Georgopoulos v Normetals Pty Ltd (No 2) - [2020] SASC 104

SUPREME COURT OF SOUTH AUSTRALIA
(Magistrates Appeals: Civil)
GEORGOPOULOS & ANOR v NORMETALS PTY LTD (No 2)
[2020] SASC 104
Judgment of The Honourable Justice Lovell
22 June 2020
MAGISTRATES - APPEAL AND REVIEW - SOUTH AUSTRALIA - APPEAL TO SUPREME COURT
APPEAL AND NEW TRIAL - APPEAL - GENERAL PRINCIPLES - INTERFERENCE WITH DISCRETION OF COURT BELOW - PARTICULAR CASES - OTHER MATTERS - COSTS
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - INTEREST ON COSTS
On 13 February 2020, the appeal in this matter was allowed, increasing the appellants’ damages from $34,116 to $50,610. The respondent’s cross-appeal was dismissed. The discretion in relation to costs and interest was exercised afresh.
Point from which pre-judgment interest should run from – delay on the part of the plaintiff – whether interest forms part of the judgment sum – whether the question of costs should be governed by the formula in r 106 of the Magistrates Court (Civil) Rules 2013 – who is the successful party in the proceedings
Held, per Lovell J:
1. Pre-judgment interest usually accrues from the date on which the party was deprived of their money but delay on the part of a plaintiff is a factor to be given some weight in exercising the discretion.
2. The appellants are awarded a fixed sum of $27,000 in lieu of interest.
3. The “judgment sum” means the award of damages before interest is calculated.
4. Costs are to be awarded to the successful party in the proceedings. The appellants were the successful party at trial and on appeal.
5. The appellants are awarded costs of the trial calculated on the formula contained in r 106(1)(a) of the Magistrates Court (Civil) Rules 2013. The appellants are awarded costs of the appeal and cross-appeal on a party/party basis.
Magistrates Court Act 1991 (SA) s 34, s 37; Supreme Court Civil Supplementary Rules 2014 (SA) r 208, r 217; Magistrates Court (Civil) Rules 2013 (SA) r 106, referred to.
Maidment v Davis (2000) 77 SASR 167 ; Haines v Bendall (1991) 172 CLR 60; Stewart v Jacobsen [2000] SASC 198; Re John Baptist Nella [1989] FCA 142; Rayner v Pethick [2006] SASC 70; Machado & Anor v Underwood & Anor (No 2) [2016] SASCFC 123; Turley v Saffin (1975) 10 SASR 463, considered.

GEORGOPOULOS & ANOR v NORMETALS PTY LTD (No 2)
[2020] SASC 104
LOVELL J.
Background

