Berry v CCL Secure Pty Ltd (No 2)

Case [2018] FCA 1351

FEDERAL COURT OF AUSTRALIA

Berry v CCL Secure Pty Ltd (No 2)

[2018] FCA 1351

File number: NSD 2597 of 2013
Judge: RARES J
Date of judgment: 17 August 2018
Legislation: Federal Court of Australia Act 1976 (Cth) s 51A
Cases cited:

Berry v CCL Secure Pty Limited [2017] FCA 1546

Gnych v Polish Club Ltd (2015) 255 CLR 414

Haines v Bendall (1991) 172 CLR 60

Heydon v NRMA Limited (No 2) (2001) 53 NSWLR 600

Kalls Enterprises Pty Ltd (in liq) v Baloglow (No 3) [2007] NSWCA 298

Date of hearing: 22 June 2018 and 17 August 2018
Registry:  New South Wales
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: Commercial Contracts, Banking, Finance and Insurance
Category: No catchwords
Number of paragraphs:  28
Counsel for the Applicants: Dr CS Ward SC with Mr PF Santucci (22 June 2018)
Dr CS Ward SC (17 August 2018)
Solicitor for the Applicants: Marque Lawyers
Counsel for the Respondent: Mr N O’Bryan SC with Mr C Juebner (22 June 2018)
Mr C Juebner (17 August 2018)
Solicitor for the Respondent: Aitken Partners Pty Ltd (22 June 2018)
Hope & Co Lawyers (17 August 2018)

ORDERS

NSD 2597 of 2013
BETWEEN:

BENOY BERRY

First Applicant

GLOBAL SECURE CURRENCY LIMITED

Second Applicant
AND:

INNOVIA SECURITY PTY LTD (FORMERLY KNOWN AS SECURENCY PTY LTD)

Respondent

JUDGE:

RARES J

DATE OF ORDER:

17 AUGUST 2018

THE COURT DECLARES THAT:

1.The letter dated 24 February 2008 to the respondent signed by the first applicant on behalf of the applicants is of no force or effect by reason of it having been procured by the respondent’s fraud.

THE COURT ORDERS THAT:

2.The respondent pay the applicants AUD 49,995,119.14 together with AUD14,814,108.00 interest thereon pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth).

3.The respondent pay the applicants’ costs of the proceeding.

4.The interlocutory application of the respondent filed 16 August 2018 be adjourned to 20 August 2018 in Sydney at 2.15pm.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT
(REVISED FROM THE TRANSCRIPT)

RARES J:

  1. I delivered reasons dealing with the substantive issues in these proceedings on 19 December 2017 in which I found for the applicants, Dr Benoy Berry and Global Secure Currency Limited (GSC), in their claim that the respondent, which at the time of the events in issue was called Securency International Pty Limited, had acted fraudulently in procuring on 24 February 2008 Dr Berry’s signature, on behalf of himself and GSC, to a letter of termination of their agency agreement with Securency: Berry v CCL Secure Pty Limited [2017] FCA 1546. In those circumstances, I found that the agency agreement, that entitled Dr Berry and GSC to a 15% commission on the net value of sales by Securency to the principal government concerned, Nigeria, remained on foot.

  2. Subsequently, on 13 March 2018, Securency gave Dr Berry and GSC written notice under


    cl 2.6(a)…

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Details
AGLC
Berry v CCL Secure Pty Ltd (No 2) [2018] FCA 1351
Case
[2018] FCA 1351
Decision Date

CaseChat Overview and Summary

In Berry v CCL Secure Pty Ltd (No 2), the dispute centred on the appropriate amount of pre-judgment interest that should be awarded to Dr Berry and GSC in relation to a judgment sum of AUD49,995,119.14. The differing calculations of interest based on various rates presented three potential outcomes: AUD14,814,108.00 if calculated at the UK rate with a 4% uplift, AUD9,698,486 if no interest is payable for the four-year period to December 2013, and AUD12,681,217 if calculated at the private loan rate without the uplift. Securency contended that the delay in Dr Berry and GSC commencing the proceedings was unreasonable, arguing that this delay exposed it to significant interest liability over the four-year period. Securency further argued that it would be unjust to require it to pay interest at any rate above zero for this period.

