New South Wales Supreme Court CITATION : Green v Schneller [2003] NSWSC 202 HEARING DATE(S) : 19 March 2003 JUDGMENT DATE : 3 April 2003 JUDGMENT OF : Simpson J DECISION : (i) the defendant is to pay interest at the rates applicable under Schedule J to the Supreme Court Rules on the costs awarded to the plaintiff from 7 November 2001 to 22 November 2002; (ii) the defendant is to pay the plaintiff's costs of and incidental to the notice of motion, other than the costs incurred in the hearing of 13 February 2003; (iii) each party is to pay his or her costs of the hearing of 13 February 2003. CATCHWORDS : interest on debt under judgment or order Bankruptcy Act 1966 (Cth) s58(3) LEGISLATION CITED : Supreme Court Act 1970 (NSW) s95 Supreme Court Rules Part 40 Rule 3(1) Green v Schneller [2000] NSWSC 548, unreported, 19 June 2000 Green v Schneller [2000] NSWSC 1207, unreported, 15 December 2000 CASES CITED : Green v Schneller [2001] NSWSC 1215, unreported, 3 July 2001 Fischer v David Syme & Co Ltd (1989) 18 NSWLR 606 Government Insurance Office of New South Wales v Healy [No 2] (1991) 22 NSWLR 380 PARTIES : Richard Green - Plaintiff Jennifer Schneller - Defendant FILE NUMBER(S) : SC 20386/94 COUNSEL : M S Henry - Plaintiff P Barham - Defendant SOLICITORS : Harris & Company - Plaintiff Somerville & Co - Defendant IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION DEFAMATION LIST SIMPSON J 3 April 2003 20386/94 Richard GREEN v Jennifer SCHNELLER JUDGMENT 1 HER HONOUR: By notice of motion the applicant/plaintiff, Mr Richard Green (to whom I shall refer as the plaintiff) seeks against the respondent/defendant (to whom I shall refer as the defendant) an order that she pay interest on costs awarded to him following his successful claim against her in defamation. 2 The proceedings have a long and regrettable history, much of which must be recounted. 3 On 21 June 1994 the plaintiff commenced proceedings against the defendant in defamation. The proceedings came on for hearing before me, sitting without a jury, and were defended by the defendant. On 19 June 2000 I delivered judgment (Green v Schneller [2000] NSWSC 548, unreported), finding in favour of the plaintiff and rejecting all defences advanced on behalf of the defendant, and awarded the plaintiff damages of $20,000. I ordered the defendant to pay the plaintiff's costs of the proceedings. On 15 December 2000 (Green v Schneller [2000] NSWSC 1207, unreported) I ordered that the costs be assessed on an indemnity basis. On 3 July 2001 (Green v Schneller [2001] NSWSC 1215, unreported) I ordered the defendant to pay interest on the costs up to 30 December 2000, and that "thereafter there be no interest payable". I framed the order in this way because the application that was, on that occasion, before me was an application for an award of interest on costs extending up to the date of judgment, that is, 3 July 2001. 4 By the present notice of motion the plaintiff seeks a further award of interest on costs, this time to cover the period from 7 November 2001 to 22 November 2002. In support of the application evidence was put before me in the form of two affidavits sworn by the solicitor for the plaintiff, Mr Bowers. Also before me by consent, and agreed to be accurate, was a chronology of relevant events. From this material the following facts emerge. On 6 May 1998 the defendant transferred to her husband, for a nominal sum, all her interest in the property which constituted their matrimonial home. On 29 June 2001, following my award of damages to the plaintiff, the plaintiff filed in the Equity Division of this court a summons seeking an order, pursuant to s37A of the Conveyancing Act 1919, that the transfer be declared void. On 17 July 2001 the plaintiff's solicitors served on the defendant bills of costs in assessable form in relation to the defamation proceedings. On 7 August 2001, in the Federal Court of Australia, the defendant was, on her own petition, declared bankrupt, with assets of $1,038.41 and very substantial liabilities. The liabilities included an amount of $267,669 owing to the plaintiff. On 16 October 2001 Barrett J in the Equity Division held that, by reason of the defendant's bankruptcy, it was not open to the plaintiff, other than with the leave of "a court" to commence legal proceedings against the defendant, or to take any fresh steps in such proceedings (Bankruptcy Act 1966 (Cth) s58(3)). He further held that this court is without jurisdiction to grant the necessary leave. Only the Federal Court had such jurisdiction. 5 On 6 November 2001 Hill J in the Federal Court, pursuant to s58(3) of the Bankruptcy Act, granted the plaintiff leave to continue the equity proceedings in respect of the transfer of property. On 31 July 2002, after a defended hearing, Barrett J delivered judgment in favour of the plaintiff in those proceedings and on 12 August 2002 he declared the transfer of the property by the plaintiff to her husband voidable. His Honour found that the transfer of the defendant's interest in the property was, within the meaning of s37A of the Conveyancing Act, made with intent to defraud creditors. He ordered the defendant and her husband to pay the plaintiff's costs of those proceedings. 