Hart v Mossensons (A Firm)
[2002] WASCA 110
•3 MAY 2002
HART -v- MOSSENSONS (A FIRM) [2002] WASCA 110
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2002] WASCA 110 | |
| THE FULL COURT (WA) | |||
| Case No: | FUL:5/2001 | 4 APRIL 2002 | |
| Coram: | ANDERSON J STEYTLER J McKECHNIE J | 3/05/02 | |
| 16 | Judgment Part: | 1 of 1 | |
| Result: | Appeal dismissed First ground of cross-appeal upheld | ||
| B | |||
| PDF Version |
| Parties: | LLOYDE WILLIAM HART MOSSENSONS (A FIRM) |
Catchwords: | Damages Negligent failure to renew the registration of a bill of sale Entitlement to damages Causation Award of damages to include assessment of value of loss of use of money Decision to award compound interest on capital sums affirmed Turns on own facts |
Legislation: | Bills of Sale Act 1899, s 14, s 25(1), s 27 Rules of the Supreme Court (WA), O 63 r 9(2) |
Case References: | Nil Bannan v Swan Brewery Co (1909) 11 WALR 15 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE FULL COURT (WA) CITATION : HART -v- MOSSENSONS (A FIRM) [2002] WASCA 110 CORAM : ANDERSON J
- STEYTLER J
McKECHNIE J
- Appellant (Plaintiff)
AND
MOSSENSONS (A FIRM)
Respondents (Second Defendants)
Catchwords:
Damages - Negligent failure to renew the registration of a bill of sale - Entitlement to damages - Causation - Award of damages to include assessment of value of loss of use of money - Decision to award compound interest on capital sums affirmed - Turns on own facts
Legislation:
Bills of Sale Act 1899, s 14, s 25(1), s 27
Rules of the Supreme Court (WA), O 63 r 9(2)
(Page 2)
Result:
Appeal dismissed
First ground of cross-appeal upheld
Category: B
Representation:
Counsel:
Appellant (Plaintiff) : Mr G R Hancy
Respondents (Second Defendants) : Mr R E Keen
Solicitors:
Appellant (Plaintiff) : Alan Mizen
Respondents (Second Defendants) : Mossensons
Case(s) referred to in judgment(s):
Andjelic v Marsland (1996) 186 CLR 20
Fitzgerald v Penn (1954) 91 CLR 268
Hungerfords v Walker (1989) 171 CLR 125
Liesbosch v The Edison [1933] AC 449
March v E & M H Stramare Pty Ltd (1991) 171 CLR 506
Medlin v State Government Insurance Commission (1995) 182 CLR 1
Palsgraf v Long Island Railway Co (1928) 248 NY 339
Stapley v Gypsum Mines Ltd [1953] AC 663
Case(s) also cited:
Bannan v Swan Brewery Co (1909) 11 WALR 15
(Page 3)
1 JUDGMENT OF THE COURT: This is an appeal and cross-appeal against the judgment of a Judge of this Court. It relates to the consequences of the respondents' admitted negligence in failing to renew the registration of a bill of sale.
Events leading to the appellant's loss
2 The respondents are a firm of solicitors. The respondents represented the appellant who, although retired at the time of trial, had been, amongst other things, a pastoralist. He had owned a sheep station near Mt Magnet in the north of Western Australia. He sold it, in May 1987, to a Mr and Mrs Cook. Mr and Mrs Cook could not pay the whole of the purchase price. The appellant consequently provided them with vendor finance in an amount of $350,000. He required security and was offered, amongst other securities, a bill of sale over the stock and plant on the station. The appellant instructed his then solicitor to attend to the settlement of the sale of the station and also to the preparation and registration of the requisite securities including a bill of sale which covered such items as motor vehicles, stock in trade and livestock situate on the station, including all "after acquired" vehicles and livestock. By cl 5 of the bill of sale the Cooks undertook not to remove any of the property covered by the bill of sale from the station without the appellant's prior written consent or to permit it to be removed other than in the normal course of their business.
3 The bill of sale was executed and presented for an assessment of stamp duty in 1987. For reasons which do not matter it was not registered until 16 June 1988. By s 14 of the Bills of Sale Act 1899, ("the Act"), the registration of the bill of sale was required to be renewed every three years. By the time the initial period of three years had expired, the respondents were the appellant's solicitors. They did not renew the registration of the bill of sale and nor were they asked to do so.
