repayment as incidental to the orders made in the appeal. Lee v Mallam

Court of Appeal (NSW)|1991-02-25|Before: Kirby P, Allen J

GOVERNMENT INSURANCE OFFICE OF NEW SOUTH WALES vy HEALEY [No 2]

KIRBY P 25 February 1991, 15 March 1991 [1991] NSWCA 103

JUDGMENT and ORDERS - judgments entered in personal injury claims - appeal - total sum paid as condition of stay of execution of judgments - appeal court reduces judgments substituted judgment less than sum paid as condition of stay - whether successful appellant entitled to recover amount of over-payment - whether entitled to have an order for interest on overpayment - whether entitlement to interest should be dated from the order or backdated to original payment - held: (1) Although the amount of over-payment might be recovered in a claim for moneys had and received, the Court of Appeal had power to order the repayment as incidental to the orders made in the appeal. Lee v Mallam (1911) 27 WN (NSW) 203 considered; (2) Having regard to the undesirability of a multiplicity of litigation and s63 of the Supreme Court Act 1970, the Court of Appeal should so order; (3) Such order might be made after judgment by a single Judge of Appeal exercising the powers of the Court under s46(2)(b) Supreme Court Act 1970; (4) The Court also had power to order the payment-of interest which could be ordered to be paid from the date of the overpayment; (5) In the circumstances, orders should be made for (a) the payment of the amount of the over-payment; and (b) interest back-dated to the date on which the over-payment was made.

INTEREST - date of order - whether order should be made retrospective - recoupment of amount of judgment overpaid as a term of stay of execution on a judgment subsequently reduced - held: Interest should be ordered and backdated to the date of the overpayment. Keogh v Dalgety and Co Limited [1917] VLR 309; Borthwick v Eldersley Steamship Company, Limited [1950] 2 KB 516 considered. supreme Court Act 1970, ss46,63,95. Supreme Court Rules, Pt40, Rule 3.

Kirby P This motion concerns the power of the Court of Appeal to order a "repayment" of a proportion of a judgment already paid but found, by a decision in an appeal, to have been excessive. It also concerns the power of the Court to award interest on the moneys so repaid and whether, in the circumstances, such interest should be ordered.

The Court of Appeal reduces a damages judgment Mr Gregory Healey (the opponent) is a solicitor. He received injuries and suffered losses as a result of a number of motor vehicle accidents. His various claims were heard together by Allen J in August 1988. On 18 November 1988, his Honour awarded him the sum of $364,476.40. That sum was the aggregate of the judgments entered in the several actions brought by him.

Following the judgments of Allen J, the Government Insurance Office of New South Wales and the other defendants in the proceedings at first instance (the claimants) applied for a stay of proceedings pending the hearing of appeals in which the amounts awarded to the opponent were to be challenged as excessive. Allen J granted a stay of execution of the judgment in each matter. However, they

were granted by his Honour upon condition that the claimants pay the opponent the sum of $160,000. That sum was then paid to the opponent on 1 December 1988.

Necessarily, in fixing the amount of $160,000 it was impossible for Allen J (any more than it would have been for this Court) to prejudge exactly the decision of the Court in the several appeals. Typically, in appeals concerning only the quantum of damages, an attempt is made by the parties or the Court to fix a sum which will be no higher than that which, it is anticipated, will be recovered in the appeal. Occasionally, the sum so fixed proves to be higher than the sum recovered in the appeal. This is what happened in the present case.

The appeals by the claimants were heard on 29 June 1990 before the Court constituted by Clarke and Handley JJA and myself. On 21 August 1990 the Court published its reasons and pronounced orders allowing the appeals. See Government Insurance Office of New South Wales and Ors v Healey, Court of Appeal, unreported, 21 August 1990. As a result of the Court's orders, the total amount payable by the claimants to the opponent was reduced to $131,682.40. That sum was less than the amount of $160,000 paid as a condition of the stay on 1 December 1988. There has been no application for special leave to appeal to the High Court. No stay of execution of the Court of Appeal's orders had been applied for. The claimants sought to recover the "over-payment" of $28,317.60 from the opponent.

