Plaintiffs v Defendants

Supreme Court of Victoria|2011-03-09|Before: HABERSBERGER J

PRACTICE AND PROCEDURE - Declaratory judgment - Delay in satisfaction of former trustee's right of indemnity - Whether interest recoverable - Costs - Supreme Court Act 1986, ss.58, 101.

2 On 24 February 2010 I published my reasons for my second judgment.[1] That judgment was primarily concerned with the question of whether the indemnity which the first defendant and former trustee, Fifteenth Eestin Nominees Pty Ltd ("Fifteenth Eestin"), was entitled to in respect of the liabilities of the E Rosenberg Investment Trust ("the Investment Trust") included interest said to be payable on the debt owed by Fifteenth Eestin to Project Hardware Pty Ltd ("Project Hardware"). I held that it did not.

3 I reserved the question of the wording of the final orders until the parties had had an opportunity to read and consider my reasons for judgment. The parties took some time to reach agreement on this question even though most of the relevant final wording of the judgment was virtually identical with my proposed draft, which in turn had drawn from the drafts submitted by counsel for both the plaintiffs and the defendants. As a result, the formal judgment was not authenticated until 7 April 2010.

4 Paragraphs 1, 3 and 9 of the judgment were as follows:

The Court declares that the Firstnamed Defendant is entitled to be indemnified by the Secondnamed Plaintiff, and has a lien or charge over the assets of the E Rosenberg Investment Trust ("the Investment Trust"), in respect of:

(a) its indebtedness to Project Hardware Pty Ltd in the sum of $3,854,770.71 (being part of its loan debt of $4,413,020.71, arrived at after deducting $558,250.00 for all rent payments credited by the Firstnamed Defendant to Project Hardware Pty Ltd, on behalf of the Investment Trust, for the period from 1 June 2007 to 31 October 2009, which rent payments may be retained by the Firstnamed Defendant absolutely pursuant to its right of indemnity);

(b) its indebtedness to S & I Investments Pty Ltd in the sum of $47,000.00;

(c) its indebtedness to Sabrina Berger in the sum of $64,801.54;

(d) its indebtedness to Antony Berger in the sum of $400.00;

(e) any properly incurred ongoing liability of the Firstnamed Defendant as Trustee or as lien-holder to pay goods and services tax on behalf of the Investment Trust;

(f) any properly incurred ongoing liability of the Firstnamed Defendant as Trustee or as lien-holder to pay income tax on behalf of the Investment Trust.

...

The Court declares that upon payment by the Secondnamed Plaintiff to the Firstnamed Defendant of the amount which fully satisfies the indemnity under paragraph 1 hereof any real property of the Trust be vested in the Secondnamed Plaintiff as Trustee, and directs that the Firstnamed Defendant then forthwith:

(a) do all such things and take all such steps to convey to the Secondnamed Plaintiff all such real property; and

(b) deliver up to the Secondnamed Plaintiff all property of the Investment Trust in its possession or control.

...

5 It seemed clear that the only way the second plaintiff, Glen Oak Nominees Pty Ltd ("Glen Oak"), the new trustee of the Investment Trust, could satisfy the indemnity was by either selling the three properties of the Investment Trust in Alexandra Parade and Hoddle Street, Clifton Hill or by borrowing against them. In my reasons for judgment, I expressed the hope that agreement could now be reached between the parties on the way forward[2] and referred to the fact that at the conclusion of the second day of the second hearing senior counsel for the defendants had announced a change in their position in that they were now "prepared to co-operate in the sale of the properties".[3] After publishing my reasons on 24 February 2010, I reiterated the hope that the parties would co-operate in a sale or borrowing of the funds necessary to satisfy the indemnity. The transcript records that I then said:

but I guess that failing that, there may have to be some court order ...[4]

6 By a facsimile dated 19 March 2010 Fifteenth Eestin's solicitors wrote to Glen Oak's solicitors informing them that Project Hardware, and the other parties owed money by Fifteenth Eestin, required it to pay the debts forthwith. The facsimile continued:

Fifteenth Eestin can only pay the debts, if your clients, and in particular, the new trustee, act accordingly.

My clients would be content for the three properties to be sold as soon as possible.

In response, Glen Oak's solicitors indicated in a facsimile on 22 March 2010 that borrowing was their client's "preferred course of action".

