CATCHWORDS PRACTICE AND PROCEDURE - Whether declaratory relief should be granted - stay of execution of orders - set off of judgment debt - interest - costs Trade Practices Act 1974 (Cth), ss 52, 82, 83, 87 Federal Court of Australia Act 1976 (Cth), ss 21(1), 51A FAI General Insurance Co Ltd v RAIA Insurance Brokers Ltd (1992) 108 ALR 479 RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd (1993) 41 FCR 164 Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 Jenkins v NZI Securities Australia Ltd (1994) 52 FCR 572 Tesco Supermarkets Ltd v Nattrass [1972] AC 153 Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439 Mok v Minister for Immigration, Local Government and Ethnic Affairs (No.2) (1993) 47 FCR 81 PETER WILLIAM METCALFE v NZI SECURITIES AUSTRALIA LTD & ORS NG 397 OF 1992 Sackville J. Sydney 29 June, 1995 IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G397 of 1992 GENERAL DIVISION BETWEEN: PETER WILLIAM METCALFE Applicant AND: NZI SECURITIES AUSTRALIA LTD NZI CAPITAL CORPORATION LTD and MICHAEL EDWARD WAYLAND Respondents CORAM: SACKVILLE J. PLACE: SYDNEY DATE: 29 JUNE, 1995 MINUTES OF ORDER THE COURT: 1. Identifies as the group members who will be affected by this judgment the persons named in Schedule "A" and Schedule "B" to the further amended application, with the exception of W.L. Hawke Holdings Pty Ltd. 2. Orders judgment for Ripoll in the sum of $450,000, inclusive of interest, against the first and second respondents. 3. Directs that enforcement of the judgment referred to in paragraph 2 be stayed until further order of the Court. 4. Orders the first and second respondents to pay: (a) 80% of the applicant's costs of the proceedings before Wilcox J.; and (b) 60% of the applicant's costs of the proceedings before Sackville J. 5. Orders the applicant to pay: (a) the costs of the third respondent of the proceedings before Wilcox J., except to the extent those costs are already the subject of orders by the Court; and (b) the third respondent's costs of the proceedings before Sackville J. 6. Directs that enforcement of the order in paragraph 4 (save for the taxation of the applicant's costs) be stayed until further order. 7. Orders that the further amended application otherwise be dismissed. 8. Reserves liberty to the parties to apply in respect of the directions in paragraphs 3 and 6. NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G397 of 1992 GENERAL DIVISION BETWEEN: PETER WILLIAM METCALFE Applicant AND: NZI SECURITIES AUSTRALIA LTD NZI CAPITAL CORPORATION LTD and MICHAEL EDWARD WAYLAND Respondents SACKVILLE J. SYDNEY 29 June, 1995 REASONS FOR JUDGMENT Introduction The hearing in this matter took place between 6 March 1995 and 13 April 1995. I delivered judgment on 31 May 1995. I stood the matter over to allow for argument as to costs and interest. I also directed the applicant to bring in short minutes of order reflecting the Court's reasons. When the matter was again before the Court it emerged that the parties wished to have the opportunity to argue a number of issues arising from the judgment and proposed orders. The argument on those matters took place on 23 June 1995. On that occasion Mr Coles QC appeared with Mr Robinson and Mr Ashhurst for the respondents. Mr Francey appeared on behalf of the applicant. I shall deal with each of the matters raised, in more or lessthe order addressed by the parties. This judgment should be read in conjunction with what I shall refer to as the principal judgment. Declaratory Relief Mr Francey submitted that the orders in favour of the applicant should include declarations that the first and second respondents had engaged in conduct that was misleading and deceptive, or likely to mislead, in contravention of s.52 of the Trade Practices Act 1974 (Cth). Mr Francey contended a declaration should be made that Ripoll had been induced to enter into the facility agreement and related documentation by the misleading conduct of NZI Securities and NZI Capital. He also argued that similar declarations should be made in favour of Mr Poignand and the estate of Mr Courtney. Both Mr Poignand and Mr Courtney executed the deed of guarantee dated 22 April 1987, as guarantors. Although the question of relief was argued at length prior to the delivery of my judgment on 31 May 1995, there was no debate at that time as to whether declaratory relief was or was not appropriate. Mr Hamilton QC, who then appeared for the applicant, did not submit that declarations should be made, although he addressed the other forms of relief claimed by the applicant in detail. This is, perhaps, not surprising since the amended application did not include any claim for declaratory relief, other than in relation to matters not pursued before me. The final version of the amended application was filed in court on 13 March 1995, pursuant to leave granted by me on 6 March 1995. Mr Francey did not seek to amend the application further to accommodate a claim for declaratory relief. Mr Coles resisted Mr Francey's claim for declaratory relief on the ground of lack of jurisdiction and on discretionary principles. In my opinion, however, it is clear that the Court does have jurisdiction to make a declaration in the circumstances of the present case under s.21(1) of the Federal Court of Australia Act 1976: FAI General Insurance Co Ltd v RAIA Insurance Brokers Ltd (1992) 108 ALR 479 (FCA/Foster J.), at 507-508, aff'd RAIA Insurance Brokers Ltd v FAI General Insurance Co Ltd (1993) 41 FCR 164 (FCA/FC), at 177-178, per Beaumont and Spender JJ. The general principles relating to the exercise of the Court's power are stated in the judgment of Mason C.J., Dawson, Toohey and Gaudron JJ. in Ainsworth v Criminal Justice Commission (1992) 175 CLR 564, at 581-582: "It is now accepted that superior courts have inherent power to grant declaratory relief. It is a discretionary power which '[i]t is neither possible nor desirable to fetter...by laying down rules as to the manner of its exercise.' Forster v Jododex Aust. Pty Ltd (1972) 127 CLR 421, at p.437, per Gibbs J. Hgwever, it is confined by the considerations which mark out the