Castlepines (IBM) v Residential Housing Corporation [2003] NSWSC 398

New South Wales Supreme Court

CITATION : Castlepines (IBM) v Residential Housing Corporation [2003] NSWSC 398 HEARING DATE(S) : 08/05/03 JUDGMENT DATE : 14 May 2003 JURISDICTION: Equity Division JUDGMENT OF : Barrett J DECISION : Notice of motion seeking part payment dismissed

CATCHWORDS : PROCEDURE - Supreme Court procedure - application for advance payment under s.76E of Supreme Court Act - whether declaration that defendant liable to pay to plaintiff under contract a sum calculated in a specified way was made in "proceedings for the recovery of damages" - meaning of "damages" - distinction between damages and debt LEGISLATION CITED : Supreme Court Act, s.76E CASES CITED : Castlepines (IBM) Pty Ltd v Residential Housing Corporation Pty Ltd [2002] NSWSC 232 Frellsen v Crossword Pty Ltd (1992) 15 MVR 343 Castlepines (IBM) Pty Limited - Plaintiff/First Cross Defendant PARTIES : Residential Housing Corporation Pty Limited - Defendant/First Cross Claimant/Cross Defendant on Second Cross Claim Robert Daniel McEwan - Second Cross Defendant/Second Cross Claimant

FILE NUMBER(S) : SC 2202/99 COUNSEL : Mr R Gorczyca, Solicitor - Plaintiff Mr W L Marler - Defendant SOLICITORS : The Bruce & Stewart Commercial Practice Pty Ltd - Plaintiff Tzovaras Legal - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

