Zepinic v Chateau Constructions

& Hart (No 2) (2000) 103 FCR 559; [2000] FCA 1132 Wilmot v Buckley (1984) 2 FCR 540 Van Reesema v Australian Growth Resources Corporation Pty Ltd (1987) 75 ALR 311 Zepinic v Chateau Constructions (Aust) Ltd [2013] NSWCA 214 Zepinic v Chateau Constructions (Australia) Ltd (Court of Appeal, 10 May 2010, unreported) Texts Cited: Courts Legislation Further Amendment Act Bill, Second Reading Speech, New South Wales Legislative Assembly, Parliamentary Debates, Hansard, 22 November 1995 Category: Interlocutory applications Parties: Dr Vito Zepinic - first applicant/first respondent on the motion Milla Zepinic - second applicant/second respondent on the motion Chateau Constructions (Australia) Ltd - respondent/applicant on the motion Representation: Counsel: Applicants/respondents on the motion - no appearance B Ilkovski - respondent/applicant on the motion Solicitors: Applicants/respondents on the motion - no appearance Toomey Pegg Lawyers - respondent/applicant on the motion File Number(s): CA 2010/45208 Publication restriction: No Decision under appeal Citation: Zepinic v Chateau Constructions (Australia) Ltd Date of Decision: 2009-11-20 00:00:00 Before: Colefax DCJ File Number(s): DC 2009/2002