6 In October and November of 2002 sums totalling $218,323 were paid to the plaintiff from the defendant's assets by the Official Receiver. Of this amount, the sum of $194,184.78, paid on 23 November, represented the costs recovered by the plaintiff. The amount was reached by agreement between the plaintiff and the defendant's trustee in bankruptcy. 7 On 13 February 2003 the present notice of motion was brought before me. I was told that the defendant had not then been discharged from bankruptcy. Accordingly, for the reasons given by Barrett J in his judgment of 16 October 2001, it was not open to the plaintiff to take any fresh step in the proceedings, including proceeding on the present notice of motion. The hearing of the notice of motion was stood over. 8 On 7 March 2003 Moore J in the Federal Court granted the plaintiff leave under s58(3) of the Bankruptcy Act to continue the proceedings. The notice of motion was re-listed before me on 19 March 2003. 9 The interest the plaintiff now claims is interest on the sums owing in respect of costs from 7 November 2001 to 22 November 2002. It is necessary to explain how these dates were selected. 10 The power to award interest on costs is derived from s95 of the Supreme Court Act 1970. That section provides as follows: "95. Interest on debt under judgment or order (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." 11 By SCR Part 40 Rule 3(1), where a judgment is given in court it takes effect as of the date on which it is given, and otherwise as of the date of entry; by sub-rule 3, and subject to sub-rule (1), an order takes effect from the date on which it is made; and by sub-rule (5), and notwithstanding the preceding sub-rules, the court may order that a judgment or order take effect as of a date earlier or later than the date fixed by those sub-rules. 12 Accordingly, unless an order is otherwise made, the order that the defendant pay the plaintiff's costs took effect on 19 June 2000, and pursuant to s96(7), interest was payable from that date, unless the court otherwise ordered. 13 The plaintiff's evidence was that, on 17 July 2001, "an application for assessment of the costs" was served upon the defendant. There was no evidence that that application was further pursued at that time. The plaintiff's solicitor deposed that, in his estimation, based on extensive experience as a litigation solicitor, in the ordinary course a certificate of determination would have been issued by 17 October 2001, in relation to a newly made application for assessment of costs. However, the "ordinary course" did not eventuate. There was no direct evidence explaining why the plaintiff did not pursue his claim for costs at that time, but a glance at the chronology yields information from which inferences are inescapable. The defendant's bankruptcy, with miniscule assets and substantial debts, made pursuit of the costs at that stage pointless. In order to ensure that the defendant was in a position from which she was able to meet the debt or any part of it, it was necessary for the plaintiff to make a diversion from the course he was on and take the equity proceedings. Until those proceedings were resolved in his favour, any further pursuit of the costs would have been a fruitless and expensive endeavour. 14 Taking 17 October 2001 as the starting point, and allowing for the 21 days envisaged by sub-ss95(2) and (3), the plaintiff contends that he is entitled to interest commencing 7 November 2001, the date the costs would or should have been paid. 15 Counsel for the plaintiff relied upon s95(1). So far as relevant, that sub-section provides that where an order is made for the payment of money, interest shall, unless the court otherwise orders, be payable from the date when the order takes effect on so much of the money as is from time to time unpaid. An order for the payment of costs is an order for the payment of money. S95(1) prima facie entitles the plaintiff to the order he seeks. 16 Counsel for the plaintiff referred to the decision of Kirby P in Government Insurance Office of New South Wales v Healy [No 2] (1991) 22 NSWLR 380. At p. 387 his Honour endorsed an earlier observation of Smart J (Fischer v David Syme & Co Ltd (1989) 18 NSWLR 606): "That the power of the Court to 'otherwise order' provides an important degree of flexibility to the Court. It allows the Court to do what is just in the particular case where the usual position, provided by the Act, would produce unfairness. The words allow the Court to avoid rigidity and to accommodate the general rule to the necessity of the case." In this case it is not necessary to make an order departing from the "usual position" provided by s95. It would be open to the court to "otherwise order" if justice demanded that this be done. But in this case justice is served by the application of the usual rule. 17 The argument put on behalf of the plaintiff is a relatively simple one. It is that the action taken by the defendant in seeking to put her property beyond the reach of creditors, including himself, caused a lengthy delay in his recovery of the costs which he had been awarded and to which he was entitled, and that he should therefore be compensated for being out of that money from the date on which, in the normal course, he could have expected to have received the payment (7 November 2001) and the date when he did in fact receive the money (23 November 2002). 