Embo Holdings Pty Ltd v Camm

[1998] FCA 727

FEDERAL COURT OF AUSTRALIA

INTEREST -Assessment - calculation of interest - the rate at which interest is assessed - when entitlement to interest arises - whether interest is part of the judgment given - whether interest claim is an amount sought in the proceeding.

POWERS - Delegated powers of Judicial Registrars of the Federal Court of Australia - whether there is power to give judgment for damages and interest where the interest component takes the judgment sum beyond $100,000.00.

COSTS - Whether judgment for less than $100,000.00 where judgment given for $100,000.00.

Federal Court of Australia Act 1976 (Cth), ss 51A(1), 18AB(1A)
Federal Court Rules, o 62 r 36A, o 79 r 1 and r 3
Penalty Interest Rate Act 1983 (Vic)

Namol Pty Ltd and Another v A W Baulderstone Pty Ltd and Others (1993) 119 ALR 187, applied.
S.E.A. Food International Pty Ltd v Theng Pew Lam, Huxham Pty Ltd (By original action) and Theng Pew Lam and Megamix Pty Ltd v S.E.A. Food International Pty Ltd, Lake Yale Pty Ltd and The Yew Choong (By cross-claim) (1998) 16 ACLC 552, referred to.
Australian Guarantee Corporation Limited v Border Printing Services Pty Ltd, Mervyn George Howes and Louise Anegal Bandiera (Lockhart, Spender and Hill JJ, 21 April 1998, unreported), referred to.

Commonwealth of Australia v SCI Operations Pty Ltd and Commonwealth of Australia v ACI Operations Pty Ltd (1988) 152 ALR 624, referred to.
SCI Operations Pty Ltd v Commonwealth of Australia and ACI Operations Pty Ltd v Commonwealth of Australia (1996) 69 FCR 346). Referred to.
Smallacombe v Lockyer Investment Co Pty Ltd (1993) 114 ALR 568, applied.

Re Stevens (1968) VR 356, discussed.

EMBO HOLDINGS PTY LTD -v- GARY STIRLING CAMM, WESTERN GROUP PTY LTD (ACN 010 104 631), ALEC MERCER, URS FELIX, FELIX HOLDINGS PTY LTD, GARY STIRLING CAMM, EMBO HOLDINGS PTY LTD, URS FELIX AND FELIX HOLDINGS PTY LTD, EMBO HOLDINGS PTY LTD
VG 38 of 1994

MILLANE JR
MELBOURNE
19 JUNE 1998

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 38  of   1994

BETWEEN:	EMBO HOLDINGS PTY LTD APPLICANT
AND:	GARY STIRLING CAMM FIRST RESPONDENT WESTERN GROUP PTY LTD (ACN 010 104 631) SECOND RESPONDENT ALEC MERCER THIRD RESPONDENT URS FELIX FOURTH RESPONDENT FELIX HOLDINGS PTY LTD FIFTH RESPONDENT
AND BETWEEN	GARY STIRLING CAMM CROSS-APPLICANT
AND	EMBO HOLDINGS PTY LTD CROSS-RESPONDENT
AND BETWEEN:	URS FELIX AND FELIX HOLDINGS PTY LTD CROSS-APPLICANTS
AND:	EMBO HOLDINGS PTY LTD CROSS- RESPONDENT
JUDGE(S):		MILLANE
DATE OF ORDER:		19 JUNE 1998
WHERE MADE:		MELBOURNE

THE COURT ORDERS THAT:

1. Order 2 made in this proceeding on 11 June 1998 be varied to read that:

   “There be judgment for the applicant against the second and thirdnamed respondents in the sum of $100,000.00”.

