Gippsreal Ltd v Melbourne Linh Son Buddhist Society (No 2)
[2016] VSC 696
•15 December 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2014 00069
BETWEEN:
| GIPPSREAL LTD (ACN 005 443 292) | Plaintiff |
| and | |
| MELBOURNE LINH SON BUDDHIST SOCIETY INC (FORMERLY MELBOURNE LINH SON BUDDHIST CONGREGATION INC) | Defendant |
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JUDGE: | Daly AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 25 October 2016 |
DATE OF JUDGMENT: | 15 December 2016 |
CASE MAY BE CITED AS: | Gippsreal Ltd v Melbourne Linh Son Buddhist Society (No 2) |
MEDIUM NEUTRAL CITATION: | [2016] VSC 696 |
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COSTS: plaintiff largely, but not entirely successful at trial – Reliance upon indemnity clause in Deed of Offer in an application for indemnity costs – Whild v GE Mortgage Solutions Pty Ltd [2012] VSC 322 referred to – Reasons to deprive plaintiff of benefit of indemnity clause – Application of Rule 63.24 of the Supreme Court (General Civil Procedure) Rules 2015– Judgment sum less than $100,000 – Reason to ‘otherwise order’ – Whether unreasonable of the defendant to fail to accept Calderbank offers – Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435 applied.
INTEREST – Claim for interest on judgment sum at contractual rate from the date of demand refused – Whild v GE Mortgage Solutions Ltd (No 2) [2012] VSC 322 referred to – Claim for contractual interest based upon incorrect tax invoices – Section 60(1) of the Supreme Court Act 1986 (Vic) applied.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr S K Morris | Oakleys Legal |
| For the Defendant | Mr R Andrew | Starnet Legal |
HER HONOUR:
On 20 July 2016, I delivered my reasons in relation to the proceeding between the plaintiff (‘Gippsreal’) and the defendant (‘the Society’), in which Gippsreal sought to recover certain sums from the Society pursuant to a Deed of Offer dated 23 August 2013.[1] The Deed of Offer concerned a proposed loan agreement between Gippsreal and the Society which did not proceed, and, among other things, provided for the payment by the Society of certain fees and charges if the loan did not proceed (‘liquidated damages claim’). I found that the Deed of Offer was binding on the Society, and that Gippsreal was entitled to judgment with respect to the payment of an establishment fee in the full amount sought of $31,625. However, I awarded a substantially lesser sum with respect to a liquidated damages claim in respect of interest on the sum proposed to be advanced. I reserved for determination the question of the plaintiff’s entitlement to interest on the judgment sum, the quantum of any interest payable upon the judgment sum, and the parties’ costs of the proceeding for hearing and determination at a later date.
[1][2016] VSC 324.
Prior to the resumed hearing date of 24 August 2016, Gippsreal issued a summons seeking declarations that the Society and its solicitors had contravened the overarching obligations in ss 18, 23 and 24 of the Civil Procedure Act 2010 (Vic) (‘CPA’). Paragraph 3 of the summons sought that the Society’s solicitors pay the legal costs and expenses arising from their contraventions of the CPA.
Relevantly, s 18 of the CPA prohibits a person to whom the overarching obligations apply from making a response to a claim in a civil proceeding that is frivolous, vexatious or an abuse of process, or does not, on the factual and legal material available, have a proper basis. Section 23 of the CPA provides that a person must use reasonable endeavours to narrow the scope of the issues in dispute, while s 24 of the CPA imposes an obligation upon a person to ensure that legal costs and other costs incurred in connection with the proceeding are reasonable and proportionate to the complexity or importance of the issues in dispute, and the amount in dispute.
The summons also sought that the Society pay Gippsreal’s costs of its application dated 10 January 2014 on an indemnity basis, pursuant to the terms of the Deed of Offer. In this application, Gippsreal sought a declaration that it was entitled to a caveat over the property which was to secure the proposed loan, and that its charge over the property ranked ahead of the proposed mortgagee, the ANZ Bank. Subsequently, this issue was resolved by Gippsreal entering into a deed or priority with the ANZ Bank.
