Is interest payable on costs in respect of a period prior to judgment?
6 The jurisdiction conferred by s 43 of the Act to award costs is very wide. In Caboolture Park Shopping Centre Pty Ltd (In Liq) v White Industries (Qld) Pty Ltd (1993) 45 FCR 224, the Full Court, referring to s 43, said at 229:
"The jurisdiction of the Court to award costs has not been narrowly defined by Parliament and the Court is able to make such orders for the payment of costs as may be required for the just disposal of all proceedings brought before it."
The unfettered discretion of the Court to make an order for costs pursuant to s 43 was recognised by the High Court in Knight v FP Special Assets Limited (1992) 174 CLR 178, where at 185 Mason CJ and Deane J said:
"According to their natural and ordinary meaning, the words of the rule [O 91, r1 of the Rules of the Supreme Court of Queensland- similar in terms to s 43 of the Act] are sufficiently expansive to enable the Court to make an order for costs against a person, whether that person is formally a party to the proceedings or not. The jurisdiction and the discretion thereby conferred are not limited. Because they are not limited it is easy to postulate a variety of circumstances where an exercise of the jurisdiction against a non‑party would be extravagant and unjust. However, the existence of that possibility provides no justification for the imposition by the courts, by way of implication, of an arbitrary limitation upon the general jurisdiction conferred by the rule. To do so would, as will appear, deny power to the Court to order costs against a non‑party in cases in which, in the interests of justice, such orders should be made. The inevitable answer to arguments directed to limiting curial jurisdiction based on the supposition that the jurisdiction might lend itself to abuse is that the court will and should develop principles governing the exercise of the discretion which will ensure that the jurisdiction is not exercised in such a way as to give rise to abuse. And that is the answer to the appellants' case to the extent to which it seeks to confine the scope of the jurisdiction by reference to arguments in terrorem."
In Caboolture Park Shopping Centre Pty Ltd (In Liq) v White Industries (Qld) Pty Ltd (supra) the Full Court considered s 43 to be no narrower than O 91 r1 of the Rules of the Supreme Court of Queensland.
7 Notwithstanding the discretion contained in s 43, it is still necessary to determine whether the power contained in that section extends to awarding interest on any costs ordered to be paid. Flower & Hart contended that no such jurisdiction is conferred explicitly by the section and that there is no basis for implying a power in s 43 to award interest on costs. An implication of a power in s 43 to award interest on costs should only be found if such power is incidental to and necessary for the exercise of the primary grant of power: cf Parsons v Martin (1985) 5 FCR 235 at 241. I do not consider that it is incidental to, or necessary for, the exercise of the grant of jurisdiction in s 43 to award costs that there be appended a power to order interest on such costs. More particularly is this so in an Act where there are specific provisions set out for the payment of interest: s 51A and s 52 (see also O 62 r45(4) of the Federal Court Rules). Conceptually, orders for the payment of costs and orders awarding interest are based on quite different rationales. In Latoudis v Casey (1990) 170 CLR 534 Mason CJ said at 543:
"If one thing is clear in the realm of costs, it is that, in criminal as well as civil proceedings, costs are not awarded by way of punishment of the unsuccessful party. They are compensatory in the sense that they are awarded to indemnify the successful party against the expense to which he or she has been put by reason of the legal proceedings ..."
An award of interest rather is made to compensate a party who has been deprived of the use of money otherwise due to, or recoverable by, that party: see generally Hungerfords v Walker (supra).
8 White relied upon McWilliams Wines Pty Ltd v Liaweena (NSW) Pty Ltd (1993) 32 NSWLR 190 where Rogers CJ Comm D concluded that s 76 of the Supreme Court Act 1970 (NSW) (which was in equivalent terms to s 43 of the Act) empowered the Court to order that the defendant pay the plaintiff interest on the plaintiff's taxed costs and that such interest should be paid from the respective dates on which the plaintiff made payment of costs to its solicitors. Section 76 provided:
"(1) Subject to this Act and the rules and subject to any other Act:
(a) costs shall be at the discretion of the Court,
(b) the Court shall have full power to determine by whom and to what extent costs are to be paid, and
(c) the Court may order costs to be assessed on the basis set out in Division 6 of Part 11 of the Legal Profession Act 1987 or on an indemnity basis.
