New South Wales Supreme Court CITATION : Coates v Harbour Radio Pty Ltd & Anor [2009] NSWSC 1047 HEARING DATE(S) : 28 August 2009, 3 September 2009 JUDGMENT DATE : 1 October 2009 JUDGMENT OF : Fullerton J DECISION : 1. The motion is dismissed. 2. The plaintiff is to pay the defendants' costs. CATCHWORDS : COSTS - interest on costs after judgment Associations Incorporation Act 1981 (Vic) LEGISLATION CITED : Civil Procedure Act 2005 Defamation Act 1974 Supreme Court Act 1970 Coates v Harbour Radio Pty Ltd & Anor [2008] NSWSC 292 Farkas v Northcity Financial Services Pty Ltd [2006] NSWSC 1036 CASES CITED : Grogan v Thiess Contractors Pty Ltd and Anor [2000] NSWSC 1101 Lahoud v Lahoud [2006] NSWSC 126 Lolomanaia v RTA [2002] NSWSC 918 John Dowling Coates (Plaintiff) PARTIES : Harbour Radio Pty Ltd (1st Defendant) Alan Jones (2nd Defendant) FILE NUMBER(S) : SC 2004/20443 COUNSEL : G Lucarelli (Plaintiff) ATS Dawson (Defendants) SOLICITORS : Kennedys (Plaintiff) Banki Haddock Fiora (Defendants) IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION FULLERTON J 1 OCTOBER 2009 2004/20443 JOHN DOWLING COATES v HARBOUR RADIO PTY LIMITED & ANOR JUDGMENT 1 HER HONOUR: By notice of motion filed 29 May 2009 the plaintiff seeks an order that the defendants pay interest on costs pursuant to s 101(4) of the Civil Procedure Act 2005. 2 Section 101(4) provides: "The court may order that interest is to be paid on any amount payable under an order for the payment of costs." The primary proceedings 3 In the primary proceedings the plaintiff successfully sued Mr Jones and Harbour Radio Pty Limited in defamation in respect of a number of imputations which he claimed were conveyed when Mr Jones broadcast his views concerning certain events that occurred during and immediately following the rowing final of the Women's Eights in the 2004 Olympic Games. At the time of the broadcast the plaintiff was the President of the Australian Olympic Committee ("the AOC") and a member of the Executive of the Australian Olympic Committee Inc ("AOC Inc"), an incorporated association under the Associations Incorporation Act 1981 (Vic). 4 In a trial conducted under s 7A of the Defamation Act 1974, a jury found that the following imputations had been conveyed: As to the first broadcast : (a) The plaintiff practised a cover-up in relation to Sally Robbins in his role as a leader of the Olympic movement; (b) The plaintiff's leadership in dealing with the Sally Robbins' incident was sadly lacking; (c) The plaintiff bullied rowers into saying what he wanted them to say after the Sally Robbins' incident. As to the second broadcast : (a) The plaintiff ordered a cover-up over the collapse of Sally Robbins in the Olympic final of the rowing eights; (b) The plaintiff in his role as head of the AOC and as Chef de Mission bullied the crew of Sally Robbins into saying what he wanted them to say at a news conference at Athens after the collapse of Sally Robbins; (c) The plaintiff in his role as head of the AOC was incompetent in the manner in which he handled the Sally Robbins' affair. As to the third broadcast: (a) The plaintiff in his role as an Olympic leader was incompetent in his handling of the Sally Robbins' business. 5 On 4 April 2008 Adams J awarded the plaintiff $360,000 for the damage to his reputation and to compensate him for his injured feelings for what his Honour described as the "bullying imputations, the cover-up imputations and the incompetence imputations". He reserved the question of judgment interest and costs to enable the parties to prepare submissions (Coates v Harbour Radio Pty Ltd & Anor [2008] NSWSC 292). 6 On 12 September 2008 the defendants consented to an order for the payment of judgment interest from the date of the filing of the statement of claim to the date of judgment, and to an order that they pay the plaintiff's costs on a party - party basis up to 30 November 2006 and thereafter on an indemnity basis. No application was made at that time for an order that the defendants pay interest on costs. However, in correspondence dated 12 August 2008, the plaintiff's solicitors advised that if costs could not be agreed an application under s 101(4) would be made in due course. In that correspondence the interest claimed on costs was calculated in accordance with the statutory scale against what were described as "our client's costs of the proceedings". The proceedings for the order under s 101(4) 7 The affidavit filed in support of the notice of motion was sworn by Ms Giles, the solicitor with carriage of the current proceedings. She is also employed by the firm of solicitors who acted for the plaintiff in the primary proceedings from September 2006. The plaintiff was represented by another firm of solicitors at the time the proceedings were commenced. The plaintiff's claim for interest was calculated by Ms Giles by reference to the whole of the costs of the primary proceedings. She also deposed to the fact that the plaintiff had paid all tax invoices within one month of their issue. 