Hogan v Trustee of the Roman Catholic Church (No 2)

[2006] NSWSC 74

CITATION:	Hogan v Trustees of the Roman Catholic Church (No. 2) [2006] NSWSC 74
HEARING DATE(S):	10/2/06
JUDGMENT DATE :	3 March 2006
JUDGMENT OF:	Bell J at 1
DECISION:	1. The defendants are to pay the plaintiff interest at the rate prescribed by Schedule 5 on his costs of the second trial in the sum of $109,577.17; 2. The plaintiff is to pay the defendants interest on costs in 91801/04, 91802/04, 91803/04 in the amount of $13,508.26; 3. No order as to the costs of each motion.
CATCHWORDS:	Interest on costs
LEGISLATION CITED:	Civil Procedure Act 2005 Legal Profession Act 1987 Supreme Court Rules 1970
CASES CITED:	Minister Administering the Environmental Planning and Assessment Act 1979 v Carson (1994) 35 NSWLR 342 Trustees of the Roman Catholic Church v Hogan [2001] NSWCA 381 Trustees of the Roman Catholic Church v Hogan (No. 2) [2002] NSWCA 7
PARTIES:	Paul Martin Hogan (Plaintiff) Trustees of the Roman Catholic Church for the Archdiocese of Sydney (Defendant)
FILE NUMBER(S):	SC 20164/98
COUNSEL:	M Einfeld QC / D Brogan (Plaintiff) I Harrison SC (Defendant)
SOLICITORS:	Anthony J E Gould Solicitor (Plaintiff) Makinson & d’Apice (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

BELL J

Friday 3 March 2006

20164/98 Paul Martin Hogan v Trustees of the Roman Catholic Church for the Archdiocese of Sydney

JUDGMENT

1 BELL J: By notice of motion filed on 17 November 2005 the plaintiff claimed orders including:

3. The defendants pay the plaintiff interests on his costs and disbursements awarded, from the date of judgment of the first trial (15 February 2001) to the date the defendants pay the plaintiff’s costs and disbursements, at the rates prescribed by Schedule 5 of Uniform Civil Procedure Regulations 2005.

4. The defendants pay the plaintiff interest on his costs and disbursements awarded, from the date of judgment to the second trial (7 April 2003) to the date the defendants pay the plaintiff's costs and disbursements, at the rate prescribed by Schedule 5 of Uniform Civil Procedure Regulations 2005.

5. In the alternative, the defendants pay the plaintiff interest on his costs and disbursements, from the date of the plaintiff’s payments of such costs and disbursements, to the date the defendants pay the plaintiff’s costs and disbursements, at the rate prescribed by Schedule 5 of Uniform Civil Procedure Regulations 2005.

2 In light of an undertaking given by the defendants, the plaintiff did not move for the orders claimed in paragraphs 1 and 2 of his motion.

3 Section 101 of the Civil Procedure Act 2005 (the Act) relevantly provides as follows:

(4) The court may order that interest is to be paid on any amount payable under an order for the payment of costs.

(5) Interest under subsection (4) is to be calculated, at the prescribed rate or at such other rate as the court may order, as from:

(a) the date or dates on which the costs concerned were paid, or

(b) such later date as the court may order.

4 In prayers (3) and (4) of his motion the plaintiff claims orders for interest from the date of judgment in each of two trials. Mr Einfeld QC, who with Mr Brogan appeared on the plaintiff’s behalf, acknowledged that the language of s 101(5) was not apt to support the making of orders in these terms. His submissions were directed to the order claimed in prayer 5 of the motion, that the defendants pay interest on the plaintiff’s costs and disbursements from the dates the plaintiff paid his solicitor such costs and disbursements.

5 The defendants filed a notice of motion on 20 December 2005, claiming orders for the payment of interest with respect to costs and disbursements incurred by them, which were the subject of interlocutory orders in their favour. The two motions were heard together.

6 During the course of the hearing Mr Harrison SC, who appeared on the defendants’ behalf, handed up two schedules identifying the respects in which the defendants claimed that the costs of each of the trials should be reduced. Mr Einfeld was not in a position to concede the accuracy of the schedules at the time. The parties were given leave to file supplementary submissions in this respect. In response to this invitation, I was informed that the differences on quantum had been resolved between the parties and Mr Einfeld submitted a short note as to the position reached. The plaintiff accepted a number of variations identified in the defendants’ schedule for the costs of the first trial, save for one item in the amount of $1,379.00. The defendants accepted this refinement. In the result the agreed costs upon which the plaintiff claims interest arising out of the first trial is in the amount of $231,912.46.