(2) …
(3) …"
9 The reasoning of Rogers CJ is a little elusive. His Honour accepted that s 76 of the New South Wales Act was intended to give the Court the widest possible power and discretion in the allocation of costs. His Honour observed that in AWA Limited v Daniels t/as Deloitte Haskins and Sells (Rogers CJ Comm D, 19 April 1993, unreported) he had ordered the payment of interest on costs running from the date when payment was made by the successful plaintiff to its solicitors on account of costs. His Honour said at 193:
"I record, without comment, that, in that case, there was no argument that there was an absence of power to make such an order. I record with embarrassment that it did not occur to me that there may be an argument for an absence of power when I made the order."
His Honour did not then consider whether there was any argument for the absence of power but reasoned:
"It seems to me that, in the circumstances, I should hold that power is conferred by s 76 and make an order notwithstanding the fact that the notice of motion did not seek the Court's exercise of that power. I raised that question with the parties, at the time of the argument taking place, and it was not suggested by anyone that there may be an injustice in exercising a power not specifically sought to be invoked by the notice of motion. Bearing in mind that the Court has clear power under the Act to assess costs for itself and in that assessment to include an amount for interest, bearing in mind the disbursements made by the successful party on account of costs at an earlier point of time, it would be odd if the same could not be achieved by taking the orthodox course of requiring costs to be taxed and then making an order for interest to be paid on those costs."
It is not immediately apparent why his Honour concluded that the Court had "clear power" to include interest in the assessment of costs.
10 There were separate sections in the New South Wales Act dealing with the payment of interest (s 94 and s 95). Even if one reads s 76 broadly, and without any implication of any limitation on the discretionary power to award costs, I do not consider that it encompasses a power to award interest on costs. The issue became academic in New South Wales after McWilliams Wines Pty Ltd v Liaweena (NSW) Pty Ltd (supra) as a result of an amendment to s 95 of the New South Wales Act which contained a provision for the payment of interest on costs. Subsection (4) was inserted in s 95 by Act No 88 of 1995 (assented to on 19 December 1995) and it provided:
"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."
11 McWilliams Wines Pty Ltd v Liaweena (NSW) Pty Ltd (supra) does not appear to have been followed in any other case. A contrary view of similar statutory provisions was taken by the Full Court of the Supreme Court of South Australia in South Australian Superannuation Fund Investment Trust v Leighton Contractors Pty Ltd (1996) 66 SASR 509. The issue before the Court was whether an arbitrator under the Commercial Arbitration Act 1986 (SA) had power to award costs on an indemnity basis and power to award interest on costs. The arbitrator had stated in his award:
"6. My award is that Leighton Contractors pay to the South Australia Superannuation Fund Investment Trust the sum of $438,617.00 (four hundred and thirty eight thousand, six hundred and seventeen dollars), plus interest at the Supreme Court rate from July 1st 1991 until the date of this Award. Interest at the same rate at which interest is payable on a judgement debt in the Supreme Court will be payable on the amount of the Award, from 21 days after the date of the Award, until payment is made."
Section 31 (the equivalent of s 51A) provided:
"(1) Unless a contrary intention is expressed in the arbitration agreement, where the arbitrator or umpire determines to make an award for the payment of money (whether on a claim for a liquidated or an unliquidated amount), the arbitrator or umpire shall, subject to subsection (2), have power to include in the sum for which the award is made interest at such rate as the arbitrator or umpire may direct (being a rate not exceeding the rate at which interest is payable on a judgment debt of the Supreme Court) on the whole or any part of the money for the whole or any part of the period between the date on which the cause of action arose and the date on which the award is made.
(2) Subsection (1) does not -
(a) authorise the awarding of interest upon interest;
(b) apply in relation to any amount upon which interest is payable as of right whether by virtue of an agreement or otherwise;
or
(c) affect the damages recoverable for the dishonour of a bill of exchange."
Section 32 (the equivalent of s 52) provided:
"(1) Unless a contrary intention is expressed in the arbitration agreement, where the arbitrator or umpire makes an award for the payment of money, the arbitrator or umpire shall have power to direct that interest at the same rate as that at which interest is payable on a judgment debt of the Supreme Court shall be payable from the date of making of the award or such later date as the arbitrator or umpire may specify on so much of the money as is from time to time unpaid and any interest that so accrues shall be deemed to form part of the award.
(2) If judgment is entered by the Court in terms of an award, interest shall cease to accrue in pursuance of a direction under this section on the date of the entry of the judgment."