8 Prior to the hearing the plaintiff served an affidavit from Mr Mercer, the Director of Corporate Services for the AOC Inc, which addressed the fact that after service of the notice of motion and Ms Giles' supporting affidavit the defendants sought and obtained confirmation from the plaintiff's solicitors that the plaintiff did not personally pay the legal costs associated with the primary proceedings either during the currency of those proceedings or at any time thereafter. Instead the tax invoices, rendered by his solicitors between June 2005 to the date of judgment and thereafter to 30 March 2009, were raised in the name of AOC Inc and paid by that entity. The defendants must have believed that to be the case, even if they did not know it as a fact, given that in June 2008 the plaintiff directed that the judgment sum in the amount of $360,000, and judgment interest in the amount of $28,563.29, be paid directly to the AOC Inc. Mr Mercer deposed to the fact that these payments were made in partial discharge of the plaintiff's obligation under a private arrangement he had with the AOC Inc to repay the costs of the litigation in the event that an award was made in his favour, and to do so as a first priority before taking the benefit of any award. In the result, as at the date of the hearing of the motion, of the $580,654 paid by the AOC Inc to the solicitors retained to act for the plaintiff in the primary proceedings, the plaintiff has repaid $388,563. The plaintiff has not as yet applied for costs to be assessed as provided for in Division 11 of Part 3.2 of the Legal Profession Act 2004, the solicitors retained by the AOC Inc having not settled a bill of costs to enable that assessment to be made. The hearing before me proceeded on the assumed basis that after assessment the AOC Inc is likely to recover the difference between the costs they have paid and what the plaintiff has repaid under the funding arrangement. The plaintiff is expected to receive the residue. 9 Upon service of Mr Mercer's affidavit the plaintiff's application for interest originally calculated by reference to the entire costs of the proceedings was abandoned and an order that the defendants pay interest at the prescribed rate on 65 per cent of the recoverable costs from 1 July 2008 was sought. Mr Lucarelli of counsel invited me to utilise the concept of "recoverable costs" by reference to the total amount of costs assessed as payable by the defendants in accordance with the costs order made on 4 August 2008, and to calculate interest from 1 July as the date by which the plaintiff has partially repaid the AOC Inc the costs they had incurred on his behalf. 10 Mr Lucarelli characterised these payments as being "on account of his costs" thereby grounding the jurisdiction to award interest on costs under s 101(4). He submitted that it is wholly immaterial to the question of jurisdiction that the finance the plaintiff secured to fund the primary proceedings was as a result a private arrangement with the AOC Inc as distinct from a commercial arrangement with a litigation funding entity. In his submission, arrangements of this kind, or the more usual case where solicitors enter into special funding arrangements with impecunious clients, do not deprive the Court of jurisdiction under s 101(4), although the nature of the funding arrangements, and how they operate in the particular case, may bear upon the exercise of the discretion (see Campbell J in Lahoud v Lahoud [2006] NSWSC 126 at [80]). By way of example Mr Lucarelli referred me to Lolomanaia v RTA [2002] NSWSC 918. In that case a litigant made payments to his solicitor on account of costs from an award of damages. Dunford J was satisfied that it was appropriate to award interest calculated by reference to that amount until costs were paid by the defendant since the plaintiff was out of pocket in that amount in the interim. Despite the fact that the award in that case was made under s 95(4) of the Supreme Court Act 1970, the authorities make it clear that the legislative purpose in awarding interest on costs under s 101(4) has not altered with the passage of the Civil Procedure Act namely, that in an appropriate case, to compensate a successful litigant who is out of pocket in circumstances where the other party has had the use of the funds otherwise committed to paying the costs associated with litigation (see Grogan v Thiess Contractors Pty Ltd and Anor [2000] NSWSC 1101 at [12] as cited by Campbell J in Lahoud v Lahoud [2006] NSWSC 126 at [83]). Mr Lucarelli submitted that the general power in s 101(4) to award interest on costs is qualified only by s 101(5) which requires that costs actually be paid before the power under s 101(4) is engaged. Thus his characterisation of the monies paid by the plaintiff to the AOC Inc as being "on account of his costs". The operation of s 101(5) as a necessary precondition to the power to award interest under s 101(4) is exemplified by the approach taken by Bergin J in Farkas v Northcity Financial Services Pty Ltd [2006] NSWSC 1036. In that case her Honour refused to order interest on costs to a plaintiff for the work he did in his capacity as a legal practitioner. Her Honour was of the view that although in doing the work himself the plaintiff saved costs, he did not pay the costs in the sense comprehended by s 101(5). 