Judgment 1McCOLL JA: By amended notice of motion filed in Court on 17 June 2013 Chateau Constructions (Aust) Ltd ("Chateau Constructions") seeks an order pursuant to s 101(4) of the Civil Procedure Act 2005 (the "CP Act") that Dr Vito Zepinic pay interest on costs and disbursements allowed on assessment from their date of payment by it, at and subject to the rates prescribed by Uniform Civil Procedure Rules 2005 ("UCPR") 36.7. It also seeks the costs of the motion in a specified gross sum pursuant to s 98(4)(c) of the CP Act. 2The relief was originally sought against Dr Zepinic and his wife, Milla Zepinic, however, in the circumstances briefly referred to below (at [22]), Chateau Constructions elected to seek relief against only Dr Zepinic. I will, however, where context demands refer to both Dr and Mrs Zepinic as the respondents. 3The amount of interest sought was calculated in the amended notice of motion up to and including 29 May 2013 - the date the original notice of motion was filed. Thereafter a daily rate was set out to be payable up to and including the date on which the assessed costs were paid. 4The costs and disbursements the subject of the interest order were incurred by Chateau Constructions in respect of an application by the respondents, seeking leave to appeal from a decision of Colefax DCJ: Zepinic v Chateau Constructions (Australia) Ltd (District Court of New South Wales, Colefax DCJ, 20 November 2009, unreported). 5On 10 May 2010 Tobias JA dismissed the summons seeking leave to appeal: Zepinic v Chateau Constructions (Australia) Ltd (Court of Appeal, 10 May 2010, unreported) ("Zepinic No 1"). It is unnecessary to set out the reasons Tobias JA dismissed the summons seeking leave to appeal. There has been no challenge to his Honour's dismissal of the proceedings. I shall refer to the proceedings before his Honour as the Court of Appeal proceedings. 6Tobias JA's formal orders were: "1. Make order in terms of paragraph 1 of the Notice of Motion filed 19/3/10. 2. Order the applicants to pay the costs of the summons for leave to appeal and the Notice of Motion." 7In order to have an understanding of the chronology of events after Tobias JA's orders, it is necessary that there be a brief overview of the proceedings. As Mr Loel, Chateau Constructions' solicitor, explained in his affidavit of 29 May 2013 and as is also apparent from Tobias JA's reasons, the Court of Appeal proceedings were related to three other proceedings, respectively in the Consumer, Trader and Tenancy Tribunal (the "CTTT"), the District Court and the Supreme Court. 8All the proceedings arise out of a building contract made in February 2006 between Chateau Constructions and the respondents pursuant to which the company performed residential building work at a property the respondents owned. The respondents did not pay Chateau Constructions amounts due to it under two progress claims. Accordingly Chateau Constructions commenced, and was successful in, proceedings against the respondents in the CTTT to recover those amounts. 9The respondents sought to appeal from the CTTT decision to the District Court, a step apparently taken because the order of the CTTT, having been registered in the District Court, became an order of that Court: Zepinic No 1 (at [3]). 10In circumstances which again it is unnecessary to recount and as I have said, Colefax DCJ dismissed the respondents' District Court appeal on 20 November 2009. 11The Supreme Court proceedings arose from Chateau Constructions enforcing a charging provision in the building contract to secure the sum the CTTT found to be due to it. To that end, it lodged a caveat over the respondents' property which, in due course, was the subject of a lapsing notice pursuant to s 74J of the Real Property Act 1900. Chateau Constructions approached the Supreme Court seeking an extension of the caveat pursuant to s 74K(2) of the Real Property Act. On 28 September 2009 Slattery J extended the caveat until further order of the Court: Chateau Constructions (Aust) Ltd v Zepinic [2009] NSWSC 1339. 12The matter came back before Slattery J on a number of occasions. Relevantly, on 8 April 2010, his Honour made a declaration that the respondents had charged their property with due payment to Chateau Constructions of $370,847.35 plus interest and ordered that the property be sold, but that the sale order be stayed until further order: Chateau Constructions (Aust) Ltd v Zepinic [No 5] [2010] NSWSC 265. 13Mr Loel explained in his affidavit of 29 May 2013 that the purpose of the stay was to enable Chateau Constructions to have its costs of all four matters (the CTTT proceedings, the District Court appeal proceedings, the Supreme Court proceedings and the Court of Appeal proceedings) assessed and then seek to have those costs included in the charge over the property. 14Mr Loel's affidavit recounts in detail the steps Chateau Constructions has taken to have its costs of the various proceedings assessed since he says attempts to agree the quantum of their costs orders with the respondents failed in November 2010. 15In the course of that process Mr Loel says it has been necessary to engage private investigators to ascertain the whereabouts of the respondents, to arrange for Dr Zepinic to be served personally with documents relating to the costs assessment process at a conference in Vienna (in the course of which the investigator informed Mr Loel that the respondents may be residing in London) and to engage an investigator to serve the costs assessment documents on Mrs Zepinic at the address in London, a step which was finally achieved on 14 June 2011. 16On or about 14 July 2011 the Supreme Court referred the applications for assessments of costs in all proceedings to a costs assessor. On or about 14 November 2011 the costs assessor advised that he had completed the assessment of costs in respect of the Court of Appeal proceedings. 17On 16 December 2011 Chateau Constructions filed and served an application for a review of the costs assessor's determination of its costs in respect of the Court of Appeal proceedings. On 5 January 2012 the respondents also filed an application for a review of the assessor's determination of the costs of the Court of Appeal proceedings. Both applications for review were referred to a Review Panel on or about 25 January 2012. That Panel issued its certificate of determination of the review and statement of reasons on 2 May 2012. Chateau Constructions was successful on its review but the respondents were unsuccessful. 18Neither Chateau Constructions nor the respondents sought to appeal from the Review Panel's determination. 19The original costs assessor did not proceed to assess the costs in the CTTT, District Court and Supreme Court proceedings because of a conflict of interest. Those applications for assessment were, accordingly, reassigned to another costs assessor who completed his determinations in late September and early October 2012. None of the parties sought a review of, or appealed against, those determinations. 20Thereafter, it appears, Chateau Constructions commenced the process of seeking interest on the costs of the various proceedings. It obtained such an order in respect of the District Court proceedings on 12 April 2013 (as evidenced by a minute of the Court's order attached to Mr Loel's 29 May 2013 affidavit) and, in the Supreme Court, on 5 July 2013: Chateau Constructions (Aust) Ltd v Zepinic [2013] NSWSC 909. 21Mr Loel says in his affidavit of 29 May 2013, in substance, that throughout the costs assessment process before both costs assessors and the Review Panel, the respondents engaged in conduct which, in his opinion, had the effect of delaying the determination of the assessments and the determination of the reviews. 22The amended notice of motion came before me for hearing on 1 July 2013. Neither respondent appeared. I ordered, pursuant to UCPR 10.6(2), that the evidence was sufficient to establish that the forwarding of the original notice of motion and the amended notice of motion to an address in Little Thames Walk, London should be taken to constitute sufficient service for the purposes of the amended notice of motion on Dr Zepinic. On that basis, Chateau Constructions sought to proceed only against Dr Zepinic in relation to the amended notice of motion: Zepinic v Chateau Constructions (Aust) Ltd [2013] NSWCA 214.