At 513 Matheson J, with whom Bollen and Millhouse JJ agreed, said:
"In my opinion, the arbitrator invoked s 31 when he awarded interest on the sum of $438,617 in the first sentence of par 6 of his award. I am unable to see how s 31 can now have any further application. The arbitrator invoked s 32 when he awarded interest in the second sentence of par 6. In the event that costs ultimately became part of the award in the sense of a monetary amount, (say, $50,000) interest would 'be payable from the date of the making of the award or such later date as the arbitrator … may specify …' That award would not be 12 August 1994 (supra), but the actual date it came to be made, and it would not be possible to order interest from any earlier date. Moreover, it could only be 'at the same rate as that at which interest is payable on a judgment debt of the Supreme Court'.
There is no statutory or common law authority for the award of compound interest.
Reference was made to McWilliams Wines Pty Ltd v Liaweena (NSW) Pty Ltd (1993) 32 NSWLR 190, where Rogers CJ Comm D ordered interest on taxed costs, but he expressly relied on s 76 of the Supreme Court Act 1970 (NSW), and accordingly the case does not assist the applicant."
The Full Court therefore held that the arbitrator did not have any power under a section in equivalent terms to s 51A of the Act to award interest on costs in respect of a period prior to the date of the award of the costs.
12 I would with respect differ from the conclusion reached by Rogers CJ that the power conferred by s 76 of the New South Wales Act, and by analogy s 43 of the Act, conferred clear power to include in an assessment of costs an order for the payment of interest on those costs. Notwithstanding the broad discretion granted by s 43 of the Act I do not consider that it extends to the ordering of interest on any costs to be awarded. The observation of Lord Nicholls in Nykredit Mortgage Bank Plc v Edward Erdman Group Ltd (supra), albeit in a different context, is apposite in this context. His Lordship said at 1636:
"However desirable it might be for the court to have power to order the payment of interest on costs from a date earlier than the date on which the court gives judgment, I do not think such a power can be squeezed out of this rule. That would be to use the rule as a means of doing indirectly what the court has no power to do directly."
I would however agree with the reasoning of the Full Court in South Australian Superannuation Fund Investment Trust v Leighton Contractors Pty Ltd (supra). Under s 31 of the South Australian Act interest is only payable in respect of an award of the "payment of money." The section does not, in its terms, allow for the payment of interest on any costs as such ordered to be paid. But that decision does not resolve the present issue because of the cause of action White alleged against Flower & Hart which gave rise to the entitlement in White to recover its costs of the principal proceeding from Flower & Hart.
13 White relied in the alternative on s 51A(1) of the Act which provides:
"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."
14 The cornerstone of Flower & Hart's submission was that White's application for costs against Flower & Hart was an application made pursuant to s 43 and that an order for costs under that section cannot entitle a person to make application for interest on those costs pursuant to s 51A as there is no relevant cause of action within s 51A(1).
15 Flower & Hart submitted that the opening words in s 51A(1) "In any proceedings for the recovery of any money" were not appropriate to cover a claim for costs which is endorsed on an application or a writ in which substantive relief is sought. That may be so, but in the present case there is a proceeding for the recovery of money instituted by the notice of motion filed by White on 7 May 1993 specifically seeking an order that Flower & Hart pay its costs of the principal proceeding. That motion sought an order that Flower & Hart "pay all of White's costs of the action". So expressed the motion sought the recovery of money within s 51A(1) albeit money that was the costs White had incurred in the principal proceeding. The term "proceeding" is defined in s 4 of the Act as including:
"an incidental proceeding in the course of, or in connexion with, a proceeding".
Accordingly the motion was a proceeding for the recovery of money within s 51A.
16 It was put by Flower & Hart that in order for White to rely upon s 51A to obtain interest on its costs order against Flower & Hart s 51A must apply to any application for costs. I do not accept this submission. In the present case there is a particular application made for costs which is predicated, not upon White's success in the principal proceeding as against Flower & Hart, but rather upon a particular claim or cause of action against Flower & Hart directly which gives an entitlement to recover money from Flower & Hart for and in respect of the costs White incurred in the principal proceeding. Although it is s 43 of the Act which gives rise to an entitlement to a party to a proceeding to have its costs paid, White's claim against Flower & Hart was made by reference to a cause of action identified in its amended statement of facts and contentions, based upon abuse of process and breach of Flower & Hart's duty to the Court. It is an over simplification of White's claim against Flower & Hart simply to call it an application for costs pursuant to s 43 of the Act. Although s 43, itself, may not warrant an order that interest be paid on any costs ordered, there is in the present case a cause of action which arises independently of s 43, which seeks "the recovery" of money expended by way of costs . That cause of action falls within s 51A(1).