4 On 26 November 1991 the appellant wrote to the respondents telling them that he had agreed to a request by the Cooks for an extension of the time within which they were required to pay the outstanding balance of the purchase price for the station and that the Cooks were to have until 31 March 1993, provided that he was assured that he retained mortgage security and "the registration of the bill of sale is altered". On 10 April 1992 the appellant and Mr and Mrs Cook executed a deed (which was drawn up by the respondents) by which the appellant extended the time for repayment under the bill of sale to 31 March 1993.
(Page 4)
5 In January 1993 Mr Cook asked the appellant for a further extension of time to pay the money secured by the bill of sale. He said that he and his wife were in the process of selling the station to a Mr and Mrs Treloar. On 18 February 1993 the appellant instructed the respondents to draw up a deed extending the period for payment by a further period of two years and to arrange for the extension of the mortgage securities and the registration of the bill of sale accordingly.
6 On the same day the appellant wrote to Elders Ltd ("Elders"), which was the Cooks' agent for the purposes of the sale of their station's wool clip. The letter was addressed to, and received by, Elders' regional finance officer, Mr Kerry Skinner. In the letter the appellant referred to the securities which he held in respect of the station, including the bill of sale. He then said that:
"Mr C C Cook has advised me to exercise direction to your company to pay all Nett Proceeds from this current wool clip of 1993 … to my a/c …".
7 He also said (without further explanation) that the Cooks "had been granted extra time on this arrangement which expires 1st April 1993". He invited Mr Skinner to note, also, that the Treloars were "claiming they have a Lean [sic "Lien"], as per message from Mr Cook". This item of information was followed by the phrase "(Not likely)".
8 On 8 March 1993 a further deed (also prepared by the respondents) was executed by the appellant and the Cooks. By this deed the appellant agreed to extend the time for repayment of the amount secured by the bill of sale to 31 March 1995.
9 On about 30 March 1993, Mr Skinner received a letter written to Elders by the solicitors for the Treloars. In it they said that their clients had settled "certain outstanding differences" with the Cooks arising out of a dispute over the purchase of the station. They said that the settlement had been committed to writing. They enclosed a copy of the settlement agreement. This, it seems, gave to the Treloars what their solicitors described as "a lien over the … Station 1993 wool cheque to cover the settlement amount of $20,000". The solicitors asked Elders to "note" their clients' lien and to let them "have a cheque when it is payable in their name for $20,000 or any lesser proceeds".
10 Mr Skinner told the appellant about the letter from the Treloars' solicitors. The appellant insisted that he had priority arising out of his registered bill of sale. Mr Skinner consequently wrote to the Treloars'
(Page 5)
- solicitors. He told them that their instructions were "in direct conflict with those of the … [appellant] who claims a prior charge over the assets of … [the] Station and is demanding all proceeds from the 1993 clip be directed to his bank account". Mr Skinner's letter concluded with a paragraph as follows:
"There appears to be registered securities ahead of your clients' claim and as such I will leave you to discuss the matter with your client [sic]."
12 On 29 April 1993 the appellant telephoned the respondents. He said that he had been informed that the registration of the bill of sale had not been renewed. He was told by the solicitor to whom he spoke that "in fact the document had been registered and it was covered in the extension deed which was being prepared". The deed was thereafter received by the appellant. It was executed by him and by the Cooks on about 8 May 1993 (although it is dated 8 March 1993). The appellant delivered the executed deed to the respondents on the afternoon of 10 May 1993. It was submitted for assessment of stamp duty some seven days later.
13 On 11 May 1993 Mr Skinner told the appellant that he had ascertained from his own inquiries that the bill of sale was not registered and Elders consequently proposed to pay the proceeds to Mr and Mrs Cook. Elders then did so, seemingly with the appellant's concurrence.
14 The wool clip had been sold for $20,040.73. However, Elders had made advances to the Cooks against the sale proceeds, totalling $13,185.46. The net amount paid to the Cooks was consequently only $6,855.27.
15 On 1 October 1993 the Official Receiver in bankruptcy wrote to the appellant informing the appellant that the Cooks had been declared bankrupt on 27 September 1993. He also advised that his search of the Register had indicated that the bill of sale was not registered and was consequently void as against him. He was right. By s 25(1) of the Act every bill of sale not renewed in the time provided for by the Act is to be
(Page 6)
- deemed fraudulent and void as against the Official Receiver as regards the property in, or right to the possession of, any chattels comprised in the bill which, at any time within three months before the time of the presentation of the petition in bankruptcy and after the expiration of the time allowed for the renewal of the bill of sale, have been in the possession or apparent possession of the grantor.
