New South Wales Supreme Court Fletcher Australia P/L v Savday P/L [2005] NSWSC 1320 CITATION : This decision has been amended. Please see the end of the judgment for a list of the amendments. HEARING DATE(S) : 25/11/05 JUDGMENT DATE : 25 November 2005 Equity Division JURISDICTION : Technology & Construction List JUDGMENT OF : White J DECISION : The Court orders: 1. The Plaintiff to pay to the First Cross-Defendant to the Third Cross-Claim (the First Cross-Defendant) interest on the First Cross-Defendant's costs of the Third Cross Claim, provided that: (a) the interest shall be payable on such of those costs as are allowed on assessment; (b) the interest shall be calculated at the rates prescribed in Schedule 5 to the Uniform Civil Procedure Rules 2005 (NSW); (c) the interest shall commence to accrue from the dates upon which the said allowed costs were paid to the First Cross-Defendant's solicitor; and (d) the interest shall cease to accrue upon the earlier of: (i) the date that the said allowed costs are paid by the Plaintiff to the First Cross-Defendant, and (ii) if the amount of the said allowed costs is lower than an amount offered in writing to be paid by the Plaintiff to the First Cross Defendant for costs, the date that is 14 days after the date of such offer. 2. The Plaintiff pay the costs of the First Cross-Defendant to the Third Cross-Claim of the Notice of Motion dated 9 November 2005. CATCHWORDS : PRACTICE AND PROCEDURE - Application for interest to be paid on costs - Where costs are high and respondent on application was found to be liable to make payments in respect of costs but has failed to do so thus far - Where all matters including costs had been referred to a referee - Whether adoption of referee's report precludes a later application for interest on costs - Other discretionary factors considered - Interest on costs ordered. LEGISLATION CITED : Civil Procedure Act 2005 (NSW) Grogan v Thiess Contractors [2000] NSWSC 1101 CASES CITED : Australian Development Corporation Pty Ltd v White Constructions (ACT) Pty Ltd [2002] NSWSC 280 Dyktynski v BHP Titanium Minerals [2004] 60 NSWLR 203 Fletcher Australia Pty Ltd PARTIES : v Savday Pty Ltd FILE NUMBER(S) : SC 55014/00 Plaintiff: F Hicks 1st Cross-Defendant: N Kidd - MPN Group COUNSEL : Plaintiff: Avendra Singh Strati & Kam Lawyers SOLICITORS : 1st Cross-Defendant: Allens Arthur Robinson LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION TECHNOLOGY & CONSTRUCTION LIST WHITE J Friday, 25 November 2005 55014/00 Fletcher Australia Pty Ltd v Savday Pty Ltd JUDGMENT 1 HIS HONOUR: This is an application by the first cross-defendant to the third cross-claim ("MPN Group") for an order pursuant to s 101(4) of the Civil Procedure Act that interest be paid on such amount as may be payable by the plaintiff under an order made on 5 August 2004 that the plaintiff pay that cross-defendant's costs of the third cross-claim. 2 The proceedings were commenced against Savday Pty Ltd in 1999, and later transferred to the Technology & Construction List. Savday filed a cross-claim against the plaintiff. Later the plaintiff filed further processes, described as cross-claims, including a third cross-claim against MPN Group Pty Ltd, the present applicant. 3 The whole of proceedings, I was told, were referred to the Honourable Mr J M N Rolfe QC for inquiry and report. The referee conducted the hearing between December 2003 and January 2004. He provided his first report on 8 April 2004. On 1 July 2004 he delivered a second report dealing with questions of costs. He recommended, inter alia, that the plaintiff pay the cross-defendant's costs on the plaintiff's cross-claims on a party and party basis. 4 On 5 August 2004, the parties consented to an order adopting his reports and, accordingly, on that day, the Court ordered that the plaintiff pay the costs of the cross-defendants of the cross-claims brought by the plaintiff on a party and party basis. 5 MPN Group was insured by QBE Insurance Australia Limited. Between 23 April 1999 and at least 25 August 2005, QBE paid legal costs and disbursements rendered by the solicitor retained to act for MPN Group. The amounts so paid exceed half a million dollars. Payments have been paid at regular intervals during that period. Having regard to the amount of costs involved, the length of time that the payee of those costs has been out and will be out of pocket before recovery, the nature of the proceedings, their complexity, the circumstance that the plaintiff is undoubtedly liable to make some payments in respect of the costs incurred by MPN Group, and that it has not made any payment to date, it is clear that, subject to the matters which I will address later in these reasons, it is appropriate to order that interest be paid on such amount of costs as are assessed to be payable, from the dates on which the costs concerned were paid. See generally Grogan v Thiess Contractors [2000] NSWSC 1101 and Australian Development Corporation Pty Ltd v White Constructions (ACT) Pty Ltd [2002] NSWSC 280. 6 However, there are three particular matters upon which the plaintiff relies to resist the application. The first is that it says this application should have been made when all questions of costs were considered by the referee prior to his delivery of his second report. Alternatively, the application should have been foreshadowed before orders were made on 5 August 2004 when the referee's report was adopted without opposition. 7 In relation to that objection it was accepted that it is open to a party to apply for orders under section 101 for interest on costs after orders are made for the final disposition of the proceedings and for the payment of costs. 