At the return of the summons on 24 August 2016, counsel appearing for the Society’s solicitors, Starnet Legal, sought further time in which to respond to the application pursuant to the CPA (‘CPA application’). Further, the Society signalled its intention to apply to the Court of Appeal for leave to appeal my orders made that day, but consequent upon my reasons of 20 July 2016. I formed the view that it would be inappropriate to deal with the CPA application pending the hearing and determination of the Society’s application for leave to appeal, on the basis that even a successful application for leave to appeal, let alone a successful appeal, would render a finding that a proceeding had been defended on no proper basis to be somewhat absurd. However, it seemed to me that there was no barrier to dealing with the question of the costs of the proceeding as between the parties to the proceeding in the usual way.
At the hearing on 25 October 2016, counsel for Gippsreal submitted that I should make an order for indemnity costs against the Society, on the following bases:
(a) Gippsreal was entirely successful in four of the five issues identified in the proceeding for determination, and was partially successful in respect of its claim for liquidated damages on account of interest;
(b) pursuant to the terms of the Deed of Offer, in particular, pursuant to the indemnity in favour of the plaintiff at clause 34 of Schedule 3 of the Deed of Offer (‘indemnity clause’);
(c) the Society’s failure to accept three Calderbank offers made by Gippsreal to the Society; and
(d) by reason of the conduct of the Society in the proceeding, in particular, running unmeritorious defences, and putting Gippsreal to proof on all of the allegations in its statement of claim.
I agree that Gippsreal was substantially successful in this proceeding, and as such, would in the ordinary case be entitled to its costs on a standard basis. While it was not successful in obtaining an award of damages for the full sum claimed by it, it was successful in relation to four out of the five key issues at trial.
Taking Gippsreal’s claim under the indemnity clause first, the indemnity clause provides that:
(a)Immediately upon execution of this Deed by the Borrower (and irrespective of whether or not this Deed has been delivered to the Mortgagee or if the terms of this Deed have been fulfilled) the Borrower indemnifies the Mortgagee (and any other party or agent acting on the Mortgagee’s behalf or instruction) against any and all damages loss or costs (including legal costs) incurred by the Mortgagee on account of anything with respect to the subject matter of this Deed or the Proposed Mortgage (including the Security) or otherwise arising as a result of the Mortgagee’s relationship with the Borrower, and whether or not those damages losses or costs are incurred by the Mortgagee directly or indirectly, to any third party, or before or after the Borrower’s execution of this Deed.
(b)The Borrower further and expressly indemnifies the Mortgagee against all costs (including legal costs) incurred by the Mortgagee with respect to the subject matter of this Deed, the Proposed Mortgage, the Security or on any account whatsoever (and whether or not such legal costs would be allowable on a party and party or solicitor and own client taxation) including without limitation:
(i)in any enforcement or attempted enforcement of any right of the Mortgagee (or any right the Mortgagee reasonably believed they had) against the Borrower or against any other third party;
(ii)any and all costs (including legal costs) incurred by the Mortgagee in enforcing, defending or otherwise establishing:-
(1)any rights of the Mortgagee (or any rights the Mortgagee reasonably believes they have) against the Borrower or any third party;
(2)the rights and or obligations of the Mortgagee generally
with respect to this Deed, the Proposed Mortgage, the Security or any other matter or thing arising as a result of the Mortgagee entering into a business relationship with the Borrower (and whether such costs are contemplated by the parties at the time of entering into this Deed or not);
(iii)any orders (including orders as to costs) made against the Mortgagee by any court or tribunal with respect to matters arising (directly or indirectly) from the Mortgagee’s relationship with the Borrower, and whether such orders are made in the Borrower’s favour or not (the Borrower acknowledges that any agreement between parties is unable to exclude the jurisdiction of the Court to award costs to any party the Court determines, however the Borrower acknowledges that it is their express intention to indemnify the Mortgagee against all such costs orders and that the Mortgagee has relied upon that acknowledgement);
(iv)any and all costs arising as a result of any complaints made by the Borrower or holder of any subsequent security against the Mortgagee its lawyers or agents, including any costs incurred by any independent costs consultant in assessing legal or other costs; and/or
(v)all costs expenses duties taxes and other monies in addition to all costs expenses duties taxes and other monies for which the Borrower might be liable at law or in equity;
(c)It is expressly agreed that this indemnity applies where such losses damages or costs arise as a result of the Mortgagee’s negligence;
(d)This condition is notice of the Mortgagee’s intent to recover full indemnity costs on any/all legal proceedings and/or apply all legal costs (on an indemnity basis) on Account of the Borrower;
(e)This condition shall not merge in the discharge of the Proposed Mortgage and shall continue to apply to any costs orders or expenses incurred both before and after the discharge of the Proposed Mortgage and specifically any claims made against the Mortgagee by the Borrower, and will be a continuing indemnity despite any other matters or things and is not affected by the Deed of Release.
