New South Wales Supreme Court CITATION : Grogan v Thiess Contractors Pty Limited & Anor [2000] NSWSC 1101 CURRENT JURISDICTION: Common Law FILE NUMBER(S) : SC 13117/99 HEARING DATE(S) : 17/07/2000, 18/07/2000 JUDGMENT DATE : 22 December 2000 PARTIES : Peter Grogan trading as P Grogan & Co v Thiess Contractors Pty Limited & Anor JUDGMENT OF : Barr J at 1 COUNSEL : J Sexton SC - Plaintiff/Applicant DF Rofe QC/MJ Lawler - Defendants/Respondents SOLICITORS : Gadens Lawyers - Plaintiff/Applicant Crisp & Associates - Defendants/Respondents CATCHWORDS : Interest on costs - proceedings in Common Law Division - whether interest not payable unless Court otherwise orders. LEGISLATION CITED : Supreme Court Act 1970, s 95(3), (4) Fischer v David Syme & Co Limited (1989) 18 NSWLR 606 Goodwin v Phillips (1908) 7 CLR 1 at 14 McWilliams Wines v Liaweena (1993) 32 NSWLR 190 CASES CITED : The Minister v Carson (1994) 35 NSWLR 342 Minister for Immigration and Ethnic Affairs; Ex parte Quin (1989) 186 CLR 622 Osborne v Kelly & Klimenko [1999] SASC 486 Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589 DECISION : See para 42. THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION GRAHAM BARR J Friday, 22 December 2000 13117/99 - Peter Grogan Trading as Peter Grogan & Co v Thiess Contractors Proprietary Limited & Anor JUDGMENT 1 HIS HONOUR: By his summons the plaintiff seeks an order under s 95 Supreme Court Act or otherwise ordering the defendants to pay interests on assessed costs and other costs incurred by him in certain proceedings in the Common Law Division. The plaintiff sued the defendants for the unlawful termination of a contract in 1989. The proceedings commenced on 5 February 1992 in the Commercial List. The question of liability was referred to a Referee. The Referee reported, and after a contested hearing the Court remitted two further matters for consideration. The Referee reported a second time and the Court made orders adopting the two reports concerning liability. The question of damages was referred to the Referee and a timetable set. The reference continued on and off for twenty-eight days and the Referee published a report. After a further contested hearing the Court adopted the report but remitted two matters for consideration by the Referee. The Referee published a second report. After a further contested hearing the Court determined the matter on 12 April 1995 and made orders as to damages, interests and costs. Judgment in favour of the plaintiff in the sum of $825,295 plus costs was entered on 20 April 1995. The defendants appealed and moved for a stay of execution on the judgment, which was granted upon the defendants' securing a sum of money by bank guarantee. The appeal was heard on 11 December 1995 and dismissed on 24 July 1996. 2 Offers and counter-offers were made about quantum of costs. On 21 January 1997 the defendants paid $72,568 in respect of undisputed costs and on 25 March 1998 they paid a further $450,000 on account. The plaintiff filed an application for the assessment of costs on 4 January 1999 and on 23 July 1999 the costs assessor certified that the sum of $754,828.97 was fair and reasonable. On 12 August 1999 the defendants paid the balance of that sum. 3 The defendants made three broad responses to the plaintiff's claim. First they submitted that the power of the Court to award interest on costs was confined to that set forth in s 95(3) Supreme Court Act, the effect of which was interest was not payable unless the Court otherwise ordered, and no occasion arose to vary the ordinary position. Secondly, they raised circumstances which it was submitted disentitled the plaintiff to interest on costs. Thirdly, they attacked the plaintiff's calculations. The power of the Court to order interest on costs 4 S 95 is in the following terms - [s 95] Interest on debt under judgment or order 95 (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 or order takes effect on so much of the money as is from time to time unpaid. (2) Notwithstanding subsection (1), where, in proceedings on a common law claim the Court gives judgment for damages and the damages are paid within 21 days after the date when the judgment takes effect, interest on the judgment debt is not to be payable under subsection (1) unless the Court otherwise orders. (3) Notwithstanding subsection (1), 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 assessment under Division 6 of Part 11 of the Legal Profession Act 1987 or otherwise, interest on the costs shall not be payable under subsection (1) unless the Court otherwise orders. (4) If an order is made for the payment of costs, the Court may order that interest is to be paid on the amount so ordered, at the prescribed rate referred to in subsection (1), from the date or dates when the amount in respect of costs was duly paid. 5 It was submitted by counsel for the defendants that subs (4) has no application to a claim for interest on costs in the Common Law Division because such a claim is specially provided for by subs (3). Therefore, it is submitted, subs (3) must be read as a proviso to subs (4). Reference was made to Goodwin v Phillips (1908) 7 CLR 1 at 14; Pearce Statutory Interpretation, Second Edition paras [168]-[171]. 