Dairy Vale Foods v Manfield & Manfield No. Scgrg-98-2729 Judgment No. S245

[1999] SASC 245

DAIRY VALE FOODS V MANFIELD AND MANFIELD

CIVIL

LANDER J. In this matter I delivered reasons for judgment on 4 December 1998. At that time I entered judgment for the plaintiff in respect of the plaintiff’s claim against the defendants and I made declarations in relation to the defendants’ counterclaim against the plaintiff.
In those reasons for judgment, I indicated that the defendants’ claim for damages was not clearly articulated in the pleadings and needed to be further considered and addressed.
After delivery of reasons the defendants sought to amend their counterclaim and I gave leave to amend the relevant paragraph in the defendants’ counterclaim.
Initially the defendants indicated that they wished to call further expert evidence and tender further evidence on their claim for damages. However, in due course the defendants indicated that they did not wish to present any further evidence apart from some formal evidence relating to a claim for interest.
At one stage the plaintiff also indicated, in response to the defendants’ statement that they wished to call further evidence, that it also wished to call further evidence on the defendants’ claim for damages against it.
The plaintiff subsequently withdrew its application to call any further evidence.
In the end result I was left with the same evidence which was before me at the time that I made the declarations except for three bank statements and three schedules of interest rates which I admitted on this further hearing.
The defendants recognised that their claim for damages was limited to the claim pleaded in paragraph 11.1 in so far as their claim relied upon the Trade Practices Act and paragraph 11.4 in so far as their claim relied on a breach of contract.
As those two claims were identical the matter proceeded upon the basis of the defendants approaching an assessment of damages in accordance with paragraph 11.1.
Paragraph 11.1 (after amendment) reads:
“11. In the premises the defendants have suffered loss and damages.

PARTICULARS
11.1Damages pursuant to Trade Practices Act and/or Fair Trading Act.
11.1.1Loss of the opportunity to acquire a business which the defendants would have acquired had they become exclusive wholesale milk vendors for National Diaries (sic).   300,000.00
11.1.2Trading Loss
1/7/94 to 30/6/95  88,795.00
1/7/95 to 2/11/95  22,931.00       111,726.00

11.1.3Loss of profit from conducting an
uneconomically viable round of 42,500
litres per week for 70 weeks 63,665.00

11.1.4Aletrnatively (sic) to .3 unremunerated
labour of WJ & CJ Manfield on
Torrensville round 1/7/94 - 30/6/95 42,500.00

11.1.5Interest payable on overdraft of $91,988
used to fund trading losses from 2/11/95
to 20/6/95 and continuing at the rate of
13.5% p.a. and compounding 8,289.00”

Before going to each head of damage a general observation must be made. The defendants claimed that but for the representation they would have become Farmers Union Wholesale vendors. They wished to have their claim for damages assessed accordingly. They did not claim damages upon the basis that the representation was not fulfilled. In other words they did not claim damages upon the basis that they did not receive a round of 42,500 litres. Their claim was that they would have gone to Farmers Union and damages should be assessed accordingly.
At one stage during argument the defendants’ counsel suggested that the defendants were entitled to damages under paragraph 11.4 of the Statement of Claim but later that claim was abandoned. Specifically the defendants abandoned any claim for damages for expectation losses pleaded in paragraph 11.4. They limited themselves to damages as pleaded in paragraph 11.1.