7 The plaintiff agreed to the variations proposed by the defendants in the schedule of the costs of the second trial. The figure on which interest is claimed in relation to the second trial is to be reduced by $13,542.50. The agreed costs on which the plaintiff claims interest for the second trial are $492,678.82.

8 The defendants claim interest on costs paid by them from time to time that were the subject of costs orders in their favour, which are summarised as follows:

· 91801/04 - $10,439.49

· 91802/04 - $1,557.21

· 91803/04 - $2,676.81

9 The parties agreed that interest in relation to the defendants’ claim is allowable up to 21 November 2005 (subject to the plaintiff's contention that no order should be made for interest since it was not the defendants but their insurer which paid the costs and disbursements to the defendants’ solicitors). The parties are agreed that assessment 91803/04 is the subject of a 25 percent deduction, consistent with the ruling of the costs assessor. The result is that the parties are agreed that interest, if payable to the defendants, should be in the amount of $13,508.26.

10 The proceedings came on for trial before Wood CJ at CL and a jury and were concluded by verdict and judgment for the plaintiff given on 15 February 2001. On that day his Honour ordered that the defendants pay the plaintiff's costs on a party and party basis. His Honour stayed the execution of the judgment conditioned, inter alia, upon them making a payment of the sum of $500,000.00 to the plaintiff within 21 days and lodging their notice of appeal within the same period.

11 On 7 March 2001 the defendants’ solicitors, Makinson & d’Apice, forwarded their clients’ cheque in the sum of $499,245.90 in accordance with the orders of Wood CJ at CL to TD Kelly & Co, the plaintiff’s solicitors. The balance, an amount of $754.10 appears to have been forwarded to the Health Insurance Commission in satisfaction of a notice of charge.

12 On 5 April 2001 TD Kelly & Co wrote to the plaintiff enclosing a cheque in the sum of $218,026.04 and a statement itemising their professional costs and disbursements. The balance of the sum received from Makinson & d’Apice, $281,219.86, was withheld on account of TD Kelly & Co’s costs and disbursements of acting for the plaintiff in the proceedings.

13 The defendants successfully appealed against the verdict and judgment. The Court set aside the judgment and ordered a new trial limited to the assessment of damages. The Court directed that the costs order made by Wood CJ at CL should stand: The Trustees of the Roman Catholic Church v Hogan [2001] NSWCA 381 per Mason P (with whom Heydon JA agreed at [58] and Hodgson JA agreed at [53]).

14 On 7 February 2002 Mason P ordered the plaintiff to repay to the defendants the sum of $499,245.90, plus interest in accordance with Schedule J of the Supreme Court Rules 1970 (the SCR) from 8 March 2001 to the date of repayment: Trustees of the Roman Catholic Church v Hogan (No. 2) [2002] NSWCA 7.

15 By letter dated 4 July 2002 TD Kelly & Co wrote to Makinson & d’Apice enclosing a cheque in the sum of $230,996.04, being the amount that the plaintiff had been ordered to repay to the defendants less the sum of $268,249.86, which was described as being the amount of costs conceded by the defendants as payable to the plaintiff pursuant to the costs order of 15 February 2001.

16 Makinson & d’Apice wrote to TD Kelly & Co on 8 July 2002 acknowledging receipt of a bank cheque in the sum of $230,996.04 and denying that any concession had been made with respect to costs in the amount of $268,249.86. The defendants maintained that the plaintiff was liable to account to them for the balance of the sum which Mason P had ordered to be repaid and noted that interest was accruing on this sum from 4 July 2002 at the rate prescribed in Schedule J to the Supreme Court Rules 1970.

17 On 7 April 2003 following the second trial verdict and judgment was entered for the plaintiff against the defendants in the amount of $1,278.067.46. The defendants were ordered to pay the plaintiff’s costs of the second trial on a party and party basis up to and including 16 July 2002 and thereafter on an indemnity basis.