Competence of the application 23Prior to the matter being called on, the Registrar of the Court of Appeal forwarded to the email addresses of Chateau Constructions' legal representatives and the respondents a reference to Drummond & Rosen Pty Ltd v Easey [No 2] [2009] NSWCA 331 ("Drummond (No 2)") with the request that that authority be addressed on the hearing of the amended notice of motion. 24The critical issue which emerges from Drummond (No 2) is whether I have jurisdiction to make the orders sought, having regard to the fact that Tobias JA's orders were made on 10 May 2010. 25Drummond (No 2) relevantly concerned an application for interest on costs prior to assessment pursuant to s 101(4) of the CP Act. The matter came before the Court (Tobias and Macfarlan JJA, Handley AJA) pursuant to an application seeking a variation of the costs orders made in the principal judgment: Drummond & Rosen Pty Ltd v Easey [2009] NSWCA 74. The application was made pursuant to leave granted in the principal judgment and within the time limited by UCPR 36.16(3A): Drummond (No 2) (at [10]). 26Handley AJA considered the nature of the power to award interest on costs conferred on the Court pursuant to s 101(4) and s 101(5) of the CP Act in light of the fact that there was no evidence in the affidavit supporting the application of the date or dates when the relevant costs had been paid and no other evidence which would enable the Court to fix a later date: Drummond (No 2) (at [35]). 27Critically his Honour held (at [49]) "that the power in s 101(4) must be exercised by the Court and under UCPR Pt 36 r 16 it must be exercised in the substantive judgment, or on a motion filed within 14 days thereafter" and that "the power should not be exercised without evidence of the amounts paid and the dates of payment". 28Handley AJA was prepared to assume (at [51]), contrary to his inclination, that the s 101(4) power was wide enough to permit the Court to make an order without evidence of the amounts paid and the dates of payment, but declined to make such an order, saying: "52 The general rule is that interest on costs only runs from the certificate of assessment and is only payable if the assessed costs are not paid within 28 days. I see no reason for exercising the power when the party seeking the order does not provide the Court with evidence and invites the Court to make an order without knowing what its practical effect will be. In my opinion an order for interest on costs should not be made in the present case." 29Macfarlan JA agreed with Handley AJA's reasoning and proposed orders subject to one matter, that being the order for payment of interest on costs. In his Honour's view (at [3]), it was unnecessary for there to be evidence of the nature of that to which Handley AJA referred to make a s 101(4) order for the payment of interest on costs. Accordingly, absent any countervailing discretionary factor, it was 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 it had paid: (at [4]). Accordingly, his Honour added orders providing for interest on costs to the orders Handley AJA proposed. The orders his Honour added were "along the lines" of those approved in Leda Pty Ltd v Weerden (No 2) .[2007] NSWCA 283 and Evans v European Bank Ltd (No 2) [2009] NSWCA 170. That form of order requires a calculation to be made of interest on payments of costs and disbursements by reference to the proportion allowed on assessment, or by agreement, of the costs and disbursements as a whole and is modelled on orders Campbell J (as his Honour then was) made in Lahoud v Lahoud [2006] NSWSC 126 (at [85], [91]); Evans v European Bank Ltd (No 2) (at [27]) per Basten JA (Campbell JA agreeing). 30Tobias JA agreed with Handley AJA's reasons and orders, but also agreed with Macfarlan JA's proposed orders dealing with interest on costs for the reasons Macfarlan JA had given. 31As will be apparent from the chronology, the reason Drummond (No 2) was drawn to the parties' attention was because of Handley AJA's statement (at [49]) "that the power in s 101(4) must be exercised by the Court and under UCPR Pt 36 r 16 ... in the substantive judgment, or on a motion filed within 14 days thereafter." 32Mr B Ilkovski, who appeared for Chateau Constructions, did not cavil with the proposition that Tobias JA's orders were entered on 10 May 2010, the day they were made. He argued, however, that despite UCPR 36.16 the Court could exercise the power in s 101(4) notwithstanding that the notice of motion seeking that relief was not filed until 29 May 2013. 33First, Mr Ilkovski submitted that neither Tobias JA nor Macfarlan JA agreed with Handley AJA's reasons insofar as they concerned the payment of interest on costs. Accordingly, he argued Handley AJA's view concerning UCPR 36.16 was a minority one. Mr Ilkovski also submitted that even if, properly understood, Tobias JA or Macfarlan JA agreed with Handley AJA's observation as to UCPR 36.16, nevertheless that observation was obiter because the application for interest on costs in Drummond (No 2) was made within the time contemplated by Order 9 of the principal judgment. 34Secondly, Mr Ilkovski submitted that the orders sought in the amended notice of motion were not a variation of a judgment or order within the meaning of UCPR 36.16, but, rather, an additional order which would not affect the existing orders. While he accepted that the interest order Chateau Constructions sought depended upon Tobias JA's costs order, he argued that it was an additional order which was contemplated by s 101(4). He submitted that this contention was supported by other cases, such as Leda Pty Ltd v Weerden (No 2) in which, relevantly, an order in respect of interest on costs was expressed to be "additional". 35Thirdly, Mr Ilkovski submitted that because neither of the certificates for determination issued by the Review Panel in respect of the costs of the Court of Appeal Proceedings had been registered with any court, there had been no final judgment for the assessed costs and, accordingly, the principle of finality was not offended by the proposed orders. He relied in this respect upon Timms v Commonwealth Bank of Australia (No 3) [2004] NSWCA 25.

