Woolworths Limited v Strong

Court of Appeal (NSW)|2011-05-04|Before: Campbell JA, Harrison J

Judgment 1CAMPBELL JA : The Appellant in this case was the occupier of a shopping centre in which the First Respondent slipped and fell. In the District Court the First Respondent recovered a judgment against the Appellant. 2The District Court judge granted a stay of the judgment provided that 50% of the verdict monies were paid to the First Respondent within 28 days. 3Within the 28 days, on 28 September 2009 the solicitors for the Appellant sent to the solicitors for the First Respondent a bank cheque for $285,768.66. 4The judgment in favour of the First Respondent was reversed on appeal on 2 November 2010: Woolworths Limited v Strong [2010] NSWCA 282.

Statutory Provisions Relevant to Restitution 5Section 75A(10) Supreme Court Act 1970 provides, concerning appeals to the Court of Appeal: "The Court may make any finding or assessment, give any judgment, make any order or give any direction which ought to have been given or made or which the nature of the case requires." 6This power is supplemented by UCPR 51.54, which provides: "If any step has been taken for the enforcement of a judgment or order that the Court varies or sets aside, the Court may make such orders for reinstatement or restitution as it thinks fit." That provision empowers the Court of Appeal, when a judgment that has already been paid in whole or part is set aside, to make an order for restitution of the amount that was paid under the judgment. 7Uniform Civil Procedure Rule 51.19 provides: "An appellant or cross-appellant who seeks an order for reinstatement or restitution must include in the notice of appeal or notice of cross-appeal: (a) a claim for the order and the form of the order, and (b) where restitution is sought-any claim for interest that is at a rate other than the relevant rate set out in rule 36.7(1)." 8Section 101(1) Civil Procedure Act 2005 provides: "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." 9Section 101(7) makes provision for the rate of interest to be that which is prescribed from time to time. It is UCPR 36.7 that sets out the rate of interest payable pursuant to section 101. Until 1 July 2010 (though no longer) UCPR 36.7 set out the rate by reference to a table of rates of interest contained in Schedule 5 of the Rules. Before enactment of the UCPR , the rates were fixed by reference to a table contained in Schedule J of the Supreme Court Rules. 10Thus, section 101 Civil Procedure Act and the rates of interest prescribed pursuant to it are not made applicable, as a direct matter of statutory construction, to any order for payment of interest if, following an appeal, an order is made for restitution or reinstatement of the amount paid. However, UCPR 51.19 requires the notice of appeal to specifically state if the appellant seeks restitution, with interest at a rate other than the rate prescribed under UCPR 36.7.

The Claim for Restitution in this Appeal - History 11In partial compliance with UCPR 51.19, the Amended Notice of Appeal in the present case listed amongst the relief claimed: "Restitution with interest on the fifty percent of the verdict sum ordered to be paid by the court below." 12My judgment on the appeal referred to that claim for restitution and continued, at [76]-[77]: "... It is appropriate to make such an order. However the court has not been informed of the amount actually paid, or when it was paid, so it is not at present possible to make an order for repayment of a precise sum. If any greater formality is required than the order for restitution as proposed below, and the parties agree on Short Minutes to effect that change and submit them to me in chambers within 10 days of the handing down of these reasons for judgment, I indicate that I would be prepared to exercise the powers under Part 36 rule 36.16(3B) Uniform Civil Procedure Rules to vary the order for restitution in accordance with the agreement of the parties. If the parties do not so agree, and the Appellant wishes to achieve greater formality in the order for restitution, Part 36 rule 36.16(3A) UCPR would require such a change to be sought by filing a Notice of Motion and any affidavits within 14 days of the handing down of these reasons for judgment." 13The order for restitution actually made was: "(6) Order the First Respondent to pay to the Appellant any amount she has received in payment or partial payment of the judgment in the court below, together with interest at the rate prescribed pursuant to section 101 Civil Procedure Act 2005 from the date the First Respondent received that sum to the date she repays it." 14The inability of the court to make a precise order for restitution at the time of handing down judgment arose from the failure of the Appellant to comply in full with UCPR 51.19. A notice of appeal that states the form of the order for restitution that is sought must state the sum concerning which restitution is sought, and the time period over which interest is sought. Further, if the court is to actually make the order for restitution at the time of delivering judgment on the appeal, there must be evidence before the court which establishes the amount that has been paid and the date of payment. Such evidence has been placed before us for the present application. It is appropriate for the Court of Appeal to receive this type of evidence on appeal under section 75A(9) Supreme Court Act 1970 , even though that evidence would not have been before the court below, because it relates to events which have occurred after the judgment. 15The day after the judgment was handed down, the solicitors for the Appellant had written to the solicitors for the First Respondent seeking repayment of the principal that had been paid, foreshadowing that interest on that amount could be paid later (as the time during which interest would run would only be known once the principal was repaid) and enquiring whether any greater formality was needed than the actual order that had been made. 16The solicitors for the First Respondent replied, saying nothing concerning the questions they had been asked, but foreshadowing that they would seek a stay of orders pending an application for Special Leave to Appeal to the High Court. However, there was no further communication from the solicitors for the First Respondent before the expiry of the 14-day period fixed by UCPR 36.16(3A). 17Within 14 days of the handing down of the judgment, on 16 November 2010 the Appellant filed a Notice of Motion seeking restitution of the amount that had been paid on 28 September 2009, together with interest on that amount at the rates prescribed by section 101 Civil Procedure Act and UCPR 36.7, together with its costs of the motion. 18Though the First Respondent has filed an Application for Special Leave to Appeal to the High Court, no application for a stay of any order has been made. 19The Appellant's Notice of Motion seeking restitution was returnable on 22 November 2010. 20On 22 November 2010 the legal representatives of the parties told the Registrar that there was expected to be an agreement on the terms of the orders. The matter was adjourned to 6 December 2010. 21By 6 December 2010 no agreement had been reached. The Registrar gave directions for the Appellant to file and serve its submissions by 14 January 2011, and for the First Respondent to file and serve her submissions by 4 February 2011. 22No submissions had been received by 11 February 2011 from either party. The Registrar listed the matter for directions on 21 February 2011. On that date, the Appellant handed up submissions in court. On the basis of a further indication that a resolution of the matter was expected, the Registrar granted an adjournment to 28 February 2011. 23By 28 February 2011, there was still no resolution, so a direction was made for the First Respondent to file and serve submissions by 14 March 2011. On 24 March 2011 the solicitors for the First Respondent requested a further extension of time in which to file submissions. That extension was granted, to expire on 31 March 2011. 24On 31 March 2011, the First Respondent filed written submissions.