7 On 30 March 2010, Fifteenth Eestin's solicitors wrote asking when Glen Oak "would be in a position to pay out the debt". This was followed by a facsimile dated 6 April 2010 in which Fifteenth Eestin's solicitors conveyed their clients' offer to buy the three properties "at a price to be determined by an independent valuer". The offer was "to settle the purchase within 30 days of receipt of a written valuation". There was no reply from Glen Oak's solicitors to that facsimile or a follow up facsimile on 13 April 2010.

8 By a facsimile dated 21 April 2010, Fifteenth Eestin's solicitors wrote to Glen Oak's solicitors setting out the history of the correspondence concerning payment of the indemnity. The facsimile concluded:

Under the circumstances, Fifteenth Eestin will seek to be indemnified by the [Investment Trust] in respect to [sic] the interest which it is liable to pay to [Project Hardware], incurred after this date.

9 By a facsimile dated 29 April 2010, Fifteenth Eestin's solicitors wrote to Glen Oak's solicitors advising that if they did hear by 5.00 pm the next day "with some news about when the indemnity will be paid", they had instructions to apply "for an order for the sale of the properties for the purposes of satisfying the debts owing".

10 This threat brought a response from Glen Oak's solicitors in a facsimile dated 30 April 2010, part of which read:

Our client's position remains that it proposes to pay out an indemnity[sic] by borrowing against the properties. Our client is progressing this matter, and we will have a more detailed update for you after a meeting which is scheduled to occur with the Bank on Monday, 3 May 2010.

11 Correspondence continued to be exchanged, with Fifteenth Eestin's solicitors pressing Glen Oak's solicitors for a date when Glen Oak would be in a position to satisfy the indemnity by borrowing the required funds. Another threat, on 10 June 2010, to apply for an order for the sale of the properties was met by a facsimile from Glen Oak's solicitors on 11 June 2010 advising that "the bank has indicated it sees no issues with the application and has requested a valuation of the properties". Despite the valuer apparently inspecting the properties in early July 2010, by a facsimile dated 30 July 2010 Glen Oak's solicitors informed Fifteenth Eestin's solicitors that the valuer had advised that he expected that his valuations would be "ready to provide to the bank next Monday 2 August 2010" and that the solicitors "anticipated" that the matter would "then be able to proceed quickly after the valuation has been provided to the bank".

12 By a summons issued 4 August 2010 ("the August summons"), Fifteenth Eestin sought orders that State Trustees Limited be appointed to sell the three properties out of court and that from the net proceeds of sale there be paid to Fifteenth Eestin the amount of its indemnity, interest on its debt to Project Hardware at the penalty rate from 21 April 2010, and costs. The summons was returnable before me on 9 August 2010. However, at the request of the parties the hearing was adjourned on the papers to 13 September 2010. Directions were given for the filing and serving of supporting material.

13 On Monday, 13 September 2010, the hearing was further adjourned by consent to 20 October 2010 on the basis that Fifteenth Eestin's solicitors had been informed the previous Friday that a loan to Glen Oak was about to be approved so that the transfer of the three properties to Glen Oak could take place in return for the payment of the indemnity later that week. However, it was said that there were two outstanding issues requiring my determination, namely the question of interest and the question of the costs of the application. Written outlines of submissions dealing with these two issues were filed and served by both parties.

14 By 18 October 2010, the settlement had still not taken place. It appeared that one issue holding up the settlement was the unresolved question of whether stamp duty was payable on the transfers from Fifteenth Eestin to Glen Oak. By a summons issued that day ("the October summons") and returnable on 20 October 2010, Fifteenth Eestin sought an order that the costs payable by the defendants pursuant to paragraph 6 of the judgment given on 7 April 2010 be stayed and paid by them within 7 days after the first defendant received payment of the amounts of the indemnity set out in paragraph 1(a) and 1(c) of the judgment.

15 On 20 October 2010, after lengthy negotiations between the parties, an agreement was entered into which dealt with procedures for resolving most of the outstanding issues. Relevantly, clause 10 of the agreement provided that, subject to clause 11, the defendants would not be required to pay the costs, which had been taxed by consent on 15 October 2010, until settlement under paragraph 3 of my order made on 7 April 2010 or settlement of the sale of the three properties, whichever occurred first. Clause 11 provided that if settlement under paragraph 3 did not occur because of a failure by Fifteenth Eestin to do anything which it was required to do under the agreement, then the taxed costs would be payable forthwith. In clause 13 of the agreement the parties acknowledged that the agreement did not determine the question of whether Fifteenth Eestin was "entitled to be indemnified for interest on the Project Hardware debt after 7 April 2010" or the question of the costs of the August summons and the October summons. Both summonses were adjourned by consent to 14 December 2010.