6 I do not accept this submission. Subs (4) was added to the section in 1995 following comments by Rogers CJ Comm Div in McWilliams Wines v Liaweena (1993) 32 NSWLR 190 at 192. In moving that the Bill for the amendments be read a second time Mr Whelan, the responsible Minister, observed in the Legislative Assembly that there was then no power under s 95 to compensate a litigant who had paid a sum of money on account of costs at a time distant from an order for costs and the receipt of a taxed bill by allowing the Court to order interest to be paid on that money. Hansard 22 November 1995 at 3768-9. The Minister continued at 3769 - It is proposed to amend the Supreme Court Act and the District Court Act to confer on the Supreme and District courts a discretionary power to order that a party against whom a party-party costs order is made also pays interest on such costs to the party in whose favour the order is made. The power will be available on the basis that: 1. It is exercised only when the special circumstances of the case warrant the making of such an order. 2. Interest should accrue from the time when the party in whose favour the order is made had made payment or payments to his solicitor in respect of work done or disbursements paid. 3. The entitlement to interest should not be dependent upon taxation or assessment under the Legal Profession Act. 4. The rate of interest should be equal to that prescribed from time to time pursuant to section 95(1) of the Supreme Court Act. 7 It is not surprising in view of that express purpose that the Minister made no distinction between business in the Common Law Division of the Court and that in any other division. Subs (4) does not in terms restrict itself to divisions other than the Common Law Division. In my view the intention was to remove inappropriate discrimination between proceedings in the Common Law Division, other divisions and the District Court. 8 It seems to me that subs (3), with its concentration on the time at which the defendant pays assessed costs, is principally concerned with interest after the period for which costs are ordered. It seems possible that when framing subs (3) the Parliament had in mind a state of affairs that often or usually exists in common law claims when the plaintiff's costs and disbursements are not met until the defendant actually pays costs ordered. Subs (4), on the other hand, seems to be concerned with interest on costs paid before assessment. 9 A construction allowing subs (3) to make a prima facie or overriding rule that in Common Law cases no interest should be payable unless the Court otherwise ordered would not only be contrary to the intention expressed by the Minister. It would have no practical utility and might produce capricious and unjust results. This case is a good example of what might happen. The proceedings commenced at a time when such cases were dealt with in the Common Law Division. If the case were commenced today it would be filed in the Equity Division. There would be no change of principle, the difference resulting only from the manner in which the Court has decided the better to administer the cases it has to deal with. 10 Subs (4) bears no requirement that interest on costs is not to be awarded in an ordinary case. It does not fetter the power of the Court to order costs in an appropriate case. The width of the power conferred by the subsection is, I think, consistent with that of the power over the ordering of costs generally: Supreme Court Act s 76; McWilliams Wines v Liaweena (NSW) per Rogers J at 192. 11 No doubt the Court in deciding whether to award interest on costs ought to look at all the circumstances of the case, including the amount of costs paid, the length of time the claimant has been out of pocket before recovery, whether during the time between commitment and assessment the respondent has been relieved of the need to borrow at interest or has obtained the advantage of leaving monies invested at interest and how the parties have conducted themselves during the litigation. This brings me to a consideration of the defendants' second response. Conduct disentitling 12 The legislative purpose in providing a judicial discretion in subs (4) to order interest on amounts actually paid is not to penalise but to recompense a litigant for being out of pocket whilst the other side has had the use of the money. The Minister v Carson (1994) 35 NSWLR 342 at 352-354. In that respect it is significant if the respondent conducts a commercial enterprise. Fischer v David Syme & Co Limited (1989) 18 NSWLR 606 at 617. However, the discretion is not to be exercised as though there were to be an accounting by the respondent for monies earned. Whether monies are earned on the money of which the respondent has had the use is irrelevant because the purpose is to compensate. The Minister v Carson at 352-354; Osborne v Kelly & Klimenko [1999] SASC 486. The denial of an order for interest on the grounds of the misconduct of the applicant must therefore be seen as a secondary consideration. 