8 This ground was advanced as a discretionary reason for refusing the application. There is no logical connection between the applicant's claim for interest on costs and the grounds for the order as to costs made on 5 August 2004 in accordance with the report of the Honourable Mr Rolfe QC of 1 July 2004. That is to say, there is no logical connection between the present application and the question whether the plaintiff might have been successful in arguing that a Bullock order or a Sanderson order should have been made, as was submitted before the referee. Nor is there any evidence that the plaintiff took into account in deciding not to oppose the adoption of the referee's report the circumstance that no application had been advanced for interest on costs. Nor is there evidence from anyone in the plaintiff's camp that they might have taken a different view on the adoption of the referee's report had the present application been advanced before 5 August 2004. 9 It was said that this was a relevant tactical matter, although it was accepted that the claim for interest on costs had no logical relevance to the adoption of the referee's report. In my view there is no relevant prejudice arising from the fact that this application was not made or foreshadowed before 5 August 2004. 10 The second ground advanced in opposition to the present application was that the costs have been paid not by the applicant itself, but by its insurer. The applicant has not been out of pocket. Thus the real party to the present application is not MPN Group, but QBE. I do not consider that to be a relevant consideration. QBE is subrogated to MPN Group's claims, including its claims to recover its costs. There is no reason in principle why its interests should not be considered in relation to the merits of the application for the recovery of interest on costs. As McColl JA said in Dyktynski v BHP Titanium Minerals [2004] 60 NSWLR 203 at 220 [95]: "Applying the indemnity principle to ensure that a real party with an interest in the litigation can recover the costs incurred in proceedings brought in another's name accords with the proposition that `it is just and reasonable that the party who has caused the other party to incur the costs of litigation should reimburse that party for the liability incurred.' Latoudis v Casey ". 11 The same principle applies to an application for an order for interest on costs paid. 12 The next ground of opposition to the order sought was the suggested delay in MPN Group's applying for the assessment of costs. The order for costs was made on 5 August 2004. The application for assessment was not made until 10 June 2005. However, the substantial period of that delay occurred between 19 August 2004 and 10 March 2005. This was a period over which the applicant's solicitors advised the plaintiff's solicitors of the solicitor and client costs incurred in the proceedings. That information was provided, clearly enough, because the parties were in discussions, or proposed to have discussions, with a view to reaching an agreement, if agreement could be reached, on the amount of costs which might be payable. 13 Notwithstanding a follow-up facsimile of 23 November 2004, it was not until 10 March 2005 that the plaintiff's solicitors responded to the information provided as to the plaintiff's costs and made an offer. Thereafter, matters proceeded with what appears to be reasonable promptitude, leading ultimately to the preparation of a bill of costs and application for an assessment on 10 June 2005. It was not until that day that the applicant's solicitors foreshadowed the claim for interest, but I do not think that itself gave rise to any prejudice over that period, or is a reason for refusing the present application. 14 It was then put that the present application should stand over until after the assessment was given. It was pointed out that, depending upon the assessment, it may be appropriate that interest should stop. That is to say, if the assessment is for a figure below that which the plaintiff has offered to pay, then it would not be just that interest continue to run after that date. That is no doubt, correct. But it is not a reason for not making an order for the payment of interest on costs. Interest will continue to run until the costs are paid. If, however, the assessment is for a figure below that which the plaintiff has offered to pay, then interest will cease to be payable within a reasonable period of time after the date of such an offer from the plaintiff. 15 It also became clear during discussion with counsel that the order for interest on costs should include a provision that interest run only on such of the costs as are allowed on assessment. 16 I direct that counsel for the first cross-defendant to the third cross-claim bring in short minutes of order in accordance with these reasons. That is to say, the order should be in accordance with paragraph 1 of the notice of motion but amended so as to provide that interest will run from the dates upon which such costs as are allowed on assessment were paid. Secondly, it should provide for interest to cease running from payment, or from fourteen days after the date of the plaintiff's offer or offers for the settlement of costs, in the event that the assessment is for a figure less than that which the plaintiff has offered by way of settlement. The first cross-defendant is entitled to its costs of the notice of motion of 9 November 2005, and the short minutes should provide accordingly. ****** 21/12/2005 - Amended erroneous hearing & judgment date of 25/12/05 to 25/11/05. - Paragraph(s) 0 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.