Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd

Seiwa Australia Pty Ltd v Beard [2009] NSWCA 240 Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd [2008] NSWSC 1260 CASES CITED : Simmons v Colly Cotton Marketing Pty Ltd [2007] NSWSC 1092 Sirius Shipping Corporation v The Ship 'Sunrise' [2007] NSWSC 766 Timms v Commonwealth Bank of Australia [No 3] [2004] NSWCA 25

Seiwa Australia Pty Ltd (First Plaintiff) Australia Seiwa Pty Ltd (Second Plaintiff) PARTIES : Shojiro Azuma (Third Plaintiff) Malcom James Beard (Fourth Defendant) Gregory Charles Ralph (Fifth Defendant)

COUNSEL : M W Young (Plaintiffs) S E Gray (Fourth and Fifth Defendants)

SOLICITORS : Dixon Holmes du Pont Lawyers (Plaintiffs) Henry Davis York (Fourth and Fifth Defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

2004/185743 Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd (No 2) JUDGMENT 1 HIS HONOUR: On 27 November 2008 I dismissed the plaintiffs' proceedings and ordered them to pay the costs of the fourth and fifth defendants, Mr Beard and Mr Ralph: Seiwa Australia Pty Ltd v Seeto Financial Services Pty Ltd [2008] NSWSC 1260. The plaintiffs appealed unsuccessfully against my decision to the Court of Appeal: Seiwa Australia Pty Ltd v Beard [2009] NSWCA 240. Mr Beard and Mr Ralph now seek orders from me pursuant to s 101(4) of the Civil Procedure Act 2005 ("the Act") that the plaintiffs pay them interest on costs and disbursements at the rates set out in Schedule 5 of the Uniform Civil Procedure Rules. The plaintiffs initial response to that application is to contend that I am functus officio and therefore unable to determine the motion. These reasons deal only with that preliminary question. 2 Section 101(4) of the Act is relevantly as follows: " 101 Interest after judgment

(1) Unless the court orders otherwise, interest is payable on so much of the amount of a judgment (exclusive of any order for costs) as is from time to time unpaid.

(2) Interest under subsection (1) is to be calculated, at the prescribed rate or at such other rate as the court may order, as from:

(a) the date on which the judgment takes effect, or

(4) The court may order that interest is to be paid on any amount payable under an order for the payment of costs.

(5) Interest under subsection (4) is to be calculated, at the prescribed rate or at such other rate as the court may order, as from:

(a) the date or dates on which the costs concerned were paid, or

(6) This section does not authorise the giving of interest on any interest payable under this section.