Restitution Following Successful Appeal of Judgment Debts Paid - Principles 25There is ample authority that when a judgment that has been paid in whole or part is reversed on appeal, the appellant is entitled as of right to restitution of the sum paid, with interest: Commonwealth v McCormack (1984) 155 CLR 273 at 276; Production Spray Painting and Panel Beating Pty Ltd v Newnham [No 2] (1991) 27 NSWLR 659 at 661-662; Haig v Minister Administering the National Parks and Wildlife Act [No 3] (1996) 90 LGERA 408; TCN Channel 9 Pty Limited v Antoniadis [No 2] (1999) 48 NSWLR 381; Krishna v Loustos (No 2) [2001] NSWCA 99 at [4] per Spigelman CJ, Mason P and Handley JA; Heydon v NRMA (No 2) [2001] NSWCA 445; 53 NSWLR 600 at [12]-[23] per Mason P (Beazley JA and Ipp AJA agreeing); Ambulance Service of New South Wales v Worley (No. 2) [2006] NSWCA 236; 67 NSWLR 719 at [25]-[34] per Basten JA (Tobias and McColl JJA agreeing); Nationwide News Pty Ltd v Naidu (No 2) [2008] NSWCA 71 at [10] per Spigelman CJ, Beazley and Basten JJA; K Mason, J W Carter & G J Tolhurst, Restitution Law in Australia 2 nd ed (2008) Chapter 7.