Paragraph 11.1

The first head of damage is a valuation of the lost opportunity to become a Farmers Union wholesaler.
I was provided with the opinion of two experts on how a valuation of this kind ought to proceed. Mr McLaren, who was called on behalf of the defendants, said that the appropriate method of valuation of a wholesale milk vendors business was to identify the weekly gross profit and multiply that by a factor of 90 to 100. He said that was the method that was commonly used in the industry involving a business of this kind.
Mr Kennedy, who was called on behalf of the plaintiff, said that, in his opinion, the appropriate method of valuation was to identify the annual gross sales and to take a figure of between 15 and 20 per cent which would represent the value of the business. He said, in his opinion, that was the appropriate method of valuation within the industry.
Neither expert was asked why it was that the method which that expert was advocating was superior to the method being advocated by the other expert. Neither was challenged as to the appropriateness of the method of valuation.
Probably neither could have legitimately criticised the other method. Both were ‘rule of thumb’ valuations. Neither method can be said to be superior to the other. In those circumstances I should have regard to both methodologies for the purpose of valuing the lost opportunity.
It is the fact that arithmetically, provided that one assumes that the gross margin is in the order of 12 per cent, Mr McLaren’s method gives rise to a higher valuation.
In my opinion, one ought to assume that the gross margin is in the order of 12 per cent. That was the evidence of Mr Laube. He said that the gross margin in the industry was in the order of 12 per cent. It is the fact that these defendants had never obtained gross margins of that kind. Indeed their gross margins were substantially lower than 12 per cent. However, it does not appear to me to be appropriate to have regard to the gross margins obtained by these defendants in a valuation of the loss of the opportunity to become Farmers Union wholesalers. Indeed, in my opinion, a buyer would ignore whatever Mr and Mrs Manfield were able to obtain by way of gross margins and proceed on the basis that he or she would be able to obtain a gross margin of 12 per cent. In those circumstances a reasonable and prudent buyer would approach the valuation of the business assuming the gross margin to be 12 per cent.
The valuation should be arrived at as at 30 June 1994 which is the operative date when the opportunity to become a Farmers Union wholesaler was lost.
To calculate either the gross weekly profit or the annual gross sales an assumption must be made as to the volume of milk which would have been available to the defendants if they had become wholesale milk vendors with Farmers Union.
As at 30 June 1994, the defendants were delivering 16,280 litres of Farmers Union product in the Edwardstown round. That was made up of predominantly white milk but with a significant volume of flavoured milk. The flavoured milk volume is significant because the higher the volume of flavoured milk the greater the return available to the vendor.
Mr O’Brien has asked me to assess the defendants’ damages not upon a volume of the order of 16-17,000 litres but in respect of a volume of 25,000 litres per week.
In doing so he has recognised that a volume of 25,000 litres is effectively 50 per cent greater than that which was being delivered at the relevant time.
He has suggested, however, that there were a number of factors which would indicate that an assumption of 25,000 litres ought to be made rather than 16,780. Between 1993 and 1994 the defendants increased the volume of Farmers Union milk which they were delivering by a factor of two. Most of that increase came about after December 1993 when Mr Manfield was reprimanded, as it were, by Farmers Union for failing to push their product in the market. Nevertheless there was a significant increase in Farmers Union product over that period of time.
He also said that it was likely that the volume available to Mr and Mrs Manfield would increase because Farmers Union itself increased its market share in the period leading up to 30 June 1994. I think that is right. Indeed it would appear that the Farmers Union market share increased by something of the order of 8 per cent in that period leading up to 30 June 1994 and clearly as it increased its market share then the wholesale milk vendors would have increased their deliveries. He also said that it would be appropriate to have regard to a higher volume because Farmers Union had indicated that it would make up the gross profit which the wholesale milk vendors had previously obtained. I accept the three reasons advanced by Mr O’Brien in support of his submission all of which, in my opinion, would have tended to expand the Farmers Union round available to the defendants if they had become Farmers Union wholesale milk vendors.
There is another factor which, I think, is more important than the matters to which Mr O’Brien alluded. The two producers contemplated by their actions in 1994 that after 30 June 1994 each producer would have designated wholesale milk vendors. That meant that at least one half of those who had previously been wholesale milk vendors for Farmers Union would cease to be as at 30 June 1994. The rounds which they had serviced had to be allocated to those who were appointed as designated wholesale milk vendors for Farmers Union.
In those circumstances there was bound to be increased volume available to the defendants if they had become designated wholesale milk vendors for Farmers Union.
It is not possible to be precise about the increased volume which would have been available to them. It is true to say as Mr Robertson, who appeared for the plaintiff, argued that even if the defendants had become designated wholesale milk vendors for Farmers Union that they would not have been until late in the piece. In those circumstances the greater proportion of the extra rounds which would have been available would have been distributed by the time they were signed up. In those circumstances, he said, one could not be sure that the defendants would have had the significant increase in their volume which is predicated in the calculations put forward by the defendants’ counsel. There is some force in what Mr Robertson has put but in the end it is a matter of judgment. I must decide, for the reasons advanced by Mr O’Brien and the further reasons to which I have alluded whether the round they would have obtained would have a volume available to the defendants as high as 25,000 litres.