16 On 31 October 2010, Mr John Adams, the sole director and shareholder of Glen Oak, passed away. This led to a further summons being issued on behalf of Fifteenth Eestin on 10 November 2010 seeking the removal of Glen Oak as trustee of the Investment Trust and the appointment of a new trustee. By a consent order made on the papers on 17 November 2010 that summons was dismissed with no order as to costs.

17 On 29 November 2010, Glen Oak provided the following bank cheques to Fifteenth Eestin:

(a) a cheque payable to "Project Hardware Pty Ltd" for $3,604,520.71;[5]

(b) a cheque payable to "S & I Investments Pty Ltd" for $47,000.00;

By way of exchange Fifteenth Eestin handed to Glen Oak:

(a) duplicate Certificates of Title for the three properties;

(b) a discharge of the mortgages that were registered against the properties in favour of Macquarie Bank;

(d) a bank cheque for the balance of funds held in Fifteenth Eestin's bank account in the sum of $4,433.34.

Also on that day the defendants paid to the plaintiffs' solicitors the sum of $397,500 in satisfaction of the costs orders made in the proceeding.

18 A Transfer of Land for the Investment Trust's properties had already been provided by Fifteenth Eestin's solicitors to Glen Oak's solicitors on 22 October 2010 with a Statutory Declaration signed by Mr Ian Berger, the third defendant, for stamp duty purposes and rate notices. Pursuant to the agreement entered into by the parties on 20 October 2010, the Transfer of Land was provided to allow Glen Oak to seek a ruling from the State Revenue Offie as to the stamp duty payable.

19 For various reasons, the hearing concerning the two issues mentioned above could not proceed on 14 December 2010. On the adjourned date, Fifteenth Eestin was represented by new counsel. On the day before the hearing, Fifteenth Eestin filed and served a replacement outline of submissions prepared by its new counsel. As will be seen, this outline changed Fifteenth Eestin's submissions with respect to the question of interest. This late change had certain repercussions which are discussed below.

20 I turn then to consider each of the outstanding issues.

21 In the written outline of submissions delivered prior to the hearing on 20 October 2010, one of the submissions of the counsel then appearing for Fifteenth Eestin was that Glen Oak was liable to pay interest from 7 April 2010 on the debt due by Fifteenth Eestin to Project Hardware, pursuant to s.101 of the Supreme Court Act 1986. That section provides that "every judgment debt carries interest" at the penalty rate "from the time judgment was given".

22 In his written outline in response, counsel for Glen Oak had submitted that the declaration made by the Court on 7 April 2010 did not create a "judgment debt", within the meaning of s.101 of the Supreme Court Act, because that section concerned executory judgments, not declaratory judgments. Counsel referred to the following passage from a leading textbook on the subject of declaratory judgments:

A declaratory judgment is a formal statement by a court pronouncing upon the existence or non-existence of a legal state of affairs. It is to be contrasted with an executory, in other words coercive, judgment which can be enforced by the courts.[6]

23 As the learned authors go on to explain, in the case of an executory judgment the court determines the rights of the parties and then orders the defendant to act in a certain way, whereas in the case of a declaratory judgment the court pronounces upon a legal relationship but does not make any order which can be enforced against the defendant.[7] Thus, a court will not grant a stay of a declaratory order because there is no coercive element to be stayed.[8] Although I had not heard final submissions, I considered that this was a compelling argument against Fifteenth Eestin's claim for interest under s.101 of the Supreme Court Act.

24 Whether or not Fifteenth Eestin accepted the strength of this argument, reliance upon s.101 of the Supreme Court Act was abandoned. Instead, its new counsel submitted that, pursuant to s.58 of the Supreme Court Act, Glen Oak was liable to pay interest from 21 April 2010 on the debt due from time to time by Fifteenth Eestin to Project Hardware. Alternatively, it was submitted that an award of interest could be made on equitable principles.

25 Section 58 of the Supreme Court Act relevantly provides as follows:

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 ... 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.

