Plaintiff v First Defendant

1 On 21 October 2015 I published my reasons[1] for deciding to award contribution in favour of the plaintiff (now Amaca, formerly James Hardie) against one or both of the defendants (CSR and Bradford). James Hardie succeeded on five of the eight claims that had been selected for separate trial from the 204 claims made in the proceeding. Contribution was awarded in two cases pursuant to Part IV of the Wrongs Act 1958 (Vic) ('Wrongs Act') and in three cases by way of equitable remedy upon the discharge of coordinate liability. An issue has arisen in respect of the appropriate calculation of interest on four of the five judgments.[2]

2 The plaintiff argued that I should award interest under s 58 of the Supreme Court Act 1986 (Vic) ('Act') whereas the defendants argued that I should award interest under s 60 of the Act. In practical terms, the difference lies between awarding interest from the date the plaintiff made demands of payment upon the defendants before action or only from the date each claim for contribution was joined to the proceeding.

3 Sections 58 and 60 of the Act relevantly provide:

58 Interest to be allowed when debts or sums certain recovered

(1) If in a proceeding a debt or sum certain is recovered, the Court must on application, unless good cause is shown to the contrary, allow interest to the creditor on the debt or sum at a rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 or, in respect of any bill of exchange or promissory note, at 2% per annum more than that rate from the time when the debt or sum was payable (if payable by virtue of some written instrument and at a date or time certain) or, if payable otherwise, then from the time when demand of payment was made.

...

(3) A debt or sum payable or a date or time is to be taken to be certain if it has become certain.

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.

(2) Nothing in this section -

(a) authorises the granting of interest on interest;

(b) applies in relation to any sum on which interest is recoverable as of right by virtue of any agreement or otherwise;

(c) affects the damages recoverable for the dishonour of a negotiable instrument;

(d) authorises the allowance of any interest otherwise than by consent on any sum for which judgment is entered or given by consent;

(e) applies in relation to any sum on which interest might be awarded by virtue of section 58 or 59; or

(f) limits the operation of any enactment or rule of law which, apart from this section, provides for the award of interest.

4 Arising from the debate, there are three issues to resolve:

(a) Do the judgments in each case attract interest under s 58 or s 60?

(b) Even if s 58 would otherwise apply, have the defendants shown 'good cause' why the court should order interest to run only from the commencement of the action in each case?

(c) In any event, do the letters sent by the plaintiff before action constitute a 'demand of payment' under s 58?

5 Before dealing with these three questions I need to note some reservations and concessions made by each side for the purpose of these particular claims only. For the plaintiff's part, it elected not to argue any entitlement to interest on equitable principles, choosing (for these cases) to confine its claim to interest under statute only. As for the defendants, they conceded for the purpose of these claims that interest was payable under s 60, electing not to argue on these cases that neither statutory provision applied to the judgments obtained by the plaintiff.

Under which section of the Act is interest payable?

6 The plaintiff argued that s 58 applies because it has recovered 'a debt or sum certain' as that phrase is to be construed. The focus, it argued, is on the nature of what is recovered rather than what was originally sought in the proceeding, citing McDonald J in Oddy v Fry.[3] Because what has been recovered is the fruit of a claim in quasi-contract - at least in so far as the equitable remedy is concerned - the plaintiff argued the law would characterise that recovery as a 'liquidated' sum. Another way of putting it was to characterise the judgment as one for a debt which, in the eye of the law, always existed in contrast to a judgment for damages which, until assessed by the court, were always at large.

7 The defendants denied that what had either been sought or recovered by the plaintiff on the claims upon which it was successful meet the description 'debt or sum certain'. They drew my attention to passages in the decisions of the High Court in Victorian WorkCover Authority v Esso Australia Limited[4] and the Victorian Court of Appeal in Chong & Neale v CC Containers Pty Ltd & Ors[5]. In particular, the defendants relied upon the following passage in the last mentioned case in which the Court of Appeal (Redlich, Santamaria and Kyrou JJA) said:

Both ss 58 and 60 have the beneficial purpose of providing for the award of interest to compensate parties who have been obliged to institute proceedings to recover a money sum and who in the meantime have been kept out of moneys which they could otherwise have used or upon which they could otherwise have earned interest. However, as is evidenced by the language of s 60(2)(e), ss 58 and 60 are not intended to overlap. The legislature clearly intended to distinguish between cases where a debt has become payable prior to the initiation of a proceeding for its recovery (in which case, s 58 will be enlivened if its requirements are met), and one in which the obligation to pay has not so crystallised at an earlier time (in which case, s 60 will be enlivened if its requirements are met).[6]

8 Picking up from the text of that passage, the defendants argued that the amounts recovered by the plaintiff are not ones that had become payable prior to the initiation of the proceeding for their recovery.