Interest on costs orders 44Understanding the interrelationship between s 101(4) and UCPR 36.4(2) requires a somewhat lengthier exploration of the history of interest on costs orders. 45At common law, a judgment debt did not carry interest and, accordingly, the only way of recovering interest on that debt was by action on the judgment: Reis v Carling [1908] HCA 25; (1908) 5 CLR 673 per O'Connor J (at (684); see also Griffith CJ (at 676 ff). That position, as O'Connor J explained (at 684) was remedied in England by the enactment of s 17 of the Judgments Act 1838 (1 & 2 Vic c110). Section 17 relevantly provided that "[e]very judgment debt shall carry interest ... from the time of entering up the judgment ... until the same shall be satisfied". A costs order was regarded as part of the judgment debt: Craine v Colonial Mutual Fire Insurance Co Ltd [1923] VLR 623 (at 628) per Schutt J. 46However, the words "from the time of entering up the judgment" in s 17 of the Judgments Act led to different approaches in the Courts of Common Law and in the Court of Chancery because of the different forms of writ each adopted to give effect to the provision. The Courts of Common Law issued a writ directing levy of all interest recoverable on the judgment debt, including interest on costs, from date of entry of judgment (the incipitur), whereas the Court of Chancery, also acting under s 17, issued a writ in the form of a writ of fieri facias directing that the interest on costs should run from the date of the Taxing Master's certificate (the allocatur): see Reis v Carling (at 676 - 677) per Griffith CJ; (at 684 - 685) per O'Connor J. 47Act 24 Vic. No 8, s 2 which followed the wording of s 17 of the Judgments Act , was enacted in New South Wales. Without descending into too great detail, the effect of the adoption in this State of the practice and orders of the High Court of Chancery in force on 15 February 1860 was that the allocatur rule came to govern the practice concerning interest on costs: see Re North Sydney Investment and Tramway Co Ltd (1897) 18 LR (NSW) (Eq) 50 (at 53) per Owen CJ in Eq; (at 57 - 58) per Darley CJ (Stephen J agreeing); (at 59 - 60) per Manning CJ in Eq. 48The Courts of Common Law gave effect to the incipitur rule by leaving "a blank ... in the form of incipitur, in which the amount of the costs when ascertained [was] written, the costs being due from the date of the incipitur"; in equity, "the date of the Master's certificate [was treated] as equivalent to the entering up of judgment at Common Law": Re North Sydney Investment and Tramway Co Ltd (at 57 - 58) per Darley CJ. 49In T A Field Pty Ltd v Frigmobile of Australia Pty Ltd [1978] 2 NSWLR 488 ("Field") Master Allen (as his Honour then was) considered the question of the date from which interest should be payable on costs. 50In Field, terms of settlement were filed in an action for damages which provided, amongst other things, for a verdict for the plaintiff for a sum of stated money "together with costs to be assessed or taxed". A Master directed entry of judgment in accordance with the terms. After the taxing officer gave his certificate of taxation, the plaintiff sought a direction that judgment be entered for the amount of the costs so certified, together with interest thereon from the date on which the Master directed entry of judgment pursuant to the terms of settlement. The defendant disputed the plaintiff's entitlement to interest from that date, submitting that, unless the court otherwise ordered, interest on the costs would run from the date the court directed entry of judgment for the amount of costs as taxed and certified or, if the court was disposed to order that interest ran from an earlier date, the appropriate date would be that of the certificate of taxation: Field (at 488 - 489). 51Master Allen looked at the history of the divergent practices in law and equity concerning the date from which interest ran on costs observing (at 490) that the different approaches to which I have referred continued in New South Wales at least until the enactment of the Law Reform (Miscellaneous Provisions) Act 1965. However he also concluded (at 490) that by at least 1965 solicitors had come to conduct their practices on the basis that interest on taxed costs in the Supreme Court, both at law and in equity, ran from the date of the certificate of taxation. 52In 1965 the Common Law Procedure Act 1899 was amended by the insertion of s 143A which relevantly provided that: " ... interest shall not be payable on costs payable to the plaintiff if the amount of such costs is paid within twenty-one days after assessment or after taxation". 