2. The second and thirdnamed respondents pay the applicant’s costs of the proceeding between the applicant and the second and thirdnamed respondents.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 38 of 1994

BETWEEN:	EMBO HOLDINGS PTY LTD APPLICANT
AND:	GARY STIRLING CAMM FIRST RESPONDENT WESTERN GROUP PTY LTD (ACN 010 104 631) SECOND RESPONDENT ALEC MERCER THIRD RESPONDENT URS FELIX FOURTH RESPONDENT FELIX HOLDINGS PTY LTD FIFTH RESPONDENT
AND BETWEEN	GARY STIRLING CAMM CROSS-APPLICANT
AND	EMBO HOLDINGS PTY LTD CROSS-RESPONDENT
AND BETWEEN:	URS FELIX AND FELIX HOLDINGS PTY LTD CROSS-APPLICANTS
AND:	EMBO HOLDINGS PTY LTD CROSS- RESPONDENT

JUDICIAL REGISTRAR	MILLANE
DATE:	19 JUNE 1998
PLACE:	MELBOURNE

REASONS FOR ORDERS ON INTEREST AND COSTS

On 11 June 1998 I handed down reasons for judgment in this proceeding and on that occasion made orders including an order that:

“On or before 4.00pm on Tuesday 16 June 1998 the parties file and serve any written submissions on both the question of interest and costs.”

On 16 June 1998 the applicant filed a written submission seeking both an order for payment of interest pursuant to s 51A of the Federal Court of Australia Act 1976 (“the Act”) and the payment of its costs without reduction of these costs in accordance with Order 62 Rule 36A of the Federal Court Rules. In support of its submissions that the Court should order interest by way of damages and not reduce any order made for costs the applicant also submitted that the Court as constituted had power to give judgment for a sum greater than $100,000.00. Given the matters raised in the applicant’s submissions and the fact that these submissions were apparently served on the respondents after 4.00pm on 16 June 1998 I made a further order in chambers allowing the respondents until 10.00am on 19 June 1998 to file and serve any reply. No submission has been forthcoming from either respondent.

On 16 June 1998 I also took the opportunity to clarify the first order made by me on 11 June 1998 by varying the wording of that order in the following way:

“1.Pursuant to Order 35 Rule 7 of the Federal Court Rules, paragraph 1(a) of the orders made on 11 June 1998 is varied to read:

(i)the secondnamed respondent engaged in conduct in trade or commerce which contravened s 52 of the Trade Practices Act 1974 (Cth); s 38 of the Fair Trading Act 1989 (Qld) and s 11 of the Fair Trading Act 1985 (Vic);

(ii)the thirdnamed respondent engaged in conduct in trade or commerce which contravened s 38 of the Fair Trading Act 1989 (Qld) and s 11 of the Fair Trading Act 1985 (Vic).”

Interest
Relevantly subsection 51A(1) of the Federal Court Act 1976 provides:

“In any proceedings for the recovery of any money (including any debt or damages or the value of any goods) in respect of a cause of action that arises after the commencement of this section, the Court or a Judge shall, upon application, unless good cause is shown to the contrary, either -

(a)order that there be included in the sum for which judgment is given interest at such rate as the Court or the Judge, as the case may be, thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date as of which judgment is entered; or

(b)without proceeding to calculate interest in accordance with paragraph (a), order that there be included in the sum for which judgment is given a lump sum in lieu of any such interest.”

As noted in my reasons for judgment in this proceeding the Amended Application filed by the applicant on 26 August 1994, as against the second and thirdnamed respondents, included a claim for “Interest pursuant to Statute”.  However, no submissions were made to the Court by the applicant in respect to this claim for interest until 11 June 1998 on which date the applicant asked the Court to make an order for interest payable at the rate of 12% per annum from 10 January 1994 for a sum exceeding $50,000.00.  As the respondents were not present to hear judgment and were not on notice of this further application the applicant agreed to notify the respondents of the claim made for interest.  At the same time I gave the applicant the opportunity to make written submissions in support of this further claim, which when it was first raised before me did not appear to be a considered claim.  This was in part because the submission made rested on the incorrect assumption that the various monetary sums sought to be recovered and comprising the $97,133.06 awarded were losses the applicant suffered by 10 January 1994.  In fact the consequential monetary losses suffered all occurred between the latter part of 1994 and 1997.