I think, perhaps, a figure of 25,000 litres is generous to the defendants but I am prepared to assume, for the purpose of a calculation of damages, that such an increase would have occurred.
I am prepared to accept that the gross margin for Farmers Union product as Mr Laube suggested it ought to be. For the reasons I have already given I am not prepared to make any discount to that gross margin because the defendants were not able to achieve those margins themselves. The value of their business would have been calculated on what was achievable not on what was achieved.
Lastly, I am prepared to assume that the average sales price as at 30 June 1994 for Farmers Union product was 93.3 cents per litre. That sales price is taken from Mr McLaren’s evidence and I think it is a figure which can be safely assumed.
Applying that sales price with that margin to 25,000 litres of milk one would obtain, using Mr Kennedy’s valuation method at the mid point of his range, that is at 17.5 percent, a figure of $212,257. Using a figure of 20 per cent of annual gross sales Mr Kennedy would arrive at a figure of $242,580. Using Mr McLaren’s valuation method and the mid point of Mr McLaren’s range, i.e. 95 times average weekly gross earnings, yields a figure of $265,905. The high point of Mr McLaren’s range arrives at a valuation of $279,900.
I must arrive at a judgment of the value of the business which but for the representation would have been acquired.
I think the appropriate calculation for the value of a business which would have been acquired if the defendants had not relied upon the representation made by Dairy Vale is $250,000. In my opinion, therefore, they lost the opportunity of obtaining a business of the value of $250,000.
However they did obtain a business by staying at Dairy Vale. In fact they obtained two businesses the first being the pre-existing round at Edwardstown and the second being the Torrensville round.
The Edwardstown round was of a like size to that business they would have acquired if they had gone to Farmers Union. The weekly delivery volume was 24,000 litres of milk. However, the Edwardstown round had a number of deficiencies which would not have accompanied a round with Farmers Union. First the mix of flavoured milk and white milk was significantly different which reduced the gross margin. It also reduced, of course, the average sales price. Also the Dairy Vale business was acquired in a shrinking Dairy Vale market.
I think in respect of the Edwardstown round it would be appropriate to assess its volume on the basis of a weekly turnover of 24,000 litres at sales price of 90 cents and a gross margin of 10 per cent.
Using again the midpoint of Mr Kennedy’s range (17.5 per cent) and the midpoint of Mr McLaren’s range (95 times average weekly gross earnings) the respective valuations are $196,560 and $205,200.
Using the high points of both valuation methods the respective valuations are $224,640 and $216,000.
Again a judgment has to be arrived at. In my opinion, the value of the business acquired; i.e. the Edwardstown business, was $210,000.
In arriving at that assessment I have made no calculation of the value of the Torrensville round. I am inclined to agree with Mr O’Brien in respect of the Torrensville round that it was so diverse and so small that it was not profitable. It, therefore, had no value.
Mr O’Brien said that I should arrive at a nil value in respect of the Edwardstown round as well. He said that the evidence was that Dairy Vale would not have allowed the defendants to sell the Edwardstown round without selling the Torrensville round. He said that the Torrensville round was such that if attached to the Edwardstown round it made the Edwardstown round unsaleable and therefore of no value.
He also said that the evidence demonstrated that over the fifteen month period the defendants had made a loss of $111,000. That loss demonstrated that neither round was viable and therefore no value could be attached to the Edwardstown round.
I do not agree with either submission. I do not agree that the evidence supports a finding that Dairy Vale would not have allowed the Edwardstown round to be sold disassociated from the Torrensville round. Indeed my earlier findings are to the contrary. I therefore reject that submission.
I also do not agree that simply because the defendants had suffered losses in respect of both Edwardstown and Torrensville that both rounds therefore had no value. The value to the buyer, of course, was the same as the value to the buyer of a Farmers Union round. It is not what Mr and Mrs Manfield could make out of the business which mattered to a buyer, it is what a buyer could make out. A buyer would, in relation to this round, assume the volume to which I have referred the sales price to which I have referred and the gross margin to which I have referred and value the business accordingly.
I have arrived at a valuation of the Edwardstown round at $210,000. That figure is consistent, in my opinion, with the offer which was made by Dairy Vale to the defendants in October 1995.
It is to be remembered that on 17 October 1995 Dairy Vale agreed to offer to purchase the defendants’ rounds (including Torrensville) and including the fixed assets accompanying the business for about $200,000.
I think that that was a genuine estimate of the defendants’ business. As the earlier reasons for judgment show the defendants refused that offer. It was that refusal which gave rise to these proceedings.
Mr O’Brien argued that the offer of $200,000 for the defendants’ business in October 1995 did not reflect any genuine estimate of the value of the defendants’ business. He said it was made because of the fear of litigation and because of circumstances in which the plaintiff found itself.
I have no doubt that the offer was made in an endeavour to avoid any prospect of litigation between the parties and in an endeavour to bring the association between the plaintiff and the defendants to an end.
However I think that the offer still reflected the commercial realities that existed and was an acceptance on the part of Dairy Vale of the value of the business which was being conducted by the defendants.
It is further evidence, in my opinion, that the submission that the defendants did not acquire any assets when they became Dairy Vale wholesale milk vendors cannot be accepted.
In my opinion, the measure of the defendants’ damage in respect of paragraph 11.1 is in fact the difference between the value of a Farmers Union round assessed upon the basis upon which I have proceeded less the value of a Dairy Vale Edwardstown round assessed on a similar basis, but having regard to the adverse contingencies to which I have referred.
That comes to a figure of $40,000.