26 Counsel for Fifteenth Eestin submitted that as s.58 of the Supreme Court Act had a beneficial purpose it should be given a broad construction in accordance with what the Court of Appeal had said in AJ Lucas Drilling Pty Ltd v McConnell Dowell Constructors (Aust) Pty Ltd[9] following what Kirby J had said in Victorian Workcover Authority v Esso Australia Limited[10] about s.60 of the Supreme Court Act. Counsel submitted that the declaratory judgment given on 7 April 2010 was a judgment capable of being enforced, as was evidenced by the procedure adopted by Fifteenth Eestin in the August summons seeking judicial sale. He further submitted that the judgment required Glen Oak to pay a "sum certain", which had been "recovered" by Fifteenth Eestin. He also submitted that it did not matter that interest was only sought in respect of the debt owed to Project Hardware, which was a "sum certain", and not in respect of all of the amounts, some certain and some not yet ascertained, set out in the judgment. Finally, counsel submitted that the facsimile dated 21 April 2010 constituted the required "demand of payment".

27 I have serious doubts about the correctness of some of these submissions. However, it is not necessary to deal with all of them. It is sufficient to state that, in my opinion, s.58 is not applicable in the current situation. As counsel for Glen Oak submitted, s.58 allows interest to be awarded from an earlier date up to the entry of judgment in a case where a "sum certain" has been "recovered". It did not apply to a situation where there had already been a declaratory judgment under which no sum, certain or otherwise, had been "recovered" and interest was claimed in respect of part of the period between the judgment and the carrying into effect of that judgment and the demand relied on was made, if at all, after the judgment was entered. Counsel for Glen Oak emphasised that ss.58 to 60 of the Supreme Court Act dealt with claims for interest prior to judgment and that s.101 of the same Act dealt with claims for interest after judgment. As already discussed, s.101 did not assist Fifteenth Eestin because the judgment was only declaratory.

28 The fact that Fifteenth Eestin issued a summons seeking judicial sale does not, in my opinion, demonstrate that the judgment given on 7 April 2010 was capable of being enforced, as was submitted by counsel for Fifteenth Eestin. Rather, it demonstrates the contrary, that a further order was required before there could be enforcement by Fifteenth Eestin of its declared rights.

29 Because of the late change in position by Fifteenth Eestin with respect to the claim for interest, counsel for Glen Oak sought and was granted the opportunity to file a supplementary submission dealing with any matter not covered in the hearing. In that supplementary submission, counsel submitted that the relief claimed by Fifteenth Eestin in the August summons (sale of the properties and interest) presupposed the existence of coercive orders. He submitted that coercive orders that Glen Oak pay to Fifteenth Eestin, or indemnify it for, the amounts referred to in paragraph 1 of the order made on 7 April 2010 were available to Fifteenth Eestin but that it chose not to seek them. Accordingly, counsel submitted, Fifteenth Eestin "must abide the consequences of the procedural steps that [it] took", quoting from the judgment of Callaway JA in King v Lintrose Nominees Pty Ltd.[11] He further submitted that in the absence of a coercive order, it was not open to Fifteenth Eestin to seek "enforcement" or relief consequent on the failure to comply with an order by way of an application in this proceeding or otherwise. It was also submitted that insofar as the August summons sought relief by way of the putative enforcement of the declaratory order of 7 April 2010, the Court was functus officio.

30 I do not agree that no further orders could be sought in this proceeding. While the Court may well have been functus officio with respect to the wording of the declaration,[12] that is as far as it goes.

31 The ability of a party to seek subsequent executory relief following the making of a declaration has been recognised in a number of cases,[13] such as Islington Vestry v Hornsey Urban District Council,[14] Elsdon v Hampstead Corporation,[15] Litchfield Speer v Queen Anne's Gate Syndicate (No.2) Ltd,[16] Robinson v Thames Mead Park Estates Ltd,[17] and Sebel Products Ltd v Commissioners of Customs & Excise.[18] Such an application can be made pursuant to an express reservation of liberty to apply or, if there were none, pursuant to an implied liberty to apply.[19]

32 The situation being considered by Callaway JA in King was not the same as the situation in this case. There, as Callaway JA summarised it, the critical question was:

whether Mr King, having joined the Messrs Hopkins as defendants to a proceeding in 1992 in which it was alleged that they were guilty of breach of fiduciary duty and a declaration to that effect was sought, could make a fresh claim against them in 1999 on the same cause of action but claiming a different species of relief, namely equitable compensation as opposed to a declaration.

