Principal Strategic Options Pty Limited v Coshott - [2003] FCA 736 - FCA 2003 case summary — Zoe

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Principal Strategic Options Pty Limited v Coshott

[2003] FCA 736

Federal Court of Australia|2003-07-21|Before: Branson J

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Source facts

Court

Federal Court of Australia

Decision date

2003-07-21

Before

Branson J

Source

Original judgment source is linked above.

Judgment (35 paragraphs)

[1]

introduction 1 On 28 June 2000 Principal Strategic Options Pty Limited ('Strategic Options') presented a creditor's petition in relation to Robert Gilbert Coshott ('Mr Coshott'). The following day a judge of the Court, upon noting that Strategic Options gave the usual undertaking as to damages, made an interlocutory order ('the Interlocutory Order') under s 50 of the Bankruptcy Act 1966 (Cth) ('the Bankruptcy Act') requiring a trustee ('the Trustee'), in effect, to take control of the property of Mr Coshott. 2 The usual undertaking as to damages if given to the Court in relation to an interlocutory order made by it is an undertaking: (a) to submit to such order (if any) as the Court may consider to be just for the payment of compensation, to be assessed by the Court or as it may direct, to any person, whether or not a party, adversely affected by the operation of the interlocutory order … or any continuation (with or without variation) thereof; and (b) to pay the compensation referred to in (a) to the person therein referred to.' (see Practice Note No 3 issued by the Chief Justice on 14 June 1999) 3 Strategic Options accepts that, as the judgment which gave rise to the debt upon which the petition was based has been overturned on appeal, both Mr Coshott and Ljiljana Coshott ('Mrs Coshott'), his wife, are persons 'adversely affected' by the order of 29 June 2000 ('the Interlocutory Order'). The dispute which it is necessary to determine on this application is as to the amount of compensation that the Court should consider it just to order Strategic Options to pay to Mr and Mrs Coshott respectively.

[2]

background facts 4 On 28 March 2000 Strategic Options obtained a judgment in the Supreme Court of New South Wales ('the Supreme Court') against Mr Coshott in the sum of $1 355 239.74. On 14 April 2000 Mr Coshott filed a notice of appeal against the judgment of the Supreme Court. 5 On 1 June 2000 Strategic Options caused a bankruptcy notice to be served on Mr Coshott. The bankruptcy notice required Mr Coshott within twenty-one days to pay the judgment debt or to make an arrangement satisfactory to Strategic Options for settlement of the judgment debt. Mr Coshott did not comply with the bankruptcy notice or apply to set it aside. As a consequence he committed an act of bankruptcy within the meaning of s 40 of the Bankruptcy Act. 6 On 28 June 2000 Strategic Options presented to the Court a creditor's petition under s 43 of the Bankruptcy Act seeking the making of a sequestration order against the estate of Mr Coshott ('the Creditor's Petition'). On the same day Strategic Options filed an application seeking an order under s 50 of the Bankruptcy Act. On 29 June 2000 the application for an order under s 50 was heard. Mr Coshott did not appear at the hearing. As is mentioned above, upon Strategic Options giving the usual undertaking as to damages, the Court made the Interlocutory Order. 7 On 7 September 2000 Shipton Thoroughbreds Pty Limited ('Shipton') was substituted for Strategic Options as the petitioning creditor in the Creditor's Petition. 8 Sometime during September 2000 Mr and Mrs Coshott ceased to live at 5 Gilliver Avenue, Vaucluse ('the Vaucluse property') as a consequence of orders for possession having been obtained against them by the mortgagee of the property, Citibank Limited. Contracts for the sale of the Vaucluse property were exchanged on 18 November 2000. On 21 December 2000, $1 195 394.73, being one half of the net proceeds of the Vaucluse property, was paid to the Trustee. On 29 December 2000, $1 020 257.77, being Mrs Coshott's share of the proceeds of sale of the Vaucluse property was paid to Mrs Coshott. 9 On 24 April 2001 the New South Wales Court of Appeal allowed Mr Coshott's appeal and the judgment of the Supreme Court of 28 March 2000 was set aside. 10 On 8 May 2001 I ordered that the Creditor's Petition be dismissed. On the same day the consent orders referred to in [11] below were foreshadowed by the parties and I heard argument on the costs orders to be made in the bankruptcy proceeding and this proceeding. I reserved my judgment on the issues of costs. 11 On 10 May 2001 orders were made by consent which brought to an end the trusteeship which came into effect by reason of the Interlocutory Order. The Trustee was, however, authorised to retain the sum of $10 000 as security for the payment of his expenses and remuneration. 12 On 15 May 2001 Mr Coshott's solicitors received a cheque in the sum of $1 195 718.19 from the Trustee. 13 On 28 May 2001 Mr Coshott filed a notice of motion in this proceeding seeking the taking of an account of the losses suffered by him as a consequence of the Interlocutory Order. Mrs Coshott did likewise on 5 September 2002. 14 On 6 June 2001 I published my reasons for judgment on the issue of the costs orders to be made in the bankruptcy proceeding and in this proceeding. With respect to the costs of this proceeding I observed at [35]-[36]: 'It is plain that on 29 June 2000 the Court was satisfied, on the evidence then before it, that an order under s 50 of the Act was in the interests of the creditors of Mr Coshott generally. However, that evidence included evidence of the judgment debt. Indeed, the bankruptcy notice which founded the application for the order under s 50 of the Act was itself based on the judgment debt. Plainly enough, were it not for the existence of the judgment debt on 29 June 2000, the order under s 50 of the Act would not have been made. The judgment which gave rise to the judgment debt has now been set aside in the circumstances outlined above. Moreover, the order under s 50 of the Court was made upon Strategic Options giving the usual undertaking as to damages. While the usual undertaking as to damages may not, by reason of its terms, have a direct relevance to the issue of costs, the fact that the Court required Strategic Options to give it as a condition of the making of the order placed Strategic Options on notice that it was to bear the risk of the order ultimately proving unsustainable. As the parties have now acknowledged, the order became unsustainable when the judgment which gave rise to the judgment debt was set aside by the Court of Appeal. In the circumstances, in my view, Strategic Options must bear its own costs of the s 50 proceeding and meet the trustee's expenses and remuneration. Neither Mr Coshott nor Shipton Thoroughbreds sought an order for costs in his or its favour in the s 50 proceeding.'

