Edmonds v. Donovan

[2005] VSCA 97

SUPREME COURT OF VICTORIA

COURT OF APPEAL

No. 2053 of 2001

CHRISTOPHER EDMONDS & ORS
	Appellants
v.
KEVIN PATRICK DONOVAN & ORS	Respondents

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JUDGES:	WINNEKE, P. and CHARLES, J.A.
WHERE HELD:	MELBOURNE
DATE OF JUDGMENT:	29 April 2005
MEDIUM NEUTRAL CITATION:	[2005] VSCA 97

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JUDGMENT – Interest on judgment – Penalty interest – Date when judgment was given – Appropriate rate of interest – Whether direction to vary amount of interest and date from which interest accrues – Supreme Court Act 1986 s.101.

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APPEARANCES:	Counsel	Solicitors
For the Appellants	Mr C.J. Delany, S.C. with Mr A.T. Broadfoot	Arnold Bloch Leibler
For the Respondents	Mr S.H. Parmenter	Mallesons Stephen Jaques

WINNEKE, P.
CHARLES, J.A.:

1. In the action leading to these appeals, Warren, J., on 31 October 2002 declared that the first, second and fifth defendants (the appellants) were jointly and severally liable to pay to the plaintiffs (the respondents) compensation for breach of fiduciary duty in an amount to be assessed.  The appellants appealed against these orders and the respondents cross-appealed. 

1. On 6 December 2002 her Honour assessed equitable compensation in favour of the respondents in the sum of $3,327,174.67 plus interest to the date of that order in the sum of $75,015.02. 

1. In December 2002 both the appellants and the respondents appealed against these orders. 

1. On 16 December 2002 the Court of Appeal ordered that there be a stay of the orders made in the Trial Division until the hearing and determination of the appeal.  In the meantime a trust account had been established in the joint names of the parties’ solicitors to hold the net proceeds of sale of the golf course which is the subject of the proceedings.  By this Court’s order of 16 December 2002 the appellants were ordered, as a condition of obtaining the stay, to pay further moneys into the fund held in the joint account, so that the fund there held was sufficient to satisfy the award of compensation determined by the trial judge in favour of the respondents against which both parties had appealed.

1. On 28 February 2005 this Court made orders allowing the appeal in part, and reducing the amount ordered to be paid by the appellants to the respondents by $800,000.  The consequence was that the amount of compensation payable was reduced to the sum of $2,793,708 plus interest to 6 December 2002 of $61,704.09 in lieu of the compensation assessed by Warren, J.  The cross-appeal of the respondents seeking an account of profits was dismissed. 

1. The parties are agreed that five subsidiary issues remain for determination, and have consented to these issues being determined by two judges of the Court.  We shall deal with these issues in turn.

1. The first issue is when in this case “judgment was given” within the meaning of s.101 of the Supreme Court Act 1986, which deals with post judgment interest. The appellants submit that judgment was not “given” to enliven s.101 until such time as this Court allowed the appeal as to part, dismissed the cross-appeal and assessed the plaintiffs’ entitlement to equitable compensation on 28 February 2005. The respondents on the other hand submit that the Court’s orders of 28 February 2005 had the effect merely of varying the judgment of Warren, J. made on 6 December 2002. They submit accordingly that this Court’s judgment took effect as from the date of the original judgment, with the result that s.101 of the Supreme Court Act is applicable from 6 December 2002, and that the compensation awarded bears interest between 6 December 2002 and 7 March 2005 at the rates provided for in the Penalty Interest Rates Act 1983.

1. The appellants rely on GEF Packaging Services Ltd. v. Turner[1].  In that case it was said that when in Victoria the appellate court reassesses damages on appeal, the judgment which the Court substitutes by its order for the judgment below takes effect from the date of the order made on appeal, unless the Court, either expressly or by implication, directs that the judgment as substituted by its order takes effect from some other date, and in particular from the date of the judgment below.[2]

   [1]VSCA unreported 5 September 1995, Brooking and Hayne, JJ.A.

   [2]Per Brooking, J.A. at [5], Hayne, J.A. agreeing.

1. On 28 February 2005, this Court held in its supplementary[3] judgment that $800,000 for the “Buxton interests” should be deducted prior to the division of the profit of the venture between the parties, and that to that extent, and to that extent only, the appeal by the appellants was allowed.  The respondents submit, and we think correctly, that it is perfectly clear from the wording of the orders made on appeal that the principal sum of compensation, excluding interest, was assessed as at 6 December 2002, and that the quantum of interest up to 6 December 2002 was varied from the amount ordered below because of the variation in the principal sum assessed.  It follows that this Court has by clear implication directed that the judgment as substituted should take effect from the date of the judgment below.  Furthermore the decision in GEF Packaging, unlike the present case, is to be distinguished in that it concerned considerations such as the value of money at the time of the reassessment and a reassessment of damages for personal injuries in circumstances where the original assessment was set aside and the Court reassessed for itself the damages which it regarded as warranted by the evidence;  cf. Backwell v. AAA[4].