boundaries of judicial power. Hence, declaratory relief must be directed to the determination of legal controversies and not to answering abstract or hypothetical questions: see In re Judiciary and Navigation Acts (1921) 29 CLR 257. The person seeking relief must have 'a real interest': (Forster at 437...), and relief will not be granted if the question 'is purely hypothetical', if relief is 'claimed in relation to circumstances that [have] not occurred and might never happen' (University of New South Wales v Moorhouse (1975) 133 CLR 1, at 10, per Gibbs J.) or if "the Court's declaration will produce no foreseeable consequences for the parties": Gardner v Dairy Industry Authority (NSW) (1977) 52 ALJR 180, at 188, per Mason J...." The principles relating to the grant of declaratory relief were also referred to by the Full Court at an earlier stage of the present proceedings, although in the context of considering a declaration in negative form in favour of NZI, which had been made by Wilcox J. at the first trial: Jenkins v NZI Securities Australia Ltd (1994) 52 FCR 572 (FCA/FC), at 575-577. It may well be appropriate in a case in which damages are awarded under s.82 of the Trade Practices Act 1974, in respect of a contravention of s.52 of that Act, to grant declaratory relief of the kind that Mr Francey seeks: Jenkins v NZI, at 576. Any such declaration ordinarily should be in form reflecting the substantive cause of action sued upon: RAIA v FAI Insurance, at 178, per Beaumont and Spender JJ. Thus, if declaratory relief were to be granted, the form of declaration proposed by Mr Francey would require some modification. I do not think it is appropriate, however, to grant declaratory relief when it has not been sought in the amended application and was not the subject of submissions at the hearing. A fortiori, this is so when no application to amend the pleadings has been made. It is true that the question of misleading or deceptive conduct has been a matter of controversy between the parties. But, in my view, the question of declaratory relief should have been raised prior to the handing down of the principal judgment. I would have been disposed to take a different view, even at this late stage, if Mr Francey had been able to point to some significant practical consequence that would flow from the granting of a declaration in an appropriately limited form. He was not able to point to any such consequence. He did suggest that a declaration might have consequences for the represented parties and for other people in separate proceedings. I do not think Mr Francey made good this suggestion. The case is not one, for example, where the respondents dishonestly or flagrantly contravened s.52 of the Trade Practices Act 1974 in circumstances calling for a finding of misleading and deceptive conduct to be embodied in an order of the Court. To the extent that the findings I have made are, or may be, significant for other litigation involving different parties, the making of a declaration will not add to the force or effect of those findings: see s.83 of the Trade Practices Act 1974. In my opinion, therefore, the orders made in these proceedings should not include declarations of the kind proposed by Mr Francey. The Quantum of Ripoll's Debt Mr Coles argued that the orders should include a declaration that the indebtedness of Ripoll Pty Ltd to NZI CapitalCorporation Ltd, as at 16 March 1992, was $15,482,068.06. Although there was evidence adduced of Ripoll's indebtedness under the facility at various times, the precise quantum of that indebtedness at 16 March 1992 (or indeed at any other time) was not an issue in the proceedings before me. It was for that reason that I made no finding as to the precise quantum of the debt. Had it been an issue, the applicant might well have conducted his case differently and, in particular, may have cross-examined Mr Taylor, who gave evidence as to Ripoll's indebtedness. Of course the quantum of Ripoll's indebtedness is likely to be an issue in the guarantee proceedings, which have yet to be determined. In my opinion, there is no basis for including a declaration to the effect sought by Mr Coles. Mr Poignand Mr Francey pointed out that in the principal judgment I had not dealt specifically with Mr Poignand's position as a guarantor and his claim to be relieved of liability under the guarantee or to receive an award of damages. It will be recalled that Mr Poignand himself executed the deed of guarantee dated 22 April 1987. The issue had been referred to, if only briefly, in submissions and was overlooked by me in preparing the principal judgment. NZI joined in the applicant's submission that the claim for relief on behalf of Mr Poignand be specifically addressed. In my opinion, Mr Poignand's position as guarantor falls to be determined in accordance with the findings of fact made in the principal judgment. The analysis is as follows: (i) On 3 April 1987 Mr Poignand was induced, in part, by NZI's misleading and deceptive conduct to execute the facility agreement on behalf of Ripoll. (ii)Mr Poignand did not learn of the disparity between cl.5.08 of the facility agreement and the terms of the facility letters until long after he executed the deed of guarantee. (iii)Mr Poignand gave evidence that at the time he executed the deed of guarantee he believed that it corresponded to the facility letter. He also said that he received the guarantee on or shortly after 3 April 1987, although he sought the signature of other guarantors on or shortly before 22 April 1987. I accept that one reason for Mr Poignand executing the guarantee was his belief that the facility agreement accurately reflected the terms specified in the facility letter (as clarified in the conversations between Mr Poignand, Mrs Middleton and Mr Parker). Thus, I think that NZI's misleading and deceptive conduct played some part in Mr Poignand's execution of the guarantee. (iv)I have considerable doubts whether Mr Poignand, if he had discovered the true position prior to his execution of the guarantee (that is, if he had discovered that cl.5.08 of the facility agreement did