The applicant’s submission is that it is entitled to interest at penalty interest rates between 12.3% and 13.2% per annum or at the rate of 12% per annum from 10 January 1994 (which is the date it says is the latest date on which the cause of action accrued) to the date judgment is entered.  The alternative rate of interest claimed; namely 12% seems to refer to the rate the applicant believes is currently applied to judgment debts by Order 35 Rule 8 of the Federal Court Rules.  This is not so because from 25 September 1997 that rate was fixed at 10.5% per annum.

As a preliminary matter, I accept that there is authority in this Court for adopting the rate of interest which reflects the rate payable in the State in which the Federal Court sits to hear the proceeding.  (see Namol Pty Ltd and Another v A W Baulderstone Pty Ltd and Others (1993) 119 ALR 187 and S.E.A. Food International Pty Ltd v Theng Pew Lam, Huxham Pty Ltd (By original action) and Theng Pew Lam and Megamix Pty Ltd v S.E.A. Food International Pty Ltd, Lake Yale Pty Ltd and The Yew Choong (By cross-claim) (1998) 16 ACLC 552). Therefore, in this case the rates of 13.2% and 12.3% fixed by the Penalty Interest Rates Act 1983 (Vic) may be applied to any award of interest made.

Relying on the penalty interest rates set out above the applicant seeks interest on the judgment sum of $97,133.06 at the rate of 13.2% between 10 January 1994 and 22 February 1998 totalling $52,855.60 and a further sum at the rate of 12.3% between 23 February 1998 and 11 June 1998 totalling $3,534.84.  It also seeks interest for the period “12-6-98 to Judgment at the rate of 12.3%”.  This lastmentioned claim appears to relate to the period up until the date as of which judgment is entered.

In my reasons for judgment I set out in some detail the circumstances giving rise to the losses claimed, which came about because on 10 January 1994 the applicant did not acquire good title to the aircraft.  Nevertheless on that date the applicant took possession of the aircraft, having paid the balance of the purchase price of $50,000.00.  It appears to have had the use of the aircraft until it was taken out of operation by the Civil Aviation Authority pending a person “entitled to” register the aircraft doing just that.  Notwithstanding the disputed ownership of the aircraft the applicant retained possession of it throughout the period of the dispute when, by reason of a settlement entered into between the applicant and the fourth and fifthnamed respondents, it acquired good title to the aircraft in approximately December 1996.  Therefore, the monetary losses suffered were not related to the price paid on 10 January 1994 to acquire the aircraft.  The additional payment of $20,000.00 to perfect its title was not made until December 1996 and, this being so, there could be no claim for this loss until it was suffered; nor could there be any proper claim for interest as compensation for it being kept out of this money until December 1996 (see the decision of the Full Court of the Federal Court of Australia generally in Australian Guarantee Corporation Limited v Border Printing Services Pty Ltd, Mervyn George Howes and Louise Anegal Bandiera (Lockhart, Spender and Hill JJ, 21 April 1989, unreported)).

The same considerations referred to above apply to each of the amounts claimed, which form part of the damages sum awarded because these were losses incurred over a period of time.  On the evidence the replacement aircraft (with its new engine) was purchased for $67,000.00 on 5 August 1994.  On 26 September 1994 there was a demand for possession of the aircraft but it seems that the Civil Aviation Authority took no steps to ground the aircraft until 27 October 1994, after which date the aircraft was hangared until the applicant gained title to the aircraft and repaired and serviced it by March 1997 at a cost of $28,068.00.

For the period the aircraft was hangared there was the claim for the cost of insuring the aircraft ($4,160.00) but no evidence was given of the dates on which the amounts paid for insurance were paid.  In May 1997 the replacement aircraft was sold for a loss of $7,000.00 on that resale.  The cost of borrowing funds to purchase the replacement aircraft amounted to $18,983.00 and this sum consisted of interest payments on an overdraft facility.  Presumably, that cost ceased as at May 1997 as to $60,000.00 of the original purchase price.  Without evidence to the contrary I have assumed that the interest cost included the interest paid on the $7,000.00 loss to the date of hearing if in fact that sum was still overdrawn and attracted the payment of interest.