[11]

Loss of increase on the capital value of a home which would otherwise have been purchased. 18 Mr Coshott gave affidavit evidence as follows: '14. In the period up to late December, 2000, I discussed with my wife the options available to us to acquire a new home. At that time, my wife and I were aware of the following: a) The Vaucluse Property had been sold for $6,000,000.00 on 18the [sic] November, 2000. b) Settlement of the sale was due in December, 2000. c) The net proceeds of the sale would be in excess of $2,400,000.00. d) One half of the net proceeds of sale were to be accounted for to my wife by Citibank and the other half would be paid to Mr. Thomas pursuant to the orders of Beaumont J. dated 29th June, 2000. e) My appeal against the judgment of Mr. Justice Hunter in favour of Principal Strategic Options Pty Limited was heard on 29th November, 2000 and judgment reserved. f) I had been advised by my solicitors, CKB Partners, and my counsel, Mr. Michael Cashion S.C., that I had reasonable prospects of success in the appeal. g) If the appeal was allowed and the judgment of Hunter J. set aside, then I would be solvent and the creditor's petition against me in N7558 of 2000 ought be dismissed and that any monies held by Mr. Thomas would be accounted for to me following the dismissal of the creditor's petition. h) That if my appeal was successful, then after payment of my acknowledged debts, I would have a surplus of over $550,000.00. i) That my wife and I would be able to borrow any additional funds required from Fewin Pty Limited and that we would be able to purchase a house for around $2,000,000.00. 15. Had my share of the net proceeds of sale of the Vaucluse Property been released to me on or about 21st December, 2000, my wife and I would have been able to purchase a 4 or 5 bedroom house in Vaucluse in early January, 2001 for around $2,000,000.00. 16. It was our intention to purchase a new home in joint names provided the Creditor's Petition against me, originally presented by Principal Strategic Options Pty Limited in this proceeding was dismissed.'