11.1.2

The defendants next claim that they are entitled to all of their trading losses between 1 July 1994 and 2 November 1995.
In my opinion, there is no doubt they are entitled to the trading losses in respect of Torrensville. I have already made a finding that those trading losses are somewhere between $5,000 and $25,000 in the period 1 July 1994 to 30 June 1995.
The evidence does not allow a discrimination between Edwardstown and Torrensville for the period of 1 July 1995 to 2 November 1995 and a judgment will have to be made.
In my opinion, it would be appropriate to allow $10,000 as being the loss in relation to that period for Torrensville.
I think, notwithstanding the uncertainty about the extent of the loss in the first period, it would be appropriate to allow for the defendants the higher end of the range in relation to the loss for Torrensville over that period. I will allow $25,000.
It is therefore, in my opinion, appropriate to allow losses in relation to Torrensville for the period claimed in paragraph 11.1.2 in the sum of $35,000.
The defendants, however, made a further loss of $75,000 over that period. Mr O’Brien argued that they should be entitled to the whole of that amount which was occasioned by the defendants’ reliance upon the representation made in June 1994 and by their entry into their agreement with Dairy Vale.
He said, but for that representation they would not have made a decision to go with Dairy Vale and would not have suffered those losses.
Mr Robertson, on the other hand, argued that the further loss of $75,000 would have been occasioned whichever producer supplied the defendants. He argued that those losses were due to the defendants’ mismanagement.
These losses were occasioned by the defendants in reliance upon the representation made by Dairy Vale entering into a contractual relationship with Dairy Vale. When they became designated wholesale milk vendors for Dairy Vale they acquired the businesses in the Edwardstown and Torrensville rounds. These businesses lost money. Torrensville lost money because it was uneconomical. Edwardstown lost money because the defendants could not achieve the industry gross margins. Why that is so is not clear. It was probably a combination of factors. However the causal connection is sufficiently identified to say that the loss was as a result of the conduct of the plaintiff.
In the end result I am persuaded by the defendants’ argument that the cause of this loss was the reliance on the representations made by Dairy Vale’s employees. It may have been that if the defendants had undertaken a business with Farmers Union they also might have suffered a loss in that business but that is not to the point, in my opinion.
There is an appropriate causal relationship between the representation and the loss and, in my opinion, the defendant should be entitled to the whole of the loss under this heading.

I am satisfied that the whole of the trading losses do amount to $111,726 and I assess damages at that amount.
The defendants made no claim for loss of profits. They limited their claim to trading losses. I raised that matter with Mr O’Brien but no attempt was made to enlarge the defendants’ claim in that respect.
The defendants therefore are entitled to be compensated for the whole of their trading losses for the period to November 1995. There being no claim for loss of profits during that period none can be awarded.
Moreover the defendants did not seek to have damages assessed upon the basis that if the representation had been made good they would have received an income based upon 42,500 litres volume. Mr O’Brien specifically disclaimed any reliance for damages upon that basis.

11.1.3

This claim was abandoned.

