New South Wales Supreme Court CITATION : Roberts v Rodier [2006] NSWSC 1084 HEARING DATE(S) : 25 September 2006 JUDGMENT DATE : 18 October 2006 JURISDICTION : Equity JUDGMENT OF : Campbell J DECISION : Indemnity costs refused. First and second defendants to pay 92.5% of plaintiff's costs. Pre-judgment interest awarded. CATCHWORDS : PROCEDURE – costs – Calderbank letter – effect of an imprecise offer – effect of an offer to settle if offeree pays a stipulated amount in costs – effect of an offer which if accepted might not completely disentangle offeree from the proceedings – PROCEDURE – interest on damages – principles for calculating LEGISLATION CITED : Civil Procedure Act 2005 Uniform Civil Procedure Rules 2005 Amalgamated Television Services Pty Ltd v Marsden [2002] NSWCA 419 Darryll Cullen v ZLB Behring LLC [2006] NSWSC 359 Forster v Farquhar [1893] 1 QB 564 MBP (SA) Pty Limited v Gogic (1991) 171 CLR 657 Oshlack v Richmond River Council (1998) 193 CLR 72 CASES CITED : Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (unreported, Hodgson CJ in Eq, New South Wales Supreme Court, 3 June 1998) Roberts v Rodier [2006] NSWSC 282 Sherborne Estate (No 2); Vanvalen and Another v Neaves and another; Gilroy v Neaves and Another [2005] NSWSC 1003; (2005) 65 NSWLR 268 Skalkos v T & S Recoveries Pty Ltd (2005) 65 NSWLR 151 Wheeler v Page (1982) 31 SASR 1 White v Baycorp Advantage Business Information Services [2006] NSWSC 910 Margaret Helen Roberts - Plaintiff PARTIES : Glen Rodier - First Defendant Helen Louise Rodier - Second Defendant FILE NUMBER(S) : SC 2711/03 COUNSEL : L Byrne - Plaintiff M Fraser - Defendants SOLICITORS : Central Coast Business Lawyers - Plaintiff Bowen & Gerathy - Defendants IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION EQUITY LIST CAMPBELL J 18 OCTOBER 2006 2711/03 MARGARET HELEN ROBERTS v GLEN RODIER & ANOR JUDGMENT 1 HIS HONOUR: I gave judgment in this matter on 4 May 2006: Roberts v Rodier [2006] NSWSC 282. The hearing took place over seven days, from 20 March 2006 to 28 March 2006. I found the plaintiff entitled to $17,925 in damages. That amount was made up of compensation for building work ($16,500), compensation for revegetation ($450), and compensation for nuisance concerning loss of pedestrian access ($975). That $975 was in turn made up of $500 general damages, and $475 as compensation for the loss of a set of steps. 2 This judgment concerns costs, and interest. Even though there were three defendants in the proceedings the claim against the third defendant has settled. Hence I shall refer to the first and second defendants as "the defendants", unless I make special reference to particular defendants. 3 Each party accepts that, while an order for costs is discretionary, usually costs should follow the event, and there should be an award to a successful party of the whole of his or her costs, unless there is sufficient reason to make a different order. Each party contends that there is sufficient reason to depart from the usual way of exercising the costs discretion. Plaintiff's Application for Indemnity Costs 4 The plaintiff submits that she should receive an order for indemnity costs incurred in the period after an unsuccessful mediation held on 1 September 2004, or after 21 December 2004. 5 In the course of the mediation the plaintiff put two different offers to the defendants, on the basis that the defendants were free to choose either of those offers. One of the offers the plaintiff accepts could not be the basis for an order for indemnity costs. The other was: "Your clients do all of the work required to rectify the damage caused by the excavation and retaining wall and otherwise pay our client the sum of $25,000 on account of party/party costs." 6 The plaintiff's solicitor repeated in writing, on 21 December 2004, the two alternative offers that had been made orally in the course of the mediation. 7 The plaintiff tendered a memo of fees dating from around the time of making these offers, on the basis of which one could calculate that the figure of $25,000 mentioned in the offer was approximately 65% of her solicitor/client fees up to that time. 8 I do not accept that the plaintiff's offer should result in the defendants paying indemnity costs. Insofar as it was a proposal for the defendants to "rectify the damage caused by the excavation", it needed to be understood in the context of the contentions that the plaintiff was making. She had sworn an affidavit on 28 May 2003, in which she had said that she had lived at 27 Table Top Road North Avoca since 1981, and in that time had had no problem with slippage of the land until the defendants started work. While the plaintiff did not read that part of her affidavit at the