Western Land Developments Pty Limited v Maganic Brothers and Sister Pty Limited

Claim for the Charging Order

1. Mr Sneddon has ultimately conceded that the charging order sought on the motion cannot be obtained. There is no general charging clause in respect of the mutual liabilities of the parties in the original settlement agreement in these proceedings. Mr Sneddon did not claim the benefit of any other contractual or equitable right to a charge. He pursued order 1 of the motion on the basis of Civil Procedure Act, s 126, a statutory provision permitting the Court to declare a charge over certain kinds of property, and which is based upon the now repealed Judgment Creditors' Remedies Act 1901 (Cth).
2. Mr Fernandes of counsel submitted for Western that Civil Procedure Act, s 126 is directed to the creation of security interests against a debtor in respect of "any equitable interest in property": Civil Procedure Act, s 126(1)(c). Mr Fernandes further submits that Western's interests in its subdivided portion of the land the subject of these proceedings is a legal interest as registered proprietor and is not an equitable interest in property.
3. This argument is persuasive. And Mr Sneddon ultimately conceded its correctness. Young J's decision in: Quint v Robertson (1985) 3 NSWLR 398 (at 401C-402F) and White J's decision in Paul Michael Pty Ltd v Urban Traders Pty Ltd [2010] NSWSC 1246 (at [70]) ("Paul Michael") make clear that the Judgment Creditors' Remedies Act, s 27 and its successor Civil Procedure Act, s 126 were and are only applicable to equities of redemption or equitable interests, and not purely legal interests. White J explained the reason for this: in Paul Michael: "as the legal owner of the land [the registered proprietor of land held under the Real Property Act] does not also hold an equitable interest in the land. An equitable interest is something imposed on a legal title, not carved out of it. A legal owner does not hold the property on trust for himself or herself": Paul Michael at [70].
4. Accordingly, I dismiss this part of the motion.