not accurately reflect the terms of the facility letter as understood by him), would have done anything other than execute the guarantee as presented to him. By the time he executed the guarantee, even if he did so well before 22 April 1987, NZI Capital had already advanced about $8.18 million under the facility. A refusal by Mr Poignand (or other guarantors) to execute the guarantee would have exposed Ripoll to the risk of being in default under the facility agreement. That agreement required the deed of guarantee to be executed by all parties thereto within 14 days of execution of the facility agreement itself: see Schedule 3; Schedule 4, cl.1. A dispute between Ripoll and NZI at this stage might have produced a catastrophic situation for Ripoll. On balance, however, I think it likely that Mr Poignand would have requested NZI Capital to modify cl.5.08 to accord with the terms of the facility letters, as understood by the parties. This accords with my finding as to what he would have done had he discovered the discrepancy prior to 3 April 1987. (v) Had such a request been made, I infer that the likelihood is that NZI Capital would have agreed to amend the facility agreement to accord with the facility letters as understood by the parties. Even if the request had been made after execution of the facility agreement on 3 April 1987, Mrs Middleton and Mr Parker would have recognised that the request simply sought to bring the facility agreement into line with the position that had been agreed prior to the execution of the agreement. I find that they would have agreed to the amendment proposed. (vi)If, as I think, NZI would have agreed to modify the facility agreement, Mr Poignand would have executed the deed of guarantee without alteration. There was no legal or commercial reason for him not to have done so. (vii)If, contrary to my view, NZI Capital would not have been prepared to amend the facility agreement, I think that Mr Poignand would have executed the deed of guarantee anyway. Faced with the prospect of a dispute with a recalcitrant financier, which might refuse to advance further funds and to call up the amounts advanced, I have little doubt that Mr Poignand would have taken a course which did not threaten the project. (ix)It follows that Mr Poignand can establish no compensable loss flowing from NZI's misleading and deceptive conduct, beyond that which is provided for in the award of damages to Ripoll. There is no basis in the circumstances for Mr Poignand to be granted any relief under s.87 of the Trade Practices Act 1974. Mr Courtney In the principal judgment I also did not deal with the position of Mr Courtney as a guarantor under the deed of guarantee dated 22 April 1987. Again, both the applicant and NZI agreed that Mr Courtney's position should be specifically addressed. Mr Courtney died prior to the institution of the representative proceedings. He was, nevertheless, included in the Schedule A to the application as a member of the group of guarantors represented by the applicant. Of course, there is no direct evidence of what motivated Mr Courtney to execute the guarantee. Nonetheless, it is clear from the evidence that Mr Courtney participated, together with Mr Poignand, in the major events recounted in the principal judgment. Mr Courtney and Mr Poignand planned the retirement village project together in late 1984 and the first half of 1985; they made the approach to NZI together in early January 1987; the facility letters were all addressed to Mr Courtney and Mr Poignand; Mr Courtney attended the meeting of 27 January 1987 at which significant representations were made by Mrs Middleton and Mr Parker; there is some evidence that Mr Courtney instructed Mr Hawkins and dealt with him on behalf of Ripoll in relation to the negotiation of the facility agreement; and Mr Courtney attended the meetings of 2 April and 3 April 1987 which culminated in the execution of the facility agreement. Mr Courtney also executed the same deed of guarantee as Mr Poignand. In these circumstances, I infer that Mr Courtney's knowledge of events and state of mind was the same as Mr Poignand's knowledge and state of mind. The findings I have made in relation to Mr Poignand therefore apply to Mr Courtney. In summary, I find that he was induced to execute the deed of guarantee, at least in part, because of his belief that the facility agreement contained provisions corresponding to the terms of the facility letters as understood by the parties. However, had he learned of the true position prior to executing the guarantee, he would have requested NZI to amend the facility agreement to ensure that it corresponded with the facility letters as understood by the parties. Had the request been made it would have been acted upon favourably by NZI, and Mr Courtney would have executed the guarantee in unchanged form. If NZI had declined to act on the request, Mr Courtney would have executed the guarantee in any event. Mr Courtney (or his estate) is not entitled to relief under s.87 of the Trade Practices Act 1974. Dr Emmett At the hearing before me no submission was made on behalf of Dr Emmett, who was a represented party. Dr Emmett was one of the guarantors named in the deed of guarantee and indemnity with NZI Capital, dated 22 April 1987. Dr Emmett's address was given as Basle, Switzerland. The deed was executed on Dr Emmett's behalf by Mr Courtney, who did so pursuant to a registered power of attorney. Mr Francey submitted that a finding should be made that Dr Emmett's execution of the guarantee in favour of NZI Capital, by his attorney under power, was induced by NZI's misleading and deceptive conduct. Dr Emmett did not give evidence in the proceedings. No explanation was given for his failure to do so. The only evidence relied upon by the applicant was the fact that Mr Courtney had executed the document. It was argued that, since Mr Courtney executed the deed of guarantee on Dr Emmett's behalf, it must follow that Dr Emmett was induced to execute it by NZI's misleading and deceptive conduct. In other words, since Mr Courtney was misled in relation to his own