K and E George Pty Ltd v Survery

[2009] NSWSC 1044

CITATION:	K & E George Pty Ltd v Survery [2009] NSWSC 1044
HEARING DATE(S):	25 September 2009
JUDGMENT DATE :	2 October 2009
JUDGMENT OF:	Harrison J
DECISION:	1. Order pursuant to s 100 of the Civil Procedure Act 2005 that the first defendant pay interest to the plaintiff on payments made by the plaintiff to the second defendant from the date of each payment to date at rates prescribed by Schedule 5 of the Uniform Civil Procedure Rules 2005. 2. Order the first defendant to pay the plaintiff's costs of these proceedings. 3. Order that there be no order for costs of the plaintiff for any participation by it in the medical negligence proceedings 2006/20221 in this Court.
CATCHWORDS:	INTEREST – where employer makes payments of compensation to an injured worker in circumstances creating a liability in a third party to pay damages in respect of the injury – where the employer commences separate proceedings against the third party for declarations and orders under s 151Z Workers' Compensation Act 1987 for repayment and indemnity – where employer claims interest on payments made to worker – where entitlement to interest not in dispute – question of "conventional practice" to apply Court rates - whether employer entitled to interest at UCPR Schedule 5 rates or market rates – COSTS – whether employer entitled to costs of proceedings when repayments made or conceded by third party without orders being pronounced – whether reasonable or necessary to commence proceedings
LEGISLATION CITED:	Civil Procedure Act 2005 Uniform Civil Procedure Rules Workers' Compensation Act 1987
CATEGORY:	Procedural and other rulings
CASES CITED:	George v Survery [2009] NSWSC 5 Heydon v NRMA Ltd (No 2) [2001] NSWCA 445; (2001) 53 NSWLR 600 Hexiva Pty Ltd v Lederer (2) [2007] NSWSC 49 Hogan v Trustees of the Roman Catholic Church (No 2) [2006] NSWSC 74 Ruby v Marsh [1975] HCA 32; (1975) 132 CLR 642 RW Miller & Co Pty Ltd v The Ship Patris [1975] 1 NSWLR 704 Wallersteiner v Moir (No 2) [1975] 1 QB 373
PARTIES:	K & E George Pty Ltd (Plaintiff) Dr Hafizur Survery (First Defendant) Kevin George (Second Defendant)
FILE NUMBER(S):	SC 20575/2008
COUNSEL:	L King SC with M J Walsh (Plaintiff) M T McCulloch SC (Defendant)
SOLICITORS:	Turks Legal (Plaintiff) Avant Law Pty Ltd (First Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

HARRISON J

2 October 2009

20575/2008 K & E George Pty Ltd v Dr Hafizur Survery & Kevin George

JUDGMENT

1 HIS HONOUR : On 12 January 2009 in separate proceedings I decided that the plaintiff's injury for which compensation was payable under the Workers Compensation Act 1987 ("the Act") was caused in circumstances creating a liability in the defendant to pay damages in respect of that injury: see George v Survery [2009] NSWSC 5. These reasons assume familiarity with that decision.

2 K & E George Pty Ltd was the employer of the plaintiff in those proceedings. These proceedings were commenced by that company seeking a declaration that it was entitled to an indemnity from Dr Survery pursuant to s 151Z(1)(d) of the Act for compensation that it had paid to Mr George and a declaration that Mr George was liable pursuant to s 151Z(1)(b) of the Act to repay the company the compensation it had paid Mr George out of any damages payable to him by Dr Survery in those proceedings. Orders for the payment of these amounts were also sought in cognate terms. If these declarations and orders originally appeared to be controversial, they are not controversial now. This is because even though the declarations and orders were never made, the parties have proceeded to conduct their affairs as if they had been.

3 The company also sought orders for interest on the amounts that it had paid and for its costs of the proceedings. Dr Survery acknowledges that the company is entitled to interest but disputes the rate at which such interest should be calculated and paid. Dr Survery denies that the company is entitled to costs. These reasons are limited to an adjudication of those two issues.

Interest

The company

4 The company claims interest at Uniform Civil Procedure Rules ("UCPR") Schedule 5 rates. The company's claim is for an order for interest up to judgment and by rule 6.12(8) "is taken to be the relevant rate of interest prescribed by Schedule 5 for the purposes of s 101 of the Civil Procedure Act 2005 ". The Court has power to prescribe the precise rate of interest and the period over which it is to be paid. The company contended that it was conventional practice to adopt the Schedule 5 rates, without the need to call evidence, in the absence of some specific or compelling reason to do otherwise: see RW Miller & Co Pty Ltd v The Ship Patris [1975] 1 NSWLR 704. The company submitted that the scheduled rates should apply to this case so that whether on a compensatory or restitutionary basis it is reimbursed for the amounts by which it has been out-of-pocket as a result of the payments it has made.