18 Counsel for the defendant put a number of arguments in opposition to the order. I do not deal with them necessarily in the same order in which they were put. 19 Firstly, he argued that the plaintiff had himself delayed in taking steps to enforce his order for costs and that the defendant should not therefore be required to pay interest upon that amount, at least so far as delay on the part of the plaintiff deferred his receipt of the money. He argued that, notwithstanding his pursuit of the equity proceedings, the plaintiff could have concurrently sought an assessment of costs which would have resulted in an earlier determination of the quantification of the costs payable. 20 I do not think this argument can stand up to examination. There was no explanation by the plaintiff for not taking the course propounded on behalf of the defendant, but, as I have indicated above, the chronology itself lends no support to the argument. The summons in the Equity Division was filed on 29 June 2001. The evidence does not disclose when the plaintiff became aware of the purported transfer of the defendant's interest in the property and I would not draw any inference either way as to the alacrity with which he acted on learning of that transfer. However, he served the bill of costs on 17 July; the defendant became bankrupt on 7 August; Hill J gave leave to the plaintiff to proceed against the defendant on 6 November; and Barrett J delivered judgment in the Equity proceedings on 31 July 2002. There is no reason to believe that the plaintiff was responsible for the lapse of time between the filing of the summons in the Equity Division and judgment by Barrett J except for one aspect. That is the delay which occurred as a result of the plaintiff seeking to proceed in the Equity Division without the leave of the Federal Court. The need for leave did not arise until 7 August 2001, the date of the defendant's bankruptcy. It was on 16 October 2001 that Barrett J held that leave was required, and that this court did not have jurisdiction to grant it. There is no evidence from which to draw any conclusion as to the date on which the substantive equity proceedings would have been heard and determined had the bankruptcy not intervened. 21 Nor was it likely that an earlier determination of the quantum of costs would have accelerated the payment of costs. The quantum ultimately paid was determined, in the end, by agreement between the defendant's trustee in bankruptcy and the plaintiff. This could not occur until the decision of Barrett J on the s37A claim. Until then the defendant's assets available to her creditors were a little over $1,000. Even if the plaintiff had, rather than negotiating informally with the trustee, proceeded to a formal assessment of costs, he could have recovered nothing until Barrett J had made his orders. Barrett J's final order was made on 12 August 2002. The money in respect of costs was paid on 22 November 2002. 22 I do not consider it was unreasonable of the plaintiff to defer taking any further steps or incurring any further costs pending the outcome of the s37A claim. Counsel for the defendant suggested that, had the plaintiff had confidence in his own s37A claim, he could and should have proceeded with the assessment of costs. I accept that such a course was available to the plaintiff, but I do not accept that not to follow it was unreasonable and should provide a reason for depriving him of interest on the costs, if he is otherwise entitled to such an order. Ordinary prudence dictated the avoidance of additional costs until the property transfer matter was finalised. 23 A second matter argued on behalf of the defendant was that "there has to be some end to litigation". Counsel pointed to the earlier applications made to this court by the plaintiff since the verdict in the defamation claim. These were the application that the costs be assessed on an indemnity basis, and for an award of interest on the costs from the date of verdict to the hearing of the previous notice of motion (3 July 2001). It is to be observed that the plaintiff was successful in each of these applications. 24 The difficulty with this argument is that the need for the present application has been brought about by the defendant's own action. Had the defendant not put herself in the position of being unable to pay at an earlier time, the plaintiff would not have been out of his money. Had the defendant not put the plaintiff in the position of having to take the proceedings in the Equity Division, the plaintiff would not have been out of his money. 