11.1.4

This claim is, by its terms limited to a claim for unremunerated labour for the defendants in relation to the Torrensville round in the period between 1 July 1994 and 30 June 1995. It is limited to that round and for that period.
During the further argument Mr O’Brien sought to amend the claim to delete the words “on Torrensville round” but I refused that application. It appeared to me to be too late in the day to try to amend the claim in 11.1.4 to include all unremunerated labour in respect of Edwardstown and Torrensville.
The Torrensville round always made a loss. In those circumstances Mr and Mrs Manfield did work in relation to that round which was unremunerated. They also, however, carried out their work in relation to the Edwardstown round. They are not entitled to unremunerated labour in respect of that round.
Evidence was led that Mr Manfield could have earned $17,000 per annum and Mrs Manfield $13,000 per annum in other employment in 1997. It was put, in those circumstances, that should give rise to a claim of $37,500 being $30,000 for one year and $7,500 for the extra three months. As I have noticed the claim is limited, however, to a one year claim.
It is difficult to gauge how much time the defendants devoted to the Torrensville round. It is also difficult to identify, with any precision, the time which Mrs Manfield devoted to the business at all let alone to Torrensville. Mr Robertson argued that no allowance should be made for her time. He also argued that I should not have regard to income which they received in 1997 for the purpose of determining a loss in 1994.
I believe Mrs Manfield did contribute her labour to the business although not to be same extent as her husband.
I agree that logically income received in 1997 does not necessarily indicate the value of an earning capacity in 1994. However the amount claimed for the two partners is very small. I cannot believe that they could not have earned $30,000 between them in 1994. This is again a matter of judgment upon which minds might reasonably differ.
The Torrensville round probably occupied about one third of the defendants’ time even though the volume of milk in that round was only about 20 per cent of the volume delivered.
It would be appropriate, in my opinion, to allow Mr and Mrs Manfield one third of what they might have otherwise earned by way of unremunerated labour in respect of the Torrensville round. In that respect I allow $10,000.

