New South Wales Supreme Court CITATION : Simmons v Colly Cotton Marketing Pty Limited [2007] NSWSC 1092 HEARING DATE(S) : 28 September 2007 JUDGMENT DATE : 5 October 2007 JURISDICTION : Equity Division Commercial List JUDGMENT OF : Bergin J DECISION : Applicants entitled to order for interest on judgment debt and interest on costs. Respondents' Motion dismissed. CATCHWORDS : [JUDGMENTS] - Date when judgment "takes effect" for the purposes of determining the date from which the 28 day moratorium commences when calculating interest on a judgment debt under s 101(3) of the Civil Procedure Act 2005 where Court of Appeal substitutes the amount of damages - [INTEREST] - Whether interest to be awarded on judgment debt - [INTEREST ON COSTS] Whether first instance Court can make order for interest on costs awarded by Court of Appeal - Whether interest should be awarded LEGISLATION CITED : Civil Procedure Act 2005 Common Law Practice Act 1867 (Qld) Australian Development Corporation Pty Limited v White Constructions (ACT) Pty Limited (in liquidation) [2002] NSWSC 280 Colly Cotton Marketing Pty Limited v Simmons [2006] NSWCA 134 Davies v Kur-ring-gai Municipal Council [2003] NSWSC 1010 Gould v Vaggelas (1985) 157 CLR 215 CASES CITED : Grogan v Thiess Contractors Pty Limited [2000] NSWSC 1101 Kardos v Scarbutt (No 2) [2006] NSWCA 206 Lahoud v Lahoud [2006] NSWSC 126 Puntoriero v Water Administration Ministerial Corporation [2002] NSWSC 217 Rabobank Australia Limited v Colly Cotton Marketing Pty Limited [2005] NSWSC 727 PARTIES : John Simmons and ACN 073 056 461 - applicants Colly Cotton Marketing Pty Ltd and Colly Farms Risk Management Pty Limited - respondents FILE NUMBER(S) : SC 50166/2003 COUNSEL : AJ Greinke - applicants DR Pritchard - respondents SOLICITORS : Brown Wright Stein - applicants Kemp Strang - respondents - 1 - IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST BERGIN J 5 OCTOBER 2007 50166/03 JOHN SIMMONS & ANOR v COLLY COTTON MARKETING PTY LIMITED & ANOR JUDGMENT 1 The applicants, John Simmons and the company ACN 073 056 461 Pty Limited, by Notice of Motion seek against the respondents, Colly Cotton Marketing Pty Limited and Colly Farms Risk Management Pty Limited (Colly), a declaration and orders in respect of monies allegedly remaining outstanding on the judgment debt and also orders awarding interest on the costs awarded to the applicants. The respondents have also filed a Notice of Motion seeking an order that if interest is payable on the judgment between 16 June 2006 and 13 July 2006 that no order should be made requiring it to pay interest during that period. 2 The applicants succeeded on a cross-claim against Colly and judgment was entered for $1,948,925. Final orders were made on 2 August 2005 and entered on 18 August 2005: Rabobank Australia Limited v Colly Cotton Marketing Pty Limited [2005] NSWSC 727 (the first instance proceedings). Colly appealed and the applicants cross-appealed. Colly's appeal was dismissed and the applicants' cross-appeal was successful in that the damages were increased by the Court of Appeal to $2,022,861: Colly Cotton Marketing Limited v Simmons [2006] NSWCA 134 (the appeal proceedings). 3 There has been no objection raised by either party to the Court dealing with these applications by way of Notices of Motion in the first instance proceedings. The Notices of Motion were heard on 28 September 2007 when Dr AJ Greinke appeared for the applicants and Mr DR Pritchard appeared for the respondents. The Act 4 Both the interest on judgment and interest on costs arguments require the interpretation of s 101 of the Civil Procedure Act 2005 (the Act). Section 101 provides as follows: 101 Interest after judgment (1) Unless the Court orders otherwise, interest is payable on so much of the amount of a judgment (exclusive of any order for costs) as is from time to time unpaid. (2) Interest under subsection (1) is to be calculated, at the prescribed rate or at such other rate as the court may order, as from: (a) the date on which the judgment takes effect, or (b) such later date as the court may order. (3) Despite subsection (1), interest is not payable on the amount of a judgment if the amount is paid in full within 28 days after the date on which the judgment takes effect, unless the court orders to the contrary. (4) The court may order that interest is to be paid on any amount payable under an order for the payment of costs. (5) Interest under subsection (4) is to be calculated, at the prescribed rate or at such other rate as the court may order, as from: (a) the date or dates on which the costs concerned were paid, or (b) such later date as the court may order. (6) This section does not authorise the giving of interest on any interest payable under this section. (7) In this section, a reference to the "prescribed rate" of interest is a reference to the rate of interest prescribed by the uniform rules for the purposes of this section. 