[20]

Financial Institutions Duty on bank deposits 25 When Mr Coshott's share of the proceeds of the sale of the Vaucluse property was paid to the Trustee, Financial Institutions Duty ('FID') totalling $717.23 was incurred. Further FID in the sum of $9.39 was subsequently incurred in respect of interest which was paid on the deposited funds. As a consequence of the order of 10 May 2001, the funds in the account of the Trustee were paid into the trust account of Mr Coshott's solicitors. The FID payable on that deposit was $717.48. Mr Coshott's solicitors rendered to Mr Coshott a bill which included a claim for the FID of $717.48 plus GST thereon of $71.74. It was not suggested by Strategic Options that this course was inappropriate. The same course was adopted by Mr Coshott's solicitors in respect of FID of $6.24 which was incurred when $10 374.64 was paid into their trust account in accordance with the order of 15 August 2001. The total claim for GST is thus: $717.23 9.39 717.48 71.74 6.24 0.62

Total: $1,522.70 26 Strategic Options contended that FID falls within the concept of 'costs' and is thus covered by the order made by me on 6 June 2001. I reject this contention. In my view the FID incurred in respect of the payments into the account which was opened in the joint names of Mr Coshott and the Trustee pursuant to the Interlocutory Order was an expense of the Trustee. That is, it fell within paragraph 2 of my order of 6 June 2001. As Mr Coshott has in fact met that expense I consider it just that he now receive recompense from Strategic Options. 27 I regard the issue of the FID incurred in respect of the deposit into the account of Mr Coshott's solicitors as more troubling. As is mentioned above, the order requiring the payment by the Trustee of the funds held by him on trust for Mr Coshott to Mr Coshott's solicitor rather than to Mr Coshott was made by consent on 10 May 2001. The consent order was, in my view, both sensible and appropriate. It was negotiated in the context of an application for an order for the dismissal of the Creditor's Petition. In the event the making of that order was not opposed. Shipton, which had been substituted for Strategic Options as the petitioning creditor in the Creditor's Petition, was an admitted creditor of Mr Coshott as at 8 May 2001 in the amount of $29 486.95. Shipton also asserted at that time that Mr Coshott owed it an additional amount of $28 000. The order made by consent on 10 May 2001 required Mr Coshott's solicitors to pay from the funds received from the Trustee Mr Coshott's admitted debts and to establish a security fund in respect of Mr Coshott's alleged liabilities. Mr Coshott's admitted debts as at that date totalled $543 336.74 and his alleged liabilities totalled $152 595.02. 28 I note incidentally that the payment by Mr Coshott's solicitors of his debts from the funds received from the Trustee meant that the FID ultimately paid by Mr Coshott when he received the balance of the funds due to him was approximately half of the amount that would otherwise have been payable by him. 29 In all of the circumstances I do not consider that Strategic Options should be required to compensate Mr Coshott for the FID incurred in respect of the payment from the Trustee to Mr Coshott's solicitors. The incurring of that FID was not the natural consequence of the making of the Interlocutory Order but rather the consequence of the terms of the order of 10 May 2001 which the parties invited the Court to make. 30 I conclude that Mr Coshott is entitled to compensation in the sum of $726.62 under this head.

[21]