It was held that he could not do so, whether by a summons in the initial proceeding or by a separate proceeding. Thus, the statement by Callaway JA about a party having to abide the consequences of the procedural steps which it has taken is not applicable to this case.

33 On the contrary, it was open to Fifteenth Eestin, in my opinion, to seek further orders from the Court if Glen Oak was taking too long to satisfy the indemnity. Such orders could have included an order for payment and interest may then have been recoverable under s.101 of the Supreme Court Act from the date payment was due. Even then questions would arise as to whether the payment of interest on the amounts the subject of the indemnity would be a partial or complete windfall for Fifteenth Eestin, and if so, who should benefit - the shareholders of Fifteenth Eestin or the beneficiaries of the Investment Trust? In any event, no such further order was made and, before the final hearing, the indemnity was satisfied in full.

34 Therefore, Fifteenth Eestin is, in my opinion, unable to rely on any statutory entitlement to interest on the debt due to Project Hardware.

35 The alternative basis of Fifteenth Eestin's claim for interest was equitable principles. Counsel relied on the judgment of Ashley J (as he then was) in Anchen v Mendes Da Costa.[20] In that case, his Honour held that the plaintiff was entitled to interest under s.58 of the Supreme Court Act on his share of the proceeds of the sale of a property which the defendant had wrongly deprived him of for some 20 months between the sale and the date of judgment. The question of interest had been reserved for later decision. Ashley J said at the end of his judgment:

If I was wrong in concluding that interest should be allowed under s.58(1), I should certainly have allowed interest on equitable principles. It would have been proper, I think, to allow interest from date of settlement. I say nothing about the rate(s) at which such interest ought to have been calculated.[21]

a court of equity has an inherent jurisdiction to award interest at an appropriate rate to compensate a plaintiff for loss, and is not constrained by interest rates prescribed by statute.[22]

37 However, the situations in which a court of equity may require interest to be paid in addition to an order for the payment of money, such as Anchen, do not include this case.[23] Glen Oak is not a fiduciary of Fifteenth Eestin. There has been no declaration of a constructive trust in favour of Fifteenth Eestin. On the contrary, Fifteenth Eestin is a trustee which was validly removed from its position and which had incurred the liability to pay interest to Project Hardware after it had ceased to be the trustee and after its challenge to its removal as trustee had been rejected by the Court.[24] Moreover, I also held that it was difficult to see that the agreement with Project Hardware to pay penalty interest "was an obligation that was not improperly or unreasonably incurred", because "it had the potential of depriving the beneficiaries of the Investment Trust of any equity remaining in the three properties if the amount of interest payable exceeded any increase in their capital value".[25]

38 Counsel for Fifteenth Eestin submitted that its entitlement to equitable relief was founded on "the clear unfairness that has arisen by reason of the significant and unexplained delay on the part of Glen Oak". It was submitted that there was "no cost" to Glen Oak in the period for which interest was sought because it was not "out of its money", whereas Fifteenth Eestin's liability for interest continued to accrue.

39 While Glen Oak does seem to have been inexplicably slow in putting itself in the position of being able to satisfy the indemnity, for the reasons already given I am not persuaded that equity requires that Fifteenth Eestin recover interest on the debt due to Project Hardware. Even if it were appropriate to allow some interest to be recovered, it seems to me that it would only be in respect of some of the period between 4 August 2010, when the summons was issued seeking a coercive order which might have been made on 13 September 2010 had the hearing not been adjourned on the basis that the transfer would take place within a few days, and 29 November 2010, when payment was made. I say some of that period because part of the consequent delay apparently resulted from the dispute about stamp duty and on further investigation it might be held that Fifteenth Eestin was responsible for some or all of that period of delay.

40 I therefore reject Fifteenth Eestin's claim for interest, however the claim is put.

41 The dispute about costs concerned the costs associated with, first, the August summons and, secondly, the October summons. Fifteenth Eestin sought the costs of the first of those summonses and submitted that there should be no order as to the costs of the second summons.

