Plaintiff v Firstnamed Defendant

1 The plaintiff sued Amaca (first defendant) and Seltsam (second defendant) alleging that he had contracted mesothelioma as a result of their negligence.

2 On 16 February 2010 the plaintiff settled with Amaca and Seltsam. Judgment was entered for the plaintiff against Amaca in the sum of $2,000,000 with Amaca agreeing to pay the plaintiff's costs of that case to be taxed in default of agreement.

3 In these proceedings Amaca claimed statutory contribution from Seltsam under Part IV of the Wrongs Act 1958. The trial of these proceedings was held from 16-19 February 2010. Further written submissions were received in March and April 2010. On 5 November 2010 I delivered judgment in these contribution proceedings. I directed that Seltsam ought to contribute 7½% towards the damages that Amaca was liable to pay the plaintiff.

4 On 1 April 2010 Amaca paid to the plaintiff's solicitors the judgment sum.[1] On 20 October 2010 Amaca paid the plaintiff's taxed costs.[2]

5 On 5 November 2010, after delivering my reasons for judgment, I stood the matter down to allow the parties to discuss final orders. The only matters left for discussion between the parties were issues relating to the costs of the contribution proceeding. Later that day, I was informed by counsel for Seltsam that his instructing solicitors needed more time to obtain instructions from Seltsam in relation to costs.

6 Late in the afternoon, counsel for Amaca sent an email to counsel for Seltsam attaching proposed orders, including an explanation of the basis for an interest calculation. Counsel for Seltsam sought and received a further clarification of the interest calculation.[3]

7 On 8 November 2010 Mr Justin Griffin, solicitor for Seltsam, contacted my associate by email and advised that he had been ill and requested time to obtain instructions from Seltsam. He requested that the matter not be relisted before 11 November 2010.

8 On 15 November 2010 Ms Kim Bradey, solicitor for Amaca, sent an email to the solicitors for Seltsam inquiring whether the matter could be relisted. She received no response to that email.[4] By 20 December 2010 my associate, at my instigation, telephoned the solicitors for the parties. On that day Amaca's solicitors again enquired of Seltsam's solicitors as to interest payable to Amaca but nothing was finally resolved[5].

9 By February 2011 three months had passed since I delivered reasons for judgment in the substantive proceeding. On 14 February 2011 the solicitors for Seltsam emailed the solicitors for Amaca with updated proposed orders calculating interest at $14,461.06. In his written submissions Mr Moloney for Amaca contends that this amount "must have been calculated by reference to the then prevailing 'Penalty Interest Act.'" I consider this must be correct. On 16 February 2011 Seltsam's solicitors advised Amaca's solicitors that they were instructed to "withdraw" the email of 14 February 2011 and that proposed revised orders would be circulated within 24 hours.[6] No revised proposed orders were received for a further three months.[7]

10 On 13 May 2011 the matter was listed for further hearing on the question of costs. On that day I made the following final orders by consent:

1. The second defendant pay to first defendant the sum of $150,000 being the amount equal to 7.5 per cent of the settlement sum paid by the first defendant to the plaintiff.
2. The second defendant pay to first defendant the sum of

$15,036.29 being the amount equal to 7.5 per cent of the plaintiff's taxed costs paid by the first defendant to the plaintiff.

1. The second defendant pay the first defendant's party/party costs of the contribution proceedings only to be taxed in default of agreement.

1. On or before 4pm on 3 June 2011, each of the defendants file and serve a copy of its submissions on the question of interest and the costs of today and any affidavit material on which they seek to rely.

11 Amaca and Seltsam have also agreed that Seltsam will pay interest to Amaca both on the $150,000 contribution towards the damages from 1 April 2010, and on the $15,036.29 contribution towards taxed costs from 20 October 2010.

12 The interest rate has not been agreed and I am asked to determine it.

13 Amaca is entitled to interest that has accrued in two distinct periods:

(a) The pre-judgment period. Amaca is entitled to interest commencing on the day it paid the plaintiff's settlement monies[8] and the day it paid the plaintiff's taxed costs[9].