The Rate of Interest 26The First Respondent does not dispute that she should repay the amount she received under the District Court judgment, with interest. The sole issue raised by the First Respondent concerns the rate of interest she should be required to pay. The Appellant had submitted that interest should be paid from 28 September 2009 at the various rates prescribed from time to time under the Civil Procedure Act 2005 and UCPR 36.7 for payment of interest on judgment debts. The First Respondent submits that she should only be required to pay interest at market rates, and that the appropriate measure of those market rates is the cash rate of the Reserve Bank of Australia (" RBA ") from time to time. 27In Heydon (No 2) at [32], Mason P said it was the practice of the Court "to award restitutionary interest at the rates payable on judgments unless special circumstances exist" . At [31] his Honour had explained that this approach is taken, in part, because "[t]here is no reason to assume that the [Schedule J] rates are fixed in disregard of commercial reality or that they embody a deterrent or punitive intent". However in Cai v Zheng (No 2) [2009] NSWCA 317 Basten JA (Giles JA and Hoeben J agreeing) referred to the way that Mason P in Heydon (No 2) had formulated the court's practice concerning payment of interest on orders for restitution following a successful appeal and said, at [32]: "It is open to the court to deny an appellant interest in appropriate circumstances. There is always a danger in seeking to identify guiding principles, to which a court will usually adhere, by stating a practice subject to an exception arising in "special circumstances". Rather, the question is whether, in all the circumstances of a particular case, it is appropriate to award interest on an order for repayment of an amount of a judgment, paid in part as a condition of a stay." 28There may be room for argument about whether that statement is consistent with Heydon v NRMA (No 2) per Mason P at [30]-[31], where one of the reasons his Honour gave for the court adopting the practice of ordering restitution with interest at the rates appropriate to unsatisfied judgments was the impracticality of the court investigating the financial circumstances of a party every time an application for restitution was made. There may also be room for argument about whether the statement in Cai v Zheng (No 2) is consistent with Antoniadis [No 2] at [5]-[8], where this Court (Handley, Beazley and Stein JJA) rejected an argument that the predecessor of UCPR 51.54 conferred, through the word "may" , a discretionary power to withhold restitution. Rather, Antoniadis [No 2] held it was the sort of provision that conferred a power which must be exercised, if the circumstances were appropriate for its exercise. However, Antoniadis [No 2] still left some room for discretion to affect some aspects of the granting of restitution following reversal of a paid judgment. At [8], the Court said: "Of course orders for restitution may be moulded on discretionary grounds to provide for matters such as the date for repayment or delivery of possession, and perhaps for a stay of execution on appropriate security being given." 29Their Honours in Antoniadis [No 2] also, at [14], accepted that they would have power to grant a temporary stay pending the hearing of an application for special leave to appeal to the High Court, or to allow the opponent time to raise the funds by sale or mortgage of assets. 30It is not necessary to face any of those potential problems in the present case. The First Respondent accepts that she bears the onus of persuading the court that the rate should differ from the prescribed rate (cf Heydon (No 2) at [36]). She submits that the appropriate interest rate should be significantly lower than the prescribed rate for the following reasons: "(a) The Court's powers as to ordering interest are discretionary; (b) The payment of interest above the RBA cash rate would amount to a windfall for the Appellant because it would profit from receiving a higher rate of interest that what it would have received, for example, by holding such sum in a regular bank account; (c) The First Respondent was in a position only to receive interest at an amount lower than or equal to the RBA cash rate; (d) The First Respondent would have tax liability in relation to holding the amount after being paid following the District Court proceedings, but if ordered to repay the amount in accordance with the prescribed rate, she would not only suffer a tax liability for money she no longer holds but would also have to pay the difference between the RBA cash rate and the prescribed rate to the Appellant; (e) The First Respondent is a natural person in stark contrast to the Appellant, which is a major corporate entity. (f) In Wallersteiner v Moir (No 2) [1975] QB 373 it was held that an award of interest at a lesser rate than court rates is appropriate if there is good cause for so doing in the special circumstances of the particular case. In such circumstances, it is incorrect to adopt a merely conventional rate of interest: see Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390 at 409. (g) In Hexia Pty Limited and ors v Lederer and ors (2) [2007] NSWSC 49 at [19] it was noted that the purpose of the prescribed rates being higher than market rates is to provide an incentive to judgment debtors to pay quickly. A purposive interpretation of s 101 in relation to this motion favours the First Respondent in that she is not a judgment debtor who needed encouragement to pay her judgment debt. She received part of her verdict and is now required to repay the damages which had been paid to her as a condition of the grant of a stay pending the appeal. (h) The compensatory nature of the order as to restitution is such that the First Respondent should only be required to pay interest at market rates." 