McKeith v Royal Bank of Scotland Group PLC; Royal Bank of Scotland Group PLC v James (No 2)

The case involved appeals from orders made by McDougall J in proceedings between McKeith and the Royal Bank of Scotland Group PLC, and Royal Bank of Scotland Group PLC and James. The dispute concerned the calculation of pre-judgment interest and the award of costs, including indemnity costs and interest on costs. The appeals were heard by Macfarlan JA, Tobias AJA, and Emmett AJA in the Court of Appeal of New South Wales.

The primary legal issues before the Court of Appeal were: (1) the correct period for which pre-judgment interest should be awarded under s 100(1) of the *Civil Procedure Act 2005* (NSW), particularly whether the proceedings were for damages and if an "appropriate settlement sum" had been offered or if "special circumstances" existed; (2) whether offers of compromise made at first instance could be relied upon to support an application for indemnity costs on appeal, even if not renewed before or during the appeal proceedings; and (3) whether interest on costs should be awarded under s 101(4) of the *Civil Procedure Act 2005* (NSW) given the partial success of all parties. The court also considered the appropriate rate of interest for restitution where a judgment had been paid and was subsequently reversed in part on appeal.

The Court of Appeal allowed the appeals in part, setting aside the original judgment and costs orders. The court recalculated the principal amounts and pre-judgment interest awarded, adjusting them significantly. The court determined that the period for pre-judgment interest was to be calculated differently, and that the original offers of compromise were not relevant for awarding indemnity costs on appeal. Costs at first instance were divided, with each party to pay the other's costs on different bases for different periods. The court also ordered that the parties cooperate in recovering tax paid to the ATO.

In relation to the James appeal, the court ordered restitution of certain amounts and specified interest rates for those sums. The court also ordered that the Respondent pay 50 per cent of the Appellants' costs of the appeal on an ordinary basis. For the McKeith appeal, judgment was entered for the Appellant against the First Respondent with pre-judgment and post-judgment interest. The Respondents were ordered to pay 50 per cent of the Appellant's costs of its appeal on an ordinary basis. Liberty to apply was granted for seven days to correct any errors or omissions.