Counsel for Gippsreal submitted that the existence of the broad ranging indemnity in the indemnity clause should cause me to exercise my discretion to order that the Society ought pay Gippsreal’s costs of the proceeding, including the costs of the application brought by Gippsreal with respect to the validity of Gippsreal’s caveat (‘caveat application’), on an indemnity basis. He relied upon the following extract from the decision of Croft J in Whild vGE Mortgage Solutions Ltd (No 2)[2] where his Honour referred with apparent approval to the detailed survey of the authorities in the English Court of Appeal decision of Gombas Holdings (UK) Ltd v Minories Finance Ltd, including the following summary:[3]
[2][1993] Ch 171, 194.
[3][2012] VSC 322, [6].
In our opinion, the following principles emerge from the cases and dicta to which I have referred.
(i)An order for the payment of costs of proceedings by one party to another party is always a discretionary order: section 51 of the Act of 1981.
(ii)Where there is a contractual right to the costs, the discretion should ordinarily be exercised so as to reflect that contractual right.
(iii)The power of the court to disallow a mortgagee’s costs sought to be added to the mortgage security is a power that does not derive from section 51 but from the power of courts of equity to fix the terms on which redemption will be allowed.
(iv)A decision by a court to refuse costs, in whole or in part, to a mortgage litigant may be a decision in the exercise of the section 51 discretion or a decision in the exercise of the power to fix the terms on which redemption will be allowed or a decision as to the extent of a mortgagee’s contractual right to add his costs to the security or a combination of two or more of these things. The pleadings in the case and the submissions made to the judge may indicate which of the decisions to which we have referred has been made.
(v)A mortgagee is not, in our judgment, to be deprived of a contractual or equitable right to add costs to the security merely by reason of an order for payment of costs made without reference to the mortgagee’s contractual or equitable rights and without any adjudication as to whether or not the mortgagee should be deprived of those costs.
Counsel for Gippsreal submitted that there was no disentitling conduct on the part of Gippsreal which should deprive it of its contractual right to indemnity costs.
Further, in the event that the Court was not satisfied that Gippsreal ought to be able to rely upon the indemnity clause, Gippsreal relied upon the failure of the Society to accept three Calderbank offers made by it (‘Calderbank offers’). On 4 August 2016, the solicitor for Gippsreal, Mr Trevor John Rickard, swore an affidavit which exhibited Calderbank offers made by Gippsreal on 9 April 2014, 14 July 2014 and 10 February 2016 (the latter a few days prior to the commencement of the trial). The letter of 9 April 2014 was headed ‘Without prejudice save as to costs’ and provided extensive commentary upon the strengths of Gippsreal’s claims, and the merits (or lack thereof) of the Society’s defences. At this stage no defence had been filed, but the Society’s position had been outlined in the affidavit of Master Dao sworn on 10 February 2014. The letter of 9 April 2014 asserted that, as at the date of the letter, the Society was indebted to Gippsreal in the sum of $121,549.46, including the legal costs incurred by Gippsreal up to 5 February 2014, with interest accruing at 19.25 per cent per annum pursuant to the terms of the Deed of Offer. This letter proposed that Gippsreal would accept the sum of $110,000, upon which the proceeding would be discontinued on the basis that there would be no order as to costs, and Gippsreal would lodge a withdrawal of the caveat over the property. The offer was open until 28 April 2014, and noted that the offer was made in accordance with the principles set out in Calderbank v Calderbank[4] and Cutts v Head,[5] as adopted in Victoria in Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (‘Hazeldene’s‘).[6]
[4](1975) 3 All ER 333.