guarantee, his belief is to be imputed to Dr Emmett, presumably as Dr Emmett's agent. But the mere fact that Mr Courtney executed the deed of guarantee on Dr Emmett's behalf does not establish that Dr Emmett held the same belief as Mr Courtney as to the term of the facility. Nor does it establish (if it be relevant) that Dr Emmett left the decision to execute the deed of guarantee to Mr Courtney. The evidence does not reveal what communications took place between Mr Courtney or, indeed, Mr Poignand and Dr Emmett. The evidence is consistent with Dr Emmett deciding to execute the guarantee, or to authorise its execution on his behalf, for reasons quite unconnected with any belief on his part as to the term of the facility or with any reliance on his part on Mr Courtney's state of mind. The execution of the deed of mortgage by an attorney under power may have taken place, so far as the evidence reveals, simply because Dr Emmett was temporarily unavailable. The onus is on an applicant for relief under the Trade Practices Act 1974 to establish reliance on the respondent's misleading and deceptive conduct. That onus has not been discharged by Dr Emmett. Pannikote Holdings Pty Ltd As noted in the principal judgment, the seal of Pannikote Holdings Pty Ltd was affixed to the deed of guarantee in the presence of Mr Courtney, as director of the company, and Mr Metcalfe, as secretary. As I understood the argument put at the hearing on behalf of the Pannikote interests, including the company, it was that Mrs Pannikote was told by Mr Poignand that the term of the facility would be in excess of four years. Based on this conversation, Mrs Pannikote claimed that she formed the belief that a facility term of four years would not be long enough for Ripoll. It was also contended that Dr Pannikote, who executed the guarantee as guarantor in his own right, had been satisfied with his wife's assurances as to the term of the facility. I rejected these contentions, because I did not accept the accounts of Mrs Pannikote and Dr Pannikote concerning the discussions they claimed to have had relating to the terms of the facility. I therefore concluded that Pannikote Holdings was not entitled to relief. It was not suggested at the hearing, at least as I understood the argument, that a finding should be made that Pannikote Holdings was induced to execute the deed of guarantee by NZI's misleading and deceptive conduct because Mr Courtney, as a director, participated in affixing the company seal to the deed. However, that argument is now put. It is said that Mr Courtney believed that the term of the facility was for four years plus an option for a further two years, if Ripoll passed the review at the end of the third year of the facility. Thus, his belief (which was induced by NZI's misleading and deceptive conduct) should be attributed to the company. The argument now put assumes that Mr Courtney should be regarded as being the corporate mind of Pannikote Holdings, for the purpose of determining what factors induced the company to enter into the guarantee. In Tesco Supermarkets Ltd v Nattrass [1972] AC 153 (HL), at 170-171, Lord Reid expressed the principles this way: "I must start by considering the nature of the personality which by a fiction the law attributes to a corporation. A living person has a mind which can have knowledge or intention or be negligent and he has hands to carry out his intentions. A corporation has none of these: it must act through living persons, though not always one or the same person. Then the person who acts is not speaking or acting for the company. He is acting as the company and his mind which directs his acts is the mind of the company. There is no question of the company being vicariously liable. He is not acting as a servant, representative, agent or delegate. He is an embodiment of the company or, one could say, he hears and speaks through the persona of the company, within his appropriate sphere, and his mind is the mind of the company. If it is a guilty mind then that guilt is the guilt of the company. It must be a question of law whether, once the facts have been ascertained, a person in doing particular things is to be regarded as the company or merely as the company's servant or agent. In that case any liability of the company can only be a statutory or vicarious liability. ... Normally the board of directors, the managing director and perhaps other superior officers of a company carry out the functions of management and speak and act as the company. The subordinates do not. They carry out orders from above and it can make no difference that they are given some measure of discretion. But the board of directors may delegate some part of their functions of management giving to their delegate full discretion to act independently of instructions from them. I see no difficulty in holding that they have thereby put such a delegate in their place so that within the scope of the delegation he can act as the company." In my opinion, the argument now put on behalf of Pannikote Holdings is not only inconsistent with the appellant's case at the trial, but is not consistent with the evidence. Both Dr Pannikote and Mrs Pannikote, in their affidavits, clearly sought to convey the impression that Mr Courtney was merely a professional adviser and that decisions relating to the company were made by them. Dr Pannikote explained the position this way (paragraph 5 of his affidavit of 8 December 1994): "Due to the demands on me and my practice, I have left my wife to attend to the business aspects of the practice and matters relating to personal investment by me and investment by my companies including Pannikote Holdings. As a consequence I have relied upon my wife to convey to me any advice from our professional advisers from time to time. My direct involvement with Mr Courtney was irregular and for the most part my wife represented my interests when obtaining advice from Mr Courtney." Mrs Pannikote referred to a conversation with Mr Courtney in 1984, in which Mr Courtney put "a proposition" for an investment opportunity relating to the purchase of land at