16 The appellant ultimately settled his claim against the bankrupt estate for the money still owed to him by the Cooks. He did so in the course of repurchasing the station from the Official Receiver by means of a contract dated 17 December 1993.
17 After taking possession of the station, the appellant found that two vehicles which he had believed to be covered by the bill of sale were missing. One of these was a 1985 Isuzu truck. This was found by the trial Judge to have had a value of $8,100. The other was a Suzuki motorcycle. It was found by the trial Judge to have had a value of $3,500.
The action taken by the appellant
18 The appellant sued the respondents, claiming that he had suffered damage arising from their negligence in failing to renew the registration of the bill of sale. He alleged that the respondents' negligence in failing to renew the registration of the bill of sale had caused him to lose the sums of $20,040.73, being the value of the Cooks' 1993 wool clip, and $11,600, being the value of the Isuzu truck and the Suzuki motorcycle. He claimed these sums from the respondents. He also claimed a sum of $24,505, being the difference between an amount of $60,000 which he had paid (on 13 June 1994) for plant and stock on repurchasing the station and the sum of $35,495, being the final dividend which he had received from the Cooks' trustee in bankruptcy on 7 April 1995. He said that he would not have lost this sum if his bill of sale had not been void as against the Official Receiver as he would, in that event, not have had to purchase the plant and stock covered by it.
19 The respondents admitted that it had breached the duty of care which it had owed to the appellant in failing to renew the registration of the bill of sale. It also acknowledged that it was liable to the appellant in the sum of $24,505. However, it denied that it was liable to pay to him the sums of $20,040.73 and $11,600.
(Page 7)
The judgment of the trial Judge
20 As to the proceeds of the wool clip, the trial Judge said, in his judgment, that it was not suggested that the Cooks had breached the bill of sale by selling their wool clip through Elders. He said that the Cooks were entitled to remove any part of their stock in trade from the station in the normal course of their business. There was no evidence that they were then in default under the bill of sale. The appellant consequently had no entitlement to the proceeds of sale of the wool clip other than by virtue of what the trial Judge described as "the apparently collateral agreement with Mr and Mrs Cook".
21 Notwithstanding this finding, the trial Judge held that the respondents were liable to pay damages to the appellant in the sum of $6,855.27 which he held to be the net proceeds of the wool clip after offsetting advances made by Elders to cover shearing expenses. The trial Judge found that this was the amount which would have been paid to the appellant had Mr Skinner been satisfied that the bill of sale remained registered.
22 So far as the issue of causation is concerned, the trial Judge, after considering March v E & M H Stramare Pty Ltd (1991) 171 CLR 506, said (par 30):
"To my mind, taking that approach to the issue, causation is established. Certainly Hart [the appellant] had a valid bill of sale as against the Cooks, but as I have indicated, the evidence does not establish that he had any capacity or in fact purported to base his claim to the money in the hands of the Cooks' agent, Elders, upon any default under the bill. Certainly it is also the case that Mr Hart ultimately conceded to Mr Skinner that the money should be credited to the Cooks, but pursuant to his agreement with the Cooks he first sought to have the money paid to him and the net proceeds of sale of the wool clip would have been paid to him had Mr Skinner for Elders been able to satisfy himself that Mr Hart had a priority over the competing claim of the Treloars by reason of the registration of his bill of sale. That was not a legally appropriate way of deciding the issue, but in fact it did lead to the loss of $6,855.27 which I infer would otherwise have been paid to Mr Hart on about 21 May 1993, upon which date the evidence reveals the credit was made to the Cooks' account with Elders."
(Page 8)
23 As to the claim in respect of the Isuzu truck and the Suzuki motorcycle, the trial Judge said that the appellant had taken possession of these vehicles pursuant to the bill of sale in December 1993. He went on to say (par 31):
"The fact that he thereafter lost possession to the Cooks or otherwise, and what may have been their liability in respect of that loss, is to my mind irrelevant to the question whether any loss of the kind claimed in respect of these vehicles was sustained by the … [appellant] as a result of the negligent failure of … [the respondents] to maintain the registration of the bill of sale, which clearly it was not."
24 His Honour consequently awarded to the appellant only the sum of $31,360.27. He described this sum as "the capital component of an award of damages".