hearing, it got back into evidence when the plaintiff was cross-examined about it. In the cross-examination she agreed that the allegation that she had had no problems with slippage on the land was "completely incorrect", and she had known since she had got documents from the Council on subpoena, about there being problems with slippage of her land even before the defendants started work. Even if it was after December 2004 that she got those documents on subpoena, the fact remains that, at the time of making the offers in question, her contention, communicated to the defendants, was that all the slippage problems on her land had been caused by the defendants. The defendants' contention was (as I have found to be correct) that there were significant pre-existing slip problems on the plaintiff's land, and tortious conduct of the defendants had caused only some of the slippage problems. The terms in which the plaintiff's offer was put masked this very real disagreement. That disagreement would have needed to be sorted out before the plaintiff's offer, in the general terms it was cast, could be turned into a description of the work which needed to be done, in sufficient detail to be a building or engineering specification. A Calderbank offer that is not clear about what is being proposed is not one that it would be unreasonable for the recipient to reject. 9 As well, a Calderbank offer which is on the basis that it is for a sum of money inclusive of costs, does not result in the person who issued it becoming entitled to indemnity costs: White v Baycorp Advantage Business Information Services [2006] NSWSC 910 at [12] and cases there cited. Similarly, in my view, a Calderbank offer which has as an essential element of it that the party to whom it is made agree to pay a particular sum for costs, without the opportunity for checking or assessment, could give rise to an order for indemnity costs only in circumstances where it ought to have been obvious to the person receiving the offer that the party/party costs of the offeror would be equal to or more than the sum stated in the offer. It is not established that the defendants were in that situation. They had not seen the memo of fees that was tendered on this application. It has not been shown that, by any other means, it ought to have been obvious to the defendants that the party/party costs of the plaintiff to that time would be equal to, or more than, $25,000. 10 Further, at the time the offer was made, the Council was a third defendant in the litigation, and the plaintiff was claiming damages from the Council. The offer that the plaintiff made to the first and second defendants was an offer to settle with them alone. If they accepted the plaintiff's offer, there would have been nothing to stop the Council from immediately bringing a cross-claim against them, seeking contribution or indemnity in relation to the damages which the plaintiff was claiming from the Council. When accepting the plaintiff's offer would have left them exposed in this fashion, it could not be said that the first and second defendants, acting reasonably, ought to have accepted the offer. 11 For all these reasons, I reject this submission that the defendants should pay the plaintiff's costs on an indemnity basis. 12 An alternative basis upon which the plaintiff seeks an order for indemnity costs arises from two settlement offers made by the plaintiff's legal representatives part-way through the hearing. 13 One of them was on Saturday, 25 March 2006. It is recorded in a note, saying "$14,000, each party pay costs, D do Option 1". "Option 1" was the work which I have described in paras [80] and [82] of the principal judgment. That note is not elucidated by any evidence. It is not clear what it means, apart from the fact that the defendant would carry out the Option 1 work, which the experts have agreed would cost $33,000. It is not clear who is to pay $14,000 to whom. I am not satisfied that the defendants have done worse, in the litigation, than they would have done if they had accepted this offer. Hence I do not regard this offer as warranting any indemnity costs order. 14 The other settlement offer was on 26 March 2006. It was for the defendants to do the work in Option 1, and each side pay their own costs. As it has eventuated, the amount of money which the defendants have to pay is significantly less than the cost of the Option 1 work. The offer was one made an extremely late stage. I do not regard it as warranting any indemnity costs order. The Defendants' Open Offer 15 I set out, at para [63] of my principal judgment in this matter some of the terms of an open offer of settlement that the defendants' solicitors made on 21 July 2003. The parts I did not quote were: "1. The defendant will complete construction of the retaining wall in accordance with geotechnical advice, being the work described by Brink & Associates in their report of 29 June 2003 and be supervised by them. As we understand it, this simply requires a few more blocks to be placed on the retaining wall, and for backfilling to occur." 