Dee Why. Mrs Pannikote deposed that, after discussing the proposal with her husband, she told Mr Courtney that they would be agreeable to participating in the venture. The initial investment was made by Proban Pty Ltd. However, in early 1987 Mrs Pannikote deposed to a conversation with Mr Courtney to the following effect: Mr Courtney: "Some extra security is required by NZI. Would you be agreeable for us to use the block of units you have at Robertson Street, Kogarah as extra security?" Mrs Pannikote:"I'll discuss it with Vic." After discussing the matter with her husband Mrs Pannikote informed Mr Courtney that security over the block of units, which was registered in the name of Pannikote Holdings, would be provided. This evidence does not suggest that Mr Courtney, although he was a director of Pannikote Holdings, had been delegated responsibility for determining whether the company would or would not provide security or execute a guarantee. On the contrary, the evidence shows that the decisions relating to investment by the Pannikotes, and by Pannikote Holdings specifically, were made by the Pannikotes. They received advice upon which they relied heavily, even uncritically. But that is different from Mr Courtney being empowered to make decisions on behalf of the company. I do not think that his mind should be regarded as the corporate mind for the purposes of assessing what induced Pannikote Holdings to enter particular transactions. Mrs Pannikote gave evidence that in April 1987 she was unaware that a guarantee had been executed by Pannikote Holdings, although she was of course aware that the mortgage of the block of units at Kogarah had been executed by the company. Even if that is correct, it does not establish that Mr Courtney's state of mind at the date the guarantee was executed determines whether the company was induced to execute the deed by NZI's misleading or deceptive conduct. The applicant adduced no evidence as to how it was that Mr Courtney came to affix Pannikote Holdings' seal to the deed of guarantee, beyond Mrs Pannikote's statement that she was unaware that Pannikote Holdings was giving a guarantee. As previously noted, Mr Courtney died prior to the commencement of the representative proceedings. However, Mr Metcalfe, who also witnessed the affixation of the seal as company secretary, was not asked about the circumstances in which the seal was affixed. The evidence does not enable me to find that Mr Courtney was authorised by the other directors to decide whether the company should execute the deed of guarantee, independently of their views. The evidence is consistent with Mr Courtney, at the least, believing that he had the approval of the Pannikotes to cause Pannikote Holdings to execute the guarantee. To find otherwise would be to attribute to Mr Courtney a deliberate act of wrongdoing. I should add that, in any event, I would not be prepared to make an affirmative finding that Mrs Pannikote was not aware in April 1987 that Pannikote Holdings was to execute the guarantee. I appreciate that Mr Coles did not expressly put to Mrs Pannikote that she was aware of this fact at the time, or that she had forgotten that she had given approval for the execution of the deed by Pannikote Holdings. This omission (if that is the correct description) was no doubt attributable to the fact that, on the case as outlined and pleaded on behalf of the Pannikotes, it was not apparent that any claim that Pannikote Holdings had been induced to execute the deed of guarantee would be based on Mr Courtney's role in affixing the company seal. I do not think that the respondent should reasonably have expected such a case to be mounted; indeed it seems to have emerged only as something of an afterthought following publication of the principal judgment. I am prepared to accept that Mrs Pannikote had no recollection at the time of swearing her affidavits and giving oral evidence that she had authorised execution of the guarantee by Pannikote Holdings. But I think it is inherently improbable that she (and, for that matter, Dr Pannikote) did not know in April 1987 that the guarantee was to be executed by the company. Mr Courtney had sought and received approval from the Pannikotes for the execution of the mortgage of the Kogarah units by Pannikote Holdings. The mortgage, which, like the guarantee, was dated 22 April 1987, was executed by Pannikote Holdings in the presence of Mr Courtney and Mr Metcalfe. The deed of guarantee executed by Dr Pannikote contained provision for Pannikote Holdings to execute the document as guarantor. While Dr Pannikote executed the deed in circumstances of urgency, it was not suggested that the deed had been presented to him by Mr Poignand in a manner calculated to conceal the fact that Pannikote Holdings was intended to be a party. Nor was there any apparent motive for Mr Courtney or Mr Poignand to mislead the Pannikotes as to whether Pannikote Holdings was to be a guarantor under the deed. The Pannikotes had already agreed to support the project to the extent of Dr Pannikote executing a guarantee and Pannikote Holdings executing a mortgage over a valuable block of units. Whether or not Mr Poignand and Mr Courtney told the Pannikotes the whole truth, there was no obvious reason for Mr Courtney to cause Pannikote Holdings to execute the deed of guarantee in circumstances of secrecy when the Pannikotes could have been expected to give their authority to do so readily. In my opinion, the argument now sought to be advanced on behalf of the Pannikote Holdings cannot succeed. Even if it did, Pannikote Holdings would still face the difficulty that, on my findings, had the truth become known to Mr Poignand and Mr Courtney prior to the execution of the guarantee by the company, the guarantee would still have been executed. This is for the reasons I have given on p.157 of the principal judgment. In short, Mr Courtney or Mr Poignand would have requested an amendment to cl.5.08 of the facility agreement; the amendment would have been made; and Pannikote Holdings, on Mr Courtney's recommendation, would have executed the deed of