Interest on Costs

1. Maganic also seeks under Civil Procedure Act, s 101(4) interest on the costs that it has paid to its lawyers in these proceedings. This particular section of the Civil Procedure Act was amended by the New South Wales Parliament during the course of these proceedings, which proceedings commenced as long ago as 2012 and which are now being concluded in 2016. The relevant changes may be shortly summarised.
2. At all relevant times up until November 2015 Civil Procedure Act, s 101 provided 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 (b) such later date as the court may order. (3) Despite subsection (1), interest is not payable on the amount of a judgment if the amount is paid in full within 28 days after the date on which the judgment takes effect, unless the court orders to the contrary. (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 (b) such later date as the court may order. (6) This section does not authorise the giving of interest on any interest payable under this section. (7) In this section, a reference to the prescribed rate of interest is a reference to the rate of interest prescribed by the uniform rules for the purposes of this section."
3. The provision was amended in November 2015 to reflect the reasoning of the decision of the Court of Appeal in Doppstadt Australia Pty Ltd v Lovick and Son Developments Pty Ltd (No. 2) [2014] NSWCA 158 (at [403]) ("Doppstadt"), to the following effect: "Thus in the absence of any countervailing discretionary factor, it is appropriate that an order for interest on costs be made to compensate the party having the benefit of a costs order for being out of pocket in respect of relevant costs which it had paid. There is no requirement to establish that the circumstances of the case are out of the ordinary: Drummond and Rosen Pty Ltd v Easey & Ors (No 2) [2009] NSWCA 331 at [4] per Macfarlan JA (Tobias JA agreeing) citing Lahoud v Lahoud [2006] NSWCA 126 at [82]-[83] per Campbell J."
4. The effect of the amendment is also readily explained by looking at Civil Procedure Act, s 101, in its amended form, which gives statutory force to the reasoning in Doppstadt and provides 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 (b) such later date as the court may order. (3) Despite subsection (1), interest is not payable on the amount of a judgment if the amount is paid in full within 28 days after the date on which the judgment takes effect, unless the court orders to the contrary. (4) Unless the court orders otherwise, interest is payable on an amount payable under an order for the payment of costs. (5) Interest on an amount payable under an order for the payment of costs is to be calculated, at the prescribed rate or at any other rate that the court orders, as from the date the order was made or any other date that the court orders. (6) This section does not authorise the giving of interest on any interest payable under this section. (7) In this section, a reference to the "prescribed rate" of interest is a reference to the rate of interest prescribed by the uniform rules for the purposes of this section."
5. The amended s 101 makes it clear that the presumed position is that interest will be payable on costs, and that after the amendment the practical onus now lies on the party resisting an order for interest on costs to show that it should not be awarded. The new legislation is slightly stronger than the effect given to the previous legislation by Doppstadt.
6. Mr Fernandes took the Court to passages in McKeith v Royal Bank of Scotland Group PLC; Royal Bank of Scotland Group PLC v James (No. 2) [2016] NSWCA 260 ("Royal Bank of Scotland") which explain the changes effected by these amendments to s 101 and the applicable discretionary factors in play, when awards are made under the section. Royal Bank of Scotland relevantly provides as follows ([52]-[69]): "Interest on costs 52. Section 101(4) of the CPA provided (prior to its amendment in November 2015) that the Court may order that interest be paid on any amount payable under an order for the payment of costs. In reliance upon this provision RBS seeks an order for interest on the costs and disbursements it has outlaid since the commencement of litigation in October 2011. 53. It is common ground that an order for the payment of interest on costs does not require special circumstances to be demonstrated (Lahoud v Lahoud [2006] NSWSC 126 at [82] per Campbell J) and that the purpose of such an order is to compensate a party having the benefit of a costs order for being "wrongly required to spend money on litigation to enforce established rights": Robb Evans of Robb Evans & Associates v European Bank Ltd (No 2) [2009] NSWCA 170 at [44] per Basten JA, Campbell JA agreeing; Davies v Kur-ring-gai Municipal Council [2003] NSWSC 1010 at [5] per Austin J; Drummond & Rosen Pty Ltd v Easey (No 2) [2009] NSWCA 331 at [4] per Macfarlan JA; Gillfillan v Australian Securities and Investments Commission (No 2) [2013] NSWCA 143; (2013) 94 ACSR 543 at [33] per Sackville AJA, Beazley P and Barrett JA agreeing. 54. Whilst it is accepted that an application for interests on costs need not point to any special or otherwise out of the ordinary circumstances, an expectation that the court will undertake a general assessment of the circumstances of the case finds some support in the authorities referred to. To this end, relevant matters include the conduct of the parties, whether the successful party has been out of pocket in respect of costs it has paid and for what length of time, as well as whether the unsuccessful party has benefited from the use of that money in the relevant period: Ying v Song [2011] NSWSC 618 at [100] per Ward J citing Grogan v Thiess Contractors Pty Ltd [2000] NSWSC 1101 at [11] per Barr J. 55. Some recent formulations of the principle as to interest on costs appear to frame it as giving rise to a presumption that interest will be awarded as a matter of course in the absence of any countervailing discretionary consideration: see Grace v Grace (No 9) [2014] NSWSC 1239 at [66] per Brereton J. This approach is, however, possibly at odds with the statements, albeit obiter, by this Court in Illawarra Hotel Company Pty Ltd v Walton Construction Pty Ltd (No 2) (2013) 84 NSWLR 436; [2013] NSWCA 211 ("Illawarra Hotel") at [38] where it was accepted that generally some positive case in support of the application must be established. The Court (Meagher, Barrett and Ward JJA) observed that a party who contends that there should be an order for interest on costs must do more than simply point to the fact that the proceedings were protracted and that it had to outlay moneys on its own costs over an extended period. 56. In Grace v Grace, Brereton J (at [59]-[60]) comprehensively reviewed the authorities as to interest on costs, including Illawarra Hotel which he declined to follow for reasons articulated at [62]. Significantly, his Honour (at [68], [76]) emphasised that the circumstances in which a claim for interest is liable to be refused "are rare". 57. At [60] Brereton J cited the following passage from the judgment of Gleeson JA in Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd [2014] NSWCA 158 at [403]: "Thus, in the absence of any countervailing discretionary factor, it is appropriate that an order for interest on costs be made to compensate the party having the benefit of a costs order for being out of pocket in respect of relevant costs which it had paid. There is no requirement to establish that the circumstances of the case are out of the ordinary." 58. Drummond and Rosen Pty Ltd v Easey was cited in support of his Honour's remarks. I note that s 101(4) was recently amended with effect from 24 November 2015 by the Courts and Other Justice Portfolio Legislation Amendment Act 2015 (NSW). It now reads: "Unless the court orders otherwise, interest is payable on an amount payable under an order for the payment of costs." 59. It may be observed that the effect of the amendment is that whereas under the previous sub-section the onus lay upon the party seeking an order for the payment of interest, under the new provision the onus is on the party resisting the payment of interest to persuade the court to "order otherwise". Absent such an order interest is payable by force of the mandatory terms of the sub-section and a court order is no longer required. 60. In the present case, however, it was not suggested that the Court should proceed otherwise than in accordance with the unamended sub-section. That was the position at the time of trial and, relevantly, at the time the primary judge was requested to consider the question of costs in July 2015 and at the time of the hearing of the appeal in October 2015. I therefore proceed accordingly. … 68. In my view, a number of countervailing discretionary factors tend against the making of orders in favour of any of the parties as to interest on costs of both the proceedings below and now on appeal. First, it is necessary to take account of the fact that the parties have agreed that RBS should pay the plaintiffs' costs at first instance on the ordinary basis up to 26 April 2012 and that the plaintiffs should pay the costs of RBS on an indemnity basis thereafter. This split in the costs orders principally follows by reason of the first offer of compromise as opposed to the outcome of the appeal. Secondly, as already determined, I propose to make an order that Mr James pay 50 per cent of RBS's costs of the appeal and that RBS pay 50 per cent of Mr McKeith's costs of the appeal. Consequently, both Mr James and Mr McKeith submit that if they are required to pay interest on the costs awarded against them in favour of RBS, the latter should likewise pay interest on the costs incurred by them prior to 26 April 2012 as well as upon the costs of the appeal to the extent that they have been awarded in their favour. In this context, it is to be noted that Mr James did not seek an order from the primary judge that he be awarded interest on the costs awarded to him at first instance. 69. Accordingly, notwithstanding the compensatory nature of the statutory provision for the payment of interest on costs, the balance of advantage and disadvantage in the present case renders it inappropriate for such an order to be made in respect of any of the parties. Whether this case answers the description of a rare case or not, it is, in my view, one of those cases where an order for interest on costs should be refused. In these circumstances, it is unnecessary to deal in detail with the parties' submissions as to the rate of interest which would have applied had the payment of interest been upheld. Had it been necessary to deal with this issue, my tentative view is that the rate of interest to be applied is that contemplated by UCPR, r 36.7."
7. Any differences between the Court of Appeal's reasoning in Doppstadt and the form of the post-November 2015 amended Civil Procedure Act, s 101 do not matter for present purposes. It is not in contest that the transitional provisions for the November 2015 Civil Procedure Act amendments mean that the old legislation applies in this case. The parties argued the case based on the old legislation, Doppstadt and Royal Bank of Scotland principles.