18 On 24 April 2003 Makinson & d’Apice wrote to TD Kelly & Co enclosing the defendants’ cheque in the sum of $923,532.13. The sum of $213.90 was withheld to be forwarded direct to the Health Insurance Commission. Together these two sums were expressed to amount to full satisfaction of the judgment sum. The sum of $268,249.86 (the unpaid balance of the monies ordered to be repaid to the defendants) was deducted from the judgment monies. Interest at the rate prescribed by Schedule J was also deducted. This comprised $66,625.37 being interest on the whole sum up to 4 July 2002 (when part repayment was made) and $19,446.27 being interest on the outstanding balance from that date to 24 April 2003.

19 Considerable delay attended the assessment of the plaintiff’s costs of both trials and is relied on by the defendants in opposing the making of the orders. It is necessary to refer to the history of litigation between the plaintiff and his former solicitors in dealing with the submissions that were advanced in this respect.

20 TD Kelly & Co acted for the plaintiff at both the first and the second trials. The plaintiff’s wife, Ms Gould, was employed as a solicitor with TD Kelly & Co and undertook some solicitors’ work in connection with the proceedings. At some time, not later than late April 2003, the plaintiff had a falling out with TD Kelly & Co. Mr Kelly, of TD Kelly & Co, became concerned that Ms Gould had given Makinson & d’Apice’s cheque for the judgment sum (less adjustments) to her husband. TD Kelly & Co wrote to Makinson & d’Apice requesting that payment on the cheque be stopped and it was. On 1 May 2003 Mr Kelly commenced proceedings in the Equity Division seeking a declaration that he and his partner, Mary Anne Grieve, had a lien over the proceeds of any judgment for unpaid legal fees and disbursements. The Trustees of the Roman Catholic Church for the Archdiocese of Sydney (the Trustees) were joined as third defendants to that suit. In the event, the Trustees paid the amount of the judgment (less the deductions representing the unpaid balance of the sum the subject of Mason P’s order and interest) into Court.

21 Orders were made in the Equity proceedings that the sum of $506,221.32, which had been paid into court, was to be paid out to Mr Kelly and Ms Grieve upon their undertaking to disburse it in accordance with the Court’s order. The orders, which were entered on 26 May 2003, specified the payment of various disbursements including counsels’ fees and fees due to expert medical witnesses. I am satisfied that these sums were paid out of court on 4 June 2003.

22 It would seem that the delays that attended the assessment of the plaintiff’s costs of both trials in the period after April 2003 were occasioned in some degree by the fact that TD Kelly & Co did not have access to their file with respect to the plaintiff’s claim.

23 Mr Kelly subsequently obtained access to his firm’s file and solicitors acting for him wrote to Mr McGruther, the costs assessor, on 18 May 2005 noting that he had been furnished with the same. Applications for the assessment of the plaintiff’s costs of the first and second trials were filed on his behalf in April 2005. TD Kelly & Co’s application for the assessment of their costs on a solicitor and client basis was determined by Mr McGruther at the same time.

24 On 26 October 2005 Mr McGruther issued certificates as to the determination of costs on a party and party basis pursuant to s 208F and s 208J of the Legal Profession Act 1987 with respect to the costs of the first trial in the sum of $308,580.05 and in respect of the second trial in the sum of $586,855.51.

25 On 21 November 2005 Makinson & d’Apice wrote to the plaintiff’s solicitors enclosing a cheque drawn in the sum of $777,118.54. This sum represented the two costs assessments, together with an amount of $500 referable to a costs order made on 8 July 2002, less the amount of $118,817.02 which was the sum of a number of costs assessments in the defendants’ favour (assessments 91800/04, 91801/04, 91802/04, 91803/04 and a High Court taxation S270 of 2001).

26 The plaintiff submitted that his judgment monies were applied in payment of his solicitor’s costs on 5 April 2001 and that he is entitled to be compensated by an award of interest from that date until 21 November 2005 when the costs were paid.

27 With respect to the costs of the second trial, the plaintiff contended he has been out of pocket in the amount of $506,221.32, which was paid out his judgment monies in respect of disbursements pursuant to the Court order from 4 June 2003. He claims an order for interest from that date until 21 November 2005. Attached to written submissions made on his behalf is a schedule of interest calculated in accordance with Schedule 5 of the Uniform Civil Procedure Rules 2005.