31I do not accept that those reasons provide a justification from departing from the prescribed rate. The rationale of a court ordering restitution in favour of a successful appellant when a judgment that is reversed on appeal has been paid is explained in Commonwealth v McCormack at 276: " 'Restitutio in integrum is the right of every successful appellant': per Lord Field in Cox v Hakes (1890) 15 App Cas 506, at p 547. An appellant who has satisfied a judgment for the payment of money is entitled, on the reversal of the judgment, to repayment of the money paid by him with interest: Rodger v The Comptoir D'Escompte de Paris (1871) LR 3 PC 465, Merchant Banking Co v Maud (1874) LR 18 Eq 659. In the former case, Lord Cairns said (1871) LR 3 PC at p 475: '... one of the first and highest duties of all Courts is to take care that the act of the Court does no injury to any of the Suitors, and when the expression "the act of the Court" is used, it does not mean merely the act of the Primary Court, or of any intermediate Court of appeal, but the act of the Court as a whole, from the lowest Court which entertains jurisdiction over the matter to the highest Court which finally disposes of the case.' Isaacs and Rich JJ espoused the principle in Heavener v Looms (1924) 34 CLR 306 at pp 323-324. It follows that the Commonwealth is entitled to an order for the repayment of the amount which it paid in satisfaction of the judgment first entered against it in Mr McCormack's action but reversed on appeal to the Full Court of the Federal Court." 32Earlier, in The Commissioner for Railways (New South Wales) v Cavanough (1935) 53 CLR 220 at 225 Rich, Dixon, Evatt and McTiernan JJ had approved a statement in Archbold's Criminal Pleading, Evidence and Practice , 21 st ed (1893), at 226, 227 that: "... upon the reversal of a judgment against any person convicted of any offence, the judgment, execution and all former proceedings become thereby absolutely null and void. If living, he (or if dead, his heir or personal representative, as the case may be) will be entitled to be restored to all things which he may have lost by such erroneous judgment and proceedings, and shall stand in every respect as if he had never been charged with the offence in respect of which judgment was pronounced against him" (emphasis added) 33In other words, the focus of the granting of restitution to a successful appellant is that an act of the court, namely the granting of a judgment in the court below, has harmed the appellant when it obeyed the court's order and paid that judgment. The restitution that must be made is to the appellant. Interest is awarded because it is only if both the principal, and also interest, are paid to the appellant that the appellant can be put back in the situation in it would have been in, if the lower court had not incorrectly granted judgment against it. As Lord Cairns said in Rodger at 475-476, successful appellants: "... will by reason of an act of the Court have paid a sum which it is now ascertained was ordered to be paid by mistake and wrongfully. ... injustice will be done to the [appellants], and that the perfect judicial determination which it must be the object of all Courts to arrive at, will not have been arrived at unless the persons who have had their money improperly taken from them have the money restored to them, with interest, during the time that the money has been withheld." 34The House of Lords has arrived at a similar explanation for the basis of the court's power to award restitution following a successful appeal. Lord Nicholls of Birkenhead (with whom all other Lords sitting agreed on this point) said that the power to award restitution with interest "fall[s] squarely within that range of powers which are necessarily implicit if a court of law possessed of appellate functions is to carry out its prescribed functions properly": Nykredit Mortgage Bank plc v Edward Erdman Group Ltd [1997] 1 WLR 1627 at 1637. 35Both the High Court and the House of Lords have explained the basis for restitution following a successful appeal as being that it is a necessary attribute of there being a court system of appeals, in which a possible outcome is that a judgment given below is set aside. That explanation for the basis is completely consistent with the original payment under the judgment being not only not the commission of a wrong on anyone's part, but an act that the law positively required for so long as the judgment was on foot and not subject to a stay. As Ben McFarlane, "The Recovery of Money Paid under Judgments Later Reversed" [2001] Restitution Law Review 1 points out, that basis exists without there being any need to force restitution following a successful appeal into the conceptual straightjacket of being a subcategory of recovery of payments made under duress, or recovery of payments whose basis has failed. (Some writers persist in attempts to impose the straightjacket, eg AJ Papamatheos, "What are the juridical bases of reversal of judgment restitution?" (2004) 25 Australian Bar Review 268, but courts have seen no need to follow.) 36In Heydon (No 2) at [19] and [21] some reference was made to the restitution being to restore both parties to the situation they would have been in if the first instance judgment had not been given. I regret that I cannot see how those remarks are consistent with the statement of principle I have quoted at [31] from McCormack . Further, it will usually be the case that the benefit that a plaintiff successful in the court below will have obtained from payment of a judgment sum will not be equal to the detriment that the defendant in the court below has sustained by making the payment. Thus, it will usually not be possible to restore both of them to the situation they would have been in if the payment had not been made. A need to restore the plaintiff who succeeded in the court below to the situation it had been in did not enter into the result of Heydon (No 2) , because the outcome was that restitution was ordered with interest at the prescribed rates - thus the remarks about the need to restore both parties are dicta. When they are not consistent with a statement of principle by the High Court, my duty is to follow the High Court.

