Kahu NZ Ltd v Aviation Utilities Pty Ltd [No 4]

[2024] WASC 395

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   KAHU NZ LTD -v- AVIATION UTILITIES PTY LTD [No 4] [2024] WASC 395

CORAM:   SOLOMON J

HEARD:   ON THE PAPERS

DELIVERED          :   24 OCTOBER 2024

FILE NO/S:   CIV 2012 of 2022

BETWEEN:   KAHU NZ LTD

Plaintiff

AND

AVIATION UTILITIES PTY LTD

Defendant

Catchwords:

Post-judgment orders - Depreciation - Interest - Costs

Legislation:

Chancery Amendment Act 1858 (21 & 22 Vict c 27)
Legal Profession Uniform Law Application Act 2022 (WA) s 141(3)
Supreme Court Act 1935 (WA) s 32(1)

Result:

Method of allocation of depreciation resolved

Pre-judgment interest payable

Category:    B

Representation:

Counsel:

Plaintiff	:	No appearance
Defendant	:	No appearance

Solicitors:

Plaintiff	:	Peter May McAuliffe Legal (Busselton)
Defendant	:	Norton White

Cases referred to in decision:

Blackley Investments v Burnie City Council (No 3) [2013] TASSC 14

Kahu NZ Ltd v Aviation Utilities Pty Ltd [No 3] [2024] WASC 347

Madden v Kevereski [1983] 1 NSWLR 305

SOLOMON J:

1. On 25 September 2024, I published reasons relating to the trial of this matter: Kahu NZ Ltd v Aviation Utilities Pty Ltd [No 3] [2024] WASC 347 (primary reasons).

2. The parties are in dispute as to the orders that should follow from the primary reasons.  These brief reasons are directed to resolving that dispute.  As the matter was explained fulsomely in the primary reasons, I have made only brief reference to the issues in broad terms.

3. The substantive dispute between the parties concerns the final quantum of damages to be paid by the defendant in accordance with the primary reasons.  Following exchanges of written submissions, the dispute reduced to two primary issues; the appropriate amount in relation to depreciation, and whether interest is payable on the judgment sum.

Depreciation

1. The conclusion reached in the primary reasons was that depreciation ought not to be excluded from the calculation of profit for the 2021/22 firefighting season.[1]  As explained in the primary reasons at [423], the approach of Kahu's accounting expert Ms Low was to assess the lost profit for the 2021/22 firefighting season, and to use that figure as a baseline to assess lost profit for future seasons.  The primary reasons accepted and adopted Ms Low's approach other than in respect of depreciation, which Ms Low considered should be excluded from the calculation of profit.

   [1] Primary reasons [450(d)].

2. As also explained in the primary reasons, both expert accountants accepted that there ought to be a reallocation of overhead expenses. The experts were divided on how that reallocation should be undertaken. Their approaches were explained in the primary reasons; Ms Low at [427], and the defendant's expert Mr Honey at [440]. In the primary reasons, the approach of Ms Low was preferred and adopted. That approach was that 34.5% of the expenses should be allocated to the calculation of Kahu's profit.

3. The parties agree that, on the basis of the primary reasons, the calculation of profit for the 2021/22 firefighting season should be adjusted to include depreciation.  They also agree that the full depreciation expense for that year was NZD $190,348.  However, they are again divided on the allocation of the depreciation expense.  The plaintiff contends that Ms Low's approach should be applied to depreciation, and that 34.5% of the depreciation should be allocated to the expenses for the 2021/22 firefighting season.  The defendant contends that the proportion should be that adopted by its expert, Mr Honey, which for depreciation was 65%.

4. As observed in the primary reasons at [441], both experts accepted that neither approach was perfect and neither approach was wrong; it was a matter of preference and appropriateness in the circumstances. 

5. I see no reason that would compel a different approach to the reallocation of depreciation than that adopted for other expenses.  It may be accepted that in respect of depreciation, Mr Honey was able to quantify a percentage as he had information that was not entirely available for other expense items.  Nevertheless, in my view, it is preferable to adopt a consistent approach to all expense items.  I will make orders reflecting an allocation of 34.5% of the depreciation expense to the calculation of profit for the 2021/22 firefighting season. 

Interest

1. The principles, including the statutory provisions that govern the award of compensation are set out in the primary reasons at [381] - [387].  As explained, the court has a wide power to assess compensation in such manner as it thinks fit.

2. Kahu contends that pre-judgment interest ought to be ordered. The defendant contends that in light of the conclusion at [387] of the primary reasons, the plaintiff is not entitled to pre-judgment interest. Kahu accepts that it is not entitled to interest under s 32(1) of the Supreme Court Act1935 (WA) by reason of the conclusion at [387], because that provision provides for interest since the point in time at which the cause of action arose. However, Kahu submits that the broad discretionary power under s 25(10) permits an award of pre-judgment interest.

3. The parties in their written submissions referred to a number of cases and texts.  It may be accepted that there is a degree of complexity and perhaps lack of clarity in this area of the law.  In my view, it is not necessary to traverse the authorities in any detail.  It is sufficient to observe that s 25(10) gives the court a broad discretion (see also Madden v Kevereski [1983] 1 NSWLR 305 at 307 and Blackley Investments v Burnie City Council(No 3) [2013] TASSC 14 at [14]). That statutory provision manifests the flexibility of equity over the common law which itself reflects the history of Lord Cairns Act and its equivalent provisions[2] (see generally McGregor on Damages [12‑029][3]).  In my view, in the exercise of that discretion, general propositions should yield to a solution that best reflects the interests of justice in providing fair compensation. 

   [2] Chancery Amendment Act 1858, (21 & 22 Vict c 27).

   [3] Edelman J, McGregor on Damages (22^nd edition, 2024) [12-029].

4. I consider that fair compensation and the interests of justice require that interest be paid on the pre-judgment amounts, that is, on the loss of profits for the 2022/23 season and the 2023/24 season.  I agree with Kahu's submission that interest should only accrue from the end of the season, that is, from 4 April of the relevant year.

Costs

1. The parties agree generally that costs should follow the event, that is, the defendant should pay the plaintiff's costs including reserved costs.  I shall make orders in those terms.

2. The plaintiff seeks orders under s 141(3) of the Legal Profession Uniform Law Application Act 2022 (WA). The defendant opposes that application. I shall make orders providing for the mechanism and a timetable for the determination of that application. I am prepared to give each party the time it prefers to file materials in support of its position.

3. The plaintiff seeks four specific orders in relation to costs:

   (1)an express order that the plaintiff's costs shall include allowances in respect of specific written material;

   (2)an express order that the plaintiff's costs shall include allowances in respect of complying with certain directions or requests from the court;

   (3)an express order that the plaintiff's costs shall include an allowance for two junior counsel; and

   (4)an order that certain existing costs orders in favour of the defendant be set off against the costs payable by the defendant to the plaintiff in relation to the trial.

4. The defendant opposes those orders and contends that those matters ought to be determined by the costs assessor.

5. I consider that matters (1) and (2) should be left to the costs assessor, but I consider that matters (3) and (4) are appropriately dealt with by the trial judge.  I consider it appropriate for those orders to be made.

Payment out of court

1. Kahu has paid money into court to satisfy orders for security.  The parties are agreed that orders should be made for the payment out of court of those funds and accordingly those orders will be made.

Minute

1. The parties should prepare a minute of orders that reflect these remarks.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

LZ

Associate to the Honourable Justice Solomon

24 OCTOBER 2024