11.1.5

This subparagraph raises a claim for interest specifically in relation to an overdraft of $91,988.
In due course the particular claim for interest was subsumed in a wider claim for interest under 30C.
In my opinion, the defendants are entitled to interest under section 30C of the Supreme Court Act 1935. In relation to the losses under paragraph 11.1.1 interest should run, in my opinion, from 1 July 1994 being the date upon which the loss was suffered. Since that date the defendants have been kept out of their money. They are entitled to interest on the amount assessed for the period 1 July 1994 to the date of this judgment.
The trading losses developed over the period of fifteen months. It would be appropriate to allow interest in respect of those trading losses since 1 January 1995 which is nearly the midpoint of the period over which the losses were occasioned. So also interest should run in relation to the matter under paragraph 11.1.4 since 1 January 1995.
Mr Robertson did not dispute that interest should commence on or about the dates which I have mentioned. He did, however, argue that the defendants should not be entitled to have interest over the whole of the period to the date of this judgment.
This matter was first listed for trial to commence on 7 October 1997. On 15 September 1997 the defendants sought and obtained, on 22 September 1997, an adjournment of the trial upon the ground that they had recently instructed new solicitors. I have not been told why it was that the defendants changed their solicitors so near to trial.
The trial did not commence until 2 March 1998. There was thus a delay of about five months. Mr Robertson argued that the defendants should be mulcted in interest for a period of six months.
The purpose of an award of interest is to compensate the successful party for being kept out of his or her money; Thompson v Faraonio (1979) 24 ALR 1; Cullen v Trappell (1980) 146 CLR 1; MBP (SA) Pty Ltd v Gogic (1991) 171 CLR 657. The purpose of awarding interest is not to punish the unsuccessful party for being dilatory in settling the successful party’s claim; Batchelor v Burke (1981) 148 CLR 448 at 455.
It is the case that these defendants have been kept out of their money over the whole of the period since the breach of the statute and the breach of the contract. Correspondingly, of course, whilst the defendants have been kept out of their money the plaintiff has enjoyed the use of that money in the meantime. Whilst the defendants have not been able to earn interest on the moneys to which they have been entitled since the dates I have mentioned, the plaintiff has earned interest on that money.
An award of interest under s30C of the Supreme Court Act must be made in accordance with the provisions of the Act unless good cause is shown to the contrary. For myself I cannot think that a failure to prosecute an action with appropriate diligence is a good reason to disallow the successful party interest over the period where a lack of diligence was shown. Through the whole of that time the successful party has been kept out of that party’s money whilst the party who is obliged to pay the judgment has had the use of the money.
In Diggens v Brunotte ((King CJ), 22 November 1988 Unreported), King CJ recognised that interest was included in judgments because the plaintiff had been kept out of his or her money and not because the defendants had had the use of the money. He concluded, in that case, that if a plaintiff is kept out of his or her money by reason of the plaintiff’s lack of diligence in the prosecution of the plaintiff’s claim then the plaintiff should not to be awarded interest over that period.
With respect I cannot agree with that proposition. That proposition introduces, in my opinion, an element of fault. It suggests that a plaintiff is only entitled to interest if the plaintiff has both been kept out of his or her money and has prosecuted an action against the party obliged to pay that money with diligence.
Moreover it is not right, in my opinion, to overlook the fact that the unsuccessful party has had the use of the successful party’s money. To not award a successful party interest means that the successful party is under compensated and the unsuccessful party benefits by investing the successful party’s money.
A plaintiff can only be adequately compensated for the loss of use of money to which that plaintiff is entitled by awarding interest over the whole of the period during which the plaintiff is kept out of his or her money. It seems to me it is no hardship to a defendant to require the defendant to pay interest over that whole period because the defendant had use of what was in fact the plaintiff’s money. A defendant should not be entitled to profit by earning interest on money the defendant has neglected to pay to the plaintiff.
Diggens v Brunotte was considered by the Full Court in Metro Meat Ltd v Werlick (1992) 167 LSJS 455 and in Osborne v Kelly (1993) 61 SASR 308.
In the former case Olsson J considered a number of cases and in particular De Girolamo v State of South Australia (1991) 56 SASR 40. In that case Cox J said that he was not persuaded that an unjustified delay on the part of the plaintiff was a self evident ground for awarding interest for a reduced period only. Cox J said at 44/45:
“However, the effect of this on the calculation of interest is another matter. It seems to me that the principle that delay will not ordinarily affect a plaintiff’s entitlement to interest, laid down by this Court in such cases as Catanzariti v Steadfast Insurance Co Ltd (1976) 14 SASR 15, has not been abrogated by later decisions about the entitlement to or calculation of interest under s 30c. Interest is awarded to compensate a plaintiff for the detriment he has suffered by being kept out of his money: see Batchelor v Burke (1981) 148 CLR 448. It is true that the time between accident or writ and judgment has been greatly lengthened in this case by the plaintiff’s neglect - his own “fault”, if you like - so that there is a sense in which, with respect to some of that period, he has not been kept out of his money by the defendant but by his own inaction. However, it is still the case that the plaintiff has not had the use of the money in question for the whole of the relevant period, and the necessary practical consequence of this is that the defendant has had the use of that money, presumably to its advantage, for the same time. That, in my opinion, is an important consideration in deciding whether the plaintiff’s delay should affect the amount of interest to be awarded. This is not one of those cases, of which some compensation neurosis claims are an example, in which delay can itself lead to an increase in the overall damages awarded to a plaintiff, and it was not suggested that variations in either commercial or real interest rates over the lengthened interest period, or any other factor, could have resulted in any prejudice to the defendant in this case. There is no punitive or inducing or moral component in the awarding of interest now, certainly not of the kind discussed in Ruby v Marsh (1975) 132 CLR 642 at 652-653. Section 30c may not be used to discourage defendants from delaying settlements. See Bennett v Jones [1977] 2 NSWLR 355; Wheeler v Page (1982) 31 SASR 1. It was not put to me that the court nevertheless could, or should, as a matter of policy use s 30c to discourage plaintiffs from sleeping on their rights. The submission was based on mere unjustified delay on the part of the plaintiff as, it would seem, a virtually self-evident ground for awarding interest for a reduced period only. I am not persuaded of the general soundness of that submission. However, the principle of the matter was not really argued by either party and I hesitate to express a final view on the subject. It is enough for present purposes to say that I am not satisfied that any interest that would otherwise be awarded to the plaintiff in this case under s30c should be diminished by reason of his failure to prosecute the action diligently.”
Olsson J in Metro Meat Ltd v Werlick agreed with Cox J’s proposition.
However, His Honour then went on to say at 460:
“It seems to me that a clear balance of authority does favour the disallowance of interest in respect of any significant periods of time during which there has been inexplicable tardiness on the part of a plaintiff in prosecuting his claim. However, the rationale for such an approach lies not in any penal sanction against a failure to prosecute per se, but, rather recognises the notion that the whole basis for awarding interest is that a plaintiff has been kept out of the enjoyment of his money by virtue of the failure of a defendant to concede his claim and pay damages or other moneys which are due, when properly claimed.”