Exhibit R1 indicates that the legal costs paid by the applicant in respect to the claims made against the fourth and fifthnamed respondents and their cross-claims against the applicant were paid on various dates up until 25 July 1997.  Therefore, any calculation of the interest on the financial loss suffered should take into consideration when these losses occurred.

All of the circumstances I have described above have bearing on the proper calculation of interest and, indeed, raise the issue of whether in respect of each loss claimed the cause of action arose in respect of the interest claim at the time the loss was incurred and not on 10 January 1994 when none of these losses had been suffered.  (For discussion of when a cause of action arises and when the entitlement to interest arises see the High Court decision in Commonwealth of Australia v SCI Operations Pty Ltd and Commonwealth of Australia v ACI Operations Pty Ltd (1998) 152 ALR 624 generally and, in particular, the decision of Chief Justice Brennan (as he then was) at page 628 et seq).

If what I consider to be a fairer and more appropriate approach to the calculation of interest is adopted it is nevertheless the case that the claim for payment of interest up to the date judgment is entered is part of the loss or damage suffered, and therefore, the amount of the judgment given will exceed $100,000.00.  (see the decision of the Full Court of the Federal Court of Australia in SCI Operations Pty Ltd v Commonwealth of Australia and ACI Operations Pty Ltd v Commonwealth of Australia (1996) 69 FCR 346)

It is submitted by the applicant that I am not precluded from giving “...Judgment for a sum greater than $100,000.00 where the damages sought were not more than $100,000.00”.  In my view this submission is incorrect for a number of reasons.

Subsection 18AB(1A) of the Federal Court Act 1976 sets out the powers that may be delegated to a Judicial Registrar.  It provides:

“The Rules of Court may delegate to the Judicial Registrars, either generally or as otherwise provided in the Rules, all or any of the Court’s powers in relation to proceedings in the Court in the exercise of the Court’s original jurisdiction, except:

(a)proceedings in which the amount sought, or value of the subject matter, is more than $100,000.00; and

(b)proceedings for a prerogative writ or an order in the nature of a prerogative writ; and

(c)proceedings that involve a claim under the Workplace Relations Act 1996; and

(d)proceedings arising under the Human Rights and Equal Opportunity Commission Act 1986; and

(e)proceedings arising under the Native Title Act 1993.

Powers of the Court in relation to proceedings mentioned in any of paragraphs (a) to (e) may, however, be delegated to Judicial Registrars by the Rules of Court if this is expressly provided for by another provision of this or any other Act.”

Order 79 of the Federal Court Rules details the extent of the delegation of powers made by the Judges of the Federal Court in August 1997 and relevantly that delegation is expressed in the following way in Rules 1 and 3:

“1.All the Court’s powers in relation to a proceeding in the Court in which the Court is exercising original jurisdiction (except a proceeding mentioned in subsection 18AB(1A) of the Act) are delegated to each Judicial Registrar.

2......

3.A Judicial Registrar may exercise the powers delegated to the Judicial Registrar under this Order in a proceeding, or part of a proceeding, referred to the Judicial Registrar by the Court or a Judge.

4.....”

In my view the fact that the claim made included a claim for interest pursuant to statute and, further, the fact that the award of interest is compensation for the applicant being out of pocket mean that the interest on the losses was part of the amount sought in this proceeding (see Smallacombe v Lockyer Investment Co Pty Ltd (1993) 114 ALR 568). If I am correct in this view and the interest is treated as part of the amount sought or, indeed, part of the value of the subject matter of the proceeding then, at the date of hearing, the amount sought exceeded $100,000.00; save for the fact that when Mr Northrop opened the applicant’s case and sought to amend the applicant’s claim to a sum of $99,133.06, in response to a query from me about the jurisdictional limit of the Court as constituted, he confirmed that the applicant’s claims were within that jurisdictional limit; namely $100,000.00. This circumstance alone may amount to good cause for not ordering that interest be included in the judgment given. Moreover, it makes it inappropriate to proceed to make an order for payment of interest to the date judgment is entered, which exceeds the $100,000.00 ceiling, whether or not this ceiling may be avoided by interpreting my powers in the way suggested by the applicant in its submission.