[5](1984) Ch 290.
[6](2005) 13 VR 435.
The letter dated 14 July 2014 post-dated the filing and serving of the Society’s amended defence, and stated that ‘we provide this letter to you as a Calderbank letter’. Again, the letter included an extensive commentary upon the merits of the Society’s amended defence, and stated as follows:
In the circumstances, we consider that your client should review its defence in this proceeding with a view to abandoning each of the assertions referred to above and/or abandoning its defence in this proceeding or generally.
If your client does not abandon, at least, the above assertions which it has made and if those matters are subsequently disproven by Gippsreal at trial, we will produce this letter to the Court on the question of costs and we reserve all our rights under the overarching obligations of the Civil Procedure Act requiring clients and their advisers to have a proper factual and legal basis for making allegations, denials or omissions in pleadings; to make claim for costs against legal advisers for unnecessary costs incurred in the proceedings.
The letter asserted that the Society was indebted to Gippsreal in the sum of $143,150.11, stated that Gippsreal offered to accept the sum of $90,000 on the same basis as the April 2014 letter, and stated again that ‘If the offer in this letter is rejected or not accepted by 8 August 2014 and our client obtains an order from the Court more favourable than this offer then our client will produce this letter to the Court and seek payment of its costs of this proceeding on an indemnity basis.’
On 10 February 2016, the solicitors for Gippsreal sent a relatively brief letter to the solicitors for the Society, noting that they anticipated the total cost of the proceeding, including the pending trial, to be in excess of $130,000, and Gippsreal’s total potential claim to be in excess of $274,000, but that it would accept the sum of $150,000 in full and final settlement of its claim. The offer was stated to be open for acceptance until 4.00pm the following day, 11 February 2016, noting that the trial of the proceeding was scheduled to commence on 15 February 2016.
Finally, Gippsreal relied upon the Society’s conduct in failing to admit any matter in Gippsreal’s Notice to Admit dated 29 September 2015, and filing numerous defences and maintaining positions that were not supported by facts or law. In particular, the assertion that Mr John Adicho was the agent of Gippsreal, rather than the Society, was found by me to be lacking in any merit. Further, counsel for Gippsreal noted that the Society disputed every single fact set out in Gippsreal’s Notice to Admit, including uncontroversial factual matters such as the terms of the Deed of Offer, and corporate governance and licensing issues, which ultimately required Gippsreal to file and serve an extensive affidavit addressing these matters. The Society foreshadowed filing a counterclaim which did not proceed, the Society did not serve its witness statement on time, and as such, Gippsreal submitted that the Society’s conduct of the litigation prolonged the pre-trial steps and caused Gippsreal to incur substantial further costs in running the litigation.
Counsel for the Society submitted that, insofar as Gippsreal sought its costs of the proceeding on an indemnity basis pursuant to the indemnity clause, this had been claimed by Gippsreal as a head of damages in the proceeding, and that claim was not pursued at trial. As I have made orders as to the damages payable by the Society, the Court is functus officio.
Further, counsel for the Society submitted that I should not find that the Society’s conduct in refusing to accept the Calderbank offers was unreasonable, as it is notoriously difficult to assess offers that are made on an ‘all-in’ basis, particularly in circumstances where Gippsreal’s entitlement to costs on an indemnity basis was questionable. Further, he once again relied upon the fact that the quantum of Gippsreal’s claim (and the ultimate judgment) meant that this proceeding should have been issued in a lower court.