(7) …." 3 In the present case the following additional agreed facts are relevant. After my dismissal of the plaintiffs' proceedings, Mr Beard and Mr Ralph made a written offer to accept an amount of costs pursuant to the costs order that I made at the time. The plaintiffs responded by indicating that they intended to file a notice of appeal. On 15 December 2008 Mr Beard and Mr Ralph caused the orders made by me, including the costs order, to be entered by the Court. The plaintiffs' notice of appeal was served on them about 18 December 2008. 4 On 12 February 2009 the plaintiffs filed a notice of motion seeking to stay the costs order. Tobias JA heard that application on 23 February 2009 and ordered that the costs order be stayed until further order and that the costs of the motion be costs in the appeal. On 11 August 2009 the Court of Appeal dismissed the plaintiffs' appeal with costs. 5 On 23 September 2009 Mr Beard and Mr Ralph made a written offer to accept an amount of costs pursuant to my costs order and the costs of the appeal. Thereafter the parties continued to correspond regarding costs until about 23 November 2009. No agreement concerning payment of the costs payable pursuant to the costs order was reached. Mr Beard and Mr Ralph have not yet filed an application for assessment of their costs payable pursuant to the costs order made by me, nor has a certificate of determination been issued in respect of those costs. Consideration 6 In Timms v Commonwealth Bank of Australia [No 3] [2004] NSWCA 25 the claimants brought proceedings against the Commonwealth Bank alleging negligent misrepresentation by the Bank in relation to the financial viability of a business it was purchasing and in respect of which it borrowed substantial funds. The Bank cross-claimed against the claimants seeking repayment of the claimants' borrowed funds in respect of which there had been default. Young CJ in Eq heard the matter in 2001, found against the claimants and entered a verdict on the Bank's cross-claim. The claimants successfully appealed to the Court of Appeal, which ordered a retrial and that the Bank pay the claimants' costs of the appeal. Thereafter, the claimants had their costs of the appeal assessed in accordance with the provisions and procedures specified in Part 11 Division 6 of the Legal Profession Act 1987. A costs assessor issued his certificate as to determination of costs assessed in the sum of $126,911.78. The claimants filed the costs certificate in the Court in accordance with SCR Pt 40 r 12. Pursuant to s 208J (3), the effect of filing the costs certificate was that the amount of costs thereby assessed became a judgment of the Court for that amount. 7 The claimants then sought an order pursuant to s 95(4) of the Supreme Court Act 1970, the predecessor to s 101(4) of the Act, that the Bank pay interest on the amount of the assessed costs at Schedule J rates, as from the dates on which they paid those costs to their solicitors until 11 December 2003, being the date of entry of judgment for the costs. At that time Schedule J specified the interest rate payable under various provisions of the Supreme Court Rules, and applied to any order for interest that might be made: SCR Pt 40 r 7 (2). Section 95(4) provided as follows: "…(4) If an order is made for the payment of costs, the Court may order that interest is to be paid on the amount so ordered, at the prescribed rate referred to in subsection (1), from the date or dates when the amount in respect of costs was duly paid." 8 The claimants in that matter submitted that an order for interest on the costs ordered by the Court ought to be made. In the events that occurred there was a preliminary question of whether or not that order could be made following the filing of the costs certificate, which operated as a final judgment in the amount of the costs assessed. An application to set aside or vary that order pursuant to Part 40 r 9 was unsuccessful. In the course of her judgment on that point, Beazley JA referred at [8] to what she described as "a preliminary question whether the claimants [were] entitled to the order sought or whether the right to claim interest has merged in the judgment". For presently relevant purposes, her Honour proceeded to say this about the claim for interest under s 95(4): "[11] A claim for interest under s 95(4) is part of the claim that a party has in relation to costs. It is not a separate or independent cause of action. If no application for interest is made and determined before entry of judgment for costs , the claim for interest merges with the judgment for costs. That is what has occurred in this case. The claimants obtained a final judgment for their assessed costs when they filed the Costs Certificate on 11 December 2003." (emphasis added) 9 Mr Beard and Mr Ralph rely upon her Honour's statement as inferential support for the proposition that their claim for interest is viable, in that I am still possessed of jurisdiction and power to make such an order, provided an application that I do so is made at some time before judgment for their costs is entered. 10 Simmons v Colly Cotton Marketing Pty Ltd [2007] NSWSC 1092 was also a case involving a claim for interest on costs. Bergin J dealt with the issue in the following way: "[12] Mr Pritchard submitted that the Court does not have any power to make an order for interest on costs: (1) because the first instance order for costs was entered in August 2005 and the Court is now functus officio ; and (2) any interest on the Court of Appeal's costs order is a matter for the Court of Appeal and the Court at first instance has no power to order interest on the costs ordered by the Court of Appeal. The Court of Appeal's orders included an order granting liberty to the parties to apply to the Commercial List of the Supreme Court in respect of orders in relation to the assessment of costs and various other orders relating to bank guarantees and a stay. The Court of Appeal cost order was as follows:

4. The appellants pay the respondents 90 per cent of their costs of and incidental to the appeal and cross-appeal, to be assessed on the ordinary basis.