25 With respect to the appellant's claim for interest, the trial Judge held that the appellant had lost the use of the sums of money amounting to the "capital component" of $31,360.27, being the sums of $6,855.27 (which, he said, might have been, but was not, received on about 21 May 1993) and $24,505. He concluded that, had these sums been available to the appellant, they would have been devoted to business or commercial activities, including the payment of debts owed to the Commonwealth Bank and Elders, or to investments in term deposits. He considered that, taking a conservative approach, he could safely value the loss of the use of the funds by reference to the interest which might have been earned by safe investment of the money for the relevant periods. He adopted, for this purpose, a rate of 5 per cent interest, compounded monthly. He consequently awarded interest at that rate on the sum of $6,855.27 from 21 May 1993 to the date of judgment, on the sum of $60,000 from 13 June 1994 to 7 April 1995 and on the sum of $24,505 from 7 April 1995 to the date of judgment.
The grounds of appeal and cross-appeal
26 The appellant appeals on three grounds.
27 He contends, firstly, that the trial Judge erred in finding that, had Mr Skinner been satisfied that the bill of sale had been registered, "he would have paid … [the appellant] $6,855, whereas the evidence of Mr Skinner was that he would have paid the appellant the sum of $20,040.73".
(Page 9)
28 The second ground is that the trial Judge erred in finding that the appellant came into possession of the two vehicles pursuant to the bill of sale in December 1993, "whereas the evidence revealed that he did not take possession of those chattels and relied on Cook's [sic] Trustee in Bankruptcy that those assets were not available for the Appellant because of the fact that the Bill of Sale was not registered and that those assets had been sold to bona fide purchasers without notice".
29 The third ground is that the trial Judge erred in finding that the loss sustained by the appellant in respect of the two vehicles "was not as a result of the negligent failure of the … respondent[s] to maintain the registration of the Bill of Sale when he should have found that the negligent failure of the … respondent[s] to maintain the registration of the Bill of Sale was a cause of the loss sustained by the Appellant".
30 The respondents raise two grounds of cross-appeal and four (overlapping) points by way of a notice of contention lodged pursuant to O 63 r 9(2) of the Rules of the Supreme Court (WA).
31 The first ground of cross-appeal is that the trial Judge erred in finding that the appellant should be compensated for what has been described as "the loss of the wool clip" when there was no causal connection between that loss and the negligence of the respondents. The second is that his Honour erred in law in finding that the appellant was entitled to an award of compensation by way of compound interest for the loss of use of the "capital component" awarded by him.
32 The four points raised by the notice of contention deal with the appellant's claim in respect of the two vehicles. The first is that there was no evidence that either of the vehicles was covered by the bill of sale. The second is that there was, in any event, no evidence that the disposal, by Mr and Mrs Cook, of either of the vehicles was to a bona fide purchaser for value without notice (thereby attracting the protection afforded by s 27 of the Act). The third is that the trial Judge should have found that there was no causal connection between the failure to register the bill of sale and the disposal of either vehicle. The fourth is that the trial Judge should have found that there was no evidence that the Cooks sold either vehicle because of non-registration of the bill of sale.
Ground 1 of the appeal and of the cross-appeal
33 We propose to deal, first, with ground 1 of each of the appeal and the cross-appeal.
(Page 10)
34 The trial Judge's finding that the respondents were liable to pay to the appellant damages in the amount of the net sale proceeds of the Cooks' wool clip was based upon the proposition that, if the bill of sale had been registered, Mr Skinner would have authorised the payment of that amount to the appellant and, because Mr Skinner did not authorise this to happen, his reason being, so he said, that the bill of sale was not registered, the appellant has lost that amount. This, his Honour concluded, was sufficient to establish causation "as a question of fact to be answered by reference to commonsense and experience and without necessarily relying upon commonly accepted tests of causation, such as the 'but for' or causa sine quanon test" (par 29).
35 That proposition necessarily assumes that no-one else on behalf of Elders or, for that matter, no-one on behalf of the Treloars, would successfully have challenged Mr Skinner's decision to authorise payment to the appellant. If those assumptions (which appear not to have been explored in evidence) are rightly made, there remains the problem that the appellant had no entitlement to any part of the proceeds of the Cooks' 1993 wool clip pursuant to the bill of sale, even if it had been registered. The Cooks were not then in default under the bill of sale and were entitled to sell their wool clip in the ordinary course of their business, according to the findings of the trial Judge, which were not challenged. The appellant's only entitlement to the net proceeds of sale arose under what his Honour described as his "apparently collateral agreement with Mr and Mrs Cook".