28 In Mr Einfeld’s submission the plaintiff was notionally out of pocket for his costs from the date when TD Kelly & Co first applied the defendants’ monies to this end. The monies were the plaintiff’s judgment monies. In Mr Einfeld’s submission there could be no argument but that the plaintiff was entitled to be compensated by an order for interest for the period between 5 April 2001 and 7 February 2002 when Mason P directed that the plaintiff repay the whole of the sum. From the latter date Mr Einfeld accepted that one could not characterise the monies as in any sense the plaintiff’s monies. However, he submitted that the Court should take into account that the defendants withheld the sum of $268,249.86 together with interest from the plaintiff’s judgment monies. I am not persuaded that the proper exercise of the discretion conferred by s 101(5) of the Act is to order interest to be paid in respect of the period to 7 February 2002 or after it. The sum forwarded by Makinson & d’Apice to TD Kelly & Co on 7 March 2001 pursuant to the order made by Wood CJ at CL as a condition of the stay was money to which the plaintiff had no entitlement by reason of the outcome of the appeal. I do not consider that the plaintiff should be compensated by an order for interest from the date when his solicitors chose to apply monies received from the defendants in satisfaction of their costs. The whole of the sum should have been repaid to the defendants in accordance with Mason P’s order. Whatever cause for complaint the plaintiff may have arising out his solicitors’ conduct in failing to refund the whole of the sum (thereby exposing him to the payment of interest on the balance at the Schedule J rate) I do not consider that I should direct the defendants to pay interest on costs that were paid out of their funds.

29 The defendants submitted that the plaintiff’s conduct, including events that led to the Equity suit brought by his former solicitor, had occasioned excessive delays over which they had no control. The delays had been so extreme as to disentitle the plaintiff to an order for interest at all. A number of the defendants’ submissions on delay were developed by reference to the very lengthy delay that attended the assessment of the costs of the first trial. It is not necessary to recite the history in this respect in light of the view to which I have come concerning the costs of the first trial.

30 The defendants referred to the evidence filed in the Equity suit and, in particular, Mr Kelly’s claim that Ms Gould had removed the plaintiff’s files from his office, making it difficult for him to prepare a bill in assessable form. It appears that TD Kelly & Co files relating to the Common Law proceedings were produced by the plaintiff on 16 May 2003 and on 19 May 2003 leave was granted to TD Kelly & Co to uplift the documents. Mr Harrison noted that despite the plaintiff having access to the TD Kelly & Co’s files until approximately 16 May 2003, a bill of costs in respect of the second trial was not served until 14 April 2004, more than a year after the order for indemnity costs was made. The bill of costs in respect of the second trial was not served until 24 September 2004.

31 Mr Harrison submitted that the costs assessment was itself lengthy: a circumstance explained in some measure by the simultaneous assessment carried out by Mr McGruther of the solicitor and client costs in circumstances in which the plaintiff and his former solicitors had been “at war” with one another.

32 In Mr Harrison’s submission his clients had been placed in a position of difficulty. This was because it would have been in breach of the indemnity principle had the defendants paid costs to the plaintiff and had the costs assessor upheld the plaintiff’s objections to the TD Kelly & Co solicitor and client costs. In support of this submission Mr Harrison pointed to the plaintiff’s notice of objections, which included matters such as the absence of records of who had performed the work and the absence of any timesheets.

33 Mr Einfeld relied on a letter prepared by the plaintiff’s then solicitor, dated 14 April 2004, which was sent to Makinson & d’Apice:

I enclose a copy of the bill of costs that was prepared by TD Kelly & Co together with an itemised statement of JP Gould for his professional fees and fees for preparation of the enclosed document. I note that preparation for the second trial and the trial itself are all covered by the indemnity costs order.

It is noted that my client expressly reserves his right under the Legal Profession Act 1987 concerning the assessment of his former solicitors’ bill of costs. The service of this bill is not endorsement of TD Kelly & Co’s bill of costs. It is for this reason that my client gives his undertaking that he will not profit from costs having regard to the costs indemnity rule.
A claim for interest on unpaid costs shall be made at the prescribed rate from the date of the costs orders. It is for this reason, I consider that it is in your clients’ interests to resolve the issue of costs with my client expeditiously to avoid a substantial interest bill that accompanies the claim for his costs.
Accordingly please forward your clients’ objections if any, to the bill of costs enclosed within twenty-one days.

34 By letter dated 28 April 2004 the solicitors for the plaintiff reiterated the undertaking that he would not profit from costs (noting the reservation of his rights with respect to the assessment of the TD Kelly & Co bill of costs) and asked for Makinson & d’Apice’s objections to be provided by 5 May 2004.

