Glenorcy Pty Limited v Law Society of New South Wales

[2005] NSWSC 300

CITATION:	GLENORCY PTY. LIMITED & ORS v. LAW SOCIETY OF NEW SOUTH WALES [2005] NSWSC 300
HEARING DATE(S):	31/05/04
JUDGMENT DATE :	15 April 2005
JURISDICTION:	COMMON LAW
JUDGMENT OF:	Greg James J at 1
DECISION:	Determine "interest on interest" prohibition does not apply to plaintiffs' claims, otherwise parties to provide any further submissions within 7 days of the publication of this judgment.

CATCHWORDS:	Appeal against Law Society's disallowance of claims on Fidelity Fund - whether claims include an interest component - whether interest under Supreme Court Act may be allowed.
LEGISLATION CITED:	Legal Profession Act 1987 Supreme Court Act 1970 Supreme Court Rules 1970
PARTIES:	GLENORCY PTY. LIMITED & ORS v. LAW SOCIETY OF NEW SOUTH WALES
FILE NUMBER(S):	SC No. 11678 of 2000
COUNSEL:	Pltff: G. Lindsay, SC./M. Herschderfer Deft: S. Epstein, SC.
SOLICITORS:	Pltff: Freehills Deft: A.S. Brown

LOWER COURT JURISDICTION:

IN THE SUPREME COURT

OF NEW SOUTH WALES

COMMON LAW DIVISION

GREG JAMES, J.

15 APRIL 2005

No. 11678 of 2000

GLENORCY PTY. LIMITED & ORS v. LAW SOCIETY OF NEW SOUTH WALES

JUDGMENT

1 HIS HONOUR: On the 31 May 2004 I published a judgment upholding the appeal of the plaintiff and allowing the plaintiff’s claims. At paragraphs 81 and 82 of that judgment I said:-

81. “I therefore conclude that for the reasons I have given, the appeal should be upheld and that the appropriate orders should be made to allow the various claims of the plaintiffs. However, in case there is some necessary adjustment to the amount of those claims and for the purpose of ensuring the orders I will make are appropriate in form, I direct the parties to bring in short minutes to give effect that intent.”

82. “There appears no reason why the plaintiffs, having been fully successful, should not have an order for costs, but I will defer making that order to permit further argument if the parties consider it appropriate. Otherwise, costs should be provided for in the short minutes.”

2 On 1 February 2005 I was contacted by solicitors acting for the defendant who sought the matter be re-listed. I directed that written submissions be filed, and that if any party wish to make oral submissions, notice should be given of that desire. Subsequently, I have received extensive written submissions from both parties, neither of whom wish to be heard orally.

3 The parties have not been able to agree on the form of short minutes in respect of one matter in particular. That matter relates to a contention raised by the defendant at this point, though not earlier in the proceedings, that the plaintiff’s claims as quantified in correspondence and in draft proposed orders includes an amount that the court has “no jurisdiction” to allow as it represents “interest on interest” and that the allowance of such thing is not permitted under Section 94 of the Supreme Court Act 1970.

4 In my judgment of 31 May 2004 at paragraph 14 and 15, appear the following:-

14 “The affidavit of 25 July 2002 contains a table of the claims that have been rejected by the Law Society of New South Wales. Those claims are not challenged as representing monies claimed to be losses incurred by the plaintiffs and as representing the balance of the losses originally claimed which losses have partially been the subject of indemnity (subject to the argument that I will later deal with, which characterises the monies claimed as unpaid interest).”

15 ”The affidavit provides further information to enable the tracing of the monies involved in each individual transaction and the total extent to which the plaintiffs have been indemnified by the Law Societies of New South Wales and Queensland. I was supplied with further information as to the amounts during the hearing and in the written submissions. Notwithstanding the amounts sought in the summons, the total effect of what has occurred is that the plaintiffs have received indemnity for all except a remaining total claim of $377,215.00 comprising, (a) a claim of $247,890.00 by the first plaintiff; (b) $46,000.00 by the second plaintiff; and (c) $83,325.00 by the third plaintiff. It is sought by this appeal to obtain orders that those monies be paid accordingly by the defendant. The references to the dates and amounts in the summons, affidavits and exhibits allow the identification of the entrustments and the tracing of the claims back to them.”