Counsel for the Society relied upon r 63.24(1) of the Supreme Court (General Civil Procedure) Rules 2015 (‘Rules’), which provides that:
Subject to paragraph (1.1), where in a proceeding for debt or damages the plaintiff recovers by judgment or otherwise an amount (exclusive of costs) not exceeding $100,000, the plaintiff shall, unless the Court otherwise orders, be entitled only to the costs to which the plaintiff would have been entitled if the plaintiff had brought the proceeding in the County Court less an amount equal to the additional costs properly incurred by the defendant by reason of the proceeding having been brought in the Supreme Court instead of the County Court, but shall not be required to pay to the defendant any amount by which the additional costs exceed the costs payable to the plaintiff.
Counsel for the Society submitted that there was no reason why I should not adopt the default position in the Rules.
Further, counsel for the Society submitted that I should not take into account the manner in which the parties conducted the litigation in making a determination as to costs, as those matters are matters for consideration in the hearing of Gippsreal’s application under the CPA. In any event, criticism could be made of Gippsreal’s conduct in bringing its claims in this Court, and in preparing lengthy affidavits and exhibit books which included documents concerning irrelevant or peripheral matters. In any event, the trial was conducted relatively expeditiously, being completed within two days.
In my view, having regard to the indemnity clause, the Calderbank offers, and the default position under the Rules, Gippsreal should have its costs of this proceeding, but on a standard basis, save for the costs of the caveat application, which should be payable on an indemnity basis. Gippsreal was put in a position where it really had no choice but to issue the caveat application, and its right to a charge over the property, albeit securing a lesser sum, has been vindicated.
I accept that the indemnity clause is broad ranging, and sufficient, subject to the Court’s discretion, to encompass Gippsreal’s legal costs of this proceeding, including the caveat application.
Also, I do not accept the submissions advanced on behalf of the Society that Gippsreal has waived the right to rely upon the indemnity clause by failing to pursue that claim at trial. Indeed, it would not have been appropriate for Gippsreal to do so: the authorities suggest that, subject to certain exceptions, a party cannot claim in a proceeding as a head of damages in that proceeding.[7]
[7]See Gray v Sirtex Medical Ltd (2011) 276 ALR 267, 273-274.
Therefore, the existence of the indemnity clause is relevant to the Court’s exercise of its discretion with respect to costs, rather than being the source of a separate claim for loss and damage at trial. This would apply equally to Gippsreal’s costs of the caveat application: while that application was resolved in March 2014, it was made in this proceeding.
As to the exercise of my discretion, in my view, there are two matters which cause me to depart from the usual course referred to in paragraph 9 of these reasons: first, Gippsreal’s conduct in demanding that the Society pay amounts in respect of two tax invoices (the tax invoices issued on 4 October 2013, and the tax invoice issued on 7 February 2014) which were, on any view, patently incorrect, as conceded by counsel for Gippsreal at the commencement of the trial; and secondly, by pursuing its claim against the Society in this Court after the resolution of the caveat application. In my view, given the position under the Rules, and in particular the terms of r 63.24, Gippsreal must be taken to have known that if it were to rely upon the indemnity clause, the Society would be liable for the additional costs of defending a proceeding in this Court. Alternatively, in continuing to proceed in this Court following the resolution of the caveat application, contrary to the policy reasons behind r 63.24, Gippsreal must be taken to have assumed the risk that it would not be able to rely upon the indemnity clause.
However, while the policy reasons behind rule 63.24 have influenced my discretion with respect to the application of the indemnity clause, I do consider there are special circumstances such that there is reason to ‘otherwise order’, such as to shield Gippsreal from the usual consequences of rule 63.24. First, I agree that it was necessary to commence the caveat application in this Court, and, that in all of the circumstances, given the position of the Society, it was necessary to bring the caveat application. Secondly, while strictly speaking, Gippsreal ought to have made an application to transfer the proceeding, presumably to the County Court, for many months the parties (and the Court) were ‘in limbo’ waiting to see whether the Society would issue a counterclaim, which may well have been sufficient reason for the proceeding to stay in this Court.