13 The defendants raised a substantial number of circumstances in support of a submission that the discretion should be exercised against an order for interest. The first five, summarised, were a twenty-two month delay in the plaintiff's instructing his solicitors and a thirty month delay in commencing proceedings, an exaggerated claim by the plaintiff, in which a claim for about $2.4 million led only to an award of $494,000, the fact that the judgment amount only slightly exceeded the amount of an offer of compromise made by the defendants early in the proceedings, the alleged reasonableness on the part of the defendants in conducting their defence and the fact that both sides opposed the adoption of the various referee's reports. 14 It seems to me that none of these points is relevant to the question whether the plaintiff ought to be compensated. All were no doubt relevant to the question whether the plaintiff should have an order for costs in the first place and were no doubt considered, if raised, by the trial judge. It is inappropriate to try to relitigate them in this summons. 15 The next two matters raised were the delay by the plaintiff in the preparation of his bill of costs following the dismissal of the defendants' appeal to the Court of Appeal on 24 July 1996 (being a substantial portion of the sixteen months that elapsed between the dismissal and the presentation of the bill of costs) and the delay by the plaintiff in making an application for assessment of costs on 4 January 1999, the defendants' objections having been filed on 14 May 1998, notwithstanding some ongoing settlement negotiations. 16 The bill of costs comprised 429 pages, listed 4,967 items and claimed $906,184.32. The narrative alone comprised thirty-two pages. An enormous amount of work was required in order to prepare it and deal with objections. Eighty-three per cent of the costs claimed were considered fair and reasonable. The only uncontested costs totalled as little as $72,568. 17 Clearly a substantial time was needed to do what the plaintiff's solicitor had to do and I am not satisfied that any delay was sufficient to justify denying compensation to the plaintiff. 18 The next two matters raised are what were said to be the obfuscation by the plaintiff in relation to requests by the defendants for provision of information about the plaintiff's costs and the inadequacy of information provided by the plaintiff to the defendants in relation to the plaintiff's claim for costs in the sum of $837,766.82. 19 I am not satisfied that there was such "obfuscation" or such "inadequacy" as is contended for. Even when they had inspected the plaintiff's documents the defendants offered only a figure slightly exceeding $450,000 and even when the full bill of costs was presented offered only $650,000. Both offers were inadequate and obfuscation or inadequacy, if proved, would have been irrelevant. 20 The next matter was what was said to be the inadequacy of the information provided by the plaintiff to the costs assessor, occasioning further delay in the assessment process. As I have observed, the matter was very complicated and I am not satisfied that any need on the part of the plaintiff's solicitor to furnish further information, with consequent delay, was other than incidental to a necessarily complicated process of costs assessment. 21 The next circumstances were said to be the payment by the defendants on 29 January 1997 of $72,568 as to undisputed costs and on 25 March 1998 of the sum of $450,000 on account of costs. Whilst these matters are relevant to the calculation of interest on costs, they are not in my view relevant to the question whether the plaintiff should have interest on costs. 22 The next matters concerned offers made by the defendants to settle the costs issue. On 15 January 1997 they offered $400,000 and that was rejected. On 26 February 1997 they offered $455,451.31 in addition to the sum of $72,568, and this was rejected on 11 June 1997. The next was $650,000 (including the $72,568) on 23 December 1997. It also was rejected. The last was on 2 February 1998, an offer including $72,578 of $700,000. It, too, was rejected. 23 The first thing to observe is that none of these offers exceeded the assessment. The offers have to be considered against the plaintiff's estimates. On 20 April 1995 that was $638,810, on 22 April 1996 it was $837,766. Ultimately over $750,000 was recovered. The defendants were on notice of the general range of costs claimed and none of their offers went close to the amount ultimately assessed. 