16 The other condition related to the plaintiff consenting to that work taking place on her land. 17 In the principal judgment, at [127] ff I considered whether the failure of the plaintiff to accept that offer meant that she had not acted reasonably to mitigate her damage. I concluded that the defendants had not established that the offer was one which the plaintiff ought reasonably to have accepted. 18 The defendants submit that this was an offer to provide the plaintiff with, in substance, an engineer-designed wall, that she has ended up with half of the cost of additions to the Driveway Retaining Wall which are needed to bring it up to an appropriately engineered standard, and hence that they offered more than she has been awarded by the judgment. 19 I do not agree that it is appropriate to read the open offer in that broad-brush way. It seems to me that the first paragraph of it is an offer to carry out the work described by Brink & Associates in their report on 29 June 2003. At [127] of the principal judgment I held, "Indeed, at the conclusion of the trial, the defendants have still not established that completion of the Driveway Retaining Wall in this fashion would have prevented the plaintiff from suffering any further damage in consequence of the torts of the defendants". 20 I do not accept that an offer to carry out work, which is not shown to be adequate to fix damage, is a better result than a judgment for a sum of money. 21 I do not regard the open offer of 21 July 2003 as being a basis for altering the usual costs rule. Defendants' Offer of 6 February 2006. 22 On 6 February 2006 the defendants' solicitors wrote to the plaintiff's solicitor, offering to construct a set of stairs which would give access to Surf Rider Avenue from the plaintiff's land. The offer was made by reference to a plan, which looks detailed enough to build from. The stairs that the defendants proposed are the type of stairs a carpenter or metal fabricator would make. They are vastly superior to the rough steps which the plaintiff used before the excavation was made. 23 This letter did not, however, deal with any issue in the proceedings other than the stairs. I do not regard it as providing a basis for departing from the usual rule as to costs. The Defendants' Offer of 15 March 2006 24 On 15 March 2006 – the third working day before the trial started – the defendants sent another Calderbank letter to the plaintiff. It offered to pay the plaintiff a total of $23,000, plus the plaintiff's costs as agreed or assessed up until a date 14 days after the offer of settlement of 21 July 2003, and that the defendants would bear their own costs from a date 14 days after that offer of settlement of 21 July 2003. 25 Making a costs offer on that basis presupposed that the defendants' offer of 21 July 2003 was one which the plaintiff ought to have accepted. For reasons already given in this judgment, and in the principal judgment, I do not agree. 26 The defendants' letter of 15 March 2006 does not provide a reason for departing from the usual principle as to costs. Plaintiff's Failure on Some Issues 27 There were several issues on which the plaintiff failed. The plaintiff failed to establish that the effects of the torts extended any further west on her land than the Hutchison Line. She failed to make out a case for damages for "mental trauma". She asserted, and did not establish, that the steps which gave access to Surf Rider Avenue were on her land. In the initiating process, the plaintiff made a claim for a mandatory injunction, seeking restoration of the land to the condition it was in before the torts occurred. In light of the expert evidence that such restoration was impossible, that injunction would never have been granted. The claim for the injunction was abandoned in the plaintiff's opening. That left the case as nothing more than an action for damages for tort. 28 The principal judgment left open a question of whether the plaintiff would press a claim for loss in value of the land, in addition to the damages which I had held were appropriate connected with the costs of restoration. Ultimately, that claim was not pressed. One directions hearing after the judgment had been given was wasted when the plaintiff had not made her mind up what she wanted to do about that claim. 