I note that there is scant judicial consideration of the phrase “the value of the subject matter” however, in his decision in Re Stevens (1968) VR 356 His Honour Justice McInerney had occasion to consider the meaning of the phrase “the subject - matter of the cause or matter” contained in Order XVI Rule 22 of the former rules of the Supreme Court of Victoria.  He concluded that because the proceeding did not raise in issue in any way the defendant’s title to or right to possession of his land, the land did not fall within this phrase and the rule.  In the proceeding before me the applicant has put in issue as part of its claim for damages the right to be compensated for being out of pocket to the extent of the principle amounts claimed up to the date judgment is entered and, in that sense, I am satisfied that any valuation of the subject matter of this proceeding includes the compensation sought as interest.

Accordingly, on the question of any award of interest I am satisfied that I do not have power to give judgment for a sum exceeding the $100,000.00 limit. I am however, prepared to exercise my power to order the payment of interest as a lump sum pursuant to paragraph 51A(1)(b) of the Act up to this limit, which amounts to a further sum of $2,866.94.

Costs
The applicant relies on its submission that because of its prima facie entitlement to interest pursuant to s 51A of the Act the amount of the judgment will exceed $100,000.00 and, therefore, it says no reduction in the costs payable to it as contemplated by Order 62 Rule 36A of the Federal Court Rules applies to it. Rule 36A provides that:

“36A1.Where a party is awarded judgment for less than $100,000 on a claim (not including a cross-claim) for a money sum or damages any costs ordered to be paid, including disbursements, will be reduced by one-third of the amount otherwise allowable under this Order unless the Court or a Judge otherwise orders.

36A2.If the Court or a Judge is of the opinion that a proceeding (including a cross-claim for a money sum or damages) brought in this Court could more suitably have been brought in another court or in a tribunal and so declares, then any costs to be paid, including disbursements, will be reduced by one-third of the amount otherwise allowable under this Order.

36A3.This rule applies in respect of all actions commenced on and after 21 September 1987.”

The abovementioned Rule refers to judgment for less than $100,000.00.  Taking into account the effect of the interest awarded as compensation in this case, the judgment for a monetary sum or damages is for $100,000.00; not for less than $100,000.00 and, because of the expression used in the Rule, the applicant passes the threshold set without having exceeded $100,000.00.

Had the judgment sum remained at a sum less than $100,000.00, the applicant’s claim for relief nevertheless required the Court to exercise Federal jurisdiction as well as jurisdiction to hear and determine claims made pursuant to Fair Trading legislation operating in a number of States and this circumstance would have provided a proper basis for exercising my discretion to order that the costs made not be reduced by reason of the operation of Order 62 Rule 36A of the Federal Court Rules.

I propose to vary Order 2 made by me on 11 June 1998 to include the interest sum payable and to make a further order for payment of the applicant’s costs.

AND THE COURT ORDERS THAT:

1. Order 2 made in this proceeding on 11 June 1998 be varied to read that:

   “There be judgment for the applicant against the second and thirdnamed respondents in the sum of $100,000.00.”

2. The second and thirdnamed respondents pay the applicant’s costs of the proceeding between the applicant and the second and thirdnamed respondents.

I certify that this and the preceding
nine (9) pages are a true copy
of the Reasons for Orders on Interest
and Costs herein of Judicial Registrar Millane

Associate:
Dated:             23 June 1998

Counsel for the Applicant:  MR C NORTHROP

Solicitor for the Applicant:  DUNHILL MADDEN BUTLER

Counsel for the Second Respondent:     MS D SKENNAR

Counsel for the Third Respondent:       JAMES WALKER, SOLICITOR

Date of Submissions:  19 June 1998

Date of Orders:  23 June 1998