Cost of copying documents produced to the Trustee 31 Paragraph 7 of the Interlocutory Order is in the following terms: 'The Respondent [i.e. Mr Coshott] deliver to the Trustee within 7 days all books, documents, papers and writings in his or her [sic] possession or power relating to his dealings, property or affairs.' 32 On 18 July 2000 the Interlocutory Order was varied on the application of Mr Coshott although not in the manner sought by him. Relevantly, the following paragraph was added to the Interlocutory Order: 'that, the Trustee be authorised to redeliver to the respondent debtor such of the books, documents, papers and writings delivered by the respondent debtor to the trustee pursuant to Order 7 if reasonably satisfied that the respondent debtor requires such books, documents, papers and writings for the purpose of the prosecution of his appeal in the Supreme Court of New South Wales.' 33 Mr Coshott's affidavit evidence in respect of this head of claim is as follows: '3. At 18 July 2000 I had four large cardboard shipping containers containing some of my personal, financial and business records. These records included bank statements, cheque butts, records of dealings with my former solicitor, Mr Vardas, dealings with the Commonwealth Bank of Australia, dealings with the Woollahra Municipal Council and also dealings with the applicant in this proceeding.
At 18 July 2000 I was involved in litigation including: a) an appeal against the decision of Justice Hunter of the Supreme Court of New South Wales upon which the applicant based its bankruptcy notice and this proceeding; b) proceedings against the Commonwealth Bank of Australia in the District Court of New South Wales plaint no 1643 of 1996 alleging breach of contract, interest and fee overcharges and other relief involving transactions from 1986; c) proceedings against my former solicitor, Mr Vardas in the District Court of New South Wales plaint number 4389 of 2000 respect of allegations of professional negligence, breach of contract and failure to account involving over 100 matters. This matter has since been transferred to the Supreme Court of New South Wales; d) issued proceedings against the Woollahra Municipal Council in the District Court of New South Wales. The District Court proceeding against the Woollahra Municipal Council followed on litigation in the Land & Environment Court of New South Wales with a nine-day hearing, an appeal to the New South Wales Court of Appeal, proceeding in this Court and an appeal to the full Federal Court plus the District Court documentation. 5. The records in the shipping containers included documents relating to those litigious matters. I required access to copies of the documents to prosecute the litigation. 6. I estimate that the material relating to the appeal from Justice Hunter's decision comprised approximately 10% of the material photocopied at my request. 7. The charge of $3,475.00 to Bay Pacific Management Pty Limited for the cost of sorting and photocopying the contents of the four large cartons was calculated at the rate of $0.10 per page inclusive of GST.' 34 Under cross-examination Mr Coshott agreed that he did not ask the Trustee to allow him to take possession of the documents which he required to prosecute his appeal in the Supreme Court. Rather he said that he had all of his records photocopied before he delivered them to the Trustee. For this reason, as his evidence established, he did not deliver his documents to the Trustee within the time frame required by the Interlocutory Order, namely within seven days. Mr Coshott did not deliver his documents to the Trustee until approximately four months later in mid‑November 2000. 35 The tax invoice received by Mr Coshott in respect of the sorting and photocopying of his documents is in the following terms: 'Re: Photocopying of Files Sorting and photocopying of four large cartons of Documents on 12th, 13th and 14th November 2000. Total cost labour & materials: $3,159.10 Plus 10% GST $ 315.90 $3,475.00 Payment terms: C.O.D.' 36 It was argued on behalf of Strategic Options, in effect, that in view of the amendment made to the Interlocutory Order on 18 July 2000 it was unnecessary for Mr Coshott's documents to be copied at all. It was further argued that the evidence of Mr Coshott about the nature of the documents copied and the necessity for copying the four boxes of documents was so vague and unsatisfactory that the Court should not be satisfied that the expenses flowed from the making of the Interlocutory Order. 37 There is much to be said for the above arguments. Additionally, I do not consider that Mr Coshott is entitled to be compensated by Strategic Options for the cost of having four large cartons of documents sorted. If, as he claims, Mr Coshott required access to the documents in the cartons to prosecute litigation, he would have needed to sort the documents irrespective of the Interlocutory Order. There is no evidence to suggest that Mr Coshott could not have arranged for the documents to be copied without additionally engaging a commercial enterprise to sort them. It seems likely, although there is no direct evidence to this effect, that Mr Coshott adopted the expedient of sorting and copying his documents before providing them to the Trustee because they were not, prior to being sorted and copied, in a state such that he could sensibly have approached the Trustee to gain access to such of them as were relevant to the litigation which he wished to prosecute. 38 More importantly, as it seems to me, Mr Coshott in reality seeks under this head to be compensated in respect of a course of conduct adopted by him in disregard of the requirements of the Interlocutory Order. The compensation to which he is entitled is compensation for having been adversely affected by the operation of the Interlocutory Order. 39 I conclude that Mr Coshott has not established the necessary connection between the costs incurred by him for the sorting and photocopying of his documents and the operation of the Interlocutory Order. In the circumstances it is irrelevant, in my view, that it might be inferred that had Mr Coshott complied with the Interlocutory Order he might as a consequence have legitimately incurred photocopying costs in respect of some, and possibly many, documents redelivered to him by the Trustee.

[23]