9 The history of ss 58 and 60 has been detailed a number of times.[7] Some uncertainty arises from the fact that both sections refer to the recovery of 'debt' as an ingredient in the criteria for their application, yet s 60(2)(e) makes it clear that the two provisions have distinct operation. Comments have been made in the past about that 'puzzling' feature.[8] It has been suggested that the reference to proceedings for 'debt' in s 60 is designed to sweep up relatively rare cases for the recovery of a debt due under an oral contract where there had been no demand for payment before action.[9]

10 Otherwise, the situations to which s 58 generally apply are those for the recovery of an ascertained sum - being a sum that, of its nature, does not require the bringing of a proceeding to ascertain the amount to be paid[10] - that was due and payable before the initiation of the proceeding.[11] Such a claim may encompass a number of the older money counts that were recoverable in an action for debt founded upon a simple contract and executed consideration. Examples of such claims were given by McInerney J in CML v Giannarelli[12] after which his Honour said:

In summary, it may be said that in all cases where the consideration has been executed and where there is an absolute duty to pay money or the value of the performance rendered, either debt on simple contract or indebitatus assumpsit is a proper remedy. Debt lies only for a liquidated sum of money, that is, a pecuniary demand where the amount due is fixed and specific, or where it can readily be reduced to certainty by a mathematical computation.[13]

11 It is not at all clear that s 58 is the appropriate provision for all claims in restitution which may owe their origin to an action in quasi-contract. For example, Peet v Richmond (No 2)[14] involved a resitutionary claim for the recovery of money paid under a mistake. On the appeal, in obiter dicta, Nettle JA referred to s 60 as the potential statutory jurisdiction to award interest on money recovered in such an action, the existence of which may suppress equity's jurisdiction to award interest.[15]

12 Turning more closely to s 60, the phrase 'proceeding for the recovery of debt or damages' is to be construed broadly to embrace any money claim for debt or damages not otherwise provided for by statute (such as under s 58) or by contract or otherwise.[16] So, the phrase has been interpreted so as to encompass a claim made by a statutory workers' compensation authority for a statutory indemnity from an employer legally liable to the injured worker to whom the authority paid compensation in respect of the injury.[17]

13 In their arguments on the issue of which section should apply, the parties did not differentiate between the two types of claims on which the plaintiff obtained judgments. For my part, I think it is necessary to analyse the issue by reference to each type of claim distinctly.

14 In my view, the recovery of contribution under the Wrongs Act is clearly not the recovery of a debt or sum certain. The statutory remedy does not conform to any of the descriptions of debt, and it is not the recovery of a sum certain. It is a unique statutory remedy for an amount the quantification of which depends on the court's assessment of what is just and equitable having regard to the defendant's relative degree of responsibility for the damages to which it is required to contribute.

15 Without finally deciding the matter, I would be inclined to think that a claim for Part IV contribution is captured by the language in s 60 of the Act as construed by the High Court in VWA v Esso. But it is enough for present purposes that I find that a claim of that kind is not covered by s 58 of the Act in which case, as conceded by the defendants for the purpose of these particular judgments, s 60 applies.

16 The next question is whether the judgments for equitable contribution should be treated differently. Superficially, there is some basis for treating those judgments differently. As I stated in my reasons for the substantive decision, the equitable contribution claims that succeeded in this case are based upon an implied contract between the former partners to contribute equally to partnership liabilities for wrongs.[18] The entitlement to contribution arose when (and because) one partner (James Hardie) discharged a common obligation to the benefit of the other (CSR).[19]

17 On that basis it might be said that, by operation of the contract implied at law, a 'debt' arose at that moment of discharge for a sum that could be readily reduced to certainty by mathematical computation. That is, the sum was theoretically capable of ascertainment because it was one half of the joint liability discharged by the payment by James Hardie.