Basis for Fixing RBA Cash Rate and Court's Prescribed Rate 37One would need to understand the basis on which the RBA sets its cash rate before adopting it as the appropriate measure of interest to be paid upon a judgment reversed on appeal that is the subject of restitution. One would also need to understand the basis on which the court sets its prescribed rate before deciding whether a case had been made out for departing from it, for the purpose of setting such a rate. 38Until 1 July 2010, UCPR 36.7(1) said: "The prescribed rates at which interest is payable under section 101 of the Civil Procedure Act 2005 are as set out in Schedule 5." 39As at 30 June 2010, Schedule 5 UCPR prescribed a rate of 9% to apply at all dates after 5 March 2009. 40Effective from 1 July 2010, UCPR 36.7(1) was amended to read: "(1) The prescribed rate at which interest is payable under section 101 of the Civil Procedure Act 2005 is: (a) in respect of the period from 1 January to 30 June in any year-the rate that is 6% above the cash rate last published by the Reserve Bank of Australia before that period commenced, and (b) in respect of the period from 1 July to 31 December in any year-the rate that is 6% above the cash rate last published by the Reserve Bank of Australia before that period commenced. 41The RBA website http://www.rba.gov.au/glossary/index.html says: "Broadly defined, the term cash rate is used to denote the interest rate which financial institutions pay to borrow or charge to lend funds in the money market on an overnight basis. The Reserve Bank of Australia uses a narrower definition of the cash rate as an operational target for the implementation of monetary policy. The Reserve Bank of Australia's measure of the cash rate is the interest rate which banks pay or charge to borrow funds from or lend funds to other banks on an overnight unsecured basis. This measure is also known as the interbank overnight rate. The Reserve Bank of Australia calculates and publishes this cash rate each day on the basis of data collected directly from banks. This measure of the cash rate has been published by the Reserve Bank of Australia since June 1998." 42As a matter of ordinary language, there could be a difference between a target cash rate and an actual market interest rate, because it is inherent in the notion of a target that it might be missed. However, when the RBA uses the expression "cash rate" in the specialised sense of a target cash rate, and UCPR 36.7 is cast in terms of "the cash rate last published by the Reserve Bank of Australia" , it is that specialised sense of "cash rate" that is applicable in UCPR 36.7. 43The RBA cash rate targets from time to time, are published at http://www.rba.gov.au/statistics/cash-rate.html. That RBA publication includes the following relevant entries: Cash Rate Target Effective Date Change in cash rate Percentage points New cash rate target Per cent 3 Nov 2010 0.25 4.75 5 May 2010 0.25 4.5 7 Apr 2010 0.25 4.25 3 Mar 2010 0.25 4 2 Dec 2009 0.25 3.75 4 Nov 2009 0.25 3.5 7 Oct 2009 0.25 3.25 8 Apr 2009 -0.25 3

