FEDERAL COURT OF AUSTRALIA Oldendorff Carriers GmbH & Co. KG v Tharmalingam [2019] FCA 2020 File number: NSD 121 of 2018 Judge: RARES J Date of judgment: 18 December 2019 Catchwords: PRACTICE AND PROCEDURE - referee - application for adoption of referees'report under s 54A of the Federal Court of Australia Act 1976 (Cth) - where no reason to not adopt referees'assessment of damages and costs COSTS - pre-judgment interest on foreign currency amount under s 51A of the Federal Court of Australia Act 1976 (Cth) - assessment of appropriate rate of pre-judgment interest to apply where judgment sum in United States dollars - where award of pre-judgment interest is compensatory in nature Legislation: Competition and Consumer Act 2010, Sch 2 (Australian Consumer Law) ss 18, 236 Federal Court of Australia Act 1976 (Cth) ss 37M, 39, 51A, 54A Federal Court Rules 2011 rr 5.21, 5.23, 11.02, 16.02-16.08, 28.65, 28.66, 28.67 Cases cited: Ahmad v Minister for Immigration and Border Protection [2018] FCAFC 199 Buckley v Bennell Design & Constructions Pty Limited (1978) 140 CLR 1 Chocolate Factory Apartments v Westpoint Finance [2005] NSWSC 784 CPB Contractors Pty Limited v Celsus Pty Limited (No 2) (2018) 364 ALR 129 Optiver Australia Pty Limited v Tibra Trading Pty Limited (2012) 203 FCR 520 Suzlon Energy Ltd v Bangad (No 2) [2014] FCA 1173 Date of hearing: 14 November 2019 Date of last evidence: 28 November 2019 Registry: New South Wales Division: General Division National Practice Area: Admiralty and Maritime Category: Catchwords Number of paragraphs: 34 Counsel for the Applicant: Ms C O Gleeson Solicitor for the Applicant: HFW Australia Counsel for the Respondents: The Respondents did not appear ORDERS NSD 121 of 2018 BETWEEN: OLDENDORFF CARRIERS GMBH & CO. KG Applicant AND: SHANKARALINGAM THARMALINGAM First Respondent BATTELLE HOLDINGS PTY LTD Second Respondent JUDGE: RARES J DATE OF ORDER: 18 December 2019 THE COURT ORDERS THAT: 1. The respondents pay the applicant USD1,830,408.68 (inclusive of prejudgment interest up to 28 November 2019 of USD271,161.93) pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth). 2. The respondents pay the applicant's costs of AUD32,678. 3. Interest on so much of the judgment sum in order 1 as is unpaid accrue at the published official maximum target (interest) rates set by the Federal Reserve Bank of New York of the United States of America plus 3.106% during any period or periods while it remains unpaid. 4. Orders 1, 2 and 3 take effect as and from 28 November 2019. 5. The time in which the respondents may file a notice of appeal be extended to 28 days after today. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) RARES J: 1 This is an application to adopt the report of the two referees, who are judicial registrars of the Court whom I appointed, pursuant to s 54A of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act), on 7 November 2018, to determine the quantum of the claims of the applicant, Oldendorff Carriers GmbH & Co KG, for damages in its originating application and for the costs of the proceeding. 2 I made the order for the reference in consequence of my determining on 7 June 2018 that there be judgment in favour of Oldendorff in accordance with r 5.21 of the Federal Court Rules 2011, and that its damages be assessed in accordance with r 5.23(2)(d) and (e). The two respondents, Shankaralingam Tharmalingam and Battelle Holdings Pty Ltd, had defaulted in complying with several orders to file and serve their defences in the form required by rr 16.02 to 16.08 and, if it intended to appear, for Battelle to file and serve a notice of address for service pursuant to r 11.02 (so that a lawyer, as opposed to Mr Tharmalingam personally, acted for it). I made orders initially on 22 March 2018 but subsequently varied the orders on more than one occasion to extend the time by which the respondents had to comply with them. The last extension gave the respondents until 31 May 2018 to comply. The referees' report 3 The referees reported on 19 June 2019 that, in accordance with r 28.66(b), in their opinion: Oldendorff was entitled to USD1,559,246.75 in damages for Battelle's breach of the charterparty between them dated 21 August 2015, and or the respondents' misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law in Sch 2 of the Competition and Consumer Act 2010 (Cth); and Oldendorff's costs of the proceeding be assessed in the amount of AUD32,678. 