clause 13.4 of the Agency Agreement is in the following terms:

13.4 The Vendor will be liable to pay the Agent

(a) interest upon any monies that are due under this Authority, at a rate two percent higher than the rate prescribed from time to time under the Penalty Interest Rates Act 1983 (Vic): and

(b) any legal costs incurred in recovering any monies due, on a full indemnity basis.

3 The plaintiff submitted that the commission sum of $1.1 million (including GST) is and remains due as a debt. It was submitted that pursuant to s 58(1) of the Supreme Court Act 1986 (Vic) ('the Act'), the plaintiff has recovered "a debt or sum certain", and is accordingly entitled to interest from the date when the sale of business agreement was executed on 14 November 2011. On this date the plaintiff became entitled to his commission under the Agency Agreement. The plaintiff is in any event, it was submitted, entitled to interest from that date pursuant to clause 13.4(a) of the Agency Agreement.

4 The rate prescribed under the Penalty Interest Rates Act 1983 (Vic) has since 1 February 2010 been 10.5%.[2] Under the Act the plaintiff is entitled to interest not exceeding 10.5%. However, under clause 13.4(a) of the Agency Agreement, the plaintiff is entitled to interest at a rate 2% higher than that prescribed under the Penalty Interest Rates Act 1983 (Vic), namely 12.5% per annum.

5 Accordingly it was submitted the plaintiff is entitled to interest on $1.1 million at the rate of 12.5% per annum since 14 November 2011. That period is (until 19 July 2013) 366 days (because 2012 was a leap year) plus 247 days, a total of 613 days. The annual interest rate at 12.5% on $1.1 million is $137,500, and the daily rate is $376.71, making a total interest amount for 613 days of $230,924.65.

6 The defendants submitted that as a matter of construction of the Agency Agreement, the Guarantors were not liable for interest. I reject the submission. The guarantee clearly covers all amounts owing to the plaintiff.

7 The defendants submitted further that interest should not be payable on the sum of $100,000, being the amount representing GST on the commission of $1 million. I agree. Had the amount of $1.1 million been paid as it should have been, the plaintiff would not have had the use of the sum of $100,000. In the exercise of my discretion I do not consider that interest should be paid on this amount.

8 The final submission made by the defendants was that the pleading only claimed interest from 18 March 2012 following demand made on 17 March 2012, and accordingly any interest should only commence from the date actually claimed. I reject the submission. Whatever the pleading, the relevant date is when the debt became due. The commission became due on the sale of the Business and it should have been paid on this date. The plaintiff has been out of pocket on and from this date.

9 Pursuant to s 58(1) of the Act, I must award interest from the time the debt became payable unless good cause is shown to the contrary. I do not regard the demand at a later date to be good cause. Good cause means good reasons according to the justice of the case.[3] None has been submitted and the interest claimed is justified. No submission was made in relation to the percentage claimed in respect of interest.

10 The plaintiff submitted that he was entitled to his costs on a full indemnity basis for the whole of this proceeding pursuant to clause 13.4(b) of the Agency Agreement. It was submitted that although the Court still retains an independent discretion as to costs and the basis on which costs should be ordered, the Court should take into account the contractual agreement as to costs between the parties, and enforce the agreement in the absence of a reason not to do so.[4]

11 In the present case it was submitted that there was no basis for not awarding the plaintiff indemnity costs for the whole of this proceeding pursuant to the contract between the parties.

12 Alternatively it was submitted that the plaintiff is entitled to indemnity costs pursuant to Rule 26.02 (and following) from 30 April 2013 onwards, due to the defendants' non acceptance of an offer of compromise which he served on that day. That offer of compromise was to accept $750,000 in full and final settlement of the plaintiff's claim.

13 On any view, the decision and judgment of the Court[5] is more favourable to the plaintiff than the terms of the 30 April 2013 offer of compromise, and, it was submitted, entitles the plaintiff to his party-party costs of the proceeding up to 30 April 2013, and indemnity costs from 30 April 2013 onwards, pursuant to Rule 26.08(3).

14 The defendants submitted that there should be no order as to costs essentially because costs were incurred due to the confusing pleading of the plaintiff. I reject the submission. The plaintiff is clearly entitled to indemnity costs from 30 April 2013. The only question is whether indemnity costs should be ordered for the prior period.

15 In my opinion such a costs order is appropriate and gives effect to the specific agreement between the parties. There is no good reason why the court should not give effect to the agreement between the parties and none has been suggested.

[1] Raffoul v Fresh 2 U Pty Ltd & Ors [2013] VSC 308 ('Judgment'). Defined terms in these reasons are the same as those defined in the Judgment.

[2] See Government Gazette No 2, 14 January 2010 page 51; Williams Civil Procedure Victoria Vol 3 [10,133], 20,436.

[3] Clarke v Foodland Stores Pty Ltd [1993] VicRp 81; [1993] 2 VR 382, 388-9, 392-4.

[4] Reference was made to Shepparton Projects Pty Ltd v Cave Investments Pty Ltd (No 2) [2011] VSC 384 (Croft J); Taree Pty Ltd v Bob Jane Corporation Pty Ltd & Anor [2008] VSC 228 (Vickery J).

Interest Rates Act 1983

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Judgment (24 paragraphs)

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Legislation Cited (4)