On 13 February 2020, I allowed the appeal of Mr and Mrs Georgopoulos, increasing their damages from $34,116 to $50,610. I dismissed the respondent’s cross-appeal. Further submissions were made by the parties on the question of costs and interest relating both to the trial and the appeal (including the cross-appeal). As I have allowed the appeal and increased the damages awarded to the appellants, I must exercise the discretion in relation to costs and interest afresh.
Interest
Given the argument mounted by the appellants on the question of costs, it is convenient to start with the question of interest.
Section 34 of the Magistrates Court Act 1991 (SA) (‘Magistrates Court Act’) governs the question of interest. It relevantly provides:
34—Pre-judgment interest
(1)Unless good reason is shown to the contrary, the Court will, on the application of a party in whose favour a monetary judgment has been, or is to be, given include in the judgment an award of interest in accordance with this section.
(2)The interest—
(a)    will be calculated at a rate fixed by the Court; and
(b)   will be calculated in respect of a period fixed by the Court (which must, however, in the case of a judgment given on a liquidated claim, be the period running from when the liability to pay the amount of the claim fell due to the date of judgment unless the Court otherwise determines); and
(c)    is, in accordance with the Court's determination, payable in respect of the whole or part of the amount for which judgment is given.
(3)The Court may, without proceeding to calculate interest under subsection (2), award a lump sum instead of interest.
The Court has an unfettered discretion as to the rate of interest to be fixed and, in relation to an unliquidated sum, the period over which interest runs. The award of pre-judgment interest is compensatory, that is, it compensates a party for being kept out of his or her money and is not to punish defendants from delaying settlement of claims.[1] An award of interest up to the date of judgment is not awarded as compensation for the “damage” done in the commission of the tort but it is an essential element in achieving true compensation for that damage. Pre-judgment interest usually accrues from the date on which the party was deprived of their money. This allows the plaintiff to be placed in the situation, as far as money can do, in which he or she would have been but for the defendant’s tort.[2]
[1] Maidment v Davis (2000) 77 SASR 167 at 180 [117]-[120].
[2] Haines v Bendall (1991) 172 CLR 60 at 66.
However, when exercising the discretion to award interest, delay on the part of the plaintiff may be taken into account as a factor against the award of interest, or in favour of reducing the amount of interest that would otherwise be awarded.[3] While the respondent has had the benefit of the appellants’ money for the entire period from when the cause of action arose, the courts should not encourage plaintiffs to treat defendants as a kind of “risk free, interest bearing investment”.[4] The Magistrate determined that the appellants delayed the issue of proceedings in this matter until the six-year time limit nearly expired; he considered that to award interest for the entire period of the conversion would be unfair to the respondent. While I must exercise the discretion afresh, I agree with his finding that the delay in issuing proceedings is a matter to be given some weight when exercising the discretion. However, I do not agree, as the Magistrate found, that interest should only run from the date of issue of the summons.
[3] Stewart v Jacobsen [2000] SASC 198.
[4] Re John Baptist Nella [1989] FCA 142 at [12] per French J (as he then was).
On the topic of the appropriate rate of interest, the appellants provided the calculations of Mr Gordge based on the assumption that r 217 of the Supreme Court Civil Supplementary Rules 2014 (SA) (‘SCSR’) applied, or at least could be used as a guide. That rule, however, only applies to post-judgment interest. SCSR 208 guides the discretion on pre-judgment interest.
At trial, the appellants submitted that an interest rate of 6.9% per annum should be applied across the period. The respondent suggested a rate of 5% per annum be applied across a more limited period. Given the lengthy period on which interest is to run, I consider 5% per annum too conservative. I will use the rate of 6% per annum.
Taking all the circumstances into account, I fix a lump sum of $27,000 in lieu of interest pursuant to s 34(3) of the Magistrates Court Act.
Costs
Trial costs
I must exercise the discretion in relation to costs afresh given that the award of damages has been increased. It is common ground that on the question of costs, r 106 of the Magistrates Court (Civil) Rules 2013 (SA) (‘MCR’) applies (as it was at the time the action was instituted).[5] The amount claimed by the appellants was $100,000. Damages were awarded in the sum of $50,610 before an award of pre-judgment interest was assessed. A question raised on appeal is whether the assessment of costs is undertaken on the amount of damages awarded, or the amount of damages awarded plus the interest assessed on the damages award. The appellants submitted that I should take into account interest when considering the question of costs; the respondent argued the contrary position.
[5] This MCR 106 was deleted and replaced with a new MCR 106 by Amendment 14 (Gov Gaz 4 August 2016, p 3015).
Section 37(1) of the Magistrates Court Act provides:
Subject to the Act and the rules, costs in any civil proceedings will be in the discretion of the Court and may be awarded against any person (whether a party to or a witness in the proceedings or not).
Thus, the general discretion is at large and is not fettered by rules of court, although it must be exercised judicially and not, for example, capriciously. The starting point, when exercising a discretion as to costs judicially, is that a successful party has a reasonable expectation of obtaining its costs.[6]
[6] Rayner v Pethick [2006] SASC 70 at [13].
MCR 106(1)(a) provides for a formula whereby the “successful party” for costs purposes is identified, and the costs due to the “successful party” are calculated by multiplying the total “shared costs” (a defined term) by the result of the following formula:

2 x the judgment sum – amount claimed

the amount claimed

The calculated amount, where the result is a positive sum, is to be awarded to the plaintiff (as the “successful party”) and, where the result is a negative sum, to the defendant (as the “successful party”). Here, there is no difficulty in ascertaining the amount claimed; it was $100,000. The difficulty arises with the meaning of the expression “judgment sum”. That is, does the expression “judgment sum” include pre-judgment interest, or is it limited to the award of damages for the tort of conversion.
In Machado & Anor v Underwood & Anor (No 2), Kourakis CJ and Nicholson J observed:[7]
As we understand the position, the rule has been formulated on the assumption that, even though a claim might be for unliquidated damages, the form of claim required to be filed in the Magistrates Court provides for the amount of those damages to be specified. In other words, and for the purpose of any future application of rule 106, a plaintiff is obliged to “nail their colours to the mast”. The effect of the formula is that if the damages awarded are less than 50 per cent of the amount nominated as claimed, an application of rule 106 will lead to the plaintiff paying costs rather than receiving costs.
[7] Machado & Anor v Underwood & Anor (No 2) [2016] SASCFC 123 at [31].
Implicit in the observations of Kourakis CJ and Nicholson J is that the expression “judgment sum” is the amount of damages awarded. As I observed earlier, an award of interest up to the date of judgment is not awarded as compensation for the “damage” done in the commission of the tort; however, it is an essential element in achieving true compensation for that damage. Thus, for the purpose of calculating costs under MCR 106(1), the “judgment sum” means the award of damages before interest is calculated.
In my view, this interpretation is congruent with the Full Court decision in Turley v Saffin[8] where pre-judgment interest was held to be irrelevant for the purposes of determining the jurisdictional limit of a court. Bray CJ observed:[9]
The award of interest is discretionary and the plaintiff can never be sure what interest he is going to get. Rather I think the intention was that the interest should be in addition to the amount of the damages and that the jurisdiction should be determined by the amount claimed, as indeed ss. 31 and 32a make it so dependent.
…
Both interest and costs are procedural matters and not matters of substantive law. In neither case is it necessary to make a specific claim in the particulars of claim. In both cases the award rests in the discretion of the court, whereas once the plaintiff has proved that he has suffered some damage as a result of a tort the court has no discretion to refuse him any damages at all, though, of course, the amount of the damages rests within the bounds of a judicial discretion.
[8] (1975) 10 SASR 463.
[9] Turley v Saffin (1975) 10 SASR 463 at 474.
Applying the damages awarded on appeal to the formula leaves a positive result for the appellants at trial. The appellants therefore become the “successful party” for the purpose of MCR 106.
The appellants urged me to order costs on a solicitor/client basis, pursuant to MCR 106(4). To do so, the appellants must establish that “proper cause” exists.
The appellants submitted that the issues at trial were complex and that the conduct of the respondent, particularly in asserting that the appellants were not honest in their claim, added to the complexity. Further, no offers were made by the respondent to settle the matter before trial. Also, the respondent, on appeal, conceded that they had sold some of the disputed property and not paid out that money to the appellants as they considered that the appellants had abandoned the property. The money had not been repaid at the time of the hearing of the appeal despite the fact that the property was clearly not abandoned. These factors, it was submitted, founded the basis for an award of solicitor/client costs.
The respondent submitted that not only should the appellants not receive costs on a solicitor/client basis, but that costs should be calculated on the basis the respondent be regarded as the “successful party”. This submission was based on the premise that on the new award of damages, the appellants, while getting a “positive result” under the MCR 106 formula, only “just” did. The appellants were awarded only 50.6% of their damages claim. Alternatively, the respondent submitted that on application of the formula, the practical result of the calculation was so close to zero that there was no “successful party” for the purposes of the rule. I cannot accept these submissions. The simple point is that the appellants achieved a “positive result” pursuant to MCR 106. The rule does not suggest that a party has to obtain anything other than a positive result. To suggest that a low or small “positive result” means the respondent becomes the successful party is to distort the clear meaning of the rule. The fact that the appellants achieved a positive result, however minor, must be the starting point for the assessment of costs.
The respondent further submitted that the appellants, despite the fresh award, had still overstated their claim, and had only adduced scant evidence of loss and value of the converted items. The respondent submitted that had the appellants been “realistic” about the value of the claim, the matter may have settled.
I have taken into account all the submissions.
I have considered the discretion on costs against the following background. Both the appellants and respondent were victims of a scam. The respondent, having accepted at an early stage that at least some items it had accepted from the thief, and crushed as scrap metal, belonged to the appellants, simply refused to pay the appellants any money. This behaviour continued when, knowing that some other items that remained in its possession were claimed by the appellants, eventually sold those items on the basis that the appellants had “abandoned” them. As mentioned, the respondent accepted on appeal that despite the claim being made it had kept the proceeds of that sale. The respondent accepted that it made no offers to settle the proceedings. While the respondent maintains that the appellants had overstated their claim, it has consistently refused to acknowledge any liability to the appellants despite the tenuous nature of its position.
That said, the appellants were very slow in prosecuting the claim. Their suggested valuation of items changed over time; that fact alone increased the respondent’s suspicion about the legitimacy of the claim. The increases in value can be seen to be, in part at least, due to the respondent’s requests for further proof of value. These demands were made despite the respondent not accepting any responsibility to pay. In the end, the value of the items depended largely on the evidence of the appellants; the respondent viewed their evidence with suspicion.
The respondent maintains its submission that the claim was exaggerated. To an extent, that submission has some basis, but I reject the submission that had the appellants claimed less the claim may have settled. The respondent has shown no inclination to settle these proceedings on any basis. However, the appellants did not prove more than just over 50% of their suggested value. While that is not relevant to the operation of MCR 106, it is a relevant factor when considering the question of whether solicitor/client costs should be ordered.
While the discretion to award costs is unfettered, regard should be had to the rules when considering the discretion. I accept that the claim was not straight forward; however, I would not regard it as particularly complex. The appellants gave evidence about the items converted and called an appraiser to ascribe value to the converted goods. The respondent produced no evidence regarding the value of the items, but denied liability, and queried the evidence of the appellants. The respondent was unsuccessful in those challenges. It is unfortunate that the matter became protracted and, at times, bitter. Both parties have to accept some responsibility for the way the matter was conducted.
Taking into account all the evidence and submissions in this matter, I am of the view that the question of costs should be governed by the formula contained within MCR 106. I reject the appellants’ arguments on the question of solicitor/client costs. I reject the arguments of the respondent relating to the operation of MCR 106(1)(a). The application of the formula under MCR 106(1)(a) means the appellants are the “successful party” and costs should be awarded accordingly.
Appeal costs
The appellants were successful on appeal. The respondent was unsuccessful in relation to the cross-appeal. There is simply no reason to depart from the usual order as to costs. In those circumstances, the appellants are to have the costs of the appeal and cross-appeal on a party/party basis.
Orders
1The Magistrate’s order as to interest is set aside. A lump sum of $27,000 is ordered in lieu of interest.
2The appellants are to have the costs of the trial calculated on the formula contained in MCR 106(1)(a).
3The respondent is to pay the appellants’ costs of the appeal and cross-appeal on a party/party basis.