5 The parties agreed that the judgment debt outstanding to 16 June 2006, including interest, was $1,663,235.38. Colly paid that amount to Mr Simmons on 13 July 2006. Colly claims it is entitled to withhold payment of interest for the further 28 day period on the basis that it is entitled to the benefit of the "moratorium" provided by s 101(3) of the Act. 6 Section 101(3) of the Act gives the judgment debtor the opportunity to pay the judgment debt without interest if it is paid within 28 days after the judgment "takes effect". In Gould v Vaggelas (1985) 157 CLR 215 an appeal to the full Court of the Supreme Court of Queensland from the first instance judgment was allowed reducing the judgment awarded from $1,427,500 to $700,000 (including $50,000 "as damages by way of interest"). Section 73 of the Common Law Practice Act 1867 (Qld) provided that "interest" was payable at relevant rates "from the date of the judgment or order on so much of the money as is from time to time unpaid". The High Court (Gibbs CJ, Wilson, Brennan and Dawson JJ) said of the Court of Appeal order at 274: The order plainly varies the judgment given by Connolly J. by substituting a different sum for the figure set out therein. The "date of judgment" remains 18 September 1981 and it is from this date that the award of interest at the rate of 12 percent per annum is to be calculated. That this must be so is demonstrated by the problem that would arise if the order of the Full Court were taken to set a new date of judgment, arguably leaving the original judgment of Connolly J. to attract the statutory interest in accordance with s. 73 of the Act until varied at the later date. 7 In the present case Colly paid the judgment debt within 28 days of the Court of Appeal judgment and paid interest on the judgment debt from the date of the judgment in the first instance proceedings to the date of the Court of Appeal judgment. It was submitted by the respondents that the 28 day moratorium is to permit a judgment debtor an opportunity to raise funds to satisfy the judgment debt in an orderly manner, potentially involving the sale of assets or borrowing of funds, without the over-burden and/or uncertainty created by ever increasing interest. 8 The respondent obtained a stay of enforcement of the first instance judgment within the 28 day "moratorium" and the Court of Appeal made an order substituting the judgment debt in the first instance proceedings with a judgment debt in a different amount. In Kardos v Scarbutt (No 2) [2006] NSWCA 206, Brereton J, with whom Basten JA and Hunt AJA agreed, said at [56]: When the Court of Appeal substitutes an order or judgment for a different amount to that of the court below, the substituted judgment is not a judgment of the Court of Appeal but is a judgment of the Court below, as if it had been given on the date when that court gave the judgment appealed from. 9 In this case the order of the Court of Appeal included interest in respect of the period from the date of the first instance judgment to the date of the order of the Court of Appeal. The respondent submitted that when the Court of Appeal substituted the first instance judgment with the new figure, the date the Court of Appeal made the order was "the date on which the judgment takes effect" for the purposes of s 101(3) of the Act. It was further submitted that in those circumstances, Colly was entitled to the benefit of the 28 day moratorium provided it paid, as it did, the judgment debt within 28 days of the Court of Appeal order. 10 The date the judgment "takes effect" is a date on which the orders are entered. In this case that was 18 August 2005. Colly could have obtained the benefit of not having to pay interest if it had paid the judgment debt within 28 days of that date. It chose not to do so. The stay on the enforcement of the judgment did not change the date the judgment took effect, it simply prevented the applicant from enforcing it. Dr Greinke submitted that Colly chose not to pay the judgment debt within the 28 day period and it is now not able to avail itself of it. If it were thought that the 28 day period was interrupted by the stay after 7 days then the 21 days remaining of that period after the Court of Appeal gave its judgment would mean that Colly had 21 days within which to pay the judgment debt without incurring interest. It did not do so. 11 I am satisfied that the applicant is entitled to interest on the judgment for the additional 28 day period after the Court of Appeal made its order and up to the time the judgment debt was paid. Interest on costs 12 Mr Pritchard submitted that the Court does not have any power to make an order for interest on costs: (1) because the first instance order for costs was entered in August 2005 and the Court is now functus officio; and (2) any interest on the Court of Appeal's costs order is a matter for the Court of Appeal and the Court at first instance has no power to order interest on the costs ordered by the Court of Appeal. The Court of Appeal's orders included an order granting liberty to the parties to apply to the Commercial List of the Supreme Court in respect of orders in relation to the assessment of costs and various other orders relating to bank guarantees and a stay. The Court of Appeal cost order was as follows: 4. The appellants pay the respondents 90 per cent of their costs of and incidental to the appeal and cross-appeal, to be assessed on the ordinary basis. 