(b) The post-judgment period. From the day of the entry of formal judgment[10] to the day when Seltsam makes payment in accordance with the orders made on that day. I shall consider this period first.

14 The post-judgment interest entitlement is governed by s 101 (1) of the Supreme Court Act. This provides as follows:

(1) Every judgment debt carries interest at the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 from the time judgment was given or, in the case of costs which are assessable by the Costs court, from the date of the order of the Costs Court stating the result of the assessment or such other date as the Court orders.

Amaca is entitled to interest in this period at the rate currently fixed under s 2 of the Penalty Interest Rates Act 1983 which is 10.5% per annum. This is the right of every judgment creditor.[11] Seltsam did not address this post-judgment period in written submissions filed on their behalf and confined its submissions to the appropriate interest rate in the pre-judgment period.

(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.

I have a discretion to fix the rate of interest taking into account all the relevant circumstances with that rate capped by the current penalty interest rate fixed under section 2 of the Penalty Interest Rates Act 1983.

16 As a general rule the starting point is the rate fixed by the Penalty Interest Act.[12] In Johnson Tiles Pty Ltd v Esso Australia Pty Ltd, Gillard J identified three objectives of an award of interest

(a) as compensation to the judgment creditor for being out of the funds from the date of the commencement of the proceeding until judgment;

(b) to deter judgment debtors from delaying proceedings, and thereby having use of the money for a longer period; and

(c) to encourage defendants to make realistic assessments of their liability in a case and to take bona fide steps to compromise the claim.[13]

17 In Hartley Poynton v Ali [14] the Court of Appeal stated as follows:

The Penalty Act's object, as I perceive it, has been in part to encourage the early settlement of litigation (cf Grincelis at 329), but it may be seen to have the broader purpose of ensuring that recalcitrant defendants, owing money or otherwise subject to an award of damages, do not withhold payments properly sought by plaintiffs upon the selfish basis that in the meantime they may without risk invest moneys so owed in a manner which will give them not merely sufficient to repay successful plaintiffs with interest under the Act but with an element of profit which might fairly be perceived as wrongfully obtained. This has ordinarily given Victorian courts a degree of flexibility in relation to the payment of interest which may not exist in other jurisdictions where the relevant rates are only broadly sufficient to recompense plaintiffs for being kept out of their money while their actions are fought or delayed, as frequently used to occur.

Nevertheless the pattern in Victoria has been that, unless good cause be shown, successful plaintiffs are ordinarily awarded interest at the rate prescribed under the Penalty Act without too fine a regard for these distinctions and I would assume that the plaintiff in the present case is entitled, at the least, to interest on the moneys invested and ordered to be repaid, although that would bring in a sum in excess of what it might have been invested at, as the quotation from Clarke suggests. The seemingly more difficult issue is whether the rates prescribed by the Penalty Act should be awarded on top of the damages reflecting the various loss of opportunities which formed a significant part of the primary judgment sum awarded to the plaintiff. Here again I would see no reason ordinarily to deprive a party of interest at the rates prescribed unless it was unfair to do so and in particular unless it could be shown that there was in effect double counting by awarding interest on those damages.

Submissions

18 Seltsam argued, correctly in my view, that the power to fix an interest rate lower than the rate fixed under s 2 of the Penalty Interest Rate Act does not depend upon "good cause [being] shown to the contrary" and that the Court is at large below that rate.[15] Interest, it was submitted, was awarded to compensate a party for being kept "out of the money" and ought not be inflated beyond a reasonable figure to punish a defendant for having been dilatory in settling a plaintiff's claim.

19 Seltsam argued that Amaca is no longer a commercial entity and its principal function now is to provide compensation to those who suffer from asbestos related illness as a result of exposure to Amaca/James Hardie products. Seltsam further contended that an analysis of Amaca's affairs demonstrated that its average return on its invested funds was 3.03% for the year ended 31 March 2009 and 2.14% for the year. The argument proceeds that I ought fix interest in this range and no higher as the opportunity cost arising from keeping Amaca "out of the money" is the loss of interest to Amaca that otherwise would have been received had the monies been paid over promptly.