5 In paragraph 9 of that judgment I noted the reasons given by the Society in each case, as the basis for the disallowance that the Society was not satisfied that “there was an entrustment of these amounts, or a failure to account…”

The Committee also noted that the claim did not have a sufficient connection with practice as a New South Wales solicitor in Australia. It can be seen that no question of disallowance on the present basis has until now been raised.

6 The proceeding brought by the plaintiff, were brought under Section 90 D of the Act. That section provided that the claimant may appeal to the Supreme Court against “(a) a decision by the Law Society Council to wholly or partly disallow a claim, or (b) a decision by the Law Society Council to reduce the amount allowed in respect of a claim by virtue of Section 80 A.

7 Section 80 A provides that a person who is not entitled to recover against the fund in respect of a failure to account, an amount greater than the balance of the pecuniary loss suffered by that person by reason of that failure to account after deduction of the amount or value of all money or benefits which in the Council’s opinion that a person might, but for their own neglect or default, have received from a source other than the fund in respect of the loss.

8 Pecuniary loss is defined by Section 79 as having the meaning set out in Section 79 C. Section 79 C (1) provides that, pecuniary loss resulting from a failure to account includes…(c) interest that, but for the failure to account, would have been received by a claimant, calculated to the date on which the claim succeeds, being interest at a rate that does not exceed the rate prescribed by the Supreme Court Rules 1970, in respect of unpaid judgments as at that date”.

9 Section 80 provides the purpose of the Fidelity Fund to be that of compensating persons who suffer pecuniary loss because of a failure to account. This review of statutory provisions and of my judgment, makes it clear that there was no deduction by the Society under Section 80, that interest forgone is included in pecuniary loss, and there was no disallowance of the plaintiff’s claims on any such basis as is now asserted so that it was not open to the plaintiffs to appeal against any such disallowance and indeed for that reason, the issue now raised was not in issue on the appeal.

10 However Section 90 D (4), of the Act, confers on the court power to make such orders as it thinks fit. It might be asserted, that in doing so, the court should not order that which is forbidden by another Act. Section 94 (1), of the Supreme Court Act 1970, provides that:- “in any proceedings for the recovery of any money the court may order, there shall be included in the sum for which judgment is given, interest at such rate as it 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 when the judgment takes effect. Section 94 (2) (a), provides this section does not (a) authorize the giving of interest upon interest”. The defendant asserts that the calculations proposed by the plaintiff comprises “ interest on interest”.

11 However, I am unable to accept that Section 94 (2) (a), of the Supreme Court Act 1970 is applicable to the claims involved in the present proceedings. They are proceedings by was of an appeal from a disallowance of a claim, they are not proceedings under section 90 D (5) of the Act, which provides that a claimant may sue in debt against the Society. The plaintiffs are entitled to the interest to which section 79 C (1) (c) of the Legal Profession Act 1987 refers, as moneys to compensate the plaintiff for the pecuniary loss sustained by reason of the failure to account. In addition, pursuant to section 90 D (4) of the Act, the plaintiffs are entitled to interest on their pecuniary loss as an from the disallowance of the claim until payment in consequence of the appeal having been allowed.

12 I therefore conclude that the plaintiff’s contentions are to be accepted. However, when I examine the comparison of the plaintiffs’ calculations and the defendant’s calculations, I note that there are some small differences as to individual items, e.g. the difference on $123,945 at 8% per annum times 689 days is shown in the plaintiff’s figures as $18,720.13, this being in respect of the period of 4 June 1998 to 27 April 2000. The defendant shows that sum as $18,801.71. Whilst I am of the view that the plaintiff should succeed in respect of the contention now raised by the defendant, it will be necessary for the parties to give consideration immediately to the appropriate amounts to be allowed for interest in respect of each item and further to provide any submission on costs.

13 I will allow seven days from the publication of this judgment for the parties to provide any such submissions and to reconcile their arithmetical differences, failing which I will remit the outstanding matters for determination by a Master.

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