BARRETT J

WEDNESDAY, 14 MAY 2003

2202/99 – CASTLEPINES (IBM) PTY LIMITED v RESIDENTIAL HOUSING CORPORATION PTY LIMITED JUDGMENT 1 Following a hearing which extended over five days in March 2002, Campbell J gave judgment in which he stated conclusions with respect to the matters in controversy between the parties and directed that short minutes of order be brought in giving effect to his judgment so far as it concerned the construction of an agency agreement: Castlepines (IBM) Pty Ltd v Residential Housing Corporation Pty Ltd [2002] NSWSC 232. Short minutes were subsequently filed. His Honour made a declaration in accordance with paragraph 1 of the short minutes on 4 October 2002. That declaration was as follows: "DECLARES that, upon the proper construction of clauses 3.2, 3.4 and 10.2 of the Agreement, subject to clause 10.3 of the Agreement, the Defendant is liable from the Trigger Date to pay to the Plaintiff each month the sum of 0.1% per annum of the outstanding monthly balance of each Standard Variable Loan and of each Fixed Rate Loan advanced by the defendant after the Trigger Date to a customer of the Agent or to a customer of a Licensee provided that, prior to termination of the Agreement, the Agent or a Licensee is an effective cause of the relevant Standard Variable Loan or Fixed Rate Loan being advanced, where: (a) The 'Agent' means the second cross-claimant as trustee of the McEwan Family Trust; (b) the 'Agreement' means the agreement between the defendant, the Agent, the second cross-claimant and Starr Investments (Australia) Pty Limited as trustee of the Phoenix Trust dated 10 December 1997; (c) 'Fixed Rate Loan' means any one of the fixed rates loans identified in the fee schedule to the Agreement; (d) 'Licensee' has the same meaning as in clause 1.1 of the Agreement; (e) 'Standard Variable Loan' means the standard variable loans identified in the fee schedule to the Agreement; and (f) 'Trigger Date' means the date upon which the sum of all loans (not merely Standard Variable Loans and Fixed Rate Loans) advanced by the defendant to customers of the Agent or a Licensee and settled exceeds $20,000,000." 2 The second order made by Campbell J on 4 October 2002 was an order pursuant to Part 72 rule 2(1) of the Supreme Court Rules that the matter be referred to a referee for inquiry and report on questions relating to quantum that were set out in the order. 3 On 8 May 2003, I heard a notice of motion by which the plaintiff sought an order that the defendant make to the plaintiff an interim payment of $47,217.03 pursuant to s.76E of the Supreme Court Act 1970. That application was opposed by the defendant on two bases: first, that s.76E has no application in the circumstances of this case; and, second, that the circumstances are, in any event, not such as to warrant the exercise of the discretion conferred by that section. 4 The evidence adduced by the plaintiff upon the hearing of the notice of motion traced the steps that had been taken in conformity with order 2 to have the relevant matters of quantum referred to and determined by a referee. Particular attention was drawn to an affidavit sworn on 25 February 2003 by a joint managing director of the defendant for the purposes of the inquiry being conducted by the referee. That affidavit contained statements about the defendant's views on the appropriate outcome of the referee's inquiry according to several variables in relation to which the referee would be required to make decisions. The affidavit was seen by the plaintiff as pertinent to its application because of the "worst case" position, from the plaintiff's viewpoint, put forward on behalf of the defendant. The affidavit stated, in effect, the defendant's view as to the sum the referee should determine to be the relevant quantum if the arguments most favourable to the defendant ultimately prevail. The plaintiff has therefore chosen (not unreasonably) to regard the sum thus stated by the defendant, being $47,217.03, as one which the defendant effectively accepts, even though the plaintiff says that the correct sum is greater. It is for that reason that $47,217.03 has been chosen as the sum in respect of which the plaintiff now seeks an order under s.76E. 5 I should deal first with the defendant's objection going to jurisdiction. Section 76E is in the following terms: "(1) In any proceedings for the recovery of damages, the Court may, in accordance with this section, order a defendant in the proceedings to make one or more payments to the plaintiff of part of the damages sought to be recovered in the proceedings. (2) The Court may make such an order against a defendant on the application of the plaintiff at any stage of the proceedings. (3) The Court may make such an order if: (a) the defendant has admitted liability, or (b) the plaintiff has obtained judgment against the defendant for damages to be assessed, or (c) the Court is satisfied that, if the action proceeded to trial, the plaintiff would obtain judgment for substantial damages against the defendant. (4) The Court may not make such an order if the defendant satisfies the Court that: (a) the defendant is not insured in respect of the risk giving rise to the plaintiff's claim for the recovery of damages, and (b) the defendant is not a public authority, and (c) the defendant would, having regard to the defendant's means and resources, suffer undue hardship if such a payment were to be made. (5) The Court may order a defendant to make one or more payments of such amounts as it thinks just but not exceeding a reasonable proportion of the damages which in the opinion of the Court are likely to be recovered by the plaintiff. (6) In estimating those damages, the Court is to take into account any relevant contributory negligence or any cross-claims on which the defendant may be entitled to rely." 6 The submission of Mr Marler of counsel who appeared for the defendant is, quite simply, that these proceedings are not "proceedings for the recovery of damages". In support of that, he referred not only to the orders made but also to the terms of the amended summons filed on 8 May 2000. By that amended summons, the plaintiff claimed declarations that the defendant was obliged to pay to the plaintiff a monthly fee calculated in one of several alternative ways. There was also a prayer for an order that the defendant specifically perform the obligation declared by the court and a prayer for an order "that the defendant pay to the plaintiff the amount due under the agreement as at the date of the order". There were claims for interest and costs. There was no clam for anything designated "damages" as such. 7 Not surprisingly perhaps, the Supreme Court Act contains no definition of "damages". There are, however, textual indications as to the meaning of "damages". Section 19(1), for example, defines "claim for relief" as including "a claim for the recovery of damages or other money …". The same section defines "common law claim" as a "claim for damages or other money" or certain other relief in proceedings in the Common Law Division. Section 68, dealing with a case where the court has power to grant an injunction against certain wrongful acts or to order the specific performance, empowers the court to "award damages to the party injured either in addition to or in substitution for the injunction or specific performance". Section 75A, dealing with appeals, does not apply to so much of an appeal as relates to a claim "for a new trial on a cause of action for debt, damages or other money …". The same section says that, upon an appeal, the appeal court shall have the powers and duties of the court, body or other person from whom the appeal is brought, including powers and duties concerning "the assessment of damages and other money sums". Section 76B empowers the court to refer to arbitration proceedings "on a claim for the recovery of damages or other money". Section 94, which is concerned with interest, refers to "proceedings for the recovery of any money (including any debt or damages or the value of any goods)" as well as to proceedings "for the recovery of a debt or liquidated damages". Section 102 makes specifications with respect to any application for "the alteration of a verdict by increasing or reducing any amount of debt, damages or other money". Section 106 is concerned with cases where it appears to the Court of Appeal that "the amount of damages awarded at the trial is manifestly too high or too low". Section 107, also concerned with appeals, applies where the Court of Appeal would be disposed to order a new trial "on an issue of the amount of debt or damages or the value of goods". 8 Running through these provisions is the theme that there is a distinction between, on the one hand, "damages" and, on the other, "debt" and "other money". The distinction between damages and debt is, of course, fundamental. As is pointed out by Professors Carter and Harland (in J W Carter and D J Harland, "Contract Law in Australia", 4th edition, 2002, at page 875), the action to recover a debt due for payment has a longer history than the action to recover damages for breach of contract and, despite the concurrent administration of law and equity, it remains the case that an action to recover a contract debt due is not a claim for breach of contract. A person who points to a contract as the source of an unsatisfied right to be paid asserts a claim different in nature from that of a person who, relying upon a breach of contract, seeks compensatory relief in the form of monetary damages. 9 The same dichotomy is noticed in the very first paragraphs of H McGregor, "McGregor on Damages", 16th edition, 1997, at pages 3-4: "Damages are the pecuniary compensation, obtainable by success in an action, for a wrong which either a tort or a breach of contract, the compensation being the form of a lump sum awarded at one time, unconditionally … . This definition covers the usual and strictly correct meaning of the term 'damages' and excludes claims for money other than those which are for compensation for a tort or breach of contract. Accordingly there are four types of case in which pecuniary satisfaction is gained by success in an action and which are yet outside the present definition: actions for money payable by the terms of a contract, actions in restitution formerly quasi-contract, actions in equity and actions under statutes where the equitable or statutory right to recover is independent of any tort or breach of contract." 10 To the extent that there may be any ambiguity as to the meaning to be attached to "damages" in s.76E of the Supreme Court Act, resort may be had to parliamentary materials: Interpretation Act 1987, s.34. An extract from the second reading speech of the then Attorney-General on the Bill which became the Act by which s.76E was inserted into the Supreme Court Act was quoted by Sully J in Frellsen v Crossword Pty Ltd (1992) 15 MVR 343: "The next provision of the bill will enable the Supreme Court, in certain cases, to order the defendant in civil proceedings to make one or more interim payments in respect of damages to the plaintiff during the course of proceedings. The bill later duplicates this provision in respect of the District Court. Interim payments of damages may ameliorate considerably the distress suffered by plaintiffs who are accident victims, particularly where such plaintiffs are financially disadvantaged. A court order to make interim payments may also encourage earlier settlement in some cases, because such an order would place liability for outgoings on a defendant at an early stage in the proceedings. The Workers Compensation Act provides for compulsory interim payments in the form of weekly instalments of income support. Such payments are not an admission of liability, and if in fact the Compensation Court later finds that there was no liability, it can order that the weekly payments