guarantee. Set Off or Stay Mr Coles argued that the judgment of $314,000 should be set off against the debt owed by Ripoll to NZI Capital and an order to that effect should be made. If this were done, Mr Coles contended that there would be no need to assess interest, since the damages of $314,000 awarded in favour of Ripoll could simply be offset against the debt ultimately found to be due by Ripoll to NZI Capital at 16 March 1992, the date of the appointment of the receiver to Ripoll. I accept that, on the material available to me, any award of damages in favour of Ripoll is capable of being set off against any amount due by Ripoll to NZI Capital under the facility agreement: Murphy v Zamonex Pty Ltd (1993) 31 NSWLR 439 (NSW SCt/Giles J.), at 464-465. and the authorities cited there. However, at this stage it has not been finally established by a court order that NZI Capital is entitled to recover a specific or indeed any sum from Ripoll. Moreover, there is no cross-claim or other pleading before me in which an order is sought that any damages awarded to Ripoll be set off against the amount due to NZI Capital under the facility agreement. Nevertheless, it seems to me unjust that Ripoll should be at liberty to enforce its judgment for damages against NZI Capital and NZI Securities. In this complex and prolonged litigation, what started out as a cross-claim on the guarantee proceedings has been determined before the claims against the guarantors. This has largely been for reasons of procedural convenience. As matters stand, although NZI Capital's entitlement to recover moneys under the facility agreement has not been quantified in any court order, it appears from evidence given in the representative proceedings heard by me that that entitlement is greatly in excess of the damages I have awarded in respect of Ripoll's claim. I am not aware of any attack on NZI Capital's entitlement to recover from Ripoll the amount under the facility agreement, other than the attack made on the representative proceedings themselves. Equally, however, I am not aware of proceedings whereby NZI Capital has sought to recover against Ripoll (or Rosewick Holdings Pty Ltd, which replaced it as trustee of the DYV Unit Trust) the amount due under the facility agreement. In the circumstances I think that the appropriate course is to enter judgment for Ripoll for the amount of damages assessed by me, together with interest, but to stay the execution of the judgment until further order, pursuant to Federal Court Rules O.37, r.10. The grant of a stay of execution will enable the guarantee proceedings to run their course and the judgment in favour of Ripoll to be taken into account in assessing the liability (if any) of each of the guarantors. It may be that at some point the precise entitlement of NZI Capital against Ripoll will be the subject of a court order, or otherwise be established. At that point, if necessary and appropriate, any issue of set off could be finally determined. I shall reserve liberty to apply to allow an application to be made to vary or discharge the stay order, should circumstances warrant such an application. Interest Mr Coles submitted that the question of interest should be left in abeyance until the final amount of Ripoll's indebtedness to NZI Capital had been quantified. However, as I have said, although the guarantee proceedings remain to be determined, there seem to be no proceedings currently on foot between NZI Capital and Ripoll, or Rosewick Holdings Pty Ltd, calling for a quantification of Ripoll's indebtedness to NZI Capital. This situation may or may not change. I think that the appropriate course is to include in the judgment an award of interest on the damages of $314,000 but, for the reasons I have given, to stay the judgment. In written submissions filed in Court, the applicant contended that interest should be awarded under s.51A of the Federal Court of Australia Act 1976, at a rate of interest broadly matching the rate charged by NZI Capital as moneys outstanding under the facility agreement. This rate, where default had occurred, was the Bank Bill rate plus 5% per annum, compared with the Bank Bill rate plus 2% per annum for interest where there had been no default. It was submitted that the appropriate date from which interest should run was 16 March 1992, the date of the appointment of the receiver. It was also submitted that interest should be compounded, since this is the approach that NZI Capital would take to the amounts due under the facility agreement. The applicant provided calculations of interest, using 90 day commercial bill or bank accepted bill rates as the bench mark. Adopting the calculations for interest compounded annually. The total for the period March 1992 to May 1995 (inclusive) was $127,747.70, using bank accepted bill rates derived from the Reserve Bank, and $137,078.47, using commercial bill rates derived from Westpac Banking Corporation. Mr Coles addressed no argument in opposition to the applicant's approach to the calculation of interest. Having regard to the absence of any such argument, I propose to allow $136,000 for interest, for the period from 16 March 1992 to the date of this judgment. This will result in a judgment in favour of the applicant in a total sum of $450,000, inclusive of interest. Costs Mr Francey submitted that NZI should pay the applicant's costs of the trial, perhaps with a small discount to reflect the failure of the claims put forward on behalf of the guarantors who had not opted out of the representative proceedings. He submitted also that the applicant should receive a percentage of the costs of the trial before Wilcox J. reflecting the proportion of that hearing devoted to the question of NZI's misleading and deceptive conduct. Mr Francey contended that the applicant had succeeded in establishing that NZI had engaged in misleading and deceptive conduct in relation to Ripoll and that NZI had breached its contract with Ripoll; that the applicant had received a substantial award of damages; and that the applicant's failure to obtain other relief on behalf of Ripoll (such as orders under