24 Then the defendants submitted that the plaintiff was not entitled to claim interest on his assessed costs as a judgment debt failed to file the certificate as to determination of costs with the Court. No justification for that written submission was put forward in oral argument. It does not appear to me that the discretion of the Court cannot be exercised if such a certificate is not filed. 25 Then it was submitted that the plaintiff's failure to make an application for interest on costs before the trial judge or the Court of Appeal should be taken into account in the exercise of the Court's discretion. It was submitted that there is a public interest in seeing that all available and relevant matters should be litigated at the same time. Reference was made by analogy to Port of Melbourne Authority v Anshun Pty Limited (1981) 147 CLR 589. Reference by analogy was also made to Minister for Immigration and Ethnic Affairs; Ex parte Quin (1989) 186 CLR 622. 26 Notwithstanding detailed oral submissions it did not become apparent that the defendants had suffered any prejudice because of the manner in which the plaintiff had brought these proceedings. Rather, the argument was put on general principles of propriety and fairness. 27 Of course, however, whenever and wherever the plaintiff made his application for interest, he could not pursue it until he had an order for costs and would be prevented in practice from taking the matter very far without an assessment of costs. The bill of costs was endorsed to the effect that the plaintiff intended to seek interest on costs, so the defendants always knew that the plaintiff would bring this application in due course. The history of the case was difficult, not least because it was a very complicated action arising out of, as it turned out, the breach by the defendants of an engineering contract they had with the plaintiff. During the course of its life in the Common Law Division of this Court it came before four different judges. No single judge had an individual involvement with the proceedings overall and there was no particular reason why the application should have been made before any of those judges or before the Court of Appeal. There has been no need in the consideration of this summons to enter into the issues raised before the trial judge or the Court of Appeal, and the Court has consequently not been disadvantaged. 28 Accordingly, there seems no reason why it is necessary to deny the plaintiffs an order for interest in order to encourage the operation of the principles relied on by the defendants. The calculation of interest 29 The plaintiff claims interest for costs incurred and actually paid by him to his lawyers for costs and disbursements during the course of the proceedings before the final costs order of 20 April 1995 and the order of the Court of Appeal on 24 July 1996 dismissing the defendants' appeal. Subsequently the plaintiff paid further costs, making the total $909,747.80, and it was in response to a claim for that amount that the costs assessor considered the sum of $754,827.97 appropriate. 30 The plaintiff put forward a schedule, exhibit B, containing a calculation of interest claimed totalling $310,144.03. Senior Counsel for the defendants criticised it in a number of respects, however, and Senior Counsel for the plaintiff ultimately conceded that it was incorrect in certain respects. Defence counsel put forward two schedules, exhibits 1 and 2, setting out calculations in a pattern similar to that used by the plaintiff, together with a sheet of calculations and notes, exhibit 3, analysing what were said to be errors in the plaintiff's document. The defendants' documents have been of great assistance and their accuracy is not challenged. 31 As the defendants' documents show, the costs actually paid by the plaintiff up to the date of the judgment of the Court of Appeal totalled $740,897.60. That sum was, of course, included in the calculation of the ultimate claim of $909,747.80. The plaintiff faces a difficulty in calculating precisely the interest to which he is entitled, however, because substantial sums were paid between the Court of Appeal judgment and the assessment. Although the costs assessor considered the sum of $754,827.97 fair and reasonable he did not precisely identify each payment that was allowed or disallowed. 32 It was submitted on behalf of the plaintiff that because it was not possible to identify which amounts assessed as reasonable were paid before and after the orders of the Court of Appeal, it was appropriate to treat the amount of approximately $741,000 known to have been paid before the orders as though it had been found wholly fair and reasonable, even though it was not. 33 As oral submissions proceeded, counsel for the plaintiff conceded that it was inappropriate to allow interest on costs paid before the orders but disallowed in due course by the costs assessor. 