11 Mr Lucarelli also submitted that there is no disentitling conduct of any kind that would deprive the plaintiff of the award he seeks in the exercise of discretion. The defendants' opposition to the order sought 12 The defendants opposed the making of the order on a number of bases. Mr Dawson's primary submission was that the jurisdiction to order interest under s 101(4) has not been invoked in the particular circumstances of this case. He submitted that the ultimate form of the order the plaintiff seeks, namely an award of interest calculated by reference to monies he directed be paid to the AOC Inc from the judgment sum in partial repayment of the costs they paid on his behalf, is not "…interest … on [an] amount payable under an order for the payment of costs". This is said to follow from the fact that the plaintiff has not personally paid the costs of the primary proceedings to which the order for the payment of costs relates as required by s 101(5), and he is not "out of pocket" in the sense in which that concept is utilised when consideration is given to whether an applicant should be compensated by an award of interest. 13 Mr Dawson conceded that an application for interest on costs may be made in cases where litigation funding has been secured on commercial terms or under a conditional costs agreement. He submitted, however, that the plaintiff's private arrangement with the AOC Inc is not an arrangement of the kind that is comprehended by the section; it was not on commercial terms, or even on contractual terms, but advanced from public funds the AOC Inc was obliged to manage in the public interest. He also emphasised that the funding was provided at no cost to the plaintiff but at considerable cost to the AOC Inc. In addition, as the terms of the funding arrangement make clear, were the plaintiff to have been unsuccessful in the primary proceedings he was under no obligation to repay the monies the AOC Inc paid to his lawyers or to personally meet an adverse costs order. Mr Dawson also relied upon Mr Mercer's evidence in cross-examination in support of the further submission that in funding the current proceedings the AOC Inc has the expectation that any award of interest made in the plaintiff's favour will either be received by them in accordance with the existing funding arrangements or, in the alternative, on the basis that they may ask the plaintiff to direct that it be paid to them until costs are assessed. 14 Viewed in this way, and in the absence of any evidence from the plaintiff as to his actual intentions in bringing the proceedings, Mr Dawson submitted that the order sought is not in reality to compensate the plaintiff for being "out of pocket", despite the fact that the proceedings having been recast and re-characterised by his counsel in that way. He submitted that despite the fact that the application is brought in name of the plaintiff, it should be seen for what it is, namely an application by the AOC Inc for interest on the funds it expended to pay the plaintiff's costs and to compensate it for the fact that the primary proceedings were funded in part from its operating cash flow, in part from monies held on deposit (with a commensurate loss of interest) and in part from bank borrowings where interest was incurred. 15 Mr Dawson also submitted that even were I persuaded that despite the nature of the funding arrangements between the plaintiff and the AOC Inc the jurisdiction under s 101(4) is enlivened, I should refuse to make the order in the exercise of discretion. He submitted that the nature of the funding arrangements, and the extent of the benefit the plaintiff has already enjoyed at the public expense and at no cost to himself, should be a disentitling factor. He also submitted that the proceedings raise serious questions raised about the propriety of the plaintiff's conduct at the meeting of the Executive of the AOC where the funding arrangements were approved which, left unexplained by him, also weighs against the discretion being exercised in his favour. 16 These considerations aside, Mr Dawson also pointed to the fact that after the balance of the costs paid by the AOC Inc on the plaintiff's behalf have been repaid (presumably from the costs to be paid by the defendants after assessment, as distinct from the plaintiff's own resources) the plaintiff is entitled to the residue. In this way, so it was submitted, to the extent that the plaintiff is out of pocket at this time, it is necessarily only a temporary detriment and not one that should be compensated for by an order against the defendants. 17 Mr Dawson also relied on the plaintiff's delay in seeking an assessment of costs as a disentitling factor. Since I have decided the application should be refused on other grounds I do not propose to refer to the evidence going to delay, or perceived delay, or the submissions advanced by the parties going to that issue. 18 In order to consider the competing submissions going to jurisdiction and the other matters that bear upon the exercise discretion under s 101(4), it is necessary to set out, albeit in a summary way, the nature of the funding arrangements between the plaintiff and the AOC Inc and the extent to which the plaintiff participated in the decision that secured the funding as revealed by the evidence. The funding arrangements 19 I am satisfied that the plaintiff's costs were paid in accordance with an existing publicly disclosed policy whereby members of the Executive of the AOC are indemnified against legal fees and expenses where, with the approval of the Executive, they institute proceedings arising out of loss or damage suffered as a direct result of their membership of the Executive. On 31 March 2005 the Executive of the AOC passed a resolution in the following terms: "The Executive confirmed