Exercising the s 101 discretion

1. Invoking the pre-November 2015 form of Civil Procedure Act, s101 and Doppstadt and Royal Bank of Scotland, Mr Fernandes argued that there is a strong countervailing discretionary factor tending against the making of any orders in favour of Maganic for interest on costs.
2. Mr Fernandes argued that the Court's previous judgments, and in particular the third judgment, show that the delay in giving effect to the subdivision and in the conduct of these proceedings is partly to be placed at the doorstep of Maganic, as well as Western. By parity of reasoning with what is said in the passage from Royal Bank of Scotland cited above (at [68] - [69]), Mr Fernandes argues that the present is a case in which "The balance of advantage and disadvantage…renders it inappropriate for such an order [for interest on costs] to be made in respect of any of the parties".
3. I do not find this argument persuasive. The exercise of the Court's discretion that informed the existing orders for costs against Western that the Court made on 31 August 2016, already takes full account of the delays occasioned on both sides. The existing costs order nevertheless make a substantial award of costs against Western: namely, that Western pays two-thirds of Maganic's costs of these proceedings.
4. The Court has already considered the issue of delay and has reduced the quantum of the costs payable to Maganic for a number of discretionary reasons, including delay. When it comes to the awarding of interest on costs no further discount on this account is warranted.
5. For those reasons, in my view, an order for interest on costs should be made in Maganic's favour.
6. What is the appropriate form of order? The Court raised with the parties, as a possible template for similar orders in this case, a form of Civil Procedure Act, s 101 order, which the Court had made in other proceedings. The Court made such an order in Jones v Poletti (No. 2) [2014] NSWSC 1057 ("Poletti").
7. The parties reviewed the form of order made in Poletti and adopted it as appropriate to their circumstances. The Court will therefore make a form of order for interest on costs at the conclusion of these reasons based on the order made in Poletti.