29 Of the issues on which the plaintiff failed, only the claim for mental trauma seems to me to be a severable issue from the issues on which she succeeded. The evidence relevant to the claim for mental trauma was extremely small in scope, and only a small proportion of the hearing time was spent on that issue. The expert evidence on surveying and geotechnical matters was relevant to claims on which the plaintiff succeeded, and also to ones on which she failed. 30 The defendants contend that, if the plaintiff is to avoid suffering in costs for having raised issues on which she lost, it is not enough for the plaintiff to point out that, in particular, the detailed geotechnical evidence in the case, which occupied a significant amount of hearing time and is bound to have been expensive, was relevant to an issue on which the plaintiff succeeded. 31 Cases where a plaintiff has succeeded in only some of the issues raised have sometimes resulted in the plaintiff not receiving an order that all its costs be paid by the defendant. One principle in accordance with which such a result has sometimes been worked out has been that the costs of litigating those issues on which the plaintiff has failed are dealt with in a separate way to the costs of litigating those issues on which the plaintiff has succeeded: Forster v Farquhar [1893] 1 QB 564; Permanent Trustee Australia Ltd v FAI General Insurance Co Ltd (unreported, Hodgson CJ in Eq, New South Wales Supreme Court, 3 June 1998), quoted in Darryll Cullen v ZLB Behring LLC [2006] NSWSC 359 at [12]. To be able to apply that principle, one needs to be able to identify the costs of litigating those issues on which the plaintiff has failed. In applying that principle, if a particular item of evidence is relevant to a claim on which the plaintiff has succeeded, and also to one on which the plaintiff has failed, it would be appropriate to treat the costs of adducing that evidence as costs of an issue on which the plaintiff failed only when its relevance to the issue on which the plaintiff succeeded was so slight that it should be disregarded. 32 In the present case, the expert evidence on surveying and geotechnical matters was relevant to claims on which the plaintiff succeeded, and also to ones on which she failed. Thus, if the appropriate way of dealing with the fact that the plaintiff has failed on some issues is by making a separate order in relation to the costs of the issues on which the plaintiff has failed, it would not result, in the present case, in the costs of that expert evidence not being paid by the defendants. 33 However, I do not accept that the appropriate way of exercising the costs discretion is limited to the identification of separate costs of particular issues. It could sometimes be within the scope of a proper exercise of discretion, where the costs of certain evidence was relevant to issues on which a plaintiff succeeded and also to issues on which the plaintiff failed, to decide to allow the plaintiff a proportion only of those costs. 34 I agree with the statement in Ritchie's Uniform Civil Procedure, para [42.1.15] that, "… it will ordinarily be appropriate to award the costs of proceedings to the successful party without attempting to differentiate between those particular issues on which it was successful and those on which it failed, unless the matters on which the party failed were either the clearly dominant issue in contest or were very clearly separable from the matters on which the party succeeded." 35 That approach is justified by the considerations that the plaintiff has been wronged, has needed to come to court to right that wrong, and (in circumstances where the plaintiff has not been offered, once the litigation was begun, a better outcome than the plaintiff actually obtained) has needed to see the litigation through to judgment to obtain the full extent of his or her legal entitlement. It is an inevitable part of the litigious process that sometimes costs will be incurred which can ultimately be seen not to have contributed in any material way to the outcome of the case. Even so, if the incurring of those costs is something which is reasonable at the time they are incurred, the incurring of them is a consequence of the plaintiff having been put in a position of needing to litigate to obtain a remedy for the wrong which has been committed, and so such costs often ought appropriately be borne by the defendant. 