[13] The applicants submitted that the Court has power to award interest on costs pursuant to its inherent powers to ensure justice is done between the parties and that, in any event, s 101(4) of the Act contemplates that an order for interest may be made after entry of orders for costs. I agree with that submission. Dr Greinke also submitted that the first instance Court is able to make an award of interest on the costs awarded by the Court of Appeal. It was submitted that the order made by the Court of Appeal granting liberty to the parties to approach the Commercial List contemplated that the Court of first instance could deal with matters relating to costs. Although the Court of Appeal's order granting liberty did not expressly refer to the order for costs in paragraph 4, I am satisfied from the terms of that order and the context in which it appeared that the Court of Appeal intended that any matters relating to costs or including interest on costs were to be dealt with by a judge of the Commercial List. In those circumstances it is not necessary to decide the other point raised by Mr Pritchard that without such authorisation by the Court of Appeal a first instance judge does not have power to deal with and decide an application for interest on costs awarded by the Court of Appeal." 11 The Court of Appeal in the present case dismissed the plaintiffs' appeal with costs. It made no special order of the sort referred to by Bergin J in Simmons. 12 Palmer J dealt with the specific issue of functus officio in Sirius Shipping Corporation v The Ship 'Sunrise' [2007] NSWSC 766. The case involved an application for costs in proceedings heard by another judge of the Court. His Honour described the principal issue in the proceedings as "whether the proceedings in which the costs orders are sought have been finally determined so that the Court is now functus officio". 13 His Honour dealt with the issue as follows: "[37] The policy of the law is that there should be finality in litigation. Accordingly, the general rule is that a Court has no power to set aside its own final judgment once it has been passed and entered: Bailey v Marinoff (1971) 125 CLR 529, at 530, 539; DJL v Cental Authority (2000) 201 CLR 226, at 245. Yet, powerful as is the policy of finality, it is subservient always to the fundamental requirements of justice that a litigant is to receive a fair hearing and is to have a determination by the Court of the case on its merits. If a proceeding in the Supreme Court is brought to conclusion without substantial compliance with these requirements, the Court by which the proceeding was heard and determined itself has jurisdiction - inherent and not deriving from the 'slip rule' - to re-open the proceedings and to make substituted or additional orders; and this is so even when the previous orders have been perfected by entry. The principle applies both in civil and in criminal cases: see, for example, Bailey v Marinoff (supra) at 539-545 per Gibbs J; State Rail Authority of New South Wales v Codelfa Construction Pty Ltd (1982) 150 CLR 29, at 38-39; R v Bow Street Magistrate; Ex parte Pinochet Ugarte (No 2) [2000] 1 AC 119, at 132; DJL v Central Authority (supra) at [94].

[40] A superior court of record, such as the Supreme Court, is never functus officio when its procedures have miscarried by denial of the fundamental requirements of justice. This is not to diminish the importance of adherence to procedure. Procedure is the cornerstone of justice: due observance of procedure guarantees, so far as is possible in any system of human devising, that decisions of the Courts are not made capriciously or with partiality or clandestinely so that they cannot be examined in the light of public scrutiny. By insisting on observance of established procedure the Court - which often must stand between the State and the citizen, between the powerful and the weak, the popular and the unpopular - insists on its independence in administering justice fairly, evenly and consistently according to law.

[41] Yet the Court is not a slave to its own procedure. Procedure has largely been devised by Judges in decisions or rules made over the centuries and is now encapsulated in rules of Court. Circumstances sometimes arise when observance of the letter of procedure would offend against the very notions of justice which procedure is designed to protect: see e.g. Mulholland v Mitchell [1971] AC 666, at 679-680; D v Director General, Department of Community Services [2005] NSWCA 474, at [46]. For that reason, the superior courts have always insisted that the procedure which they administer is subject to a retained inherent jurisdiction in the Court to do justice. That inherent jurisdiction cannot be exercised in accordance with the idiosyncratic notions of justice held by any particular judge; the jurisdiction is exercised only to accommodate the anomalous circumstances of a particular case within already established and accepted principles of justice according to law.