18 Such analysis may be capable of application to some instances in which a coordinate liability is discharged. It certainly does not apply comfortably to the current case. It does not apply to the current case because the payment made by James Hardie toward each sub-group claimant's claim[20] did not determine or fix the coordinate liability of the partners; it merely capped it. The task remained for the court to fix the amount of the coordinate liability and thus quantify the contribution to be paid. In substance, it did that by assessing the extent to which James Hardie's payment was attributable to the discharge of the coordinate liability as opposed to some other liability. The evaluative nature of that process is demonstrated by the detailed evidentiary analysis that had to be undertaken for each contribution claim.[21]

19 There was no specific or calculable sum due and payable prior to the initiation of the proceeding that could be ascertained without the court making an evaluation of the coordinate liability.

20 For these reasons it defies common sense to characterise the recovery in equity as a debt or sum certain. Authority does not mandate that I should so find. In my view, despite the origins of the claim in quasi-contract, the amounts recovered by the plaintiff as equitable contribution to its payments toward the settlements of Alexander and Kracht[22] were not amounts recovered for debt or sums certain.

21 In the result, section 58 does not apply to any of the sums recovered, either under the Wrongs Act or in equity. Interest will be awarded under s 60 in each case.

22 In case I am found to be wrong on that conclusion, I will deal with the other two issues.

Have the defendants shown good cause why s 58 should not apply?

23 The defendants argued that even if s 58(1) did apply to these claims the court should find that 'good cause [has been] shown to the contrary' so that interest should not be permitted to run from the date of any such demand. In support of that argument, the defendants reiterated arguments made in the trial to the effect that at no time had CSR been engaged by the plaintiff in the process under the general settlement agreements, before the letters were sent, depriving them of any opportunity to obtain further information or participate in the resolution of the amount to be paid to the State of Victoria. They also reminded the court that just before the commencement of the trial the plaintiff dropped 40 of the claims which it had otherwise intended to proceed with, highlighting the uncertainty as to which matters the plaintiff thought it could prove.

24 For those reasons, the defendants argued that the only safe starting point for the commencement of the time when interest should run is when the plaintiff decided to actually join a particular claim to the proceeding.

25 I observe that the language of s 58 is mandatory - unless good cause is shown interest must be allowed under the section if the criteria is met - and I also accept, as the plaintiff said, that the purpose of awarding interest is to compensate the judgment creditor and not to punish the judgment debtor. But the question of 'good cause' must import some consideration of the reasonableness of the commencement date in all the circumstances. As explained in the Reasons,[23] James Hardie's payments under the general settlement agreements were never capable of quantifying the liability of the Hardie-BI partners alone. Necessarily, some process of assessment by a court had to be undertaken to fix the partnership liability. In those circumstances, I consider that it is reasonable that James Hardie should bear its own loss for the period it refrained from bringing its contribution claim in respect of each payment.[24]

26 So, I would hold that in the particular circumstances of this case the defendants have shown good cause for the court not to apply interest from the date of any demand. It was not disputed by the parties that if s 58 did not apply because good cause was shown interest should be awarded under s 60.

27 Assuming s 58 applied, the plaintiff did not contend that there was any written instrument governing when time for interest began to run, or any 'date or time certain'. Instead, it relied upon having made a demand of payment. As evidence of its demand in each case, the plaintiff relied upon letters it sent to the defendants which typically took the following form:

(a) The first paragraph contained the sentence 'Amaca claims contribution from CSR in this matter'.

(b) The letter contained a list of enclosed documentation 'to allow you to consider this new claim'.

(c) After setting out the details of the dollar amount that the plaintiff/claimant had been paid, the State of Victoria's contribution to that settlement[25] and the percentage contribution paid by Amaca towards it, the letter then finished with words along these lines:

Amaca claims [number] percentage from CSR. I look forward to discussing this matter with you in due course.

28 In the letter relating to one claimant, Alexander, Amaca actually mentioned a dollar figure claimed from the defendants as well as a percentage.

29 The plaintiff argued that its letters constitute demands for the purposes of s 58(1), relying upon what had been said in AJ Lucas Drilling Pty Ltd v McConnell Dowell Constructions (Aust) Pty Ltd[26] that a 'demand need not be in any particular form, or specify the exact sum due, so long as it contains a distinct demand of payment'.

30 For their part, the defendants argued that the letters did not constitute demands for payment but, rather, invitations to negotiate or consider the plaintiff's claim.