Consequential Orders

1. In the course of the Court's third judgment in these proceedings, the Court made directions with a view to the parties reaching agreement concerning the calculation of a final figure for judgment. The parties have now reached that agreement and have set out the terms of that agreement, in orders and notations (1) to (5) below, which are made by consent. Those orders explain the various integers of the calculation and the net result.

Costs

1. The parties contested the appropriate costs order, that flows from the result of this motion.
2. The parties have had mixed success on the motion. The issue that took considerable time in argument today has resulted in a money order in Maganic's favour. In this sense, Maganic has been successful. On the other hand, Maganic has not been wholly successful: it failed to obtain any of the relief it sought in prayer for relief 1. But argument on prayer for relief 1 took little time. When Mr Fernandes put his ultimately successful argument about this prayer for relief, Mr Sneddon withdrew from the contest reasonably quickly, which shortened the Court time occupied on that issue.
3. In my view, in these circumstances the appropriate order is that the plaintiff/cross-defendant, Western, pay two-thirds of the defendants/cross-claimant's, Maganic's, costs of the motion of 6 October 2016.

Conclusion and Orders

1. For these reasons therefore the Court orders as follows: 1. ORDERS that there be judgment in favour of the Defendant against the Plaintiffs in the sum of $22,245 for 50% of the driveway costs, such order giving effect to the Court's judgment of 31 August 2016. 2. NOTES that pursuant to consent orders made on 23 August 2016, the following amounts were agreed to be owed by the Plaintiffs to the Defendant: 1. $ 11,577.75 (in relation to Order 1 (c) made on 23 August 2016); 2. $26,755.98 (in relation to Order 2 made on 23 August 2016); 3. $69,031.77 giving a total sum of $107,365.50 in favour of the Defendant against the Plaintiffs, with the only monetary amounts besides costs outstanding after that date being the driveway costs dealt with in order 1 above. 1. NOTES that the previous net set-off under Order 4A of the Court's orders of 10 June 2016 was $147,978.28 in the Plaintiffs' favour. 2. NOTES that the further amount owing to the Defendant by the Plaintiffs is in the sum of $129,610.50 (being the sum of the amount of $107,365.50 agreed on 23 August 2016 and the further sum of $22,245 in relation to driveway costs). 3. ORDERS that, in final set-off and determination of all monetary amounts owing between the parties in this proceedings besides costs, there be judgment in favour of the Plaintiffs against the Defendant in the sum of $18,367.78. 4. DISMISS prayer 1 of the Defendant/Cross Claimant's motion of 6 October 2016. 5. In relation to prayer 2 of the Defendant/Cross Claimant's motion of 6 October 2016 the Court orders that interest will be payable on the costs orders in favour of the defendant cross-claimant made in judgment (No. 3) and in this judgment, in accordance with this order. Pursuant to s 101(4) of the Civil Procedure Act 2005 the interest payable on the Defendant/Cross Claimant's costs so ordered shall be calculated at the rate set out in Uniform Civil Procedure Rules 2005, Part 36, Rule 36.7 on the Allowed Percentage of each amount of costs and disbursements paid by the defendant/cross-claimants to their legal advisers from the date on which the costs were paid until the first to occur of:
2. (a) such time as the plaintiff/ cross-defendant has paid the costs to the defendants/cross-claimant or either of them; or
3. (b) any further order relating to interest on costs in these proceedings.
4. For the purposes of subparagraph (a) above, Allowed Percentage means the formula of (Y/X multiplied by 100) percent where:
5. X equals the total amount of costs and disbursements on which the defendant/cross-claimants entitled to receive interest have paid or are liable to pay their legal advisers in connection with these proceedings; and
6. Y equals the total amount of costs and disbursements already the subject of the Court's orders in judgments 3 and 4 which are agreed or allowed on assessment to the defendant/cross-claimants, entitled to receive interest in connection with these proceedings. 1. The plaintiff/cross-defendant pay two-thirds of the defendant/cross-claimant's costs of the motion of 6 October 2016. 2. Otherwise dismiss the defendant/cross claimant's motion of the 6 October 2016. 3. Grant liberty to apply in relation to the implementation of these orders.

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. Decision last updated: 28 November 2016