As for the Society’s refusal to accept any of the Calderbank offers, the applicable test is, whether at the time the Calderbank offers were made, it was unreasonable of the Society to reject those offers, or any of them.
In the leading Victorian authority on this issue, Hazeldene’s, the Court of Appeal considered what matters might ordinarily be taken into account when determining whether the rejection of a Calderbank offer was unreasonable, such as to warrant an award of indemnity costs in favour of the party making the offer, as follows (citations omitted):[8]
[8] (2005) 13 VR 435 [25].
The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations. It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of a Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:
(a) the stage of the proceeding at which the offer was received;
(b) the time allowed to the offeree to consider the offer;
(c) the extent of the compromise offered;
(d) the offeree’s prospects of success, assessed as at the date of the offer;
(e) the clarity with which the terms of the offer were expressed;
(f) whether the offer foreshadowed an application for an indemnity costs in the event of the offeree’s rejecting it.
Further, the Court of Appeal held that there was no general rule that a communication containing a Calderbank offer must set out with reasonable specificity the basis for the offeror’s contention that the offeree should accept the offer. It is also not necessary for a party seeking to rely upon any misconduct in the litigation, or show that the offeree acted with ‘wilful disregard of known facts or clearly established law’ in order to be entitled to an order for indemnity costs.
For present purposes, the relevant principles that can be distilled from Hazeldene’s are as follows:
(a) while the discretion with respect to costs remains ‘at large’, the Court should ordinarily have regard to the matters set out in the above extract from the judgment in Hazeldene’s;
(b) there is no general rule that the offer must set out with specificity the reason why the offeree should accept the offer, although the presence or absence of such an explanation might be a relevant matter; and
(c) there is no need for the offerer to establish that the offeree has misconducted him or herself in the litigation: the focus of the inquiry is upon the reasonableness or otherwise of the offeree’s rejection of the offer.
In the current case, two of the Calderbank offers were made at a relatively early stage of the proceeding (some eighteen months or more before the trial), specified that they were made pursuant to the principles in Calderbank v Calderbank,[9] were open for a reasonable period of time, and went into some detail concerning what were said to be the weaknesses of the Society’s case. Further, all of the offers went some way towards explaining why the amount offered was reasonable in the circumstances at the time, in the context of the quantum of Gippsreal’s claim and costs at the date of the offer.
[9][1975] 3 All ER 333.
However, while I accept that the fact that the Calderbank offers were made on an ‘all-in’ basis does not of itself mean that it was not unreasonable for the Society to fail to accept the Calderbank offers, there is some force in the submissions made by counsel for the Society to the effect that it is often difficult to evaluate an offer made on an all-in basis. Furthermore, while the Calderbank offers amounted to a substantial compromise of the amount claimed by Gippsreal, it is necessary to take into account the outcome of the proceeding, being a judgment in favour of Gippsreal of $49,436.77.
In the letter dated 9 April 2014, Gippsreal offered to accept $110,000 in settlement of its claim against the Society. At that time, Gippsreal claimed the sum of $121,549.46. However, if the sum of $49,436.77 was substituted for the sum claimed by way of liquidated damages, and, for present purposes, a corresponding adjustment of the interest component of Gippsreal’s claim was made, the true value of Gippsreal’s claim at that time was a maximum of $73,772.32. Accordingly, assessed in hindsight, the amount of the offer did not reflect a genuine compromise on Gippsreal’s part.
At the time of the letter of 14 July 2014, Gippsreal’s claim was in the sum of $143,150.11, and it offered to accept $90,000. However, even if one accepts Gippsreal’s entitlement to full indemnity costs, and for interest on its claim at the rate of 19.25 per cent per annum, the true value of Gippsreal’s claim was $77,408.18. Accordingly, assessed in hindsight, even this offer did not represent a real compromise on the part of Gippsreal.
