Supreme Court New South Wales Medium Neutral Citation: Mark Lawler Architects Pty Ltd v Rod Seymour Pty Ltd (No. 2) [2014] NSWSC 1418 Hearing dates: 2 September 2014 Decision date: 02 September 2014 Before: White J Decision: Refer to paras [6] and [10] of judgment. Catchwords: COSTS - departure from usual order in cases concerning taking of accounts of partnership following dissolution - application for costs on indemnity basis - offer of compromise - offer made by plaintiff - refusal of offer by defendant - entitlement for costs to be assessed on indemnity basis - Uniform Civil Procedure r 42(2) - order for costs on ordinary basis up to date of offer of compromise and thereafter on indemnity basis INTEREST - pre-judgment interest - whether pre-judgment interest payable at rate specified in Civil Procedure Act 2005 (NSW) s 100 or rate specified in Partnership Act 1892 (NSW) s 24 - held pre-judgment interest payable at rate specified in Civil Procedure Act 2005 (NSW) Legislation Cited: Civil Procedure Act 2005 (NSW) Partnership Act 1892 (NSW) Cases Cited: Mark Lawler Architects Pty Ltd v Rod Seymour Pty Ltd [2013] NSWSC 1697 Category: Costs Parties: Mark Lawler Architects Pty Ltd (Plaintiff) Rod Seymour Pty Ltd (Defendant) Representation: Counsel: G Carolan (Plaintiff) M Maconachie (Defendant) Solicitors: Bilbie Dan Solicitors & Attorneys (Plaintiff) File Number(s): 2012/97946 Judgment 1HIS HONOUR: There are two remaining questions in this matter. Pursuant to the orders I made following my judgment of 11 November 2013, the accountant, Mr Katehos, has provided a report as to the amount that is to be payable by the defendant to the plaintiff on the taking of the partnership accounts consistently with my reasons for judgment. It is agreed between the parties that the amount that the defendant is required to pay the plaintiff following Mr Katehos' report is the sum of $101,801.47. The plaintiff seeks interest on that sum at the rate prescribed for the purposes of s 100 of the Civil Procedure Act 2005 (NSW) from the date of dissolution of the partnership, that is, 30 June 2009 to today. The defendant does not dispute that interest is payable but contends that interest should only be payable from 22 September 2010. That was the date on which the accountant for the partnership, Mr Lambourne, provided finalised accounts for the year ended 30 June 2009 for the partners. 2An issue also arises as to whether the rate at which interest should be payable should be that prescribed for the purposes of s 100 or whether interest should be payable at the rate of seven per cent per annum by analogy to the rate of interest which, in the absence of contrary agreement, is payable on advances by a partner to the partnership beyond the amount of capital that the partner has agreed to subscribe (Partnership Act 1892 (NSW), s 24(3)). 3I concluded in my judgment of 11 November 2013 (Mark Lawler Architects Pty Ltd v Rod Seymour Pty Ltd [2013] NSWSC 1697) that the effect of the agreement made between the partners on 18 August 2007 was that the defendant was required to make contributions to partnership billings on the basis for which the plaintiff had contended. Such contributions should have been made after the end of each relevant financial year. It is true that the amount that the defendant would be required to contribute pursuant to the agreement could only be exactly determined after the billings for each financial year had been established. It does not appear from the evidence of the accountant that the accounts for the earlier financial years had not been finalised until September 2010, and the evidence appears to be to the contrary. It appears that by at least 10 August 2009, the accountant had prepared a statement of both partners' billings for each of the relevant financial years. The plaintiff does not seek interest prior to 30 June 2009. In my view, it is at least entitled to be put into the position as if the defendant had complied with the agreement, as I found it to be, by the time of the partnership dissolution. If there is some short period of a month or two after 30 June 2009 in which it might be unfair to charge interest because the amount of contribution required for the 30 June 2009 financial year would not then have been known until the accounts were finalised, that is more than offset by the plaintiff's being out-of-pocket in respect of the defendant's contributions for the earlier two financial years. I think that the just outcome is for interest to be payable as sought from the time of dissolution of the partnership. 4For the reasons which were debated in submissions, I am not satisfied that s 24 of the Partnership Act, which provides for the rate of interest in the absence of contrary agreement on advances to the partnership beyond the amount of capital which a partner has agreed to subscribe, provides the appropriate analogy. This is not a case of a partner's making advances for the purpose of the partnership business. Rather, it is a case involving one partner having to account for money which is, in substance, payable to his other partner. 5Counsel for the defendant accepted, in my view correctly, that the present proceedings are proceedings for the recovery of money within the meaning of s 100. The summons seeks an order that the defendant pay to the plaintiff such amount as may be found to be due to it after the taking of accounts and enquiries. Having regard to the nature of the issues, I think that the appropriate rate of interest is the rate prescribed for the purposes of s 100. The amount of interest up to today from 1 July 2009 calculated at those rates is $41,886.81. 6For these reasons, I give judgment for the plaintiff against the defendant in the sum of $143,687.55 inclusive of pre-judgment interest pursuant to s 100 of the Civil Procedure Act. 7On the question of costs, the plaintiff seeks an order that the defendant pay his costs on the ordinary basis up to and including 24 March 2014, and thereafter on the indemnity basis. On 24 March 2014 the plaintiff's solicitors served an offer of compromise which was expressed to cover all sums payable to the plaintiff once adjustments were made to the partnership accounts, (applying the methodology set out in my judgment) and after a proper accounting treatment had been applied to the debts of the partnership. The offer of compromise was that there be judgment for the plaintiff for the sum of $100,000. The judgment to which the plaintiff is entitled, even without any amount of pre-judgment interest, exceeded the offer of compromise. It is not, I think, a sufficient reason to depart from the principle in Uniform Civil Procedure Rules, r 42(2) that judgment, on one view, was only for a small excess of the amount of the offer. In fact I think the excess was not small. The offer if accepted would have included a compromise of the claim for pre-judgment interest. 8Independently of that consideration, there was a genuine element of compromise in the offer. The plaintiff made contentions to Mr Katehos that there should be further adjustments to the partnership account than were in fact allowed. If the whole of the plaintiff's claim had succeeded, the result would have been that the plaintiff was entitled to a larger sum than has been found. 9These are proceedings in relation to the taking of accounts of a partnership following its dissolution. The usual order in such cases is that the costs of both parties would be either agreed or assessed and would be treated as a liability of the partnership to be borne by the partners according to their respective shares. That is not an order sought by either party. Having regard to the nature of the issues litigated on 11 November 2013, I am satisfied that it is appropriate to depart from the usual orders made for costs in a partnership dispute. In my view, the appropriate order is that sought by the plaintiff. 10I order that the defendant pay the plaintiff's costs of the proceedings on the ordinary basis up to and including 24 March 2014 and thereafter on the indemnity basis. I order that the further amended summons be otherwise dismissed. 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. Decision last updated: 16 October 2014