Difference between NSW Court interest rates and interest earned on funds in the trust account 43 This claim was advanced by Mr Coshott as an alternative claim to claim 1. As I have rejected claim 1 it is appropriate to give consideration to this claim. 44 Mr Coshott argued, in effect, that as it was the practice of this Court sitting in Sydney to adopt the interest rates of the Supreme Court, he was entitled to be placed in the position that he would have been in had he received interest at New South Wales Court rates on the sum of $1 195 394.73 from 21 December 2000, when that sum was paid to the Trustee, until 15 May 2001, when Mr Coshott's solicitors received a cheque in the sum of $1 195 718.19 from the Trustee. 45 I reject the above contention. There is no evidence to suggest that but for the Interlocutory Order Mr Coshott would have received interest on his funds at New South Wales Court rates. The only evidence given by Mr Coshott as to what he would have done with the sum of $1 195 394.73 had it not been paid to the Trustee is that he would have paid his creditors and then, had the Creditor's Petition been dismissed, put the remaining money towards the purchase of a home. The Creditor's Petition was not in fact dismissed until 8 May 2001. Mr Coshott's solicitors received the amount of $1 195 718.19 from the Trustee one week later. 46 In the absence of evidence from Mr Coshott that he would have taken another course, I consider it appropriate to proceed on the basis that had the Interlocutory Order not been made Mr Coshott would have invested the amount in fact paid to the Trustee on term deposit with a major Australian bank. The evidence of Mrs Coshott was that she placed her share of the proceeds of the sale of the Vaucluse property on deposit with Westpac Banking Corporation ('Westpac'). She gave evidence that the interest rate that she thereby received was the best rate that she could get at the time. That interest rate was the rate payable on deposits of $1 000 000 and over deposited for a term between seven days and one month. I consider it appropriate to conclude that if Mr Coshott were at that time aware of a major Australian bank that was paying a higher rate of interest at that time he would have so advised Mrs Coshott. 47 Having regard to the evidence of Mr Coshott that had his funds been available to him he would have paid his creditors, which evidence is the foundation of claim 4 above, I do not consider it appropriate to proceed on the basis that Mr Coshott would have placed the entire sum of $1 195 718.19 on term deposit. I consider that I should proceed on the basis that had the Interlocutory Order not been made Mr Coshott would have made a term deposit with Westpac of approximately $633 458. It is open to debate whether the amount deposited might for a period have been increased by an amount of $18 500 reflecting disputed debts of Mr Coshott later accepted by him to be payable. 48 The evidence discloses that the interest rates paid by Westpac on deposits of $1 000 000 and over for a term between seven days and one month varied during the relevant period from 6.05% at the commencement of the period to 4.80% at the end of the period. No evidence was placed before me as to the interest rates paid by a major Australian bank on term deposits of under $1 000 000 during the relevant period or of interest rates paid in respect of terms longer or shorter than between seven days and one month. Evidence was placed before me as to the value at the end of 15 May 2001 of an investment of $651 958 at the beginning of 29 December 2000 in a typical Cash Management Trust. That value was $664 609.51; that is, an increase in value over the period of $12 651.51. 49 On the whole of the evidence, it seems likely that had Mr Coshott deposited approximately $633 458 with Westpac he would have earned slightly more interest on his deposit than would have been payable on the same funds in a typical Cash Management Trust but less than that paid by Westpac on deposits of $1 000 000 or more for a term of between seven days and one month. 50 To be deducted from any amount payable to Mr Coshott under this head is the interest actually received by him on the funds held in the Trustee's account, other than the funds which were ultimately paid to creditors. Compensation in respect of the loss of access to the funds eventually paid to creditors is calculated under head 4. 51 The funds in the trust account accrued interest at an average rate of 4.89% over the period that the funds were held by the Trustee. The gross interest earned over the whole life of the trust account was $21 453.68. 52 In my view, it would be unrealistic to attempt a precise calculation of the compensation to which Mr Coshott is entitled under this head; the factual tools necessary for this calculation are not available to me. Doing the best I can with the evidence available, I propose to award Mr Coshott compensation of $850 under this head.

[26]