His Honour went on to say:
“In so far as a plaintiff is dilatory in pursuing his remedy, he cannot be heard to say that, during the period of the delay, he has been kept out of moneys to which he is entitled by virtue of any action on the part of the defendant.”
In a sense his Honour’s dictum is inconsistent with an endorsement of Cox J’s dictum. Olsson J has introduced in his reasons the suggestion that the plaintiff has not been kept out of his or her money when the plaintiff has been dilatory. For myself I find it difficult to agree with that suggestion. Interest is compensatory. The plaintiff has still been kept out of his or her money if the plaintiff has delayed. The defendant has still had the use of that money. The concept of fault was the very notion that Cox J was denying.
However King CJ and Mullighan J agreed with Olsson J although both of those judges expressed some reservations about the Court putting too much emphasis on the delay on the assessment of interest payable on the award of damages.
King CJ said at 455:
“I agree that delay on the part of a plaintiff is a factor to be considered by the judge in exercising his discretion as to interest, for the reasons given by Olsson J. I consider, however, that it should not be given undue importance for two reasons. The first is that a defendant has remedies at his disposal for unwarranted delay on the part of a plaintiff. If he neglects to pursue his remedies, the plaintiff’s delay becomes a less important consideration. That does not apply in the present case because the delay occurred in serving the proceedings and the defendant had no remedy for that. The second reason is purely practical. From the time of the introduction of the statutory interest provisions, the Courts have inclined strongly against allowing interest to become a new issue in litigation and a source of costly disputation. The statute gave to the judges a broad discretion to be exercised on common sense lines. It would be totally contrary to the spirit of the legislation to allow the justification for delay to become an issue in the proceedings. I consider that delay should therefore be used as a discretionary basis for reducing the interest otherwise allowable only where the delay is considerable and plainly unjustifiable.”
Mullighan J said at 463:
“However, I do not subscribe to the view that delay, even unjustified, should be the dominant factor in the exercize of discretion with respect to an award of interest. It is but one matter to be brought to account along with all other matters which bear upon how that discretion is to be exercized. In many cases unjustified delay may be a matter of considerable importance. In others, it may be of less significance.”
In the Osborne v Kelly (supra) Mohr J (with whom Bollen and Millhouse JJ agreed) in approving Diggens v Brunotte said at 311:
“In the present case there is no doubt that the respondent was kept out of his money for some 12 years from that date of the issue of the writ until trial. Whatever may be the case, where it can be shown that the delay in bringing the action to trial can be sheeted home to the plaintiff, for denying such a plaintiff interest for some period in my opinion the critical factor is in the words of King CJ in Digging v Brunotte (sic) (supra):
‘The plaintiff is kept out of the money by his own default.’
In the present case whatever might be said about the causes of the delay there is no suggestion that the plaintiff himself was responsible for them except in the sense that he was not capable of controlling the time taken.”
Specifically the Full Court in that case decided that a plaintiff or a successful party would only be disallowed an award of interest if it could be shown that it was that party’s own default which had given rise to the delay. The decision seems to suggest that if the delay has been caused by the default of the successful party’s legal advisors then the plaintiff would still be entitled to interest.
There are difficulties, it seems to me, in that decision. It would mean that a plaintiff might need to be separately represented in relation to the claim for interest because the plaintiff may need to complain about his or her own legal advisors’ delay so as to avoid being mulcted in interest.
There is a likelihood that would give rise to the necessity to inquire into collateral issues between the plaintiff and the plaintiff’s legal advisors but in which the defendant has an interest. It would be in the defendant’s interest for the plaintiff’s legal advisers to succeed on that issue because if the plaintiff’s legal advisers succeeded then the defendant would be able to keep the interest that the defendant has earnt on the money which the plaintiff has been kept out of.
The other difficulty with the proposition is that as interest forms part of the judgment itself the plaintiff might, during the trial itself and before judgment is reserved, have to instruct other legal advisors to present a claim for interest.
It is not clear to me why one would discriminate between the delay of the successful party and the delay of the successful party’s legal advisors if the rationale for refusing an award of interest is that the plaintiff should not be compensated for interest over a period in which the plaintiff has been guilty of default.
If it was for myself, I would have thought because the rationale for awarding interest is compensatory, it is irrelevant whether there has been any delay in the bringing and prosecuting of proceedings. The fact of the matter is that the party who has brought the action and who is entitled to the award has always been entitled, in the case of an unliquidated claim, to the judgment money since the date the cause of action arose. It is from that date that the party has been kept out of that party’s entitlement. One can only compensate that party by awarding interest over the period of time that the party has been kept out of his or her money at the appropriate rate having regard to the dollar value of the assessment of damages.
The contrary argument is that because the plaintiff has failed to prosecute the action diligently the plaintiff should not be compensated for having been kept out of his or her money. If that was right then it would in the interests of all defendants that the plaintiffs delay in the prosecution in their claim. In those circumstances the plaintiff would not be compensated for the loss of use of the money in the meantime but the defendants, who ought to have paid the money, would be entitled to profit by reason of the plaintiffs’ delay.
In my opinion to refuse to award interest to the plaintiff because of delay on the plaintiffs’ part is in fact to penalise the plaintiff for failing to prosecute the proceedings in a timely fashion. No similar penalty can ever be visited upon the defendant. The defendant can delay the proceedings but the defendant will pay no more than the defendant would have had to pay in any event. Interest is not awarded to plaintiffs “simply to discourage defendants from delaying the settlement of claims”: per Gibbs CJ at 455 Batchelor v Burke (1981) 148 CLR 454.
Both damages and interest are awarded to compensate the successful party. Damages are not reduced to penalise a party for being tardy. To refuse to award interest because a party has been dilatory is to recognise that a party should be under compensated for delay. At the same time such an approach recognises that the defendant will profit by having the use of the plaintiff’s money. The Supreme Court Rules provide procedures which can be used by both the Court and the parties when a party is dilatory. Those procedures are adequate without the Court penalising a party by under compensating the party.
If it was for myself I would prefer to follow the decision of Cox J in De Girolamo v State of South Australia but I think, however, I am bound by Metro Meat Ltd v Werlick and Osborne v Kelly to have regard to the successful party’s delay in the exercise of my discretion to award interest. Metro Meat Ltdv Werlick was cited with approval in Duke Group Limited (In Liquidation) v Pilmer & Ors (1999) SASC 97. (Unreported Full Court SA Doyle CJ, Duggan and Bleby JJ 20 May 1999). In that case the Court said after referring to the passages in Metro Meat Ltd v Werlick to which I have referred:
“These passages indicate that delay on the part of a plaintiff is a relevant matter, because it may cause the court to conclude that the plaintiff cannot complain of being kept out of its money during the relevant period. However, undue emphasis is not to be placed upon delay.”