By letter dated 4 September 1990 the claimants asked for the recovery of an amount which was miscalculated. The correct sum was claimed by letter dated 24 September 1990. No payment having been made, a further claim was made by letter of 12 October 1990. This letter also claimed interest calculated in accordance with rates set out in Pt40 Rule 7 of the Supreme Court Rules. The amount then claimed for interest was $9,283.89. No point arises concerning the several entitlements of the respective claimants. In the case of named claimants, they were all indemnified by the Government Insurance Office of New South Wales. Their interests are identical.

The opponent not having made the payments demanded, either in respect of the "over-payment" or interest, the claimants on 31 January 1991 filed a motion seeking an order that the opponent reimburse the claimants for the amount by which "the verdict of the Court of Appeal was exceeded by the part-payment made by the claimants as a condition of a stay of proceedings". The motion also sought an order that the opponent pay interest and costs.

The motion came before me, exercising the powers of the Court of Appeal under s46 of the Supreme Court Act 1970. No application was made by any party that the proceedings be referred to the Court as constituted when the appeal was determined or otherwise. Both sides in the contest dealt with the matter upon the basis that the issue was appropriate for the determination of a single judge. I am prepared to assume that had the issue now before me been raised during the hearing of the appeal, it would have been dealt with by the Court and provided for in the Court's orders. So far at least as the "repayment" was concerned, the opponent did not contest this. Disposing of the motion does not involve the determination of the appeal for that has already occurred. The issue raised is incidental to the primary function of the Court of Appeal in the appeal. It is thus appropriate to be dealt with by me pursuant to s46(2)(b) of the Supreme Court Act.

\ROVERNMENT INSURANCE OFFICE OF NEW SOUTH WALES v HEALEY [No 2] (Kirb$ P)

It was suggested that the Court should treat the failure to make an order for repayment of the over-payment as a slip which could be corrected by way of amendment of the orders of the Court of Appeal. Cf The Commonwealth of Australia v McCormack (1984) 155 CLR 273. For two reasons I do not consider this to be appropriate. In the first place, I do not believe that this is a case of a slip. There was nothing before the Court of Appeal concerning the stay or the over-payment. No order was asked for in the appeal. No terms were laid down by the Court itself in connection with the earlier stay. In these circumstances the issue was not overlooked. It was simply not in contest. Secondly, any such correction would have to be made by the Court as constituted when the orders said to have been in error were made. No such correction could be made by a single Judge of Appeal.

Let me start with the justice of the case. Justice would appear to dictate that the opponent should repay the excess payment. Because it is impossible to predict exactly the orders in an appeal, in fixing the sum to be paid as a condition for a stay of execution pending the disposal of the appeal, it is inevitable that problems such as the present will occasionally arise. The only way they could be avoided would be by the determination of the appeal at the time the stay was sought or the provision of a minimal sum as part-payment, pending the outcome of the appeal. The first course would be impossible in the state of the Court's list and equity to other litigants. The second course would be unjust and possibly involve a misapplication of the discretion to provide a stay on proper terms. Over-payments thus being inevitable from time to time in the nature of the task of fixing the sum to be paid as a condition for a stay, it is appropriate and just that the amount of the excess should be repaid as quickly as possible. In most cases this commonsense requirement produces agreement on the part of the beneficiary of the excess. The sum is repaid without delay. That has not occurred here for reasons which do not appear but which are, in any case, irrelevant.

So far as interest is concerned, the justice is more equally balanced. The party required to pay the excess may not have invested the sum repaid in such a way as to accrue interest upon it. It may have been expended on a motor car, an overseas trip, lent to the family or reused in repaying debts accumulated as a result of the subject injury. The obligation to repay is only known when the judgment of the appeal court is pronounced. - It is only then that the liability to repay arises. To burden the party unsuccessful in the appeal with the obligation not only to repay the excess of the judgment but interest on it could, in a particular case, cause an injustice.