44If one carries out the calculation called for by the post-1 July 2010 version of UCPR 36.7 on the RBA cash rates from time to time, the following set of figures is arrived at: Half year starting Immediately preceding cash rate Immediately preceding cash rate + 6% 1 Jul 2009 3.00% 9.00% 1 Jan 2010 3.75% 9.75% 1 Jul 2010 4.50% 10.50% 1 Jan 2011 4.75% 10.75%

Decision on Rate of Interest to Order 45The basis on which the RBA sets its cash rate - the overnight interbank unsecured rate - is a rate for lending for an extremely short term, between entities that, in the Australian context, are of such credit-worthiness that the loan is for practical purposes risk-free. That rate is set in a market which seems to have the oddity, for financial markets, that there is no difference between the rate at which a participant can borrow, and the rate at which it can lend. Such a rate does not seem to have any relation to the loss that the Appellant is likely to have suffered through having been kept out of its money. The Appellant is a trading entity, and the sort of loss it is likely to have suffered through being out of its money is the sort of rate of return that is appropriate for a trading entity to earn on funds it employs in its business. The prescribed rates are more likely than the RBA cash rate to provide an approximation of the amount of that loss. 46I will consider seriatim the First Respondent's reasons why, in its submission, the Court should in this case set the rate of interest lower than the prescribed rate. 47Reason (a) is not an accurate statement of the law. The entitlement to interest when there is restitution of a judgment that has been paid but is reversed on appeal is a matter of right, not discretion. In Haig v Minister Administering the National Parks & Wildlife Act 1974 (No 3) (1996) 90 LGERA 408 at 411 Handley JA (Priestley and Clarke JJA agreeing) said, "the court has no general discretion to exercise in a case such as this" . In BHP Steel (JLA) Pty Ltd v Khan (No 2) [2001] NSWCA 269 at [5] Hodgson and Giles JJA said that an appellant's "entitlement is as of right, not as a matter of discretion" . The principle upon which the interest is to be quantified (namely, what is needed to restore the successful appellant) is also a matter of law. In individual cases there may be some room for discretion about how properly to apply that principle, and also discretion of the types referred to in Antoniadis , but it is not as though the court can choose whatever rate it fancies. 48Concerning reason (b), I do not accept that payment of interest above the RBA cash rate would amount to a windfall for the Appellant, because it would profit from receiving a higher rate of interest than it would have received, for example, by holding such sum in a regular bank account. There is no evidence at all about what the Appellant would have done with the amount it paid to the First Respondent, had it not made that payment to her. However, the court can proceed on the basis that the Appellant is a trading entity, and the rates that are prescribed are ones that are not inappropriate for quantifying the detriment that a trading entity such as the Appellant has suffered by being out of its money. 49Concerning reasons (c) and (d), the focus of the remedy is not to deprive the plaintiff who was successful in the court below of any benefit that she has received through having had the judgment sum for a period of time. It is not as though the First Respondent has committed a wrong, and the court must ensure that she receives no benefit from having committed that wrong - she has committed no wrong at all. There is no evidence about what use the First Respondent actually made of the amount that was paid to her, or about her tax position. Even if there were, the interest she might have received had she invested it, and her tax liability on any interest, are not matters that bear upon the reason why the court grants restitution to an appellant who has paid a judgment that is reversed on appeal. 50Concerning reason (e), even major corporate entities have a legal right for the court system to grant a remedy that will make good a loss that imperfect operation of the court system itself has imposed on them. 51Concerning reason (f), I do not accept that Wallersteiner v Moir (No 2) [1975] 1 QB 373 provides any guidance for the present situation. It concerned the granting of interest as part of an equitable remedy against a defaulting fiduciary, a remedy driven by different principles to the restitution that is now in question. The judges in Wallersteiner adopted a compound interest rate, and fixed the rate at 1% above the official bank rate or minimum lending rate in operation from time to time (at 388) because that was judged to be the appropriate way, in the circumstances of that case, of stripping the defaulting fiduciary of the benefit of his wrong. That is nothing more than the familiar situation of an equitable remedy being moulded to undo the departure from equitable principle that has occurred, in the way most appropriate on the facts of the instant case. 52Nor do I accept that Legal & General Insurance Australia Ltd v Eather (1986) 6 NSWLR 390 provides guidance in the present case. It concerned an insurer who was held to have wrongfully failed to pay a claim. The District Court judge who decided the matter awarded pre-judgment interest at the conventional rate of 10% that then applied as a matter of the practice of the District Court. McHugh JA, at 409, held that the appropriate rate of interest was the (then much higher) rate that was the prescribed rate under Supreme Court Practice Note No 30 . The prescribed rate under the Practice Note was as much a conventional rate of interest (in the sense of one not derived from the circumstances of the individual parties but rather one applied as a matter of practice to many litigants) as the District Court's 10%. The rate set by the Practice Note was awarded because it better suited the objective of the remedy of requiring a defendant held to have wrongfully withheld money from plaintiff to pay pre-judgment interest. 53Concerning reason (g), while the First Respondent clearly is not a judgment debtor who needs encouragement to repay her judgment debt, the rationale for the fixing of a rate of interest for restitution does not depend upon the situation of the First Respondent, but rather upon the situation of the Appellant. In any event, while in Hexiva Pty Ltd v Lederer [2007] NSWSC 49 at [19] Brereton J said that the prescribed rate of interest under s 101 includes an additional incentive element, beyond market rates of interest on cash deposits, to encourage judgment debtors to pay promptly, I would not accept that that is the only matter that underlies the fixing of the rate. Without trying to be exhaustive, the prescribed rate also takes account of the fact that, ex hypothesi, a judgment debtor has already kept the judgment creditor out of money to which the judgment creditor was entitled, and thus has, in effect, helped itself to the benefit of money to which the plaintiff was entitled. The rate of interest at which one can borrow in the market is usually higher than the rate that one can obtain on cash deposits. Further, failing to pay a debt can sometimes be evidence of being less credit-worthy than many potential borrowers, and less credit-worthy borrowers are often charged higher rates of interest than totally reliable borrowers. The prescribed rate also takes account of the fact that it aims to provide a default rule that can adequately cover a range of situations, and that there will be plaintiffs who are entitled to interest who would have used the money for purposes that are more productive to them than cash deposit rates. 54Reason (h) is a non sequitur. The purpose of the order for restitution is not so much to compensate as to restore the Appellant. Compensation often carries with it the notion of making good the consequences of a wrong, and when a judgment has been paid but is reversed on appeal no-one has committed a legal wrong. However, for the reasons I have already given, the prescribed rates have not been shown to provide an inappropriate measure of how much interest the Appellant should receive to be restored. 55In all these circumstances, the appropriate rate at which to order interest is the rate prescribed under section 101. What is the Prescribed Rate? 56A problem appeared to have arisen from the Appellant's submissions concerning the manner of calculating that rate. It concerned the correct rate of interest to apply in the period from 1 January 2010 to 30 June 2010 inclusive. As mentioned earlier at [39] and [44], the rate prescribed by Schedule 5 UCPR during that period was 9%, while the rate that results from the application of the post-1 July 2010 version of UCPR 36.7 to that period of time is 9.75%. 57In an affidavit of 16 November 2010, filed in connection with the claim for restitution with interest, the solicitor for the Applicant, Mr Anthony Tooher, asserted, without identifying the source from which the figures were derived, that the calculation of interest in accordance with s 101 Civil Procedure Act and UCPR 36.7 required the application of the following rates: 28 September 2009 to 31 December 2009 9% 1 January 2010 to 30 June 2010 9.75% 1 July 2010 to 16 November 2010 10.50%