Not too much emphasis should be put on delay but in any event not all delay leads to a penalty. The delay must be, to use King CJ’s words, “considerable and plainly unjustifiable”. The delay in this case was not considerable. I do not know whether it was unjustifiable. Moreover the delay must be that of the party otherwise entitled to the interest not the party’s legal adviser. There is no evidence who was responsible for the delay. I cannot infer that it was the defendants’ own fault.
I therefore decline to refuse to award interest for the period between October 1997 and March 1998.
The following items attract interest from the date specified.
1.Loss of chance to become a Farmers Union Wholesaler; $40,000 from 1 July 1994; say 5 years.

2.Trading losses of $111,726 from 1 January 1995 say 4 1/2 years.

3.Unremunerated labour of $10,000 from 1 January 1995; say 4 1/2 years.

There is no reason to differentiate in the rate of interest in respect of any of the heads of damage. Interest, because damages were assessed in the dollar value of the time rather than in today’s dollar value, should be at ordinary commercial rates including that interest which reflects the fear and expectation of inflation. Mr O’Brien suggested that the appropriate interest rate and the periods to which I have referred would be 10.5 per cent.
He pointed out that the plaintiff had obtained an award of interest at the rate of 10 per cent on its judgment. However, that was a rate fixed by the parties by contract. That interest rate is not relevant to a consideration of interest in respect of the counterclaim.
I have had regard to the schedule of interest rates provided by the defendants. I have also had regard to the rates of interest allowed by this Court on judgments. It is necessary to fix an interest rate over a long period of time and to that extent the interest rate is an average of commercial interest rates over that time.
The appropriate interest rate is 8.5%.
Upon that basis I calculate interest to amount to $63,500.
The defendants are therefore entitled to judgment including interest against the plaintiffs in the amount of $225,226.

[1999] SASC 245

11 June 1999