9 The approach of Cole J is to be preferred to that of Perry J. Once the court has rejected the insurer's defence to a policyholder's claim, that defence becomes irrelevant as does the fact that the insurer had a bona fide belief in its efficacy. To hold otherwise would put a premium on erroneous advice. Taken to its logical extreme, an insurer which relied upon incorrect legal advice or an inadequate report of a loss adjuster to form a belief as to the possibility of its successfully defending a policyholder's claim would be advantaged by having obtained bad legal or loss adjusting advice. The successful policyholder would be correspondingly disadvantaged by the same irrelevant circumstance.
10 Ormiston J in V.L. Credits v Switzerland General Insurance[5] assessed interest on the same principle; that is to say he allowed the insurer a reasonable time to investigate the claim and determined the date from which interest ran as being at the end of that time. His Honour appears to have selected a period of three months in a case involving arson as being a reasonable period during which the insurer was entitled to investigate the claim. He awarded interest after that period. His judgment does not suggest that that assessment was made on the basis of evidence as to what the insurer knew and what it did. Rather, it appears to have been selected by his Honour as being a reasonable period taking into account the type of case and the probable issues which had to be investigated.
11 In this case the parties are agreed that, notwithstanding the provisions of the Insurance Contracts Act, the sum awarded by paragraph 1 of the judgment of 26 August 2005 carries interest in favour of the first plaintiff of $22,712.26 to the date of judgment (26 August 2005) calculated in accordance with the Supreme Court Act 1986. This is because that part of the first plaintiff's claim was for contribution in equity and was not "under a contract of insurance or under (the Insurance Contracts Act) in relation to a contract of insurance . . .". This mutual concession means that there is no need to consider this item further.
Interest on Second Plaintiff's Award
12 On 31 August 2005 the plaintiffs' solicitors wrote to the insurer's solicitors setting out calculations of interest based on the Supreme Court Act 1986. On 21 February 2006 they again wrote to the defendant's solicitors with a revised claim calculated in accordance with the Insurance Contracts Act. The calculations applied interest rates derived, as the Act required, from the Insurance Contracts Regulations 1985. There was no argument between the parties as to the correctness of any of these calculations. The only issue was as to the date from which interest should run in respect of the various payments made by the HIH Support Scheme on Mr Steele's behalf.
Interest on judgment sum
13 Mr Steele was held liable to pay damages to Screenco by McClellan J in the New South Wales Supreme Court on 16 September 2002. Those damages were paid by the Scheme by cheque on 13 December 2002 on Mr Steele's behalf. Interest is now claimed from a date one week later (to allow cheque clearance and funds transfer) to the date of judgment in this proceeding. As Mr Steele was entitled to indemnity from the defendant immediately upon his being held liable, the date from which interest is claimed is reasonable. Interest should be allowed to the date of judgment in the sum of $291,565.65.
Costs payable to Screenco
14 On 4 December 2003 the Scheme paid $175,000 costs to solicitors for Screenco. Again, there seemed to be no reason why interest should not run from a week after that date on the same basis as the sum paid in respect of the New South Wales judgment. The agreed amount to the date of judgment in this proceeding is $24,721.75.
Costs payable to Highrise Scaffolding
15 There is no direct evidence of the date upon which the scheme paid a sum of $81,000 demanded by solicitors for Highrise Scaffolding for their costs by letter of 17 September 2004. The second plaintiff claims interest from a date one month after that demand as being a reasonable time allowance for the demand to be met in the ordinary course of business. This is not unreasonable. The agreed amount to the date of judgment is $8,197.64, being interest at appropriate rates on $81,000 from 17 October 2004 to 26 August 2005.
Mr Steele's own costs payable to Deacons
16 The New South Wales proceeding went both to the Court of Appeal and to the High Court. In this instance interest has been calculated from one month after the date each bill was rendered by Deacons at a discounted rate of 90%, to reflect the portion of Deacons' accounts which were paid by the Scheme on Mr Steele's behalf. Calculated pursuant to the Insurance Contracts Regulations, the sums for interest to the date of judgment are $1,803.08 and $1,568.69, a total of $3,361.77.
Costs payable to Ligeti Partners
17 Four separate amounts are involved under this heading. The first involves interest on the portion of Ligeti's accounts payable by the Scheme following the collapse of HIH. This amount has been calculated at the applicable rates from one month from the date each bill was rendered to the date of judgment in this proceeding. These dates are reasonable in the circumstances. The amount claimed is $28,651.52. The second amount involves interest on the portion of Ligeti's accounts payable by HIH prior to its collapse. Three calculations of interest are involved; in respect of payments made prior to 1 January 2000; in respect of payments made prior to 1 January 2001 and in respect of payments made in 2001. Each of the amounts claimed have been reduced by 50% because the first plaintiff was entitled to only 50% from the defendant in respect of the amounts paid by it. The interest payments claimed are $3,791.34, $11,980.54 and $792.89 respectively.
18 Taking into account each of the calculations described, the total for interest is $370,368.04 to 26 August 2005, the date of judgment.
19 So far as interest from that date onwards is concerned, having regard to the terms of s 57 of the Insurance Contracts Act, it would seem that Victorian legislation as to interest on judgments is displaced once again. Giles J in the Supreme Court of New South Wales held in Fruehauf Finance Corporation Pty Ltd v Zurich Australian Insurance Ltd & Ors [6] that, as a matter of construction, s 57 applied to post-judgment interest as well as pre-judgment interest. His Honour applied NRMA Insurance v Tatt.[7] This construction of s 57 appears, with respect, to be correct. Accordingly, interest will continue to run on all of these amounts at the rate prescribed by the Insurance Contracts Regulations until payment is made by the defendant insurer.
Stay of proceedings
20 The defendant insurer seeks a stay of proceedings pending its appeal to the Court of Appeal in respect of this Court's judgment of 26 August 2005. It argues that the circumstances of this case justify a stay notwithstanding the ordinary rule that an appeal does not, of itself, operate as such.
21 The circumstances relied upon by the defendant arise from the fact that although Mr Steele would be the nominal recipient of any sum paid by the defendant by way of indemnity, in fact any money so paid would be paid to Mr Steele's assignee, HIH Claims Support Limited - an entity of unknown solvency. Once paid to HIH Claims Support Limited such money would become part of its funds available to meet its ongoing liabilities. As HIH Claims Support Limited has no apparent income or income earning capacity, once the Commonwealth Government's appropriated subvention is exhausted the capacity of HIH Claims Support Limited to make any repayment to the defendant, should it be successful on appeal, must be considered, at least, doubtful.
22 The defendant's argument has merit. In the circumstances, to ensure preservation of the subject matter of the appeal now before the Court of Appeal it is appropriate that a stay be granted as sought by the defendant. However, it should be granted only upon terms that the defendant vigorously prosecutes its appeal to achieve finality in this litigation as soon as possible.
Orders
23 Subject to hearing counsel as to form and on the question of costs (including the costs of the proceeding generally) the orders proposed are as follows:-