13 The applicants submitted that the Court has power to award interest on costs pursuant to its inherent powers to ensure justice is done between the parties and that, in any event, s 101(4) of the Act contemplates that an order for interest may be made after entry of orders for costs. I agree with that submission. Dr Greinke also submitted that the first instance Court is able to make an award of interest on the costs awarded by the Court of Appeal. It was submitted that the order made by the Court of Appeal granting liberty to the parties to approach the Commercial List contemplated that the Court of first instance could deal with matters relating to costs. Although the Court of Appeal's order granting liberty did not expressly refer to the order for costs in paragraph 4, I am satisfied from the terms of that order and the context in which it appeared that the Court of Appeal intended that any matters relating to costs or including interest on costs were to be dealt with by a judge of the Commercial List. In those circumstances it is not necessary to decide the other point raised by Mr Pritchard that without such authorisation by the Court of Appeal a first instance judge does not have power to deal with and decide an application for interest on costs awarded by the Court of Appeal. 14 The next question is whether I should exercise my discretion in favour of the applicants to award interest on the costs. There is no requirement on the applicants to show a "special" case: Australian Development Corporation Pty Limited v White Constructions (ACT) Pty Limited (in liquidation) [2002] NSWSC 280 at [23]-[28]: Grogan v Thiess Contractors Pty Limited [2000] NSWSC 1101 at [10]; Puntoriero v Water Administration Ministerial Corporation [2002] NSWSC 217 at [10]. Similarly there is no requirement on the applicants to demonstrate that the circumstances of the case are "out of the ordinary": Lahoud v Lahoud [2006] NSWSC 126 at [82]; Davies v Kur-ring-gai Municipal Council [2003] NSWSC 1010 at [7]. 15 The purpose of an award of interest on costs is to compensate a successful litigant for having been out of pocket for its legal costs that would otherwise have earned interest or been used in a commercial enterprise: see the cases as summarised by Einstein J in Australian Development Corporation Pty Limited v White Constructions (ACT) Pty Limited (in liquidation). 16 Mr Pritchard submitted that there had been inordinate delay in making the application for an award of interest on costs and that there had been no proper explanation in respect of that inordinate delay. In those circumstances it was submitted that the Court would not exercise its discretion to award interest. There was also reference to the terms of the applicants' retainer and a suggestion that this case may have been litigated "on spec". The fact that a successful litigant may have been assisted by lawyers who did not require payment of costs until a particular time later than usual does not in my view disentitle that litigant from an award of interest on costs. It will depend upon when the litigant paid the costs and for how long the costs have been outstanding and whether that money could have been otherwise utilised, particularly in a commercial enterprise. Mr Simmons is a farmer and the details of his farming arrangements are found in the judgment at first instance. It is obvious that his farming business is heavily geared and is subject to mortgages and the like. The money that he paid by way of costs could have been used in the operation of his farming enterprise. 17 This litigation was hard fought and even the costs assessment seems to be hard fought. On 6 July 2006 the applicants wrote to Colly proposing that the issue of costs be disposed of by referral to a mutually agreeable costs assessor. No response was received to that letter. The applicants therefore had to engage in formal and more protracted costs assessment. On 23 November 2006 the applicants served a bill of costs on Colly, claiming $922,881.03. It was not until 21 February 2007 that Colly served its notice of objection conceding $498,898.42 but disputing the balance. The conceded amount has still not been paid. The bill of costs was filed for assessment on 29 June 2007 and that assessment is pending. The evidence establishes that Mr Simmons has made payment through the course of the proceedings to the solicitor and to town agents, to counsel and to expert witnesses, either directly or to the trust account of the solicitors. Monies paid into that trust account did not accrue interest. It is apparent from the number of items in the bill of costs and the process described above that the so-called protracted delay is explicable on the basis of the parties pursuing the alternative of having the costs assessed. I am not satisfied that the applicants' conduct disentitles them from an award of interest on costs. I am satisfied that interest should be awarded on the costs and to avoid unnecessary complexity in the calculation of interest, the formula used by Campbell J in Lahoud v Lahoud will be adopted. 18 The parties are to bring in Short Minutes of Order reflecting these findings. The only amount payable on the judgment debt is an amount of interest between 16 June 2006 and 13 July 2006. The parties are to agree on that calculation. The order for interest that is to be utilised is that proposed by the applicants in their Short Minutes of Order. In all the circumstances I am also satisfied that the respondents should pay the applicants' costs of an incidental of the Motion. The respondents' Motion is dismissed with no order as to costs. 19 The matter is listed on 12 October 2007 for the filing of Short Minutes of Order, however if the parties are able to agree on the terms of those Short Minutes before that date I will make the final orders in Chambers and vacate that listing ********** 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.