36 Once it is accepted that the appellant had no entitlement to those proceeds under the bill of sale, even if registered, then, it seems to us, the respondents should not have been held to be liable to compensate the appellant on account of the refusal of Elders to pay those proceeds to him. It is beside the point that Mr Skinner might have been persuaded to make (or cause Elders to make) the payment in the belief that the proceeds were payable to the appellant if the bill of sale was registered. They were not. Had the true position been known, there would have been no question of any entitlement by the appellant, under the bill of sale, to be paid the proceeds, or net proceeds, of the wool clip.
37 The ultimate question, in considering an issue of causation, is whether the defendant's wrongful act or omission is, as between the plaintiff and the defendant and as a matter of commonsense and experience, properly to be seen as having caused the relevant loss or damage: Medlin v State Government Insurance Commission (1995) 182 CLR 1 at 6; Fitzgerald v Penn (1954) 91 CLR 268 at 277 - 278; March v E & M H Stramare Pty Ltd, above, at 515, per Mason CJ (with whom
(Page 11)
- Toohey and Gaudron JJ were in agreement), and 522 and 524, per Deane J (with whom Gaudron J was also in agreement). The test is not one of simple cause and effect. As was pointed out by Mason CJ in March, above, at 516, the cases demonstrate that the "but for" test, applied as an exclusive criterion of causation, yields unacceptable results. The Courts have consequently said that it must be tempered by the making of value judgments and the infusion of policy considerations. (See March, above, at 516, per Mason CJ; 523 per Deane J; and 524, per Toohey J.)
38 Those value judgments and policy considerations might take into account such issues as remoteness. In Stapley v Gypsum Mines Ltd [1953] AC 663, Lord Reid, at 681, suggested that one must discriminate between those faults which must be discarded as being too remote and those which must not. Lord Wright, in Liesbosch v The Edison [1933] AC 449 at 460, said that the law "must abstract some consequences as relevant, not perhaps on grounds of pure logic but simply for practical reasons". To similar effect is the judgment of Andrews J, in Palsgraf v Long Island Railway Co (1928) 248 NY 339 at 352 (referred to by Fleming: The Law of Torts, 9th ed, page 232), to the effect that, "because of convenience, of public policy, or a rough sense of justice, the law arbitrarily declines to trace a series of events beyond a certain point. This is not logic. It is practical politics." While these are old cases, they still, in our opinion, reflect commonsense and experience.
39 With due respect, the respondents' failure to renew the registration of the bill of sale was not, as a matter of commonsense and experience, properly to be seen as having caused the appellant's loss, if, indeed, he can properly be said to have suffered a loss at all in this respect. As we have said, he was never entitled, under the bill of sale, to the money which he claimed, even if the bill of sale had been registered. That being so, the respondents' failure to renew the registration of the bill of sale should not be found to have caused what he claims to have been his loss in this respect.
40 We would consequently uphold ground 1 of the cross-appeal and dismiss ground 1 of the grounds of appeal.
41 We should add that, if we had not allowed ground 1 of the cross-appeal, we would not have been prepared to interfere with the trial Judge's conclusion that only the net proceeds of the wool clip ($6,855) would have been payable in any event. The trial Judge made no mistake as regards Mr Skinner's evidence on that point. Also, the appellant, in his evidence at the trial, acknowledged that he was told by Mr Skinner that
(Page 12)
- the net proceeds amounted to around $6,855. He did not suggest that he made any objection to that sum. Moreover, the appellant, in his letter of 18 February 1993, asked only that the "Nett proceeds" from the sale of the wool clip be paid to him. In these circumstances it was, in our opinion, open to the trial Judge to arrive at the conclusion reached by him.
The second and third grounds of appeal and the notice of contention
42 The appellant may be right in his contention that he took possession of the station pursuant to his agreement to repurchase it and not pursuant to the bill of sale. Indeed, counsel for the respondents conceded this to be so. He may also be right in his contention that he relied on the Cooks' trustee in bankruptcy in assuming that the two vehicles had been sold to bona fide purchasers without notice. However, there was, in our opinion, still no basis for awarding to him any compensation for the loss of those vehicles.