17 The cause of action, upon which White relied in order to obtain the order for costs, would entitle it to obtain that order whether or not s 43 existed. In essence, White was claiming that it was put to expense and suffered loss and damage as a result of the abuse of process and breach of duty to the Court to which Flower & Hart was a party. White has succeeded in that claim. In my earlier reasons for judgment I said, at 249:
"The consequence is that Flower & Hart breached the duty it owed to the court to conduct proceedings before the court with propriety, not to be a party to an abuse of process and not to obstruct or defeat the administration of justice."
It is as a result of that conclusion that White can recover its costs of the principal proceeding from Flower & Hart.
18 Counsel for Flower & Hart submitted that within the framework of the proceeding brought by Caboolture Park against White, the only avenue open to White to obtain its costs was an application under s 43 of the Act for the Court to exercise its discretion in its favour, whether that be against Caboolture Park or Flower & Hart. Counsel for Flower & Hart correctly pointed out that White could have sued Flower & Hart in another jurisdiction in tort for damages, in which case an equivalent statutory provision under s 51A(1) of the Act would have applied to any damages awarded. Flower & Hart submitted that I should not look at White's notice of motion filed 7 May 1993 in terms of seeking damages in tort but rather as an application pursuant to s 43 of the Act, namely an application for costs in the exercise of the Court's discretion under s 43.
19 I do not consider that I should view White's application by that notice of motion so narrowly. The substantive part of the notice of motion filed 7 May 1993 is in the following terms:
"2. That, in addition to the costs orders made by Ryan J on 17 August 1989 and 6 April 1990, Flower & Hart pay all of White Industries (Qld) Pty Ltd's costs of the action other than those costs that are solely referrable to White Industries (Qld) Pty Ltd prosecuting its cross‑claim, except insofar as such costs are an unreasonable amount or have been unreasonably incurred, such that White Industries (Qld) Pty Ltd are completely indemnified by Flower & Hart for these costs and interest on these costs.
3. That the costs are to be specified as a gross sum by Ryan J on a date to be fixed, or to be ascertained in such other manner as on that date he may direct."
White's statement of facts and contentions alleged that Flower & Hart breached its duty to the Court in the manner in which it commenced, continued and conducted the principal proceeding. One aspect of the duty alleged was a duty not to abuse or facilitate the abuse of the Court's process. It was then alleged that the circumstances of the case as pleaded were:
"an appropriate occasion for the exercise of the court's power to order the respondent to pay the applicant's costs of and incidental to defending the proceedings on an indemnity basis together with interest on that amount at the rate or rates and on such terms as to the compounding of those rates in the calculation of interest as will ensure that the applicant recovers all loss suffered as a result of the respondent's conduct or such as the court as may seem just."
Flower & Hart in its statement of contentions admitted that at all material times it owed a duty to the Court:
"(a) To conduct the proceedings before the Court with due propriety.
(b) to be honest with the Court.
(c) Not to act so as to obstruct or defeat the administration of justice by the Court.
(d) Not to be a party to an abuse of the Court's process."
It denied any breach of the duties it owed to the Court.
20 It can therefore be seen that the substance of the application made, and the manner in which it was argued, was predicated upon a substantive cause of action and not simply upon White's success in the principal proceeding.
21 Flower & Hart relied on the Commonwealth of Australia v SCI Operations Pty Limited (1998) 192 CLR 285 for the proposition that no cause of action arose in favour of White until the judgment upon White's notice of motion had been delivered. In that case the relevant cause of action only arose on the day upon which the Commonwealth refunded the customs duty to the importer so that there was no period of time in respect of which interest could run. In short, no cause of action had arisen under the refund provisions of the Customs Act 1901 (Cth) when the proceeding was commenced. The distinction between the present case and what was before the High Court was adverted to by McHugh and Gummow JJ at 316:
"The present is not a case where the assertion is that the appellant's breach of contract or negligence has caused the respondents to pay away or the appellant to withhold money and as a result the respondents have been deprived of the use of the money so paid away or withheld. Nor do the respondents seek an award of damages representing compensation for a wrongfully caused loss of their money, which is assessed wholly or partly by reference to the interest which would have been earned by safe investment of the money."
