Freeman, R.P. v Metropolitan Permanent Building Society

[1991] FCA 253

9/

JUDGMENT NO. 2x3 ...I ........ ..... ....

CATCHWORDS

DAEIAGES - interest - "slip" rule - S. 51A of the Federal Court Act mandatory unless good cause to the contrary shown - date cause of action arose - interest rate - relevance of delay in commencing and conducting proceedings - evidence of cost of deprivation of funds - inadequate presentation of applicant's claim at trial - lump sum in lieu of interest - discount for lack of evidence.

Federal Court Act - S. SlA(1)

Bennett v. Jones [l9771 2 NSWLR 355
Hunaerfords v. Walker [l9891 84 ALR 119
M.B.P. (S.A.I Ptv Ltd v. Goaic, High Court, 26 February 1991,

unreported.

RODNEY PAUL FREEMAN & ANOR v. METROPOLITAN PERMANENT BUILDING
SOCIETY

NG 433 of 1987

REGISTRY

Einfeld J.
Sydney

13 May 1991

RECEIVED

14 MAY 1991

FEDERAL COURT OF

AUSTRALIA PRINCIPAL

IN THE FEDERAL COURT OF AUSTRALIA)

NEW SOUTH WALES DISTRICT REGISTRY) NO G 433 of 1987

GENERAL DIVISION 1

Between: RODNEY PAUL FREEMAN

First Applicant
FIGHILL PTY LIMITED

Second Applicant

And: METROPOLITAN PERMANENT

BUILDING SOCIETY

Respondent

SHORT MINUTE OF ORDERS OF THE COURT

Einfeld ;I	Svdney	13 Mav 1991
THE COURT ORDERS THAT:

1.   The respondent to pay the second applicant $15,000 in lieu of interest in addition to $80,000 ordered on 25 March 1991.

1. Each party to pay its own costs of the application for interest.

NOTE :  Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules

IN THE FEDERAL COURT OF AUSTRALIA)
NEW SOUTH WALES DISTRICT REGISTRY) No G 433 of 1987

GENERAL DIVISION 1

Between: RODNEY PAUL F R E E M

First A p p l i c a n t

FIGHILL PTY LIMITED

Second A p p l i c a n t

And: METROPOLITAN PERMANENT

BUILDING SOCIETY

Respondent

REASONS FOR JUDGMENT

E i n f e l d	S v d n e y	13	Mav	1991
Judgment	was	g i v e n i n t h i s m a t t e r o n 25 March	1991.	Pursuan t

t o s e c t i o n 51A(1) o f the Federa l C o u r t A c t , F i g h i l l now

a p p l i e s f o r interest o n the award o f damages o f $80 ,000 . T h a t

s u b s e c t i o n p r o v i d e s :

( l ) In a n y p r o c e e d i n g s for the recovery o f a n y

money ( i n c l u d i n g a n y d e b t or damages or the

v a l u e o f a n y goods) i n r e s p e c t o f a c a u s e o f

a c t i o n t h a t a r i s e s a f t e r the commencement o f

t h i s section, the C o u r t or a Judge s h a l l , upon

a p p l i c a t i o n , u n l e s s good c a u s e i s shown t o the

c o n t r a r y , either -

( a ) o r d e r t h a t there be i n c l u d e d i n the sum

for wh ich judgment i s g i v e n interest a t

s u c h r a t e a s the C o u r t or the Judge , a s

the c a s e may be, thinks fit on the who le

or a n y p a r t o f the money for the whole or
a n y p a r t o f the p e r i o d b e t w e e n the d a t e

when the c a u s e o f a c t i o n a r o s e and the

d a t e a s o f wh ich judgment i s e n t e r e d ; or

(b) w i t h o u t p r o c e e d i n g t o c a l c u l a t e interest

i n accordance w i t h paragraph ( a ) , o r d e r

t h a t there be i n c l u d e d i n the sum for

wh ich judgment i s g i v e n a l u m p sum i n l i e u

o f a n y s u c h interest.

By consent the hearing on interest was conducted in public Chambers with the applicants' legal representatives present and the respondent's counsel on the telephone from Brisbane. Fighill says that it applies under the "slip" rule but in my opinion this is not a case for the application of that rule. Section 51A only comes into operation on application. This is in truth the only application ever made because, despite the original application itself, the claim for damages at the hearing was so confused and confusing as not to be properly construed as constituting such an application. In any event, the respondent agreed that I have power to award interest under section 51A now. Its argument against an order being made was that because good cause has not been shown, interest should not be awarded. I observe that the subsection is in fact mandatory unless good cause to the contrary is shown.