43 The only admissible evidence in respect of the two vehicles was very limited. It came from the appellant who said that he had seen the Isuzu truck on the station in August 1993 and again in December 1993 and that on both occasions it was being used by Mr Cook. He simply assumed that the truck had been purchased as a replacement for one which had been subject to the bill of sale and which appeared no longer to be on the station. The appellant also saw Mr Cook using the Suzuki motorcycle on the station in August 1993 and, on the trial Judge's finding, it seems to have been on the station in January 1994. The appellant knew nothing else about that motorcycle.
44 This evidence is too flimsy to support the contention that the two vehicles were subject to the bill of sale. The fact that they were seen on the station (and were in use by Mr Cook upon the only occasions on which they were seen) does not mean that the Cooks owned the vehicles. They may have been borrowed, hired or leased. There is no admissible evidence that the vehicles were sold by the Cooks. Even if they were owned by the Cooks and sold or removed by them shortly prior to their bankruptcy, this must have been done in breach of the terms of the bill of sale which, although unregistered, was still in force as between the Cooks and the appellant. Moreover, there was no admissible evidence as regards the identity of any purchaser or purchasers, or as regards the circumstances of any sale, and there is consequently nothing to say whether or not the two vehicles, if sold, were acquired by the purchaser or purchasers bona fide, for valuable consideration and without express notice, thereby attracting the protection of s 27 of the Act.
(Page 13)
45 There is consequently no sufficient basis for any finding of liability on the part of the respondents in this respect and we are not prepared to uphold these grounds of appeal.
Ground 2 of the cross-appeal
46 That leaves ground 2 of the cross-appeal which, as we have said, takes issue with the award of compound interest in favour of the appellant.
47 Because of the conclusions at which we have arrived in respect of the other grounds of appeal and cross-appeal, this issue remains alive only in respect of interest awarded by the trial Judge on losses suffered by the appellant arising out of his payment, on 13 June 1994, of a sum of $60,000 to the Official Receiver. That was the sum paid by the appellant for plant and stock under the contract of purchase with the Official Receiver dated 17 December 1993. We have said that the trial Judge found that if the bill of sale had been registered, this expenditure would not have been incurred. We have also mentioned that his Honour also found that, on 7 April 1995, the appellant received a dividend from the Cooks' bankrupt estate in an amount of $35,495, leaving the appellant out of pocket in the sum of $24,505.
48 The trial Judge found that, if this money had been available to the appellant, it would have been devoted to business or commercial activities, including the payment of debts owed by him to the Commonwealth Bank and Elders, or to investments in term deposits. These findings were made on the basis of evidence which established that the appellant was, at the time, paying interest on his debts at an annual rate of 11.25 per cent and that the sums placed by him on deposit were returning between 7 and 8.5 per cent per annum. We have said that the trial Judge took what he described as "a conservative approach" and awarded to the appellant interest at the rate of 5 per cent per annum, compounded monthly. Interest was awarded at that rate on the sum of $60,000 from 13 June 1994 to 7 April 1995 and on the sum of $24,505 from 7 April 1995 to the date of judgment.
49 There is no challenge to any of the trial Judge's findings of fact in this respect and nor is there any challenge to the rate at which interest was awarded. The only grounds of challenge are that the trial Judge should have declined to award compound interest in point of principle because (a) the compensation payable to the appellant was in the nature of unliquidated damages, and "not moneys caused to be paid away or withheld" from him, and (b) to the extent that the justification for the
(Page 14)
- award of compound interest by way of damages was dependent upon the respondents' knowledge of the state of the plaintiff's financial affairs, there was no evidence to support such knowledge.
50 We are not persuaded that either of these contentions has been made good.
51 The damages to which the appellant was found to be entitled resulted, as we have said, from the fact that he was required, on 13 June 1994, to pay a sum of $60,000 which, were it not for the negligence of the respondents, he would not have been required to pay. He consequently lost the use of that sum between that date and 7 April 1995, upon which date his loss was reduced to the sum of $24,505. The award of compound interest was not made in order to compensate the appellant for the late payment of his damages (as to which see Hungerfords v Walker (1989) 171 CLR 125 at 152 and Andjelic v Marsland (1996) 186 CLR 20 at 36 - 37). Rather, it was made in order to compensate the appellant for wrongfully caused loss of use of his money; that is for losses that were found to have been suffered by him as a consequence of his inability to use the sums in question for the purposes identified.