The central legal issue for the court was whether the delay by Dr Berry and GSC in bringing the proceedings was unreasonable and, if so, whether this justified reducing or eliminating the award of pre-judgment interest. The court considered the principle that the award of pre-judgment interest should compensate the plaintiff for being deprived of their money and that the delay by the plaintiff may impose an unfair burden on the defendant if the interest rates used exceed commercial rates. The court also examined whether Securency had demonstrated that the delay was unreasonable and if so, whether this warranted a reduction in the interest payable. The court concluded that Securency had not demonstrated that the delay was unreasonable, particularly given the context of ongoing investigations that potentially placed Dr Berry at risk. The court held that the fundamental principle of compensating the plaintiff for the loss of use of their money should be upheld, and therefore, the award of pre-judgment interest should not be reduced.

The court ruled that the appropriate pre-judgment interest should be calculated at the UK rate plus a 4% uplift, resulting in a total judgment sum of AUD64,813,227.14. The court found no justification for reducing the interest based on the delay in commencing the proceedings, as it was not demonstrated to be unreasonable. Consequently, the court ordered that CCL Secure Pty Ltd pay the total amount including the pre-judgment interest to Dr Berry and GSC and also ordered that CCL Secure pay the costs of the proceeding.

Orders

Orders of the court

2. The respondent pay the applicants AUD 49,995,119.14 together with AUD14,814,108.00 interest thereon pursuant to s 51A of the Federal Court of Australia Act 1976 (Cth).

3. The respondent pay the applicants’ costs of the proceeding.

4. The interlocutory application of the respondent filed 16 August 2018 be adjourned to 20 August 2018 in Sydney at 2.15pm.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

The difference in the three outcomes is agreed to be as follows. If interest is payable at the UK rate, with the same uplift of 4% above the Reserve Bank’s cash rate, that is used ordinarily, for calculation of pre-judgment and post-judgment interest pursuant to the Court’s Interest on Judgments Practice Note (GPN-INT), the amount of interest up to today is AUD14,814,108. If, as is Securency’s preferred option, no interest at all should be payable for the four year period to December 2013, the amount of total interest payable on the judgment sum will be AUD9,698,486. And, if the alternative private loan rate is used, without an uplift of 4%, the amount of interest will be AUD12,681,217.Background On 22 June 2018, I made orders that enabled Dr Berry, had he wished, to file affidavit evidence to explain any matters on which he proposed to rely for the purposes of making any award of interest. He did not do so. However, in submissions, his counsel relied on the fact of the Serious Fraud Office’s investigation as being relevant to the reasonableness of Dr Berry and GSC not commencing or prosecuting civil proceedings for the recovery of money against Securency over the period of the delay. As I recorded in Berry [2017] FCA 1546 at [287]-[289], Dr Berry first made a claim on Securency in his letter of demand dated 29 September 2009, to which he received no reply. He followed that up with a letter dated 19 April 2010 in which he claimed that he and GSC were owed over, USD15million, to which he again received no reply. There is no evidence of precisely when the Serious Fraud Office’s raid occurred or of Dr Berry’s reasons for his and GSC’s inaction before it. However, I infer that the delay in commencing proceedings in the period after 19 April 2010, following Dr Berry’s last unanswered letter to Securency, was not unreasonable given the continuing investigations in which Dr Berry was potentially at risk of prosecution or further investigation, regardless of whether or not he had done anything to justify any prosecution or investigation (and nothing appeared on the evidence before me to suggest that he had). By May 2009, because of Securency’s conduct and that of some of its agents, regulators around the world, including the Serious Fraud Office in the United Kingdom, began investigating and then prosecuting persons who had, or were suspected of having, paid or conspired to pay bribes to government officials, including in Nigeria, to obtain contracts for Securency. As I explained, the Serious Fraud Office investigated Dr Berry. But, ultimately, it took no proceedings against him, and in administrative law proceedings, the High Court of Justice of England and Wales ordered it to pay him compensation: Berry [2017] FCA 1546 at [17] and [275]. Moreover, Peter Chapman whom I found had fraudulently procured, on Securency’s behalf, Dr Berry’s signature to the letter of 24 February 2008, was found guilty by a jury on 11 May 2016 on four counts of bribing, in early 2009, the managing director of the Nigerian mint, and had recently finished serving his 30 months sentence when he gave evidence in London before me: Berry [2017] FCA 1546 at [25].Securency’s submissions

