New South Wales Supreme Court CITATION : Davies v Kur-ring-gai Municipal Council [2003] NSWSC 1010 HEARING DATE(S) : 17, 24, 27 October 2003 (by written submissions) JUDGMENT DATE : 4 November 2003 JURISDICTION: Equity JUDGMENT OF : Austin J DECISION : Application denied; liberty to apply CATCHWORDS : PRACTICE & PROCEDURE - costs - interest on costs - whether, in the Equity Division, an order under s 95(4) should be made as of course when claimant shows payment to solicitor LEGISLATION CITED : Supreme Court Act 1970 (NSW), ss 76, 95 Supreme Court Rules, Pt 40 r 3 Australian Development Corporation Pty Ltd v White Constructions (ACT) Pty Ltd [2002] NSWSC 280 Bennett v Jones [1977] 2 NSWLR 355 Falkner v Bourke (1990) 19 NSWLR 574 Gray v Guardian Trust Australia Ltd [2003] NSWSC 887 Grogan v Thiess Contractors Pty Ltd [2002] NSWSC 1101 CASES CITED : Home Owners Insurance Pty Ltd v Job (1983) 2 ANZ Ins Cas 60-635 Hughes Bros v The Trustees of the Roman Catholic Church [1999] NSWSC 1051 Hunt v RM Douglas (Roofing) Ltd [1990] 1 AC 398 Lolomanaia v Roads & Traffic Authority of NSW [2002] NSWSC 918 Minister Administering the Environmental Planning and Assessment Act 1979 v Carson (1994) 35 NSWLR 342 Puntoriero v Water Administration Ministerial Corporation [2002] NSWSC 217 Woods v Woods [2001] NSWSC 1108 PARTIES : Kathryn Davies (P) Kur-ring-gai Municipal Council (D) FILE NUMBER(S) : SC 1655/02 COUNSEL : R Horsley (P) B R McClintock SC with S Flanigan (D) SOLICITORS : Colin Biggers & Paisley (P) Deacons (D) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION AUSTIN J TUESDAY 4 NOVEMBER 2003 1655/02 KATHRYN DAVIES V KU-RING-GAI MUNICIPAL COUNCIL JUDGMENT (Interest on costs) 1 HIS HONOUR: I published my reasons for judgment in this case on 10 September 2003. The plaintiff was successful in both aspects of her case, based on narrow and broad ultra vires respectively. On 10 October 2003, when the matter returned to me for the making of orders, the plaintiff made an application for an order that the defendant pay interest on costs. I made orders giving the plaintiff substantive relief in the proceeding, and I ordered the defendant to pay the plaintiff's costs, but it was not practicable to deal with the application for interest on costs immediately. I directed the parties to make written submissions on the basis that I would publish my reasons for judgment in chambers. The submissions have been received and these are my reasons for judgment on the plaintiff's application. 2 As I explained more fully in Gray v Guardian Trust Australia Ltd [2003] NSWSC 887 (30 September 2003), the usual rule governing an application for interest on costs in the Equity Division is the allocatur rule, according to which interest begins to accrue with respect to unpaid costs only upon the making of an assessment of costs. This is because s 95(1) of the Supreme Court Act 1970 (NSW) provides that where an order is made for the payment of money, interest is payable when the order takes effect, unless the Court otherwise orders. Part 40 rule 3(4), read in conjunction with clause 45 of Schedule 8 to the Legal Profession Act 1987 (NSW), provides that where an order directs the payment of costs and costs are to be assessed, the order takes effect as of the date of the certificate of assessment. 3 However, the Court has discretions under ss 76 and 95 of the Supreme Court Act to depart from the usual rule by ordering that interest accrue from a different time. Specifically, s 95(4) authorises the Court to order that interest be paid "from the date or dates when the amount in respect of costs was duly paid". The plaintiff invites the Court to apply s 95(4) by awarding her interest on costs from the date she paid them to her solicitors. 4 The evidence shows that the plaintiff made payments to her solicitors on account of costs and disbursements in the total amount of $78,976.84, over the period from 10 January 2002 to 23 July 2003. In the period from the former date up to 17 January 2003 she made nine payments in amounts varying from $385 to $9,673.39. The total amount paid during that period was $26,500.39. Subsequently she made a payment of $15,000 on 11 February 2003, a payment of $12,087 on 18 June 2003 and a payment of $25,389.45 on 23 July 2003. The plaintiff contends that the Court should make an order now that interest be paid at the prescribed rate under the Act in respect of each of her payments to her solicitors, from the dates when the respective amounts were paid. 5 The cases to which I have been referred show that: · in general, judicial discretions in relation to the award of interest should be exercised to ensure that the successful party is properly compensated (Bennett v Jones [1977] 2 NSWLR 355; Home Owners Insurance Pty Ltd v Job (1983) 2 ANZ Ins Cas 60-635; Falkner v Bourke (1990) 19 NSWLR 574); · the Court examines all the circumstances of the case in deciding whether to make an order for interest on costs under s 95(4) or s 76, including such matters as whether the successful party has been out of pocket for a lengthy time, whether the unsuccessful party has benefited from the use of money during that time, and the conduct of the parties (Grogan v Thiess Contractors Pty Ltd [2002] NSWSC 1101 (22 December 2002), at [11] per Barr J). 6 In some cases an order for the payment of interest on costs has been found to be justified principally because the claimant has paid substantial legal costs from time to time over a lengthy period. Thus, in Australian Development Corporation Pty Ltd v White Constructions (ACT) Pty Ltd [2002] NSWSC 280 (Einstein J, 5 April 2002), the claimants had been paying costs to their solicitors for almost 10 years. In Lolomanaia v Roads & Traffic Authority of NSW [2002] NSWSC 918 (2 October 2002), Dunford J drew attention to the significance of that fact to the decision in the White Constructions case. In other cases, the Court has been influenced by the indigent circumstances of the claimant: for example, Woods v Woods [2001] NSWSC 1108 (Hamilton J, 4 December 2001). 