The total interest claim is for $82,783, based upon rates varying for most of the period between 18% and 21%, in accordance with the prevailing rate of interest prescribed

under the New South Wales Supreme Court Act between 16 April

1985 and 31 March 1991. However, during argument Fighill

agreed that the interest rate for judgment debts in this Court
of 17% (see 0.35 r.8) might be more appropriate.

Fighill argued that the date when the cause of action arose as established by the judgment was 26 February 1985. This is because that was the date of the respondent's first breach of contract and was the date from which the loan moneys commenced to be withheld by the respondent. I do not agree. The property was not expected to be completed for sale until May

1985 if all went well. Certainly the evidence was that

construction was generally on track until about April 1985 but subsequent events showed that even without the financial problems ultimately caused by the respondent's breach of contract, it is likely that the May 1985 ultimate completion date for the purposes of sale would not have been met. Even if the first breach of contract was in February, the relevant breach(es) which actually led to Fighill's financial losses did not occur until some later time.

Further, the damages were awarded in part by reference to and were in part affected by the difference between the ultimate sale price and something approaching the expected earlier sale price. This loss was not crystallised until September 1987. Consideration of an interest component is necessarily and was in fact built into this type of calculation. There is no deprivation of moneys not yet lost.

The respondent submitted: 

1.	There is no evidence as to the cost to Fighill of its having been deprived of the funds.
2.	The rate provided under the mortgage was 16%.
3.	The applicants ought not to have interest for their delay in commencing proceedings until 1987 and in not pressing the matter fox hearing until 1989 when the Court listed the matter for directions.
4.	The judgment for damages has already allowed for interest, especially in the light of the hardly intelligible claim of damages by Fighill.

To my mind the first three of these matters are irrelevant. The first matter is assumed under such statutory provisions as section 51A: Hunaerfords v Walker [l9891 84 ALR 119; M.B.P. j S . A . ) Ptv Ltd v Goaic, High Court 26 February 1991 unreported except for [l9911 1 Leg. Rep. 1. The mortgage rate itself has nothing to do with interest on a verdict for breach of the mortgage agreement. Except in special circumstances not applicable here, delay is irrelevant: Bennett v Jones [l9771 2 NSWLR 355. In principle interest is payable because to the extent and for the period the respondent has had the use of the Fighill's money and Fighill has not had and has been

deprived of the use of it. 

The fourth of the respondent's arguments has more substance. Fighill's lack of reaction to the respondent's breaches of contract despite the continuing nature of the breaches meant that there was no loss crystallised for some time after the first breach occurred. In addition, the way in which Fighill left its case on damages in the evidence, and the necessarily general assessment of its damages, deprives it of anything remotely approaching a clearcut means of calculating a precise period and amount for interest as set out in its claim now.

The respondent has not really argued, and in my opinion has certainly not shown, good cause to the contrary of any interest at all as required by the otherwise mandatory provisions of section SlA(1). Its case is in substance that the amount claimed is excessive. I agree. In the circumstances I conclude that a lump sum in lieu of interest is payable pursuant to subparagraph (b) of section 51A(1). The period from late 1987 after the sale of the property to the date of judgment is a little under three and a half years. At an average rate of 17% p.a. in this period, the interest would be of the order of $45,000. It seems to me to be appropriate to discount substantially from this amount because of the evidentiary problems to which I have earlier referred, the lack of evidence that all the loss supposed to attract interest had occurred as at late 1987, because some of the

counting of allowances for interest already included in the loss ought not to attract interest at all, and to avoid double judgment. I think the appropriate sum is $15,000, making the total amount to be paid by the respondent $95,000 plus costs to be assessed or taxed. Each party will pay its own costs of the application for interest.

I certify that this and the four (4) preceding

pages are a true copy of the Reasons for

Judgment herein of his Honour Justice Einfeld ~ i y : b ( d . V v U

Dated: 13 May 1991  Associate:

Counsel and Solicitors for

the Applicants :  M r C. Harris instructed by

Messrs Sly and Weigall

Counsel and Solicitors for

the Respondent:	Mr P.D. McMurdo instructed by
Messrs McCullough Robertson
Date of Hearing:	15 April 1991
Date of Judgment:	13 May 1991