35 The delay with respect to the second trial is between 4 June 2003 and April 2005 when the application for assessment of the costs of the second trial was filed. The circumstance that the assessment may have taken a number of months reflecting, in part, the difficulties associated with the concurrent assessment as between TD Kelly & Co and the plaintiff does not seem to me to be material to consideration of the defendants’ submission that the plaintiff's conduct is such as to disentitle him to an order for interest.

36 Significant delays attended the matter up until the submission of the bill of costs for assessment in April 2005. These delays occurred in the context of the breakdown in the relationship between the plaintiff and his former solicitor, which led to the Equity suit. Mr Harrison invited me to read Mr McGruther’s costs determination that sets out the history of disharmony between the plaintiff and TD Kelly & Co. My attention was drawn to the evidence in the Equity proceedings relating to the removal of the plaintiff’s file from TD Kelly & Co at the time his relationship with the firm soured. In the absence of any assertion that the plaintiff’s conduct was carried out deliberately in order to delay the assessment of his costs, it is not clear what it is about his conduct that disentitles him to an order for interest that serves to compensate him and recognises that the defendants have had the benefit of the funds over the period: Minister Administering the Environmental Planning and Assessment Act 1979 v Carson (1994) 35 NSWLR 342.

37 In Mr Harrison’s submission the rates prescribed by Schedule 5 exceed those which an ordinary investor might have obtained in the market with the result that the delay leads to the plaintiff receiving a windfall and the defendants suffering a like detriment. Accepting, for present purposes, that the Schedule 5 rates over the relevant period were higher than the rates available to an ordinary investor, the defendants’ submission would not justify the refusal of an order for interest but may be a reason to order interest at some other rate. No evidence was led of commercial rates over the relevant period. It was submitted that the fact that the Schedule 5 rates are high is a matter of common knowledge and that the Court might do justice to the parties, taking into account the delay that was wholly occasioned by the plaintiff, by making an order for interest over some shorter period as may be determined. In the absence of evidence as to the suggested benefit to the plaintiff and detriment to the defendants it is not clear on what basis the Court would arrive at the appropriate reduction in the period. The Act contemplates that an order for interest will ordinarily be made on the basis that it is to be calculated at the rate prescribed in Schedule 5. The fact that there has been delay, which is not attributable to the defendants, is not in my view a sufficient reason for departing from the rate prescribed in the Schedule.

38 For these reasons I decline to make an order that the defendants pay interest with respect to the costs of the first trial. There will be an order for interest in the plaintiff’s favour in relation to the costs of the second trial for the period from 4 June 2003, when the disbursements were paid in accordance with the direction of the Court, and 21 November 2005 when the defendants paid the costs. The parties are in agreement that the interest for this period on the costs of $492,678.82 is $109,577.17.

39 Mr Einfeld submitted that the defendants should not have the benefit of an order for interest in relation to their costs because their solicitor deposed in his affidavit to the circumstance that his firm’s costs and disbursements had been paid on an interim basis throughout the proceedings by Catholic Church Insurances Limited (paragraph 11 of the second affidavit of Stewart Roberts sworn on 20 December 2005). In his submission the defendants were not able to establish that they were out of pocket in respect of the costs and accordingly should not be compensated by an order for interest. The circumstance that a party’s costs have been paid by its insurer does not seem to me to be a reason to withhold an order for the payment of interest under s 101 of the Act. The claim may only be made by the party to whose rights the insurer is subrogated. As I have earlier noted, the parties are agreed as to the amount of the interest calculated at the Schedule 5 rate in respect of the costs paid by the defendants under interlocutory costs orders in their favour for the period to 21 November 2005.

40 Each party has had a measure of success with respect to the relief claimed in the plaintiff’s motion. The defendants’ motion was filed after the plaintiff brought his motion and sought to set off claims for interest on relatively modest assessed costs, which had been paid a number of years earlier. The two motions proceeded in tandem and although the defendants were substantially successful with respect to their motion I have concluded that it is appropriate that there be no order as to costs with respect to each of the motions.

ORDERS
1. The defendants are to pay the plaintiff interest on his costs of the second trial in the sum of $109,577.17.
2. The plaintiff is to pay the defendants interest on their costs of assessments 91801/04, 91802/04, 91803/04 in the amount of $13,508.26.
3. No order as to the costs of each motion.
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