53Master Allen concluded that the effect of s 143A was that "[f]or all practical purposes the position thereafter at law was the same as it was in equity, namely, that interest on taxed costs did not commence to run until costs were taxed": Field (at 491). He then turned to consider the position under the Supreme Court Act and the Supreme Court Rules 1970 ("SCR"). 54Section 95 of the Supreme Court Act provided: "(1) Where judgment is given, or an order is made, for the payment of money, interest shall, unless the Court otherwise orders, be payable at the prescribed rate from the date when the judgment takes effect on so much of the money as is from time to time unpaid. ... (3) Notwithstanding subsection one of this section, where, in proceedings for damages on a common law claim, the Court makes an order for the payment of costs and the costs are paid within twenty-one days after ascertainment of the amount of the costs by taxation or otherwise, interest on the costs shall not be payable under subsection one of this section unless the Court otherwise orders." 55SCR Part 40, rr (1) - (3) provided that a judgment should take effect relevantly as at the date of the direction for judgment (r 1), the date of entry (r 2) or subject to those rules "as of the date on which it is made" (r 3). SCR Part 40, r (4) gave the Court power to order "that a judgment or order take effect as of a date earlier or later than the date fixed by those subrules." 56Master Allen concluded (at 491) that judgment was "given" in respect of costs within the meaning of s 95 of the Supreme Court Act when entry of judgment was directed in accordance with the terms of settlement. However, he also held (at 492) that it was "implicit in an order that a party pay costs (in the amount thereafter ascertained by taxation) that the order is to take effect from the date when the costs are taxed". It would appear he thought that conclusion followed from SCR 40 r (4). 57SCR Pt 40 r 3(4) was amended in 1983 (Amendment 141, New South Wales Government Gazette, No 170, 9 December 1983 at 5565) to read: "3 (1) A judgment shall take effect - ... (4) Notwithstanding subrules (1) and (3), where an order of the Court directs the payment of costs and the costs are, pursuant to any Act or the rules, to be taxed, the order shall take effect as of the date of the certificate of taxation. (5) Notwithstanding subrules (1), (2), (3) and (4), the Court may order that a judgment or order take effect as of a date earlier or later than the date fixed by those subrules." 58Amendment 141 also inserted Pt 52, r 54A a rule which, in short, enabled the taxing officer to exercise the powers of the court under s 95(1) of the Supreme Court Act to make orders for interest to be payable at prescribed rates on amounts paid before the conclusion of the taxation by the successful party to his or her solicitor for or on account of the costs to be payable and as at the date on which the amount was paid. 59In Fischer v David Syme & Co Ltd (1989) 18 NSWLR 606 (at 617) ("Fischer"), Smart J suggested that the new Pt 40 r 3(4) reflected Master Allen's view of s 95(1) in Field. 60Smart J disagreed with the views Master Allen expressed in Field as to the operation of s 95(3). In his view (at 616) "an order for costs to be taxed fell within 'every judgment debt within s 17 [of the Judgments Act ]" and, at law, took effect "when the judgment is entered in the master's book in the form of an incipitur": Fischer (at 616). In his Honour's view, the words "otherwise orders" in s 95(3) allowed "the Court to avoid rigidity and to accommodate the position recognised in the English cases that neither the incipitur rule nor the allocatur rule will operate justly in all circumstances." 61Smart J also considered (Fischer, at 617 - 618) the effect of SCR Pt 40 r 3(4). He doubted that that rule fitted comfortably with s 95. However in his view it did not matter whether his approach to s 95 rendered SCR Pt 40 r 3(4) otiose, or whether that rule should be applied, because both s 95(3) and SCR Pt 40 r 3(5) empowered the court to order that a costs order take effect from a date other than that of the certificate of taxation. He regarded SCR 52.54A as a rider to SCR 40 r 3(4), albeit that he thought the reference in SCR 52.54A to s 95(1) should be supplemented by a reference to s 95(3) of the Supreme Court Act.

[2007] NSWCA 159

(2005) 223 CLR 1

(1989) 18 NSWLR 606

(2001) 109 FCR 280

(1993) 32 NSWLR 190

(1994) 35 NSWLR 342

(1908) 5 CLR 673

(2000) 103 FCR 559

(1984) 2 FCR 540

(1987) 75 ALR 311

(1971) 125 CLR 529

[2013] NSWSC 909