that the President is entitled to defend his reputation as a result of the positions he holds at the AOC and: IT WAS RESOLVED: (i) to ratify the payment of legal fees to date and going forward in this matter by the AOC; (ii) to confirm the policy whereby Members of the Executive are indemnified against legal fees and expenses where, with the approval of the Executive, they institute legal proceedings arising out of loss and damage suffered as a direct consequence of their membership of the Executive. The indemnification is on the basis that the Committee is reimbursed such legal fees and expenses as a first priority out of any award or settlement ; and (iii) in response to a request from the AOC Auditor to confirm that in the opinion of the Executive no material contingent liability is likely to arise out of the defamation action during the course of the next twelve months." (emphasis added) 20 Before the resolution was put to the vote, the minutes record that the plaintiff outlined the nature of the proceedings that had been commenced by him and the current status of those proceedings. The Chairman of the Finance Commission reported that in accordance with the funding policy published in the notes to the 2004 Financial Statements and Corporate Governance Statement he had already approved the payment of costs and disbursements associated with the commencement of the proceedings. 21 The minutes of the meeting do not record that the plaintiff either absented himself when the resolution was put to the vote or that he abstained from voting as he was obliged to do under the AOC's Code of Conduct given his direct pecuniary interest in the outcome of the resolution. Mr Mercer's evidence was to the effect that while he was unable to confirm from memory whether the plaintiff in fact voted in favour of the resolution, his usual practice was to note any abstentions and none were noted by him. Although Mr Dawson did not invite me to find that the plaintiff acted improperly in relation to securing the funding agreement, or that the policy under which the funds were advanced was ultra vires the Constitution of the AOC, he submitted that in the absence of evidence from the plaintiff clarifying or addressing the questions left unanswered in the evidence, I should find against him in the exercise of discretion. 22 In the course of the hearing Mr Dawson also alluded to a submission that would be advanced on the defendants' behalf to the effect that in the filing of the motion and the supporting affidavit the plaintiff had deliberately sought to conceal the fact that he did not personally pay the costs of the primary proceedings. What was ultimately put by way of submissions was that the evidence simply favours a finding that the plaintiff is not, in reality, seeking an award of interest to compensate him for being out of pocket, as distinct from the application being mounted to enable the AOC Inc to recover its holding costs, and that he should not have brought the application in those circumstances. 23 Having regard to all the evidence adduced on the motion, particularly Mr Mercer's evidence concerning the way in which he understood an award of interest on costs in the plaintiff's favour was likely to be treated by the plaintiff and/or the Executive as referred to in [14] above, the plaintiff has failed to persuade me that the application has been brought to compensate him for what he repaid the AOC Inc. This is despite the fact that his counsel has sought to characterise the payment as being "on account of costs", and despite the fact that by a strict accounting that may be the case. I do not consider that in those circumstances the jurisdiction under s 101(4) has been engaged. I am of that view not because the governing operation of s 101(5) requiring that costs be paid by the plaintiff as a prerequisite has not been satisfied (although I have doubts as to whether that is an appropriate characterisation) but because I am not persuaded that the order sought is to compensate the plaintiff. 24 Even were I wrong in that view I would refuse, in any event, to exercise the discretion in the plaintiff's favour. I do not regard the plaintiff's conduct in seeking the funding, or his apparent participation in securing it, as relevantly disentitling. In particular, I make no finding at all as to whether the plaintiff conducted himself in accordance with the AOC's Code of Conduct at the meeting of the Executive where the resolution was passed. In addition, I accept that the funding arrangement was pursuant to an existing policy and that it was the subject of a formally constituted resolution of the Executive who apparently saw the plaintiff's private interests in pursuing the defendants for damages as coincident with its interests in protecting the integrity of its President. I am, however, left unsettled by the way the application has been mounted and the state of the evidence led in support of it. It was of course entirely a matter for the plaintiff and his advisors as to whether he gave evidence as to his intentions in bringing the application. In the circumstances where he has elected not to do so, he has failed to persuade me that the discretion should be exercised in his favour. 25 Accordingly, I make the following orders: 1. The motion is dismissed. 2. The plaintiff is to pay the defendants' 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.