4 Oldendorff claimed in its statement of claim that it had relied on representations that the respondents made when entering into the charterparty and subsequently. The charterparty was on the Americanized Welsh Coal Charter form (amended in 1979) for the charter of Tao Hua Hai to lift a cargo of coal from Newcastle, New South Wales, to the port of Krishnapatnam, India, on the basis of a freight rate of USD9.50 per metric ton. As noted in cl 1 of the charterparty, the ship's capacity was between 108,000 and 118,800 metric tons. 5 In the event, Battelle was unable to arrange for the carriage of any cargo on the ship. The pleading in the statement of claim the subject of the default judgment alleged that: Mr Tharmalingam, on each of his own and or Battelle's behalf, continued to represent to Oldendorff that it should not terminate the charterparty after it had delivered the ship into Battelle's service at Newcastle on 8 September 2015 because Battelle would perform and would be able to meet its obligations to pay the freight under the charterparty; after 8 September 2015, the ship remained ready and able to load the cargo until Oldendorff terminated the charterparty on 1 December 2015 and fixed the ship on that day on another charter; and Oldendorff had relied on the representations, had lost the opportunity to terminate the charterparty earlier than 1 December 2015 and refix the ship, and had incurred expense in daily hire costs, operational expenses and the cost of bunkers while she waited at Newcastle. 6 On 22 October 2019, I fixed the hearing of the application to adopt the report for today and directed that if the respondents wished to oppose its adoption, they file and serve any written submissions and any affidavits upon which they proposed to rely on or before 31 October 2019, and that Oldendorff file and serve any written submissions in response and any affidavits on which it proposed to rely on or before 8 November 2019. The principles 7 A purpose of the Court adopting the separate mode of trial of a proceeding, or one or more issues in a proceeding, by using a referee is to achieve what is now expressed in the overarching purpose in s 37M of the Federal Court Act, namely to facilitate the just resolution of the dispute according to law, as quickly, inexpensively and efficiently as possible: see, e.g., Optiver Australia Pty Limited v Tibra Trading Pty Limited (2012) 203 FCR 520 at 530-532 [33]-[41], where I discussed the principles. In CPB Contractors Pty Limited v Celsus Pty Limited (No 2) (2018) 364 ALR 129 at 145-147 [67]-[71], Lee J also discussed the principles and adopted expressly what McDougall J had said in Chocolate Factory Apartments v Westpoint Finance [2005] NSWSC 784 at [7]. There, McDougall J synthesised the principles that had emerged from a series of cases, principally in the Supreme Court of New South Wales over the preceding 20 years of that Court's adoption of the use of referees to resolve, among others, technical issues in a variety of cases, including commercial matters. 8 The Federal Court Rules 2011 provide that: each party to an inquiry must give to the referee and any other party a brief statement of the findings of fact and law for which the party contends (r 28.65(7)); the referee's report must attach those statements together with the referee's opinion and reasons on the subject of the reference (r 28.66); and after the report has been given to the Court, a party, such as Oldendorff, among other courses, may ask it to adopt, vary or reject the report in whole or in part but cannot adduce, in the Court, evidence given in an inquiry before a referee (r 28.67). 9 These Rules reflect the purpose inherent in the Court's power to order a reference, as a separate of mode of trial to the ordinary mode of trial by judge alone (see s 39 of the Federal Court Act). In a jury trial, for example, the jurors are told, as is the case, that they are the tribunal of fact. Unlike a referee, of course, they do not have to give reasons. But the result obtained from a jury trial is a verdict by the jury that identifies its ultimate findings including, if required to do so, their answers to questions; similarly, on a reference. In Buckley v Bennell Design & Constructions Pty Limited (1978) 140 CLR 1 at 15, Stephen J explained the character of a referee's report as follows: Whether described as a report or as an award, and s. 16 (2) employs both terms, the outcome of such a trial possesses none of the quite special qualities which give to the award of an arbitrator in an arbitration founded upon an out of court submission its own uniquely conclusive character. As Mr. Quintin Hogg, as he then was, said in Law of Arbitration (1936), p. 193, such