On the other hand, the claimants, represented by the claimant insurer, can point to the fact that they have been deprived of the excess during the time from payment until recovery. Had the insurer had the moneys during that time it would undoubtedly have invested the funds at commercial rates of interest. By the theory of the law, it ought never to have been required to pay the excess to the opponent. At least in the present case, the opponent is a solicitor well able to invest moneys received by him. No evidence has been placed before the Court in the motion to suggest that the moneys were, or were not, invested. In such circumstances, just as the insurer would have been required to pay interest on an under-payment of the judgment so the opponent should now be required to pay interest on the over-payment.

The justice of the case thus favours the claimants. The opponent did not dispute that the law provided machinery for requiring the payment to be made of the amount of the excess. However, he contended that the proper way by which the claimants could recover the excess was by suing the opponent in a court of competent jurisdiction (presumably the District Court) on a common money count or its modern equivalent. Such a procedure was adopted in Lee v Mallam (1911) 27 WN (NSW) 203. In that case a successful plaintiff in the District Court obtained from the defendant the payment of his taxed costs. Subsequently, upon a review, a certain proportion of the costs were taxed off. The plaintiff refused to refund the amount received in excess. The defendant thereupon commenced an action in the Supreme Court for moneys had and received. The Full Court confirmed that such an action would lie. Sly J (with whom Cohen and Gordon JJ agreed) said (at 204):

"An action for money received is applicable wherever the defendant has received money which in justice and equity belongs to the plaintiff. See Bullen and Leake p 44. Prima facie therefore the action is well founded unless there is something in the district Courts Acts expressly or by clear intendment taking away such right. I cannot see anything [to do so]. The present plaintiff did not bring the action in the District Court but was brought there by the present defendant, and his argument is that the defendant now has money of his and it is immaterial to him how the present defendant got it, whether in an action in the Supreme Court - District Court - or any other Court. I think this argument is right. Assuming that the altered judgment is right. Assuming that the altered judgment is correct, then the defendant has money which in justice belongs to the plaintiff, and the plaintiff can sue for it in an action for money had and received."

Those words are directly applicable to the present case. The opponent did not dispute that. He said that that is what the claimants should do.

Acknowledging that that course would be available to the claimants, there are reasons why they should not be put to such inconvenience. The proceedings have been, until now, in the Supreme Court. The moneys paid were paid incidentally to a stay of execution of a judgment of the Supreme Court. No suggested defence to any proceedings in the District Court has been hinted at, still less proved by evidence. The determination of the excess which may be recovered by the claimants follows a judgment of this Court. The Court is enjoined by s63 of the Supreme Court Act 1970 to grant the remedies that a party may be entitled to have in respect of any claim brought forward in the proceedings so that, as far as possible, all matters in controversy may be completely and finally determined and multiplicity of legal proceedings avoided. That is an injunction which I should have been minded to follow anyway. My resolve to do so is strengthened by the instruction of Parliament.

There is no reason why the claimants should be put to the inconvenience and further delay of bringing proceedings in another court for the recovery of the over-payment. It was faintly suggested that the judgment in the Court of Appeal had already taken effect and that in some way that might prevent an order being made on the present motion. The Court was informed that judgment had not yet been entered. But it was said that the judgment of the Court of Appeal had been given in Court and was thus effective as of the date on which it was given pursuant to Pt40 Rule 3(1)(a) of the Supreme Court Rules. In my opinion, this is beside the point. Although the Court determining the appeal might have added to its orders (had it been alerted to the possibility of a problem such as the present) a further order that the amount of excess payment should be refunded, there is no

\ROVERNMENT INSURANCE OFFICE OF NEW SOUTH WALES v HEALEY [No 2] (Kirbs P)

reason why I cannot now so order. There is nothing in the orders of the Court disposing of the appeal which would be inconsistent with such an order. On the contrary, such an order made by me would not only be consistent with the orders of the Court. It would assist the attainment of the purpose of those orders. I am authorised to provide the relief by the terms of s46(2)(b). The order for repayment is one in the appeal, being incidental to the judgment which the Court has pronounced. The claim for interest

As I have said, the claimants' request for interest raises a more difficult question. The power to award interest on damages or debts at common law was very limited. Doubtless this was because of the early attitude of the common law to usury. See Ogus, The Law of Damages, 1973, 98. That attitude was encouraged by very low rates of inflation during much of the time when the common law developed.