36 One circumstance which can contribute to (but is usually not sufficient for) a departure from the usual rule as to costs, is if the litigation is brought in the public interest or involves a question of public importance: Oshlack v Richmond River Council (1998) 193 CLR 72 at [20], [49], [137]–[139]. That circumstance is not present in this case. 37 The defendants say that a reason why the case took on the proportions it did, was, to put it bluntly, that the plaintiff was trying to make them pay for damage to her land which they did not cause. I accept that proposition. The defendants submit that they conducted the litigation on the basis that they admitted the torts, and made reasonable concessions. I also accept those propositions. However, I do not think that they result, in the circumstances of the present case, in any departure from the usual costs order. 38 When a defendant in litigation concedes that it has a liability to the plaintiff, but is faced by a plaintiff claiming significantly more than she is entitled to, the law provides a course for that defendant to follow to protect itself against a costs order. It is to make an offer to compromise the proceedings pitched at, or slightly above, the measure of the plaintiff's true entitlement, plus the plaintiff's costs as agreed or assessed up to a date a short time (but long enough to give the plaintiff a reasonable opportunity to consider the offer) after the making of the offer. The defendants in the present case tried to follow that course, but as events have worked out, they did not succeed in doing so. Section 98(4) Order 39 Section 98(4) Civil Procedure Act 2005 empowers the Court to make orders that a party receive: "(a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount." 40 Even if it were otherwise appropriate, there is no evidentiary basis whatever upon which I could fix a gross sum for costs. Even if it were the case that, for some kinds of regularly repeated litigation the Court has knowledge of what reasonable costs should be, this is not one of those cases. An order under section 98(4) can be made only when it has a proper factual foundation: Sherborne Estate (No.2); Vanvalen and another v Neaves and another; Gilroy v Neaves and another (2005) 65 NSWLR 268 at 276, [41], [45]-[46]. 41 For the same reason, it would not be possible for me to fix an amount which provided a cap to the recoverable costs. 42 One basis on which the defendants submit that I could fix a sum for costs is by fixing an amount "proportional to the outcome the plaintiff has obtained." 43 It is clear that proportionality is a matter which can be taken into account in the quantification of costs. In Skalkos v T & S Recoveries Pty Ltd (2005) 65 NSWLR 151 Ipp JA (with whom Sheller JA and Grove J agreed) said at [8], 153: "In my opinion, in determining whether costs have been reasonably and properly incurred, it is relevant to consider whether those costs bear a reasonable relationship to the value and importance of the subject matter in issue. See in this regard Szlazko v Travini [2004] NSWSC 610; Moore v Moore [2004] NSWSC 587, Gallagher v CSR Ltd (unreported, Supreme Court of Western Australia, 31 March 1994). This conclusion is supported by section 208G(f) of the Legal Profession Act ." 44 See also Sherborne Estate (No 2); Vanvalen and Another v Neaves and another; Gilroy v Neaves and Another [2005] NSWSC 1003; (2005) 65 NSWLR 268 at [30], 274 per Palmer J. However in the vast majority of cases the appropriate way for proportionality to be taken into account is in the course of the assessment process. I do not see any reason for this case being distinguishable from that vast majority. I note that Skalkos was itself an appeal concerning the principles which had been applied in an assessment of costs. 45 There are two other specific matters to which the defendants point, as entitling them to a modification of the usual rule concerning costs. The first relates to some costs of evidence given by Mr Barker. Mr Barker was a geotechnical engineer engaged by the Council. On Friday, 24 March 2006 at about 11 am a settlement between the plaintiff and the Council was announced in court. That announcement came at a time when the four geotechnical engineers who gave evidence in the case had all been sworn, and were all giving evidence in a "hot tub" procedure. The plaintiff's Counsel at that stage said that, from the plaintiff's standpoint, Mr Barker was free to go, but that the plaintiff would not object to Mr Barker continuing to participate in the giving of evidence until the other legal representatives had had an opportunity to consider their position, about what role Mr Barker should play thereafter, over the lunch adjournment. The following remarks were then made: "HIS HONOUR: What occurs to me is Mr Barker has played a role in this dialogue so far, it may be that he has valuable views which would assist. His report, when first filed, raised some matters that had not previously been raised. I think it is something on which the opinion of the experts themselves could be useful to know. GRAVES: I have no objection to that course either. HIS HONOUR: I am conscious also what the cost situation may be. If Mr Barker is being paid by the day rather than by the hour, then it may be the Court could gain some assistance by him being here as the cost of his attending would have already been spent; if it is otherwise, then that may affect the situation. Mr Barker, if you could remain until lunch time and we will consider your role further after that." 46 After the luncheon adjournment, Mr Barker continued to give evidence, and nothing more was said by any party about his doing so. 47 Mr Fraser, counsel for the defendants, tells me that Mr Barker continued to be present at the hearing pursuant to an undertaking given by the solicitor for the defendants to meet his ongoing costs. He submits that because the plaintiff did not succeed in relation to the major issue in respect of which Mr Barker was retained in the proceedings, those costs concerning Mr Barker are a distinct cost which the plaintiff should bear from 11 am on 24 March 2006. 48 I do not accept that submission. Counsel for the plaintiff made it clear that, so far as the plaintiff was concerned, Mr Barker was free to go, as soon as the settlement was announced. As well, while the motivation of the defendants to undertake to pay Mr Barker's fees was to bolster their case that they had not caused any damage west of the Hutchison Line, I do not see why Mr Barker's costs, which the defendants paid, ought be treated any differently to other costs which went to that issue. 49 The second specific matter which the defendants point to as entitling them to a modification of the usual costs rule concerns one of the occasions when there was argument about interlocutory injunctions. On Friday, 23 May 2003 Hamilton J granted the plaintiff an injunction restraining the first and second defendants from entering onto the plaintiff's land and from undertaking further works on the plaintiff's land. That injunction was extended by consent on Monday, 26 May 2003. On 28 May 2003 the plaintiff brought the matter back before the court once again, seeking additional orders that the defendants be restrained from doing any work on building the driveway in the road reserve, and on their own land. Bryson J dismissed the application, saying: "The injunction made on 23 May, and continued on 26 May, is founded on the very strong basis of the plaintiff's property right and the right to be free of trespass on the land of which she is the proprietor. The claim made now to control activities and construction on the road reserve does not have that basis and, indeed, in my view, does not have a clear basis in a right at all." 50 His Honour modified the injunction previously granted, so as to permit the defendants to enter the plaintiff's land and do works with the written consent of the plaintiff, but otherwise dismissed the plaintiff's application. He reserved the costs of that day's application. 51 The defendants submit that they ought be entitled to the costs of 28 May 2003, or alternatively the fact that they substantially succeeded on 28 May 2003 ought be taken into account in the overall order for costs which is made. 52 In my view the plaintiff's failure on 28 May 2003 ought be reflected in the overall costs order which is made. That failure goes, in my view, beyond the type of ultimately unproductive effort which is a usual incident of litigation. 53 Taking into account the failure of the plaintiff's separable case on mental trauma, the wasted directions hearing, the fruitless interlocutory application on 28 May 2003, the length of the hearing, and the fact that extensive expert evidence was called, the appropriate order is that the defendants pay 92½ % of the plaintiff's costs of the proceedings. That figure is arrived at on the basis that 95% seems a bit high, and 90% a bit low. Interest on Damages 54 Section 100 Civil Procedure Act 2005 provides, so far as presently relevant: "(1) In proceedings for the recovery of money (including any debt or damages or the value of any goods), the court may include interest in the amount for which judgment is given, the interest to be calculated at such rate as the court thinks fit: (a) on the whole or any part of the money, and (b) for the whole or any part of the period from the time the cause of action arose until the time the judgment takes effect." 55 The present proceedings, being a claim for damages for tort, are "proceedings for the recovery of money" within the meaning of section 100(1). The effect of section 100(1) is to give the court a discretion about (i) whether to award interest at all (ii) if so, whether to award interest on the whole of the damages recovered or only on some part (and if so what part), and (iii) in relation to any component on which interest is awarded, for what period the interest should be awarded. 