Solicitor/client costs in proceeding No. N 7558 of 2000 from 7 September 2000 56 Mr Coshott's written submissions with respect to this head of claim are as follows: '31. Proceeding N 7558 of 2000 related to the creditor's petition issued against Mr Coshott by the applicant in this proceeding. On 7 September 2000, an order was made substituting another creditor, Shipton Thoroughbreds Pty Ltd. Shipton had a judgment debt against Mr Coshott. Had the orders made on 29 June 2000 not been made, Mr Coshott would have been able to deal with his other creditors and make alternate financial arrangements with them either by borrowing funds to pay them or by negotiating terms of payment. 32. Mr Coshott's inability to deal with his creditors led to the prolongation of proceeding N 7558 of 2000 until Mr Coshott's successful appeal from the judgment in favour of the Applicant in the Supreme Court of New South Wales. At the conclusion of that appeal, Mr Coshott demonstrated solvency. The claim for $12,758.00 represents the costs and disbursements relating to proceeding N7558 of 2000 from 7 September 2000 until the dismissal of the petition on 8 May 2001, after a credit for costs allowed and recovered from Strategic Options on a party/party basis.' 57 On 6 June 2001 I made the following orders as to costs in the bankruptcy proceeding: '1. Principal Strategic Options Pty Limited pay Mr Coshott's costs of the proceeding up to and including 7 September 2000. 2. Mr Coshott pay Shipton Thoroughbreds' costs of and incidental to its obtaining the order that it be substituted as the petitioning creditor.' 58 In my reasons for judgment of 6 June 2001 at [28]-[32] I said: '28 The appropriate order between Strategic Options and Mr Coshott in the bankruptcy proceedings is, in my view, that Strategic Options pay Mr Coshott's costs of the proceeding up to and including 7 September 2000, the date upon which Shipton Thoroughbreds was substituted as the petitioning creditor. I reject the submission of Mr Coshott that, by reason of the undertaking as to damages given by Strategic Options in the s 50 proceeding, Strategic Options should pay all of Mr Coshott's costs of the bankruptcy proceeding. Mr Coshott's costs of the bankruptcy proceeding are not in my view attributable to the actions of Strategic Options in seeking and obtaining the order under s 50 of the Act. 29. I turn to consider the position of Shipton Thoroughbreds so far as the costs of the bankruptcy proceeding are concerned. As is mentioned above, the amended creditor's petition filed by Shipton Thoroughbreds relied upon a final judgment obtained on 7 July 1999. By an affidavit filed on 9 April 2001 in the bankruptcy proceeding, Mr Coshott acknowledged his indebtedness to Shipton Thoroughbreds. 30. Mr Coshott's failure to make payments to his creditor after the date upon which Strategic Options obtained judgment against him in the Supreme Court is understandable in the context of his being insolvent while the judgment remained in force. There was a risk that the payment in full of any creditor would have resulted in that creditor being unduly advantaged over other of Mr Coshott's creditors. However, Mr Coshott's earlier failure to pay, or to make satisfactory arrangements for settlement of, his admitted debt to Shipton Thoroughbreds has not been explained. 31. However, had Strategic Options not obtained judgment against Mr Coshott in the Supreme Court, it seems that Mr Coshott would at all relevant times have been able to establish his solvency. That is, in the circumstance hypothesised, had Shipton Thoroughbreds presented a creditor's petition against Mr Coshott his solvency would, in all likelihood, have rapidly become apparent. 32. In all of the circumstances I consider that the appropriate order to be made as between Mr Coshott and Shipton Thoroughbreds with respect to the costs of the bankruptcy proceeding is that Mr Coshott pay Shipton Thoroughbreds' costs of and incidental to its obtaining the order that it be substituted as the petitioning creditor in the bankruptcy proceeding. In my view, no other order ought, in the circumstances, be made as between Mr Coshott and Shipton Thoroughbreds with respect to the costs of the bankruptcy proceeding. Mr Coshott is not, in my view, entitled to an order requiring Strategic Options to indemnify him in respect of the costs payable by him to Shipton Thoroughbreds. As is mentioned above, I do not regard the undertaking as to damages given by Strategic Options in the s 50 proceeding as having any relevance to the costs of the bankruptcy proceeding.'

[29]

Interest on compensation payable 60 Section 51A(1) of the Federal Court of Australia Act 1976 (Cth) ('the Federal Court Act') provides: '(1) In any proceedings, for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either: (a) order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or (b) without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest.' 61 Section 51A(2)(a) makes it clear that the above subsection does not 'authorize the giving of interest upon interest or of a sum in lieu of such interest'. 62 It was agreed by Strategic Options that to order interest on the amount of compensation that the Court should consider it just for Strategic Options to pay to Mr Coshott would, because of the nature of Mr Coshott's claims, be to order the giving of interest upon interest. I reject that contention. Although I have had reference to rates of interest in giving consideration to the amount of compensation that Strategic Options should be ordered to pay to Mr Coshott under its undertaking as to damages, that does not give the compensation ultimately determined to be payable the character of interest. 63 It was not contended that s 51A of the Federal Court Act has no application in the context of an undertaking as to damages. Nor was any good cause shown why I should not order the payment of interest under s 51A(1) of the Federal Court Act. It is the practice of the Court to adopt the interest rate that would be applied by State courts in litigation in the State in which the litigation is heard (see McCormick v Riverwood International (Australia) Pty Ltd [2000] FCA 32 per Weinberg J at [9]-[17] and the authorities there cited). It was not argued by Strategic Options that, should I consider it appropriate to award interest, I should depart from this practice. 64 It will be ordered that there be included in the sum by which Mr Coshott is to be compensated under the undertaking as to damages interest at the interest rate that would be applied in the Supreme Court of New South Wales for the period between 10 May 2001 and the date of judgment.