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

I am not satisfied that Securency has demonstrated any unreasonableness in Dr Berry and GSC’s delay in commencing this proceeding, unfortunate as it was both for Securency and for the overall administration of justice: Kalls [2007] NSWCA 298 at [12]. Nor am I satisfied that a diminution in the UK rate uplifted by 4% on the Australian dollar principal judgment sum would compensate Dr Berry and GSC properly in accordance with principle at a fair level of compensation: Haines 172 CLR at 66-67.Conclusion For these reasons, in my opinion, the appropriate order is that I should enter judgment in favour of Dr Berry and GSC in the principal sum together with pre-judgment interest in the further sum calculated at the UK rate plus 4%. That will produce a total judgment, including pre-judgment interest, of AUD 64,813,227.14.

Ratio Decidendi

Legal Principle Established

Securency argued that it was unreasonable for Dr Berry and GSC to have delayed in bringing the proceedings after he appreciated, as his letter of 29 September 2009 demonstrated, that Securency had, in effect, sidelined him from, or acting, as its recognised agent in Nigeria and it had not paid him or GSC any commission since about the end of 2007. It argued that, moreover, Dr Berry and GSC had delayed 4 years before commencing the proceeding, only shortly before the six year limitation period (other than for fraud) would have expired in February 2014, before bringing claims under the agency agreement to set aside the effect of the letter of 24 February 2008 and to enforce their rights. Securency submitted that this delay had exposed it to liability to pay interest potentially at a significant rate over or in respect of all or part of the four year period. Securency agreed that Dr Berry had not explained why he had not commenced the proceeding earlier despite having been given an opportunity by the 22 June 2018 orders to give an explanation. It argued that Dr Berry and GSC had been dilatory and delayed unreasonably in commencing the proceeding and that it would cause injustice to Securency were it to have to pay interest at either rate above zero for the four year period to December 2013.Consideration The fundamental principle in considering whether, and in what amount to award, or to modify the usual exercise of the Court’s discretion to award, pre-judgment interest pursuant to s 51A of the Federal Court of Australia Act1976 (Cth), and its analogues, for the full period between the accrual of the cause of action and the date of judgment, is that, whatever award is made, it should be just as between the parties and should compensate the plaintiff (or applicant) for being kept out of his, her or its adjudged entitlement to monetary relief. Thus, courts have made orders that take into account periods of delay by a plaintiff (or applicant) in commencing proceedings that otherwise would work injustice to a defendant (or respondent) if the usual rate of pre-judgment interest were applied inflexibly. In Kalls Enterprises Pty Ltd (in liq) v Baloglow (No 3) [2007] NSWCA 298 at [10]-[12], Giles, Ipp and Basten JJA said that, ordinarily, the delay is not a reason for refusing or reducing the inclusion of interest. They recognised that the purpose of provisions such as s 51A is to compensate the plaintiff (or applicant) from being kept out of his, her or its money. They said that the question was one of injustice to the defendant and that if the interest rates used by the plaintiff exceeded commercial interest rates (although such rates were an imprecise criterion), the plaintiff’s self-inflicted loss of use of money (caused by the delay in commencing proceeding) may unfairly impose a burden on the defendant. However, they said at [12]: “[u]nreasonable failure needed to be positively demonstrated, and it was not”. Their Honours cited, at [16], what Mason P (with whom Beazley JA and Ipp AJA agreed) had said in Heydon v NRMA Limited (No 2) (2001) 53 NSWLR 600 at 609 [32] namely that, in the Supreme Court of New South Wales:the practice is to award restitutionary interest at the rates payable on judgments unless special circumstances exist… (citations omitted)