42 Apart from the question of interest, there was no determination of the relief sought in the two summonses because, by the time of the hearing, the indemnity had been satisfied. The difficulty of awarding costs where there has been no hearing on the merits has been considered in a number of cases. In Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia: Ex parte Lai Qin,[26] McHugh J said:

In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.[27]

43 In Australian Securities Commission v Aust-Home Investments Limited,[28] Hill J outlined the following five propositions concerning the exercise of a court's discretion to order costs where the parties to a proceeding no longer wish to continue:

(1) Where neither party desires to proceed with litigation the Court should be ready to facilitate the conclusion of the proceedings by making a cost order. ...

(2) It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a Court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial. ...

(3) In determining the question of costs it would be appropriate, however, for the Court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them. ...

(4) In a particular case it might be appropriate for the Court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation. ...

(5) Where the proceedings terminate after interlocutory relief has been granted, the Court may take into account the fact that interlocutory relief has been granted ...[29] [References omitted]

44 In Lai Qin,[30] McHugh J approved of this approach:

In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties ... In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. ...

Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried ...

If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.[31]

45 In his first written outline of submissions, counsel for Glen Oak submitted with respect to the costs of the August summons:

As to costs, Glen Oak does not resist an order for Fifteenth to be paid the costs of its application by summons filed 4 August 2010, including reserved costs, on an indemnity basis, subject to the proviso below.

That proviso is that if Fifteenth is unsuccessful in respect of its contention that it should be paid interest, Glen Oak will contend that Fifteenth should not recover the costs arising from its agitation of that question. Rather, the costs of that question should be paid by Fifteenth.

46 This position was repeated in the hearing on 17 February 2011. Indeed, it was agreed by both counsel that if Fifteenth Eestin was successful on the question of interest then there should be an order that all of the costs associated with the August summons be paid by Glen Oak, but that if Fifteenth Eestin was unsuccessful on that question then there should be an order that Glen Oak pay Fifteenth Eestin's costs of the August summons on an indemnity basis but not including the costs attributable to the agitation of the claim for interest and that Fifteenth Eestin should pay Glen Oak's costs arising from that question. Fifteenth Eestin's costs were payable on an indemnity basis because in issuing the August summons seeking a judicial sale it was simply attempting to obtain satisfaction of its entitlement as the former trustee to an indemnity.

47 However, in the written supplementary submission filed on behalf of Glen Oak, counsel addressed the question of costs and sought to substitute new submissions in respect of the costs of the August summons for those previously made. The justification for this course was said to be as follows:

An analysis of the wholly changed way in which the applicant put its case for interest has caused Glen Oak to review the fact that it has previously said that it would not resist an order for costs. It now resists such an order.

48 Counsel for Fifteenth Eestin submitted in his written supplementary submissions in reply that the leave granted by the Court to file supplementary material was limited to the issue of interest and therefore that it was not now open to Glen Oak to seek to resile from its earlier concession about costs and to reagitate this matter, at least not without the leave of the Court. He referred to the admonition of Mason J (as he then was) in Carr v Finance Corporation of Australia Ltd [No.1]:[32]

After argument had concluded in this Court lengthy written submissions dealing with issues not hitherto raised and a further affidavit were filed. ... The material was submitted without leave having been given by the Court. The impression, unfortunately abroad, that the parties may file supplementary written material after the conclusion of oral argument, without leave having been given beforehand, is quite misconceived. We have to say once again, firmly and clearly, that the hearing is the time and place to present argument, whether it be wholly oral or oral argument supplemented by written submissions.

49 I do not need to stay to decide whether or not the substituted submission on the costs of the August summons comes within the limited grant of leave to file supplementary material because I am firmly of the view that the position initially adopted by Glen Oak was the correct one.

50 Glen Oak's substituted submission was that the application by the August summons could never have succeeded because it depended on the existence of coercive orders for the payment of the amounts which are the subject of the declaratory order where such orders might have been made but were not sought. It was submitted that without such orders, the declaration could not have been "enforced".

51 I have already explained why, in my opinion, the basis of that submission is not correct. I consider that Fifteenth Eestin acted reasonably in issuing the August summons and that it may well have been successful on 13 September 2010, if the hearing had gone ahead, in obtaining an order requiring the indemnity to be satisfied by a certain date as a result of a judicial sale, a sale by Glen Oak or a borrowing by Glen Oak. Moreover, the initial concession by counsel for Glen Oak concerning the costs of the August summons was a recognition that it had unduly delayed the satisfaction of the indemnity.