[42] The limits of the Court's inherent jurisdiction to depart from the policy of finality in litigation and to set aside its own perfected orders where justice so requires are probably best left undefined in exact terms, lest justice be thwarted in any particular case: see e.g. Meier v Meier [1948] P 89, at 95 per Evershed LJ; Bailey v Marinoff (supra) at 542, 544 per Gibbs J; DJL v Central Authority (supra) at [95] per Kirby J. However, the jurisdiction is always exercised with great caution and is never available where a claim has in fact been finally determined on the merits in accordance with the requirements of justice and what is sought is, in truth, a review of such decision by way of appeal: R v Bow Street Magistrate (supra) at 132; Postiglione v R (1997) 189 CLR 295, at 300; R v Burrell (supra) at [22]." 14 Counsel for Mr Ralph and Mr Beard also relied upon s 33 of the Interpretation Act 1987 as follows: " 33 Regard to be had to purposes or objects of Acts and statutory rules

In the interpretation of a provision of an Act or statutory rule, a construction that would promote the purpose or object underlying the Act or statutory rule (whether or not that purpose or object is expressly stated in the Act or statutory rule or, in the case of a statutory rule, in the Act under which the rule was made) shall be preferred to a construction that would not promote that purpose or object." Conclusion 15 It was submitted on behalf of the plaintiffs that interest on costs could, and by implication should, originally have been sought. They contended that I am functus officio on and from the point when the Court of Appeal determines the appeal. I disagree. 16 As earlier indicated, Mr Beard and Mr Ralph have not yet filed an application for assessment of their costs that are payable by the unsuccessful plaintiffs pursuant to the costs order. A certificate of determination has not yet been issued in respect of those costs. There is therefore no present aspect of this case that offends the notion of finality of the litigation as it has been conducted before me. The plaintiffs chose to appeal to the Court of Appeal. That Court specifically stayed my costs order pending the outcome of the proceedings in that Court. Following the result in the appeal the parties were in practical terms returned to the status of litigants at first instance whose dispute had been adjudicated subject only to finalisation of the amount of the costs payable by the plaintiffs in accordance with the order that I made. No agreement about costs was reached but Mr Beard and Mr Ralph have neither put in train nor concluded the formal steps for the recovery of an enforceable judgment for a specified sum for those costs. Presumably, although not certainly, that process would by now have been concluded, or at least would have been further advanced, but for the need to attend to the proceedings in the Court of Appeal and to abide by the order of that Court staying the costs order made by me. That stage has now passed. 17 The claim for interest under s 101(4) is part of the claim that Mr Ralph and Mr Beard have in relation to their costs in these proceedings. It is not a separate or independent cause of action. Even though Mr Beard and Mr Ralph have entered the orders made by me, including the order for costs, they have not obtained a final judgment in the amount of their assessed costs. There has not yet been entry of judgment for those costs in that sense as contemplated by the reasoning of Beazley JA in Timms. Provided that their application for interest is made and determined before that occurs, the claim for interest cannot have merged with any judgment for costs. 18 Moreover, that view is supported by the reasoning of Bergin J in Simmons where her Honour accepted that this Court has power to award interest on costs pursuant to its inherent powers to ensure justice is done between the parties but that in any event s 101(4) contemplates that an order for interest may be made after entry of orders for costs. In this last respect it seems reasonably clear that Bergin J was also referring to an entry of orders for costs by obtaining a final judgment in a specific sum for assessed costs as contemplated by Beazley JA in Timms. In the particular circumstances of this case, the significance of any possible uncertainty about that is of no moment because Mr Beard and Mr Ralph have not even filed an application for assessment of those costs and no issue of merger could possibly arise. 19 In my opinion, no issue arises that the costs issue has been finally determined in a way that prevents me from dealing with the present application. I do not, therefore, consider that I am functus officio. 20 The next question to arise is whether I should exercise my discretion in favour of Mr Beard and Mr Ralph to award interest on costs. I have not yet heard argument on that issue, having postponed consideration of it until after I determined whether I was able to do so. I am unaware whether or not a contest about that issue remains. In any event, I will give the parties an opportunity to consider these reasons and ask that they approach my Associate for the purpose of appointing a further date for hearing of argument on it if so required. Orders 21 Accordingly, I will do no more than publish these reasons and stand the matter over to a date convenient to the parties and to the Court.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.