s.87 of the Trade Practices Act 1974) related only to ancillary issues. While the representative proceedings had not resulted in orders in favour of the guarantors, the amount of time spent on their claims was under 10% of the total hearing time. Mr Francey pointed out that, at the first trial before Wilcox J., the principal issue was whether NZI had engaged in misleading and deceptive conduct in connection with the grant of the finance facility. In addition, the case had raised the validity of the receiver's appointment. However, his Honour noted that this issue, on which NZI failed before him, had occupied little hearing time. Wilcox J. ordered the then applicant in the representative proceedings to pay 80% of NZI's costs since, on his Honour's findings (later set aside by the Full Court) NZI succeeded on the issue of misleading and deceptive conduct: Poignand v NZI Securities Australia Ltd (1994) 120 ALR 237, at 251. (Mr Francey, in the course of argument, stated that Wilcox J. had ordered the then applicant to pay 90% of NZI's costs. However, both the report of Wilcox J.'s judgment and the version of the judgment handed down by his Honour refer to 80% rather than 90%. Both parties have subsequently confirmed that 80% is correct.) On appeal the Full Court said this about the costs of the proceedings before Wilcox J. (Jenkins v NZI Securities Australia Ltd, at 577): "Since the respondents were substantially successful at first instance, Wilcox J. ordered that they have 80% of their costs of the whole proceeding. That order should now be set aside, but a question remains as to the proper order to be made in respect of the costs of the proceeding at first instance with respect to the issues agitated in this appeal. In our view, those costs should abide the decision of the trial judge on the new trial. That judge will be in a better position to make a judgment on this question than we are, at this stage of the litigation." Mr Ashhurst, who argued the question of costs for NZI, contended that the applicant should pay 90% of NZI's costs of the proceedings before Wilcox J. and the same percentage of the costs of the proceedings before me. (Presumably the percentage of the proceedings before Wilcox J. was chosen because it was thought that Wilcox J. had made an order for the payment of 90% of NZI's costs by the applicant.) Mr Ashhurst characterised the guarantors' claim to be relieved of any obligation to meet Ripoll's debt to NZI Capital as the "primary claim" in the proceedings. On this issue the guarantors had failed. The applicant sought to reduce Ripoll's debt to NZI Capital by at least some $10 million; on this aspect of the case the applicant had succeeded only to a minor extent. If the issues identified in the amended statement of claim were considered, the applicant had succeeded only in about a fifth of them. Had the proceedings before Wilcox J. or before me taken the form of a claim by NZI Capital against Ripoll for the amount due under the facility agreement, the end result may have been an order that Ripoll pay the amount found to be due, less the damages award that I have made. In this case, NZI Capital (assuming it succeeded in establishing that Ripoll was liable to pay an amount calculated generally in accordance with the evidence before me) would have had the benefit of a judgment in its favour against Ripoll for a substantial sum. This might have had a significant bearing on the award of costs, depending on how the case was conducted. But the matter has not proceeded in this way. Except for the issue of the validity of the receiver's appointment, the proceedings before Wilcox J. were fought solely on the issue of whether NZI had engaged in misleading or deceptive conduct. The proceedings before me were expanded by the addition of the guarantors' claims and the assessment of damages occasioned by NZI's misleading and deceptive conduct. These questions were fought out at length. As I have previously explained, neither in the representative proceedings nor the guarantee proceedings did NZI Capital seek an order against Ripoll for the payment of moneys due under the agreement. In these circumstances I think that costs should be assessed on the basis that the representative proceedings are to be regarded as discrete litigation. On this approach, the applicant should have succeeded before Wilcox J. on the substantial issue litigated before his Honour. The applicant has ultimately succeeded in obtaining an award of damages by establishing misleading and deceptive conduct by NZI. It is true that the award ultimately made was very much less than that sought by the applicant, but I do not think that of itself provides a reason for reducing an award of costs that otherwise should be made in favour of the applicant. NZI's preferred position was that, even if misleading and deceptive conduct were found to have occurred, the applicant had not made out a case for any damages on behalf of Ripoll. It was necessary to assess all of the evidence in order to decide that Ripoll was entitled to damages, albeit considerably less than the award sought by the applicant. Furthermore, it was always open to NZI, both before and after I ordered that the issue of damages should be dealt with at the hearing, to have made an offer of compromise to the applicant. Had such an offer been made, allowing Ripoll credit against the amount due by Ripoll to NZI Capital, for a sum not less than the damages ultimately assessed, NZI is likely to have been protected against a costs award in relation at least to the assessment of damages. This was the question that occupied most of the hearing time before me. However, NZI did not take this course. As a consequence of the contested hearing, Ripoll has the benefit not only of a finding of misleading and deceptive conduct, but also of an order for damages against NZI. In the circumstances, I think that the applicant in the representative proceedings should be awarded the costs of the proceedings before Wilcox J., insofar as they relate to the issue of NZI's misleading and deceptive conduct. The applicant also should receive