5 The company emphasised what was said by Mason P in Heydon v NRMA Ltd (No 2) [2001] NSWCA 445; (2001) 53 NSWLR 600 at [30] as follows:


"[30] It would be intolerably burdensome if a court required evidence and argument in every case as to what rate or rates of interest would do justice to the principles which I have endeavoured to summarise. The interests of the parties and of the court, including the interest of consistency as a component of justice, are served by taking a broad, standard approach whereby interest is calculated according to pre-determined rates that the parties can take into account in their dealings during the litigation and in their endeavour to avoid wasteful disputation concerning its outcome."

6 There must be special circumstances to justify a different rate from the Schedule 5 rates and they must be circumstances particular to the case. See, for example, Wallersteiner v Moir (No 2) [1975] 1 QB 373. Bell J discussed departure from the scheduled rates in Hogan v Trustees of the Roman Catholic Church (No 2) [2006] NSWSC 74. At [34] her Honour said the following:


"[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." (emphasis added)


7 The company contended that there was no basis to apply any rate of interest other than the relevant rate of interest prescribed by Schedule 5 for the purposes of s 101 of the Civil Procedure Act .

Dr Survery

8 Dr Survery argued that the rate of interest ordered should be one that "fairly reflects the effect of the [company] being without its money for the relevant period of time". He contended that that was either the actual rate as it applied to the company's investments or in default a "market rate".

9 Dr Survery referred to the decision of Brereton J in Hexiva Pty Ltd v Lederer (2) [2007] NSWSC 49, especially at [6] – [8], [16] and [23]. His Honour described the claim in that case as "in substance a claim for damages in the nature of interest for late payment of the principal debt". He went on to say that accordingly in that case "an award of interest [could] be supported either by reference to s 100(2), or as damages". Paragraph [16] of his Honour's judgment was relevantly as follows:


"[16] The prescribed rates for interest on judgment debts do not apply, at least directly, to prejudgment interest under s 100: they are prescribed only for the purposes of Civil Procedure Act , s 101, which relates to interest after judgment [ CPA , s 101(7), (NSW) Uniform Civil Procedure Rules 2005, r 36.7]. Where no rate is prescribed for pre-judgment interest, the starting point is the average commercial rate for the relevant period [ Smallacombe v Lockyer Investment Co Pty Ltd (1993) 42 FCR 97, 103]. However, even though they have no statutory force in respect of claims for prejudgment interest under s 100, there is a conventional practice of adopting the rates prescribed for post judgment interest, without the necessity for calling specific evidence, in the absence of reason to do otherwise [ Smallacombe v Lockyer Investment Co , 574; R W Miller & Co Pty Ltd v The Ship Patris [1975] 1 NSWLR 704]. . ."


10 Dr Survery raised a series of matters that he said supported his contention that other than the scheduled rates should apply. First, Mr George did not commence his medical negligence proceedings against Dr Survery until 1 May 2007. Secondly, Mr George's entitlement to any damages was not admitted until then. Thirdly, Dr Survery was entitled to contend that s 151Z did not apply. Indeed, Mr George himself had contended that it did not apply until 19 December 2007. Fourthly, the company did not commence these proceedings until 18 December 2008, which was the same day allocated by this Court to determine as a separate question in the medical negligence proceedings whether Dr Survery was liable under s 151Z. Fifthly, it is likely that the company's insurer in fact obtained a return on invested premiums, which it has not been prepared to disclose for consideration by the Court. Sixthly, as a general proposition, the Court should have regard to the prevailing market rates: Ruby v Marsh [1975] HCA 32; (1975) 132 CLR 642 at 653. Finally, the company declined to participate in a mediation of the medical negligence proceedings.

11 Doing the best I can I have had some difficulty understanding what bearing any of these matters could have upon a resolution of the present issue. In my view they have no bearing at all and do not support the proposition that by reason of some particular or peculiar fact or set of facts a basis to apply any rate of interest other than the relevant rate of interest prescribed by Schedule 5 for the purposes of s 101 of the Civil Procedure Act has been demonstrated .

Conclusions on interest

12 In my view the relevant rate of interest prescribed by Schedule 5 for the purposes of s 101 of the Civil Procedure Act should apply.

Costs

The company

13 One of the orders that I made on 18 December 2008 was pursuant to UCPR 28.5 that these proceedings should be listed and tried at the same time as the medical negligence proceedings and that the evidence in each proceeding should be treated as evidence in the other. Counsel for the company thereafter made submissions in those proceedings without objection by Dr Survery. No point was taken at the time that this should not have occurred and no opposition was raised to the order that was sought.

14 The company contends that it was potentially affected by the outcome in the medical negligence proceedings and that it was proper that it should have been heard on the application then before the Court. There were said to be common questions that were likely to arise with respect to the company's entitlement to seek an indemnity pursuant to s 151Z, including the question of whether or not Dr Survery was a tortfeasor within the meaning of that section.

15 The company contended that these matters were sufficient to justify an order for costs against Dr Survery. However, in addition to these matters the company contended that it could not have been confident that its interests would have been fully canvassed or protected in its absence. The company submitted that it was "inescapable" that having all three interested parties before the Court bound them all to the same result, eliminated the prospect of any subsequent applications and thereby conformed with the overriding purpose in s 56 of the Civil Procedure Act .