Finally, in the letter of 10 February 2016, Gippsreal stated that it estimated its total claim to be in excess of $274,000, and offered to accept the sum of $150,000. However, this letter did not descend to any great degree of particularity regarding the components of Gippsreal’s claim, or explain the basis upon which the offer of $150,000 was calculated, and the offer was open for only one business day. In any event, the difference between costs on a standard basis and costs on an indemnity basis for the trial itself is likely to be relatively modest.
Accordingly, in my view, it was not unreasonable for the Society to fail to accept any of the Calderbank offers, such as to warrant an award of indemnity costs.
As for the question of the costs said to have been incurred by Gippsreal by reason of the conduct of the Society and its solicitors, I agree that, given that I have chosen to award Gippsreal its costs of this proceeding, albeit on a standard basis, these matters really fall for evaluation during the course of the CPA application. Gippsreal’s claim for costs in the CPA application can only be for the difference between the quantum of its costs on a full indemnity basis and the quantum of its costs on a standard basis, insofar as those costs, or any part of those costs, have been incurred by reason of the Society’s or its solicitors’ alleged breaches of the CPA.
In relation to the question of interest, Gippsreal submits that it ought to be entitled to interest at the rate of 19.25 per cent upon the damages claimed by it from the date of demand, being 4 October 2013 in respect of the sum claimed in respect of liquidated damages, and from 7 February 2014 upon the component of Gippsreal’s claim which is referrable to the costs of the caveat application (again, being the date of the demand). Gippsreal relies upon clause 32(c) of the Deed of Offer, which provides as follows:
Interest at the Higher Rate shall be payable on the Liquidated Damages, default costs, legal costs and all other monies becoming due pursuant to this Deed and/or on any subsequent judgement debt and will be capitalised and added to the Liquidated Damages and bear interest at the Higher Rate.
Counsel for the Society did not make specific submissions as to on what basis interest should be calculated, and from what date interest ought to be awarded. However, he submitted that the Deed of Offer provides that interest is only payable on the sum actually loaned to the borrower, and Gippsreal was only entitled to issue a tax invoice after the loan had settled, which never occurred. I took this to be a submission that I should not depart from the terms of s 60(1) of the Supreme Court Act 1986 (Vic), which provides as follows:
The Court, on an application in any proceeding for the recovery of debt or damages, must, unless good cause is shown to the contrary, give damages in the nature of interest at such rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 as it thinks fit from the commencement of the proceeding to the date of judgment over and above the debt or damages awarded.
I agree that Gippsreal is entitled, by the terms of s 32(c) of the Deed of Offer, to interest at the Higher Rate from the date of the judgment in its favour, being 24 August 2016, and any future judgment in its favour with respect to costs. I reject the submissions that the interest rate referred to in the Deed of Offer is applicable only to interest on any sum advanced, the terms of clause 32(c) being quite clear. However, prior to 24 August 2016, there was no sum certain to which s 32(c) could apply. Gippsreal’s legal costs will only be certain following agreement between the parties, or after they have been taxed. It is common ground that the tax invoices dated 4 October 2013 and 7 February 2014 were incorrect, even on Gippsreal’s view of its claims, and the quantum of the judgment of 24 August 2016 fell well short of the amounts claimed by Gippsreal in the tax invoices. I doubt that clause 32(c) could be construed as giving an entitlement to interest at a rate well above commercial rates based upon the dates upon which ultimately unsustainable demands were made. Rather, interest should be payable on the judgment sum from the date the statement of claim was filed and served in this proceeding, pursuant to s 60(1) of the Supreme Court Act 1986 (Vic).
Accordingly, interest is payable on the judgment sum on the rate fixed from time to time by s 2 of the Penalty Interest Rates Act 1983 (Vic) between 21 March 2014 (being the date the statement of claim was filed) and 23 August 2016, and at the Higher Rate specified in the Deed of Offer of 19.25 per cent from 24 August 2016. Interest will not be payable on Gippsreal’s costs of the proceeding until costs are the subject of an order of this Court, by consent or otherwise, but will then accrue at 19.25 per cent in accordance with clause 32(c) of the Deed of Offer.
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