56 It is within the discretion conferred by section 100(1) for the court to decide that interest should be awarded on one part of the damages for a period of time running from a particular date, and on another part of the damages for a period of time running from a different date. It is also within the discretion to award interest at different rates on different components of the damage. In exercising the discretion, minute particularity of calculation is not necessary. Indeed, given the discretionary nature of the judgment involved, and (as will be seen) the arbitrariness of at least one of the principles that guide the Court in applying the discretion, and of the rate prescribed by the Court's rules, and given that the principal sum on which interest is allowed is often itself at least in part the result of an exercise of judgment rather than purely a matter of calculation, minute particularity of calculation of interest could give a misleading impression. 57 The plaintiff submits that interest should be awarded on the whole of the damages ($17,925), at the rate of 9% per annum which is prescribed by Schedule 5 Uniform Civil Procedure Rules, from the date the cause of action arose, namely 18 October 2002. The defendants submit that the principal component of the damages award was derived from the rectification costs of $33,000 that the experts fixed as at March 2006, and that in those circumstances interest should only be awarded from the end of the hearing (28 March 2006). 58 In support of her application for interest, the plaintiff called evidence to the effect that the Council now looks likely to require work to be done to stabilise her land, along the lines of the Option 1 work. It has said that it will require some engineering certification, of a kind that had not been allowed for in the cost estimate that the experts agreed on for the Option 1 work, and on which the assessment of damages in the principal judgment was based. The plaintiff submits that, when she will be faced with this additional expense, and the damages she has been awarded will not cover the whole cost of doing the Option 1 work, she has all the greater need to be awarded interest. In my view, considerations like these are not ones that can properly be taken into account in exercising the discretion to grant interest. 59 While the award of pre-judgment interest is discretionary, that discretion needs to be exercised bearing in mind the purpose for which courts are empowered to award pre-judgment interest. 60 In MBP (SA) Pty Limited v Gogic (1991) 171 CLR 657 at 663 the Court (Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ) said: "The function of an award of interest is to compensate a plaintiff for the loss or detriment which he or she has suffered by being kept out of his or her money during the relevant period: Batchelor v Burke (1981) 148 CLR 448 at 455, per Gibbs CJ." 61 As Beazley, Giles and Santow JJA explained in Amalgamated Television Services Pty Ltd v Marsden [2002] NSWCA 419 at [1540]: "The purpose of an award of interest, and the guiding principle, is that interest should be awarded where it is necessary in order that the plaintiff be properly compensated. The interest is awarded to compensate the plaintiff for having been kept out of money which was due to the plaintiff at the date the plaintiff was wronged, in order to put the plaintiff in the position in which the plaintiff would have been had the damages for the wrong immediately been paid: see Ruby v Marsh (1975) 132 CLR 642 at 652; Pheeney v Doolan (1977) 1 NSWLR 601 at 604-5; Thompson v Faraonio (1979) 54 ALJR 231 at 233; MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657 at 663; Grincelis v House (2000) 201 CLR 321 at 328." 62 The application of that principle is simple when a plaintiff's damage all accrues at the time of commission of a tort, and is all quantified according to the value of money at the date of the tort. Such a case occurs if an item of property is damaged and the plaintiff immediately pays to have it repaired. In that sort of case, the plaintiff has been out of pocket from the time of paying for the repair, and it is appropriate to allow interest at a commercial rate from the time of commission of the tort. 63 The application of the principle is more complicated if a component of the plaintiff's damage is quantified according to the value of money at the date of the trial. In an action to recover damages for personal injuries at common law (ie ignoring any statutory modifications of the common law), the damages for non-economic loss (ie pain and suffering