The Appellant's submission of 17 February 2011 proceeded on the basis that the appropriate rate for the period from 1 January to 21 February 2011 was 10.75%. It provided a calculation said to be based upon those rates, of the interest that would accrue from 28 September 2009 up to and including 21 February 2011 on the $285,786.66 that the First Respondent had been paid. Its bottom line was $36,789.73. 58It appears that the rates contained in Mr Tooher's affidavit and in the submission of the Appellant are derived on the assumption that it is the rates prescribed by UCPR 36.7, in the form it has had since 1 July 2010, which govern all periods since the First Respondent received payment of the verdict sum. 59In my view this is not the correct method of deriving the applicable rates under UCPR 36.7. The principal role of UCPR 36.7 is to state the rates that are payable on judgement debts. Whenever there is an unpaid judgement debt, that has been ordered to bear interest at the rates prescribed under s 101 from time to time, the judgement creditor would have had a vested right, as at 30 June 2010, to receive interest at the rate that had been prescribed up to 30 June 2010 by the former UCPR 36.7 and Schedule 5. The usual principle about retrospective operation of legislation is that it does not operate to take away vested rights unless there is an intention expressed "with reasonable certainty" that it do so: Maxwell v Murphy (1957) 96 CLR 261 at 267. 60The amendment to UCPR 36.7 that came into effect on 1 July 2010 was made by Schedule 1 [5] Uniform Civil Procedure Rules (Amendment No 32) 2010 . That provision said nothing more than that the old version of 36.7 was to be omitted, and the new one inserted. The regulation that effected the amendment had no transitional provisions. 61In those circumstances there is no indication at all that the amendment will operate retrospectively. Hence it does not operate retrospectively. 62The applicable rate of interest should be ascertained, up to 1 July 2010, by reference to Schedule 5 as it was from time to time up to 1 July 2010, and only from 1 July 2010 should the new version of UCPR 36.7 be used. The applicable rates in the present case are thus 9% up to and including 1 July 2010, 10.5% from 1 July 2010 to 1 January 2011, and 10.75% thereafter. 63Both parties were given the opportunity to make such submissions as they wished concerning the question of construction that arose from the Appellant's submissions, but no further submission was received from either party within the time the court set for responses. 64Thus I set out to amend the draft calculations provided by Mr Tooher to substitute interest at the rate of 9% during the period 1 January 2010 to 30 June 2010 inclusive for the rate of 9.75% that Mr Tooher said his calculations had included for that period. On doing so, it emerged that his calculation was incorrect: even though he said he had included interest at 9.75% for that period, in fact the amount he had allowed for that period was calculated at 9%. The waste of the court's time that has been occasioned by this error in Mr Tooher's affidavit should not have occurred. 65I have accepted all the other lines of his calculation, including the bottom line, and propose to order interest accordingly.

Stay 66Notwithstanding that it was earlier foreshadowed, the First Respondent has made no application for stay of judgment pending the determination of the application for special leave to appeal to the High Court that she has lodged. There seems to be a prospect, on the basis of the little that the court knows about the First Respondent's circumstances from facts established in the court below and that were before us on the hearing of the appeal, that providing restitution might cause her hardship. In those circumstances I would propose that the court, of its own motion, make an order providing for restitution, but staying the enforcement of that order for 28 days. The running of interest during those 28 days will adequately protect the Appellant, and the existence of the stay will not prevent the First Respondent from complying with the order for restitution during that 28 day period should she wish to do so.