52 Therefore, I consider that there should be orders that:

(b) the second plaintiff pay the first defendant's costs of and incidental to the summons filed on 4 August 2010, including any reserved costs, such costs to be taxed, in default of agreement, on an indemnity basis, but such costs are not to include any costs attributable to the making of the claim for interest; and

(c) the first defendant pay the second plaintiff's costs attributable to the making of the claim for interest, including any reserved costs, such costs to be taxed, in default of agreement, on a party and party basis.

53 The second issue is the costs of the October summons. Counsel for Glen Oak submitted that Fifteenth Eestin should pay its costs because the application could never have succeeded. I do not agree. Although the costs order sought to be stayed until satisfaction of some parts of the indemnity was an order against the three defendants, and not just Fifteenth Eestin, I may well have been persuaded to stay the order for costs as they had only been taxed on 15 October 2010. Further, I may have queried why Glen Oak should be paid costs when it did not seem interested in finalising the arrangements for obtaining the properties of the Investment Trust by satisfying the indemnity. However, it is impossible, after the event, to predict what the outcome of Fifteenth Eestin's application would have been.

54 Therefore, I consider that it is not necessary to descend into the detail of whether or not there was any causal relationship between the non-satisfaction of the indemnity and the alleged inability of the defendants to pay the costs ordered to be paid and whether or not utilisation of some of the moneys payable to Project Hardware by Fifteenth Eestin to pay the costs owing to Glen Oak by the defendants would have been in breach of an undertaking given by Project Hardware (Australia) Pty Ltd ("PHA") and Mr and Mrs Berger, on 14 September 2007 in proceeding No.7027 of 2007, concerning specified financial transactions by PHA and its subsidiaries Project Hardware and S & I Investments (Australia) Pty Ltd.

55 Accordingly, there will be an order that the summons filed 18 October 2010 be dismissed, with no order as to costs.

[1] Rosenberg v Fifteenth Eestin Nominees Pty Ltd (No. 2) [2010] VSC 38.

[5] This amount was less than the amount mentioned in paragraph 1(a) of the Order made on 7 April 2010 because Fifteenth Eestin's indebtedness to Project Hardware was being reduced each month by the amount of rent otherwise payable by Project Hardware to Fifteenth Eestin.

[6] Zamir & Woolf, "The Declaratory Judgment", 3rd ed., 2002, Sweet & Maxwell, [1.02].

[7] Zamir & Woolf, "The Declaratory Judgment", 3rd ed., 2002, Sweet & Maxwell, [1.02]. See also Young, "Declaratory Orders", 2nd ed., 1984, Butterworths, [214].

[8] Roosters Club Inc v Northern Tavern Pty Ltd (No.2) [2003] SASC 143, [18] (Doyle CJ) (Nyland and Bleby JJ agreed with Doyle CJ); Arnhem Land Aboriginal Land Trust v Northern Territory of Australia [2007] FCAFC 31, [8] (French, Finn and Sundberg JJ).

[9] [2009] VSCA 310, [170]-[171] (Redlich and Dodds-Streeton JJA and Beach AJA).

[11] [2001] VSCA 140, [13] (Batt and Buchanan JJA relevantly agreed with the judgment of Callaway JA).

[12] R v Cripps, ex parte Muldoon [1984] QB 686.

[13] See generally Zamir & Woolf [7.08].

[19] Fischer v Secretary of State for India (1898) LR 26 IA 16, 29 (Lord Macnaghten), cited with approval by Isaacs J in Royal Insurance Co Ltd v Mylius [1926] HCA 49; (1926) 38 CLR 477, 497. Reliance on liberty to apply in this situation "in the course of working out the order" (Re Porteous, deceased [1949] VicLawRp 68; [1949] VLR 383, 385; Burke v Gillett [1996] VicRp 11; [1996] 1 VR 196, 198), is not the same as relying on liberty to apply in the situation in King in respect of which Callaway JA cast doubt on the proposition, [2001] VSCA 140, [23].

[22] Peter M. McDermott "Equitable Damages", 1994, Butterworths, 125.

[23] See JRL Davis "Interest as Compensation" in PD Finn (ed) "Essays on Damages", 1992, Law Book Co, 132.

Interest Rates Act 1983

At a glance

Court

Decision date

Before

Source

Judgment (119 paragraphs)

Parties

Legislation Cited (16)

Cases Cited (5)