The same attitude was not observed in the civil law. There interest was awarded, as of right, whenever a principal sum of money was "withheld and not paid on the day when it ought to have been paid". See Riches v Westminster Bank Limited [1947] AC 390, 411. Equity, which more often reflected civil law notions, regularly awarded interest, including not only simple interest but also compound interest where justice so demanded. It did so, independently of statute. Wallersteiner v Moir (No 2) [1975] QB 373. In Admiralty, simple interest was regularly ordered, the Admiralty Court following the civil law and holding that interest was always due to the obligee when payment was not made. See The Northumbria (1869) LR 3 A and E 6, 10.

Lord Mansfield contemplated that at common law there were circumstances in which interest might be awarded "in cases of long delay under vexatious and oppressive circumstances". See Eddowes v Hopkins (1780) 1 Dougl 376, 99 ER 242. Lord Ellenborough in De Havilland v Bowerbank (1807) 1 Camp 50; 170 ER 872 acknowledged four particular categories in which interest might be awarded at common law. They were (1) where there was a contract on a certain date; (2) where there was an express promise; (3) where a promise to pay might be inferred from the course of dealing; and (4) where the money had been actually used and interest made on it.

The inappropriateness of applying the early common law doctrine to claims for interest in modern circumstances in Australia may be seen reflected in at least two recent decisions of the High Court. In Government Insurance Office of New South Wales v Atkinson-Leighton Joint Venture (1981) 146 CLR 206 it was held to be within the authority of an arbitrator, receiving a reference of a dispute between parties to award interest as a court might do under a statute enacted for that purpose. A similar conclusion has been reached in England. See President of India v La Pintada Compania Naviqacion SA [1985] 1 AC 104. In Hungerfords and Others v Walker and Others (1988) 84 ALR 119 the High Court held that a loss due to late payment was recoverable from accountants if it constituted special damage within the contemplation of the parties. The case was one where, due to an error in calculating the amount of depreciation allowable as a deduction, over-payments of tax were made. The clients sued the accountants for breach of contract and negligence claiming to recover the losses resulting from the over-payments. The High Court held that incurred expense and opportunity costs constituted an integral element of the loss for which the clients were entitled to be compensated by an award of damages. The Court also held that

there was no relevant distinction between the award of damages for the loss of the use of the moneys in the case of a liquidated claim and the award of such interest in an unliquidated claim.

The holding in Hungerfords does not resolve the present case. This is not a case where the claimants have sued the opponent to recover moneys for breach of contract or negligence where the claimants have suffered a foreseeable loss necessarily within the contemplation of the parties which is directly related to a breach of contract or tort. Nor does the case fall readily into any of the exceptions to the general rule of the common law, whether stated by Lord Mansfield or by Lord Ellenborough. It cannot be said that the long delay during which the opponent held the moneys occurred under vexatious or oppressive circumstances. Although there may have been an implied promise to refund the "over-payment" if so it proved to be, the opponent denies that promise. I would not in these proceedings and on the materials before me determine the matter on that footing. l express no final view on the entitlement of the claimants to recover interest from the opponent at common law because, in my opinion, the issue can be resolved by reference to applicable statutory provisions.

S95 of the Supreme Court Act provides for orders to be made for the payment of interest. Relevantly, the section states:

"95(1) Where judgment is given or an order is made for the payment of money interest shall, unless the Court otherwise orders, be payable at the prescribed rate from the date when the judgment or order takes effect on so much of the money as fs from time to time unpaid.

(2) Notwithstanding subs(1) where, in proceedings on a common law claim, the Court gives judgment for damages, and the damages are paid within 21 days after the date when the judgment takes effect, interest on the judgment debt is not to be payable under subs(1) unless the Court otherwise orders.