and loss of amenities of life) are assessed in accordance with the value of money at the date of the trial. Concerning such damages the High Court (Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ) recognised, in MBP (SA) Pty Limited v Gogic (1991) 171 CLR 657 at 663, that: "commercial rates of interest reflect a component to compensate a lender for the decline, by reason of inflation, in the real value of the principal which occurs during the period of the loan…" 64 Their Honours held that therefore, when a component of damages is assessed in accordance with the value of money at the time of the trial, it would be overcompensation to allow pre-judgment interest at commercial rates of interest on that component from the time of accrual of the cause of action. Their Honours considered that, although "somewhat arbitrary", the 4 per cent rate of interest that had been selected in Wheeler v Page (1982) 31 SASR 1 was "more likely to achieve fair and reasonable compensation for plaintiffs than the use of the real rate of interest figure - which may result at times in a plaintiff obtaining no or little interest and at other times an amount of interest greater than the return which could be achieved by real-life investors on a comfortable sum after the incidence of income tax" (at 666). 65 The application of the principle is further complicated if a component of the damages is quantified by reference to losses sustained or damage suffered over time. For example, if an injured plaintiff has lost wages in consequence of a tort, he or she is only kept out of his or her money concerning any particular week's wages from the time that week's wages would have been paid. In relation to such heads of damage that accrue gradually over time, a common practice, if they accrue at a fairly even rate over the time between commission of the tort and trial, is to allow interest at either half the appropriate rate for the full time between commission of the tort and trial, or (a process which produces an identical mathematical result) at the full rate of interest for half the time between commission of the tort and the trial. 66 If there is both the complication that a component of the damages is assessed by reference to the value of money at the date of the trial, and that that component of the damages is the sort of damage that has accrued over the time from commission of the tort to trial, the method of calculation of interest used for that component of the damages is that method endorsed by Beazley, Giles and Santow JJA in Amalgamated Television Services Pty Ltd v Marsden [2002] NSWCA 419 concerning general damages for defamation at [1548]: " … either interest at the 4 per cent MBP(SA) Pty Ltd v Gogic rate for half the period from the date of [the tort] to trial or interest at half the 4 per cent rate for the whole of the period from the date of [the tort] to trial." 67 In the present case, the elements of damage relating to the cost of the building work concerning the wall, the cost of the steps, and the cost of the revegetation, totalling $17,425, have all been assessed as at the date of trial. The damage to which they relate is all damage which was sustained at the time of the commission of the tort. Thus the appropriate principle on which to allow interest of those items is to allow interest at 4% from the time of commission of the tort until the time of trial. The element of general damages for nuisance, of $500, is assessed as at the date of the trial, and relates to a damage which has accrued over the period between commission of the tort and the time of trial. Interest on that $500 should be allowed at 4% for one half of the time between commission of the tort and trial. Interest on the whole of the damages, of $17,925, should be allowed at 9% from the time of the trial until the time of giving of judgment. 68 The calculations to give effect to those principles are: Interest @ 4% on $17,425 for 41 months $2,381.42 Interest @ 4% on $500 for 20 months $33.33 Interest @ 9% on $17,925 for 7 months $941.06 Total $3,355.81 I shall round that amount to the nearest dollar, $3,356. Costs of Interest and Costs Application 69 Each party has had a measure of success, and a measure of failure, concerning its contentions on both interest and costs. The appropriate order is that each party bear its own costs of the application concerning interest and costs. Orders 1. Judgment for the plaintiff for $21,281. 2. First and second defendants to pay 92½ % of the plaintiff's costs, other than the application concerning interest and costs. 3. Each party to bear her or their own costs of the application concerning interest and costs. ********** 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.