34 As counsel for the defendants submitted, there are two broad ways of reducing the capital sum by an amount equivalent to the amounts disallowed by the costs assessor, namely by applying reductions first to the earliest payments and by applying them first to the most recent payments. The calculated results of each of these approaches are set out in exhibits 1 and 2 respectively and the parties are agreed that they are accurate. The first method favours the defendants and produces interest at Supreme Court rates up to the date of judgment of the Court of Appeal of $125,590.05. The second favours the plaintiff and yields a figure of $139,066.51. 35 Not enough is known about the facts to suggest that either method is fairer or more correct that the other. There is no authority to guide the Court and it seems to me that the fairest way of dealing with the matter is to favour neither side but to take a figure midway between the two. I therefore allow the plaintiff interest up to the date of the Court of Appeal judgment in the sum of $132,328.28. 36 The major difference between the parties concerns the manner of ascertaining the capital sum on which to calculate interest between the date of the judgment of the Court of Appeal and the date of assessment. 37 On 29 July 1999 the plaintiff's solicitor wrote to the plaintiff setting out the determination of the costs assessor and recording some of the more substantial amounts claimed, with corresponding amounts reduced and allowed by the assessor. Items that can be precisely identified from the letter concern payments to five individual barristers, one expert witness and the plaintiff's solicitors themselves. Out of the total claim for those items of $742,179.47 the costs assessor took off $143,218.47 and allowed $598,961, or 80.7 per cent. A percentage rate is calculable for amounts paid to each recipient. The defendants submit that the amounts paid by the plaintiff to those recipients before the Court of Appeal judgment should be reduced by the percentage rates so calculated. If that is done, interest will be calculated on an initial figure of $616,369.20. That amount reduces, of course, as the defendants' payments of $72,568.50 and $450,000 are brought into account. Interest calculated by this method is $115,371.79. 38 The plaintiff submits that it would be unfair to reduce the principal sum in that manner because to do so would fail to take into account that substantial sums were paid to one of the barristers, Mr Morling, and a lesser sum to the expert witness, at some time between the Court of Appeal judgment and the determination of the costs assessor. Whereas only $35,512.50 was paid to Mr Morling before the Court of Appeal judgment, a further $82,125 was paid to him afterwards but before the costs assessor's determination. 39 A broader but fair approach, it was submitted, would be to calculate interest for the whole period on the sum of $741,000. This is a rounding-up of $740,897.60, adopted notionally as though the whole amount had been allowed by the costs assessor. In support of the proposal counsel for the plaintiff pointed out that costs totalling a greater amount, namely $754,827.97 were held fair and reasonable. Making allowance for the defendants' payments, interest calculated by this method is $153,692.97. 40 According to the letter of 29 July 1999 the costs assessor thought fair and reasonable approximately eighty per cent of amounts paid to Mr Morling. It is therefore reasonable to suppose that at some time before assessment the plaintiff paid a fair and reasonable sum of about $65,000 for Mr Morling. Of course, the date or dates on which that sum was paid cannot be ascertained and no accurate idea can therefore be obtained of whether and to what extent that sum would produce any significant amount of interest during the period between the judgment of the Court of Appeal and the determination of the costs assessor. The same may be said of other components of the costs totalling $754,827.97 that were considered fair and reasonable. It seems quite possible that Mr Morling waited until very late in the proceedings before he was paid, possibly after the costs assessor's determination. 41 In the circumstances, therefore, the plaintiff has not persuaded me that it is appropriate to allow any payment for the purposes of interest calculation other than those made by the time the Court of Appeal gave judgment and considered by the costs assessor to be fair and reasonable. It is therefore appropriate to adopt the calculations put forward by the defendants and to assess interest for this second period in the sum or $115,371.79. 42 I order that the defendants pay interest on the plaintiff's costs assessed in the sum of $247,700.07. I order that the defendants pay the plaintiff's costs of summons. ********** Last Modified: 12/29/2000 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.