a reference "is a species of trial, and the decision is now equivalent to a form of judgment or verdict and not an award". In such a reference the court's procedures of adjudication are not abandoned in favour of extra-curial settlement of the dispute by arbitration. Instead the court directs that, for the better resolution of the particular proceedings initiated before it, resort should be had to this special mode of trial which the legislation has made available. (emphasis added) The application for an adjournment 10 Mr Tharmalingam availed himself of that opportunity on behalf of both Battelle and himself. On 25 October 2019, he swore an affidavit in which he both made submissions and also sought an adjournment of the hearing today. In his affidavit, he said that there was an "emergency of a Medical Condition of an immediate family member", but did not explain who the family member was, what the condition was, or attach any medical evidence in support. Mr Tharmalingam claimed that some travel arrangements had been made for him to travel overseas during the first week of November 2019 so that whomever the unnamed person was may be able to be treated for the unknown condition in an unknown country by persons on an unexplained basis. He then asked that the hearing be adjourned to sometime towards the end of January 2020 or early February 2020. The respondents failed to give any detail of the subject matter of their application for the adjournment or to adduce some medical evidence in support of it. When the matter was called outside the Court today, there was no appearance for the respondents. 11 I am of opinion that there is insufficient material before me to justify the grant of an adjournment. In Ahmad v Minister for Immigration and Border Protection [2018] FCAFC 199, Bromwich J, with whom Rares and Davies JJ agreed, considered a similar unspecific application for adjournment by a litigant in person made, effectively, in correspondence on the day of the hearing of his appeal to the Court. His Honour said that, ordinarily, an appellate court would not act on a formulaic document and would require an explanation on oath from a medical practitioner about the illness and the reasons for the party's inability to attend Court. 12 I accept that Mr Tharmalingam applied for an adjournment promptly in his affidavit after learning of the date fixed for hearing. But as I have noted, his affidavit lacks any real specificity to explain or justify the grant of an adjournment. Moreover, in determining not to grant the adjournment, I had regard to the respondents' submissions in opposition to the adoption of the report. The respondents' submissions 13 In substance, the respondents' submissions comprised two substantive arguments that they had put unsuccessfully to the referees: first, the existence of a settlement agreement, dated 21 December 2015, between Oldendorff and Vkandasamy Arullkumar trading as Vahini Enterprises with whom the respondents had contracted in India for the transport and sale of the coal cargo the subject of the charterparty and, secondly, over the course of the dispute, Oldendorff had claimed four different amounts as its damages, ranging between USD1,385,883 and USD2,104,000. The former was the amount of a London arbitration award given on 11 April 2018 in an arbitration under the arbitration clause in the charterparty between Oldendorff and Battelle. Consideration 14 The settlement agreement provided that, in consideration of Vahini paying Oldendorff USD2,104,000 in full and final satisfaction of Oldendorff's claims for loss or damage arising from the failure of the charterparty between it and Battelle, Oldendorff agreed to release and discharge both Vahini and Battelle (but, I interpolate, not Mr Tharmalingam) from all actions and claims which Oldendorff had or, at any time in the future, might have against Vahini and or Battelle arising from the charterparty and or the failure of both Battelle and Vahini to enable it to be performed. 15 The referees found that the settlement agreement provided for a release only in the event that Vahini paid the consideration of USD2,104,000. They found that Vahini had not paid that sum and, therefore, the settlement agreement did not operate in accordance with its terms to create any release or discharge of any possible liabilities of Battelle or anyone else. 16 The referees considered in detail the various claims which Oldendorff had made against the respondents over time, including the claims the subject of the arbitration award and in the evidence of Oldendorff's senior chartering manager, Jesper Andersen, in an affidavit he made that was before them. In the event, the referees accepted some of Mr Andersen's evidence and rejected other parts that asserted a higher monetary value than that at which they arrived. 