31 True it is that the letters are expressed in the somewhat soft language of inviting consideration and discussion. But, construed objectively, I have little hesitation in finding them to be requests (that is, demands) for payment of the amounts that were either expressed or were the mathematical product of the stated percentages and stated sums.

32 Although not necessary for my conclusion, a consideration of their likely context reinforces that view. Each of the four letters is dated in either 2009 or in 2013. I infer (I believe reasonably) that these letters were a mere sub-set of a considerable body of similar correspondence that had gone before them in relation to other payments. Presumably no payments had been made by the defendants upon any of the previous claims, and there was probably little expectation that payment would be made on these either. The proceeding having been commenced in 2003, the parties had long-since locked horns in the battle. Many other claims were by that time already the subject of the proceeding. In that knowledge, the objective bystander would understand these letters to be a demand for payment preliminary to consideration to joining the claim to the proceeding.

33 For those reasons, had I been persuaded that s 58 otherwise applied to the judgments obtained (whether under the Wrongs Act or for equitable contribution), I would have held that the letters did constitute a demand for payment.

34 For the reasons given above, the plaintiff is entitled to damages in the nature of interest under s 60 of the Act in respect of each of the five contribution claims on which it has been successful. That is to say, it is entitled to interest in each case only from the date the claim was joined to the proceeding.

35 I was informed by the parties that, if s 60 was the applicable basis, there is no dispute that the appropriate amounts in each case are those embodied in the total judgment sums calculated by the defendants as at 28 October 2015, as contained in the draft form of order handed to the court. Those judgment sums were as follows:

36 The parties should now recalculate those sums for a nominated date in the near future so that the court can enter judgment on that date.

[1] Amaca Pty Ltd v CSR Ltd & Anor [2015] VSC 582 ('Reasons').

[2] The contribution claim in relation to the fifth matter, McGuire, was not contentious because the plaintiff conceded it was unable to prove any demand for payment made before action. Of the four claims in contention, two were for contribution in equity (Alexander and Kracht) and two were for contribution under Part IV of the Wrongs Act (Benjamin and Johnstone).

[3] (Unreported, Supreme Court of Victoria, McDonald J, 16 June 1997).

[4] (2001) 207 CLR 520 ('VWA v Esso').

[5] [2015] VSCA 137 ('Chong & Neale').

[7] The City Mutual Life Assurance Society Limited v Giannarelli [1977] VicRp 53; [1977] VR 463, 465-8 ('CML v Giannerelli'); Braeside v Brignell [1996] VSC 348; [1996] 1 VR 17, 21-2; VWA v Esso (2001) 207 CLR 520, 532-5.

[8] David Leahey (Aust) Pty Ltd v McPhersons Limited [1991] VicRp 77; [1991] 2 VR 367, 381 (Tadgell J).

[10] CML v Giannarelli [1977] VicRp 53; [1977] VR 463, 466.

[11] Saunders v Nash [1991] VicRp 47; [1991] 2 VR 63, 68 (Vincent J); Chong & Neale [2015] VSCA 137, [256].

[12] [1977] VicRp 53; [1977] VR 463, 467-8.

[14] [2009] VSC 585.

[15] Peet v Richmond [2011] VSCA 343; (2011) 33 VR 465, 36 [125].

[16] VWA v Esso (2001) 207 CLR 520, 535 [32]-[33].

[17] VWA v Esso (2001) 207 CLR 520.

[20] The eight contribution claims selected for separate trial were described in the trial and the Reasons as claims in respect of the 'sub-group claimants'.

[21] See for Alexander, Reasons [586]-[618] and for Kracht, Reasons [747]-[775].

[22] See footnote 2 above.

[23] Reasons [96]-[104], [232(c),(d),(e)].

[24] See the reasoning of the Chief Justices Law Reform Committee of March 1960 recommending the modification of ss 78 and 79 (predecessors of ss 58 and 59) and the introduction of s 79A (predecessor of s 60) of the Supreme Court Act as quoted by McInerney J in CML v Giannerelli [1977] VicRp 53; [1977] VR 463, 466.

[25] As explained in the Reasons, James Hardie's (Amaca's) contribution in each case was made to the State Electricity Commission of Victoria (whose liabilities have since been assumed by the State of Victoria).

[26] AJ Lucas Drilling Pty Ltd v McConnell Dowell Constructions (Aust) Pty Ltd [2009] VSCA 310, 61 [179].