52 In Hungerfords v Walker, above, at 142 - 145, Mason CJ and Wilson J could see no reason why, if a plaintiff sustains loss or damage in relation to money which he has paid out or foregone, he should not be entitled to recover damages for loss of the use of the money when the loss or damage sustained was reasonably foreseeable as liable to result from the relevant tort. They said (page 143) that any other policy would be at odds with the fundamental principle that a plaintiff is entitled to restitutio in integrum. They went on to say (ibid):
"According to that principle, the plaintiff is entitled to full compensation for the loss which he sustains in consequence of the defendant's wrong, subject to the rules as to remoteness of damage and to the plaintiff's duty to mitigate his loss. In principle he should be awarded the compensation which would restore him to the position he would have been in but for the defendant's breach of contract or negligence. Judged from a commercial viewpoint, the plaintiff sustains an economic loss if his damages are not paid promptly, just as he sustains such a loss when his debt is not paid on the due date. The loss may arise in the form of the investment cost of being deprived of money which could have been invested at interest or used to reduce an existing indebtedness. Or the loss may arise in the
(Page 15)
- form of the borrowing cost, ie, interest payable on borrowed money or interest foregone because an existing investment is realised or reduced."
53 Their Honours also pointed out (at 144) that incurred expense and opportunity cost arising from paying money away or the withholding of moneys due to the defendant's wrong are something more than the late payment of damages. They are pecuniary losses suffered by the plaintiff as a result of the defendant's wrong.
54 Importantly, so far as the arguments advanced in the cross-appeal are concerned, their Honours added (page 146) that, once it is accepted that the cost of borrowing money to replace money paid away or withheld is not too remote, it is pointless to insist on a distinction between the award of damages for loss of the use of money in the case of a liquidated claim and the award of such interest in an unliquidated claim.
55 Brennan and Deane JJ, in that case, were in general agreement with the reasons given by Mason CJ and Wilson J.
56 They, too, saw (page 152) a critical distinction between an order that interest be paid upon an award of damages and an actual award of damages which represents compensation for a wrongfully caused loss of the use of money and which is assessed by reference to interest which would have been earned by investment of the money or which was in fact paid upon borrowings which need not otherwise have existed. They said (ibid) that:
"… there is no acceptable reason why the ordinary principles governing the recovery of common law damages should not, in an appropriate case, apply to entitle a plaintiff to an actual award of damages as compensation for a wrongfully and foreseeably caused loss of the use of money. To the extent that the reported cases support the proposition that damages cannot be awarded as compensation for the loss of the use of a specific sum of money which the wrongful act of a defendant has caused to be paid away or withheld, they are contrary to principle and commercial reality and should not be followed."
57 In our opinion, these principles were correctly applied by the trial Judge. On his undisputed finding, the appellant was required to pay a sum of money which he would not have been required to pay if the respondents had not been negligent. He also found (and this finding, too, is not disputed) that the need to pay this sum caused the appellant to suffer
(Page 16)
- further losses as a consequence of his being unable to put that money to use elsewhere. On our reading of what was said in Hungerfords v Walker, it was, in those circumstances, open to the trial Judge to compensate the appellant for those additional losses, in the manner in which he did so. We consider that this was so even in circumstances in which there was no evidence that the respondents knew of the state of the appellant's financial affairs. It is foreseeable that if someone is required to pay money which, were it not for the tort, he would not have to pay, this will prevent him from utilising those funds elsewhere, either to minimise debt (and therefore interest payments) or to earn interest. As was said by Mason CJ and Wilson J in Hungerfords, above, at 143 - 144:
"The requirement of foreseeability is no obstacle to the award of damages, calculated by reference to the appropriate interest rates, for loss of the use of money. Opportunity cost, more so than incurred expense, is a plainly foreseeable loss because, according to common understanding, it represents the market price of obtaining money. But, even in the case of incurred expense, it is at least strongly arguable that a plaintiff's loss or damage represented by this expense is not too remote on the score of foreseeability. In truth, it is an expense which represents loss or damage flowing naturally and directly from the defendant's wrongful act or omission, particularly when that act or omission results in the withholding of money from a plaintiff or causes the plaintiff to pay away money."
Conclusion
59 It follows that we would dismiss the appeal and uphold only the first ground of cross-appeal. The consequence is that the award of the trial Judge should be set aside and replaced with one for damages in an amount of $24,505, together with interest, at the rates set by the trial Judge, on the sum of $60,000 from 13 June 1994 to 7 April 1995 and on the sum of $24,505 from 7 April 1995 to the date of judgment.
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