Some More General Considerations 67In Antoniadis (No 2) a plaintiff had received a judgment in the court below, had been paid the amount of the judgment, but found that the judgment was reversed on appeal. At [15]-[16] this Court said: "We can only express regret that a stay of execution was not granted in this case pending the hearing of the appeal. It was never suggested that the opponent ran any risk of losing the benefit of her judgments by being prevented from enforcing them pending the appeal. She was protected from the purely financial consequences of any delay by the accrual of interest on the judgments in the meantime. This Court regularly stays execution on judgments pending an appeal where there is a risk that the plaintiff will be unable to repay the money without difficulty or delay if the appeal were to succeed. Adherence to this principle would have prevented the present embarrassing situation where the Court has enforced interim payment to the plaintiff but repayment cannot or will not be made without further litigation in the Federal Court with a risk that the opponent will be made bankrupt without the claimant recovering its money." 68The present situation, where restitution needs to be sought at all, arises from the trial judge having failed to follow the usual practice of staying judgments pending appeal where there is a risk that the plaintiff will be unable to repay the money without difficulty or delay if the appeal were to succeed. It is an appropriate time to reiterate the importance of that practice. 69As well as the trial judge, the Appellant is partly responsible for the situation where the First Respondent is placed in a situation where restitution might cause her hardship. Even though the judge incorrectly granted a stay on condition that the First Respondent pay part of the verdict money, it was open to the Appellant to approach this Court, in its original jurisdiction (not by an application for leave to appeal from the trial judge's order), to seek a stay without such a condition. This Court's original jurisdiction arises under UCPR 51.44. It is likely that this Court would have granted an unconditional stay if asked, if it were established that the money paid may be irrecoverable if the appeal were successful. If the First Respondent argued that refusal of the stay would deprive her of the means of defending the appeal the situation would be somewhat more complicated. However, such an argument is one that the First Respondent could put forward only if she gave instructions that such an argument should be advanced. 70A solicitor advising someone in the position of the First Respondent whether to give such instructions must approach that task with great care. I shall point out some of the considerations that need to be taken into account by those advising a successful plaintiff whether to seek payment of all or part of a judgment when an appeal has been lodged. 71One is the likelihood that, if the appeal is successful, restitution will be ordered with interest at the rates the court applies to unsatisfied judgments. There is a reluctance of a court hearing an application for restitution to go into the individual circumstances of how receipt of the judgment sum has affected an individual litigant and reasons of principle why it usually does not do so. Nevertheless, a lawyer advising a party whether to seek, or (insofar as there is any choice about it) accept payment of all or part of a judgment pending appeal should seek instructions about the effect that an order for repayment with interest would have on that individual party. Prudence would strongly suggest that any plaintiff who was likely not to be in a position to repay such an amount from his or her other resources, should take no active steps to get in the verdict money, or if the money was received should keep it set aside and invested until the appeal was disposed of. Even setting the sum aside and investing it would be likely not to remove all risk from the plaintiff, because the rate of interest that many people could achieve from investing the money would not be as high as the rate the court applies to unsatisfied judgments. As well, depending on the individual financial situation of the plaintiff and the size of the judgment sum, any interest earned on the judgment sum could be reduced, in the plaintiff's hands, by income tax. 72Further, there will sometimes be cases where a plaintiff who has succeeded in the court below has not paid his or her legal advisors. Any lawyers who advises a successful plaintiff to seek payment of all or part of a judgment, so that the lawyers' unpaid costs and disbursements can be met, should be acutely conscious of the situation of conflict between duty (to the client) and interest (in being paid) that they may be in. The usual practice of the court, referred to in Antoniadis (No 2) at [18], is to permit an interim payment of costs pending an appeal only on the basis of a personal undertaking from the lawyers who receive the money to repay those costs if the appeal is successful. However even if such an undertaking is given, there is still a measure of risk to the client in two ways in accepting a payment pending appeal. One is if the lawyers are not able to comply with that undertaking. The other is that, even if the undertaking that the lawyers give is to repay any money that they receive together with interest at the court rate, if the client receives any of the verdict monies at all the client will still be at risk of having to pay the difference between the net (ie after tax) interest received and the court's rate of interest. 73These remarks are ones that I make independently of the circumstances of the present case. I stress that the court knows nothing about the circumstances that led to the stay of the judgment being granted on the condition that the First Respondent be paid fifty percent of the judgment sum. Of course, if a client, having been given proper advice, makes an informed decision that he or she wishes to seek payment of all or part of a judgment sum, and instructs his or her solicitor accordingly, the solicitor must act on that instruction. If a solicitor finds that he or she is in a situation of conflict between duty and interest, there are courses of action open to the solicitor to resolve that conflict.

Costs and Orders 74The orders that the court made on 2 November 2010 included an order that the First Respondent pay the costs of the Appellant of the appeal. Ordinarily, if an order for costs is made as part of the orders that dispose of a proceeding, that order for costs catches up any costs that might have been involved in notices of motion or other interlocutory steps whose costs have not been separately provided for. In the present case, when the need for the present Notice of Motion has arisen from the inadequacy of the Appellant's Notice of Appeal, it is not appropriate for the First Respondent to bear all the costs of the Notice of Motion. In my view the appropriate way of balancing some costs having been wasted through the inadequacy of the Notice of Appeal, and the success of the Appellant on that Notice of Motion, is to make an order that has the effect that each party bears its own costs concerning the Notice of Motion. 75I propose the following orders: (1) Judgment for the Appellant against the First Respondent for $285,768.66, plus interest at the rates prescribed for the purpose of section 101 of the Civil Procedure Act 2005 from and including 22 February 2011 to the date of payment. (2) Judgment for the Appellant against the First Respondent in the further sum of $36,789.73, that sum not to bear interest under section 101 of the Civil Procedure Act 2005 . (3) The order made on 2 November 2010 that the First Respondent pay the Appellant's costs of the appeal not extend to the costs of the Notice of Motion filed 16 November 2010. (4) Stay execution of orders (1) and (2) above for 28 days from today's date. 76HANDLEY AJA : I agree. 77HARRISON J : I also agree.

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: 05 May 2011

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