17 The report engaged in a careful and considered examination of the evidence in accordance with the terms of the reference. The referees' analysis reflected an appreciation of the difference between Oldendorff's contractual entitlement to damages under the charterparty as reflected in what the arbitration award had determined, and the quantum of damages under s 236 of the Australian Consumer Law, the assessment of which can proceed on different bases. 18 In arriving at their opinion of the quantum that Oldendorff was entitled to recover, the referees had regard to evidence of Mr Andersen that they summarised. This included his method of calculating Oldendorff's loss as a result of entering into the charterparty. This comprised the expenses of the voyage and other running costs, including about USD320,000 for bunker fuel consumed on her voyage to Newcastle, and standing by there ready to load, while she remained there, until 1 December 2015, to arrive at a total of USD1,400,898.95. Oldendorff made this non-contractual claim based on its pleaded reliance on the respondents' repeated representations they would be in a position to deliver a cargo of coal to the ship for carriage to her Indian destination, if Oldendorff allowed the charterparty to remain on foot. 19 The referees also considered an additional claim in Mr Andersen's affidavit for Oldendorff's loss of opportunity to employ the vessel on other charters that she could have performed over the period during which she was ready and waiting at Newcastle to perform the charterparty with Battelle. They accepted Mr Andersen's evidence that, immediately following the termination of charterparty on or about 1 December 2015, Oldendorff entered into a subsequent charterparty for the ship to sail laden, but at a loss, to a location from where she could be more profitably chartered in the future. 20 Mr Andersen had explained that, originally, a similar loss-making situation would have arisen under the charterparty with Battelle. That was because, he said, Oldendorff was expecting to make a loss on that voyage but was prepared to do so on the basis that the ship would have been employed and earnt freight to offset some of her running costs while she sailed to a location where Oldendorff considered she would be likely to be fixed on a charter with more profitable freight rates. 21 The referees' report accepted Mr Andersen's evidence that, had Oldendorff entered into a similar charter from Newcastle to Krishnapatnam on 28 August 2015, a week after the date of the charterparty with Battelle, the ship would have arrived in Newcastle, loaded and sailed to her port of discharge by about 3 October 2015. He calculated that had this occurred, Oldendorff would have incurred a loss of USD119,340. Importantly, Mr Andersen said that, at the time, based on then prevailing international freight rates, it was likely that Oldendorff could have fixed a voyage for the ship to sail from Krishnapatnam to Brazil to lift a cargo for delivery to Kaohsiung in Taiwan, during the period between 8 October and 6 December 2015, that would have resulted in a profit of USD325,197. The referees accepted Mr Andersen's calculation that, had those two alternative charters been made, Oldendorff would have earned a net profit from the use of its ship of USD205,797 (being the difference between the expected loss on the first leg of that hypothetical set of voyages and the profit on the second). 22 The referees concluded that this was a claim for the loss of an opportunity that ought be assessed in accordance with well-established principles. They found that the value of Oldendorff's loss of opportunity to employ the ship on other charters in the period during which it had kept the charterparty with Battelle on foot in reliance on the respondents' representations, should be assessed at USD154,347.75, being 75% of Mr Andersen's calculation of net profit. 23 The referees found that Oldendorff could recover a total of USD1,559,246.75 under s 236 of the Australian Consumer Law, comprised of its direct costs of the ship sailing to, and keeping her until 1 December 2015, at Newcastle of USD1,404,898.95, together with the value of its loss of opportunity to employ her on other voyages of USD154,347.75. 