20 I find this submission highly unattractive. It is not the function of this court to conduct an inexpert audit of a successful litigant's affairs in order to determine their recent commercial acuity. A moment's consideration only is sufficient to demonstrate the unsustainability of this argument. An unsuccessful litigant could delay payment of a liability with little financial consequence in the case where the successful party has traded with modest success in recent times. If the successful party has traded at a loss is he not entitled to interest at all? Has the loser saved the winner money by not paying the judgment debt? If the winner is highly profitable should the loser pay his share post-haste? These questions answer themselves.

21 A function of an award of statutory interest is to compensate a party for the detriment suffered from being denied its money during the relevant period.[16] Whilst this function is an important consideration in the determination of the appropriate interest rate, it is not the only relevant consideration. Early resolution of litigation ought be encouraged by the courts and judgment debtors ought be deterred from delaying proceedings and thereby having use of the money for a longer period.[17]

22 The plaintiff's claim was settled on 16 February 2010. At no time after that date and before the delivery of reasons for judgment did Seltsam make any offers to contribute any sum towards the settlement and the plaintiff's costs. After reasons for judgment were delivered (but not final orders) Seltsam has engaged in what can only be described as dilatory conduct. I stood the matter down on 5 November 2010 for discussions to occur on the overall issue of costs. A full six months later Seltsam, after procrastination[18] and then silence, finally consented to Amaca's costs on the same basis as originally sought by Amaca.

23 Whilst the Penalty Interest Rate Act 1983 provides a starting point for the setting of an appropriate rate, in this case I consider the narrative set out above demonstrates that there are good reasons to fix that rate as applying to pre-judgment interest in this case. Accordingly, I consider that both pre-judgment and post-judgment interest ought be calculated at the rate fixed under s 2 of the Penalty Interest Rates Act 1983.

24 I will make orders that reflect this conclusion. I will leave it to the parties to calculate the precise amounts to be incorporated into those orders.

25 For substantially the same reasons I am also of the view that Seltsam ought pay Amaca's costs of its appearance on 13 May 2011 together with the costs of preparing, filing and serving its written submissions and the affidavit of Kim Bradey.

[1] Less $1400 which was required to be paid to Medicare.

[3] See exhibits KLB1, KLB2, attached to the affidavit of Kim Leanne Bradey dated 3 June 3011.

[4] Affidavit of Kim Leanne Bradey (KLB) paragraph 14.

[5] It appears from the email exchange set out in KLB affidavit paras 14-17 that general agreement as to the amounts of costs was reached and discussions were continuing over the interest figure.

[6] See exhibit KLB 6 to the affidavit of KLB.

[7] They were circulated on 12 May 2011, the day before this matter was listed for further hearing. See affidavit of KLB particularly paras 20 and 26.

[9] 16 September 2010. See KLB affidavit. Footnote 4.

[11] Hartley Poynton v Ali [2005] VSCA 53; (2005) 11 VR 568 at [100] per Ormiston JA (Buchanan and Eames JJA agreeing).

[12] See Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003] VSC 244 at [46]; Kalenic v Apostolidis & Ors (No. 2) [2009] VSC 410 at [78].

[13] [2003] VSC 244 at [61]; see also Grincelis v House [2000] HCA 42; (2000) 201 CLR 321 at [16].

[14] [2005] VSCA 53; (2005) 11 VR 568 at 618.

[15] See Clarke v Foodland Stores Pty Ltd [1993] VicRp 81; (1993) 2 VR 382.

[16] Batchelor v Bourke [1981] HCA 30; (1981) 148 CLR 448 at 455; MPB(SA) Pty Ltd v Gogic (1991) CLR 657 at 663.

[17] Johnson Tiles Pty Ltd v Esso Australia Pty Ltd [2003]VSC 244.

[18] That prevarication included proposing to pay (in effect) interest post-judgment at the penalty interest rate on 14 February 2010, and then withdrawing that proposal two days later.