16 Furthermore, the company submitted that an exercise of the discretion to award costs in its favour, even in the circumstances where the substantive relief sought by the company will not in the events that have occurred be the subject of judicial determination, was justified by three things. First, Dr Survery effectively capitulated in the company's claim to be entitled to the s 151Z indemnity. Secondly, unless the company had commenced these proceedings there would have been no basis to claim or to recover interest on the sums paid to Mr George on Dr Survery's behalf. Thirdly, whereas the foundation for the award of costs is compensatory rather than punitive, the company had no choice but to commence the proceedings.

Dr Survery

17 Dr Survery emphasised the comments I made at [44] in my judgment in the other proceedings where I expressed the following view:


"[44] The plaintiff and the defendant agreed that whatever the outcome of this application the costs should be costs in the cause. Mr Walsh of counsel who sought and was granted leave to make submissions on the issue on behalf of the employer argued that costs should be reserved. As the employer was not a party to the present proceedings it seems to me that Mr Walsh has no interest in, and accordingly has no standing to make submissions about, the costs order on the defendant's notice of motion. Against the contingency that I am wrong about this I propose to list the matter before me for mention at some date convenient to the parties and to the employer to be arranged in consultation with my Associate."


18 Dr Survery argued that Mr George's case was adequately presented by his counsel and that the company did not need to be represented on 18 December 2008 as well. He argued that he should not be liable for costs that were incurred unnecessarily in the sense that the company was only propounding the same arguments as Mr George. Secondly, Dr Survery contended that the company had no standing in the medical negligence proceedings to make submissions. Thirdly, Mr George and Dr Survery agreed that the costs of the motion in the medical negligence proceedings should be costs in the cause and any different order with respect to the company would be unfair. Fourthly, because no substantive orders were made in these proceedings on 18 December 2008 or at any time thereafter, it would not be open to me as a matter of discretion to order costs that were referable to an issue that had not been determined.

Conclusions on costs

19 I maintain the view that I expressed at [44] in my earlier judgment in the medical negligence proceedings. However, the issue for present purposes is whether or not the company is entitled to an order for costs in these proceedings, not whether it was entitled to contribute to the debate upon the outcome of the motion in the medical negligence proceedings or who should bear the burden of the costs of the motion in those proceedings. To the extent that Mr Walsh appeared before me on behalf of the company to seek to commence these proceedings on 18 December 2008, he was appearing in these proceedings. His contribution to the debate in the medical negligence proceedings was as counsel for the company in these proceedings alone. The company did not have standing to appear in the medical negligence proceedings and the order pursuant to UCPR 28.5 did not change that. No part of any costs to which the company is entitled in these proceedings should include the cost of its participation in the medical negligence proceedings.

20 In my opinion the company was entitled to commence these proceedings and was warranted in doing so for the reasons that it promotes. Having commenced these proceedings, and having acquired the protection and comfort of the order that the evidence in each proceeding was to be treated as the evidence in the other, there was no part that the company needed to, or could, thereafter assume in the medical negligence proceedings. Any costs incurred by the company related to or arising out of Mr Walsh's submissions on its behalf in the course of the motion in the medical negligence proceedings are not costs for which Dr Survery is liable. The company is nevertheless entitled to an order for the payment of its costs by Dr Survery in these proceedings.

21 The fact that no determination of the substantive issues has been pronounced or ordered is beside the point. Dr Survery ultimately did not put the company's entitlement to the substantive relief that it claimed in issue and in due course he repaid the amounts that the company had earlier paid to Mr George on his behalf without argument. However, this did not occur before these proceedings were commenced, and no prior offer to do so was made as far as I am aware. Until at least 18 December 2008, for all the company knew, Dr Survery was continuing to contest his obligation to indemnify it for what it had paid to Mr George. It will be recalled that on the motion in the medical negligence proceedings Dr Survery argued that the injury for which workers compensation was payable to Mr George was not an injury that was caused under circumstances creating his liability to pay him common law damages. Even now Dr Survery contends that the company's disinclination to attend the mediation of the medical negligence proceedings, and by necessary implication its refusal to contribute to a settlement of Mr George's claim, should somehow count against it. The company argues that such an attitude is potentially reflective of Dr Survery's continuing erstwhile refusal to accept the entitlements that the company sought to protect by commencing these proceedings. On the contrary, it might be argued that the company's attitude to the mediation was a reflection of the strength of its position and that the commencement of these proceedings was necessary to convince Dr Survery of the correctness of its view.

Orders

22 In all of these circumstances I consider that it was both reasonable and necessary for the company to commence these proceedings and that the following orders should be made:


1. Order pursuant to s 100 of the Civil Procedure Act 2005 that the first defendant pay interest to the plaintiff on payments made by the plaintiff to the second defendant from the date of each payment to date at rates prescribed by Schedule 5 of the Uniform Civil Procedure Rules 2005.


2. Order the first defendant to pay the plaintiff's costs of these proceedings.

3. Order that there be no order for costs of the plaintiff for any participation by it in the medical negligence proceedings 2006/20221 in this Court.

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