Normally, interest runs from the date of the taking effect of the judgment or order. See Pt40 Rule 3 Supreme Court Rules. However, the facility as provided in both subs(1) and (2) of s95 for the Court to: otherwise order". Pt40 R3(5) empowers the Court to order that an order should take effect from a date earlier than the date on which it is made. The claimants urged that as the opponent had had the use and benefit of the "excess" judgment moneys since 1 December 1988, he should be obliged to pay interest on the "over-payment" from that date.

Iam asked to make an order for the payment by the opponent to the claimants of the excess received by him. I have already indicated that I intend to make that order. By s95(1) where such an order is made for the payment of money, interest is payable from the date of the order "unless the Court otherwise orders". By Pt40 R3(5) the Court is authorised to "order that a... order take effect as of a date earlier... than the date fixed by [the] subrules". I agree with the observation of Smart J in Fischer and Anor v David Syme and Co Limited (1989) 18 NSWLR 606, 616 that the power of the Court to "otherwise order" provides an important degree of flexibility to the Court. It allows the Court to do what is just in the particular case where the usual position, provided by the Act, would produce unfairness. The words allow the Court to avoid rigidity and to accommodate the general rule to the necessity of the case.

There are three dates from which the order might be made for the payment of interest:

\ROVERNMENT INSURANCE OFFICE OF NEW SOUTH WALES v HEALEY [No 2] (Kirby P)

(b) The date upon which the Court of Appeal pronounced the judgment determining that an over-payment had been made; or

A number of cases were called to the attention of the Court in which varying opinions had been expressed relating to the orders that should be made and the dates from which such orders should take effect. See eg Craine v Colonial Mutual Fire Insurance Co Limited and Anor (1928) 28 CLR 305; Keogh v Dalgety and Co Limited [1917] VLR 309. I consider that it is enough to dispose of those cases by saying that they deal with different rules and circumstances different from the present case. In the case of Crane the issue was left undetermined. Borthwick provides some support for the opponent's contentions. Keogh on the other hand provides support for the claimants' arguments. In my view it is safer to consider this Court's statute and rules and to confine attention to the circumstances of the present case.

The subrules of Pt40 SCR would ordinarily require that an order shall take effect as of the date on which it is made. See Pt40 R3(3). But in my opinion, it is appropriate in this case to order interest and to provide otherwise than s95 of the Act would normally provide. It is also appropriate, in the circumstances to order that the order made should take effect from the date upon which the opponent received the amount which, by the judgment of the Court of Appeal, has been held to have been excessive. That is from 1 December 1988.

The parties are agreed that in the event that the claimant is entitled to interest, the mathematical calculation of that interest to 12 March 1991 is $12,100.37. Accordingly, the total amount to be paid by the opponent to the claimants is $42,417.97.

The claimants placed before the Court the letters by which they had asked for repayment of the excess sum paid to the opponent. The affidavit discloses that no reply was received to the letters of demand. Clearly, the bringing of the proceedings was both reasonable and necessary in the circumstances.

The claimants asked that a special order should be made requiring the opponent to pay the claimants' costs on a solicitor and client basis. However, failure to comply with notices of demand is not necessarily obstructive or high-handed. I do not believe that, in the present case, there have been such special or unusual features of the matter of justify making an order such as the claimants seek. The opponent's stand may have been born of sheer obduracy. But the legal entitlement of the claimants to secure the order they seek and to have interest was not self-evident. It required argument and consideration. In the circumstances I am of the opinion that the ordinary rule as to costs should follow.

Orders The result is that I would make the following orders in the motion:

Order the opponent to pay to the claimants the sum of $28,317.60, being the amount by which the judgment entered by the Court of Appeal was exceeded by a payment earlier made by the claimants to the opponent as a condition of a stay of execution of the judgment herein;

Order the opponent to pay to the claimants the sum of $12,100.37 being interest on the above sum to the date of order; and

Order the opponent to pay the claimant's costs of the motion.

Soliictors for the Applicant: Government Insurance Office of, New South Wales

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Judgment (50 paragraphs)

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Cases Cited (5)