24 I have considered the respondents' statement made under r 28.65(7). That did not identify any alternate means of calculating damages or substantive flaws with any of Mr Andersen's analysis. 25 The referees appear to have analysed the material before them thoroughly. It was for the referees to make the findings of fact in the mode of trial they were conducting. There was material before them to enable them to come to those findings. I see no reason why I should not adopt their assessment of damages. Costs 26 The respondents also contested, before the referees, the amount of costs (of $46,845.50) that Oldendorff claimed. They did not make any submissions on costs to me. The referees had regard to the respondents' submissions on costs, and, indeed, substantially reduced the claimed amount to their assessment of $32,678. 27 The referees were persons uniquely well placed to make assessments of the amount of costs to which parties are entitled, having regard to their role as Registrars of the Court with responsibility for taxing bills of costs. The referees' assessment of the amount of costs appears to be reasonable and I will adopt it. Interest 28 Oldendorff asked the referees to award it interest. However, they found that it had not provided any basis on which its claim for interest in the originating application should be calculated, and they left the quantification and assessment of any interest to the Court. 29 Oldendorff initially argued that the following prejudgment interest rates, based on the prejudgment interest rate applicable to judgments in Australian dollars, be applied in the following periods: Period Rate p.a. 1 December 2015 – 30 June 2016 6% 1 July 2016 – 31 December 2016 5.75% 1 January 2017 – 30 June 2019 5.5% 1 July 2019 – 12 September 2019 5.25% 30 In my opinion, that was not an appropriate basis on which to assess the compensatory nature of an award of prejudgment interest in respect of a foreign currency. As I said in Suzlon Energy Ltd v Bangad (No 2) [2014] FCA 1173 at [7]: There is, and for some years past has been, a well-known and large interest rate differential between cash rates in Australia as compared with those in the United States and the Eurozone for their respective currencies. Accordingly, the compensatory purpose of an award of pre-judgment interest under s 51A and its analogues would not necessarily be achieved by applying the 4% uplift from the Australian cash rate to the calculation of pre-judgment interest on judgment sums in foreign currencies. 31 Prejudgment interest is intended to be compensatory and is not contractual. Accordingly, during the hearing on 14 November 2019, I required Oldendorff to establish, by evidence, a basis to arrive at a relevant rate of interest on the United States (US) dollar sums to which it is entitled. I granted leave to Oldendorff to file and serve any affidavit and written submissions, limited to two pages, to support an interest rate on the judgment in US dollar, that I would determine on the papers. The calculation of interest 32 On 28 November 2019, Kirsten James, a solicitor for the applicant, filed an affidavit in which she gave evidence that in the period between December 2015 and October 2019, the average difference between the official maximum target (interest) rate of the Federal Reserve Bank of New York and the Federal Reserve's data recording the weekly average majority prime loan rates was 3.106%. Ms James added the average differential of 3.106% to the Federal Reserve's official rate for each month in the period for which Oldendorff was entitled to prejudgment interest to arrive at a total of USD269,218.21 up to 31 October 2019. Since the Federal Reserve had not published data for the prime rate in November 2019, Ms James calculated interest of USD1,943.72 between 1 November 2019 and 28 November 2019 using only the official rate for November 2019 of 1.63%, making a total of prejudgment interest to then USD271,161.93. 33 I am satisfied that the average differential which Ms James calculated was an appropriate figure, when added to the official rate, to use to arrive at a rate of interest that can be applied to achieve a sum of prejudgment interest that is compensatory and consistent with the purpose of such an award within the meaning of s 51A of the Federal Court of Act. Conclusion 34 I will order that judgment be entered as at 28 November 2019 using the sum for prejudgment interest of USD271,161.93 and otherwise giving effect to the referees' opinion in their report as to the amounts of the judgment sum and costs. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. Associate: Dated: 18 December 2019