the costs of the hearing before me, subject to an allowance being made for the failure of the applicant to succeed on behalf of the represented guarantors. I appreciate that, as Mr Francey pointed out, there is authority supporting the proposition that the Court's power to order a successful applicant to pay costs in respect of an issue on which he or she has failed ought to be exercised only where the court concludes that the raising of the issue was so unreasonable that it is fair and just to make the order: Mok v Minister for Immigration, Local Government and Ethnic Affairs (No.2) (1993) 47 FCR 81 (FCA/Keely J.). In the present case, the form of representative proceedings has meant that a number of distinct, albeit factually connected, causes of action claimed by different parties have been heard together. While I do not propose to make an order that the applicant pay NZI's costs in respect of the guarantors' causes of action, I think the applicant's failure on those issues should be taken into account in assessing the proportion of the applicant's overall costs that should be paid by NZI. I do not think that any mathematical formula, whether by reference to discrete issues identified by counsel or pages of transcript devoted to the guarantors, can be applied to assess an appropriate proposition of costs to be paid by NZI. A number of the factual issues were interconnected. For example, Mr Poignand's evidence was important on many questions in the case, including the claims of the guarantors. I think the appropriate orders, having regard particularly to the matters I have identified, is that NZI pay 80% of the applicant's costs of the proceedings before Wilcox J. (the proportion identified by his Honour as attributable to the issue of misleading and deceptive conduct by NZI) and 60% of the applicant's costs of the proceedings before me. A Stay of the Costs Order? Neither party addressed attention in argument to whether any order for costs in favour of the applicant (as distinct from a damages award) should be stayed. I am inclined to the view that the costs award should be stayed pending the determination of the guarantee proceedings. I appreciate that the parties to those proceedings are not the same as the parties represented in the representative proceedings. A number of guarantors have opted out of the representative proceedings and the claims against them and their cross claims will be determined on the guarantee proceedings. The costs award I have made reflects the success of the applicant on behalf of Ripoll. As I have noted, it appears on the evidence before me that the amount due by Ripoll to NZI Capital greatly exceeds not only the damages award, but the amount of the costs award (even though it is likely to be substantial). It may be that NZI Capital is prepared to grant credit to Ripoll (and thus the guarantors) for the amount of the costs order. If this occurs, it would seem inappropriate to allow the costs order to be enforced immediately. However, before finally determining whether the costs order should be stayed until further order, I shall give the parties an opportunity to make further submissions on the point. The Receiver's Costs Although the receiver was joined as the third respondent to the representative proceedings, no order was sought against him at the hearing before me. Mr Hamilton QC stated the position in opening referring to the fact that the validity of the receiver's appointment had been determined by the Full Court and thus was no longer in contest. So far as I am aware, at all times the receiver has had the same legal representation as NZI. Mr Ashhurst, on behalf of the receiver, sought an order for indemnity costs against the applicant. However, I do not think that anything has been shown to justify anything beyond an order that the applicant pay the third respondent's costs of the proceedings. There is an order already in place that the applicant (or his predecessor as representative applicant) pay NZI's costs of the proceedings before Wilcox J. insofar as they relate to the validity of the third respondent's appointment as receiver of Ripoll: see NZI Securities Australia Ltd v Poignand (1994) 51 FCR 584 (FCA/FC), at 594. The order for costs in favour of the third respondent should extend to his costs of the proceedings before Wilcox J., except in so far as they are already the subject of an order of the Court. Orders I consider that the following orders should be made: The Court: 1. Identifies as the group members who will be affected by this judgment the persons named in Schedule "A" and Schedule "B" to the further amended application, with the exception of W.L. Hawke Holdings Pty Ltd. 2. Orders judgment for Ripoll in the sum of $450,000, inclusive of interest, against the first and second respondents. 3. Directs that enforcement of the judgment referred to in paragraph 2 be stayed until further order of the Court. 4. Orders the first and second respondents to pay: (a) 80% of the applicant's costs of the proceedings before Wilcox J.; and (b) 60% of the applicant's costs of the proceedings before Sackville J. 5. Orders the applicant to pay: (a) the costs of the third respondent of the proceedings before Wilcox J., except to the extent those costs are already the subject of orders by the Court; and (b) the third respondent's costs of the proceedings before Sackville J. 6. Directs that enforcement of the order in paragraph 4 (save for the taxation of the applicant's costs) be stayed until further order. 7. Orders that the further amended application otherwise be dismissed. 8. Reserves liberty to the parties to apply in respect of the directions in paragraphs 3 and 6. I certify that this and the preceding 30 pages are a true copy of the Reasons for Judgment of the Honourable Justice Sackville. Associate: Dated: 29 June, 1995 Heard: 23 June, 1995 Place: Sydney Decision: 29 June, 1995 Appearances: Mr N. Francey, instructed by Blessington Judd, Solicitors, appeared for the applicant. Mr B. Coles QC with Mr D. Robinson and Mr M. Ashhurst, instructed by Holmes & Bevan, Solicitors, appeared for the respondents.