25 I do not accept that, because the plaintiff has made two previous successful applications, he should be treated as having no further rights to recover that to which he is entitled, if he is so entitled. 26 A fourth argument depended upon a passage in my judgment of 3 July 2001, in which I ordered the defendant to pay interest on the costs up to 30 December 2000 "and thereafter there be no interest payable". Counsel for the defendant sought to read this as a prohibition on any further application for, or order for, an award of interest on the costs. This would be so whether or not the costs were paid. My judgment cannot be read in this way. As I noted earlier, that order was made in the context of an application that interest be payable on the costs up to the date of that judgment, 3 July 2001. It was not intended to, and did not purport to, determine any future applications in relation to circumstances which had not then arisen. 27 Finally, counsel argued that the relief sought by the plaintiff is discretionary. In this respect he tendered an affidavit sworn by Ms Fiona Glynn, a solicitor employed by the defendant's solicitor. Annexed to the affidavit was a medical certificate, dated 11 February 2003, which discloses that on 14 November 2002 the defendant was diagnosed with breast cancer. At the time of the writing of the report the defendant was being treated three times weekly with chemotherapy and was anticipating undergoing radiation therapy following the conclusion of the chemotherapy course. The doctor who wrote the report added that the need for further intervention would be determined at a time approximately six months after the completion of radiation therapy. 28 Objection was taken to the admission of the affidavit and, after hearing argument, I admitted it subject to relevance. During the course of argument I expressed doubts about its relevance to the exercise of discretion in relation to the award of interests on costs. 29 The medical report engenders sympathy for the defendant. However, the personal circumstances of a party do not, in my opinion, bear upon the proper exercise of the discretion in question. I confirm my earlier tentative view that the affidavit does not disclose any material relevant to the exercise of the discretion. I disregard it. 30 The plaintiff has established his entitlement to an order that the defendant pay interest on the amount awarded for costs from the date specified, 7 November 2001, to the day preceding the date of payment, 22 November 2002. 31 He will also be entitled to an order that the defendant pay the costs of hearing the present application. However, there was an earlier occasion on which the notice of motion was listed for hearing, 13 February 2003. On this occasion the notice of motion was adjourned to enable the plaintiff to seek the leave of the Federal Court to pursue the application. Inexplicably, having regard to the earlier events in the Equity Division, the plaintiff's legal representatives had overlooked the need to take this step. At the time I adjourned the notice of motion, I heard some argument in relation to costs incurred on that day. Counsel for the defendant urged that the defendant should receive the costs of the day, the oversight being that of the plaintiff's legal representatives. Counsel who then appeared for the plaintiff argued that the oversight must have been obvious to the defendant's legal representatives, and that a simple telephone call would have alerted them to the need to take the step in the Federal Court, and avoid the appearance on 13 February and the costs so incurred. 32 I accept that it is not the function of the defendant's legal representatives to draw the attention of the plaintiff's legal representatives to an obstacle in their path in pursuit of an application. However, where legal representatives keep to themselves an obvious and deadly point, they run the risk that costs will not be awarded in their favour. Counsel for the defendant said that the point seemed to him so plain that he could only assume that counsel for the plaintiff had come up with an answer to such an obvious point and he therefore did not raise the matter with him. 33 I have found this issue rather difficult. As I have said, it is not for the defendant's counsel, or legal representatives, to advise the plaintiff. On the other hand, as I have also said, failure to raise such a matter puts the party doing so at risk. 34 I have concluded, in the circumstances, that a just result will be to order each party to pay his or her own costs of the hearing on 13 February 2003. 35 The orders I make are: (i) the defendant is to pay interest at the rates applicable under Schedule J to the Supreme Court Rules on the costs awarded to the plaintiff from 7 November 2001 to 22 November 2002; (ii) the defendant is to pay the plaintiff's costs of and incidental to the notice of motion, other than the costs incurred in the hearing of 13 February 2003; (iii) each party is to pay his or her costs of the hearing of 13 February 2003. ********** Last Modified: 04/07/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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