be refunded. The Motor Accidents Act also provides for interim payments, but on a more limited basis -in respect only of out-of-pocket and rehabilitation expenses as incurred. However, the Motor Accidents Act establishes a scheme for rehabilitation and for structured settlements which permit earlier resolution of matters, for instance, where injuries have not stabilised. In the absence of any structured scheme such as the workers compensation or motor accident schemes which offer some interim support to plaintiffs including rehabilitation, and in view of the longer court delays applying to the other personal injuries actions, there is a persuasive case for permitting the courts to make interim payment orders in respect of general common law claims. This provision is based on English legislation. It is structured to ensure that it will be a very unusual case in which an order for interim payment is made by a court and a plaintiff subsequently fails to get judgment. If liability has not already been established, by admission or by the court, a court may only make an order for an interim payment or payments if it is satisfied that, if the action proceeded to trial, the plaintiff would obtain judgment or substantial damages against defendant. Compliance with an order will not be taken as an admission of liability. The proportion of damages ordered to be paid on an interim basis will be at the discretion of the court but must not exceed a reasonable proportion of those damages which in the opinion of the court are likely to be recovered by the plaintiff. The court will not be able to make an order for interim payments unless it is satisfied that the defendant has the resources to make such payments. If the final award of damages is less than the interim payments made, or the question of liability is not resolved in favour of the plaintiff, the plaintiff may be ordered to refund all or part of the payments made, as appropriate." 11 This extract makes it clear that the main cases that were in view when s.76E was enacted were those involving claims for damages for personal injury. It cannot, of course, be suggested that the provision is restricted to those cases: the word "damages", must, according to the meaning already mentioned, be taken to extend to all cases where monetary compensation is awarded for tort or breach of contract. But the parliamentary material consolidates the impression that what are really claims for debt or the satisfaction of defined contractual monetary obligations are beyond the intended scope of the section. 12 It is important to note the jurisdiction invoked by the amended summons filed on 8 May 2000. The first four claims (which, as I have said, are alternatives) are all claims for declaratory relief. The plaintiff thus called in aid that aspect of the court's inherent jurisdiction recognised in s.75 of the Supreme Court Act. The jurisdiction to grant declaratory relief is very broad. Resort may be had to it in any case raising a question of the rights of parties. The outcome, where a plaintiff is successful, is a binding declaration of the rights of the parties. In this case, the court has made a declaration that "the defendant is liable from [a specified date] to pay to the plaintiff each month the sum of ….". This is a statement of the right of one party and the obligation of the other, being a right and an obligation created by and derived from the parties' contract. It may be (although there is room for doubt) that the subject matter is properly regarded as "debt". It would certainly come within statutory specifications referring to "other money". But on no view, as I see it, could the subject matter be said to be "damages". 13 Having regard to jurisdiction invoked, the relief sought and the orders made, I am satisfied that the defendant's submissions going to jurisdiction must prevail. In the light of the claims in the amended summons of 8 May 2000 and the declarations and orders actually made by Campbell J, these are not, in the opening words of s.76E(1), "proceedings for the recovery of damages". On that basis, there is no jurisdiction to make the order sought under that section. 14 In case I am wrong in this, I should also record that the defendant placed before the court evidence about the prospects of further indebtedness arising between the parties that would make it inappropriate to regard the sum of $47,217.03 as one in respect of which an order should be made under s.76E. Among the orders and directions made by Campbell J on 4 October 2002 was a direction that, without affecting the powers of the court as to costs, the parties be jointly and severally liable to the referee for the fees payable to him. The referee originally estimated that his fees would be "$15,000 or more, exclusive of GST". That estimate was communicated by the referee on 5 March 2003. A solicitor employed by the solicitor for the defendant deposes to having been informed by the referee more recently that his fee estimate had increased to $30,000. His work is still incomplete. The defendant also points out that an order for the costs of the proceedings themselves have not yet been made and that, despite the success of the plaintiff in an overall sense (and the fact that certain costs orders were made in favour of the plaintiff at interlocutory stages), the defendant considers itself to have grounds for seeking an order for costs. The plaintiff says, in response, that there is no evidence before the court on which it could make any finding as to the likely incidence or amount of costs. I accept that submission of the plaintiff but am influenced nevertheless by the regime that exists in relation to the referee's fees. The state of the financial account between the parties could not be regarded as sufficiently certain to warrant an order for an interim payment of $47,217.03, even if the s.76E jurisdiction was available. 15 The plaintiff's notice of motion is dismissed. **********