   [3][2005] VSCA 36 at [12].

   [4][1997] 1 V.R. 182 at 212ff.

1. In light of our decision on the first issue, the second, third and fourth issues may be restated as –

(a)What is the appropriate rate of interest to be applied in relation to the period between 6 December 2002 and 28 February 2005;  and

(b)What is the date on which an entitlement to penalty interest calculated under s.101 ceased; and

(c)Are there circumstances which warrant an exercise of any discretion conferred by s.101 to order that penalty interest should only be applicable from or to some date other than those referred to in (a)?

1. The appellants argue that on 29 October 2002 the net proceeds of the sale of the golf course ($3,490,848.60) were deposited into the joint trust account, and on 18 December 2002 the further sum of $107,000 was deposited by the appellants into that account pursuant to the order of this Court made on 16 December 2002. Accordingly they submit that the interest actually earned upon the portion of the fund attributable to the revised amount of compensation is an appropriate amount of interest to be awarded to the respondents (i.e. interest actually earned upon $2,855,412 from 6 December 2002). Alternatively, the appellants contend that if interest did carry under s.101 from 6 December 2002, any entitlement to penalty interest ceased when the appellants complied with this Court’s order of 16 December 2002 (i.e. on 18 December 2002) and paid the further sum of $107,000 into the joint account. As a further alternative the appellants argue that s.101 confers on the Court a discretion to order a date other than 6 December 2002 as the date from which penalty interest should run and that in the circumstances of this case, the discretion should be exercised to order that penalty interest should be calculated to run only from 28 February 2005, the date on which this Court’s orders were made. They submit that there is no evidence of any financial detriment occasioned to the respondents by reason of the moneys being held in the account and that the imposition of penalty interest may go beyond what is necessary to compensate a plaintiff. The moneys in the joint account earned interest at commercial rates.

1. The respondents submit that interest pursuant to s.101 is applicable from 6 December 2002, when the judgment of Warren, J. became effective, and that the judgment debt remained in existence and unsatisfied until 7 March 2005. Accordingly interest pursuant to s.101 accrued until the latter date. They argue that there is no basis for penalty interest to cease as at 18 December 2002 since the respondents were deprived of the fruits of their judgment for another two years and that the interest in the joint account was significantly lower than the penalty interest rate.

1. In Hartley Poynton Ltd. v. Ali (as Executor and Trustee of the Estate of Ali) Ormiston, J.A. said[5] that the right to a claim of interest under s.101 “is one which flows in favour of every judgment creditor and is not within the direct power of the Court to award or vary”. We accept the respondents’ submission that there is no basis for penalty interest to cease as at 18 December 2002, since the respondents were deprived of the fruits of their judgment for more than another two years following that date, and the interest in the joint account was significantly lower than the penalty interest rate. Penalty interest should therefore be fixed at the appropriate rate under the Penalty Interest Rates Act 1983.

   [5][2005] VSCA 53 at [100], Buchanan and Eames, JJ.A. concurring.

1. In our view penalty interest only ceased to accrue when the judgment was satisfied on 7 March 2005. Under s.101, penalty interest accrues on every judgment debt from the time judgment is given, and for the duration of the debt. We do not accept that the Court has a discretion to vary the amount of interest, nor in the present case to set an alternative date from which the penalty interest accrues. Accordingly the date on which the entitlement to penalty interest rate calculated under s.101 ceased was 7 March 2005.

1. The questions raised by the second, third and fourth issues should therefore be answered –

(a)The appropriate rate fixed under the Penalty Interest Rates Act 1983;

(b)7 March 2005;

(c)No.

1. The final issue submitted for the Court’s consideration is, if the respondents are entitled to penalty interest upon the reduced sum awarded by this Court, whether the appellants also are entitled to penalty interest on the sum by which the amount ordered by Warren, J. was reduced on appeal.  The appellants claim that the need to allow penalty interest in favour of both parties on different amounts is yet another factor to be weighed by the Court in the exercise of any discretion “to otherwise order”. 

1. We have concluded that the respondents are entitled to penalty interest under s.101 of the Supreme Court Act.  Under that section penalty interest accrues on a judgment debt.  The appellants have, in our view, never been entitled to a “judgment debt” as specified by the Act.  Rather, by orders dated 28 February 2005 the judgment debt owed by the appellants to the respondents was reduced.  It follows that the appellants are not entitled to penalty interest on the amount by which the judgment debt was reduced. 

1. It follows that penalty interest should be payable to the respondents by the appellants on the reduced judgment debt of $2,793,000 for the period between 6 December 2002 to 7 March 2005.

1. A further question, raised by the respondents, is whether any sums remaining in the account after payments out as aforesaid should be paid to the appellants, or should remain in the account pending finalisation of the quantum of costs entitlements as between the parties.  Having regard to the orders made by this Court on 28 February, there is in our view no sufficient reason to require the sums remaining in the account to be held pending finalisation of costs entitlements, and they should accordingly be paid out to the appellants.

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