22 The cause of action upon which White must rely, in order to come within s 51A(1), is its cause of action against Flower & Hart, not the cause of action in the principal proceeding by Caboolture Park against White. It is the former cause of action which gives rise to the recovery of money which creates the right for there to be included in the judgment sum interest pursuant to s 51A(1). I see no warrant for construing s 51A(1) narrowly so as to exclude from its operation an award of costs where those costs are awarded to a party not as a consequence alone of that party succeeding in a proceeding but rather as a consequence of that party obtaining an order for those costs because of a separate and distinct claim or cause of action which has arisen as a result of the conduct of the party against whom the costs order is sought. Wilcox J said in State Bank of New South Wales Ltd v Federal Commissioner of Taxation (1995) 132 ALR 653 at 665:
"[section] 51A(1) is a facultative provision intended to confer power on the court to do justice between parties in relation to pre‑judgment interest, a matter of some importance in these days of high interest rates and extensive delays in finalising litigation. The subsection should be interpreted as widely as its language allows."
I adopt this observation in support of my conclusion that s 51A(1) entitles White to claim interest on the amount of costs ordered to be paid to it as a result of its success on its notice of motion.
23 It was a key part of Flower & Hart's submission that s 51A was inapplicable because White could not establish the existence of a cause of action for costs earlier than the date on which I held that White was entitled to have Flower & Hart pay its costs. However, as appears from my earlier reasons for judgment, Flower & Hart was involved in an abuse of process and a breach of the duty it owed to the Court on and from the date on which the principal proceeding was filed on 23 December 1986 (p 248). White started to incur and pay costs in defending the principal proceeding from at least 30 March 1987 when it filed its defence and cross‑claim. That abuse of process and breach of duty matured and was completed when Ryan J dismissed Caboolture Park's claim on 17 August 1989. Certainly from that point White had an entitlement to proceed against Flower & Hart to recover the costs and expenses it had incurred in defending the principal proceeding.
24 Flower & Hart emphasised that pursuant to s 51A(1) of the Act interest was only payable on an amount of the judgment which was awarded in respect of the principal claim in the proceeding and formed no part of the costs of the proceeding. Flower & Hart pointed out that the expression "recovery of money" in s 51A(1) was inclusively defined as including "any debt or damages or the value of any goods". According to Flower & Hart, this definition of "recovery of money" demonstrated that there had to be an amount of money ordered other than in relation to costs before interest could be awarded. In support of this proposition it relied upon Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97 where at 103 Spender J said:
Interest under s 51A is part of the judgment: see s 51A(1). As a matter of principle, it is part of the loss or damage suffered by the applicants representing the compensation for being out of pocket to the extent of the principal amount." (emphasis added)
It may be that in a case where a sum of money is recovered (not in any way relating to any costs incurred) interest is only payable on that amount of the judgment pursuant to s 51A(1) and not on any costs awarded as part of the judgment. But in the present case, the proceeding in respect of which the amount of $1.65 million is to be ordered to be paid, is the proceeding instituted by the notice of motion on 7 May 1993 which sought an order for the payment of costs. The observation of Spender J does not apply, in my view, to White's claim against Flower & Hart for its costs of the principal proceeding brought by way of that notice of motion.
25 Although the Full Court of South Australia in South Australian Superannuation Fund Investment Trust v Leighton Contractors Pty Ltd (supra) concluded that the equivalent section to s 51A(1) did not allow for an order for interest on costs in respect of a period prior to the date of the award, that decision does not cover the situation of a proceeding for the recovery of costs, such as occurred in the present case.
26 The Court has a very wide discretion pursuant to s 43 of the Act to order costs against a non‑party: Knight v FP Special Assets Limited (supra) and although the power of the Court to order costs against a solicitor representing a party to a proceeding may be founded partly on its jurisdiction over its own officers: Caboolture Park Shopping Centre Pty Ltd (In Liq) v White Industries (Qld) Pty Ltd (supra) at 231, the reason why the order has been made in the present proceeding is because of the abuse of process and breach of duty to the Court to which Flower & Hart was a party.
27 It is not therefore necessary to read into s 51A(1) any other words to reach this conclusion. White submitted that the introductory words of s 51A(1) should be read in the following way:
"In any proceedings, for the recovery of money (including any debt or damages or the value of any goods) in any proceedings in respect of a cause of action …" (emphasised words added)
Such a construction was placed on s 73 of the Common Law Practice Act 1967 (Qld) by the Queensland Court of Appeal in Inglis v Gould [1993] 2 Qd R 250. That decision is of little assistance in the present proceeding as the provisions in the Queensland Act were different from the relevant provisions in the Federal Court of Australia Act.
28 I am satisfied that s 51A(1) provides a statutory basis for an order that interest be paid at an appropriate rate on the costs of $1.65 million.