7 I agree with counsel for the plaintiff that an order for payment of interest under s 95(4) does not require a "special" case (citing Grogan v Thiess Contractors Pty Ltd at [10]; Puntoriero v Water Administration Ministerial Corporation [2002] NSWSC 217 at [10] per Grove J; Australian Development Corporation Pty Ltd v White Constructions (ACT) Pty Ltd at [23]-[27]; Lolomanaia v Roads & Traffic Authority of New South Wales at [11]). However, no case has been cited in which interest on costs has been ordered in the Equity Division purely on the basis that the claimant made one or more payments to his or her solicitor before succeeding in the principal litigation. This suggests that in the Equity Division, an order departing from the allocatur rule will not be made as of course, simply on the ground that the claimant has demonstrated payments to his or her solicitor on account of costs. In Lolomanaia, a case in the Common Law Division, the facts went well beyond the mere fact of payment of costs prior to the hearing. However, Dunford J made some observations (at [16]-[17]) to the effect that if the plaintiff in a common law proceeding for personal injury has funded his or her solicitor before the conclusion of the litigation, it is appropriate to make an order for interest. His Honour's reasoning appears to depend on the special position of plaintiffs in personal injury litigation, where it is not usual for the plaintiff to pay costs to the solicitor before the hearing, and the special provisions concerning common law claims in ss 95(2) and (3). 8 In the present case the plaintiff has paid a large amount to her solicitors on account of costs, but it has been paid over a relatively short period of time. Of the total payment of $78,976.84, $52,476.45 was paid in the period from February to July 2003. One must be careful not to underestimate the financial difficulty encountered by a private litigant faced with the need to fund a Supreme Court proceeding against a much better-resourced opponent, but this is not a case where the plaintiff has been substantially out of pocket for an extended time. The plaintiff received the benefit of an order for costs on 10 October 2003, and from that time she has been able to proceed towards assessment. 9 In my opinion, there are insufficient facts and circumstances presently before me to justify an order for interest on costs. 10 In Hunt v RM Douglas (Roofing) Ltd [1990] 1 AC 398, where the House of Lords preferred the incipitur rule (that interest should accrue from the date of the order for costs) to the allocatur rule, Lord Ackner took into account (at 415-6) that if interest were not payable on costs between judgment and the completion of taxation, there would be an incentive to delay the taxation process in order to defer payment. His Lordship's observation was referred to with approval by Kirby P in Minister Administering the Environmental Planning and Assessment Act 1979 v Carson (1994) 35 NSWLR 342, 353. Although I have reached the conclusion that there is not at present a sufficient ground for making the order sought by the plaintiff, I am concerned not to give the defendant the kind of incentive that Lord Ackner had in mind. 11 On the other hand, it seems to me that an incentive of the opposite kind could arise if an order were made under s 95(4) in circumstances such as the present. Counsel for the defendants submitted that at the present time, interest at the prescribed rate exceeds interest rates available commercially. That contention was not challenged by counsel for the plaintiff. If it is correct, an order under s 95(4) will deprive the plaintiff of an incentive to pursue the process of assessment of costs with expedition. 12 It seems to me that the best way of avoiding an incentive to the defendant to delay the assessment and payment of costs, while not reducing the plaintiff's incentive to finalise that process promptly by making some form of anticipatory order for interest in favour of the plaintiff, is to grant the plaintiff liberty to apply, to be exercised if she believes that the facts and circumstances have changed so as to provide a proper basis for an order under s 95(4) - as might happen, for example, if the defendant unduly delays the assessment process. 13 I shall therefore grant the plaintiff liberty to apply to me on seven days' notice, exercisable by notice given no later than 30 April 2004, for an order for interest on costs on the ground that facts occurring after 10 October 2003 justify the making of the order. 14 In their submissions the parties debated the question whether the Court can, and should ever, make an order for payment of interest on costs before the amount of costs has been assessed. Having regard to my view on the merits of the application, it is unnecessary for me to decide this point. However, there is nothing in the wording of s 95(4) that would impose any jurisdictional limitation, and some cases appear to have proceeded on the basis that an order for payment of interest may be made prior to assessment: Australian Development Corporation Pty Ltd v White Constructions (ACP) Pty Ltd, at paragraphs [4] and [16]; Hughes Bros v The Trustees of the Roman Catholic Church [1999] NSWSC 1051, at paragraph [61] per Forster AJ. 15 I have decided to make no order for costs on the application for interest on costs, with the intention that each party play their own costs of the application. Although the plaintiff has not obtained an order for interest on costs at this stage, she will be granted liberty to apply, and I take into account that there is some uncertainty about the practice of the Equity Division on this question. ********** Last Modified: 11/13/2003 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. 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.